38.5% of India’s installed power capacity now belongs to non-fossil fuels and this will go up to 66% by 2030. The country has also reduced its emissions by 28%. India is the only major economy with actions in line to keep global warming below 2°C of pre-industrial levels. By 2022, as part of the world’s largest clean energy programme, India will achieve 175 GW of clean energy capacity. As India increasingly begins relying on renewable sources for its energy needs, the country’s oil imports will definitely witness a plunge – improving the health of our overall import bills. However, that is not possible without electric vehicles making it big in India.
Prime Minister Narendra Modi is pushing for electric vehicles to become the new standard in India. Last month, the Modi government approved a Rs 26,058 crore PLI scheme (Production-Linked Incentive) which promotes advanced technologies, most important among which is electric battery technology to be used for the propulsion of India’s electric vehicle space. The scheme focuses specifically on EVs and Hydrogen fuel cell vehicles and their components. According to the government, it expects the PLI scheme to bring in investments of Rs 42,500 crore.
Why OPEC is Rattled:
According to the latest long-term report from the Organization of Petroleum Exporting Countries, which is the oil-rich bloc of Middle Eastern countries fulfilling most of the world’s energy needs, Indian motorists will struggle to move away from gasoline- and diesel-powered cars over the next quarter of a century, suggesting the nation’s push toward electric vehicles may not be a complete success.
According to BloombergQuint, OPEC has said that diesel and gasoline will make up 58% of India’s oil demand in the next 25 years, from the current 51%. The organisation added that the addition of 200 million passenger and commercial vehicles means the two fuels will continue to dominate oil consumption in the world’s third-biggest oil-consuming nation. OPEC meets almost 71% of India’s crude oil requirements.
Essentially, OPEC is trying to paint a doomsday picture for India, in which the country finds itself almost entirely dependent on the Middle East for its energy requirements. The scaremongering by OPEC is aimed at dissuading electric vehicle manufacturers from betting big on India’s automobile market and the desire among Indians to adopt electric vehicles.
India has already given OPEC the chills over the past one year. India’s July crude oil imports slumped to their lowest in a year. Crude imports in July fell 12.5% month-on-month to 3.4 million barrels per day (BPD), but rose 12.8% year-on-year, as refiners shut units for maintenance and cut crude imports anticipating lower fuel demand during the monsoon season. India effectively showed OPEC how it can do just fine without entrusting its life to countries that export oil.
India’s Green Energy Push a Thorn in OPEC’s Eye
As the world moves away from fossil fuels, it is becoming exceedingly clear that the future of the world is with Electric Vehicles (EV). The EV market is powered entirely by lithium-ion batteries (LiBs). Presently, China manufactures two-thirds of the world’s Lithium-ion batteries, and it is also the biggest producer of Graphite – a key raw material for manufacturing LiB anodes. China also has high concentrations of Lithium, but it prefers importing 80 per cent of the white metal so that it can store up its own reserves for future needs.
Within India, there has been a determined attempt to reduce dependence on China when it comes to Lithium-ion batteries. As early as 2018, Anant Geete, then the Union Minister of Heavy Industries and Public Enterprises had announced that India would soon become a manufacturer of Lithium-ion batteries. India plans to make up for paucity for lithium – the most important component in LiB manufacture by tapping into South America’s ‘Lithium Triangle’ that consists of Chile, Bolivia, and Argentina. The world’s largest lithium reserves are found here, led by Chile.
So, India is visibly taking drastic steps to up its game when it comes to the electric vehicle sector. When the EV revolution does happen, India wants to be prepared. Furthermore, by tabooing conventional vehicles which use diesel and petrol, India is making it clear that in the near future, electric vehicles must become the new normal.
Meanwhile, India is not going to be reliant on fossil fuels for its energy requirements to drive the EV surge. Instead, India’s solar energy push will propel the rise of electric vehicles in India, and this sends shivers down the spines of OPEC countries. As the de facto leader of the International Solar Alliance (ISA), India has established itself as a nation that is very keen to tap into the power of the sun.
ISA will help India to lead the future of energy as well as augment its bargaining power against organizations like OPEC. The price of solar energy has gone down in the last few years with growth and investment. With India beginning to successfully leap towards clean energy, a huge amount of foreign exchange spent on oil bills could be saved in the coming decades. Therefore, India’s future in clean energy will depend on ISA’s success to a large extent.
OPEC Not India’s Oil Source Alone
Sure, OPEC countries account for the largest share of oil imports in India. However, of late, India has been trying to diversify its options. India, the world’s third-largest oil consumer with a demand of approximately 4.5 million barrels per day, is reducing its dependence on OPEC for oil imports. In the last few years, India is diversifying its oil import kitty and American oil companies, which sell WTI crude (India traditionally used only Brent crude, imported from Arab nations, which is relatively costlier) are the major beneficiaries of diversification by Indian refiners.
India’s import of WTI crude from the United States increased from 3 percent in FY 19 to 4.5 percent in FY 20, while imports from the Mediterranean also increased from 2.5 percent to 4.9 percent. The WTI crude processed in India now accounts for double-digit figures of total processing from single digit a few years ago.
OPEC had it coming for quite some time now. OPEC is an alliance of 15 countries that produce almost half of the world’s crude oil. Therefore, these countries manipulate the oil prices in international markets by reducing or increasing the output of crude oil as they deem fit, causing a hike or plunge in the prices of every barrel. On the other hand, consumer nations like India have no real ‘bargaining’ power against OPEC. However, with India diversifying its energy sources and increasingly relying on green energy, OPEC’s monopoly vis-a-vis not just India, but the world at large will be challenged. Needless to say, the organisation is scared to its very bones as a consequence.