A Double-Edged Sword for India’s Energy Sector?

Like several countries before it, on 25th March India’s 1.3 billion population went into a 21-day lockdown, enforced by its government in order to slow the spread of the novel coronavirus. While it is still too early to say whether India will manage to buck the global trend by having enforced ‘social distancing’ early on, the outcome of this unprecedented period holds implications for India’s energy sector. The lockdown has resulted in the grounding of flights, near-cessation of all public transport, restrictions on the transport of all but essential goods, and directives to public and private sector employees to work from home – the impacts of all of which will be clearer over the coming months. This Comment argues that the net impact on the energy sector is likely to be shaped by three factors: government support measures to mitigate the economic fallout of the pandemic; the level of international oil prices – which could constrain or contribute to fiscal space; and, the global economic impact of the pandemic and its effect on the competitiveness of India’s energy sector. The unprecedented nature of this crisis may also present opportunities for reforms towards other important long-term goals such as environmentally sustainable growth, as the government may seek to expand the fiscal space available to it to support domestic economic activity through the coming months. The pandemic could be a double-edged sword for the Indian energy sector; and, given India’s massive consumer base and expected contribution to global energy demand, the outcome will matter for international energy markets.

By: Anupama Sen