For decades, India’s energy landscape has been dominated by crude oil imports, fueling everything from transportation, homes, and trains to large-scale industries. Petrol and diesel have ruled India’s mobility, supply chains, and economic strategy. But the shift is happening now.
With rising fuel costs, environmental concerns, and policy shifts, the country is actively transitioning toward a multi-fuel future. Compressed Natural Gas (CNG), Electric Vehicles (EVs), and Hydrogen are emerging as viable alternatives, reshaping the way India moves and consumes energy.
This shift is not just an environmental necessity but also an economic and strategic move. But does the wider adoption of EV, CNG, or hydrogen negatively impact the oil and gas industry? The answer is complex, as we might see a gradual decline in oil’s popularity as the primary fuel, but a complete disruption is highly unlikely in the foreseeable future.
Why is there a need for a multi-fuel ecosystem?
India imports over 88% of its crude oil as per the Petroleum Planning and Analysis Cell of the oil ministry, exposing the economy to volatile global prices and geopolitical risks. While there are financial and political risks attached to importing crude oil, another risk that is encouraging a multi-fuel ecosystem in India is the growing urban pollution levels, with transportation being a key contributor. The need for cleaner, cost-effective alternatives is urgent.
The Indian government is aggressively promoting a multi-fuel ecosystem with increased investment in the expansion of CNG stations across the country. From 947 in 2014 to over 6000 in 2024, India has 5x more CNG stations across the country than a decade ago, especially covering Tier 2 and Tier 3 cities. Further, the government had allocated ₹10,000 crore under the FAME II scheme till 2024 to boost EV adoption, encouraging several startups to invest, test and build new EV-related technologies.
The government of India also aims to produce 5 million metric tonnes of green hydrogen annually by 2030 under the National Green Hydrogen Mission, with the aim to provide a cleaner fuel alternative as and when the time comes.
CNG and its impact on the economy
CNG has been India’s most successful alternative fuel so far, with widespread adoption in public transport and fleet operations. With more than 6,000 CNG stations operational and ambitious expansion plans, the government is betting on natural gas as a transitional fuel before fully committing to renewable energy.
However, India still imports nearly 50% of its natural gas, making it vulnerable to price fluctuations. While domestic gas production increased by 18% last year and is projected to reach 45.3 billion cubic meters by 2026, it remains insufficient to fully replace oil. While CNG offers lower emissions and cost savings compared to petrol and diesel, its long-term viability is questionable, especially as EV and hydrogen technologies continue to advance rapidly.
Will EVs disrupt the oil and gas industry?
The EV market is set to shake the energy sector in the coming future, with people open-heartedly accepting hybrid and complete electric vehicles as the last financial year, India saw a 49% increase in new electric vehicle sales.
The electric vehicle marketed is highly supported by government incentives, is seeing falling battery costs, and improving charging infrastructure—showing an upward trend for EV adoption over the next decade. Companies like Tata Motors, Mahindra, Tesla, and BYD are expanding their EV portfolios.
Despite this momentum, several challenges remain. Charging infrastructure is still inadequate, particularly in rural areas. The supply chain for batteries is dependent on critical minerals such as lithium, which introduces new vulnerabilities. Additionally, India’s electricity grid still relies heavily on coal, raising concerns about the overall sustainability of EVs.
Nevertheless, the push for EVs is undeniable.
Will green hydrogen create the necessary value?
Hydrogen is regarded as the ultimate clean fuel, capable of decarbonizing transportation as well as industrial processes such as steel and cement production. The government of India launched the National Green Hydrogen Mission in 2023. However, the program witnessed a significant boost in funding, receiving INR 6 billion in the latest budget, furthering the nation’s belief in hydrogen technology. Some of the key initiatives that have propelled green hydrogen adoption in the country are Oil India Limited commissioned India’s first 99% pure hydrogen plan in Assam in 2022, NTPC initiated green hydrogen blending in Surat’s piped natural gas network, and Reliance and Indian oil have invested deeply in hydrogen fuel cell technology for long-haul transport.
However, the widespread adoption of hydrogen faces significant hurdles. The cost of green hydrogen production is currently three to four times higher than conventional fuels. Moreover, the infrastructure for production, storage, and distribution requires substantial investment before hydrogen can become a mainstream energy source.
While hydrogen’s potential is undeniable, its impact on the oil and gas industry will depend on how quickly costs decline and infrastructure scales up.
How is the oil and gas industry adapting?
The oil and gas sector is at a turning point. Companies such as Indian Oil, ONGC, and Reliance recognize that traditional fuels will not dominate forever and are actively diversifying into biofuels, EV charging, and hydrogen production. Fuel retailers such as BPCL, HPCL, and Indian Oil are installing EV chargers at fuel stations to retain relevance in an electrified market, and Reliance aims to produce green hydrogen at under $1 per kilogram by 2030.
While oil and gas will remain essential for several more years, revenue from petrol and diesel is likely to decline. The companies that will see themselves as energy providers rather than just oil suppliers will thrive, while those that fail to evolve will risk losing relevance over the next two decades.
Will CNG, EV, and Hydrogen disrupt the Indian oil and gas industry?
Today, most global markets are taking a single-fuel approach, for example, Europe is pushing EVs, Japan is prioritizing hydrogen, and the US is balancing both. The Indian government is trying a completely different approach. It is actively developing a multi-fuel economy, ensuring that different energy sources coexist rather than compete.
If this strategy is successful, India could become a global case study on managing large-scale energy transitions without economic disruption. But for this to happen, the country needs to provide consistent policy support to EV, hydrogen, and CNG-based businesses, encourage private-public partnerships for faster, efficient, and innovative ways to lead, and keep a check on what people want. Alternative fuels can disrupt the entire energy sector; however, it is contingent on the many ifs and buts that will arise in the future.
