In Trump tariff era, oil and gas set to energise India's negotiation power (2025)

New Delhi: India is set to wield its energy purchases as a strategic bargaining chip in its upcoming tariff negotiations with the United States, which has threatened to impose reciprocal tariffs on India and other nations in a month, a senior government official told ET.

Following the meeting between Prime Minister Narendra Modi and US President Trump in Washington recently, India said it would increase its energy purchases from the US by $10 billion, bringing the total to $25 billion in near future. This number, though practical and based on consultation with state-run oil and gas companies, only shows what India can possibly do for energy ties with the US, said the official who didn't want to be identified. What is actually achieved will depend a great deal on the concession India can extract from the US on the tariff front, he said.

Trump is pressuring India to buy more oil and gas from the US, as he had done during his first term. Trump's resolve to increase tariffs on Indian exports to the US has prompted the Indian government to announce its intent to import more US energy this time round.

The US oil and gas have the disadvantage of higher freight due to the long distance and the only way for them to compete with other suppliers to the region is by discounting prices, which American private sector suppliers don't readily agree to.

In the absence of price discounts, there must be some other advantage that India should have for buying US energy, the official said. This could come in the form of lower tariffs, he said, adding that it will be clearer once Trump unveils his reciprocal tariffs for India. Buying US energy at higher costs must be offset by lower tariffs on some Indian exports, the official said, adding that Indian refiners can bear some losses if some other segments of the economy benefit from it. It's the 'larger national interest' that needs to be guarded, he said.

At a joint address following his meeting with Modi recently, Trump said the trade imbalance between the two countries could be addressed "very easily" by selling more US oil and gas to India.

"Prime minister and I have also reached an important agreement on energy that will ensure the United States as the leading supplier of oil and gas to India, hopefully number one supplier," Trump said. Soon after Trump's address, finance secretary Vikram Misri said: "I think last year we purchased about $15 billion in US energy output. There is a good chance that this figure will go up to as much as $25 billion in the near future."