NextFin News - India’s gas-fired power generation has plunged to its lowest level in at least six years, crippled by severe fuel shipment disruptions stemming from the ongoing war in the Middle East. This supply squeeze arrives at a critical juncture, as a relentless nationwide heatwave pushes electricity demand to record peaks, leaving the country’s power grid highly vulnerable during sweltering summer nights when solar power is unavailable.
The conflict, which escalated following U.S. and Israeli military actions against Iran on February 28, has roiled global energy markets and choked key shipping lanes. S.R. Narasimhan, an independent energy expert and former chief of the national grid operator, Grid Controller of India, has long maintained a cautious stance on India’s rapid transition to clean energy without adequate evening backup. In recent industry assessments, Narasimhan warned that while gas-fired plants represent only about 4% of India’s installed capacity, they are indispensable for grid stability, requiring up to 13 gigawatts of gas power to meet evening peak demand on high-stress days.
The disruption became acute after state-controlled Petronet LNG issued force majeure notices to major domestic offtakers, including GAIL India, Indian Oil Corporation, and Bharat Petroleum Corporation, in early March. This followed a force majeure declaration from QatarEnergy, which operates the massive Ras Laffan export terminal, after Iranian attacks knocked out approximately 17% of Qatar’s LNG export capacity. With the Strait of Hormuz heavily contested and shipping rates soaring, India has been forced to scramble for alternative, far more expensive cargoes from the U.S. and West Africa.
To prevent widespread blackouts, India has been forced to ramp up its coal-fired generation, which rose by 3.5% in April, with coal now accounting for over 70% of the nation’s electricity. This shift has drawn criticism from environmental groups. Nandikesh Sivalingam, director of the Center for Research on Energy and Clean Air, who has consistently advocated for aggressive decarbonization, noted in a recent briefing that the shortage of clean cooking gas and power is temporarily pushing consumers and utilities back to highly polluting fuels like coal and biomass. Sivalingam views this as a temporary setback, though he warns of immediate air quality risks.
However, some analysts argue that the grid’s resilience is stronger than feared. Purva Jain, an energy specialist at the Institute for Energy Economics and Financial Analysis (IEEFA), who has historically taken a skeptical view of gas as a transition fuel due to its price volatility, points out that nearly a third of India’s 25-gigawatt gas-fired fleet was already idle before the war due to high LNG prices and low domestic production. In Jain's view, the current crisis merely accelerates a structural shift away from gas toward battery storage and pumped hydro, suggesting that the long-term impact on India’s power mix may be less catastrophic than short-term disruptions imply.
The Indian Finance Ministry recently warned that supply shocks from the Middle East war and the resulting energy cost hikes pose a serious threat to domestic demand and economic growth. Wholesale and retail inflation have already ticked upward, driven by rising fuel and fertilizer costs—the latter also squeezed as domestic urea producers trim output due to the LNG shortage. While U.S. President Trump’s administration has pressured global allies to isolate Iran, New Delhi has quietly sought waivers and alternative energy arrangements to cushion the shock.
The power ministry in New Delhi has ordered all gas-fired stations to operate at full capacity during the summer peak, but with spot LNG prices remaining prohibitively high, the gap between mandate and physical supply remains a critical bottleneck for the world’s fastest-growing major economy.
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