India and US Forge Major Energy Trade Partnership with $500 Billion Framework
In a significant development for international trade, India and the United States have established an interim trade agreement framework that includes a substantial commitment from India to increase its energy imports from the US. According to a joint statement released early Saturday, India intends to purchase $500 billion worth of American products over the next five years, with a strong focus on energy commodities and coking coal.
Details of the Energy Import Expansion
The agreement outlines India's plan to import a diverse range of US products, including energy items, aircraft and aircraft parts, precious metals, technology products, and notably, coking coal. While the joint statement did not provide exhaustive details on the specific energy products, it confirms India's strategic shift toward enhancing its energy procurement from the world's largest economy.
India has already been actively working to boost imports of crude oil, liquefied natural gas (LNG), and liquefied petroleum gas (LPG) from the US in recent years. This new framework formalizes and accelerates those efforts, positioning the US as a key supplier in India's energy security strategy.
Coking Coal: A Critical Component
Coking coal, also known as metallurgical coal, is a vital raw material for steel production. India, as the world's second-largest steel manufacturer with an annual capacity of approximately 205 million tonnes, relies heavily on imports to meet its growing demand. The government aims to expand steel manufacturing capacity to 300 million tonnes per annum by 2030-31 and 500 million tonnes by 2047, further driving the need for coking coal.
India is already the largest global buyer of US coal. In the fiscal year 2025, coking coal constituted more than 40% of the total 20 million tonnes of coal imported from the US. Data from the Union Ministry of Coal indicates that during the current financial year (FY26), as of November, the US has supplied 6.04 million tonnes of coking coal to India.
The recent notification of coking coal as a critical mineral by India underscores its strategic importance to the nation's industrial growth and self-reliance goals.
Crude Oil Imports and Diversification Efforts
Another key aspect of the energy basket is crude oil. Both countries committed last year to increase bilateral energy trade to $20 billion. Amid ongoing efforts to diversify oil imports, India is looking to raise supplies from the US, especially as it faces pressure to reduce purchases from Russia.
Data from global ship tracking firm Kpler reveals that in January, India imported around 297,000 barrels per day from the US, a slight increase from 293,000 barrels per day a year earlier. Imports peaked at 568,000 barrels per day in November.
Experts suggest that US oil is emerging as a primary beneficiary of India's diversification strategy, potentially accounting for up to 10% of India's crude intake. This shift is largely displacing lighter West African grades rather than significantly reducing Russian supplies.
Economic and Strategic Implications
Union Minister for Commerce and Industry Piyush Goyal highlighted on social media platform X that the agreement would open a $30 trillion market for Indian exporters, emphasizing the mutual benefits of the trade framework.
However, challenges remain. Indian refiners may require recalibration to increase intake of West Texas Intermediate crude, which could limit immediate significant growth in imports from current levels. India imports nearly 90% of its crude oil requirements, making it highly vulnerable to supply-chain volatility. This dependency can significantly impact the country's energy security, fuel inflation, and current account deficit.
An increase of just $1 per barrel in oil prices could raise India's oil import bill by approximately ₹13,000 crore. In FY25, India's crude oil imports were valued at $167 billion, highlighting the substantial economic stakes involved.
Future Prospects and Discussions
The development follows recent discussions between Indian and US representatives during the Indian Energy Week event from January 27-30. Vikram Dev Dutt, Secretary in the Ministry of Coal, stated that India sees potential for importing more coal from the US as it aims to boost steel manufacturing capacity. Reuters reported on January 29 that both countries held talks on this matter during the four-day event.
This interim trade framework not only strengthens bilateral ties but also aligns with India's broader goals of enhancing energy security and supporting industrial growth through reliable and diversified supply chains.
