Mapping India’s Energy Transition

India's state-owned enterprises (SOEs), known nationally as Public Sector Undertakings (PSUs), were established to serve national objectives of providing energy security, affordability, supporting strategic industries, generating employment in underdeveloped regions, and stabilizing the economy during downturns. Energy sector PSUs sit at the centre of India’s energy transition. They mine most of India’s coal, produce and refine most of its crude oil, pipe most of its natural gas, and generate most of its electricity. They are also among India’s largest public sector employers, investors, and contributors to the public exchequer. Niti Aayog’s recent report suggests that public investment in electricity grids, electric vehicle (EV) charging, and green technology research and development (R &D) is critical to crowding in private capital and lowering the cost of the net-zero transition. What these PSUs do over the next decade will shape whether India meets its 2030 clean energy targets and its 2070 net-zero commitment and whether the millions of workers and communities that depend on fossil fuel sector experience an orderly transition or a disruptive one.

Through its Mapping India's Energy Policy initiative, IISD has tracked government support to India’s energy sector since 2014. In FY 2025, out of USD 78 billion of total energy support by the government, PSU capital expenditures accounted for USD 26 billion, making these enterprises not just producers of energy but the principal implementing arm of India’s energy policy. This digital story extends that analysis by examining nine strategic PSUs across economic, environmental, and social dimensions, assessing their alignment with national transition goals, and identifying the policy levers that can accelerate a just and credible energy transition.

Why These Nine Energy PSUs Matter

India has around 66 listed central PSUs, but only a handful anchor the country’s energy system. This digital story focuses on nine such energy PSUs: Coal India Limited (CIL), NTPC Limited (NTPC), NLC India Limited (NLCIL), Oil and Natural Gas Corporation Limited (ONGC), Oil India Limited (OIL), Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), GAIL (India) Limited (GAIL), and NHPC Limited (NHPC).

Together, these enterprises manage India’s most significant fossil fuel assets while also developing some of the country’s largest renewable energy projects (see below). Their dual portfolios give them a uniquely important role in shaping both India’s current emissions trajectory and its clean energy future.

The Interconnected Web of Growth, Development, and Carbon

India’s nine energy PSUs carry an enormous economic and social footprint. In FY 2025, their combined revenues reached around INR 26 trillion (USD 307 billion), equivalent to 7.7% of India’s GDP, and they transferred approximately INR 6 trillion (USD 70 billion) to the Union and state governments through taxes, dividends, and other payments (see below). They remain major public investors through sustained capital expenditure of about INR 2.6 trillion (USD 31 billion) and contribute to national priorities, including corporate social responsibility (CSR), R&D, and large-scale employment. Their trade footprint is equally significant: these PSUs account for a substantial share of India's merchandise imports through purchases of crude oil, natural gas, and petroleum products on international markets, while also generating foreign exchange earnings through exports of refined petroleum products and other energy commodities. Their scale and financial weight make them central to India’s economic trajectory and energy transition.

However, this economic and social weight is mirrored by a highly concentrated carbon footprint. Eight of the nine energy PSUs—except NHPC, which is a hydropower producer—report 488.5 Mt of direct CO₂e emissions from their own operations, which is 11% of India's national total of 4,371 Mt CO₂e. That figure, taken alone, would suggest a modest footprint for companies that collectively dominate the country's energy system.

But these companies do not just consume energy. CIL mines coal that central and state utilities and industries burn. PSU refiners sell fuels that power hundreds of millions of vehicles. When the downstream combustion of what they sell is included on a responsibility attribution basis, the combined figure rises to an equivalent of 44% of India's emissions. The figure below shows both measures, side by side, for each company.

As shown below, India’s energy PSUs are linked through a cascading chain of energy flows. CIL coal sales generate Scope 3 emissions for CIL, and become Scope 1 emissions for NTPC, and finally result in Scope 2 emissions for oil PSUs that purchase grid electricity. This sequence illustrates how one PSU’s output becomes another’s emission source, revealing the deep interdependence of India’s fossil-based energy system and the need for joint action across coal, power, and petroleum sectors, since emission reductions in one PSU directly affect the other PSU.

This concentration of emissions within publicly controlled entities presents a challenge but is also a significant opportunity for climate mitigation at scale in India. Unlike fragmented private sector emissions that require diverse policy instruments to influence, public sector emissions can be addressed through direct government ownership mechanisms, coordinated strategies, and aligned institutional mandates, backed up by appropriate government support policies.

Can PSUs bridge India’s renewable capacity-generation gap?

India’s 2035 goal of sourcing 60% of its installed electricity capacity from non-fossil sources highlights a significant gap between current capacity and the level of reliable clean power needed. The pace and direction of PSU investment will be critical not only for adding capacity but also for ensuring that renewable energy can be delivered reliably and at scale. In the early phase of renewable expansion, NTPC played a key enabling role by supporting private developers through long-term power purchase agreements, helping reduce risks and attract investment. As the market has evolved, NTPC has increasingly shifted toward building its own renewable portfolio and supporting projects that can provide more reliable power.

Even under an earlier target of 50% of installed electricity capacity from non-fossil sources, India identified the need to reach approximately 500 GW of non-fossil electricity capacity, up from around 275 GW in February 2026. Yet overall, the pace of renewable deployment has fallen short of what India’s 2030 targets require. Renewable capacity additions since FY 2021 have averaged only 20 GW per year, and in FY 2025, India added approximately 30 GW of renewable capacity. Supply-chain disruptions, fluctuating module prices, tighter financing conditions, and bottlenecks related to evacuation infrastructure, rights of way, and land have slowed renewable deployment.

Within this evolving landscape, PSUs are uniquely positioned to lead. Their access to concessional finance, land, and strong balance sheets enables them to invest in long-gestation projects. Moreover, PSUs such as NHPC and THDC India Limited (an NTPC subsidiary) bring decades of hydropower experience, positioning them to expand pumped-storage capacity, which is essential for reliable renewable power. Ultimately, India’s transition is moving from rapid capacity growth to reliable clean power delivery, and PSUs will play a central role in bridging this gap.

Rising Energy Transition Ambition but Slow Progress

Across their portfolios, India’s nine energy PSUs are signalling rising clean energy ambition, but their formal decarbonization commitments remain uneven. They are expanding into solar and wind portfolios, green hydrogen, batteries, pumped storage, critical minerals, biogas production, second-generation biorefineries, and EV charging networks. However, operational net-zero targets are patchy: some, but not all, of the nine PSUs have set net-zero goals for Scope 1 and Scope 2 emissions, highlighting an ambition gap between project-level renewable targets and whole-of-company decarbonization (see below). Only GAIL has adopted a Scope 3 target, aiming to reduce these emissions by 35% by 2040, a practice others could emulate to align more closely with India’s long-term net-zero pathway.

Progress to date is slower than these ambitions imply. Most concrete action has focused on adding renewable capacity, while comprehensive fossil-asset transition plans and just transition roadmaps remain limited. Interim measures, such as biomass co-firing and flexible coal operations, can reduce emissions in the near term, but they risk creating new dependencies if they are not anchored in clear long-term phase-down pathways. Emerging options like first-generation biofuels and coal gasification with carbon capture also carry significant uncertainties, including life-cycle emissions, high costs, technological readiness, and land and water trade-offs. These technologies may have niche roles, but large-scale deployment should be approached cautiously, particularly as more mature, cost-effective clean energy alternatives continue to improve.

The table below situates these PSU commitments within India’s wider transition goals for renewables, biowaste-to-energy, electric mobility, and green hydrogen, and summarizes the incentives supporting them. It also highlights the gap between ambition and implementation: while PSU targets for renewables and green hydrogen are expanding, progress on biowaste-to-energy, electric mobility, and hydrogen deployment remains modest, underscoring the need to accelerate PSU delivery to align with India’s broader transition trajectory.

Capital Expenditure: Fossil investments still dominate

India’s nine energy PSUs illustrate a dual mandate trap: they are expected to safeguard short-term energy security and fiscal revenues attained through fossil fuel operations while also advancing decarbonization objectives, and this tension is evident in their capital expenditure patterns. In FY 2025, these enterprises collectively invested INR 2.33 trillion (USD 28 billion) in fossil fuel-based projects, nearly eight times their combined INR 0.30 trillion (USD 4 billion) investment in clean energy. While the 5-year capital expenditure plans of these PSUs include an upward trajectory in clean energy investments, the overall investment mix remains heavily tilted toward fossil energy assets.

Most of these fossil investments fall into two categories. The first involves adding new coal-fired capacity and increasing mining capacity, in line with government plans to meet accelerating electricity demand. For example, NTPC aims to become India’s largest captive coal miner, integrating fuel security with power generation, while NLCIL continues to expand lignite mining and thermal capacity. The second category comprises oil PSUs' investments in pipeline networks, refinery expansions, and petrochemical integration. These investments align with the government’s objective of increasing natural gas share in India’s primary energy mix to 15%, while also hedging against future declines in transport fuel demand through the diversification of refineries into petrochemicals.

Taken together, this pattern reveals a dual mandate trap in practice: PSUs are responding rationally to expectations of reliable fossil energy and strong fiscal contributions, yet this keeps their capital outlays concentrated in long-lived fossil fuel infrastructure. Over the medium term, it increases the risk of locking in a high-carbon trajectory, raising future transition costs for the public sector, and stranding assets as climate policies and trade measures tighten.

Diversifying India’s Energy Mix in a Volatile and Warming World

India’s energy system is still heavily dependent on imported fossil fuels. These fuels have underpinned economic growth and helped meet rising energy demand, but they also lock the country into a high-emissions development path at a time when global mitigation needs to accelerate. In FY 2025, India imported the vast majority of its crude oil and around half of its natural gas, and it still brought in large volumes of coal. These fossil flows sustain today’s growth model while pushing cumulative emissions higher, with direct consequences for India’s future climate risk.

The infographic below illustrates how India's PSUs are directly linked to energy security and how fossil fuel price volatility transmits into their accounts and into government finances. When global energy prices spiked in FY 2023, the impact was immediate and wide-ranging: excise duties on petrol and diesel were cut, while INR 22,000 crore (USD 2.7 billion) was paid to compensate oil PSU under-recoveries on LPG. Oil PSUs saw compressed profits, with lower corporate tax and dividends, while NTPC faced sharply higher variable costs as imported coal prices surged. Gradually shifting PSU investment toward non-fossil energy can reduce the volume of coal, oil, and gas that must be procured on volatile global markets—strengthening energy security while also lowering national emissions intensity.

A faster buildout of clean energy is therefore mainly about diversifying India’s energy mix and aligning it with a safer climate trajectory. Assessments by the Intergovernmental Panel on Climate Change and others show that South Asia (and India in particular) faces some of the world’s highest risks from additional warming, including more frequent deadly heat waves, intensified monsoon variability, and coastal and riverine flooding that threaten lives, labour productivity, and infrastructure. By accelerating the deployment of clean energy, PSUs can help limit future temperature increases and reduce the scale of climate impacts that would fall disproportionately on India’s citizens and economy. The case for clean energy in India thus rests on diversification of the energy mix, credibility in meeting international climate commitments, and long-run climate resilience, rather than on narrow claims about short-run generation costs.

Managing the Just Transition Challenge

Managing the social and economic consequences of coal phase-down will be one of India’s most complex transition challenges. The scale is significant: according to Niti Aayog’s recent report, over 150 districts across India are significantly dependent on fossil fuel supply chains, directly or indirectly sustaining livelihoods for nearly one-third of India’s population. Formal coal mine employment stands at around 345,000 workers, but when informal workers in mining and ancillary activities are included, over 1 million people depend directly on coal. When fossil-fuel-linked manufacturing sectors are included, such as textiles, basic metals, petroleum products, and chemicals, the total affected labour force reaches 16.9 million, the majority in the informal sector and therefore the most exposed to disruption.

Comprehensive just transition strategies for coal- and fossil fuel-dependent regions will need to be developed collaboratively by national and state governments, PSUs, affected workers, and communities. For each fossil fuel-intensive PSU, transition planning should include worker redeployment pathways with clear timelines, reskilling programs aligned with realistic employment opportunities, regional economic diversification initiatives for coal-dependent districts, and social safety nets for workers unable to transition. PSUs have a responsibility to map their workforce exposure, communicate transparently about the implications of different transition scenarios, and engage constructively in dialogue.

Four Policy Levers for Accelerating Just Energy Transition

India's concentration of energy production and distribution within PSUs creates conditions for rapid, coordinated decarbonization that fragmented, market-based systems cannot easily replicate. Because these enterprises share a public owner, the state can set common expectations, coordinate large investments across companies, and align planning horizons with national climate goals. The institutional capacity exists within these organizations. The financial resources are available through profitable operations and access to public finance. What remains is implementation coordinated across enterprises, accountable through governance mechanisms, transparent in execution, and adequate to the scale of transformation required to meet India's climate commitments while ensuring energy security and just transition for affected workers and communities.

Four critical policy interventions can accelerate SOE transition:

• Develop a Climate Mandate for Strategic PSUs
  The government could establish a formal mandate requiring each strategic PSU to align its corporate plans with India’s 2035 and 2070 climate goals, including periodic progress reporting on renewable deployment, fossil fuel emission management, energy efficiency and just transition, coordinated across ministries to ensure coherence and accountability.
• Integrate Climate Metrics into Performance Management
  Expand DPE's annual MoU framework to include mandatory climate key performance indicators covering emissions intensity reduction, renewable capacity additions, clean energy CapEx share, and just transition milestones. Climate performance should carry weight equivalent to financial metrics in evaluations.
• Create PSU-Specific Incentives for Clean Energy CapEx
  Introduce targeted fiscal and financial incentives, such as tax rebates, dividend flexibility, or preferential access to concessional finance for PSUs investing a defined share of their annual CapEx in clean energy, green hydrogen, storage, or efficiency.
• Develop Holistic Transition Plans for Fossil and Employment-Intensive Sectors 
  Each fossil fuel-intensive PSU should contribute to comprehensive transition plans led by state and national governments. These plans should map worker and asset exposure, outline credible asset phase-down scenarios, and identify realistic redeployment and reskilling pathways for affected workers and communities.

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