India must treat 3Fs as one economic challenge to steer external shocks: CII

The call for action comes as the West Asian crisis has sent ripples through global and domestic market alike, driving up energy and fertilizer prices, logistics costs, food inflation, and currency volatility.

“The 3Fs are not three disparate pressures,” emphasised Chandrajit Banerjee, director general, CII. “Fuel feeds into fertiliser, fertiliser feeds into food and all three feed into inflation, fiscal stress and household welfare. That is why we believe it helps to treat this as a single, integrated economic challenge so that it makes navigating external shocks that much easier.”

This interdependence is a function of India’s acute import reliance across fuel and fertilizers. According to government data, India imports approximately 88 per cent of its crude oil, 90 per cent of its phosphates, and 25 per cent of its urea.

Given that a critical volume of these maritime crude and LNG flows transits the Strait of Hormuz, geopolitical developments in West Asia have had immediate ramifications. These extend beyond primary energy & fertilizer security and increasingly affect the broader economy through increased living costs and second-round impact on food prices.

CII noted that the government’s early response had been reassuring. “CII would like to acknowledge that the government has moved quickly and responsibly, cushioning consumers from the initial fuel price spike and channelling gas towards critical sectors. From here, our sense is that a few calibrated steps in the short term, taken alongside strong structural reforms, would serve India well. Global uncertainties are likely to stay with us for a while, and our growth and stability could be strengthened further through reforms that are more long-term in nature, with some action in the medium term as well,” said Banerjee.

Fuel represents the primary touchpoint for external shocks, but it also offers the most immediate opportunity to reduce India’s import reliance. To capitalize on this, CII recommends leveraging the newly notified BIS standards for higher ethanol blends, ranging from E22 to E30, by establishing a clear roadmap for their market introduction.

This should be supported by fast-tracking flex-fuel vehicles in high-supply, ethanol-producing states where the production ecosystem is strongest.

Concurrently, establishing a national framework for long-haul LNG trucking, complete with vehicle incentives, refuelling corridors, and transparent pricing, would unlock a cleaner, domestic fuel alternative for freight logistics. CII also suggests gradually transitioning a portion of LPG demand toward sustainable domestic alternatives, including electric and ethanol-based cooking, as well as green hydrogen where viable.

For long-term structural resilience, CII emphasises accelerating domestic oil and gas exploration, expediting the Strategic Petroleum Reserve expansion, and diversifying the sources for crude imports. This should be paired with expanding newer energy avenues like coal gasification, methanol blending, bio-CNG, and nuclear power, including small modular reactors (SMRs).

“Boosting efficiency and scaling up home-grown alternatives are far more than near-term fixes; they form the very bedrock of India's long-term economic security,” noted Banerjee.