India and Indonesia Strengthen Energy Trade Ties

A millennium ago, the Chola Kingdom of India exerted its influence over the seas of Southeast Asia, establishing substantial mercantile and cultural connections with the Indonesian archipelago. This alliance forged an interdependent economic journey lasting centuries. In the contemporary world, India and Indonesia are again engaging as significant players on the global stage.

India stands as the world’s most populous country, with Indonesia ranking fourth. Together, these nations form a cohort of 1.8 billion people focused on survival, industrial advancement, and improving their global economic status. Both countries are delving deeper into manufacturing, driven by the demands of a growing middle class. This demographic shift necessitates increased electricity, refined fuels, petrochemicals, steel, freight, and industrial heat. Consequently, reliance on energy sources like coal, oil, gas, and nuclear power remains a critical aspect of their energy strategy.

The importance of fossil fuels was underscored during a meeting on July 7, when Indian Prime Minister Narendra Modi and Indonesian President Prabowo Subianto convened in Jakarta to strengthen economic ties. A principal focus was enhancing energy trade, with India requesting greater volumes of Indonesian coal to satisfy its power grid’s growing appetite.

Bilateral trade between these two nations has expanded over fivefold since 2005, surging from less than $5 billion to nearly $25 billion. India stands as Indonesia’s second-largest coal buyer and the top importer of Indonesian crude palm oil, while also seeking minerals, rubber, hydrocarbons, and pulp and paper. In return, India provides refined petroleum products, automobiles, telecom equipment, steel, and agricultural goods.

An agreement between the Steel Authority of India and Indonesia’s Krakatau Steel to produce stainless steel in Indonesia highlights the ongoing industrial partnership. Notably, around 90 percent of India’s primary steel production depends on coal, and nearly 80 percent of Indonesia’s steel output similarly relies on this fuel.

Indonesian Energy and Mineral Resources Minister Bahlil Lahadalia reported India’s interest in collaborating on Indonesia’s oil and gas projects. Once a top global gas producer, Indonesia is reviving this sector, awarding exploration contracts to international firms. Discussions also included peaceful nuclear project cooperation, as nuclear power provides reliable baseload electricity that renewable sources like solar and wind cannot offer.

Both countries signed agreements on critical minerals and supply chain technology, medical product regulation, disaster management, telecommunications, and agriculture. Recent blackouts in Sumatra and Java revealed critical issues in Indonesia’s electricity grid, largely caused by coal shortages.

Indonesia’s manufacturing aspirations face challenges if reliant solely on solar and wind energy—both vulnerable to unpredictable weather. Consequently, the country is reconsidering its green strategies. By December 2025, the government decided against closing the Cirebon-1 coal-fired power plant.

India shares similar challenges, with coal generating nearly 80 percent of the nation’s power. A recent example was when severe weather forced reliance on coal due to damaged hydroelectric facilities. India’s commitment to coal usage is projected to last beyond 2047. Demonstrating energy independence, India decided to withdraw from hosting the 2028 United Nations climate summit.

This robust India-Indonesia trade relationship challenges the notion of the climate industrial complex. Together representing over one-fifth of the global population, these nations aim to secure reliable energy to uplift their populations.

Vijay Jayaraj is a Science and Research Associate at the CO2 Coalition. He holds a Master of Science in environmental sciences from the University of East Anglia and a postgraduate degree in energy management from Robert Gordon University, U.K. He was a research associate with the Changing Oceans Research Unit at the University of British Columbia.