India's new Prime Minister Narendra Modi has been dubbed the country's first energy-literate leader. But he has his work cut out for him, even as he succeeded in showcasing Gujarat as a "power surplus" state of India during his election campaigns, while promising to replicate a similar triumph for the rest of India.

Modi faces a tough challenge in balancing cost-optimization for ordinary people while mitigating environmental risks, meeting the needs of stakeholders and interest groups from energy companies to activists to regular folk who rest their hopes on his electoral promises of cheaper, cleaner and safer power.

Modi has already hinted toward his approach of making India more self-sufficient, largely from the Bharatiya Janata Party's (BJP) manifesto and from his own energy sufficiency plans based on a "rainbow vision."

Modi's "rainbow vision" lays the emphasis on developing seven energy resources such as gas, thermal, hydro, solar, wind, biomass and nuclear, to ensure energy security, and to cover entire stretches of the country in a way that the resources of richer states can be optimally tapped. Thus, fixing energy policy should be the topmost priority of Modi's government.

As far as India's hydrocarbon sector is concerned, Modi's government is expected to introduce systematic reforms, meaning an end to under-investment and a long-pending reform in gas pricing. This has been put in a context by one of the senior party leaders, when he spoke on the government's new oil and gas exploration policy by stating that there would be no 10th round of bidding yet since "the party is uncomfortable with India's growing dependence on oil imports [...] we aim to work toward restoring the interest of existing and leading oil and gas majors in the country's energy sector."

So far, out of the 360 blocks offered by the Indian government during nine rounds of bidding, 254 blocks had been awarded up until March 31, 2013, in which only 148 are active, relinquishing the remaining 106 blocks.

Modi will also look to reforms in the current oil and gas subsidy systems. If he carries on with previous reforms, inclusive measures in the downstream sector could help his government in cutting fuel oil subsidies by $24 billion, possibly more.

On cleaner energy too, particularly with respect to wind and solar power, Modi's government will seek to balance them with conventional energy resources, given his enchantment with renewable energy resources and his efforts made during his tenure as Gujarat's chief minister. India could thus expect to see a reasonable rise of renewable energy resources share in its energy mix.

India under Modi will also face geopolitical challenges in energy diplomacy, not only with the countries like the US, with which India has been cooperating well to develop its unconventional energy resources like shale gas, but also with countries like China and Russia.

This holds promise in pursuing regional energy policies in Eurasia, a space that has been a vacuum for decades.

Concurrently, Modi would also like to improve upon India's regional energy foreign policy in South Asia by developing a regional architecture comprising of energy and trade links to facilitate the ultimate objective of regional energy cooperation, for holistic economic integration and development.

This would certainly call for improving the relationship with Pakistan as well as engaging more with South Asian Association for Regional Cooperation countries to enhance trade and commerce, while integrating energy and environmental goals with each of these countries.

The author is a junior fellow at the Observer Research Foundation. manishv@orfonline.org