Microsoft-Nayara Row Sparks New Push for Indian Cloud Independence

Government calls for ‘internet resilience’ as services are restored but alarm bells ring over foreign tech reliance

The Indian government is calling for a renewed push to develop homegrown cloud infrastructure after Microsoft abruptly suspended services to Nayara Energy, one of India’s biggest private oil refiners. Though service has since been restored, the incident is being seen in official circles as a wake-up call.

“This is an opportunity for homegrown cloud players,” said a senior government official, noting that over-reliance on any single technology supplier — particularly one based abroad — is now viewed as a national vulnerability.

Microsoft Pulled the Plug. Then Reconnected.

On July 22, Microsoft quietly cut off its technical support to Nayara Energy, citing compliance concerns after the EU’s 18th round of sanctions targeted firms linked to Russian oil. Nayara, part-owned by Russia’s Rosneft, found itself indirectly caught in the dragnet.

The outage didn’t last long. Within days, services were restored after what sources described as “backchannel discussions” involving government interlocutors and Microsoft India executives.

But the damage had already been done — at least reputationally. To many inside Delhi’s digital policy corridors, the incident looked like a flashing red light.

“Even if a service is restored within a week, that’s too long when you’re talking about a national energy company,” a senior bureaucrat said bluntly.

Not Just an Oil Story — It’s a Cloud Warning

The implications go far beyond Nayara’s oil terminals or ERP systems.

Officials say this is part of a broader concern: India’s digital ecosystem leans heavily on foreign cloud providers — Microsoft Azure, Amazon Web Services (AWS), and Google Cloud among them. With geopolitical tensions rising, that’s beginning to look risky.

The Department of Electronics and Information Technology (MeitY) has already circulated internal memos urging ministries and public sector undertakings (PSUs) to consider a “multi-cloud strategy” and prioritize Indian vendors where feasible.

“There’s no suggestion to ban foreign players,” said one official. “But this is about building muscle memory. Redundancy. Backup. Sovereignty.”

Indian Cloud Players Smell a Chance

For domestic cloud companies, this might be the crack in the wall they’ve been waiting for.

Zoho, Bharti Airtel’s Nxtra, Tata Communications, and CtrlS are among the few Indian companies with serious ambitions in the cloud infrastructure space. While they’ve grown steadily, they’ve mostly been overshadowed by the global giants who dominate 70% of India’s cloud services market.

This episode, however, has given them a narrative to build on:

• CtrlS has already issued a statement emphasizing its compliance-first model

• Zoho founder Sridhar Vembu posted cryptically about the dangers of “foreign keys to domestic locks”

• Tata Communications is reportedly preparing a pitch deck for key PSU clients

As one analyst put it, “They’ve been banging on the door. Now it’s open just a little.”

Will the Government Actually Make a Move?

There’s been a lot of talk over the years about Atmanirbhar Bharat and digital sovereignty. But the government has so far stopped short of enforcing strict localization mandates.

This time feels a little different.

The fact that Nayara Energy — which sits at the intersection of India’s energy and foreign policy challenges — was impacted directly by a tech decision made outside the country has rattled policymakers. Even though Nayara is a private entity, officials privately admit it’s “too strategic to be left exposed.”

One possibility being floated is a set of incentives for Indian cloud startups to serve state-run and strategic sectors. Another is a soft mandate for dual-vendor cloud sourcing.

“It won’t be a hammer,” said a policy consultant who advises the Ministry of IT. “More like a nudge. But a firm one.”

Cloud Landscape in India: Domestic vs Foreign Players

To put things in perspective, here’s how India’s cloud infrastructure market looks right now:

As it stands, foreign cloud providers still dominate — but that might not be the case forever if policy winds shift.

Bigger Than Just Tech

At its core, this isn’t just a tech infrastructure problem. It’s also about sovereignty, economic resilience, and leverage in a world where diplomacy, sanctions, and software are increasingly tangled together.

One official summed it up with a bit of dry humour: “We’ve got indigenously developed nuclear missiles, but our cloud backups run on servers in Virginia.”

The message seems to be landing. The next time a Nayara-type disruption happens, India might not be caught so off-guard.