Determinants of Energy Intensity: A Preliminary Investigation of Indian Manufacturing
The demand for energy, particularly for commercial energy, has been growing rapidly with the growth of the economy, changes in the demographic structure, rising urbanization, socio-economic development. In this context the energy intensity is one of the key factors which impact the projections of future energy demand. The Indian manufacturing sector is among the largest consumer of commercial energy compared to the other industries in India. Energy consumption per unit of production in the manufacturing of steel, aluminum, cement, paper, textile, etc. is much higher in India, in comparison to other developing countries. The purpose of this study is to understand the factors that influence industrial energy intensity in Indian manufacturing. The analysis undertaken in this paper find a positive relationship between energy intensity and firm size and an inverted U’ shaped relationship between energy intensity and size of the firm. The analysis shows that the foreign owned firms are less energy intensive compared to the domestic firms. Capital intensive firms as well as firms spending more on repair and maintenance are found to be more energy intensive. Further the results shows that expenditure on the research and development contribute to reduce firm level energy intensity and there is a sizable difference between highly energy intensive firm and less energy intensive firms.
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