Indian Industry &  Energy  Conservation

The energy gap is, of course of prime concern to policy makers at the macro levels.  But it is consuming industries, which account for 52% of energy in India who can contribute the most through increased efficiency and reduced wastage.

This also make sound economic sense for the following reasons :-

Skyrocketing Costs

Energy cost (per kWH) has risen faster than the rate of inflation – the average cost of energy per unit rose from Rs.1.72 in 92-93 to 2.18 in 95-96, an increase of 27% in 3 years, while the rate of inflation rose by 26% in the same period, forcing producers to absorb increase in energy costs.  Over a decade, energy costs have nearly quadrupled from 1.10 to Rs.4.2 in some states like Gujarat.

This trend will continue as the nation continues to import fuel with a weak rupee.  Private Power Producers which will generate more power in the future, do not enjoy subsidies that State Electricity Boards do and will not sell cheap power.  

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      Easy to control

Of all the elements of cost, like Material, Labour, Interest & Depreciation, energy is the one cost that cannot just be controlled but reduced.

Companies often spend a lot of effort in reducing labour costs which are tougher to control and have HR and societal implications.

Managing energy costs on the other hand is easier, more achievable & completely internal to the company.  

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     Marginal, Tax – deductible Investment

Industries investing in energy saving measures are allowed several benefits such as 100% write-off of entire investment in year of purchase etc.

     So, energy conservation measures pay back very quickly.

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Significant Savings

      In many large industries, energy cost as a percentage of manufacturing cost or of turnover may be small,   but in absolute terms this can be a lot of money.

     A reputed consultant’s survey in India shows that there is a saving potential of upto Rs.5000 crores in India      through energy cost reduction of just 5%.  The table shows the impact of energy conservation on profits in      some typical energy intensive industries :- 

(Source:  Study by M. K. Raju Consultants Pvt. Ltd.)

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