Role of Energy Price and Investment in Energy Efficiency Performance of Indian Iron and Steel Sector

This study aims at estimating the driving factor of energy intensity level of Indian iron and steel industry. Iron and steel sector is the most energy-intensive sector and uses natural resources more than other industry in India. Disaggregate level data of basic iron and steel industry is taken from the annual survey of industries for the period of 1981-82 to 2013-14. We have taken four major driving factors; energy price, capital intensity, labour productivity and investment -output ratio. In order to assess the impact of these variables, time series analysis is done. The result shows the existence of long-run equilibrium relationship among all the variables. Long-run estimates show an increase in energy prices and investment-output ratio leads to decline in energy intensity while increase in labour productivity and capital intensity contributes to more energy-intensive production. Granger causality results suggest a one-way causal flow from energy intensity to energy price. So energy price needs market-oriented reforms and creates an incentive for firms to utilise energy input efficiently. Finally the study recommends the investment in energy efficient technology and diffusion of knowledge regarding energy efficiency measures.