Implications of growing competitiveness and growth of output on the pattern of shifting energy intensity: a case study of India
Student name: Ms Mangala Ghosh
Guide: Dr Poornima Varma
Year of completion: 2013
Host Organisation: Centre for WTO Studies, IIFT, New Delhi
Supervisor (Host Organisation): Dr Murali Kallummal
Abstract: This study is a firm level analysis which examines the impact of competitiveness and output
on energy intensity of firms belonging to the industries of Indian organised manufacturing.
One of the other objectives of this study is to assess the impact of liberalisation of petroleum
products on the pattern of energy intensity of the manufacturing sector in India. The dataset
selected for this study is a panel from 2007 to 2012 and inter-firm differences have been
controlled by using fixed effects. The introduction of this paper examines the rising use of
energy by industries and how the need to become fuel efficient at the firm level has become
important since the time of liberalisation in the early 1990s. Liberalisation of petroleum
products has been captured by the export intensity of goods which use petroleum products as
inputs. Later on in this study, this export intensity was found to be one of the factors
contributing to a decline in energy intensity. This result is significant because liberalisation
policies of 1991 which led to India being able to meet almost 90 per cent of its petroleum
needs have determined the ‘efficient use of energy for every unit of sales’ as one of the top
priorities when Indian manufacturing firms export their products. This could have led to the
decline in energy intensity for the manufacturing sector in India.
On the other hand, competitiveness of firms has been partially captured by using the relative
cost of energy and the net profits of firms. Increases in the relative cost of energy and net
profits were found to have a dampening effect on energy intensity. The significance of this
result comes from the fact that a rise in the relative cost of energy induce firms to shift
towards cheaper and cleaner sources of energy and a rise in net profits enables a firm to
adopt improved energy saving technology.
Keywords: Liberalisation, firms, energy intensity, manufacturing, petroleum products
