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close this bookIndustrial Metabolism: Restructuring for Sustainable Development (UNU, 1994, 376 pages)
close this folderPart 1: General implications
close this folder4. Industrial restructuring in developing countries: The case of India
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View the documentIndustrial metabolism and sustainable development
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View the documentEnergy efficiency: An overview
View the documentEnergy use in Indian industry: A case-study
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Energy use in Indian industry: A case-study

Structural change in the economy

An examination of trends in energy use in India may typify the trends in "industrial metabolism" in developing countries. When looking at structural change in industry, India differs markedly from countries like Austria, Belgium, Denmark, France' Germany, Finland, Norway, Sweden, the United Kingdom, and Japan. In these countries, economic growth after 1970 has, in absolute or relative terms, been progressively delinked from the use of natural resources (see Udo Simonis, chapter 3 of this volume). This process of delinking has been associated with:

- a decrease in resource depletion and environmental pollution;
- the use of ex ante environmental protection measures; and
- the adoption of less polluting (cleaner) technologies in industry.

Structural change in India was different, as illustrated in figure 1:

- The growing consumption of primary energy has led to an increase in pollution.
- The increase in the production of steel and cement also represents an increase in pollution.
- The increase in the weight of freight transport indicates that material demands have increased.

Fig. 1 Structural economic change in India

The growth in factors with negative environmental effects in India occurred faster than the growth in GNP. This trend is without doubt contrary to recent experience in the more highly industrialized countries (see chapter 3).

In India, the annual average growth rate for energy production has exceeded 7.5 per cent since 1983, increasing to about 10 per cent in 1985. Gross domestic consumption has grown at a fluctuating rate, varying from 6 to 6.5 per cent. The higher growth rate of energy production suggests structural changes, with a build-up in energy-intensive sectors. This is a process which could continue into the next century, as per capita energy consumption in general is still rather low (9.8 TJ in 1989). For the Indian economy as a whole, energy demand has increased because of the increasing energy-intensity of production in both agriculture and industry.

Manufacturing industry

The manufacturing sector is the largest consumer of commercial energy in India. In producing about a fifth of India's GDP, this sector consumes about half the commerical energy available in the country. Six energy-intensive industries- aluminium, iron and steel, cement, pulp and paper, fertilizers, and textiles - that account for over 60 per cent of the energy consumed within this sector have been considered for this case-study.


The demand for aluminium is likely to increase in India owing to the rapid development of the electrical and transport sectors. On average, the specific energy consumption of the Indian aluminium industry is about 27 per cent higher than in industrialized countries, as table 3 reveals. In this case, measures of energy conservation offer the only possibility of restructuring, as there is no alternative to the Bayer-Hall process for primary aluminium reduction.

Table 3 Comparison Of energy consumption in the aluminium industry, 1984

Type of energy
Indian industry
Industry in
countries (B)
Thermal 46.73 34.25 36.4
Electrical 66.07 54.56 21.10
Total 112.80 88.81 27.0

Source: Tata Energy Research Institute, 1989.

Table 4 Energy consumption per unit output of the process centre and its variations for the period 1982/83 to 1986/87 vis-รก-vis British steel plants' performance in 1986 (unit: GCAL/tp)

Plant Plant Plant Plant Plant Plant Steel
1 Sinter Max. 0.72 0.88 0.96 0.93 0.94 NEa 0 553
    Min. 0.68 0.74 0.85 0.91 0.96 NE  
2 Coke oven Max. 2.16 2.35 2.31 3.5 2.28 2.5 1.549
  (net energy) Min. 1.92 2.29 2.16 1.64 1.41 2.18  
3 Blast furnace Max. 4.32 4.58 5.89 5.18 7.91 6.11 3.35
  (net energy) Min. 3.98 3.95 5.39 4.59 6.1 4.43  
4 Open-hearth Max. 1.1 1.28 - NE 2.19 2.30 NE
  furnace Min. 1.08 1.07 - NE 1.88 1.86  
5 LD convertor Max. 0.51 0.29 0.52 0.29 NE NE 0.32
  (net energy) Min. 0.39 0.38 0.39 0.26 NE NE  

Source: Tata Energy Research Institute, 1989.

a. NE = Non-existent. There is no LD gas recovery except in Tata Iron and Steel Company.

Iron and steel

A high rate of growth for iron and steel is expected, as per capita consumption in India in 1986 was 19 kg of crude steel compared with 578 kg of crude steel per capita in Japan. Energy accounts for about a third of the total cost of finished steel. Specific energy consumption varies within a range of 36.4-62.8 GJIT of crude steel. The comparable figure for industrialized countries is substantially lower, at 16.725.1 GJ/T. A comparison of the actual performance of Indian units with that of British steel is summarized in table 4.

Nearly 37 per cent of Indian steel is produced by the technically outmoded open-hearth furnace, which is no longer used in industrialized countries. Even in plants where the basic oxygen process is used, plant efficiencies are relatively low. Higher efficiencies also possible through improvements in the quality of coking coal. Energy efficiency improvements of 20 to 30 per cent for fuel use and 12.5 to 22 per cent for electricity use are expected by 2025 in India.


Specific energy intensities for cement produced in India are 261 kg coal/tonne, and 406 kg coal/tonne for the dry and wet processes respectively. The dry process is more energy-efficient and a shift to this process would be profitable. If by the year 2010 either (a) more dry process operations and/or (b) more efficient (current world's best) techniques were chosen, total energy demand, and hence pollution, could be reduced drastically. Specific energy intensities for India and the world's best for the wet and dry processes are given in table 5.

Opting for the best available technology would lead to a reduction of around 12.0 tonnes of coal consumed per tonne of cement produced in the year 2010, i.e. from 48 to 36 tonnes. This defines savings in terms of both coal requirements and pollutant emissions. (The calculations are based on 0.18 kg/MJ coal consumption and a calorific value of 20.94 MJ.)

The above presentations serve as an indication of the extent of savings possible within an industry solely through energy-efficiency measures. Improvements in coal consumption rates would also reduce pollution. Further process improvements and a sectoral shift, i.e. from energy-intensive production to services, would have a bearing on the fuel mix and hence the energy consumption levels in the country. What becomes apparent is that energy-efficiency improvements are of great importance, although other improvements will be needed as well.

Table 5 Specific energy intensities for cement manufacturing

  Thermal GJ/T Electrical GJ/T
World's best India World's best India
West 5.0 7.0 0.25 0.41
Dry 2.9 3.7 0.39 0.55

Source: Tata Energy Research Institute, 1989.

Table 6 Comparison of Indian and international specific energy consumption in the cement industry, 1983/84

(KWh/tonne of OPC)
(Gcal/tonne of OPC)
  Indiana International Indiana International
Wet 0.41 0.25 - 0.37 6.9 5.0 - 5.4
Semi-dry 0.44 0.32 - 0.34 4.2 3.1 - 3.4
Dry 0.55 0.39 - 0.4 4.2 3.1 - 3.4

Source: Tata Energy Research Institute, 1989.

a. Weighted average, where weights used are actual production.

Table 7 Expected decline in energy intensities in the paper manufacturing industry (percentages)

Decline in fuel intensity 10 20
Decline in biomass intensity 5 5
Decline in electricity intensity 10 15

Source: Tata Energy Research Institute, 1989.

Significant energy savings are possible in the manufacture of cement in India, as shown in table 6. Technological innovations such as pre-calcination systems and suspension pre-heaters could be incorporated in the dry process which is currently used for the manufacture of over 64 per cent of the total cement production of India.

Pulp and paper

The installed capacity for paper production in India is 2.7 mt and is expected to rise to 4.25 mt by the turn of the century. In India, the energy efficiency of a typical large mill is much lower than that of its counterpart in an industrialized country. Even a relatively modern mill in India consumes 70 per cent more heat and 7 per cent more electrical energy to produce a tonne of paper than does a typical Scandinavian mill, for instance. Further, the Indian mill is likely to purchase more fuel and power since the co-generation potential of Indian units has not yet been exploited. As this industry will continue to grow, driven by increasing literacy and the demand of the packaging industry, energy intensity is likely to decline, as indicated by table 7.


Chemical fertilizers have recorded a phenomenal increase in the past in India, and this growth might continue, driven by the demand for foodgrains. However, the efficiency of fertilizer use can be improved. Gas-based fertilizer plants are more energy-efficient than those based on naptha or fuel oil, and India is increasingly shifting to the natural gas option. It is estimated that energy efficiency per tonne of fertilizer produced could easily be raised by 20 per cent.


Textile mills are major users of steam for washing, bleaching, and dyeing cloth. More than 50 per cent of the steam-generating systems in textile plants in India are over 35 years old, with "first law" efficiencies of only 50 per cent. "First law" efficiency is a single ratio of heat output to the heat value of fuel input. However, it is not a good measure of the potential for energy conservation. To estimate that potential, it is necessary to use "second law" efficiency. This is the ratio of fuel heating value needed to produce the end product (hot water for washing, in the case of textile mills) by the most efficient measure, to the amount of fuel actually used. One may suggest that the second law efficiency in this case is unlikely to be more than 10 per cent; but with basic retrofits fuel efficiency could be raised to 65 per cent.

Energy efficiency

In a recent study carried out by the Tata Energy Research Institute (TERI), the impact of restructuring in the industrial and transport sectors of the Indian economy was assessed against the overall background of energy sector developments up to the year 2010.

At the national level, one could project two future scenarios up to 2010: a business-as-usual (BAU) path, with the economy growing at an annual average rate of 5 per cent per annum, and an alternate path (ALT) in which strict energy conservation is pursued. The energy-by-fuel-type consumption estimates under these two alternate approaches are presented in table 8.

Under the ALT strategy, natural gas is the only energy source whose rate of growth is more or less constant. This is important from an environmental point of view, since natural gas emits the least CO2 and particulates per unit combusted. Further, since combustion conditions can easily be regulated, Nox formation is controlled. The most affected fuel source would be oil, whose rate of growth under an energyconservation scenario would be 4.75 per cent as compared to 6.34 per cent under a BAU strategy; coal use would go down to 5.08 per cent from 6.01 per cent. Overall, the strategy has ramifications for the environment, given that coal is the most polluting energy source. Electricity also has an impact on the environment, depending on the fuel source of the electricity, i.e. coal, gas, or hydro. Accordingly, the environmental damage incurred would vary.

Table 8 Energy growth scenarios for India for the year 2010

  BAU Rate(%) ALT Rate(%)
Electricity (PJ) 2.49 6.41 2.21 5.99
Coal (PJ) 13,516.3 6.01 11,338.88 5.08
Oil (N) 7,450.73 6.34 5,514.81 4.75
Natural gas (PJ) 2,290.52 10.03 2,286.85 10.02

Source: Tata Energy Research Institute, 1991.

Under the ALT scenario, energy consumption in the transport and industrial sectors was considered. In the transport sector, all existing buses were assumed to be phased out with the introduction of new urban buses. The additional cost was taken as US$0.5 billion, with operation and maintenance (O&M) costs at 5 per cent of the capital cost and assuming a life of 20 years.

For the shift from road to rail, the investment of US$50 billion was assumed, in a manner similar to the strategy for road improvements. The life of the system was assumed to be 35 years and the O&M cost 2.5 per cent of the capital requirement.

The metro option supposes an average investment of US$1.3 billion for each city. Interest during construction was assumed to be 12 per cent. Further, the metro was assumed to start functioning in 2000 or 2001 and to displace 10 per cent of the cars and three-wheelers, 45 per cent of the twowheelers and 35 per cent of the buses in each of the nine cities considered. The life of the metro was assumed to be 35 years, with O&M at 5 per cent of capital costs.

Given the above assumptions for the conservation measures to be implemented in the transport sector in the country, the annualized costs per unit of energy saved in the transport sector are as shown in table 9.

In all cases, the cost per unit of energy saved is lower than the economic cost of energy. Hence, they are all viable options.

In the industrial sector, conservation measures were considered for the iron and steel, petrochemicals, and cement industries. O&M costs for process changes were assumed to be 2.5 per cent of capital costs, and the life was taken as 20 years. On the basis of these assumptions, the annualized cost per unit of energy saved in the industrial sector is as shown in table 10.

Table 9 Annualized cost per unit energy saved in the transport sector

  5% of growth rate        
Fuel saving
$/kgoe saved
Urban buses 140.81 (3.29)    
Road improvements 346.23 (8.107) 2.8 x 10-9 (0.118)    
Shifts from road to rail 516.38 (12.091) 1.7 x 10-9 (0.072)     
Metro system 116.12 (2.719) 2.5 x 10-9 (0.106)     

Source: Tata Energy Research Institute, 1991.

Table 10 Cost of energy conservation investments per unit saved, in US$/joule

Iron and steel Chemicals and petrochemicals Cement
2.6x 10-9 2.6x 10-9 7.0 x 10-6
(0.11 S/kgoe) (0.12 $/kgoe) (0.03 $/kgoe)

Source: Tata Energy Research Institute, 1991.

The incremental annualized investment for the transport and industrial sectors of India has been estimated at US$1,752.77 and 2,135.93 million (TERI, 1991).

In terms of energy savings, following from the various strategies outlined above, a brief summary is presented in table 11.

A further exercise was carried out on the basis of alternative locations for new industrial units and costs of pollution control related to these locations. The economic implications of these were evaluated accordingly. The major pollutants from industry are a function of the process employed, but owing to lack of data only air pollution resulting from the combustion of fuels was considered. Air pollution from the following Indian industries was examined: textiles, chemicals and petrochemicals, aluminium, integrated iron and steel, mini-mills steel, cement, fertilizers, paper, sponge iron, and machinery. Estimates of emissions from high-speed diesel, light diesel oil, fuel oil, lowstock high-sulphur fuel, coal, naptha, natural gas, and petroleum products used in the industrial sector are given. Emissions from the industrial sector under the BAU and ALT scenarios are presented in table 12. Three zones were categorized: Zone I implies heavily polluted areas, Zone II moderately polluted areas, and Zone III relatively clean areas.

Table 11 Cost of industrial energy

Alternative path
Electricity (PJ)
1,279.09 (359.4 TWh) 1,218.94 (342.5 TWh)
46.27 (13.0 TWh) 116.38 (32.7 TWh)
Coal (PJ)
3,869.33 (184.9 Mt) 3,113.88 (148.8 Mt)
79.52 (3.8 Mt) 238.56 (11.4 Mt)
Oil (PJ)
1,443.51 (33.8 Mt) 1,311.12 (30.7 Mt)
3,818.04 (89.4 Mt) 2,340.37 (54.8 Mt)
Natural gas (PJ)
    208.57 (5.7 BCM)
874.54 (23.9 BCM) 805.02 (22.0 BCM)

Source: Tata Energy Research Institute, 1991.

Table 12 Emissions from industrial sector in India

  SOx (000 t) CO (000t) NOX (000 t) TSP (000 t)
1 2 3 1 2 3 1 2 3 1 2 3
All India, 2010  
BAU scenario 1,216 274 180 31 6 4 1,113 154 134 28,820 1,692 1,298
HLT Scenario 1,134 148 221 28 3 5 1,063 105 140 27,954 1,658 862

Source: Tata Energy Research Institute, 1991.

Under the ALT scenario, a deliberate attempt has been made to locate new projects in environmentally relatively clean regions, thereby alleviating/stabilizing the environmental stress that has emerged in the other areas. The newly declared industrial policy in India could result in a move to a more efficient utilization of energy, with optimization of material use as well as a reduction in waste generation, since it introduces greater competition through deregulation and opening of the public sector to private ownership. However, to ensure that the new industrial policy is successful, a pricing policy that reflects the true economic and environmental cost of production, an environmental policy that regulates without undue impediments, and a fiscal policy that induces the right kind of investments are essential. Tentative steps in this direction have been made, but a lot remains to be done.

Table 13 Levelized annualized cost of pollution control

Discount rate (cost/unit in cents/J (cents/kWh)) pollutant

  3%   5%   12%  
TSP 9.1 x 10-10 (0.039) 1.1 x 10-9 (0.047) 1.9 x 10-9 (0.08)
Nox 1.3 x 10-8 (0.590) 1.4 x 10-8 (0.600) 1.5 x 10-8 (0.65)
SOx 4.6 x 10-8 (1.970) 4.7 x 10-8 (2.010) 5.1 x 10-8 (2.21)

Table 14 Some characteristics of different energy scenarios, 1985-2025



1985 I (high) II (low)
Population (millions) 766.1 1,691.6 1,691.6
GDP (1986 US$ million) 191,306 1,346,792 1,346,792
Industry sector share (%) 29 37 37
GDP per capita (1986 US$) 250 796 796
Primary energy supply (PJ) 9,055 42,505 33,911
Energy intensity (MJ/1986 US$) 47.3 31.6 25.2
Energy consumption per captia (GJ) 9.2 17.6 15

Source: Tata Energy Research Institute, 19X9.

Estimates of the levelized annualized cost of pollution control for some pollutants at various discount rates are given in table 13.

The control measures considered are electrostatic precipitators for particulate matter (TSP), selective catalytic reducers for Nox, and flue gas desulphurizers for SOx. The estimates have been made for thermal power plants only. They may, however, serve as an indicator of the costs involved in environmental protection, determined in terms of damage avoided.

Improvements in capacity utilization and the availability of power could greatly reduce the energy-intensity of all Indian industries. Long-term projections from the STAIR (Services, Transport, Agriculture, Industry, Residential) model suggest that even under the pursuance of a rather modest energy strategy, energy-intensity in India would decline drastically by 2025. The details of the projections are listed in table 14.

It has been estimated that India has an energy conservation potential of at least 10 per cent in the industrial sector during the course of the eighth Five-Year Plan, rising to 15 per cent in the next plan. The Interministerial Working Group on Energy has calculated that with the installation of new equipment the savings from coal-based, oil-based, and electric power-generation machines are approximately 20, 20, and 15 per cent, respectively.

Improved housekeeping in industries in the short-term, the training of personnel, and energy audits could save India some 151.61 PJ with an investment of only Rs. 4,000 million (approximately US$160 million). In the medium term, investments in installation for waste heat recovery systems, the replacement of inefficient boilers, the introduction of instruments and control systems, and better technology could save India 190.05 PJ with a financial investment of $1,150 million. In the long run, investments in co-generation, energy-efficient technologies, and computerization of process control operations could save India 132.39 PJ on a financial investment of $1,917 million (Government of India, 1983). Figure 2 shows the potential for energy conservation in various industries in India.