Discovering the determinants of energy intensity of Indian manufacturing firms: a panel data approach

Abstract

Our study pores on evaluating the impact of firm specific and macro level determinants of energy intensity of Indian firms belonging to manufacturing and power sector. We collect a panel dataset of 3316 firms for 10 years ranging from 2010 to 2020. We employ the advanced biased corrected method of moments estimator and the quantile regression estimator for panel data models for our empirical analysis. We find that poor labor efficiency is largely responsible for increasing energy intensity of the sample firms. Energy intensity can be optimized by investing in better plant and machinery. Moreover, machineries that require frequent repairs and maintenance need to be replaced with latest tools. While larger firms are found to be energy intensive, profitable firms are found to be in a better position to enhance their energy efficiency. Under macroeconomic scenario, GDP growth and trade openness lead to boosting up the energy consumption at the firm level whereas, the global energy prices act as a constraint and necessitate careful use of energy. Based on our findings we provide certain policy recommendations and suggestions in order to limit energy intensity and enhance energy efficiency of the Indian manufacturing firms.