International Journal of Energy Economics and

Policy
ISSN: 2146-4553

available at http: www.econjournals.com

International Journal of Energy Economics and Policy, 2016, 6(3), 449-462.

The Changing Energy Intensity in Indian Economy:

A Sector-level Analysis Based on Input-Output Model

Anjali Tandon1,2*, Shahid Ahmed3

1
Department of Economics, Jamia Millia Islamia University, New Delhi, India, 2Associate Fellow (Currently on Lien), National
Council of Applied Economic Research, New Delhi, India, 3Department of Economics, Jamia Millia Islamia University, New Delhi,
India. *Email: [email protected]

ABSTRACT
This paper is an attempt to analyze changing energy intensities in the Indian economy. The hybrid input-output model at constant prices has been
used to address the problem of homogenous pricing of energy inputs across sectors of the economy. Results reveal that the indirect rather than direct
energy use is an important source of energy consumption. In such scenario, conservation measures should be pegged in upstream suppliers through
technological improvements, fuel substitution or input replacements. Finally, the paper argues that improvements in energy efficiency in the production
chains are likely to be more effective than changes within the production process.
Keywords: Hybrid Input-output, Energy Intensity, Constant Prices
JEL Classifications: C67, D57, Q40

1. INTRODUCTION 2008; GTF, 2013). Energy intensity is often used a proxy for
energy efficiency. The rates of efficiency improvement, however,
Energy is a basic input for all economic activities. The direct vary at the regional and country level. The developed countries
energy use is attributed to consumption of primary energy as a and Eastern Asia accounted for bulk of the energy savings.
fuel (e.g., electricity required to operate machines and equipment The savings occurred notably in China, US, EU and India.
in the manufacturing process) or as a material input (e.g., natural Further, these countries performed diversely in terms of sources
gas used as feedstock in fertilizer industry). Energy is also directly attributing to changes in energy intensity due to technology
consumed as a final good for various uses such as for electrification improvement and restructuring1.
and as transport fuel in household sector of the economy. The
demand for energy also varies by change in tastes and consumption Also at the sectoral level, it is argued that efficiency improvements
habits of the consumer which in turn gets manifested in production largely occurred in the sectors with initially higher level of energy
process of the economy. intensity. The industrial sector featured as an example where it
was easier to enhance efficiency. The quantum and sources of
Energy intensity, initially measured on per capita consumption energy used in the sectors of production largely influence country
basis could not well indicate the level of development and level trends in emissions. This in turn highlights the importance
of source-wise energy intensity. It is further essential to consider
efficiency of a country. Of late, energy consumption per unit of
source-wise intensity due to the renewable and exhaustive nature
gross domestic product (GDP) or output is a preferred indicator
of energy sources. This is particularly important for developing
of energy intensity. It indicates the total energy requirement
to support economic and social activities in an economy. At
1 Intensity improvements are highest for China and almost entirely due
the global level, total output expanded faster than energy use to technical changes while structural changes are influential in lowering
over time (De Cian et al., 2013; Yoder). The final use of energy intensity of the US. For India, technology changes contribute to lowering of
increased whereas energy intensity of the output declined (IEA, intensity though the extent of decline is not as substantial (UNIDO, 2011).

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 Tandon and Ahmed: The Changing Energy Intensity in Indian Economy: A Sector-level Analysis Based on Input-Output Model

countries like India which face enormous energy challenge due Electricity is a widely used form of energy across sectors of the
to a wide non-renewable energy base. economy for both intermediate use and final consumption. India’s
electricity is substantially coal based with a share of 56% in
The energy use is also affected by changes in energy intensity of total installed capacity4. The diversification to the alternate non-
the producing sectors. The amount of energy consumed directly renewable sources is well recognized as a means to meet the
per unit of output incorrectly measures the energy intensity of an supply shortfalls from increasing demand for electrification with
activity. Discounting the indirect energy consumed underestimates lower environmental externality. Electricity generation from
the energy intensity. Hence, measurement of energy intensity based renewables such as hydro and wind is encouraged by the policy
on total energy use, including the indirect energy, is an appropriate makers as cleaner sources5. Hydro power accounts for 19.5% of
measure of energy intensity. The significance of indirect energy total generation capacity while wind base power accounts for
consumption is best illustrated through the example of automobile 8.6% share6. In fact, supply of electricity from renewable sources
industry. The manufacture of automobile uses various inputs such (including generation from wind, small hydro plants, biomass,
as steel, paints, glass and tyres besides other inputs. Each of these waste to energy and solar system) has increased, albeit with a
inputs in turn consumes energy during their respective production small base as compared to non-renewable electricity7. In view
process. For instance, manufacturing of steel uses energy in the of the critical significance of renewables such as hydro power,
form of coking coal along with iron ore in the blast furnace. a study distinguishing electricity generated from renewable and
Similarly, paints are chemical derivatives of petroleum products non-renewable sources becomes increasingly relevant. This further
as energy source, while the glass industry uses energy in the form has significance in terms of viewing the non-thermal component
of natural gas during the combustion process to heat furnace for of electricity as a composite of hydro and nuclear power.
melting raw materials that form glass. The tyre industry uses
energy for process, heating, ventilation and cooling. Therefore, In view of the above, a study of the changes in energy intensity
energy requirement of a given industry is a function of the energy in Indian economy is undertaken with the following objectives:
consumption of its input industries, i.e., the upstream suppliers a. To identify the major energy consuming sectors, and
(Ahmed and Tandon, 2014). The chain of raw material suppliers b. To analyze the contribution of indirect energy intensity
can be traced down to the consumption of primary energy in all embodied in the production.
supplying industries. Thus, the embodied energy requirements
for all goods and services can be estimated as a sum total of We use the hybrid (input-output [I-O]) approach at constant prices
direct and indirect energy requirement. This is further essential for two points of time. Remainder of the paper is organized into
for two following reasons. First, the proportion of direct energy the following sections. Section 2 presents the review of literature.
consumption in total energy consumption varies across sectors The details of the methodology and database are given in Section 3.
of the economy thus highlighting the difference in direct energy The results are discussed in Section 4. Section 5 concludes the
intensities for sectors. Second, extent of the proportion of indirect discussion.
energy intensity in total energy intensity, as compared with direct
energy intensity, is useful from a policy perspective that mandates
2. REVIEW OF LITERATURE
a focus on energy conservation efforts in the energy intensive
sectors with significant output proportions.
India ranks fourth among the top energy consuming countries
after US, China and Russia. However, India’s per capita energy
India sources its energy requirements predominantly from non-
consumption is among the lowest. India also performs better
renewable energy resources particularly due to large domestic
in terms of energy intensity of GDP. During 2014, the energy
reserves of coal2. Nearly half of the total energy demand is coal
intensity of India’s GDP is 0.141 as compared to 0.156 for the
based amounting to 283 million tonne of oil equivalent (mtoe)3.
world8. This is much lower than other leading consumers. The
Although the energy use is dominated by coal, yet its share in
energy intensity of US, China and Russia stands at 0.153, 0.203 and
overall energy supply declined over time. During the period
0.340, respectively9. India’s energy intensity has been continuously
1990-1991 to 2000-2001, the energy base shifted away from coal
declining since the 1990s despite the increase in absolute energy
towards oil and natural gas. However, the share of coal increased
use (Government of India, 2013).
again during the period 2000-2001 to 2011-2012 due to increased
imports by non-coking coal by power utilities and cement industry
The role of energy intensity as a source of change in energy use in
along with imports of coking coal imports by the steel industry.
I-O framework is widely attempted in the literature. A large number
The combined share of natural gas and crude oil increased to 43%
at 234 mtoe. Nuclear power expanded its base to 17 mtoe with a 4 As on March 2012, Source: CEA (2015).
share of 3%. 5 Data for electricity generation from other renewables such as solar, tidal
and geothermal energy is not readily available on a continuous basis. This
2 Energy sources are commonly classified on their renewable nature. The leaves hydro power a main source of renewable eelctctricty.
renewable sources are easily replenished into the environment system. 6 Share of wind based power is adapted from Maithani (2011).
Examples include hydro electricity, tidal energy and solar power. On the 7 Although small, the share of renewable in India’s energy is comparable to
other hand, non-renewable sources are available in limited quantities as that for US, Indonesia, Thailand and China (Government of India, 2013).
they cannot be reproduced quickly. Examples include fossil fuels such as 8 Figures represent energy intensity of GDP at constant purchasing power
coal, natural gas and oil. parities (kilo of oil equivalent/$2005 prices), Source: Enerdata Information
3 Includes the demand for lignite, figures correspond to the year 2011-12, Services (2015).
Source: Government of India (2008). 9 US refers to North America.

450 International Journal of Energy Economics and Policy | Vol 6 • Issue 3 • 2016
 Tandon and Ahmed: The Changing Energy Intensity in Indian Economy: A Sector-level Analysis Based on Input-Output Model

of studies use decomposition analysis to analyze the contribution The present research argues that it is important to consider primary
of changes in energy intensity compared to other factors such electricity due to its: (i) Substitutability, (ii) renewable nature
as the level of output and structural change (Park, 1992; Lin of the hydro resources, and (iii) primarily domestic sourcing
and Polenske, 1995; Mukhopadhyay and Chakraborty, 2002). potential to save the outgo of valuable foreign exchange required
However, results vary with specification of the decomposition. for imports of other primary fossil fuels. Additionally, analysis of
Some of the studies in the Indian context, viewed energy intensity the electricity sector is useful to underpin the technology changes
as a major contributing factor for changing energy consumption resulting from inter-fuel substitution, say between primary and
(Tiwari, 1999) with the declining intensity of crude oil and secondary sources with varying distribution of use. This qualifies
electricity contributing to the lower consumption of the respective a case for considering primary electricity as an energy sector.
fuels while the overall increase in coal intensity contributed to The present study tries to improve upon the existing literature
higher use of coal. Similarly, energy intensity has a strong effect on on energy use by disaggregating electricity into non-thermal and
lowering India’s carbon mission (World Bank, 2007). Chakraborty thermal components.
(2007) argued that worsening of energy intensity contributed to
increasing energy use. Other study noted a relatively weak intensity 3. METHODOLOGY AND DATABASE
effect suggesting that energy reductions are purely driven by
structural effect (Gupta and Roy, 2002). In the standard I-O model, the intersectoral relationships among
sectors are expressed in the form of linear equations that constitute
Most of the studies on changing energy intensity in India a system of simultaneous equations representing all activities of
have a limited sectoral profile and have been confined to the the economy (Leontief, 1936)10. It assumes homogeneity of output
manufacturing and industrial sectors. For instance, Ray (2011) for a given sector which in turn implies identical pricing across the
is limited to cement, aluminum, glass, fertilizer, paper, iron & different using sectors (Mayer and Flachmann, 2011). However,
steel and chemical industries. Sahu and Narayanan (2010) is this assumption could be unrealistic for specific commodities
a study based on data which represents a partial picture of the such as energy. For instance, fuels such as diesel or electricity
industry. Parikh and Gokarn (1993), using an I-O framework, could be highly subsidized for certain sectors leading thereby
estimated emissions due to energy use. The authors attributed to significant price differentials across the users. The hybrid I-O
one-third of the total direct carbon emissions from fossil fuels to model is useful to address the problem of homogenous pricing of
the electricity sector. They also estimated highest total emission energy inputs across sectors of the economy. The present paper is
intensity of the electricity sector, followed by cement and iron attempted by using the hybrid I-O formulation as given by Miller
& steel sector. Murthy et al. (1997) noted high coal intensity and Blair (2009).
for the coal tar products, while fertilizers are oil intensive and
non-ferrous metals have high intensity of electricity. In a slightly The relationships in physical quantities are independent of prices.
different context, Roy and Mukhopadhyay (1999) considered the The quantity based I-O analysis is possible by using hybrid (or
electricity sector along with the primary energy sectors along mixed) I-O model that has a suitably adapted formulation. It
with other infrastructure intermediates for different sectors of the represents commodity flows through a combination of physical
economy. The analysis suggested the highest energy intensity quantities for the energy sectors and money values for the
of both primary energy and electricity; and for the basic metal remaining sectors. For a hybrid energy I-O model, the comparable
sector comprising of iron & steel and other basic metals. The matrices in hybrid (mixed) units are obtained by substituting
study by Tiwari (2000) found coal tar products as coal intensive, rows corresponding to the energy sectors with the rows that
other transport services as crude oil intensive, and production have transactions in physical quantities. The resulting hybrid I-O
of non-ferrous metal as electricity intensive process. Another contains flows of the energy sectors in physical quantities while all
study by Dash and Saxena (2000), suggested coal tar products as other non-energy commodity rows are maintained with monetary
coal intensive, fertilizer as crude oil and gas intensive, transport values. The energy rows trace the use of energy commodities
as petroleum intensive and sugar as electricity intensive. In the in other remaining sectors of the economy. A mathematical
analysis for a later period, Mukhopadhyay (2004) observed high formulation of the hybrid I-O is discussed as follows (refer
energy intensity for the electricity, petroleum products, coal tar Appendix A for specifications of the I-O model).
products, cement, fertilizer, inorganic heavy chemicals, iron &
steel, non-ferrous metal and transport sectors. Let the hybrid I-O matrices be notated as Z*, A* and L*, where
the matrices are comparable to the standard I-O matrices for the
Most of the studies ignored to consider electricity intensity which commodity flows (Z), technical coefficients (A) and the Leontief
is important not only due to changing conversion efficiencies of the inverse (L), respectively11. Additionally, we also define the
secondary energy source, but also alongside the fuel substitution following matrix equation:
during in the generation process. While Mukhopadhyay (2004)
ignored to analyze the electricity intensity of sectors, Tiwari (2000) 10 The intersectoral transactions for the American economy were initially
attempted to avoid double counting of coal in the electricity sector represented in physical units such as tonnes or numbers. The data on
through data manipulation which again ignored to account for the physical output is not readily available. Hence, the I-O transactions are
widely presented in terms of commodity flows in money values.
electricity from non-fossil sources. Besides, the methodological 11 The matrices Z and Z* differ in the energy rows that contain money values
framework in the study by Gupta and Roy (2002) is restricted with in Z but are replaced with the corresponding quantities in Z*. Similarly the
the estimation of the intensity in terms of money value of flows. matrices A and A* and L and L* differ only in the energy rows.

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 Tandon and Ahmed: The Changing Energy Intensity in Indian Economy: A Sector-level Analysis Based on Input-Output Model

E + q = g (1) process of a primary energy such as coal. Further, these concepts

are perfectly compatible within the I-O models that capture the
Where, E = (ekj) is the energy matrix that explicitly provides the impact of direct use of primary energy as well as the indirect use
quantity of energy flows from the kth energy sector to the jth sector as input to produce secondary energy.
of production for intermediate consumption and has dimensions
m × n in an economy with n sectors of which m correspond to the The renewable such as electricity from hydro, nuclear, wind and
energy sectors. The column vector q = (qk) represents the energy geothermal sources are classified as primary energy. The existing
quantities consumed as final demand and has dimensions m × 1. studies on India have conspicuously ignored electricity generated
Similarly, the column vector g = (gk) represents the total energy from primary sources, particularly the hydroelectricity. Further,
output and has dimensions m × 1. hydroelectricity generation has a significant share of 26.2% in
installed capacity13. India features prominently among the top
The comparable hybrid matrices as related to the conventional 10 countries in terms of installed capacity of hydroelectricity.
money flow matrices are follows: Hydroelectricity also accounts 16.7% of the total generation14.
Hence, there has been a gap in the existing literature with respect
 zij where i is a non-energy sector
Z* =
= ( )
zij* 
ekj where k is an energy sector
 (2) to consideration of primary electricity as a source of energy.

We identify three primary energy sectors viz. coal &lignite; natural

 fi where i is a non-energy sector gas &crude petroleum, and non-thermal electricity. Data on coal
f
= *
( )
fi*
= 
qk where k is an energy sector
 (3)
&lignite sector is consistently reported in the I-O transaction
tables (IOTTs). However, natural gas & crude petroleum sector is
 xi where i is a non-energy sector not comparable over time. Therefore, to keep the sectoral scheme
x*
= (=
x )
*
i 
 g k where k is an energy sector
 (4) comparable across the years, natural gas & crude petroleum is
considered as one sector. Using the input structure from Pal et al.
A diagonal matrix of the output vector in hybrid units is defined as: (2015), the composite electricity sector is further disaggregated
into non-thermal and thermal electricity. The study by Pal et al.
 xi where i is a non energy sector on the diagonal (2015) is based on the analysis for 36 sectors for the 2 years 1994-
=xˆ ( )
xij
=

 g k where k is an energy sector on the diagonal
(5) 1995 and 2006-2007 and differentiates electricity into hydro, non-
0 elsewhere hydro and nuclear components. Hence, the column of composite

electricity sector is spilt based on the individual input structure
Then the energy requirements can be specified using the following for each of three sources of electricity. The hydro and nuclear
matrix equations12. components are combined to represent non-thermal electricity
representing primary electricity. The row of composite electricity
( )
−1
A* = Z * xˆ* (6) is split in the proportion of corresponding outputs. It is important
to note that electricity output is supplied as a homogenous product
(irrespective of the generation source) to other sectors. Therefore,
(I − A )
−1
* *
L= (7) it is less important to examine output disposition separately for
non-thermal and thermal electricity generation (Pradhan et al.,
These equations respectively provide the direct and total energy 2014). Nevertheless, inclusion of primary electricity further helps
requirement coefficients. by providing robust estimates of electricity intensity that account
for the contribution of hydro power as a non-fossil resource.
3.1. Sectors of Analysis The mapping between present sectors of analysis and IOTT is
The energy and energy intensive sectors are identified for the presented in Table 1.
analysis. In order to capture the technology coefficients precisely,
sectors with similar production technology are grouped together. The present paper defines energy intensity as the quantity of
While forming a broader group, homogeneity amongst the sectors, energy required to produce one unit output of a given sector. For
in terms of input use and output disposition, is the basic criterion the hybrid I-O analysis, energy quantity is measured in mtoe by
for sector choice. The availability of prices indices required to using availability of conversions factors from various energy
deflate the transaction flows is another important consideration. forms. The conversion factor for coal, lignite, natural gas and
electricity is computed separately per unit of output as 0.41,
The energy sectors are identified as primary and secondary. 0.2865, 0.9 and 0.086, respectively15. Further, the proportion of
Primary energy generally represents the new energy, generally non-thermal electricity such as hydro and nuclear electricity is
in the form of extracted resources, entering into the production estimated at 21.3% and 16.9% for the years 1993-1994 and 2007-
system. Fossil fuels such as coal, lignite, crude oil and natural gas 2008, respectively16.
are examples of primary energy. On the other hand, secondary
energy refers to a transformed or processed form of primary 13 As on March 2007, Source: CEA (2015).
(or another secondary) energy. Examples of secondary energy 14 Energy Statistics (2013; 2014).
include electricity obtained from the man-made transformation 15 Output of coal and lignite is measured in thousand tones, natural gas is
measured in million cu mtrs and electricity is measured in billion kwh.
Source: Energy Statistics (2011).
12 Refer Miller and Blair (2009). 16 Ministry of Petroleum and Natural Gas (1993-94 and 2010-11).

452 International Journal of Energy Economics and Policy | Vol 6 • Issue 3 • 2016
 Tandon and Ahmed: The Changing Energy Intensity in Indian Economy: A Sector-level Analysis Based on Input-Output Model

Table 1: Mapping scheme with the input‑output sectors ‑ Disaggregate sectors

Sector name Sector IOTT codes
code 1993‑1994 2007‑2008
Coal & lignite col 023 (1) 027 (1)
Natural gas & crude petroleum oil 024 (1) 028‑029 (2)
Non‑thermal electricity# nte part 100 (1) part 107 (1)
Thermal electricity ele part 100 (1) part 107 (1)
Agriculture & allied agr 001‑022 (22) 001‑024, part 025*, 026 (26)
Mining min 025‑032 (8) 030‑037 (8)
Food, beverages and tobacco pfd 033‑040 (8) 038‑045 (8)
Paper, paper products and newsprint ppp 052‑053 (2) 057‑058 (2)
Chemicals, rubber and plastics and products crp 056‑057, 060‑068 (11) 061‑062, 065‑073 (11)
Non‑metallic mineral products nmm 069‑071 (3) 074‑076 (3)
Basic metal and metal products fmp 072‑074, 076‑077 (5) 077‑079, 081‑082 (5)
Non‑ferrous basic metals nfm 075 (1) 080 (1)
Machinery and equipment ome 078‑090 (13) 083‑094 (12)
Other manufacturing omf 041‑051, 054‑055, 091‑098, 105‑115 (21) 046‑056, 059‑060, 095‑105 (24)
Construction cns 099 (1) 106 (1)
Transport services tpt 103‑104 (2) 109‑113 (5)
Other services svs 102,105‑115 (12) 108, 114‑130 (18)
Petroleum products p_g 058, 101 (2) 063, part 025* (1)
Coal tar products ctp 059 (1) 064 (1)
#
Includes hydro and nuclear power, *In order to maintain a consistent scheme of sector aggregations across the years, the gobar gas component of forestry and fishing sector is
compiled along with the petroleum product sector that includes gasworks. Note: Figures within parenthesis are the number of sectors aggregated. Sources: Based on CSO (2000, 2012).
IOTT:  Input‑output transaction tables

The conversion of a primary energy like coal into the secondary is useful to convert the nominal technology coefficients directly
energy such as thermal electricity involves loss of energy during into real technology coefficients. The conversion process is rather
the transformation process. The use of conversion efficiencies demanding in terms of data requirements as it makes use of
provides the actual requirements of the primary energy into the separate price indices for gross output, exports and imports which
system. This is further used to validate the energy conservation is important to improve the precision of computations. The data
equation of the hybrid I-O model. Using the conversion efficiencies are available from Office of the Economic Adviser, Department
for hydro and nuclear power at 85% and 33%, respectively, the of Commerce & Industry, Department of Industrial Promotion
model conforms to the energy conservation equation for both the (Government of India, 2012), Reserve Bank of India (2009 and
years of analysis17, 18. 2013) and the National Account Statistics.

3.2. Time Frame

The analysis refers to the years 1993-1994 and 2007-2008,
4. RESULTS AND DISCUSSION
benchmarked to the corresponding IOTTs (CSO, 2000; 2012).
4.1. Direct Energy Intensity
The base year 1993-1994, also signifies relevance as the initial
Direct energy intensity of all 19 sectors of the Indian economy is
year of economic reforms. The sector specific reforms in particular
shown for the reference years by energy types in the Tables 2 and 3,
were also introduced around this time. The year 2007-2008 as
respectively. The findings for intensity of primary energy sectors
a terminal year points to the importance of second generation
are indeed consistent with findings with Mukhopadhyay (2004)
reforms in place since the early 2000s, notably the dismantling of
for the year 1993-94. Highest total energy intensity is observed
the Administered Pricing Mechanism which directly affected the
for the composite electricity sector with comparable magnitude
fuel pricing. This had implications on upstream and downstream
of estimates. The estimates of total energy intensity of the coal &
industries in the economy.
lignite and natural gas & crude oil sectors match closely except that
our estimates exceed by unity. This is attributed to the accounting
3.3. Deflation Methodology
of coal used for thermal electricity, within the coal sector itself
The methodology for deflating the IOTT at 1993-1994 base year
in the present analysis. In other words, the accounting of thermal
prices is based on Celasun (1984). This has two advantages.
electricity based on primary fossil fuels such as coal and natural gas
First, it allows for a double deflation through deflating the inputs
results in higher energy intensity. The present study improves upon
and outputs using separate deflators. Second, the methodology
the earlier research by exclusively accounting for non-thermal
17 The conversion efficiency varies across sources of generation due to
electricity over a longer time horizon.
variations in technology and input use. For instance, conversion efficiency
for coal varies between 32% and 42%, for gas between 33% and 38%, for The changes in direct energy intensity are observed by comparing
oil between 38% and 44%, for hydro electricity between 85% and 90% and corresponding columns in the tables. The following discussion
for nuclear power between 33% and 36% (Mukherjee, 2012; Euroelectric, maintains a focus on the changes observed between the two
2003).
18 Conversion efficiencies for coal & lignite and natural gas & crude petroleum
periods. Total direct energy intensity of a sector is the aggregate
sectors as obtained from the I-O based computations are consistent with of direct energy intensity of each of the three energy forms viz.
alternate source. coal & lignite; natural gas & crude petroleum, and non-thermal

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 Tandon and Ahmed: The Changing Energy Intensity in Indian Economy: A Sector-level Analysis Based on Input-Output Model

Table 2: Direct energy coefficients, 1993‑1994

Sector name Coal & lignite Natural gas & Non‑thermal Total energy
crude petroleum electricity
Coal & lignite 0.007334 (3) 0.000000 (16) 0.001119 (3) 0.008452 (3)
Natural gas & crude petroleum 0.000000 (19) 0.002491 (2) 0.000183 (4) 0.002674 (4)
Non‑thermal electricity 0.297773 (2) 0.000000 (16) 0.065587 (1) 0.363360 (2)
Thermal electricity 1.877182 (1) 0.691556 (1) 0.042861 (2) 2.611599 (1)
Agriculture & allied 0.000000 (18) 0.000000 (14) 0.000000 (17) 0.000000 (19)
Mining 0.000000 (17) 0.000000 (16) 0.000000 (11) 0.000000 (17)
Food, beverages and tobacco 0.000003 (11) 0.000001 (9) 0.000000 (18) 0.000004 (13)
Paper, paper products and newsprint 0.000024 (7) 0.000000 (12) 0.000001 (9) 0.000025 (9)
Chemicals, rubber and plastics and products 0.000008 (9) 0.000013 (5) 0.000001 (8) 0.000022 (10)
Non‑metallic mineral products 0.000054 (5) 0.000000 (16) 0.000001 (6) 0.000055 (7)
Basic metal and metal products 0.000030 (6) 0.000001 (8) 0.000001 (10) 0.000031 (8)
Non‑ferrous basic metals 0.000013 (8) 0.000001 (7) 0.000001 (5) 0.000015 (11)
Machinery and equipment 0.000001 (13) 0.000001 (6) 0.000000 (13) 0.000002 (15)
Other manufacturing 0.000002 (12) 0.000001 (10) 0.000000 (12) 0.000003 (14)
Construction 0.000000 (16) 0.000000 (13) 0.000000 (15) 0.000000 (18)
Transport services 0.000004 (10) 0.000000 (15) 0.000001 (7) 0.000005 (12)
Other services 0.000001 (14) 0.000001 (11) 0.000000 (16) 0.000002 (16)
Petroleum products 0.000000 (15) 0.000345 (3) 0.000000 (19) 0.000345 (5)
Coal tar products 0.000190 (4) 0.000090 (4) 0.000000 (14) 0.000279 (6)
Figures in parenthesis show the sector ranks, Energy intensity of energy sectors (1‑4) measured in mtoe per mtoe; for remaining sectors (5‑19) in mtoe per mrs (million rupees).
Source:  Computations based on CSO (2000)

Table 3: Direct energy coefficients, 2007‑2008

Sector name Coal & lignite Natural gas & Non‑thermal Total energy
crude petroleum electricity
Coal & lignite 0.017612 (2) 0.000000 (16) 0.000555 (4) 0.018167 (2)
Natural gas & crude petroleum 0.000001 (11) 0.001925 (2) 0.000890 (3) 0.002815 (3)
Non‑thermal electricity 0.000000 (19) 0.000000 (16) 0.002294 (2) 0.002294 (4)
Thermal electricity 0.821331 (1) 0.057890 (1) 0.031642 (1) 0.910864 (1)
Agriculture & allied 0.000000 (18) 0.000000 (16) 0.000000 (18) 0.000000 (19)
Mining 0.000000 (13) 0.000000 (15) 0.000000 (12) 0.000000 (15)
Food, beverages and tobacco 0.000000 (12) 0.000000 (11) 0.000000 (11) 0.000001 (14)
Paper, paper products and newsprint 0.000008 (7) 0.000000 (14) 0.000000 (9) 0.000008 (10)
Chemicals, rubber and plastics and products 0.000002 (8) 0.000005 (5) 0.000000 (10) 0.000007 (11)
Non‑metallic mineral products 0.000027 (6) 0.000003 (7) 0.000000 (6) 0.000030 (9)
Basic metal and metal products 0.000051 (5) 0.000003 (6) 0.000000 (8) 0.000055 (8)
Non‑ferrous basic metals 0.000100 (4) 0.000001 (8) 0.000000 (7) 0.000102 (7)
Machinery and equipment 0.000002 (9) 0.000000 (9) 0.000000 (17) 0.000002 (12)
Other manufacturing 0.000001 (10) 0.000000 (10) 0.000000 (13) 0.000001 (13)
Construction 0.000000 (17) 0.000000 (13) 0.000000 (15) 0.000000 (17)
Transport services 0.000000 (15) 0.000000 (16) 0.000000 (14) 0.000000 (16)
Other services 0.000000 (16) 0.000000 (12) 0.000000 (19) 0.000000 (18)
Petroleum products 0.000000 (14) 0.000227 (3) 0.000000 (16) 0.000227 (6)
Coal tar products 0.000225 (3) 0.000138 (4) 0.000001 (5) 0.000363 (5)
Figures in parenthesis show the sector ranks, Energy intensity of energy sectors (1‑4) measured in mtoe per mtoe; for remaining sectors (5‑19) in mtoe per mrs (million rupees).
Source: Computations based on CSO (2012)

electricity. It is seen that energy sectors have been the most coal tar products moved up at the fifth position due to an increase
intensive consumers of energy in each of the years. These include in direct energy intensity as compared with the year 1993-1994.
all three primary energy sectors – coal & lignite; natural gas & The petroleum product sector slipped to the sixth position due to
crude petroleum, and non-thermal electricity; and the secondary an improvement in direct energy intensity in 2007-2008.
energy sectors – thermal electricity, petroleum products and coal
tar products. A slight change is observed in the rank hierarchy of During 1993-1994, highest direct energy intensity of 2.611599
total direct energy intensity of the energy sectors. The thermal for the thermal electricity sector implied that one mtoe of thermal
electricity sector maintains a top position. Both coal & lignite and electricity generation required direct energy inputs of 2.611599
natural gas & crude petroleum sectors moved up by one rank each mtoe due to a very high intensity of coal use at 1.877182 mtoe,
while on the other hand, direct intensity of non-thermal electricity followed by 0.691556 mtoe of natural gas & crude petroleum and
declined during the period19. At the same time, during 2007-2008,
decreasing energy intensity is considered as improvement in energy
19 An improvement in direct energy intensity of a sector means lower intensity. Similarly, increasing energy intensity is considered as worsening
requirement of energy to produce one unit of output of the sector. Thus, of energy intensity.

454 International Journal of Energy Economics and Policy | Vol 6 • Issue 3 • 2016
 Tandon and Ahmed: The Changing Energy Intensity in Indian Economy: A Sector-level Analysis Based on Input-Output Model

0.042861 mtoe due to input of non-thermal electricity (Table 2). of the primary energy sources due to renovations of the existing
Even during the latter year, 2007-2008, thermal electricity plants and recent capacity additions that have better performance
continues to lead in direct energy intensity although the magnitude efficiency (World Energy Council, 2013).
of total direct intensity has reduced. Much of the lowering in
direct energy intensity is attributed to reduction in direct coal Among the remaining secondary energy sectors, the direct energy
intensity followed by reductions in intensity of natural gas & crude intensity of coal tar products increased by 29.9% due to increased
petroleum and non-thermal electricity, in that order. The reduction intensities of each of the three energy inputs namely coal &
in direct coal intensity of thermal electricity generation is explained lignite; natural gas & crude petroleum, and electricity. However,
due to adoption of cleaner technologies such as coal beneficiation the magnitude of these changes was lower than observed for the
that refers to the process of coal washing to reduce the ash content. former three energy sectors. Lower efficiencies are attributed to
Coal washing in India became mandatory after the Ministry of below normal levels of performance. The technological status of
Environment and Forests notified that power stations beyond foundries varies widely (Bhagat, 2002). Further, composition of
1000 km radius form the coal sources and located in sensitive, the products varies with differences in the quality o coal used. For
residential and urban areas must use coal with ash content not instance, as much as 20.7% of the volume is lost during preparation
in access of 34% (TERI, 2010). This improved the efficiency of of light oil (Ganguly et al., 1933)22. The petroleum product sector
the coal circuits that now receive washed pulverized coal which registered a decline in total direct energy intensity by 34.3%
has much higher rates of oxidation. Improvements in efficiency primarily due to the improved intensity of crude oil. A marginal
of coal use have resulted in lower coal intensity of the power worsening is observed for non-thermal electricity intensity. The
generation process. The lower intensity of crude oil and natural magnitude of change in the direct intensity is much smaller when
gas is explained due to savings from transportation of coal that compared with the changes observed for total direct intensity of
has lower ash content thus leading to savings on the transportation coal, crude oil and the electricity sectors.
of unwanted material. Also, more thermal plants are now located
closer to the pitheads. A decline in own use of electricity is result Among the non-energy sectors, changes are observed both in
of the improvement in coal efficiencies of thermal plants. Total terms of ranks as well as the magnitude of total direct energy
direct energy intensity of thermal electricity sector declined by intensity. The non-ferrous basic metal sector has emerged as the
65.1% over the period. most intensive user of direct energy. During 1993-1994 it was
the 11th most intensive user of direct energy. Its rank changed to
Unlike thermal electricity, total direct energy intensity of the coal 7th  during 2007-200823. The change is attributed to the notable
& lignite sector worsened registering an increase of 114.9%. This increase in direct coal intensity that increased by a factor of
is attributed to the high ash content of coal. As much as up to 45% eight. This is attributed to inefficient generation in the coal based
of run-of-mine adds to wastage and increases the amount of crude captive power plants such as those in the aluminum sector24. The
ore required in producing one unit output (Indian Chamber of increase outweighed savings in energy intensity due to lower non-
Commerce, 2012). Changes in the non-thermal electricity intensity thermal electricity use. Although basic metal and metal products
of the coal & lignite sector contributed to lower total energy maintained their 8th, the intensity increased due to coal intensity
intensity of the coal sector as the same reduced by 50.4%. This that worsened over time. Even though traditional methods in the
improvement can be attributed to the technology improvements iron and steel industry have been replaced with newer methods
through the use of boilers that burn the high ash content and of direct reduced iron, the low quality of coal feedstock seems to
heavy earth moving machinery such as the electricity based have affected the direct intensity. Also, the relatively low share of
power shovels (Chikkatur and Sagar, 2007). However, this was steel production from scrap explains higher energy intensity25. A
insufficient to counter the increase in direct intensity of own use decline in direct energy intensity is observed for the non-metallic
as a raw material that had a net increasing effect on total direct mineral product sector at the 9th position in 2007-08 compared with
energy intensity of the coal sector. Despite the improvement due its 7th rank during 1993-94. This is due to lower direct intensity of
to non-thermal electricity, the coal & lignite continues to rank the coal use as indicated by a lower consumption of average thermal
second most intense user of direct energy inputs. Direct energy in the dry process plants that reduced from 780 kcal/kg clinker
intensity of the natural gas & crude oil sector increased over time in 1995-96 to 750 kcal/kg clinker in 2000-01 (Government of
with mixed changes in intensity of self consumption and the India, 2002). Also, the weighted consumption of electrical energy
non-thermal electricity use. The direct intensity of non-thermal reduced from 104 kwh/tonne cement to 90 kwh/tonne cement over
electricity increased drastically while direct intensity of own use the same period (India Brand Equity Foundation, 2013a). The total
improved over the period. The improvement in own use intensity direct energy intensity of the paper, paper products and newsprint
is accounted by the energy conservation measures implement by declined and the sector ranked 10th during 2007-08. The lowering
the oil refineries. This included replacement of the less efficient of energy requirement is attributed to integrated mills that make
boilers and furnaces and other operational improvements20,21.
The worsening of electricity efficiency can be attributed to non- 22 Other prominent coal tar products include naphthalene, pitch oil and
anthracene.
commensurate drilling results. The direct intensity of non-thermal 23 A higher rank indicates increased direct intensity.
electricity improved by 99.4% with similar improvement in each 24 http://www.cseindia.org/userfiles/57-66%20Aluminium%281%29.pdf.
25 Steel production from scrap is less energy intensive as compared with that
20 http://envfor.nic.in/sites/default/files/cc/cop8/moefbk/use.pdf. from the raw material. In India, the share of scrap based steel production
21 http://www.beeindia.in/awards_and_painting_competition/document/EC_ has been at 18% as compared with 33% in the world during 2007 (Trudeau,
Award/2009/AwardBooklet2009/18-Refinery.pdf. et. al., 2011).

International Journal of Energy Economics and Policy | Vol 6 • Issue 3 • 2016 455
 Tandon and Ahmed: The Changing Energy Intensity in Indian Economy: A Sector-level Analysis Based on Input-Output Model

Table 4: Direct energy coefficient as proportion of total energy coefficient (%)

Sector name 1993‑1994 2007‑2008
Coal Natural gas Non‑thermal Total Coal Natural gas Non‑thermal Total
& & crude electricity & & crude electricity
lignite petroleum lignite petroleum
Coal & lignite 0.7 0.0 59.2 0.8 1.7 0.0 66.8 1.8
Natural gas & crude petroleum 0.0 0.2 36.2 0.3 0.0 0.2 52.1 0.3
Non‑thermal electricity 28.4 0.0 6.0 14.3 0.0 0.0 0.2 0.2
Thermal electricity 77.7 67.2 66.8 74.4 77.1 20.9 77.5 65.9
Agriculture & allied 0.1 0.0 40.1 1.5 0.1 0.0 47.1 2.2
Mining 0.3 0.0 60.3 2.2 7.7 0.1 62.3 5.8
Food, beverages and tobacco 26.6 7.2 22.7 17.1 8.5 0.6 41.0 6.1
Paper, paper products and newsprint 50.9 0.4 37.7 38.7 42.3 0.0 38.2 27.5
Chemicals, rubber and plastics and 29.7 40.5 38.1 35.5 19.8 27.5 38.1 25.0
products
Non‑metallic mineral products 73.4 0.0 48.6 55.8 69.7 13.9 53.8 51.4
Basic metal and metal products 43.4 3.8 31.8 33.9 54.5 22.0 39.1 49.8
Non‑ferrous basic metals 27.2 4.9 44.7 20.9 66.8 6.3 38.1 61.4
Machinery and equipment 3.5 6.6 28.1 5.4 6.5 2.6 28.3 6.1
Other manufacturing 9.5 4.7 36.0 8.4 7.0 1.9 34.3 6.0
Construction 0.7 0.3 21.0 1.0 0.1 0.0 25.3 0.5
Transport services 22.1 0.0 56.2 7.7 1.2 0.0 41.4 0.8
Other services 12.7 12.4 40.9 13.6 2.3 1.2 49.7 3.7
Petroleum products 4.6 96.9 17.5 95.4 2.2 92.0 25.7 88.7
Coal tar products 92.0 82.3 19.7 88.4 89.9 79.4 33.6 85.4
Source: Computations based on CSO (2000, 2012)

use of recovered heat from the production process in ancillary (Rao)27. The lower direct energy intensity of the mining sector is
activities such a drying of paper (Central Pulp and Paper Research primarily due to lower electricity intensity that is the result of use
Institute). The decline in total direct energy intensity of the of efficient heavy earth moving machinery such as power shovels
chemicals, rubber and plastics and their products at 11th position for improved drilling precision in extractions of ores (Jayanthu et
is on account of lower intensities of both coal & lignite and al., 2014). In the transport sector, lower direct intensities of coal
natural gas & crude petroleum use. This can be explained due to and non-thermal electricity have contributed to decline in total
change in feedstock from coal based naphtha to the natural gas direct energy intensity. This is due to fuel substitution towards
for production of ammonia in the fertilizer industry (Integrated CNG and increasing use of diesel consumers that benefit from
Research and Action for Development, 2007). The decrease in cross subsidization (European Business and Technology Centre,
total direct energy intensity of the machinery and equipment, at 2013). Also, lower intensity of coal is a result of increasing
12th position, has been observed due to mixed behavior of intensity electrification and dieselization of Indian railways. The improved
of various energy inputs (Sahu and Narayanan, 2010). The position direct energy intensity of the service sector is a result of energy
of the other manufacturing sector improved to 13th primarily saving measures and technology improvement that increase
due to lower intensity of coal use. This sector includes various profitability of the business (Leroi et al., 2013 and SIDBI)28. The
production activities such as the textile and wearing apparel changes in mining, construction and agriculture sectors have been
industry that have upgraded technology due to modernization relatively insignificant.
and investment promotion. The government initiatives for
technology improvements include the National Textile Policy and 4.2. Total Energy Intensity
the Technology Upgradation Fund Scheme (India Brand Equity A comparison of direct energy viz. total energy requirements shows
Foundation, 2013b and Mukherjee and Mukherjee, 2012). wide variations across sectors. For 11 sectors the direct intensity
is <10% of the total energy intensity in 2007-2008 (Table 4).
The direct energy intensity of the processed food sector, transport These include sectors namely coal & lignite; natural gas & crude
services and other services declined over time. The decline in petroleum; non-thermal electricity; agriculture & allied; mining;
direct coal intensity of the food processing sector is explained by food, beverages and tobacco; machinery and equipment; other
the greater use of refinement equipment such as driers that use manufacturing; construction, transport services, and other services.
agricultural residue, by-products and solar energy (Kachru)26. The During 2007-2008, the proportion was close to 50% for two sectors
use of energy efficient furnances in the sugary processing industry namely – non-ferrous basic metals, and basic metal and metal
has also contributed to lower direct energy requirements of the products. In two more sectors, viz. petroleum products and coal tar
food processing sector. For instance, the steam consumption has products, the contribution of direct energy intensity in total energy
declined from 60-70% to 35-40% in the sugar processing industry
27 http://www.staionline.org/pdf/latest%203 rd%20India%20Sugar%20
Expo%20Presentations.pdf.
26 http://www.panelamonitor.org/media/docrepo/document/files/agro- 28 http://www.sidbi.com/?q=financing-schemes-sustainable-development-
processing-industries-in-india-growth-status-and-prospects.pdf. including-energy-efficiency-and-cleaner-production-msmes.

456 International Journal of Energy Economics and Policy | Vol 6 • Issue 3 • 2016
 Tandon and Ahmed: The Changing Energy Intensity in Indian Economy: A Sector-level Analysis Based on Input-Output Model

Table 5: Indirect energy intensity to direct energy intensity (ratio)

Sector name 1993‑94 2007‑08
Coal Natural gas Non‑thermal Total Coal & Natural gas Non‑thermal Total
& & crude electricity lignite & crude electricity
lignite petroleum petroleum
Coal & lignite 138.9 ‑ 0.7 122.9 57.2 ‑ 0.5 55.9
Natural gas & crude petroleum ‑ 406.8 1.8 382.1 53124.2 532.3 0.9 374.1
Non‑thermal electricity 2.5 ‑ 15.7 6.0 ‑ ‑ 436.3 453.4
Thermal electricity 0.3 0.5 0.5 0.3 0.3 3.8 0.3 0.5
Agriculture & allied 1122.2 6399.6 1.5 66.0 1017.6 ‑ 1.1 43.8
Mining 386.6 ‑ 0.7 44.0 11.9 1926.6 0.6 16.1
Food, beverages and tobacco 2.8 12.8 3.4 4.9 10.8 153.1 1.4 15.5
Paper, paper products and newsprint 1.0 243.8 1.7 1.6 1.4 3682.6 1.6 2.6
Chemicals, rubber and plastics and 2.4 1.5 1.6 1.8 4.0 2.6 1.6 3.0
products
Non‑metallic mineral products 0.4 ‑ 1.1 0.8 0.4 6.2 0.9 0.9
Basic metal and metal products 1.3 25.4 2.1 2.0 0.8 3.5 1.6 1.0
Non‑ferrous basic metals 2.7 19.3 1.2 3.8 0.5 15.0 1.6 0.6
Machinery and equipment 27.9 14.3 2.6 17.5 14.3 37.5 2.5 15.3
Other manufacturing 9.5 20.2 1.8 10.9 13.3 53.0 1.9 15.7
Construction 140.6 313.2 3.8 96.0 678.3 4302.8 2.9 183.9
Transport services 3.5 ‑ 0.8 12.0 80.3 ‑ 1.4 125.1
Other services 6.9 7.0 1.4 6.4 42.8 80.4 1.0 26.0
Petroleum products 20.7 0.0 4.7 0.0 45.2 0.1 2.9 0.1
Coal tar products 0.1 0.2 4.1 0.1 0.1 0.3 2.0 0.2
‑: Insignificant values of direct intensity coefficients. Source: Computations based on CSO (2000; 2012)

intensity was higher than 80%. A low share of direct energy in total Figure 1: Indirect energy intensity as % of total energy intensity
energy intensity highlights the importance of indirect energy use,
particularly in the construction and transport services.

The ratio of indirect energy intensity to direct energy intensity

has been high for most sectors. The ratio is below unity only
for four sectors namely non-metallic mineral products; non-
ferrous basic metals; petroleum products and coal tar products
(Table 5). For remaining 15 sectors, the ratio not only exceeds
unity but also acquires significant values for sectors such as coal
& lignite; natural gas & crude petroleum; non-thermal electricity;
construction and transport services. The findings suggest that
indirect consumption can be important source of energy use. In Source: Same as Table 4
such cases, efforts to save energy or improve energy efficiency may
not be fruitful if focused through attempts to lower direct energy demand including both direct requirements of 0.910864 mote and
consumption. Instead, the policy orientation toward lowering indirect requirements of 0.47188 mtoe (Table 7)29. It is interesting
consumption of embodied energy would be more effective. Such to note that the crude oil and coal sectors switch their ranks based
measures should appropriately be pegged in upstream suppliers on direct energy intensity. While the coal & lignite, and crude oil
through technological improvements, fuel substitution or input sectors rank second and third respectively in terms of direct energy
replacements. Therefore, energy improvement in the production intensity, their respective ranks in total energy are interchanged.
chains are likely to be more effective than energy changes within This underscores the importance of indirect energy consumption
the production process of the industry itself. in raising the total energy intensity of a sector. The non-thermal
electricity has a fourth position.
From Figure 1, it is clear that indirect intensity constitutes
substantial percentage of total energy intensity in most sectors of Certain sectors gain importance upon considering the indirect
the economy. Given the significant proportion of indirect energy energy required. For instance during 2007-2008, the natural gas &
consumption, it is important to study changes in the ranks of crude petroleum sector is the third most important sector in terms
sectors based on total energy intensity. The total energy intensity of direct energy intensity but it is even more significant at second
of all 19  sectors is presented in Tables 6 and 7 corresponding position in terms of the total energy intensity (2,3)30. The coal &
to the 2  years, respectively. The six energy sectors are most
intensive users of energy inputs as observed from their highest 29 The indirect energy requirements are obtained as difference between the
total energy intensities. Total energy intensity of the thermal total and direct energy intensity of the given sector.
electricity sector is highest at 1.382745 mtoe per mote of final 30 Figures in parenthesis represent the total energy intensity rank and the
direct energy intensity ranks in the year 2007-2008. For example (2,3)

International Journal of Energy Economics and Policy | Vol 6 • Issue 3 • 2016 457
 Tandon and Ahmed: The Changing Energy Intensity in Indian Economy: A Sector-level Analysis Based on Input-Output Model

Table 6: Total energy coefficients, 1993‑1994

Sector name Coal & lignite Natural gas & Non‑thermal Total energy
crude petroleum electricity
Coal & lignite 1.025811 (3) 0.019769 (4) 0.001889 (3) 1.047469 (3)
Natural gas & crude petroleum 0.008093 (4) 1.015893 (2) 0.000504 (4) 1.024490 (4)
Non‑thermal electricity 1.049129 (2) 0.404281 (3) 1.093141 (1) 2.546551 (2)
Thermal electricity 2.414490 (1) 1.029541 (1) 0.064164 (2) 3.508195 (1)
Agriculture & allied 0.000004 (19) 0.000006 (18) 0.000000 (17) 0.000011 (19)
Mining 0.000008 (16) 0.000013 (16) 0.000001 (15) 0.000022 (17)
Food, beverages and tobacco 0.000011 (15) 0.000011 (17) 0.000001 (16) 0.000023 (16)
Paper, paper products and newsprint 0.000048 (8) 0.000015 (13) 0.000002 (8) 0.000064 (10)
Chemicals, rubber and plastics and products 0.000028 (10) 0.000032 (8) 0.000002 (9) 0.000061 (11)
Non‑metallic mineral products 0.000074 (6) 0.000023 (9) 0.000002 (6) 0.000099 (7)
Basic metal and metal products 0.000068 (7) 0.000022 (11) 0.000002 (7) 0.000092 (8)
Non‑ferrous basic metals 0.000046 (9) 0.000022 (10) 0.000002 (5) 0.000071 (9)
Machinery and equipment 0.000025 (11) 0.000017 (12) 0.000001 (11) 0.000043 (13)
Other manufacturing 0.000019 (13) 0.000015 (14) 0.000001 (12) 0.000034 (15)
Construction 0.000025 (12) 0.000014 (15) 0.000001 (14) 0.000040 (14)
Transport services 0.000017 (14) 0.000041 (7) 0.000001 (10) 0.000059 (12)
Other services 0.000006 (17) 0.000005 (19) 0.000000 (18) 0.000011 (18)
Petroleum products 0.000006 (18) 0.000356 (5) 0.000000 (19) 0.000362 (5)
Coal tar products 0.000206 (5) 0.000109 (6) 0.000001 (13) 0.000316 (6)
Figures in parenthesis show the sector ranks, Energy intensity of energy sectors (1‑4) measured in mtoe per mtoe; for remaining sectors (5‑19) in mtoe per mrs (million rupees).
Source:  Computations based on CSO (2000)

Table 7: Total energy coefficients, 2007‑2008

Sector name Coal & lignite Natural gas & Non‑thermal Total energy
crude petroleum electricity
Coal & lignite 1.024993 (2) 0.007826 (4) 0.000831 (4) 1.033650 (4)
Natural gas & crude petroleum 0.027722 (4) 1.026588 (1) 0.001707 (3) 1.056017 (2)
Non‑thermal electricity 0.027936 (3) 0.011239 (3) 1.003254 (1) 1.042429 (3)
Thermal electricity 1.064809 (1) 0.277118 (2) 0.040818 (2) 1.382745 (1)
Agriculture & allied 0.000002 (19) 0.000004 (18) 0.000000 (18) 0.000006 (18)
Mining 0.000004 (17) 0.000004 (17) 0.000000 (17) 0.000008 (17)
Food, beverages and tobacco 0.000005 (16) 0.000006 (16) 0.000001 (13) 0.000012 (16)
Paper, paper products and newsprint 0.000019 (11) 0.000011 (13) 0.000001 (9) 0.000030 (13)
Chemicals, rubber and plastics and products 0.000010 (13) 0.000017 (9) 0.000001 (11) 0.000028 (14)
Non‑metallic mineral products 0.000039 (8) 0.000019 (8) 0.000001 (8) 0.000059 (9)
Basic metal and metal products 0.000094 (7) 0.000015 (10) 0.000001 (7) 0.000110 (8)
Non‑ferrous basic metals 0.000150 (6) 0.000014 (11) 0.000001 (6) 0.000166 (7)
Machinery and equipment 0.000025 (10) 0.000006 (15) 0.000001 (15) 0.000032 (12)
Other manufacturing 0.000013 (12) 0.000007 (14) 0.000001 (14) 0.000021 (15)
Construction 0.000030 (9) 0.000014 (12) 0.000001 (10) 0.000044 (10)
Transport services 0.000006 (15) 0.000027 (7) 0.000000 (16) 0.000034 (11)
Other services 0.000003 (18) 0.000003 (19) 0.000000 (19) 0.000006 (19)
Petroleum products 0.000009 (14) 0.000247 (5) 0.000001 (12) 0.000256 (6)
Coal tar products 0.000250 (5) 0.000174 (6) 0.000002 (5) 0.000425 (5)
Figures in parenthesis show the sector ranks, Energy intensity of energy sectors (1‑4) measured in mtoe per mtoe; for remaining sectors (5‑19) in mtoe per mrs (million rupees).
Source:  Computations based on CSO (2012)

lignite sector ranks third based on total energy intensity through it terms of total energy intensity while it ranks 17th due to its low
ranked higher, at the second position, in terms of direct intensity direct energy consumption (10,17). Similarly, total energy intensity
(3,2). The coal tar products and petroleum products rank fourth rank of the transport service sector moves up substantially due to
(4,4) and fifth (5,5), respectively. high indirect energy consumption (11,16). This again emphasizes
the importance of indirect energy inputs. The remaining sectors
The non-energy sectors that lead in total energy intensity include – machinery and equipment (12,12); paper, paper products and
non-ferrous basic metals (7,7), basic metal and metal products newsprint (3,10); chemicals, rubber and plastics and products
(8,8), and chemicals, rubber and plastics and products (8,8). (14,10); other manufacturing (15,13); food, beverages and tobacco
However, the construction sector emerges as a significant user of (16,14); mining; (17,15); agriculture & allied (18,19); and other
energy due to high indirect energy consumption and ranks 10th in services (19,18) – follow in that order of total energy intensity.

implies that the sector ranks second in terms of total energy intensity but A comparison of the Tables 6 and 7 highlights the changes in
ranks third in terms of direct energy intensity. total energy consumption at the sector level over time. Between

458 International Journal of Energy Economics and Policy | Vol 6 • Issue 3 • 2016
 Tandon and Ahmed: The Changing Energy Intensity in Indian Economy: A Sector-level Analysis Based on Input-Output Model

the periods 1993-1994 and 2007-2008, total energy intensity of 5. CONCLUSIONS AND POLICY
the most energy intensive sector, thermal electricity, declined
IMPLICATIONS
by 60.6% with most significant contribution being from the
reduction in total coal intensity of the thermal electricity sector.
Energy consumption in a given sector is a function of energy
A reduction in total energy intensity is also observed for the coal
required for all inputs used by the sector. The embodied energy
& lignite sector due to the declining intensities of natural gas &
requirements, for goods and services, are estimated as a sum total
crude petroleum and non-thermal electricity. The total energy
of the energy requirements of all inputs in the production chain.
intensity of petroleum products declined despite a small increase
The sector-wise energy requirements are compared based on the
in intensity of coal and non-thermal electricity intensity of the
corresponding energy intensities. An improvement in energy
sector. Among the non-energy sectors, non-metallic mineral
intensity not only lowers the cost of production but also increases
products; paper, paper products and newsprint; chemicals, rubber
profitability of the business. It also helps the ecology through
and plastics and products; transport services; other manufacturing;
lower emissions and can be considered as a community social
mining; machinery and equipment; food, beverages and tobacco;
responsibility of the producer as well as the consumer.
other services, and agriculture sector recorded lower total energy
intensities during 2007-2008 when compared with 1993-199431.
In this paper, the hybrid I-O based analysis of changes in sector-
The behaviour of individual energy intensities has been uniform
wise energy intensity shows a low share of direct energy in total
in all these sectors except for the marginal increase of coal and
energy intensity. The results highlight the importance of indirect
non-thermal electricity intensity of the petroleum sector.
energy use due to consumption of energy intensive material
inputs or due to the use of transport services in turn used by all
At the same time, total energy intensity increased for certain sectors.
input industries at different stages. The analysis of total energy
Prominent among these is the natural gas & crude petroleum sector
intensities confirms a decline in the intensity of natural gas &
with an increase in total energy intensity. The total intensity of each
crude petroleum for most sectors. This is heartening as natural
of the three energy inputs increased. Similarly, total intensity of
gas & crude petroleum is the main input for the transportation
coal tar products increased due to increased intensity of coal and
fuel. A lower total intensity for many sectors is advantageous as it
crude oil inputs. The increase in total energy intensity of non-ferrous
reduces the cost of transportation and increases the profitability of
basic metals; basic metal and metal products, and construction has
business, but is also favorable to the environment through lower
been due to increase in total coal intensity of the sectors.
consumption of a non-renewable resource.
Besides changing importance in magnitude of total energy
The findings emphasize that indirect consumption can be
intensity, certain sectors also gained importance through higher
important source of energy use. In such cases, efforts to save
ranks based on the total energy intensity. Prominent among these
energy or improve energy efficiency may not be fruitful if focused
is the construction sector (10,14)32. Minor changes in ranks are
through attempts to lower direct energy consumption alone.
also noted for natural gas & crude petroleum (2,4); agriculture &
Instead, the policy orientation toward lowering consumption
allied (18,19); non-ferrous basic metals (7,9); transport services
of embodied energy would be more effective. Such measures
(11,12) and coal tar products (5,6).
should appropriately be pegged in the upstream suppliers
through technological improvements, fuel substitution or input
Indirect consumption of energy can be on the account of
replacements. Therefore, energy improvements in the production
consumption of material inputs that are energy intensive or due
chains are likely to be more effective than energy changes within
to the use of transport services that are used by all input industries
the production process of the industry itself. At the industry level,
at various stages. For instance, the energy used in transportation
important measures such as – standards & labelling mandating the
of raw material such as the iron ores gets accounted into the total
display on the product, certification of energy managers and energy
energy used in steel manufacture, which further gets added to the
auditing of firms are effective under the Energy Conservation Act
total energy used for transportation services in the construction
(ECA), 2002. The act also provides instructional arrangements
sector. Thus, the effect of energy intensity gets cascaded
such as the Bureau of Energy Efficiency that have the objective to
successively in the supply chain before it is finally accounted in
lower energy intensity in the economy. As many as 15 industries
the sector of ultimate consumption. This has notable impact on
have been identified as energy intensive industries for designated
the changing intensity of the natural gas & crude petroleum. The
consumers. The Energy Conservation Building Code envisages
analysis of total energy intensities shows a decline in intensity
lower intensity in the commercial building sector by setting lower
of natural gas & crude petroleum for as many as 17 of the
minimum energy efficiency standards for design and constructions
19 sectors. This is heartening as natural gas & crude petroleum is
including the building envelop, lighting, service, hot water,
the main input for the transportation fuel. A lower total intensity
pumping and electrical power.
for many sectors is advantageous as it not only reduces the cost
of transportation and increases the profitability of business, but
Eventually, the goods and services are consumed by the ultimate
is also environmentally favorable through lower consumption of
user. Therefore, consumer awareness acquires utmost importance
a non-renewable energy resource.
in controlling or lowering the energy embodied in the product.
31 The sectors are mentioned in the declining order of magnitude of reduction.
Improved awareness of the user, through energy labelling and
32 Figures in parenthesis represent the sector rank in total energy intensity certification, will be effective through the changing consumer
during the years 2007-08 and 1993-94, respectively. preferences for specific products and brands. Consumer as a major

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 Tandon and Ahmed: The Changing Energy Intensity in Indian Economy: A Sector-level Analysis Based on Input-Output Model

stakeholder can play a defining role energy intensity. Therefore, Intensity Developments in 40 Major Economies: Structural Change
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labeled products is important. This can be done through consumer Euroleectric. (2003), Efficiency in Electricity Generation. Brussels,
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Ganguly, S.K., Rao, B.S., Guha, P.C. (1933), Indian coal tar. Journal of
While the total energy intensity is important to identify sectors that
Indian Institute of Science, 16, 185-192.
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APPENDIX A

Input-Output Model
Input-output models are static models that represent demand flows of goods as intermediates and final consumption in value terms.
In an economy with n sectors, the output of each sector (X) is either consumed as an intermediate good (Z) in the production process
of another sector, or is consumed as a final good (Y). Intersectoral relations are represented through the technical coefficient matrix,
A whose ijth element shows the amount of input from the ith sector required to produce one unit output of the jth sector.

The value flows are represented in a matrix, Z (n × n for an economy with n sectors) such that:

Z = (Xij)

Where, i, j = 1,….,n

The elements of Z, i.e., Xij are the flows from sector i to the sector j, measured in money values. The corresponding technical coefficient
matrix, A (n × n), is defined such that:
X ij
A= ( xij ) ∋: x ij
= n

∑X
i =1
ij

Where, i, j = 1,….,n

The matrix notation of I-O is as follows:

A*X + Y = X (A.1)

Where, X - Output vector, Y final demand vector, A is the technical coefficient matrix. The elements of A are referred to as [aij], where
i, j = 1,…n. The integer n represents number of sectors in the economy.

Equation (1) is transformed to get:

X = (I−A)−1 * Y (A.2)

The matrix L = (I−A)−1 is called inter-industry matrix and equation (2) is used to determine the impact of change in final demand on
overall economy. Its elements are referred to as [rij], where i, j = 1,….,n.

Any production activity in economy is undertaken eventually to serve into final demand of certain sector. Energy consumption is a
feature of any production process, therefore energy use is associated with all sectors. Energy consumption can be either direct if the
production process is consuming energy itself or can be indirect if it is absorbing energy through an intermediate consumption of another
production activity. While the former refer to the consumption in the production process of a given sector, the latter accounts for the
consumption due to use of inputs that might have contributed their own direct emissions. In other words, indirect energy consumption
occurs on account of consumption of non-energy products and has an associated (implicit) flow of energy goods. Effect of change in
energy demand percolates down the entire production chain that comprises of the sector itself and the sectors that feed into the given
sector. This necessitates assessment of direct as well as indirect linkage so as to avoid any underestimation of energy requirements.

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