Indian firms have reduced power and fuel expenses to 1.5% of net sales by March 2026, down from 2.5% during the 2022 energy crisis. This improvement stems from renewable energy adoption and process upgrades, though energy-intensive sectors like cement still face significant cost pressures.
Indian companies have successfully lowered their energy burden, making the economy more resilient to global price volatility. Data from 3,620 non-financial firms shows that power and fuel expenses fell to approximately 1.5% of net sales and total expenditure as of March 2026. This is a significant improvement from the peak of 2.5% seen during the 2022 energy crisis, when global oil prices surged following the onset of the Russia-Ukraine conflict.
Efficiency Gains in Manufacturing
The manufacturing sector has been a primary driver of this trend. Energy-related costs for manufacturing companies dropped to 1.7% of net sales by March 2026, marking a sharp decline from the 3% peak recorded in September 2022. This shift is notable because it is even lower than the pre-pandemic average of 2.2%, suggesting that companies have fundamentally changed how they consume energy.
Several factors have enabled this transformation. Firms are increasingly turning to cheaper renewable power and installing captive renewable plants to bypass grid dependence. Additionally, government initiatives like the Perform, Achieve and Trade (PAT) program have created a structured environment where companies are incentivized to meet efficiency targets. The ability to trade Energy Saving Certificates has further encouraged industrial players to invest in better technology.
Sector-Specific Challenges
While the overall trend is positive, the impact has not been uniform across all industries. The cement sector, for example, continues to struggle with high energy intensity. Power and fuel costs represent nearly 25% of sales for cement producers, largely due to the clinker manufacturing process. These companies face a difficult path as they must balance the need for expensive, next-generation decarbonization technology with the realities of a highly competitive market that limits their ability to pass on these costs to customers.
Conversely, the steel industry has achieved meaningful progress. Faced with global competition and changing international carbon regulations, steel producers have moved to adopt waste-heat recovery systems, automation, and electric arc furnace technologies. These efforts have helped stabilize their energy burden at approximately 3% of net sales.
Remaining Risks to Energy Security
Despite these gains, Indian industries remain vulnerable to external shocks. Geopolitical tensions in West Asia continue to keep global energy prices higher than pre-conflict levels, which disproportionately affects smaller businesses in sectors like ceramics and textiles. High natural gas prices have forced some MSMEs to curtail production, highlighting the fragility of their energy supply.
Looking ahead, the next phase of efficiency will depend on more than just internal process improvements. Investors should monitor how effectively companies can integrate battery storage solutions and how the broader power sector manages to strengthen transmission networks. The long-term sustainability of these gains will rely on scaling up industrial electrification and the ability of firms to secure stable, long-term power purchase agreements in a volatile global market.