Energy Intensity, Capacity Utilisation and Total Factor Productivity Growth of Indian Iron and Steel Industry: A Cost Function Approach: 1980–1981 to 2016–2017

Abstract

In this study, the authors have tried to estimate and examine the relationship between energy intensity (EI), capacity utilisation (CU) and total factor productivity (TFP) of Indian Iron and steel industry for the time period 1980–1981 to 2016–2017. The estimation of TFP and its growth is based on three inputs capital (K), labour (L) and energy (E) using transcendental logarithmic cost function. Besides, capital and labour factor inputs, the estimation of CU also take into account the input, energy. It also considers the variable, price of energy and uses a variable cost (VC) function. This study also takes into account the concept of adjusting total factor productivity growth (TFPG) by CU. From our result, this study observes that CU increased over time. Again, Iron and Steel industry has become energy intensive (increasing EI) over the time period taken up for the study. On the other hand, TFPG has declined in the liberalised era. The preliminary idea that we get from our result is that TFPG is negatively related to the extent of pollution generated by energy intensive nature of the Indian Iron and Steel industry, which is in line with reality. To come out of this situation, we may prescribe the use of green technology and green energy sources for this industry.

Citation

Kumar Pal, M., Bera, P. and Hasan, M.R. (2023), "Energy Intensity, Capacity Utilisation and Total Factor Productivity Growth of Indian Iron and Steel Industry: A Cost Function Approach: 1980–1981 to 2016–2017", Kumar Pal, M. (Ed.) The Impact of Environmental Emissions and Aggregate Economic Activity on Industry: Theoretical and Empirical Perspectives, Emerald Publishing Limited, Leeds, pp. 313-329. https://doi.org/10.1108/978-1-80382-577-920231022