India Inc has become significantly more energy efficient over the past five years, but those gains may not endure without a faster shift to cleaner, more reliable energy.
The war in West Asia has once again exposed that gap. While Brent crude has retreated more than 25% from its wartime peak of around $113 a barrel to about $83, it remains well above its pre-conflict level of roughly $74, keeping pressure on fuel costs across the economy.
The latest shock also highlights how efficiently corporate India has adapted since the Russia-Ukraine war. Mint's analysis of Centre for Monitoring Indian Economy (CMIE) data covering 3,620 non-financial companies shows that India Inc has emerged from the 2022 energy crisis less exposed to fuel costs than before the pandemic.
During Russia’s invasion of Ukraine, Brent crude briefly surged to nearly $140 a barrel and global coal and natural gas prices soared. Power and fuel costs for non-financial companies climbed from nearly 2% of both net sales and total expenditure in March 2022 to almost 2.5% by September, the analysis showed.
Since then, those costs have steadily declined. By March 2026, they had fallen to around 1.5% of both measures, while manufacturing companies reduced their energy burden to just 1.7%, well below both the September 2022 peak of 3% and pre-pandemic average of 2.2%.
Cheaper renewable power, wider adoption of captive renewable plants, increased domestic coal production for electricity, and better process efficiency, have lowered energy costs in general, said Manas Majumdar, partner and oil and gas leader at PwC India.
"Combined with a shift towards higher value-added manufacturing and services, these changes have enabled the economy to generate significantly more GDP for every unit of energy consumed than a decade ago," he said.
Carbon signals
Vibhuti Garg, director for South Asia at the Institute for Energy Economics and Financial Analysis (IEEFA), said a maturing compliance market has also pushed companies to systematically improve energy efficiency. Under the Perform, Achieve and Trade (PAT) programme overseen by the Bureau of Energy Efficiency, energy-intensive industries must meet efficiency targets, while outperformers can trade Energy Saving Certificates with firms falling short and earn additional revenue for being efficient.
However, Garg said the initial PAT targets were deliberately conservative to encourage participation, allowing most designated consumers to comfortably exceed them. She added that benchmarks under the emerging Carbon Credit Trading Scheme also remain modest. Without progressively tighter performance thresholds and stronger carbon prices backed by effective price floors and ceilings, the incentive to invest in low-carbon technologies will remain limited, according to Garg.
“While India's carbon market has succeeded in bringing industries into the conversation around energy efficiency, it is not powerful enough to incentivize deeper efficiency improvements,” Garg said.
Uneven gains
Efficiency gains have been uneven across industries, with construction materials emerging as the worst hit. After the pandemic, power and fuel accounted for about 16-17% of the industry's sales and total expenditure, above pre-2020 levels of 15%. The latest oil shock has only added to the pressure, pushing energy costs up 5% year-on-year and 10% sequentially in March 2026.
The burden is even heavier in cement, the largest construction materials segment, where power and fuel costs now account for nearly a quarter of both sales and expenditure. PwC India's Majumdar said rising fuel costs have magnified the burden of clinker manufacturing, an inherently energy-intensive process that requires kilns operating at around 1,450°C and leaves cement producers heavily dependent on coal and petcoke.
Garg argued that while proven technologies to reduce energy consumption already exist, companies will only adopt them if they can earn an adequate return. “For cement producers, the next generation of decarbonization technologies demands substantially higher capital,” she said. “In a fiercely competitive market with largely commoditized products, recovering those investments by passing on higher prices to consumers remains difficult.”
Fertilizers tell a different story. Power and fuel accounted for around 11% of both net sales and total expenditure after the pandemic, slightly lower from pre-covid levels. Majumdar attributed that stability to administered urea prices, gas pooling and subsidy support, which have largely insulated producers from global gas price volatility.
"The emphasis on food security has insulated the fertiliser sector from energy price shocks, but the resulting fiscal burden will become increasingly difficult for the government to sustain," Garg of IEEFA said.
While cement remains constrained by process chemistry and fertilisers benefit from policy support, steel has reduced its energy intensity under competitive pressure. Facing global competition and carbon border regulations, producers have invested in waste-heat recovery, automation, higher scrap utilisation and electric arc furnace technologies to stay competitive, said PwC India's Majumdar. As a result, steel has nearly halved its structural energy burden, with post-pandemic power and fuel costs stabilising at 3% of net sales and total expenditure, compared with pre-2020 averages of 5.5%.
Challenges ahead
But steel is not alone. The latest West Asia energy shock is accelerating India's industrial energy transition even as it exposes lingering vulnerabilities. Elevated natural gas prices have hit energy-intensive MSME clusters such as ceramics and textiles particularly hard, forcing many units to cut production, operate below capacity or temporarily shut down as fuel costs turned uneconomical.
The disruption is prompting manufacturers to electrify industrial processes wherever feasible while expanding captive renewable plants, open-access renewable procurement and long-term power purchase agreements to reduce dependence on volatile fuel markets, Garg said.
“Yet renewable power alone cannot guarantee industrial energy security because intermittent solar and wind still require large-scale battery storage, stronger transmission networks and flexible grid management,” she said. “Whether India's recent efficiency gains translate into lasting energy resilience will depend on how quickly India scales industrial electrification, deepens carbon markets, and strengthens domestic clean-energy manufacturing in an increasingly volatile geopolitical environment.”