High energy costs, long a drag on India’s manufacturing competitiveness, are finally easing.
Power and fuel expenses accounted for 1.98 per cent of net sales in 2024–25, the lowest level in data compiled by the Centre for Monitoring Indian Economy (CMIE) over the past two decades.
The April-June 2025 quarter saw an even lower figure of 1.92 per cent.
Advances in technology, conservation measures, and firms investing in their own power generation units are among the reasons for the decline.
“Solar and wind cost Rs 3–4 per unit,” said Mahesh Bendre, fund manager at LIC Mutual Fund, noting that many firms are shifting to cheaper renewable electricity, either through third-party purchases or captive plants.
Bendre added that the transition is still underway, with energy costs likely to fall further.
Companies are pairing renewable plants with battery energy storage systems to improve reliability.
Falling battery prices and declining renewable tariffs should help companies cut energy expenses, he said.
Several manufacturers, big and small, mentioned their cost-cutting efforts in annual reports.
Bharat Heavy Electricals, valued at over Rs 75,000 crore, reported adding a 5 megawatt peak (MWp) solar plant at Haridwar, expected to generate 9 million units annually, along with a 2 MWp facility in Hyderabad that will add 3.6 million units.
“Through systematic energy audits conducted across its units, various conservation projects have been implemented, resulting in tangible reductions in energy demand,” the company’s annual report said.
Filatex India, a polyester filament yarn maker valued at under Rs 5,000 crore, said it has commissioned a 23 megawatt (Mw) hybrid wind-solar project that will meet most of its power needs.
“This shift is expected to reduce energy costs by Rs 18–20 crore annually.
"We continue to operate our 30 Mw captive power plant for reliability,” the company said in its annual report.
The trend extends beyond the manufacturing segment.
For 4,184 non-financial companies as a whole, power and fuel expenses are also at a two-decade low, standing at 1.66 per cent of net sales in the April-June quarter.
The push for nuclear energy could act as a tailwind for lower-cost, reliable industrial power generation, according to K Ramanathan, Distinguished Fellow at The Energy and Resources Institute.
Energy-intensive sectors such as steel and cement are exploring small modular reactors (SMRs) — compact nuclear power plants that promise low-cost, reliable supply.
Regulatory norms are being relaxed, and global thrust is building, with the US, China, and the UK pushing adoption.
“All the artificial intelligence and data centres coming up have huge concentrated demand,” Ramanathan said, adding that SMRs could see deployment in India within five years.
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