Assessing the impact of the Perform, Achieve, and Trade scheme on energy efficiency in India's iron and steel sector

Abstract

This paper assesses the performance of the iron and steel sector in the Perform, Achieve, and Trade (PAT) scheme's cycles I and II from firm-level data between 2004 and 2019. The two-way fixed effects difference-in-difference regression employed showed a decline of 1.7% in the energy intensity due to the scheme. To check for heterogeneity in the results, the quantile treatment estimator and centered regression showed that the PAT scheme was ineffective in firms with higher energy intensity than in firms with lower and medium energy intensity, implying structural and technical difficulties in reducing energy use. In the heterogeneity analysis, private Indian and private foreign firms performed better than government-owned firms. In the mechanism analysis, research and development intensity, repair intensity, exports, and efficiency in using net fixed assets have all contributed to meeting the targets of the PAT firms. Key policy recommendations include higher energy-saving targets, which should be set concerning energy consumption; a more decentralized approach should be taken in forming energy-saving targets for the firms considering heterogeneity in their characteristics; longer time may be given to materialize the effects of energy-efficient investments and adjust the factor inputs. © 2024 Elsevier Ltd