Process heat is a major, difficult-to-decarbonise component of India’s industrial energy demand and is currently supplied mainly through the combustion of coal, petroleum products, natural gas, and biomass. Recent techno-economic assessments indicate significant potential to electrify industrial heat in low- to medium-temperature bands, with electrified technologies already competitive with several incumbent fuels across different temperature ranges. Scaling up heat electrification could therefore substantially reduce industrial energy use and emissions, while also improving energy security through lower fossil-fuel dependence. However, large-scale electrification would have wider implications for industrial competitiveness, electricity demand, fuel imports and public finances. In particular, the transition away from heavily taxed petroleum products and natural gas could significantly affect revenue for both the Union and State governments, making the economy-wide and fiscal consequences of different deployment pathways important considerations in designing a National Industrial Heat Electrification Mission.
The study aims to employ ICRIER’s coupled Urja energy-system and Niti Computable General Equilibrium (CGE) modelling framework to assess the macroeconomic, fiscal and environmental impacts of industrial heat electrification in India, with the core analysis focusing on process heat up to 200°C. The model will assess alternative deployment and policy scenarios and quantify their impacts on economic growth, sectoral output, industrial competitiveness, employment, household welfare, trade, electricity demand, fuel use and emissions. Particular attention will be given to the fiscal implications of electrification, including the loss of fossil-fuel tax revenues, the distribution of these impacts between the Union and States, and the distinction between fiscal transfers and real resource and financing costs. The analysis will also estimate investment requirements and examine policy instruments, including capital support, accelerated depreciation, adjustments to fuel and electricity taxation, and interactions with the carbon market, to identify feasible pathways for scaling industrial heat electrification.
