This paper estimates disaggregated fuel models for seven energy intensive manufacturing
industries in India during the period 2000-01 – 2011-12. Based on data published by Annual Survey
of Industries, Government of India, coal, electricity, petroleum products and a residual group „other
fuel‟ are taken into consideration. Three types of elasticity of substitution parameters (Allen,
Morishima and McFadden‟s) along with price elasticity of the fuels are obtained based on estimated
parameters of translog fuel cost function in order to analyse the pattern of inter-fuel substitution.
Results suggest, for the chosen set of industries, the cross price elasticity estimates of a pair of fuels
are not symmetric, and thus careful assessment is needed from the part of the policymaker to identify
the most suitable energy price policy to trigger adequate behavioural response. Electricity is mostly
found to be a substitute of both coal and petroleum. Hence, policy orientation towards major
electrification in industries backed by decarbonization of electricity generation sector can be useful.
Estimated cross price elasticities are not very high suggesting price policy alone may not act as a
major trigger of fuel substitution.