How to calculate the ROI on an industrial heat pump in India, with the arithmetic shown

The return on an industrial heat pump comes out of one division: your electricity tariff per kilowatt-hour, divided by what a useful kilowatt-hour of heat costs you today from the fuel you burn. That ratio is your breakeven coefficient of performance, and in India it lands between 0.6 and 1.2 against PNG, furnace oil and light diesel oil, and between 2.8 and 6.5 against delivered coal and biomass briquette. Above the ratio, every point of COP is margin; below it, the switch costs you money however good the machine is. Everything else in an ROI model, the annual saving, the payback, the discounted return, is that one gap multiplied by the useful heat you deliver in a year.

What are the actual steps?

There are five steps in all, and only two of them are difficult.

Step	What you work out	Where the number comes from
1	Useful heat delivered per year, in kWh thermal	Duty in kW multiplied by annual operating hours, off your load survey or boiler log
2	Cost of a useful kWh of heat from your current fuel	Fuel price, divided by calorific value multiplied by boiler efficiency, converted at 1 kWh = 860 kcal
3	Cost of a useful kWh of heat from the heat pump	Landed electricity tariff, divided by the COP achievable at your output temperature
4	Annual operating saving	Step 2 minus step 3, multiplied by step 1
5	Simple payback	Installed cost from your quotation, divided by step 4

If your load is metered as steam rather than as kilowatts, 1 TPH of saturated steam is roughly 583 kW thermal. That is an approximation from 1,000 kg per hour at about 2,100 kJ per kg of enthalpy rise, not a published standard, so use it to scope a duty and not to size a machine.

Steps 2 and 3 are where models go wrong, and they go wrong in opposite directions. Step 2 is usually understated, because the fuel price used is a published or domestic rate rather than the plant’s contracted industrial rate, and because boiler efficiency is taken from the nameplate rather than from a flue gas test. Step 3 is usually overstated, because the electricity price used is the energy charge rather than the landed rate, or because a COP from the bottom of the temperature range is applied to a duty at the top of it.

What does a useful kilowatt-hour of heat cost you now?

This is the number the whole exercise turns on, and almost nobody has it to hand, because fuel is invoiced per SCM, per kg, per litre or per tonne and heat is consumed in kilowatt-hours.

The table below converts the fuels an Indian plant actually burns onto one basis. It is our arithmetic rather than a published index, so here are the assumptions in full: 1 kWh = 860 kcal; PNG gross calorific value 9,500 kcal per SCM; furnace oil 10,050 kcal per kg; coal 3,800 kcal per kg; boiler efficiency 85% on gas, 80% on oil, 70 to 72% on solid fuel and 97% on electric resistance. Light diesel oil at 10,700 kcal per kg and briquette at 4,000 kcal per kg are indicative figures that were not independently verified, so treat those two rows as weaker than the rest. Change any one of them and the rows move, which is why they are printed here rather than buried.

Heat source	Price	Cost per useful Mkcal	Cost per useful kWh thermal
PNG at the crisis peak	₹119 / SCM	₹14,737	₹12.67
Light diesel oil	₹107.65 / litre	₹14,623	₹12.58
Electric resistance, Maharashtra HT-I	₹8.44 / kWh	₹10,117	₹8.70
PNG, Morbi ceramic cluster	₹75 / SCM	₹9,288	₹7.99
Furnace oil	₹71.99 / kg	₹8,954	₹7.70
PNG, Gujarat general industrial	₹68 / SCM	₹8,421	₹7.24
PNG, Morbi, July 2024	₹41.60 / SCM	₹5,152	₹4.43
Heat pump at COP 2.5, Maharashtra HT-I	₹8.44 / kWh	₹3,926	₹3.38
Biomass briquette	₹8,500 / tonne	₹2,951	₹2.54
Heat pump at COP 3.0, Maharashtra HT-I	₹8.44 / kWh	₹3,271	₹2.81
Heat pump at COP 3.5, Maharashtra HT-I	₹8.44 / kWh	₹2,804	₹2.41
Coal, delivered at ₹6,000 / tonne	₹6,000 / tonne	₹2,256	₹1.94
Heat pump at COP 3.5, Karnataka HT-2(a)	₹7.05 / kWh	₹2,342	₹2.01

Furnace oil and light diesel oil are priced at 1 August 2026. The Gujarat and Morbi PNG rates are June 2026, and the ₹41.60 Morbi rate is July 2024. Briquette is 2026 trade pricing rather than an official index.

Work one row by hand and you can work all of them. Gujarat industrial PNG at ₹68 per SCM, at a gross calorific value of 9,500 kcal per SCM through an 85% efficient boiler, delivers 8,075 kcal of useful heat per SCM. Divide ₹68 by 8,075 kcal and scale to a million, and a useful Mkcal costs ₹8,421. Multiply by 860 over a million to move to kilowatt-hours and a useful kWh of heat costs ₹7.24. Furnace oil at ₹71.99 per kg through an 80% boiler gives 8,040 useful kcal per kg and lands at ₹7.70. Delivered coal at ₹6,000 per tonne through a 70% boiler gives 2,660 useful kcal per kg and lands at ₹1.94.

Two traps in this table are worth naming, and one of them cuts against the vendor case. Never build the incumbent side on a domestic PNG rate: consumer aggregators publish city rates for households, and industrial supply in the same city is a separate, contract-specific and materially higher number, so a model built on the household figure understates your fuel cost and therefore understates the saving. And never build the coal row on a pithead price. Non-coking G13 coal was notified at ₹1,849 per tonne in June 2026, but that is not a factory-gate cost, and using it moves the answer in a direction that would not survive an energy manager’s review.

What COP do you need before the switch pays?

Divide your landed electricity tariff by the figure you just calculated. The result is your breakeven COP: the efficiency at which the heat pump exactly matches what you already pay.

Incumbent fuel	Maharashtra, ₹8.44	Gujarat, ₹8.00	Karnataka, ₹7.05
PNG ₹75 / SCM, Morbi	1.06	1.00	0.88
PNG ₹68 / SCM, Gujarat	1.17	1.10	0.97
Furnace oil ₹71.99 / kg	1.10	1.04	0.92
Light diesel oil ₹107.65 / litre	0.67	0.64	0.56
PNG ₹41.60 / SCM, July 2024	1.90	1.81	1.59
Biomass briquette ₹8,500 / tonne	3.33	3.15	2.78
Coal delivered ₹6,000 / tonne	4.35	4.12	3.63
Coal delivered ₹4,000 / tonne	6.53	6.19	5.45

Read it as three separate markets rather than one.

Gas, furnace oil and light diesel oil break even between 0.6 and 1.2, so any functioning machine beats them and there is no sensitivity analysis left to lose. Pre-crisis gas at ₹41.60 per SCM breaks even between 1.6 and 1.9, which is still comfortably beaten, and that row is the honest answer to the question every board asks about what happens if gas comes back down. Coal and biomass break even between 2.8 and 6.5, which a high-temperature machine on grid power does not reach. Against solid fuel this is a compliance, air quality, labour and customer-audit decision and not a fuel cost decision, and any analysis claiming otherwise will be taken apart by the first competent energy manager who reads it.

The other half of the comparison is the COP you can actually hold at your duty, and that depends on the lift. Tetra Heat Pump, a product of Promethean Energy Private Limited, builds air source, water source and cascade units with continuous output to 120°C, up to 1,450 kW in a single machine and up to 5 MW across a multi-unit project; its water source units reach COP 4.5 to 5.2 at 60°C output, and performance falls as output temperature rises toward the 120°C ceiling. Independent measurement in Indian conditions puts performance at about 2.26 at 110°C output and about 2.0 at 120°C, which is the hard end of the curve. Put the figure for your output temperature into step 3, not the figure for the range, and the model survives review. There is more on how source choice changes the number in our comparison of air source and water source configurations.

Which electricity price goes into the calculation?

You should use the landed rate, and it varies from state to state far more than most buyers expect.

State and licensee	Category	Energy charge	Demand charge	Landed
Maharashtra, MSEDCL	HT-I	₹8.44 per kVAh, FY2026-27	₹650 per kVA per month	Add duty and any time-of-day adjustment
Gujarat, GUVNL	HT-I	₹4.30 per unit	Not separately verified	₹7.50 to ₹8.50 all-in
Tamil Nadu, TANGEDCO	HT industrial	₹7.50 per kWh, FY2026	₹608 per kVA per month	Plus 5% electricity tax
Karnataka, BESCOM and the other ESCOMs	HT-2(a)	₹6.70 per unit plus 35 paise surcharge	₹365 per kVA per month	About ₹7.05 before duty
Uttar Pradesh, UPPCL	LMV-6, Small and Medium Power	₹9.02 per unit average billing rate	Not verified	Already all-in

Two rows carry conditions that change the arithmetic. Uttar Pradesh’s LMV-6 is Small and Medium Power rather than large HT industrial, so do not read ₹9.02 as the rate a large plant pays. And Maharashtra bills HT-I per kVAh rather than per kWh, so a plant running poor power factor pays more per useful unit than ₹8.44 implies. That is not a small population: roughly a quarter of Maharashtra consumers above 200 kVA run power factor below 0.90, and under 0.5% actively manage it. A large compressor makes it worse, so if yours is weak, price automatic power factor correction into the project. Fixing it can pay for part of the installation on its own.

One forward-looking fact belongs in the Maharashtra row. The approved HT-I path falls from ₹8.44 per kVAh in FY2026-27 to ₹7.45 by FY2029-30. A tariff on a published downward track behaves differently in a ten-year model from a fuel priced off imported LNG, which was USD 21.38 per MMBtu on the JKM benchmark on 31 July 2026.

From the running cost delta to a payback

Take the two rows already worked. Gujarat industrial PNG delivers a useful kWh of heat at ₹7.24. A heat pump holding COP 3.5 on the Maharashtra HT-I tariff delivers the same useful kWh at ₹2.41. The gap is ₹4.83 per useful kWh thermal, which is 67% of the incumbent cost.

Multiply that gap by step 1 and you have the annual operating saving. That is the only number in the model that is genuinely yours, because duty and operating hours are plant-specific and the answer moves further on operating hours than on anything about the machine. A duty running two shifts and a duty running continuously produce different projects from identical equipment.

Across the fuels a heat pump genuinely beats, PNG, LPG, furnace oil, light diesel oil and diesel, the running cost saving falls in a 40 to 70% band. Where in that band you land is exactly what the arithmetic above tells you, and it moves with two things: which fuel you are displacing, and the output temperature you need. At a 60 to 70°C duty a COP near 3.5 is plausible and the 67% figure holds. At a 120°C duty, measured Indian performance is nearer 2.0 to 2.26 and the saving falls, though at COP 2.5 against today’s gas price it is still around 53%.

For the denominator you need an installed cost, and we do not publish one, because there is no honest single figure. Installed cost on this equipment moves with the heat source you recover from, the lift between source and output, whether the duty needs an air source, water source or cascade machine, the unit count, the pipework and controls integration into existing plant, and the electrical work at your incoming supply. A rupee-per-kilowatt constant would be wrong for most readers in one direction or the other, and the payback built on it wrong by the same amount. Put the quotation for your own duty in the numerator. The comparison of heat pump and boiler running costs works the same arithmetic across a wider set of boilers.

What payback should you actually expect?

Indian industrial buyers usually state a preference for one to three years. A World Bank study covering 224 Indian MSMEs, however, put the realised payback at 44 months.

Both numbers are true and they are not in conflict, but the second one is the one to plan against. The stated preference is a screening filter that decides which projects get a serious look, and it is worth treating as exactly that. Used as a hurdle rate it rejects sound projects and, worse, it pushes the person building the model to find assumptions optimistic enough to clear it, which is how a project gets approved on paper and disappoints in service.

The gap between the two closes from the numerator, not from the denominator. A payback quoted on equipment cost alone will always beat a payback quoted on delivered project cost, and the items in the next section are what sits between them.

What the running cost delta leaves out

The exclusions are worth naming, because a saving figure is only as good as the list of things it does not cover. All rupee figures below are the MSEDCL Schedule of Charges effective 1 April 2023, GST extra, and Maharashtra-specific.

Item	Why it is outside the delta	Indicative scale
Demand charge and power factor	Billed on sanctioned demand, not on units consumed, so it does not appear in a per-kWh comparison	₹650 per kVA per month in Maharashtra, ₹608 in Tamil Nadu, ₹365 in Karnataka
Sanctioned load enhancement	Moving heat from fuel to electricity raises connected load, and the enhancement is a one-time charge	Application and processing on HT up to 33 kV, ₹2,660, with the annexure naming load enhancement explicitly
Service connection	Charged separately from the application, and it is the largest of these items	HT 11 kV to 1,000 kVA overhead, ₹2,38,110; underground, ₹2,73,820; an 11 kV metering cubicle with CT and PT, ₹91,500
Security deposit	A cash-flow item rather than a cost, recalculated annually against the new average billing	Maharashtra sets it at twice the average billing cycle, so a bill rising by ₹6 lakh a month pulls through roughly ₹12 lakh of additional deposit. Gujarat computes it as if for a new service covering the entire load, which is harsher
Connection lead time	Not a cost, but it moves the date savings begin	MERC’s Supply Code requires the licensee to endeavour to release a connection in 7 working days without right of way and 15 with, and the word is endeavour, so treat it as a soft target
Site obligations	A site-planning consequence buyers do not anticipate	Where a distribution transformer is needed on site, the consumer provides the land or a room on lease
Civil work, integration and downtime	Project-specific, and they belong in the quotation rather than in a per-kWh model	Ask for them to be itemised separately in the numerator
The incentive stack	Reduces the effective numerator rather than changing the running cost	See below

Three provisions are worth checking before the capital request goes in. Accelerated depreciation on energy efficient equipment stands at 40%, and heat pumps are named explicitly in Appendix I item 8(ix) of the Income Tax rules; the 80% figure still circulating is out of date. ADEETIE, the Ministry of Power and BEE scheme running from FY2025-26 to FY2027-28, carries a 5% interest subvention for micro and small units and 3% for medium, across 60 clusters and 14 sectors, five of which are core process heating verticals, and it also funds the investment-grade energy audit and the detailed project report; eligibility runs on a Udyam ID in a notified cluster and a demonstrated 10% energy saving, so confirm your specific technology is covered before you count on it. And a hot water circuit below 100°C is not a registered boiler under the Indian Boiler Regulations, which removes the certified attendant across every shift and the annual inspection shutdown from your operating cost. There is more detail in our guide to government incentives for heat pumps in India.

Two things are commonly overstated in these models. PAT and ESCerts apply only above the Designated Consumer threshold of 30,000 MTOE for most sectors, so they are irrelevant to most of the addressable market, and carbon credit revenue under the compliance market is not yet a line a bank will lend against. Around 71% of the funds under ADEETIE’s predecessor scheme went unused. A subsidy is a reason to start the conversation, not a reason to buy.

Where the calculator fits

The savings calculator runs the same two divisions from your heat duty, your current fuel, your electricity cost and your annual operating hours, which is faster than doing them by hand and no more accurate than the figures you put in. This page exists so you can check its answer against your own paperwork and see which input actually moved it. Where the two disagree, your bill wins.

When the breakeven COP from your own numbers sits below what is achievable at your output temperature, the next thing to get is a week of real load data rather than a quotation, because operating hours and part-load behaviour decide the project. You can see the equipment side of that on the high temperature heat pumps page, or start the load review here.