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Abstract This study aims at to make a heuristic analysis of energy efficiency performance of Indian paper industry in a non-parametric production theoretic approach. Using the data for 2004–05 to 2013–14, radial and non-radial variants of DEA were employed to estimate energy saving potential and identify the relative position of paper industry across the states. Preliminary analysis in terms of energy intensity scores showed declining trends of energy intensity over the period of analysis for most of the states except states like Assam, Chhattisgarh, Kerala and Punjab where it does not decline much. Assuming a variable returns to scale (VRS) technology under the conditions of inherent heterogeneity and market imperfection, the slack-based measure (SBM) reported a much higher energy saving potential than reported by other measures in the study. Further by taking scale efficiency into account, the study documented the higher contribution of pure energy inefficiency in explaining the total energy inefficiency within the paper industry relative to scale inefficiency. Finally, the study recommends the propagation of energy efficiency program through a market-based and regulatory mechanism along with consolidation and technological advancement of individual units, in order to tap vast energy saving potential and thereby ensure the growth and environmental sustainability. Highlights • The paper examined the energy efficiency performance of Indian paper industry. • Both radial (BCC) and the non-radial (SBM) measures of energy efficiency, were applied. • BCC measure reported an energy saving potential of 16%. • SBM measure reported an energy saving potential of 24%, higher than BCC measure. • Scale efficiency implied the relatively higher contribution of pure energy inefficiency. [ABSTRACT FROM AUTHOR]