Does low power factor effect on performance of induction motor?

For an AC machine (induction OR synchronous), current required for a given load is dependent on applied voltage, overall efficiency, and power factor. With power factor at unity (1.00 per unit), current is at a minimum - but there is no appreciable amount of reactive power (either leading OR lagging).

Some machine designs have a "low" power factor, but that is typically because another performance parameter is being optimized (i.e. deemed more important to the user). For example - very high torque machines - or those intended to continuously operate at very low frequencies will often have observed power factor in the 70 percent range at full shaft output power.

With lighter loading, the apparent power factor becomes pretty low indeed, since the reactive power is relatively constant and the real power is going down - which makes the ratio abysmal.

The idea of power factor correction is that it covers ALL load possibilities. This means - in most cases - a reasonably complex arrangement of multiple capacitors of (potentially) varying value and a mechanism for switching them in/out as the need arises. And once you start switching - you'll need to watch out for the transients resulting from the switching action.

This is why MOST power factor correction occurs at the point where the utility feed enters the facility, or at least at a major distribution bus level (rather than doing so for each load unit individually). Of course, if there's only one or two "bad apples" in the cart, then it may make more sense to install "local" correction. In the case of local correction, you could (theoretically) do so with a device called a STATCOM (the acronym stands for "static compensation").

Most utilities penalize facilities that are below a certain "site" power factor - say, maybe 0.95.

Basically if a load is reactive, either Inductive reactive like a Motor or Capacatively reactive, often shown as "-" but it is not actually negative, just opposite direction reactive to Inductive.

A Reactive load causes the Current to either be behind or ahead of the Applied voltage. The result is that Volts x Amps will result in a Higher figure than the true non-reactive current for the same V x A as in W or kW. So we call that VA or kVA.

In its self, this higher Current is probably not any problem, the Motor expects that any way, in fact it is the Motor that causes and controls the Current for a specific voltage. The only significant problem is that with higher Currents in the cables, you will get more power loss in the cables. If the cables are short, then the power loss is insignificant, but if the cables are long, the lost power adds up.

The Grid supply wires are long, very long, so the losses do become significant and can lead to instability. So your Utility supplier may charge you a high price for your Electrical power if it is Reactive. So by providing Power Factor correction, you can reduce your Electricity Bill. But if the utility company does not charge you extra for your Reactive loads, why add the cost of PF correction?

If the cables to you motor are very long, then you might be able to save on cable copper costs, by putting PF correction near your Motor, to keep the cable Current lower. But if there is no financial advantage, then usually not worth bothering about. Why add complication if not needed?