HT Capacitor

It might but without knowing a lot of additional information I cannot tell. With all due respect, the limited information you believe is relevant that you brought us does tell me that you are not qualified to be doing anything about a substation.

Knowledge and comprehension are valuable commodities that deserve financial recognition. Hire an electrical engineer or electrician to examine your system. Let them tell you if your system configuration is wasting electric power or not.

You are looking at the magnitude of the Amps without knowing the power factor angle, your kWh meter only records the real portion (kW) and is what you should be checking, it should be reading nearly the same with or without the capacitor (all other things being equal).

Here's where "thumb rule engineering" fails, someone has to pay for the I² losses that "extra" 17A are causing as they pass through the wiring, such is the penalty that you pay for having overcompensated with the capacitors, get a different more knowledgeable consultant to help you.

The Capacitor is normally used in Substations to improve the Power Factor. The Transformer under no load conditions will cause low PF and need correction of PF to avoid penalty from MSEB for low power factor and needs correction by adding capacitor in the system but will consumes power but if you switch off the Capacitor Low power Factor penalty will be much larger. The quantum of Capacitor to be added during no load condition will be different from that of loaded conditions depending on the type of the Furnace ( Resistance Furnace or Induction Furnace. ) The best solution is to add Capacitance by steps with the help of APFC unit depending on the value of PF you need to maintain to avoid Low Power Factor penalty by MSEB as per your contract .

The capacitor will actively oppose all inductance/inductive reactance present in the circuit when connected to it.

This means the current flow caused by reactive power will be displayed on the ammeter.

I am sure that the long length of cable connecting the substation to the oven is contributing to this.

Leaving the capacitor connected at all times will act to improve the power factor as long as there is inductive reactance present however if the circuit loses the inductive reactance the capacitor will cause power factor deviation in the opposite direction.

I would suggest you monitor the Power Factor (PF) and react accordingly.

It is possible to automate the switching of the capacitor(s) on an as-needed basis based upon the power factor (PF).

Plausible but since the OP never mentioned anything at all about power factor, phase angle, reactive power or any of the other parameters that would indicate a good understanding of AC power, I believe your accurate words mean nothing to the OP. For all we know the capacitor could be properly placed downstream of the control switch and doubles as a snubber when disconnecting. Thus putting it out of the power circuitry when the system is OFF. The mystery 2 amperes of current could be control circuitry instrumentation, indicators or even an indication of insulation breakdown somewhere.

To find out what is going on requires a knowledgeable person, on site, with wiring documentation to troubleshoot the situation. The OP is clearly not a knowledgeable person. Neither you nor I are on site of this operation. As far as documentation, well nobody has mentioned anything about that until now.