From the DG’s Desk.
- The continuing growth, competitiveness and well-being of MSME units is intricately related to the health and growth of Indian economy: There are about 44 million MSME units in India which contribute 45% of the India’s manufacturing output, account for about 35 % of our exports ,and provide employment to more than 59 million people in the country. In many of the SME sectors energy is often the single largest operating cost and consequently energy productivity is key to their survival.
- However, large scale increase in energy conservation and in increased energy efficiency have been limited in MSME sector. This is because of the number of reasons but field level interventions indicate that there are three major reasons: the limited time available to the entrepreneur to identify, contract and finance energy efficiency opportunities in addition to many other tasks that call for his time limited availability of local service providers who can support entrepreneurs in project development financing and implementation, and the almost complete lack of information in the development and deployment of new energy efficient technologies that are suitable for the MSME and can be adopted in almost plug and play manner.
- These suggests that the energy productivity enhancement processes have to be developed, standardized and demonstrated so that, transaction cost are minimized and profitability for entrepreneurs, local service providers, technology suppliers and financial institutions derives large scale replication. Over the years while, there have been many small scale interventions which have demonstrated the effectiveness of the more energy efficient technologies and operating practices, the use of finance to enable large scale deployment of energy efficient technologies in MSME has been extremely limited.
- I am sure that the experience and insights presented in this web domain would work as a complete knowledge portal for entrepreneurs, local service providers, technology suppliers and financial institutions to enable a-step up increase in their understanding of BEE’s way forward for cleaner greener and efficient MSMEs.
2.1 BEE-SME SCHEME “National programme on Energy Efficiency and Technology Up gradation of SMEs”
Indian SME sector consumes energy equivalent to about 50 million tons of oil equivalent annually, which is about 20 to 25% of the energy consumption by large industries. SMEs in India are exists in form of clusters which are spread across the length and breadth of the country, and are involved in producing textiles, bricks , hand tools, metal castings and forging and pumps. The projected energy consumption in SMEs by 2017 is expected to increase to 68.2 mtoe with a projected annual growth rate of 6.0 percent.National program on Energy Efficiency and technology up gradation of SMEs (BEE-SME) scheme: In its endeavour to accelerate uptake of Energy Efficiency in SME sector, BEE initiated a program specifically to improve the energy performance of this sector in the year 2009. This program is fully funded by Government of India. In the XI Plan i.e. from FY 2007-2012, BEE conducted a number of activities starting with a Situation analysis in selected 35 SME clusters out of which 25 SMEs clusters (12 Sector Type) were undertaken for further interventions. Comprehensive energy audit and technology gap assessment was completed in 25 SMEs clusters . A repository of 375 DPRs on energy efficient technologies were prepared and peer-reviewed. Information Dissemination and awareness creation workshop were held in 51 SMEs clusters. Implementation of Small Group Activities was completed in 9 units of 3 clusters. Capacity building of Local Service Providers/Technology Providers in 25 SMEs clusters was completed. By the end of the XI plan energy savings, assessed form 988 units of 26 clusters quantified to 4934.45 toe / annum with voluntary investment of Rs 28.06 crore made by the units (988 units). BEE interventions in the XIth plan have shown that there is a vast potential to save energy in various MSMEs industries in India. These lie both in the thermal energy domain where the design of furnaces and recovery of waste heat have enormous potential, as also in the electrical energy domainIn order to make this programme more beneficial and attractive for the SME’s unit owners of the clusters and to ensure widespread replication, BEE in the XII plan, has been focusing on two activities
- Implementation of 100 energy efficient technology demonstrations in 5 energy intensive clusters with provisions of back ended subsidy of 50% of the total cost of the technology per unit subject to a max of Rs 10 Lakhs.
- Information dissemination and capacity building workshops for SME unit owner across the country to disseminate the results in terms of energy savings achieved by through these technology demonstration projects for their wide spread replication.
UNIDO with support from the Global Environment Facility (GEF) has initiated a project in September 2011 titled ‘Promoting energy efficiency and renewable energy in selected MSME clusters in India’ in collaboration with BEE, Ministry of MSME (MoMSME) and Ministry of New and Renewable Energy (MNRE). The project is focussing on development and promotion of a market environment for introducing energy efficiency (EE) and enhanced use of renewable energy (RE) technologies for process applications in 12 selected MSME clusters under five energy intensive MSME sub-sectors i.e. Brass, Ceramic, Dairy, Foundry and Hand tools.These clusters have been chosen based on the total energy consumption as well as the energy intensity levels. The total energy consumption of these 12 clusters is estimated at about 1.44 million tonnes of oil equivalent (mtoe). The project will address a few important barriers such as lack of technological solutions and capacities at cluster levels and the paucity of reliable data at policy levels. The broad goals of this 5-year project include the following:
- Increased capacity of suppliers of EE/RE products/ service providers/financing institutions
- Increasing the levels of end-use demand and implementation of EE and RE technologies and practices by MSMEs
- Scaling up of the project to national level
- Strengthening policy, institutional and decision making frameworks
A Project Management Unit in UNIDO-GEF-BEE has been setup at New Delhi to channelize the grant to the targeted beneficiaries and to coordinate activities in the 12clusters.
2.2 GEF-WB-BEE Scheme “Financing Energy Efficiency at MSMEs”
In India, the barriers for energy efficiency in SMEs include not just the market barriers typically seen in energy efficiency projects globally, but additional constraints in SME’s access to finance. Indian SMEs typically face constraints in accessing adequate and timely financing on competitive terms. Given the existing market barriers observed in India, the Project Financing Energy Efficiency at SMEs was conceptualized as a part of the GEF Programmatic Framework for Energy Efficiency in India. Global Environment Facility (GEF) and the World Bank through SIDBI and BEE are implementing an initiative on financing Energy Efficiency (EE) in MSME Clusters in India to improve EE and reduce Green House Gas (GHG) emissions from MSMEs utilizing increased commercial financing for EE. The Grant agreement was signed on September 13, 2010 and effectuation of this grant took place on October 28, 2010. Total GEF Funding under the project available to SIDBI is 9.05 Million USD to be utilized over a period of four years. In addition to the grant to SIDBI, GEF has also provided a grant of USD 2.25 Million to the Bureau of Energy Efficiency (BEE) for implementation of energy efficiency at MSMEs in India. A Project Management Unit in SIDBI has been setup at New Delhi to channelize the grant to the targeted beneficiaries. Under the project, SIDBI will focus largely on five energy intensive clusters viz. foundry cluster at Kolhapur, Forging at Pune, Limekilns at Tirunelveli, Chemical at Ankleshwar and mixed at Faridabad) in India through provision of assistance for completion of Energy Audits, preparation of DPRs and support in mobilization of financing from the Indian local banks to ensure that the identified EE measures are implemented. The project focusses on four main activities viz. as 1) Activities to build capacity and awareness for EE in MSMEs, 2) Activities to increase investments in EE in MSMEs, 3) Programme knowledge management, and 4) Project management. Through the outreach activities carried out under this program, participants from 4000 SMEs units have been capacity built, about 1120 Financial Institution personnel have been trained through special programs for FIs, NBFC and CAs, 617 Detailed energy audits have been carried out and a repository of 594 Investment Grade Detailed Project report (IGDPRs) has been created out of which 504 IGDPRs are in various stages of Implementation.