Problems in CDM execution in SME clusters

1. Problems in CDM execution in SME clusters C.S.Thanvi CEO, ISTSL

2. Outline • About MSMEs • Clusters in India • Need to enhance DSEE • Barriers for EE measures • CDM for MSMEs • Challenges • Possible Solutions • About ISTSL

3. MSMEs in India • Nearly 13 million MSMEs in India • Involved in Manufacturing vast range of products • Constitutes more than 80% of total Industrial enterprises • Contribute almost 40 % of gross industrial value

4. More than 400 SME clusters in India, • Prominent being – • Foundary cluster – Ludhiana, Jallandhar, Nashik • Forging cluster – Faridabad, Ludhiana • Ceramic cluster – Morvi, Thangarh, Bikaner • Steel Re- Rolling – Mandi Govindgarh, Bhiwadi • Textile cluster – Panipat, Pali etc. • Paper cluster • All these clusters are users of high amount of Thermal Energy

5. Energy used (fuel)- mainly Coal, Oil, LPG and Electricity for heating purpose, • Cost of fuel in overall production cost is between 20-40%. • Excess energy leads to environmental pollution and affect long term sustainability, • Brings down overall productivity of the unit.

6. Need to enhance EE • A large portion of Cost of Production constitute Energy cost. • By adopting better industrial practices, Demand Side EE can be achieved. • Includes Technology Up-gradation, Modernization. • Energy saving upto 30% can be achieved. • Direct impact on bottom lines, productivity. • Also leads to reduction in Green House gases.

7. CDM for MSMEs • CDM (Clean Development Mechanism) – one of the methodologies of Kyoto Protocol towards reduction of GHGs – Global Warming. • Developed Countries buy out the CERs generated by Industries in Developing Countries to meet obligations towards reduction in emission of GHGs. • Industries undertake measures which help in reducing the consumption of Fuel or change to bio-fuel. • Effect - Reduction in emission of Carbon di-oxide, Methane etc. • Byproduct – Certified Emission Reductions (CERs); tradable commodity.

8. CDM can be implemented by way of Bundling in the MSMEs or by way of Programmatic CDM (pCDM). • pCDM or the Programme of Activities (PoA) is considered simplified and cost effective route for adopting CDM. • ISTSL has taken up a PoA for bringing about Energy Efficiency in MSME Steel Sector.

9. Overview of the programme • Purpose: To achieve demand side energy efficiency(thermal process) • Target: Units engaged in making Stainless Steel sheets, from Steel flats, used for manufacturing utensils • Number of units: 300 in PoA • Fuel Type : Furnace Oil • Quantity: 48,000 MT /annum (one cluster as a whole)

10. Challenges From SME’s perspective - • Conventional technologies, lack of awareness of energy efficient technologies and its implementation in order to achieve the reduction in GHG emissions. • Motivating units in the clusters to participate in program, jointly. • Availability of reliable data in the SMEs and establishing baseline for fuel consumption in various operation . • Absence of trained manpower capable of implementing energy efficient technologies and taking up CDM project. • Long gestation period of CDM projects.

11. Challenges (contd.) • Limited financial ability of SME rolling units to implement energy efficiency improvements. • Lack of institutional framework to support the implementation of EE measures. From CDM perspective - • High transaction cost due to less CER being generated by individual units. • Monitoring of CERs generated from the project. • Programme methodology demands complex baseline determination. • Establishing additionality for Energy Efficiency project.

12. Investment barrier: a financially more viable alternative to the project activity would have led to higher emission; • Technology barrier: a less technologically advanced alternative to the project activity involves lower risks due to the performance uncertainty or low market share of the new technology adopted for the project activity and so would have led to higher emissions; and • Barrier due to prevailing practice: prevailing practice or existing regulatory or policy requirements would have led to implementation of a technology with higher emissions; • Other barriers: without the project activity, for another specific reason identified by the project participant, such as institutional barriers or limited information, managerial resources, organizational capacity, financial resources, or capacity to absorb new technologies, emissions would have been higher.

13. Possible Solutions • Educating SMEs about the importance of proper recording of data, CSR issues etc.. • Moivating SMEs for active participation in the program. • Financial support to take up the CDM activity with combination of concessional financing and CDM revenue necessary. • pCDM – an opportunity to aggregate multiple and combined emission reduction activities or projects but there is scope for further streamlining the baseline related issues and additionality issues.

14. India SME Technology Services Ltd. • Established in November, 2005 • Technology Bank converted from TBSE, a joint venture of SIDBI and UN-APCTT for technology transfer. • Stakeholders - SIDBI along with SBI, OBC, IOB and Indian Bank. • Main activities • Providing Technology related services including Technology Transfer, • Undertaking workshops/ seminars on Energy Efficiency and CDM in MSME clusters, • Facilitating Energy assessment/ audits in clusters,

15. Encouraging MSME units for adopting Energy Efficiency measures, • Identifying Energy Efficiency projects/ technologies, • Promoting CDM in MSME units, • MOU with KfW Carbon Fund • Partnering with GtZ, BEE, Ministry Of MSME etc. for various cluster related projects.

16. Thankyou INDIA SME TECHNOLOGY SERVICES LTD. DFC BUILDING, PLOT NO.37-38, D-BLOCK PANKHA ROAD INSTITUTIONAL AREA, JANAKPURI NEW DELHI – 110 058. PHONE NO. 28525533 – 34 FAX NO. 28525535 Website: www.techsmall.com Email: istsl@techsmall.com