With India’s micro, small and medium enterprises (MSMEs) facing the challenge of energy transition, the government could launch a PM-Suryaghar-like scheme that provides capital subsidies for green energy, and a viability gap-funding (VGF) scheme for energy efficient solutions, the Niti Aayog has recommended.
“For MSMEs, energy is one of their highest input costs and efficiency is deeply linked to their business viability and growth. It also affects their technology processes. In the export market, with all the regulations in place, if the MSME sector does not decarbonise soon, the challenges in the trade sector would deepen further,” said S C L Das, Union MSME secretary.
He was speaking at the launch of a report on decarbonisation of MSMEs by the Aayog. India's MSMEs form the backbone of the nation's industrial landscape, contributing nearly 30 per cent to national gross domestic product (GDP), employing over 250 million people and accounting for approximately 46 per cent of exports.
The Aayog, the government’s policy think tank, has recommended a host of measures to support the transition for MSMEs amid an international market turning increasingly unfavourable to goods produced through polluting means. The MSME ministry will work with stakeholders to start implementing the recommendations, at least in some high-energy-intensity clusters, and see the output, Das said.
The Aayog has estimated an emission reduction potential of 27-36 million tonnes (mt) over the implementation period of the scheme as MSMEs adopt green electricity over the next decade. The Aayog has proposed a VGF mechanism, under which funds will be directly credited to the original equipment manufacturers (OEMs), for significant uptake of energy efficiency technologies.
The scheme aims to support manufacturing projects which are economically justified but fall marginally short of financial viability. Support under this scheme is available only for companies selected through competitive bidding. The total VGF under the scheme will not exceed 15 per cent of the total project cost, and is estimated to cost the government around ₹6,000 crore.
The PM-Suryaghar-like scheme will aim to provide capital subsidies for setting up installations up to 3 kilowatt capacity, which can be provided directly to the micro enterprises for coverage up to 800,000 units.
“The scheme will require financial support from the government in terms of capital subsidy for each solar rooftop installation. The total expected outlay is estimated at ₹28,672 crore over a 20-year period, based on the projected capex of ₹21,109 crore,” the report said.
The Aayog has initially recommended an allocation of ₹7000 crore for phase-1 implementation of this proposed scheme.
The government has identified 10 electricity-intensive clusters for immediate action in the first phase of implementation. Speaking at the event, Niti Aayog Vice Chairman Suman Bery said India’s electricity charges are among the highest compared to some of its peers. He said there is a need to reconcile decarbonisation with competitiveness, which is important for meeting manufacturing goals.
 "Niti Aayog suggests ₹6,000 cr VGF, PM-Suryaghar-like scheme for MSMEs")
