Centre likely to launch ₹1,000 cr incentive scheme for energy efficiency in SMEs next month

New Delhi: The Union ministry of power may launch a scheme next month to incentivize energy efficiency measures taken by small and medium businesses, said two officials in the know of the developments.

With an outlay of ₹1,000 crore, the scheme would provide interest subvention to MSMEs for loans to adopt energy- efficient technologies. The scheme would come under the Bureau of Energy Efficiency's Assistance in Deploying Energy Efficient Technologies in Industries & Establishments (ADEETIE). 

ADEETIE is an online facilitation centre of BEE to enable financing of energy efficiency initiatives.

"Draft guidelines would be shared with the industry. The plan is to provide an interest subvention of around 5% for small enterprises and 3% for medium enterprises," said one of the two people mentioned above.

Technologies for energy efficiency include automation and control systems for better resource utilization and loss reduction, combustion control systems for boilers, methane capture technology.

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The move is in line with the country's net zero goals. The Centre has been making efforts to reduce emissions and conserve energy including measures like introduction of carbon market.

Queries sent to the power ministry remained unanswered till press time.

BEE in a presentation last year suggested interest subvention of 4-8% for energy efficiency projects where state-run Power Finance Corporation (PFC) would be the nodal agency for the interest subvention. 

It said that interest subvention would be reimbursed on a monthly basis for loans financed by PFC and annually for those financed by other institutions.

It proposed fiscal support of ₹2,000 crore for the scheme as it also aimed to bring under its ambit some large industries. However, the outlay has been finalized at ₹1,000 crore.

India has set an ambitious target to achieve net zero carbon emission by 2070. The Centre has been making efforts to reduce emissions and conserve energy including plans to introduce a carbon market. 

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In December 2022, the parliament cleared the Energy Conservation (Amendment) Bill, 2022 aimed at putting in place provisions to make the use of clean energy mandatory and paving way for setting up of carbon markets in the country.

BEE has also been working on a electrification strategy for industries in a bid to reduce the use of fuels such as coal and diesel. Further, with the National Green Hydrogen Mission it is also working on the possibilities of using green hydrogen in hard-to-abate sectors such as steel and petroleum.

The move gains significances as MSMEs form a major part of the Indian economy. It contributes to around 40% of industrial production and exports. Manufacturing within MSMEs contributes to about 7% of the GDP. MSMEs also contribute to 30.50% of services and the total contribution of MSMEs to the GDP is 37.54%.

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