Empowering India’s MSMEs for a Sustainable Energy Transition
India’s commitment to reducing emissions intensity and achieving net-zero status by 2070 presents a monumental challenge and an equally significant opportunity. A critical player in this endeavor is the Micro, Small and Medium Enterprises (MSME) sector, which forms the backbone of India’s economy, contributing nearly 30% of its GDP. However, this sector also accounts for 56% of India’s total energy demand and a quarter of the industrial sector’s energy consumption, resulting in approximately 110 million tonnes of CO2 equivalent emissions annually.
As the projected energy consumption of the MSME sector is set to rise by almost 50% by 2030, addressing its energy efficiency and sustainability becomes paramount. Moreover, this sector plays a pivotal role in the nation’s social development by employing around 110 million people. Therefore, aligning the growth of MSMEs with India’s net-zero and inclusive trajectory is imperative.
Yet, there are several challenges on the path to integrating Environmental, Social, and Governance (ESG) principles into MSME operations. Larger industries have easier access to knowledge, technology, resources, and capital, which are often lacking in the MSME sector. Additionally, the informal nature of many MSMEs poses obstacles in adopting resource-efficient technologies and sustainable practices. Limited awareness of formal financing options further compounds these issues, with only about 16% of MSMEs in India financed through formal banking systems, leaving a significant credit gap.
Recognizing the significance of the MSME sector, the Indian government has implemented various policies, strategies, and programs to promote resource efficiency and sustainability. Collaborations between government bodies such as the Bureau of Energy Efficiency (BEE), operating under the Ministry of Power, and the Ministry of Micro, Small and Medium Enterprises have been instrumental in encouraging energy-efficient practices, optimizing resource utilization, and minimizing waste generation within MSMEs.
Several schemes, including the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), the Support and Outreach Programme, Technology and Quality Upgradation (TEQUP), Technology Acquisition and Development Fund (TADF), End to End Energy Efficiency Scheme (4E), and Zero Defect Zero Effect Scheme (ZED), aim to enhance the quality and resource efficiency of MSMEs. Initiatives like “Atmanirbhar Bharat Abhiyan” have also provided critical support to distressed MSMEs.
To further accelerate the adoption of eco-friendly practices, the government can incentivize MSMEs with tax breaks, deductions, or rebates for investments in green technologies. Offering low-interest loans or credit facilities tailored to green initiatives can provide the necessary capital. Establishing a dedicated green advisory cell to guide MSMEs and raising awareness at the cluster level are vital steps. Collaboration with international organizations and multilateral development banks can facilitate funding, technology transfer, and best practice sharing.
Creating an enabling ecosystem for greener MSMEs not only aligns with India’s net-zero goals but also positions them within the global supply chain and attracts international investments. As India pursues inclusive and sustainable economic growth, nurturing the MSME sector through innovation, technology adoption, and capacity building can lead to a brighter future, contributing significantly to the nation’s net-zero targets and inclusive development.
