Government of India and World Bank Sign Additional US$5.19 Million Grant Agreement for Improving Energy Efficiency in MSME’s
The Government of India and the World Bank today signed an additional grant of US$ 5.19 million from the Global Environment Facility (GEF) to increase demand for energy efficiency investments in select micro, small and medium enterprises (MSME) and build their capacity to access commercial finance.
The project will be jointly implemented by Bureau of Energy Efficiency (BEE), Ministry of Power, Government of India and Small Industries Development Bank of India (SIDBI). The share of additional grant will be US$ 1.42 million and US$ 3.77 million respectively for BEE and SIDBI. Through a cluster approach the project will increase demand for energy efficiency products and financing solutions in five targeted industry clusters. It will help build the capacity of apex organizations to assist MSME units in identifying additional Energy Efficiency (EE) projects in the future.
The grant agreement for the project was signed by Raj Kumar, Joint Secretary, Department of Economic Affairs, Ministry of Finance, on behalf of the Government of India, Ajay Kumar Kapur, Deputy Managing Director, on behalf of SIDBI and Junaid Ahmad, World Bank Country Director in India, on behalf of the World Bank.
“The purpose of the GEF grant is to catalyze innovations and replication of successful ideas. We are, therefore, willing to consider a larger program by MoMSME to build on the success of this program, with the objective to enhance energy efficiency and reduce carbon foot prints”, said Shri Raj Kumar, Joint Secretary, Department of Economic Affairs.
The parent project – Financing Energy Efficiency at MSME Project, which became effective in September 2010, was jointly implemented by BEE and SIDBI. Currently out of the 3,200 Investment Grade Energy Efficiency Improvement Measures (EEIMs), about 2,500 have been implemented in approximately 600 MSMEs spread across four major MSME clusters. The project has successfully leveraged EE investments of about Rs.1050 crore from the market and is expected to grow by about Rs.700 crore on completion of the additional finance Project. These investments could achieve Lifetime Direct Emission Reductions of 1.5 million tons of CO2 which is further expected to result in 3 million potential replicable lifetime direct emission reductions.
“India’s programs to support urban transformation and promote economic growth provide a significant opportunity to steer the economy in the direction of more sustainable and cleaner energy development. In this context, improving energy efficiency – often called ‘first fuel’ — is one of the most cost-effective ways of enhancing energy security and mitigating climate change,” said Junaid Ahmad, World Bank Country Director, India. “The focus on energy-intensive MSME sectors through this project will help increase the demand for energy efficiency products and services in India.”
The project will engage in focused efforts in energy-intensive MSME sectors to increase the demand for EE products and services. It will help among others mobilize replication of proven technologies, demonstrate scaled down technologies which are proven in 14 large scale units but not available for MSMEs, and make available financial instruments for deploying EE technology.
The sub-sectors that will be considered for EE under the additional financing include agro-based and food processing units, ceramic industries, pulp and paper units, pharma sector, and consumer electricals. These sub-sectors consume about 25 percent of the energy share of MSMEs.
The GEF Program is one of the largest and longest standing trust-funded programs in the World Bank Group. Since 1991, when the World Bank helped to establish the GEF, it has integrated global environmental benefits across the Bank programs through more than 790 investment projects and programs in 120 countries.