financial schemes for msmes and case studies on energy...

11 -13 August 2014, Indore

Financial Schemes for MSMEs

and Case studies on Energy

Conservation

Ananda Mohan Ghosh,

Fellow,

TERI


Contents

• EC Act 2001

• Nodal Banks /Agencies

• Financial Schemes – NMCP (TEQUP) – CLCSS – CGS

• Credit lines – JICA – KfW – AfD

• CFC Schemes for foundry

• Sizing of Equipment / Utility

• Case Studies on ECMs

• Gaps in SMEs to adopt EE technologies


Energy Conservation Act - 2001

In order to promote energy efficiency in the country, Energy Conservation Act was enacted in October 2001 and became effective from March 2002. The Act provides regulatory impetus to energy efficiency activities in the country. Under the provisions of the Act, the Government of India set up Bureau of Energy Efficiency (BEE) on 1st March 2002 with the primary objective of reducing energy intensity of the Indian economy.

The Act empowers the Central Government and in some instances the State Governments to:

• Notify as designated consumers (DC)

• Establish and prescribe energy consumption norms and standards for DC

• Direct DC to designate or appoint CEM

• Direct DC to carry out DEA as per instruction

• Ask to furnish status of implementation of ECMs by DCs

• Comply with energy consumption norms and standards

• Prescribe energy conservation building codes

• Direct owners or occupiers of commercial buildings to comply EC building codes

• Direct mandatory display of label on notified equipment and appliances.

• Specify energy consumption standards for notified equipment and appliance.

• Prohibit manufacture, sale, purchase and import of sub standard notified equipment and appliances


Energy Conservation Act (Amendment) 2010

Main Amendments

• DCs may be issued with energy savings certificate (ESC) for less

consumption

• DCs shall be entitled to purchase ESCs to comply with the prescribed

norms and standards for more consumption

• The value of ESC may be prescribed for per metric ToE of energy

consumed

• ECBC is applicable for commercial buildings with a connected load of

100 kW or contract demand of 120 kVA and above


Nodal banks/ agencies

SL NO NAMEs

1 Small Industries Development Bank of India (SIDBI)

2 National Bank for Agriculture and Rural Development (Nabard)

3 State Bank of India

4 Canara bank

5 Bank of Baroda

6 Punjab National Bank

7 Bank of India

8 Andhra Bank

9 State Bank of Bikaner & Jaipur

10 Tamil Nadu Industrial Investment Corporation

11 The National Small Industries Corporation Ltd.


Financial schemes for MSMEs

• National Manufacturing Competitiveness Programme (NMCP)

Scheme

• Credit Linked Capital Subsidy Scheme (CLCSS)

• Credit Guarantee Scheme

• ISO 9000 and ISO 14001 Certification Reimbursement

Scheme

• Financial Assistance for using Global Standard(GS1) in

Barcoding

• Sustainable Finance Scheme

• Subsidies/schemes for undertaking energy audits by various

state governments e.g. Maharashtra, Gujarat etc.


National Manufacturing Competitiveness Programme (NMCP)

NMCP has 10 components are being implemented through the Public-Private-Partnership

(PPP) mode.

1. Lean Manufacturing Competitiveness Scheme

2. Enabling manufacturing sector to be competitive through Quality Management

/Standards/Quality Technology Tools (QMS/QTT)

3. Promotion of ICT (Information and Communication Technology) in MSMEs

4. Technology and Quality Up gradation Support to MSMEs (TEQUP)

5. Marketing Assistance and Technology Up gradation Scheme

6. Marketing Support/Assistance to SMEs (Bar Code)

7. Design Clinic Scheme for Design Expertise to MSMEs

8. Setting up of Mini Tool Rooms

9. National campaign for building awareness on Intellectual Property Rights (IPR)

10.Support for Entrepreneurial and Managerial Development of SMEs through Incubators


TEQUP Scheme

• The Ministry of Micro Small and Medium Enterprises (MoMSME) launched the

scheme during May 2010currently in operation during the 12thPlan

• The main objectives of the TEQUP scheme are to sensitize MSMEs on energy

efficiency and encourage and support adoption energy efficient technologies

in the MSME sector to improve the competitiveness and provides support for

• Feasibility study – 75% of the cost (cap to 75 thousand)

• DPR preparation (set of 3) - 75% of the cost (cap to 9 lakh @ 3/DPR)

• EE technology adoption support -25% of the capital cost (cap to 10 lakh &

15% energy saving equipments - ONLY FOR APPROVAL)


Details of CLCSS

The Scheme aims at facilitating technology up gradation by providing

upfront capital subsidy to SSI units, including tiny, khadi, village and coir

industrial units, on institutional finance (credit) availed of by them for

modernization of their production equipment (plant and machinery) and

techniques (LISTED TECHNOLOGY)

• Launching capital subsidy in October, 2000 – 12% (capital cost

cap to 40 lakh = 4.8 lakh) and revised to 15% since

September 2005 (capital cost cap to 100 lakh = 15 lakh)

• Under the scheme approximately 22000 units have availed subsidy

of Rs. 1146 crore till 31 March 2013.


Details of CGS

• launched by the Government of India to make available

collateral-free credit to the micro and small enterprise sector

(August 2000)

• Nodal bank - Small Industries Development Bank of India

(SIDBI)

• established a Trust named Credit Guarantee Fund Trust for Micro

and Small Enterprises (CGTMSE) to implement the Credit

Guarantee Fund Scheme

• Covers collateral free credit facility to new and existing micro and

small enterprises for loans up to INR 100 lakh per borrowing unit

(including all –WC, Term loan etc.)


Details of Credit Lines

• Special credit line to borrow finance from banks / financial institute at very low rate of interest broadly to promote energy efficiency and address various challenges posed by the entry of multinational companies in the domestic market.

• SIDBI has been identified as a Nodal Agency for the releasing of assistance, monitoring, interface and coordination with Financial Institutions, Banks and the Government for such special line of credits scheme.

• List of schemes • JICA – SIDBI financing scheme • KfW – SIDBI financing scheme

• KfW-Energy Efficiency Scheme • KfW-Cleaner Production Scheme • KfW Innovation Finance Programme

• AfD – SIDBI financing scheme


CFC Scheme for foundry cluster

• A group of at least 25 SME foundry unit register under MSME within a cluster can avail financial support under this scheme to establish CFC for sand reclamation and other common facilities.

• SMEs are encouraged to avail the benefits under the scheme to avoid lengthy procedure of soft intervention for establishing such facilities.

• Other details

Operating authority - The office of Development Commissioner, Ministry of MSME

Eligibility criteria – member of 25 MSME registered units within cluster

Financial support - 70 % by Central Government (Investment capped to Rs 15 Crores = 10.5 crore; and balance 30 % by SPV /State Government)

DSR with assistance of professional expert or institute – 2.5 lakh (report to be submitted by 3 months)

DPR with assistance of professional expert or institute – 5 lakh

• Approval

on positive response from SIDBI after vetting the DPR, Steering Committee will accept

the DPR for execution and release financial grant from Government to SPV through State Government Agency


Equipment specifications

• Sizing

• Application

• Operational parameters (maximum , minimum)

• Controlling mechanism

• Start from PoU to PoG/Source

• Discussion with suppliers

• Check for unit conversion


Case study: ECM-1

Replacement of existing inefficient cupola of 2.2 TPH with efficient induction furnace of 450 kW with crucible capacity of 500 kg

Parameters Unit Existing Proposed

Melting furnace (type) Cupola Induction

Melting rate (-) 2.2 TPH 500 kg/batch

Annual melting (MT/year) 1430 1430

Specific Energy consumption

(Unit/MT) 182.5 kg coke 550 kWh

Energy Rate (Rs/unit) 29.5/kg 7.4/kWh

Annual energy cost (Rs in lakh/year) 77 58

Monetary benefits (Rs in lakh/year) - 19

Investment Rs - 30

Payback period year - 1.6

Annual CO2 emission tCO2/year 887.4 700

CO2 avoided tCO2/year - 187.4


Case study -1: Views of furnaces

Base case (Cupola) Post implementation (Induction)


Case study: ECM-2

Installation of EE induction furnace

Parameters Unit Value

Capacity kW 175

Crucible Kg 150

Specific energy consumption kWh per tonne 650

Cost benefit analysis

Existing SEC kWh per tonne 850

Proposed SEC kWh per tonne 650

Baseline production tonne per year 432

Annual Saving kWh per year 86,400

Electricity cost Rs per kWh 7.03

Monetary Savings Rs lakh per year 6.07

Investment cost for induction furnace and cooling tower

Rs lakh 12.72

Simple payback period Years 2.2


Case study : ECM -3

Parameter Unit AC-1 AC-2 AC-3 (VFD)

Capacity cfm

519.13 127.5 210

Existing practice - Main (base AC) Stand by AC NA

Recommended - Discard Base AC Variable load

Specific Power Consumption

kW/cfm 0.414 0.190 0.180

Annual operation hour 7200-850=6350

7200 7200

Energy consumption from loading kWh/year 552450 174420 291600

Unloading time Minute/hour 0 0 15

Energy saved from unloading

kWh/year 0 0 22500

Energy saved kWh/year 108930

Rate INR/kWh 6.77

Monetary saving Lakh/year 7.37

Investment cost INR in lakh 8.48

SPP Year 1.15

Installation of EE compressor with VFD


Case study: ECM-4

Installation of down size compressor

Present Case Unit Motor of soft water pump

Present drive kW kW 15

Measured kW kW 17.8

Full load efficiency 70%

Full load power kW 21.43

Operating efficiency 71%

Demand factor 0.83

Operating losses old kW 5.19

Proposed Case

Proposed energy efficient motor kW kW 15

Full load efficiency of new drive 91%

Full load power kW 16.43

Operating efficiency of new drive 91%

Demand factor new 1.08

Operating losses new kW 1.58

Savings

Reduction in losses kW 3.61

Operating hours hrs 7,200

Energy savings kWh 25,989

Cost of electricity INR/kWh 7.33

Monetary saving INR/year 1,90,502

GHG emission factor tCO2/MWh 0.89

CO2 avoided t CO2 / yr 23.13

Energy saving per year toe/yr 2.24

Investment INR 39,150

SPP year 0.21


Case study: ECM-5

Installation of EE raw water pump for induction furnace cooling

Parameters Unit Existing Proposed

Pump efficiency % 27 49

Flow rate m3 per hour 14.1 21.6

Input power kW 6.0 5.5

Annual operating hours hours per annum 4,800 4,800

Annual energy saving kWh per year - 2,277

Monetary benefits Rs per year - 16,006

Investment Rs - 26,381

Payback period years - 1.65


Case study: ECM-6

Installation of Metal Halide lamp instead of Mercury Vapour Lamp in phase manner

Particulars Unit Existing Proposed

Type of lamp - MVL Metal Halide

Wattage of lamps W 250 150

Design Lumen (Approx.) Lumen 12,500 13,000

Watt loss per ballast W 15 15

No. of lamps to be replaced No. 16 16

Average Operating Hours per day Hours/Days 10 10

Operating day /year No. 300 300

Energy consumption kWh/year 12,720 7,920

Energy savings kWh/year 4,800

Energy Cost Rs/kWh 8.03

Energy cost savings Rs/ year 38,556

Initial retrofitting cost / lamps Rs 3,110

Initial investment cost Rs 49,760

Payback period Years 1.29



Energy savings toe/year 0.41


Case study: ECM-7

Installation of T-5 instead of T-12 FTL

Particulars Unit Existing Proposed

Type of lamp - T-12 T-5

Wattage of lamps W 40 28

Design Lumen (Approx.) Lumen 3,200 2,900

Watt loss per ballast W 12 2

No. of lamps to be replaced No. 12 12

Average Operating Hours per day Hours/Days 10 10

Operating day /year No. 300 300

Energy consumption kWh/year 1,872 1,080

Energy savings kWh/year 792

Energy Cost Rs/kWh 8.03

Energy cost savings Rs/ year 6,362

Initial retrofitting cost / lamps Rs 585

Initial investment cost Rs 7,020

Payback period Years 1.10



Energy savings toe/year 0.07


Gaps in SMEs-EE technology adoption

• Production capacity expansion gets top priority

• Unpredictability of future business due global economic downturn

• Financial analysis is highly sensitive to the external factors (different

market scenario)

• Change in government regulation/policy (affect the viability of the unit)

• High capital cost, fear of underperformance and disruption of routine

cycle due to troubleshooting

• Low awareness on various financial schemes promoting ECMs

• Shortage of skilled staff and lack of knowledge/information on

technological options

• Force of habits resist any change in routine operating practices

• Low priority segment for EE technology supplier due to perceived notion

of lower scale of business


THANK YOU

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