Transcript Risk based Supervision-A move from CAMELS approach

Cluster business development units and development
of a SIDBI energy project management unit (SIDBI)
Nov 18, 2009
1
An overview of Indian MSME

MSE Sector Contribution to Indian Economy





40% of Industrial Production
32% share of exports
More than 1000 products
Second largest sector after agriculture

More than 13.3 million units

Largest employer after agriculture in India.
Accelerates the growth of Economy


Recorded growth rate of 13% in FY 2008 (12.6% in FY 2007)
Growth higher than GDP & industrial growth
2
Source : SIDBI annual report
An overview of Indian MSME
FEATURES –

Very small in size (majority are MSE units)

Majority of units are proprietorship / family owned concern

Obsolete technology, production process

Lack of awareness of on energy efficient production options / technology

Lack of adequate finance for investments
3
Indian MSMEs : Challenges
• Slow down in world economy - Severely affecting export based MSMEs in
leather, textile, gems & jewellary, auto components, etc.
• Financial crisis - Liquidity crunch for MSMEs
• Dereservation of products - Threat from large corporates
• Opening up of Economy - Increased overseas competition
• Environmental protection issues
• Small economic size
- Threat to shut down / relocate
- High production cost / uncompetitive in market
4
Indian MSMEs : Opportunities
• Opening up of global market
– Explore new markets
• Outsourcing by large units - Opportunity to scale up
• Recession - Right time for technological upgradation / improvement in
production processes
• Survive & Grow - Reduce cost to be competitive
• Growth Mantra - Investment in Energy Efficient (EE) equipment/manufacturing
processes as a tool to cut cost, protect margin and remain competitive.
5
Approach for EE lending in MSMEs
•
MSMEs are in all major industries & spread across the country in
clusters. About 77% of 13.3 million MSMEs exist in clusters
generating 72% of total employment and 61% of total investment
•
in the MSME sector.
MSMEs at each cluster/industrial sector has its own specific
characteristic.
•
To promote the EE in MSMEs, Cluster based approach could be an
effective solution
6
Lending potential for EE in MSME clusters
Cluster based approach – Pre-requisite
 Identification of energy intensive MSME clusters – out of list of 388 clusters
listed by UNIDO about 150 could be described as highly energy intensive and 162
with medium energy intensity
 Energy saving potential of the cluster / Financial health of the sector
 Availability of proven / commercial technologies suitable for the cluster
 Replicability potential – service providers
 Strong local association
7
Definition of Energy Efficiency
• Energy Efficiency (EE) encompasses all changes that
result in a reduction in the energy used for a given
energy service (heating, lighting...) or level of activity.
This reduction in the energy consumption is not
necessarily associated to technical changes, since it can
also result from a better organization and management
or improved economic efficiency in the sector (e.g.
overall gains of productivity). by World Energy Council
• This definition indicates at both - investments as also no
investment / low investments for achieving EE.
No Investment / Low investment solutions
• Lack of documentation of best practices (even
basic practices)
• Unwillingness of MSMEs to use experts :– Low awareness
– Non availability of experts at the field level
– Unskilled manpower
– High costs associated / non benchmarking of fees
( example of SMERA)
– ‘AUDIT’
Investment solutions
• Only a few Banks have schemes to fund EE financing
• Sometimes EE proposal would involve replacement
of certain fixtures / tools etc. which may result in
asset coverage dilution
• MSMEs looking for certain pull factors like
concessional interest rates
• Capacity building of bank officials
Promotional efforts
• Awareness creation –
– 40 workshops under JICA
– Handbooks on EE – 4 no.
• Partnership with BEE – 25 clusters – shelf of EE
technologies
• Capacity building of BDS providers/ energy experts
• Cooperation with WB – use of Ind. assn/SPV for EE
lending
• Create a national level integrated mechanism to
promote & Finance EE
Energy Efficiency in BDS Clusters
• Activities include:
o Exploratory – awareness, workshop / seminar, feasibility
study
o Experimental – Walk through audits, trainings etc.
o Deeper implementation – energy audits, ISI, BEE rating etc.
• More than 50 activities covering about 1000
MSMEs are planned upto March 2010.
• Focus on documentation
• Linkages with other schemes like ISI, Star
rating etc.
WB – GEF project
• To co implement with BEE
• To generate 500 investments in energy
efficiency in MSME sector from 5 clusters
• Budget allocation of about $ 9 mio for 5 years
• To work with
– MSMEs
– Banks / FIs
– BMOs
– Intermediaries – both financial and technical
14
SIDBI’s Assistance for EE Projects
• Under KfW LoC SIDBI provided assistance to MSMEs in textile processing,
foundry, forging, ceramics, tanning, CETP for investing in energy efficient clean
production technologies to the tune of US$ 21 million (Rs. 103 crore).
• LoC from JICA, Japan of JPY 30 billion for promoting EE projects in MSME
sector.
– sanctioned approx. 927 MSME proposals for EE projects totaling
approx.US$ 55 million (Rs. 255 crore) under JICA
– refinance facility to banks at concessional rates to encourage them to lend
for EE projects in MSE sector.
• New LOCs from KfW and AFD for financing energy efficiency in MSME sector
15
Thank You
Energy Management
professionals - distribution
•Concentration in Western zone
•PUNJAB – LOW PENETRATION
•HP & UTTARANCHAL – LOT OF NEW
DEMAND
State
No. of EA/EM
Maharashtra
1445
Gujarat
672
TN
639
UP
508
AP
439
DELHI
358
HARYANA
213
ORISSA
198
PUNJAB
85
UTTARANCHAL
41
HP
3
ASSAM
41
CHANDIGARH
26
OTHERS
TOTAL
6287
17