Need to Have a Proper Energy Saving Policy

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Micro Small and Medium Enterprises (MSME) sector has acquired a prominent place in the growth of the Indian economy. It contributes 45 per cent of the industrial output, 40 per cent of exports, 42 million in employment, create one million jobs every year and produces more than 8,000 quality products for the Indian and international markets. Despite its commendable contribution to the Nation’s economy, SME Sector does not get the required support from the concerned Government Departments, Banks, Financial Institutions and Corporate, which hinders the competitiveness of MSMEs. R Narayan, Founder and CEO, Power2SME (the first ‘Buying Club’ for SMEs in India) speaks to Rahul Trivedi, Senior Correspondent, Governance Today on various issues related to SMEs. Edited excerpts:
R Narayan
R Narayan, Founder and CEO, Power2SME

What are the problems that MSMEs face because of shortage of power in various sectors?

MSMEs contribute to economic development in various ways such as creating employment opportunities for rural and urban population, providing goods and services at affordable costs by offering cost  effective innovative solutions and sustainable development to the economy as a whole. SMEs in India face a number of problems – absence of adequate and timely banking finance, non-availability of suitable technology, power shortage, ineffective marketing due to limited resources and non availability of skilled manpower.

We see mainly 3Ps constraints comprising of People (skilled manpower), Power (electricity) and Paisa (credit). The problems that MSMEs face because of shortage of power include slow/ delay in production/ order completion, capacity reduction, low product quality and increased wastage/ overhead costs. Power outages cause many other inconveniences that trigger uncertainty in business activities with its load of costs that
could come in many ways.

How MSMEs are coping up with lack of power supplied?

Majority of MSMEs have alternate arrangements to ensure 24×7 power back-up. It is estimated that almost 91 percent of firms generate electricity from alternate sources, which amounts to 31 percent of total electricity used. This adaptation strategy appears to be paying off, since it seemed to have helped avert the negative impact of power outages.

What impact does lack of power have on the production and cost of production?

The productivity of businesses may be measured using three types of productivity indices: cost efficiency, technical efficiency, and scale efficiency scores. All the three scores are affected by power shortage and overall productivity is reduced – production outcome is delayed and
cost of production increases.

Power outage duration has an adverse effect on scale efficiency, as do the number and severity of power outages. Adapting to these issues allow businesses to gain on technical and scale efficiencies, but adversely affects their cost efficiency.

Additionally, because of delay in production, there is a delay in final product delivery to respective customers. They often lead to some more unfavorable situations such as facing penalties, and/or losing customers or some market opportunities.

The uncertainty created by these issues could have some ramification directly related to the dynamic of the businesses, in terms of investing more in capital or hiring more workers. The SME hiring decisions are affected by power outages.

What is the usage of alternative energy sources in MSME sector?

Biomass Energy, Wind Energy, Solar Energy, Geothermal Energy, Hydroelectric Energy sources are the alternative sources of energy
that can provide SMEs with viable alternatives which SMEs can utilize for power generation.

The advantages of the alternative sources of energy include:

  • Serve as the only source of energy in remote areas where conventional sources of energy has not penetrated
  • Reduction in pollution as compared to non- renewable energy sources
  • Production is economical

What do MSMEs require from government on power segment?

The MSMEs policies could be drawn out towards promoting a better quality of electricity and providing a 24×7 power supply to the manufacturing establishments. The  government should work towards identifying alternate energy sources and promoting such projects.

Any other crucial issue in power and energy requirement of MSMEs that you would like to mention.

The efficient use of available energy is a crucial issue in power and energy requirements of MSMEs. Due to the usage of outdated machinery & not
following the lack of knowledge about energy conservation, there is a huge loss of energy. There is a need to have a proper energy saving policy and benchmark it against the international norms.