India Signs Grant Agreement with IBRD of USD 5.19 million for Improving Energy Efficiency in MSME’s projects

An agreement for GEF Grant of USD 5.19 Million for “Additional Financing for Financing Energy Efficiency at MSMEs Project- Programmatic Framework for Energy Efficiency” was signed by Raj Kumar, Joint Secretary (MI), Department of Economic Affairs on behalf of the Government of India and Junaid Ali Ahmad, Country Director, World Bank (India) on behalf of IBRD [International Bank for Reconstruction and Development], acting as an Implementing Agency of the Global Environment Facility.

Representatives from Ministry of Environment, Forests and Climate Change, Bureau of Energy Efficiency (BEE) and Small Industries Development Bank of India (SIDBI) were also present.

The parent project – India: Financing Energy Efficiency at MSME Project (FEEMP) became effective on September 29, 2010 with an original GEF Grant amount of US$ 11.3 million was jointly implemented by BEE and SIDBI. The Development Objective of the project was to increase demand for energy efficiency investments in select micro, small and medium enterprise clusters and to build their capacity to access commercial finance. The parent project currently has a Satisfactory rating towards achievement of Project Development Objective (PDO), and implementation performance.

The proposed additional financing (AF) would be used to help further scale up the initiatives taken up under the parent project. The additional financing will also contribute to bridge the current gap in understanding between different stakeholders, mainly energy professionals/technology suppliers, entrepreneurs, banks and financial institutions.

The project will focus on tapping EE benefits through a three pronged approach which includes (i) Awareness/capacity building (ii) Direct intervention to increase EE investments at MSME level, facilitating active involvement of service providers and Financial Institutions; and (iii) Expanding the EE knowledge base to scale up and replicate the project initiatives, especially through establishing key performance indicators.

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 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 Raj Kumar, Joint Secretary, Department of Economic Affairs.

“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.”