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Roadmap for Green
Transition of MSMEs Leadership
Shri Ishtiyaque Ahmed
Programme Director (Industry and Foreign
Investment), NITI Aayog
Dr. Anshu Bharadwaj
Programme Director (Green Transition,
Energy & Climate), NITI Aayog
Shri Rajnath Ram
Adviser (Energy), NITI Aayog
Ms. Aashwita Lal
Director (Industry and Foreign Investment),
NITI Aayog
Shri Ateesh Kumar Singh
Joint Secretary, Ministry of MSME
Research and Writing team
Shri Manoj Kumar Upadhyay
Deputy Adviser, NITI Aayog
Ms. Vrushali Lokhande
Young Professional, NITI Aayog
Shri Abhishek Bhardwaj
Senior Program Associate, WRI India
Shri Ashim Roy
Program Lead, WRI India
Peer Reviewers
Shri Vinamra Mishra
Director, Ministry of MSME
Shri Rahul Midha
Asst. General Manager, IIFCL Projects Limited
Ms. Poonam Kapur
Research Officer, NITI Aayog
Shri Ravi Kumar
Consultant, NITI Aayog
Shri Vipul Gupta
Consultant, NITI Aayog
Shri Anurag Pandey
Young Professional, NITI Aayog
Shri Saksham Agarwal
Young Professional, NITI Aayog
Shri Vishal Kumar
Young Professional, NITI Aayog
Shri K. Harshvardhan Reddy
Young Professional, NITI Aayog
Shri NGR Kartheek
Senior Program Manager, WRI India
Ms. Shivani Shah
Senior Program Communications Manager,
WRI India
Shri Deepak Krishnan
Deputy Program Director, WRI India
Disclaimer:
This document is not a statement of policy by the National Institution for Transforming India
(hereinafter referred to as NITI Aayog). It has been prepared for the purpose of independent
academic and policy-oriented research by NITI Aayog with the technical support of WRI India
(legally registered as the India Resources Trust).
Neither NITI Aayog nor WRI India makes any representation or warranty, express or implied, as
to the completeness or reliability of the information, data, findings, or methodology presented
in this document. While due care has been taken by the author(s) in the preparation of this
publication, the content is based on independently procured information and analysis available
at the time of writing and may not reflect the most current policy developments or datasets.
The assertions, interpretations, and conclusions expressed in this report are those of the
author(s) and do not reflect the views of NITI Aayog or the Government of India, or WRI India.
As such, NITI Aayog and WRI India do not endorse or validate any of the specific views or policy
suggestions made herein by the author(s).
NITI Aayog and WRI India shall not be liable under any circumstances, in law or equity, for any
loss, damage, liability, or expense incurred or suffered as a result of the use of or reliance upon
the contents of this document. Any reference to specific organisations, products, services, or
data sources does not constitute or imply an endorsement by NITI Aayog or WRI India. Readers
are encouraged to independently verify the data and conduct their analysis before forming
conclusions or taking any policy, academic, or commercial decisions.

Acknowledgment of Contributors Roadmap for
Green Transition of MSMEs
January 2026 iiRoadmap for
Green Transition of MSMEs
Preface
At the 26
th
UN Climate Change Conference (COP26), India committed to achieving
net-zero emissions by 2070, reducing carbon intensity by 45% by 2030, and increasing
non-fossil energy capacity to 500 GW by 2030. Achieving these ambitious targets will
require significant efforts across all sectors, with industrial decarbonisation playing a
crucial role. Given the diversity of the industrial landscape, a sector-specific approach
has been adopted as the pathway toward a green transition.
To enable a comprehensive strategy and develop tailored decarbonisation roadmaps,
NITI Aayog has constituted a Technical Working Committee for the Micro, Small, and
Medium Enterprises (MSME) sector, comprising stakeholders from a wide range of
backgrounds:
• Central Government – Ministries of Micro, Small and Medium Enterprises;
Power; Petroleum and Natural Gas; New and Renewable Energy; and the
Bureau of Energy Efficiency;
• Industry Associations – Experts representing Small-Scale Industries,
Small and Medium Industries, Manufacturers’ Associations, and various
state-level industry bodies.
The Committee was guided by a clear set of Terms of Reference (TOR),
which included:
i) Identifying key emission sources and establishing baseline sectoral emis-
sions across production value chains.
ii) Assessing existing government and private-sector strategies.
iii) Analysing international market trends and preparing a sectoral outlook
on India’s competitiveness.
iv) Prioritizing decarbonisation levers such as the circular economy and re-
source efficiency.
v) Developing sector-specific abatement curves outlining emission reduc-
tion potential and associated costs.
vi) Reviewing relevant policy and regulatory frameworks.
vii) Evaluating technology options and their commercial feasibility.
viii) Mapping potential capital and funding sources.
ix) Formulating a sector-specific action plan with suitable financial mechanisms.
This report draws on the Committee’s work as well as extensive consultations with
government agencies, industry associations, financial institutions, and technical
experts. It aims to present a practical, action-oriented roadmap focused on the key
technological and financial interventions required to enable the MSME sector’s green
transition. Roadmap for
Green Transition of MSMEs iii
The report also recommends the establishment of institutional mechanisms, governance
structures, and a robust Monitoring, Reporting, and Verification (MRV) framework,
along with a dedicated Regulatory Impact Assessment (RIA) body. It seeks not only to
chart comprehensive energy pathways for decarbonizing existing MSME units but also
to ensure that new and upcoming MSMEs adopt low-carbon strategies from inception.
Positioned at the intersection of global climate commitments, national development
priorities, and local livelihood needs, MSMEs have the potential to emerge as both
beneficiaries and key drivers of India’s sustainable industrial transformation. ivRoadmap for
Green Transition of MSMEs
Foreword and Acknowledgement
Micro, Small, and Medium Enterprises (MSMEs) are the backbone of
India’s industrial landscape, contributing nearly 30% to the national
GDP, 46% to exports, and providing jobs to over 250 million people.
As the world moves towards a low-carbon future, MSMEs stand at
a crucial juncture—facing both unprecedented opportunities and
significant challenges.
Despite their vital role, MSMEs often grapple with structural barriers,
including limited awareness, outdated technologies, restricted access to finance,
and inadequate institutional support. These challenges hinder their ability to adopt
sustainable, energy-efficient practices. In light of India’s commitment to achieving
net-zero emissions by 2070 and the growing global demand for green products,
decarbonizing the MSME sector is not merely desirable—it is necessary.
To address this, NITI Aayog constituted a Technical Working Committee for the MSME
sector to develop a sector-specific decarbonisation roadmap. The Committee brought
together representatives from the Central and State Governments, industry associations,
technology providers, financial institutions, and think tanks. This report is the outcome
of multiple rounds of in-depth consultations with these diverse stakeholders.
As Chairperson of the Technical Working Committee for the MSME sector, I am deeply
grateful to all members for their valuable contributions in shaping this report.
At the outset, I express my sincere gratitude to Shri B.V.R. Subrahmanyam CEO
NITI Aayog for entrusting this responsibility to the Committee and for his continued
guidance. I also extend my heartfelt thanks to Shri S.C.L. Das, Secretary, Ministry of
Micro, Small and Medium Enterprises, and Dr. Anshu Bharadwaj, Programme Director
for Green Transition and Climate at NITI Aayog, for their insightful suggestions and
constant support throughout the process.
I acknowledge with appreciation the contributions of the MSME Technical Working
Committee members whose in depth knowledge of the subject and recommendations
have been instrumental in framing the roadmap for the green transition of MSMEs.
Special thanks are due to Shri Ateesh Kumar Singh, Joint Secretary, Ministry of MSME;
Shri Rajnath Ram, Adviser, NITI Aayog; and Ms. Neha Nautiyal, Deputy Secretary, NITI
Aayog, for their active participation and contributions. I also recognize the valuable
inputs from Shri Manoj Kumar Upadhyay, Deputy Adviser, NITI Aayog, and Shri Aman
Hans, Resident Fellow, NITI Aayog, particularly in relation to the energy ecosystem.
I wish to highlight the insights provided by Shri S.C. Gupta, Director, Petroleum and
Natural Gas Regulatory Board; Shri D.K. Srivastava, Chief Engineer, Ministry of Power;
Shri Ashok Kumar, Deputy Director General, Bureau of Energy Efficiency; and Shri P.
Shyam Sunder, Director, Bureau of Energy Efficiency, on the operational realities of
India’s power network. I also thank representatives from the State Governments of
Tamil Nadu, Maharashtra, and Haryana; financial institutions such as the Small Industries
Development Bank of India (SIDBI), State Financial Corporations, and microfinance
organizations; as well as MSME and industry association representatives, technology
partners, OEMs, service providers, and research organizations for their valuable
contributions. Roadmap for
Green Transition of MSMEs v
I would also like to acknowledge the exceptional work of Shri Deepak Krishnan, Shri
NGR Kartheek, Shri Ashim Roy, and Shri Abhishek Bharadwaj from the WRI India, whose
expertise significantly enriched the preparation of this report.
Finally, I extend my appreciation to Ms. Aashwita Lal, Director, NITI Aayog; Shri Ankur
Kushwaha, Consultant, Ms. Gayatri Pande; Ms. Sandal Agrawal; and Ms. Vrushali
Lokhande, Young Professionals at NITI Aayog, along with the supporting team.
Their tireless efforts in coordinating interactions with Working Group members and
stakeholders, and their consistent input, have been invaluable in bringing this report to
its present form.
This report offers a practical and inclusive roadmap for advancing the green transition
of MSMEs by identifying sector-specific solutions. I hope it serves as a strategic guide
for collaborative action, enabling MSMEs to play an active role in building a resilient,
inclusive, and sustainable Indian economy.
Ishtiyaque Ahmed
Programme Director, Industry and Foreign Investment
Chair, Technical Working Committee on Roadmap for Green Transition of MSMEs
NITI Aayog viiiRoadmap for
Green Transition of MSMEs Roadmap for
Green Transition of MSMEs ix Message
Green transition represents a structural shift toward sustainable,
low-carbon, and resource-efficient economic systems and has
become priority for the global industrial landscape. As one of the
world’s fastest-growing economies and a signatory to the Paris
Agreement, India faces the dual imperative of sustaining economic
growth while significantly reducing environmental emissions.
MSMEs play a critical role in this transition, given their centrality to value chains,
production, employment generation, and regional development. However, they remain
disproportionately exposed to climate-related risks, including resource constraints,
rising energy costs, regulatory tightening, and changing market preferences. Their
transition is constrained by limited access to information, technical expertise, affordable
green finance, and compliant markets for sustainable products, underscoring the
need for targeted and differentiated policy support. This report positions MSMEs at
the core of India’s green transition agenda and addresses the risk of their exclusion
from sustainability-driven global value chains. It provides evidence-based analysis
and actionable pathways to enable MSMEs to adopt low-carbon practices, enhance
competitiveness, and contribute meaningfully to India’s climate commitments and
inclusive development objectives.
Dr. Anshu Bharadwaj
Programme Director
Green Transition, Energy and Climate Change
NITI Aayog
Message
The Micro, Small, and Medium Enterprises (MSME) sector plays a
crucial role in India’s economic landscape. MSMEs contribute 45% to
manufacturing output, and consume over 25% of energy use in the
industrial sector. Green transition in MSMEs is not only essential for
meeting India’s climate goals but also for enhancing energy security,
competitiveness, and long-term resilience.
This report presents a comprehensive framework to support the MSME sector in its
journey toward decarbonisation and energy efficiency improvement. It defines the
possible interventions across technology, finance, policy, and institutional ecosystems
to support low-carbon growth in MSME sector. I extend gratitude to the Working Group
for their rigorous analysis and strengthening of the key recommendations of the report.
Shri Rajnath Ram
Adviser (Energy)
Green Transition, Energy and Climate Change
NITI Aayog xiRoadmap for
Green Transition of MSMEs

1
st Floor, Godrej & Boyce Premises, Gasworks Lane, Lalbaug, Parel, Mumbai 400012, India. (PH) +91 22 24713591
---------------------------------------------------------------------------------------------------------------------------------------------
WRI India, is an independent charity legally registered as the India Resources Trust (IRT).
Message, CEO, WRI India

India’s journey towards becoming a developed economy by 2047, will be fundamentally green, inclusive, and resilient.
As the nation accelerates on this path, the role of the Micro, Small and Medium Enterprises (MSME) sector is
indispensable. With over 63 million enterprises contributing close to 29 percent of GDP, generating 250 million jobs,
and accounting for 46 percent of exports, MSMEs form the backbone of India’s industrial and entrepreneurial
landscape. Yet, they are also highly vulnerable to the impacts of climate change, resource constraints, and evolving
global expectations, demanding a strategic transition, with balanced developmental and climate imperatives.

The question is not whether MSMEs should transition to a greener, more suﬆainable model, but how they can do so
swiftly, aﬀordably, and equitably.

This report, National Programme for Green Transition of MSMEs: A 10-Year Strategy, responds to that challenge with
purpose and pragmatism. It sets out a vision for MSMEs which is not just compatible with climate action but is powered
by it. It presents a path forward that enables MSMEs to thrive in the green economy, attracting private investment,
creating thousands of new green jobs, and building long-term global competitiveness.

At the core of this strategy are three levers for decarbonisation: energy efficiency, green electricity, and alternate fuels.
Together, they are projected to reduce 75 to 87 Mt of CO2 equivalent over the next decade, mobilise over INR 2 lakh
crore in private investment, generate over 55,000 green jobs, and contribute up to INR 4,700 crore in annual tax
revenue. These outcomes not only support India’s climate goals but will also improve the long-term competitiveness
and resilience of our MSMEs.

These efforts are underpinned by a strong institutional and financial architecture, including National Project
Management Agency, innovative financing tools, and targeted capacity building. A comprehensive Monitoring,
Reporting and Verification (MRV) framework will ensure accountability, while the inclusion of Regulatory Impact
Assessments (RIA) protects MSMEs from disproportionate compliance burdens, reflecting a commitment to both
ambition and equity.

This strategy is not just about emissions reduction; it is about economic transformation. It enables Indian MSMEs to
lower energy costs, build resilience, and unlock new opportunities in a climate-conscious global economy. It aligns
growth with suﬆainability and prepares Indian enterprises to compete and lead in the green industrial revolution.

The coming decade offers an unprecedented opportunity. With the right support systems in place, India’s MSMEs can
emerge as global champions of sustainable manufacturing. This program marks a bold and necessary step in that
direction, translating ambition into action and vision into results.

(Madhav Pai)
CEO, WRI India

India?s journey towards becoming a developed economy by 2047, will be fundamentally green,
inclusive, and resilient. As the nation accelerates on this path, the role of the Micro, Small and Medium
Enterprises (MSME) sector is indispensable. With over 63 million enterprises contributing close to 29
percent of GDP, generating 250 million jobs, and accounting for 46 percent of exports, MSMEs form the
backbone of India?s industrial and entrepreneurial landscape. Yet, they are also highly vulnerable to the
impacts of climate change, resource constraints, and evolving global expectations, demanding a
strategic transition, with balanced developmental and climate imperatives.
The question is not whether MSMEs should transition to a greener, more sustainable model, but how
they can do so swiftly, affordably, and equitably.
This report, Roadmap for Green Transition of MSMEs, responds to that challenge with purpose and
pragmatism. It sets out a vision for MSMEs which is not just compatible with climate action but is
powered by it. It presents a path forward that enables MSMEs to thrive in the green economy, attracting
private investment, creating thousands of new green jobs, and building long-term global
competitiveness.
At the core of this strategy are three levers for decarbonisation: energy efﬁciency, green electricity, and
alternate fuels. Together, they are projected to reduce 75 to 87 million tonnes of CO2 equivalent
(MtCO
2
e) over the next decade, mobilise over INR 2 lakh crore in private investment, generate over
55,000 green jobs, and contribute up to INR 4,700 crore in annual tax revenue. These outcomes not
only support India?s climate goals but will also improve the long-term competitiveness and resilience of
our MSMEs.
These efforts are underpinned by a strong institutional and ﬁnancial architecture, including National
Project Management Agency, innovative ﬁnancing tools, and targeted capacity building. A
comprehensive Monitoring, Reporting and Veriﬁcation (MRV) framework will ensure accountability,
while the inclusion of Regulatory Impact Assessments (RIA) protects MSMEs from disproportionate
compliance burdens, reﬂecting a commitment to both ambition and equity.
This strategy is not just about emissions reduction; it is about economic transformation. It enables
Indian MSMEs to lower energy costs, build resilience, and unlock new opportunities in a
climate-conscious global economy. It aligns growth with sustainability and prepares Indian enterprises
to compete and lead in the green industrial revolution.
The coming decade offers an unprecedented opportunity. With the right support systems in place,
India?s MSMEs can emerge as global champions of sustainable manufacturing. This program marks a
bold and necessary step in that direction, translating ambition into action and vision into results.

1
st Floor, Godrej & Boyce Premises, Gasworks Lane, Lalbaug, Parel, Mumbai 400012, India. (PH) +91 22 24713591
---------------------------------------------------------------------------------------------------------------------------------------------
WRI India, is an independent charity legally registered as the India Resources Trust (IRT).
Message, CEO, WRI India

India’s journey towards becoming a developed economy by 2047, will be fundamentally green, inclusive, and resilient.
As the nation accelerates on this path, the role of the Micro, Small and Medium Enterprises (MSME) sector is
indispensable. With over 63 million enterprises contributing close to 29 percent of GDP, generating 250 million jobs,
and accounting for 46 percent of exports, MSMEs form the backbone of India’s industrial and entrepreneurial
landscape. Yet, they are also highly vulnerable to the impacts of climate change, resource constraints, and evolving
global expectations, demanding a strategic transition, with balanced developmental and climate imperatives.

The question is not whether MSMEs should transition to a greener, more suﬆainable model, but how they can do so
swiftly, aﬀordably, and equitably.

This report, National Programme for Green Transition of MSMEs: A 10-Year Strategy, responds to that challenge with
purpose and pragmatism. It sets out a vision for MSMEs which is not just compatible with climate action but is powered
by it. It presents a path forward that enables MSMEs to thrive in the green economy, attracting private investment,
creating thousands of new green jobs, and building long-term global competitiveness.

At the core of this strategy are three levers for decarbonisation: energy efficiency, green electricity, and alternate fuels.
Together, they are projected to reduce 75 to 87 Mt of CO2 equivalent over the next decade, mobilise over INR 2 lakh
crore in private investment, generate over 55,000 green jobs, and contribute up to INR 4,700 crore in annual tax
revenue. These outcomes not only support India’s climate goals but will also improve the long-term competitiveness
and resilience of our MSMEs.

These efforts are underpinned by a strong institutional and financial architecture, including National Project
Management Agency, innovative financing tools, and targeted capacity building. A comprehensive Monitoring,
Reporting and Verification (MRV) framework will ensure accountability, while the inclusion of Regulatory Impact
Assessments (RIA) protects MSMEs from disproportionate compliance burdens, reflecting a commitment to both
ambition and equity.

This strategy is not just about emissions reduction; it is about economic transformation. It enables Indian MSMEs to
lower energy costs, build resilience, and unlock new opportunities in a climate-conscious global economy. It aligns
growth with suﬆainability and prepares Indian enterprises to compete and lead in the green industrial revolution.

The coming decade offers an unprecedented opportunity. With the right support systems in place, India’s MSMEs can
emerge as global champions of sustainable manufacturing. This program marks a bold and necessary step in that
direction, translating ambition into action and vision into results.

(Madhav Pai)
CEO, WRI India xiiRoadmap for
Green Transition of MSMEs
Contents
List of Tables��1
List of Figures��2
List of Abbreviations��3
Executive summary��6
Introduction to the MSME Technical Working Committee��15
Methodology��17
1. Overview of the MSME sector and drivers for green transition��23
2. Scope of the report��33
3. Institutional mechanism��39
4. Recommendations��57
5. Regulatory Impact Assessment (RIA)��89
6. Conclusion��93
7. Bibliography ��95
8. Annexures��98 Roadmap for
Green Transition of MSMEs 1
List of Tables
Table 1: The sectoral technical working committees on MSMEs��15
Table 2: Categorisation of MSMEs��23
Table 3: Distinction between existing MSME schemes on green transition and the
proposed Roadmap��36
Table 4: Roadmap for implementation of the Programme��53
Table 5: Emission reduction and investment potential in 10 MSME sectors across India
due to enhancement of energy efficiency�� 57
Table 6: Emissions reduction and investment potential in 10 MSME sectors across India
due to green electricity adoption��65
Table 7: Takeaways for action and implementation from the alternate fuels lever
adoption in MSMEs��76
Table 8: Roadmap for implementation of MRV in the MSME sector��87 2Roadmap for
Green Transition of MSMEs
List of Figures
Figure 1: Overview of the program framework�� 7
Figure 2: Functions of the National Project Management Agency��10
Figure 3: Sector-wise specific energy consumption and emissions contributions of
MSMEs��25
Figure 4: GHG emissions vs consumption by fuel source in the top five MSME emission-
intensive sub-sectors��25
Figure 5: Importance and need for green transition in MSMEs��26
Figure 6: The reduction in emissions observed in LoS and aggressive scenarios........�35
Figure 7: Roles and responsibilities of NPMA��40
Figure 8: Proposed flow for the implementation of green transition across MSME
clusters��52
Figure 9: Specific tasks for NPMA to enhance the efficiency and outreach of the National
Programme��53
Figure 10: ESCO-MSME business model��58
Figure 11: Problems in implementation of MSME-ESCO business model (Source: Expert
Interviews)��59
Figure 12: Impacts of proposed recommendations�� 64
Figure 13: Comparison between capex and opex models of BTM adoption��66
Figure 14: Opex BTM model for green electricity adoption in MSMEs��67
Figure 15: Impacts of proposed recommendations��72
Figure 16: Share of Scope 1 emissions by fuel type in top 5 MSME subsectors in the year
2022��73
Figure 17: A comparison of different alternative fuels��74
Figure 18: MSME MRV framework to track GHG emissions��80 Roadmap for
Green Transition of MSMEs 3
List of Abbreviations
APPC Average Pooled Power Purchase Cost
AIF Alternative Investment Fund
APM Administered Pricing Mechanism
BEE Bureau of Energy Efficiency
BRSR Business Responsibility and Sustainability Reporting
BTM Behind-the-Meter
CBAM Carbon Border Adjustment Mechanism
CEA Central Electricity Authority
CERC Central Electricity Regulatory Commission
CGD City Gas Distribution
CLCS Credit Linked Capital Subsidy Scheme
COP Conference of the Parties
CSR Corporate Social Responsibility
DHM District Health Mission
DISCOMs Distribution Companies
DPIIT Department for Promotion of Industry and International Trade
DPR Detailed Project Report
EE Energy Efficiency
EESL Energy Efficiency Services Limited
EPG Empowered Programme Committee
ESCO Energy Service Company
FIs Financial Institutes
FAME Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India
GE Green Electricity
GCC Gross Cost Contract
GEF Global Environment Facility
GHG Greenhouse Gases
GOA Green Open Access
GoI Government of India Roadmap for
Green Transition of MSMEs 4
GST Goods and Services Tax
GIFT Green Investment and Financing for Transformation
HPHT High Pressure, High Temperature
ISTS Inter-State Transmission System
ICAI The Institute of Chartered Accountants of India
KPI Key Performance Indicators
LoS Line of Sight
LCT Low Carbon Transition
MCA Model Concession Agreement
MIDC Maharashtra Industrial Development Corporation
MoU Memorandum of Understanding
MRV Monitoring, Reporting and Verification
MoEFCC Ministry of Environment, Forest and Climate Change
MHI Ministry of Heavy Industries
MNRE Ministry of New and Renewable Energy
MoPNG Ministry of Petroleum and Natural Gas
MoP Ministry of Power
Mt Million Tonnes
MtCO
2
e

Million Tonnes of carbon dioxide equivalent
MtOe Million Tonnes of Oil Equivalent
MSEs Micro and Small Enterprises
MSME Micro, Small and Medium Enterprises
MSG Mission Steering Group
NBFC Non-Banking Financial Company
NHAI National Highway Authority of India
NIMSME National Institute for MSME
NSIC National Small Industries Corporation Limited
OEM Original Equipment Manufacturers
PAT Perform, Achieve and Trade Scheme
PAYS Pay as You Save Roadmap for
Green Transition of MSMEs 5
PE Procuring Entity
PNGRB Petroleum and Natural Gas Regulatory Board
PLI Production Linked Incentive
QCI Quality Council of India
RBI Reserve Bank of India
RE Renewable Energy
REC Renewable Energy Certificates
RESCO Renewable Energy Service Company
RFP Request for Proposal
RFQ Request for Quotation
RIA Regulatory Impact Assessment
RPO Renewable Purchase Obligation
RTP Request for Technical Proposal
RTS Roof Top Solar
ROW Right of Way
SCM Swiss Challenge Methodology
SDG Sustainable Development Goal
SEBI Securities Exchange Board of India
SEC Specific Energy Consumption
SECI Solar Energy Corporation of India
SERC State Electricity Regulatory Commission
SFCs State Financial Corporations
SIDBI Small Industries Development Bank of India
SIDCUL State Industrial Development Corporation of Uttarakhand
SPICE Scheme for Promotion and Investment in Circular Economy
SPICOT State Industries Promotion Corporation of Tamil Nadu
UNFCCC United Nations Framework Convention on Climate Change
UNIDO United Nations Industrial Development Organisation
WACC Weighted Average Cost of Capital
WBCSD World Business Council for Sustainable Development
6Roadmap for
Green Transition of MSMEs
Executive Summary
There are 69 million (6.9 crore) Micro, Small, and Medium Enterprises (MSMEs) in the
country. Of these, there are about 68.6 million, 0.48 million and 0.036 million micro,
small and medium units respectively. The share of exports from MSMEs in India’s overall
exports is 45.7% and its share in Gross Value Add (GVA) in GDP is 30%. MSMEs share
in manufacturing is 36.2% and the sector provides 250 million (25 crore) employment.
The “Zero Defect Zero Effect” (ZED) initiative by Government of India primarily
targets MSMEs to promote quality manufacturing with minimal environmental impact.
To fulfil the green ‘level’ product requirement of developed countries and regions
specially Europe and the Americas etc., MSME processes (manufacturing etc.) need
to be decarbonised. Further, to fulfil ‘Viksit Bharat’ goals by 2047, MSMEs need to be
supported in terms of technology upgradation, market access, and green transition.
MSMEs rely heavily on fossil fuels to meet their energy and process requirements,
resulting in approximately 135 million tonnes of carbon emissions (MtCO
2
e) in 2022
alone. MSMEs face a range of challenges in terms of capacity to undertake green
projects, access to reliable finance for the energy transition, lack of awareness on
policies and schemes, absence of scalable models, and niche market dynamics that
create uncertainty in investment decisions. Thus, they seek additional support from
governments to cater to the sector’s clean energy transition. This report proposes to
create a dedicated institutional mechanism that prioritises areas of deployment by
establishing incentives and funding opportunities. These interventions are tailored to
accelerate an enabling ecosystem leading to a seamless transition of MSMEs towards
sustainability.
Climate change presents significant risks to businesses, particularly MSMEs, which may
have fewer resources to adapt and respond. Understanding these risks is critical for
developing mitigation strategies and ensuring long-term sustainability. This involves
protecting businesses from potential harm as well as identifying evolving opportunities.
MSMEs can ensure their long-term viability by managing these risks proactively.
Transition risks are particularly concerning for MSMEs because the impact of policy
changes, litigation, shifting market expectations, and technological advancements
significantly affect them. Upcoming regulations may necessitate changes to
manufacturing processes or products and reshape long-term marketing strategies,
affecting supply chains, insurance costs, and increasing financial and political risks. Roadmap for
Green Transition of MSMEs 7
Figure 1: Overview of the program framework 8Roadmap for
Green Transition of MSMEs
Figure 1 provides an overview of the recommendations outlined in this report, following
which we can create a holistic environment aiding the green transition in MSMEs. Proper
implementation of the program will require a robust governance structure to ensure
that interested parties, especially those acting voluntarily, can rely on established
institutional mechanisms to ensure inclusion, accountability, and effectiveness. The
report provides for the implementation of the three levers identified for green transition
through different approaches. Under the primary approach, the report recommends
setting up a National Project Management Agency (NPMA) to implement the National
Programme for Green Transition of MSMEs. Under the second approach, the different
levers identified for the green transition roadmap will be implemented through the
line ministries as detailed in the report under Energy Efficiency, Green Electricity and
Alternative Fuels sub-sections.
The various roles and functions of the NPMA under the primary approach are:
• The NPMA to be an independent consultative and advisory entity, to be monitored
through an inter-ministerial committee.
• The NPMA to be responsible for driving the on-ground implementation of the
Programme by closely working with MSME clusters through an effective and
transparent cluster selection process.
• The NPMA to identify interested MSME clusters and industrial associations by
floating an expression of interest (EoI) that details the cluster selection process
for the implementation of identified solutions. MSME clusters can form Special
Purpose Vehicles (SPVs) to take part in the Green Transition programme.
• The NPMA to also lead the demand aggregation efforts to maximise the uptake
of green transition efforts in selected MSME clusters. This will involve capacity
building on the three identified levers/solutions to be done in close consultation
with the MSME National Level Institute for Energy and Greening stated to
be created under the Raising and Accelerating MSME Performance (RAMP)
Programme by Ministry of MSME.
• The NPMA to prepare a Detailed Project Report (DPR) for one or all of the levers
identified. Implementing agencies could also be invited through a transparent
tendering process based on the lines of the Swiss challenge methodology for
implementing the levers and preparing the DPR.
• The NPMA can support the bidding process identified in this report and could
determine a list of prequalified/approved implementing agencies under the
three levers to participate in the bidding process.
• After providing adequate time for bidders to prepare the final project scope
under a tender, the NPMA can evaluate the financial bids according to specified
timelines. The bid requiring the lowest (L1) subsidy from the NPMA will be
selected. The maximum subsidy will be determined by whichever is lower: the
absolute amount defined in the bidding document, or a fixed percentage of
expected sales (X years for typical implementing payback), calculated according
to the MSME cluster’s risk profile as determined by past loan delinquency rates.
• A tripartite concession agreement with performance payouts to be signed
between the implementing agency, the Ministry of MSME, and the MSME cluster
SPVs to mitigate financial risks from potential payment defaults of participating
MSMEs. If a MSME defaults on payments to the implementing agency, the agency Roadmap for
Green Transition of MSMEs 9
will receive compensation directly linked to achieving certain Key Performance
Indicators (KPIs) (e.g., reducing Scope 1 GHG emissions intensity from
baseline targets aligned with global Science Based Targets (SBTi) calculated
over a standard X-year payback with built-in periodic price escalations). The
disbursement of funds to the implementing agency will consider the expected
payback period on investment for the implementing agency, current valuation
of the machinery, and total payments already made (if any) as per the service
agreement. The Credit-Guarantee Fund (8-9%) under the MSME Credit Guarantee
Scheme will provide the necessary funding to cover payment default risks. The
8-9% share of the credit-guarantee fund value to be allocated specifically for the
Green Transition Roadmap. 10Roadmap for
Green Transition of MSMEs
Figure 2: Operational flow of the National Project Management Agency Roadmap for
Green Transition of MSMEs 11
The green transition of MSMEs can be achieved through the application of three levers i.e.
enhancement of energy efficiency, adoption of green electricity and alternate fuels. Under
each of the three levers, the following recommendations are provided:
1. Energy Efficiency: Scaling up of Energy Efficiency (EE) in MSME clusters will be
implemented through either of the two approaches:
A. Primary Approach
(i) Demand side-retrofitting with proven energy-efficient equipment: Following
demand aggregation, relevant implementing agencies (Energy Service
Company- ESCOs) will be selected as per the Swiss challenge methodology
and bidding process elaborated above. The ESCOs ‘Pay as You Save (PAYS)
model’ will be preferred to enhance the uptake of proven technologies in the
MSME clusters. The ESCOs can leverage aggregated demand within industrial
clusters to retrofit and replace outdated equipment with proven energy efficient
alternatives. The new EE equipment will lead to savings from lower electricity/
fuel usage, reducing the operational costs for MSMEs. These savings can be used
to repay ESCOs over time. This eliminates the need for upfront costs from the
MSMEs initially, as ESCOs mobilize the financing for the retrofitting process. The
Credit Guarantee Fund can be operationalised to mitigate any financial risk from
potential payment defaults by the MSMEs, on the retrofitted equipment.
(ii) Supply Side- Deployment of emerging energy-efficient technologies in MSME
clusters: The Roadmap will prioritise five energy-intensive MSME sub-sectors for
adoption of emerging and innovative energy-efficient technologies that provide
substantial gains if scaled. BEE and the Ministry of MSME will provide a list of
specific technologies that can provide substantial gains if scaled across MSME
subsectors. Once identified, the Programme can provide Viability Gap Funding
(VGF) through a competitive bidding mechanism to certified OEMs of key 6-7 high-
impact solutions (>20% savings) for providing these technologies at competitive
rates. An amount of ` 6,000 crore will be needed to provide VGF support for
effective uptake of emerging and innovative energy-efficient technologies
under the phase I of the National Roadmap. This could involve OEMs directly
undertaking the manufacturing and assembling of these technologies within the
country, which significantly reduces the selling price of these technologies.
B. Secondary Approach
Energy Efficiency improvements will be targeted in Small and Medium Enterprises
(SMEs) with the overall aim of reduction in specific energy consumption by at
least 20% from the baseline by using high energy efficient equipment (boilers,
heat pumps, heat exchangers, rolling, milling, cooling devices etc.). This approach
will be specifically applicable to UDYAM registered SMEs. The identification and
selection of sector specific energy efficient equipment or technology will be carried
out by Bureau of Energy Efficiency (BEE) and Ministry of MSME. Capital subsidy of
upto 15% on the cost of eligible plant and machinery will be needed for individual
SMEs for the implementation of identified technology; or to the Original Equipment
Manufacturer (OEM) for manufacturing the identified technology in the country in
form of a Production Linked Incentive (PLI) or a financial incentive. The subsidy
disbursal can be credited based on the reduction in overall energy consumption of
the SME as per the pre and post energy audit results carried out by the empanelled
energy auditor. A sum of INR 6000 crore is needed under this approach for a period 12Roadmap for
Green Transition of MSMEs
of 5 years. This approach will be directly implemented by the Ministry of MSME.
Specific guidelines on this approach will be released by the Ministry later.
The estimated impact through this lever is as follows:
• In the next 10 years, the overall potential GHG emissions reduction through the
energy efficiency lever is around 36 MtCO
2
e.
• Five key sectors and the top 10 MSME clusters based on GHG emissions reduction
potential of 12 MtCO
2
e and high export orientation

have been proposed for
immediate action in the first phase of the Programme.
• More than 10000 jobs are expected to be created in the ESCO market with a
potential peak annual tax revenue of around `1,200 crore (based on the corporate
tax on ESCO profits).
2. Green Electricity: Adoption of Green electricity will be implemented through either of
the two approaches:
A. Primary Approach:
(i) The Behind the Meter (BTM) RESCO Model and/or Green Open Access: The
programme proposes scaling green electricity across MSME clusters in India
through demand aggregation for Roof Top Solar (RTS) systems under the
Renewable Energy Service Company (RESCO) model, or uptake of green
electricity via Green Open Access (GOA) Rules, 2022. RESCOs facilitate the
installation of rooftop/ground-mounted solar at the customer’s premises.
Here, customers purchase electricity generated at a predefined tariff. One
of the key advantages of the RESCO model is that it eliminates the need for
any upfront capital cost by the customer. The GOA, Rules 2022 establish a
process that allows consumers to access renewable electricity, such as solar
and wind power, directly from generators or through power exchanges. Under
this model, electricity can be generated anywhere across the country and can
be accessed by any grid-connected consumer including MSMEs provided the
combined demand is greater than or equal to 100 kW. Since these solutions
involve no upfront payments by MSMEs to the implementing agencies and
are charged based on the service provided, any potential payment defaults
by the MSMEs will be covered under the Credit Guarantee Fund.
(ii) PM Suryaghar like initiative for individual MSME units: To enhance the uptake
of RTS among individual MSME units, the Programme recommends a direct
capital subsidy for adoption of RTS systems up to 3kW. The Programme initially
recommends an allocation of Rs. 7000 crore for phase I implementation.
B. Secondary Approach:
Green electricity adoption will be targeted in micro enterprises with an overall
aim to reduce the carbon intensity of the final manufactured product through the
adoption of RTS systems in their facilities. This will involve designing a new scheme
or the extension of PM Surya Ghar Muft Bijli Yojana to micro enterprises. Direct
capital subsidy upto a 3 kW RTS system can be provided to micro units. Under
this approach, a sum of INR 7000 crore can be allocated for a period of 5 years
with a target of covering around 1-1.5 million micro units. This approach will also
explore the implementation of Renewable Energy Service Companies (RESCOs)
‘rent a roof’ model at relevant micro units according to the interest and applicability.
The approach will also look at fast tracking of vendor certification to allow credible Roadmap for
Green Transition of MSMEs 13
and reliable vendors operate installation in the micro units that adhere to standards
and regulations as prescribed. This approach will be directly implemented by the
Ministry of New and Renewable Energy. Specific guidelines on this approach will be
released by the Ministry later.
The estimated impact through this lever is as follows:
• In the next 10 years, the overall potential GHG emissions reduction as MSMEs
transition to green electricity is 30-35 MtCO
2
e with a total private capital investment
of around
`1,50,000 crore needed.
• The top 10 electricity-intensive clusters across five MSME sub-sectors with a GHG
emissions reduction potential of 12.9 MtCO
2
e and high export orientation have been
identified for immediate action in the first phase of implementation.
• More than 45,000 jobs are expected to be created in the RESCO market with a
potential peak annual tax revenue of
`2,500-3,500 crore approximately.
3. Alternative Fuels: MSMEs rely heavily on coal, pet coke, furnace oil, etc. to meet process-
based requirements, resulting in high GHG emissions. Several alternate fuels that are
zero or less emission-intensive, including biomass, natural gas, compressed biogas, and
electrification of the process using green electricity, can be used to meet their energy
requirements. Considering the limited availability of several biomass-based alternate
fuels as well as the current market conditions, the first phase of the Programme proposes
direct support for natural gas uptake and usage in MSMEs. Natural gas is a lesser
emission-intensive fuel that MSMEs can use to meet their process-based requirements.
Under Phase I, PNGRB will be consulted for building an ecosystem that promotes uptake
of natural gas in MSME clusters by providing support towards retrofitting equipment
and extension of CGD (City Gas Distribution) networks. If demand is created, NPMA will
act as a facilitator to mobilize existing licenses of CGD units in respective geographical
areas for increasing the uptake of natural gas across MSME clusters.
The estimated impact through this lever is as follows:
• In the next 10 years, the overall potential GHG emissions reduction through the
alternate fuels lever is 9-16 MtCO
2
e, largely driven by shifts towards using natural
gas/biogas and biomass instead of fossil fuel-based fuel sources.
• Key sectors that contribute significantly to exports and have high emission intensity,
such as textiles, steel, forging, and foundry, may be considered for immediate action
in the first phase of implementation.
A comprehensive Monitoring, Reporting and Verification (MRV) mechanism is essential for
understanding the impacts of the listed recommendations. The MRV’s importance assumes
greater significance considering that the risk removal mechanism depends on achieving
specific KPIs. Hence, the MRV framework must be designed to capture data in an easy and
transparent manner. The roadmap proposes creating a platform and a tool that enables
the documentation of these emissions, the stipulated reduction targets, and achievements.
This will enable measurement of the roadmap’s reach and impact by directly linking the
results in terms of emissions reduced, monetary savings achieved, energy saved etc. An
effective MRV mechanism will play a critical role in reducing the risk perception among
implementing agencies when engaging with MSME units. The MRV tool can track any
payment defaults by MSMEs to implementing agencies, which will be compensated as per
the stipulated terms and agreements. 14Roadmap for
Green Transition of MSMEs
Industries, including the hard-to-abate sector, and MSMEs are required to be decarbonised
to meet the domestic and international targets. Decarbonisation can be achieved through
the adoption of emerging low-carbon technologies (LCT). Adoption of these LCTs is
expected to result in additional costs for these industries and to scale up its adoption, it
is proposed to set up a Climate Sister Impact Fund (CSIF). The proposed CSIF will make
strategic investments in LCTs, while generating modest financial and high social returns.
GoI can provide financial support in terms of equity capital of specific amounts in setting
up an equity fund as an Alternative Investment Fund (AIF) category I/II, registered under
Securities and Exchange Board of India (SEBI) Regulations, 2012. Additionally, a hybrid
debt fund is also proposed to be created at concessional terms by either investing in debt/
debt securities of existing entities or through a newly incorporated Non-Banking Financial
Companies (NBFC), as per the directives of SEBI and RBI. The funding will be used to
financially incentivise and mobilise private capital towards climate change mitigation and
adaptation interventions in industries, including MSMEs. It will also facilitate capital for
initiatives to help the industries decarbonise. CSIF’s objective will be to offer holistic one-
stop financing solutions at attractive blended cost of capital (e.g., by combining a modest
Weighted Average Cost of Capital (WACC) with high-risk investments) and enable capital
support at concessional rates towards financing of emerging high-potential climate change
mitigation and/or adaptation technologies and/or business models that are scalable and
replicable among industries.
Keeping in mind the price sensitivity, climate litigation charges, changing policy landscape
and their material impact on MSMEs, Regulatory Impact Assessment (RIA) will be
essential before any demand-side regulatory mandates are imposed on MSMEs. Increased
compliance burden on MSMEs could lead to net negative economic effects. RIAs can
provide decision-makers with vital information about whether and how to regulate to
accomplish public policy objectives. Moreover, RIA helps inform policymakers’ choices
to refrain from making changes in markets when doing so would be more expensive than
advantageous. RIA further supports the decisions made by policymakers by proving the
advantages of a regulation. RIA is specifically recommended since MSMEs have been kept
out of several stringent mechanisms such as GST compliance, CSR obligations, and PAT
Scheme. It is recommended to conduct a thorough RIA before introducing any specific
mandates under the roadmap for MSMEs.
In alignment with the Government’s vision of promoting sustainable industrial development,
a dedicated ‘MSME National-Level Institute for Energy and Greening’ will be required to be
established under the aegis of the Ministry of MSME.
The Programme aims to support and accelerate the decarbonisation and green transition
of MSMEs across a 10-year period. These measures are intended to result in reduction of
emissions from the MSME sector; benefit the MSMEs by helping them upgrade to new
technologies at minimum costs, providing opportunities for reduction in electricity bills,
and possible improvements in competitiveness. Further, establishing funds that cater to
manufacturing of energy-efficient technologies in the country and low-carbon transition
will streamline the transition in MSMEs and boost the country’s manufacturing capacity.
Together with this, awareness-building exercises will play a key role in maximising the
scale of adoption of the green technologies. MSMEs are at a crucial juncture where they
must meet sustainability standards to enhance their profits and productivity, and the green
transition roadmap provides these units with the required framework and support for their
green transition. Roadmap for
Green Transition of MSMEs 15
Introduction to the MSME Technical Working
Committee
To access the global markets, MSMEs needs:
• To increase productivity and efficiency through adoption of modern machinery
and green energy.
• To improve competitiveness.
• To comply with regulatory standards (CBAM, BRSR, Eco Mark) for avoiding
penalties, retaining export eligibility and meeting ESG norms which are
increasingly expected by regulators and buyers.
To cater to the above requirement and with the objective of taking a comprehensive
approach and formulate a sectoral decarbonisation roadmap for MSME sector, NITI
Aayog has constituted a technical working committee for preparing Roadmap for Green
Transition of MSMEs. The composition of the MSME technical working committee is as
follows:
Table 1: The sectoral technical working committees on MSMEs
No.Composition
1 Shri lshtiyaque Ahmed, Sr. Advisor, NITI Aayog Chairman
2 Shri Rajnath Ram, Adviser, NITI AayogMember
3
Shri Ateesh Kumar Singh, Joint Secretary,
Ministry of MSMEs
Member
4 Ms. Neha Nautiyal, Deputy Secretary, NITI Aayog Member
5
Representative from the Bureau of Energy
Efficiency (BEE)
Member
6
Representative from the Federation of Small
Scale Industries (FSSI)
Member
7
Representative from the Karnataka Small Scale
Industries Association (KASSIA)
Member
8
Representative from Federation of the Small
and Medium Industries (FOSMI)
Member
9
Representative from SIDCUL Manufacturers
Association of Uttarakhand (SMAU)
Member
10
Representative from the Federation of Indian
Micro, Small and Medium Enterprises (FISME)
Member
11Representative from Laghu Udyog BhartiMember
12McKinsey & CompanyKnowledge Partner
13Shri Aman Hans, Resident Fellow, NITI Aayog Member-Secretary 16Roadmap for
Green Transition of MSMEs
Terms of reference for the committee were:
• Identifying the sources of emissions along the production value chains and
establishing baseline sectoral emissions.
• Analysing the current strategies of the government and private sector.
• Analysing the international market trends and preparing the sector outlook on
competitiveness.
• Identifying and prioritising the various decarbonisation levers for each sector,
including circular economy and resource efficiency.
• Developing sector-specific abatement curves to illustrate decarbonisation levers,
their potential abatement, and associated costs.
• Identifying key projects and enablers required to achieve aspired decarbonisation
pathways including:
»Policy and regulatory frameworks
»Technology interventions, with high-level assessment on commercial viability
»Sources of capital and funding
• Formulating a sector-specific action plan and associated financial funding
mechanism.
• Any other measures/activities required for achieving the objectives of the
Committee. Roadmap for
Green Transition of MSMEs 17
Methodology
The MSME sector is one of the fastest-growing sectors in India and ranks second in
terms of employment generation. NITI’s MSME working group, has been created
to lead efforts that enable green transition in MSMEs and comprises experts
from the government, industry, think tanks, and private organisations who have
varying experience with different facets of decarbonisation of the MSME sector in
India. The report also comprises views and opinions from different stakeholders
such as central government ministries and agencies like the Ministry of MSME,
Ministry of Power, Central Electricity Authority (CEA), Niti Aayog, Ministry
of Environment, Forests and Climate Change (MoEFCC), Ministry of New and
Renewable Energy (MNRE), Ministry of Petroleum and Natural Gas (MoPNG),
and Bureau of Energy Efficiency (BEE). It also considers inputs from various
experts in regional and state departments, DISCOMs, financial institutions
like Small Industries Development Bank of India (SIDBI), State Financial
Corporations (SFCs), and micro-financing organisations; MSME unit owners and
industrial associations (cluster associations); MSME development organisations,
namely MSME Development Institute, National Small Industries Corporation
Limited (NSIC), National Institute for MSME (NIMSME), technology partners,
Original Equipment Manufacturers (OEMs) and service providers; and research
organisations and academic institutes while building this report.
A detailed list of stakeholders and representatives from organisations has been
provided in Annexure 1. The following approach was adopted to derive the results
and recommendations:
• Primary research: The research involved conversations with different
stakeholders to gather their opinions and suggestions around the core topics
that this report has covered. This research focused only on a few specific
issues to obtain solutions for them. The purpose of these consultations
was to get information about the real-world difficulties associated with
the green transition of MSMEs, the viability of suggested solutions, and the
possible effects of different policy options. The stakeholders’ feedback was
crucial in helping narrow the study’s scope and ensuring that the suggested
recommendations are practical and in line with market demands.
• Secondary research: Existing research published in renowned journals, meta-
analyses, and databases and datasets from publicly available sources have
been considered and cited in this report. Academic studies, industry reports,
government publications, and case studies on decarbonisation strategies,
technological advancements, and policy interventions were all included in
this review. The literature review served as a basis for identifying important
trends, obstacles, and opportunities in the MSME sector, which shaped the
study’s structure.
• Analysis: An in-depth data analysis was conducted using suitable mathematical
models and industry data. The analysis revolved around calculating the
potential impact of various interventions, evaluating the carbon footprint
of Indian MSMEs, and determining the viability of various green transition 18Roadmap for
Green Transition of MSMEs
strategies from a financial perspective. Data-driven insights helped identify
the most efficient green transition levers, which were also crucial to creating a
practical and attainable industry roadmap. In addition, this analysis compared
India’s performance to international standards in the areas of energy efficiency,
carbon intensity and the uptake of cutting-edge technologies to assess the
country’s relative standing.
The green transition of MSMEs is a key area where a huge potential for energy
reduction of GHG emissions is observed, providing several benefits for MSMEs.
The following published research pieces, reports, and other documents have
been considered while framing the guidelines and methodology for the green
transition of the MSME sector:
• Energy and resource mapping of bricks, foundry, pharma, textile, leather,
chemical, glass, and paper subsectors, sectoral roadmap for MSMEs (2021-
2023). These reports focused on achieving energy efficiency across the sub-
sectors. These reports contain observations from benchmark studies across
various sectors and evolving suitable policy recommendations along with an
implementation roadmap to make these sectors in India energy- and resource-
efficient. The scope of these studies involves estimating the production and
energy consumption patterns in the specified MSME clusters across the
nation, estimating the scale of energy demand and opportunities for energy
conservation, evaluating existing technologies and energy-saving potential in
the identified clusters through energy audits, assessing the readiness of the
sector for adoption of identified energy efficiency technologies and reviewing
of the existing institutional arrangements for energy efficiency improvement
in the identified clusters.
• BEE-SME program: Situation Analysis in 35 SME Clusters (2010): To address the
energy efficiency improvement in the MSME segment, BEE had formulated the
BEE-SME program that aimed at accelerating the adoption of energy efficiency
technologies and practices in a few chosen industry clusters through focused
studies, knowledge sharing, preparing DPRs and facilitating the process of
developing innovative financing mechanisms. A situational assessment of 35
pre-selected industry clusters was conducted to assess their present status
related to the number of operating units in a cluster, their turnover, energy
usage patterns, production processes, major energy-consuming equipment,
local service providers, etc. BEE prepared a list of the most promising clusters
for further action.
• Implementing demand aggregation for rooftop solar systems in MSME
clusters by WRI India (2020). This publication aims to demonstrate a pilot
implementation model for demand aggregation of rooftop solar (RTS)
projects in two MSME industrial clusters in western India. The publication also
presents the processes evolved to overcome the challenges and barriers that
arose during the implementation of the project. Currently, limited empirical
data is available to inform policy and guide practice on energy usage and
demands (including renewables) within MSME clusters. The practice note
aims to consolidate learning from the previous WRI India projects as well
as to develop a model for demand aggregation implementation through on-
ground insights. Roadmap for
Green Transition of MSMEs 19
• Scope for deep decarbonisation in the MSME manufacturing sector by Centre
for Study of Science, Technology and Policy (2024). Decarbonisation of
MSMEs is necessary to reduce fossil fuel dependence in the industrial sector.
However, this potential currently remains unrealised due to factors such as low
awareness and lack of access to low-cost finance. Moreover, energy efficiency
technologies have technical limitations, which constrain their decarbonisation
potential. Thus, the need for examining deep decarbonisation measures is
imperative.
• Scaling up of investments through ESCO mechanism in MSME clusters by
deploying Standard Energy Efficient Technologies (SEET) by the Global Green
Growth Institute (GGGI) (2023). In the absence of a structured framework to
support the proliferation of energy efficiency technologies and practices in
the MSME sector, this project was conceived with the objective of developing
a framework, which can enable Energy Efficiency Services Limited (EESL) to
create a viable Energy Service Company (ESCO) market in the MSME sector
and develop a roadmap for operationalising the EESL MSME Revolving Fund
(EMRF). Keeping in view the typical nature of MSME clusters around the country,
based on product types and technological diversity, clusters involved in food
processing, textiles, engineering, and services were deemed appropriate for
scaling up the implementation of energy efficiency technologies.
• Scaling up rooftop solar in SME sector in India by Deloitte and Climate
Investment Funds (CIF) (2019): This study attempts to understand the reasons
for slow growth and low investments in the solar rooftop space by MSMEs in
India by, inter alia, a) assessing key barriers to scaling up rooftop solar in the
MSME sector; b) identifying possible mitigants for the associated barriers;
and c) identifying and evaluating appropriate financial instruments that can
be considered to balance lenders’ concerns with MSMEs’ needs.
• Identifying barriers for rooftop solar uptake in MSMEs and development of a
mitigating financial framework by Ernst & Young (2020): The study aims to
identify and analyse barriers faced by MSMEs in undertaking rooftop solar
projects, with a special focus on the issues MSMEs face in financing rooftop
solar and to create a financial instrument, which can mitigate these barriers
and lead to rooftop solar propagation among MSMEs.
• Financing Low Carbon Transition (LCT) in India’s MSME Sector by TERI
(2022): This study uses qualitative research methods to explore the status
of financial assistance towards MSMEs LCT. This includes the existing
institutional arrangements, cooperation mechanisms, and policy landscape
for MSME LCT. Through this review of the existing structure, the study
identifies major barriers faced by the sector in accessing finance for MSMEs.
The study uses case studies from Gujarat and Maharashtra to get a more
detailed understanding of the policies and instruments available to MSMEs
at the state level. Additionally, the study illustrates state and centre policy
linkages by applying the theory of convergence and divergence as a policy
analysis tool and analyses its implications and future scope.
• Decarbonising India - charting a pathway for sustainable growth by McKinsey
(2022): This report identifies the optimal uses of more than 100 emissions
reduction levers in these sectors, across two scenarios. The report attempts
to be comprehensive across sectors, examining them in depth, highlighting 20Roadmap for
Green Transition of MSMEs
linkages across them while taking a practical, yet aspirational, view of the
abatement levers. It attempts to define two possible roadmaps for an orderly
transition for India in the context of its continued expected growth. Finally,
it proposes a set of actions that could be executed for an orderly transition.
• RIA toolkit- a practitioner’s guide in developing countries by CUTS International
(2015): An RIA toolkit provides a detailed guide for the assessment of
regulatory proposals to arrive at the most optimal solution. It discusses the
way governments can use Regulatory Impact Assessment (RIA) as a tool to
improve the regulatory mechanisms along with the application of the tool.
The process of RIA can be conducted while developing policies as well as
reviewing regulations. The former ensures the selection of a regulatory
proposal that produces good results at reasonable costs, while the latter
helps in course correction on evaluation of actual impact, and identification
of potential regulatory alternatives. Principles of RIA can be extremely helpful
in evaluating existing regulations and correcting errors. Thus, RIA can be
extremely helpful for developing countries.
• Energy service companies in China - the role of social networks and trust
by Frankfurt School of Finance and Management (2011): China’s ESCOs have
developed only modestly despite favourable political and market conditions.
With sophisticated market institutions still evolving in China, trust-based
relations between ESCOs and energy customers are essential for the successful
implementation of energy efficiency projects. Chinese ESCOs, predominantly
small and private enterprises, perform poorly in terms of trust-building because
they are disconnected from local business, social, and political networks. It
concluded that in the current institutional setting, the ESCO model based on
market relations has serious limitations and is unlikely to lead to large-scale
implementation of energy efficiency projects in China.
• MSME pulse report by State Industrial Development Bank of India (SIDBI)
(2024): The quarterly comprehensive report detailing MSMEs, which have
access to formal credit, with live credit facilities in the Indian banking system.
The report further provides insights to policymakers with an aim of providing
the credit industry with trends and insights for making information-oriented
business decisions. Roadmap for
Green Transition of MSMEs 21 22Roadmap for
Green Transition of MSMEs Roadmap for
Green Transition of MSMEs 23
1. Overview of the MSME Sector and Drivers for
Green Transition
1.1 Background
The projected 69 million MSMEs in India are responsible for more than 45.73%
of exports, 250 million jobs, 28.9% of the country’s GDP, and 25% of the energy
used by the industrial sector (PIB 2021; TERI 2022; GoI 2023a). Based on their
annual turnovers and investments in plant and machinery, MSMEs have been
classified into three categories as shown in Table 2 (GoI 2023b) (PIB 2025a). A
significant component of MSMEs is manufacturing, which employs more than 36
million people in India, and accounts for nearly 20 million units (Indusland Bank
2022) and represents an estimated 57% of all employment in the manufacturing
sector, thereby having a significant societal influence.
Table 2: Categorisation of MSMEs (PIB 2025a)Classification MicroSmallMedium
Manufacturing
enterprises and
enterprises rendering
services
• Investment
in plant and
machinery or
equipment not
more than Rs. 2.5
crore and
• Annual turnover
not more than
Rs. 10 crores
• Investment
in plant and
machinery or
equipment not
more than Rs. 25
crore and
• Annual turnover
not more than Rs.
100 crores
• Investment
in plant and
machinery or
equipment not
more than Rs. 125
crore and
• Annual turnover
not more than Rs.
500 crores
In India, MSMEs are commonly found in clusters. The clustering of units can
be attributed to a variety of historical factors, including the accessibility of
semi-skilled labour pools, the availability of fuels and raw materials, and the
proximity of markets. Around 17% of the (approximately 6,500 MSME) clusters
are industrial clusters, and the remaining clusters are low-technology, micro-
enterprise clusters (BEE 2010). With at least 100 registered units in each,
there are more than 140 clusters in India that are located inside or outside
of metropolitan areas. The size of these urban clusters varies greatly; some
clusters are so big that they produce 70-80% of a certain item produced in the
entire nation. The MSME sector is emissions and energy intensive. The issue
is further made worse using antiquated machinery, such as furnaces, motors,
boilers, etc., which consume more fuel than the average. MSMEs also tend to
use the cheapest locally available fuels to meet their industrial energy needs.
These fuels may include coal, pet coke, and diesel, which produce high Green
House Gas (GHG) emissions when burned. Moreover, MSMEs depend heavily
on electricity supplied by the grid. Furthermore, in 2022, 79% of the electricity
produced was generated from fossil-fuel-based brown energy sources (CEA
2022), thus making the electricity grid predominantly brown. All these factors
make MSMEs a highly emission-intensive sector. GHG emissions for MSMEs are
classified under three broad categories, Scope 1, Scope 2, and Scope 3: 24Roadmap for
Green Transition of MSMEs
1.1.1 Scope 1: Direct GHG emissions: Direct GHG emissions occur from sources
that are owned or controlled by the MSME, for example, emissions from
combustion in owned or controlled boilers, furnaces, vehicles, etc.,
emissions from chemical production in owned or controlled process
equipment (USA National Grid 2024).
1.1.2 Scope 2: Indirect GHG emissions from purchased energy: Scope 2
accounts for GHG emissions from the generation of purchased electricity,
steam, heating, and cooling consumed by an MSME. Purchased electricity
is defined as electricity that is purchased or otherwise brought within the
organisational boundary of the company. Scope 2 emissions originate
physically at the electricity generation facility.
1.1.3 Scope 3: Other indirect GHG emissions: Scope 3 is an optional reporting
category that includes all other indirect emissions. Scope 3 emissions are a
consequence of activities of a business that occur from sources not owned
or controlled by the company. It includes indirect emissions, such as those
from suppliers and the use of the organisation’s products. Emissions from
external parties that procure, manufacture, and transport the raw materials
and components used by businesses are considered upstream emissions.
Other upstream categories include emissions from waste generated and
leased assets, employee commuting, and business travel. Emissions from
the company’s product usage, transportation, and disposal fall under
the downstream category (Jeremy Gregory 2024). These upstream and
downstream emissions are accounted for as Scope 3 emissions. MSMEs, which
largely form a part of the entire product value chain, are usually covered and
reported under this category by large corporations.
MSMEs emitted around 135 MtCO
2
e
of carbon emissions in 2022
1
. Figure
3 illustrates the sectoral energy consumption among MSMEs with an
emphasis on the Specific Energy Consumption (SEC) for each of the five
sub-sectors paper, textiles, steel rerolling, foundry and forging. These
subsectors alone account for more than 60% of the total MSME emissions.
Coal and electricity, which together comprise approximately 54 percent of
the fuel mix, are responsible for around 90% of the overall emissions. The
details of the calculations have been presented as Annexure 2. Figure 4
illustrates the fuel composition and contributing emission intensities of the
top five emission-intensive MSME sub-sectors. The complete calculation
methodology is outlined in Annexure 3.
1 Source: Press search - https://energy.economictimes.indiatimes.com/news/renewable/opinion-how-
india-can-empower-msmes-to-achieve-net-zero-a-perspective/101271017 ; taking 3% emission increase
YoY from 2015 baseline data of 110 MtCO2e as per https://climatetrace.org/inventory?country=IND&year_
from=2022&year_to=2022&gas=CO2e100 Roadmap for
Green Transition of MSMEs 25C]P?? ?W ^?}?r?]? ??](] v?P? }v??u??]}v
v u]??]}v? }v??]??]}v? }( a^a9?
Figure 3: Sector-wise specific energy consumption and emissions contributions of MSMEsC]P ?
Figure 4: GHG emissions vs consumption by fuel source in the top five MSME
emission-intensive sub-sectors 26Roadmap for
Green Transition of MSMEs
1.2 Need for a Green Transition
India presented its long-term plan to reach 500 GW of renewable energy (RE)
capacity by 2030 and net-zero emissions by 2070 at the 27th Conference of
the Parties (COP27) to the United Nations Framework Convention on Climate
Change (UNFCCC 2022). To meet these climate targets, emission reduction
and renewable energy expansion will be necessary across all economic sectors,
including MSMEs. Encouraging MSMEs to implement decarbonisation measures
is critical for achieving the Sustainable Development Goals (SDGs), particularly
SDG 9 (infrastructure, industry, and innovation), SDG 12 (responsible production
and consumption), and SDG 13 (climate action). This climate transition risk is
becoming evident for MSMEs and thus warrants the government’s immediate
attention. MSMEs stand to gain several advantages through the green transition,
including:l]P ?
Figure 5: Importance and need for green transition in MSMEs
1.2.1 Building Climate Resilience: Climate change phenomena are often
viewed as macro-level environmental effects, such as rising temperatures
or changing rainfall patterns. Addressing these impacts of climate change
is a key challenge of this century for governments, communities, and
businesses alike. The consequences of climate change, including more
frequent and intense floods, are already affecting Indian MSMEs, even
if they are not explicitly recognised as climate-related disruptions. The
reasons why Indian MSMEs are particularly affected by climate change
impacts are manifold, and some are due to their inherent challenges, like
financial resources and access to credit.
Climate change and associated hazards severely impair MSMEs, disrupting
not only their daily operations but also the entire value chain. These
enterprises face vast and multi-faceted risks, from fluctuating costs
and delayed deliveries to unpredictable material availability, along with
shutdowns caused by floods and degraded infrastructure. This is more
pertinent for the MSMEs operating on low technology levels, as they are
more severely affected by climate change than high-tech businesses and
have fewer resources to cope with the impacts (WRI India 2024; GiZ India
2024). Given these risks, MSMEs must adapt and build resilience across the
board. Climate adaptation is critical for their long-term competitiveness
and survival.
This could be a win-win situation, with several benefits such as risk Roadmap for
Green Transition of MSMEs 27
reduction and increased resilience, cost savings, promotion of innovation,
and gaining a competitive advantage. Given these global changes, it is
very important to have a coherent framework and program, which can
guide the industry and MSMEs over the next 10-15 years in tackling climate
change, which is directly impacting policies, regulations, business models,
supply chains, and global trade patterns.
Box 1: Impact of Cyclones and Heat Stress/Heat Waves on MSMEs in India
Cyclone Michaung hit Tamil Nadu in December 2023, affecting 4,800 MSME units
across 24 industrial estates. This resulted in losses of at least USD 360 million. Heavy
rainfall in 2022 disrupted goods movement and factory production, costing Gujarat
industries approximately USD 600 million. Similarly, the Chennai floods (2015), Kerala
floods (2018), and Cyclone Fani in Odisha (2019)— all caused significant losses among
MSMEs, ranging from several hundred crore to tens of thousands of affected units.
Between 2001 and 2020, India lost approximately 259 billion hours of labour or $624
billion (Rs 46 lakh crore) annually because of heat and humidity. According to an
International Labour Organisation (ILO) 2019 report, by 2030, India could account
for 34 million of the projected 80 million global job losses due to heat stress-related
productivity decline. Humidity is also likely to cause inventory damage, machinery
malfunctions, equipment rusting, and an increased cooling demand. Furthermore,
increased heat raises the risk of industrial fire outbreaks and chemical hazards in
manufacturing facilities.
1.2.2 Achieving profitability through advanced technology: Implementing
green transition technologies can help MSMEs reduce costs and become
more competitive. Adopting cleaner fuels like biomass, biofuels, biogas,
and RE sources reduces emission intensity and expands access to low-
emission product markets. Transitioning to lower emission-intensive
fuels like Liquefied Petroleum Gas (LPG) and Piped Natural Gas (PNG)
can be a crucial first step in reducing emissions, since MSMEs are heavily
reliant on energy-intensive fuels like coal. Multiple incentives are also
available to implement energy-efficient technologies, such as accelerated
depreciation and credit-linked subsidy schemes for business expansion.
MSMEs adopting greener technologies have payback periods ranging
between 1-5 years.
Furthermore, adopting green electricity and alternate fuels not only
reduces emissions but also decreases dependency on grid electricity and
traditional emission-intensive fuels like diesel, which are used in generator
sets. These significant savings can increase MSME profitability, support
business expansion, generate employment, and reduce emissions.
Research indicates that the willingness to purchase sustainable products
at a premium is more prevalent in developing nations like India, Indonesia,
Brazil, and China than in developed economies. Given the momentum from
international guidelines and regional measures mandating a reduction
in emissions and adoption of sustainability, MSMEs must prioritize cost
savings and advance towards decarbonisation.
1.2.3 Adhering to international standards and regulations: Ensuring economic
competitiveness of the MSME sector in an era of globalisation is crucial. 28Roadmap for
Green Transition of MSMEs
Adopting clean energy measures can play a vital role in strengthening the
market position of MSMEs. A critical development is the Carbon Border
Adjustment Mechanism (CBAM), a policy introduced by the European
Union (EU) to impose carbon pricing on certain carbon-intensive products
imported into the region (European Union 2023). After a three-year
transition phase, CBAM is expected to take effect in January 2026, with
the possibility of expanding its scope to other high-emitting industries and
indirect emissions. This policy aims to prevent “carbon leakage,” where
companies relocate production to countries with less stringent carbon
regulations. This will significantly impact Indian MSMEs as Indian MSME
segments contribute largely to the total exports of textiles, steel, paper,
and pulp for handicraft (around 40 percent), and engineered goods (over
60 percent) (Annexure 9).
Indian products have significantly higher carbon intensity than the EU
and many other countries because coal dominates the overall energy
consumption (The Times of India 2023). MSMEs will face increased costs
for EU exports due to CBAM purchase certificates tied to product carbon
emissions. Additionally, an increase in the administrative burden can be
expected as CBAM involves monitoring, reporting, and verifying emissions,
which can be particularly challenging for smaller businesses like MSMEs.
Apart from the EU, other countries such as the UK, Canada, and Japan
have also been considering similar mechanisms. Such measures could
severely impact Indian MSME export prospects.
On the domestic front, Business Responsibility and Sustainability Reporting
(BRSR) represents India’s first framework mandating the provision of
quantitative sustainability metrics from Indian companies (the top 1,000
NSE-listed companies by market capitalisation) (SEBI 2023). The new
BRSR framework, created by the SEBI, oversees the country’s securities
markets. It was inspired by the Business Responsibility Report (BRR 2012)
published by the Ministry of Corporate Affairs. The new BRSR works
with other globally recognised reporting frameworks, including the Task
Force on Climate-Related Financial Disclosures (TCFD), the Sustainability
Accounting Standards Board (SASB), and the Global Reporting Initiative
(GRI). Respect for the environment and efforts to preserve and repair it
are among the guiding principles of this framework, under which 51% of
India’s top 100 listed companies voluntarily reported Scope 3 emissions.
As large corporations report on these emissions, MSMEs serving as
upstream and downstream partners in the entire value chain will face
compliance obligations. Only 2-3 % of manufacturing MSMEs sell directly
to retail customers, while more than 90% sell through traders and other
upstream manufacturers; hence, they may soon be asked to reduce their
carbon footprint. This necessitates the reduction of carbon emissions
for MSMEs as regional practices aim towards sustainability. Additionally,
other sustainability measures, specifically the Ecomark rules by MoEFCC,
will benefit MSMEs in the long run. Roadmap for
Green Transition of MSMEs 29
Box 2: Ecomark Rules 2024
On 26
th
September 2024, the MoEFCC notified the Ecomark Rules, 2024 to label
products that have a lesser adverse impact on the environment. The Ecomark will
be granted to a product if it holds a license or a certificate of conformity to Indian
Standards issued under the Bureau of Indian Standards Act, 2016, or the Quality
Control Orders issued by the Central Government. Other criteria that may be
considered for the grant of Ecomark include reduction of pollution by minimising
or eliminating the generation of waste and environmental emissions; recyclability
or recycled material or both; reduced use of non-renewable resources, including
non-renewable energy sources and natural resources; reduced use of any material,
which has adverse impacts on the environment. Any Ecomark, when granted, is valid
for 3 years or until there is a change in the Ecomark criteria for the product. These
rules imply that the use of environment-friendly ‘green’ products will be promoted
among consumers and will be the preferred choice for producing final goods. MSMEs
that are responsible for final product preparation and delivery will be benefited with
Ecomark label on their products.
1.3 MSMEs Need Additional Support for Green Transition
Implementing measures that aim to reduce the Scope 1 and Scope 2 emissions
of MSMEs is essential. The enhancement of energy efficiency and the adoption
of green electricity and alternate fuels can be the key drivers for this transition.
Despite the economic benefits and compliance with international standards,
the adoption of clean energy interventions is low due to a multitude of reasons.
Due to their limited manpower and inclination to focus on production and
marketing processes, MSMEs are left with little capacity to adopt clean energy
solutions. They require support from external entities for the adoption of clean
energy solutions, including access to cutting-edge innovations, technical know-
how, and best practices. MSMEs face a range of challenges in areas such as
energy efficiency, green electricity adoption, and the use of alternate fuels,
including the following:
Energy Efficiency (EE) Green Electricity (GE) Alternative fuels (AF)
• Lack of trust in the
ecosystem: MSMEs fail to
collaborate with Energy
Service Company (ESCO)
despite performance
guarantees due to lack
of trust/understanding of
such mechanism.
• Awareness and capacity to
implement latest technology:
MSMEs are unaware of the
technologies and performance
guarantee models run by
energy services companies.
• Perceived risk of payment
default by MSMEs: RESCOs
require risk of extending
services to MSMEs to be
mitigated due to perceived
payment defaults.
• Stakeholder support: State
Distribution Companies
(DISCOMs) are required to
extend timely support to
the ecosystem to get such
renewable power plants
online.
• Awareness on various agro
feed: MSMEs are typically
unaware of the possible
agro residues that can be
made into brickettes and
pellets for biomass firing.
• Scalability issues: Many
biofuels and products are
perishable and thus have
lower shelf life making it
logistically challenging. Further,
seasonality factors impact
availability and may potentially
lead to fuel shortage. 30Roadmap for
Green Transition of MSMEs
1.3.1 Other issues faced by MSMEs include:
i) Budget constraints: MSMEs often operate within tighter budgets and
have limited access to capital compared to larger enterprises, which
makes them more vulnerable to cost fluctuations. These enterprises often
face a high cost of compliance that consumes a significant portion of
their resources. Furthermore, MSMEs usually compete with larger firms
that benefit from economies of scale, making it challenging to maintain
competitive pricing for their finished goods, all of which contributes
greatly towards their cost sensitivity. MSMEs in Energy Service Company
(ESCO) markets often prefer cheaper alternatives (usually low quality) to
ESCOs’ solutions that tend to reduce the scale of impact intended.
ii) Access to finance: The Government has been supporting MSMEs by
providing finance to upgrade machinery, infrastructure, and cluster-
related developmental projects across India. Although public finance
and grants from the Government and philanthropic organisations
enable initial adoption of clean energy technologies, access to finance
from mainstream private and public sector banks is necessary to
achieve scale. However, access to such financing is limited due to
the high perceived risk in lending to MSMEs, high transaction costs
to service these low-value loans, low credit rating/scoring of MSMEs,
low business visibility, and the lack of understanding of clean energy
technologies. Even when financing options are available, MSMEs find
them unviable and unattractive as they are often expensive, involving
a cumbersome documentation process requiring additional collateral
security to cover risks.
iii) Cash-flow management challenges: MSMEs face hurdles in cash flow
management, which heavily impact their product delivery, operations, and
overall functioning. Some of these are due to late payments from customers,
inefficient invoicing and seasonal fluctuations in product demand patterns.
A significant amount is usually tied as receivables, which restricts working
capital, thus limiting funds for expansion or immediate needs. Roadmap for
Green Transition of MSMEs 31 32Roadmap for
Green Transition of MSMEs Roadmap for
Green Transition of MSMEs 33
2. Scope of the Report
Through this report, NITI Aayog aims to facilitate the development of policy
measures that enable a green transition in the MSME sector. The report provides
10-year implementation strategies that aim to reduce GHG emissions in MSMEs
through the enhancement of energy efficiency and adoption of alternative
fuels and green electricity. Solutions around energy efficiency and alternate
fuels address emissions from coal and other fossil fuels, while green electricity
solutions address emissions from brown electricity. The report also covers the
institutional mechanism that will be required to support the transition.
The Ministry of MSME along with the assistance of NITI Aayog will guide the
implementation of the Green Transition Roadmap through the formation of an
NPMA that looks at scaling clean energy solutions across the three levers of
energy efficiency, green electricity, and alternative fuels. The roadmap details
the three different levers in the green transition of the MSME sector, covering
the technological aspects, implementation mechanism and the financial outlays
required to enable this transition. The report also covers the building of the
institutional mechanism, MRV framework, setting up of RIA body and fund
mobilisation that are essential for the successful implementation of the roadmap.
The report aims to provide pathways to support the holistic decarbonisation of
the existing MSME units and propose steps that enable new and future MSMEs
to adopt low-carbon pathways right from their inception. The three sector-
agnostic green transition solutions are elaborated as follows:
• Enhancement of energy efficiency: The study provides a framework that
facilitates the adoption of energy efficiency in the MSME sector. Energy
efficiency is a key lever that can lead to an overall reduction of around 27%
of the overall GHG emissions across the MSME sector. The report highlights
the models to scale implementation of viable technologies and operational
practices which minimise energy losses and improve resource efficiency.
• Green electricity adoption: Green electricity adoption (involving use of
electricity that is produced from renewable sources), is another lever
identified for the decarbonisation of the MSME sector. With electricity as a fuel
contributing to around 41 percent share in the overall GHG emissions of the
sector, it is estimated that green electricity adoption can enable a reduction
of approximately 22-26% of the overall GHG emissions from the MSME sector,
and the report provides for models to scale adoption of green electricity for
procurement and self-generation.
• Increase in uptake of alternate fuels: MSMEs are heavily dependent on
fossil fuels to meet their thermal energy requirements. This is due to several
reasons, including cheaper prices of fossil fuels when compared with the
alternatives, maturity of the technologies harnessing the energy from fossil
fuels, and a near-developed consumer market. Since coal accounts for about
50% of the overall emissions produced across the MSME sector, replacing it
primarily with alternate fuels that are zero or lower emission-intensive can
lead to an estimated reduction of 7-12% direct emissions. Alternate fuels such 34Roadmap for
Green Transition of MSMEs
as biomass, natural gas (piped/compressed), renewable electricity (through
electrification of the process) and compressed biogas can be the long-term
solutions under this lever.
A robust institutional mechanism is essential for the effective implementation
of the Program. The program is designed to drive deep decarbonisation in the
MSME sector through an effective MRV framework that tracks ongoing efforts
and integrates key learnings into future actions. Although the three components
of MRV are frequently distinguished from one another, each component depends
on and complements the other two. Data on Key Performance Indicators (KPIs),
such as changes in energy and electricity usage, or an increase/decrease in
GHG emissions, can be measured as part of the monitoring process. A well-
functioning reporting system makes it easier to report data quickly, accurately,
and condenses it into easily understandable formats.
The MSME sector has traditionally lagged in the uptake of green schemes
and reporting on performance, which necessitates the creation of reporting
mechanisms that can capture data from the MSME owners transparently.
Verification is the final step in ensuring that reported data is accurate, consistent,
and complies with reporting regulations. Self-certification has been considered
initially to equip MSMEs for basic data verification, while inputs from external
agencies will be considered for verification of data to strengthen risk mitigation
based on the achievement of specific KPIs.
The report also recommends setting up of a Climate Sister Impact Fund (CSIF)
that can provide financial support for emerging technologies that directly enable
a green transition in industries, including the hard-to-abate sector. Additionally,
budgetary support could be proposed for research and development (R&D)
in technologies that reduce GHG emissions in the industrial space through
innovative equity and debt instruments. The fund’s investment objective would
be to ensure that capital is used to promote decarbonisation and climate
adaptation in a scalable manner.
2.1 Implementation of the Program: Scenarios Projected
The implementation of the three levers mentioned above is expected to
reduce GHG emissions significantly. Two scenarios have been represented
in the green transition of the MSME sector. The first, a Line of Sight (LoS)
scenario, wherein 35% of the energy needs from coal and other high-
emission intensity fuels are shifted to low-emission fuels (biomass, LNG/
PNG, etc.), and 45% of brown electricity is converted to green electricity.
The second is an accelerated scenario wherein 55% of energy needs from
coal and other high-emission intensity fuels are shifted to low-emission fuels
(biomass, LNG/PNG, etc.), and 60% of brown electricity is converted to
green electricity. Both scenarios account for the implementation of energy
efficiency measures, which are considered the first fuel in the energy pyramid
and a foundational step in the clean energy transition in MSMEs. Roadmap for
Green Transition of MSMEs 35
l]P?? ?

Line of sight scenarioAggressive scenario
Figure 6: The reduction in emissions observed in LoS and aggressive scenarios
Figure 6 illustrates the potential GHG emission reductions achievable by MSMEs
under two scenarios. In the LoS scenario, MSMEs can reduce 75 MtCO
2
e of GHG
emissions through three key levers— energy efficiency improvements (36 MtCO
2
e),
increased green electricity penetration (30 MtCO
2
e) and shifting to alternate fuels
(9 MtCO
2
e). Similarly, the aggressive scenario can lead to a reduction of 87 Mt
of GHG emissions by the enhancement of energy efficiency (36 MtCO
2
e), high
adoption levels of green electricity (35 MtCO
2
e), and shifting to alternate fuels
(16 MtCO
2
e). The figures have been obtained based on the current consumption
patterns of different fuels across the MSME sector. The detailed calculations and
assumptions used have been provided in Annexure 4. Under the program’s LoS and
Aggressive Scenario projections, the number of MSMEs that can be impacted are
around 340 million and 409 million respectively.
2.2 Reflections from Current Schemes for the Development of a
Roadmap for Green Transition
The MSME sector currently benefits from several schemes and programs
that address various operational challenges. A comparison of the proposed
Roadmap with the different central schemes is provided briefly in Table 3: 36Roadmap for
Green Transition of MSMEs
Table 3: Distinction between existing MSME schemes on green transition and the
proposed Roadmap
Scheme
name
ADEETIE
(Assistance for
Deployment of
Energy Efficient
Technologies in
Industries and
Establishments)
Scheme (Ministry
of Power)
Green
Investment and
Financing for
Transformation
(GIFT) Scheme
(Ministry of
MSME)
Scheme for
Promotion and
Investment
in Circular
Economy
(SPICE)
(Ministry of
MSME)
Roadmap for Green
Transition of MSMEs
Focus areasAims to facilitate
MSMEs to
upgrade with
energy-efficient
technologies/
measures across
60 clusters
spanning 14
sectors through
financial
instruments and
handholding
them in
carrying out
an investment-
grade energy
audit, a detailed
project report,
monitoring, and
verification of the
implementation.
Provides
institutional
finance at
concessional
costs to
support green
technologies,
clean
transportation,
energy-efficient
projects like
green buildings,
and waste
management
initiatives,
including
recycling,
efficient
disposal,
and energy
conversion
Provides
support to
adopt circular
economy
practices in
sectors like
plastic, rubber,
and electronics
waste
management
Provides institutional,
financial support and a
robust framework for sector
agnostic green transition
in MSMEs, with specific
focus on enhancement of
energy efficiency, adoption
of green electricity, and
alternate fuels.
• Renewable Energy
Service Company (RES-
CO)/ Energy Service
Company (ESCO) led
green electricity adoption
and energy efficiency en-
hancement in MSMEs.
• PM Surya Ghar Yojana
(PMSGY) like sub-scheme.
• Financial Incentivization for
alternate fuels adoption.
BeneficiariesAll MSMEs Micro and small
enterprises
(MSEs)
Micro and small
enterprises
(MSEs)
All MSMEs
Benefits Interest
subvention,
Streamlined
project
implementation
Interest
subvention,
Risk-sharing
facility
Credit-linked
capital subsidy
Financial incentives for
adoption of sector agnostic
solutions,
Risk sharing facility,
Streamlined project
implementation,
Boost for indigenous
manufacturing of relevant
technologies,
Monitoring, Reporting and
Verification (MRV)
Demand
aggregation
××× Roadmap for
Green Transition of MSMEs 37
The above interventions collectively enable MSME green transition through distinct
but complementary pathways. The ADEETIE scheme focuses on firm-level energy
efficiency upgrades by financing, audits, and verified technology adoption, while
the GIFT scheme provides concessional institutional finance for broader clean
technology deployment across energy, transport, buildings, and waste management,
with risk-sharing mechanisms. Complementary to these efforts, the SPICE scheme
targets circular economy integration in select sectors through credit-linked support.
The Green Transition Roadmap draws from several ongoing government initiatives
targeted at the MSME sector. It adopts a holistic and sector-agnostic approach,
emphasising demand aggregation and targeted interventions. Further, adopting
a sectoral approach offers several advantages, as it enables targeting similar units
engaged in facilitating the scaling-up of implementation measures. This allows for a
more focused and coordinated approach from implementation agencies.
Earlier schemes by the Government of India have effectively used the cluster
approach. The roadmap recommends demand aggregation, which combines
several demands of a service/product in a specific region to drive the outreach
of the initiative thereby addressing systemic barriers at scale. When combined
with demand aggregation, this approach strengthens the implementation across
3 levers. The Green Transition Roadmap has addressed a wide range of issues,
which will lead to holistic green transition. It includes specific provisions to promote
the adoption of green electricity and alternate fuels, ensuring a comprehensive
pathway toward sustainable industrial development in the MSME sector. 38Roadmap for
Green Transition of MSMEs Roadmap for
Green Transition of MSMEs 39
3. Institutional Mechanism
The successful implementation of this roadmap relies heavily on effective resource
management, mobilising finances, and division of responsibilities. Under the primary
approaches highlighted under the energy efficiency and green electricity levers, and
the alternate fuels lever highlighted in the upcoming sections, the implementation
will be undertaken by the Ministry of MSME which will institute a National Project
Management Agency (NPMA) to ensure its implementation.
Implementation of secondary approaches highlighted under the energy efficiency
and green electricity levers in the upcoming sections have been explained in
the same sections, respectively. The NPMA can be in the form of independent
consultants or a consortium, depending on the suitability, and can be monitored
through an inter-ministerial committee. The monitoring committee can include
members from the Ministry of MSME, Central Electricity Authority (CEA), DPIIT, NITI
Aayog, MoEFCC, Ministry of Power, MNRE, MHI, MoPNG, and state-level Ministry of
MSME agencies, EESL, BEE/State Designated Agencies of BEE. This committee will
appraise Detailed Project Reports (DPRs), set baselines, and establish target Key
Performance Indicators (KPIs) to be achieved.
Dedicated state-level committes can also be constituted for coordination of state-
specific activities. The state-level committee will work closely with MSME clusters
and associations, financial institutions, private organisations, OEMs, DISCOMs,
State Electricity Regulatory Authorities, and other stakeholders to look after the
green transition implementation across MSME clusters. The state committee may
also appoint agencies like MIDC, SIPCOT, SIDCUL, etc., as state Programme leads
that support the demand aggregation work. Cabinet approval will be taken for the
establishment of NPMA and allocation of funds under different levers identified
under the programme. The flowchart demarcating the roles and responsibilities
of the NPMA and the blueprint of the Green Transition Roadmap is provided in
Figure 7. 40Roadmap for
Green Transition of MSMEs &]P?
Figure 7: Roles and responsibilities of NPMA Roadmap for
Green Transition of MSMEs 41
3.1 The Different Roles and Responsibilities of NPMA are Elaborated as:
3.1.1 Administrative Support:
(i) Expression of Interest:
• NPMA will be responsible for inviting Expression of Interest (EoI)
from MSME clusters to participate in the national programme. This
EoI will largely determine the eligibility and criteria through which
MSME clusters, through SPVs, can adopt a green transition. The
EoI should ideally mention why a particular MSME cluster through
its SPV should be a part of the programme and the likely impact
on energy usage, emissions, job creation, profitability, etc. EoI will
help NPMA assess the intention and capability of the MSME clusters,
compare it with other MSME clusters and make a well-informed
decision for programme implementation. A detailed draft format for
the EoI will be shared at a later stage of implementation. EoI will
likely accommodate the following details:
»Information about the nature and type of the MSME cluster including
geographical spread, type of industries (micro, small, medium),
total number of MSME units, total employment generation, etc.
»Cluster information including export orientation, final goods
produced, electricity and energy requirements (if available),
turnover, any technical or financial requirements and other
qualification metrics that potential clusters must meet to be
considered for national programme implementation. EoI help
sellers assess the buyer’s intention and capability, compare it with
other purchase offers and make a well-informed selling decision.
Box 3: Special Purpose Vehicles (SPV) for MSME Clusters
SPVs are corporate vehicles private companies established for a variety of purposes. SPVs
can be established as subsidiaries, project or joint venture vehicles to ensure that only those
assets linked to a related transaction are exposed to the liabilities associated with that
transaction. SPV will be a company registered under Section 8 of the Company Act and
will have at least 10 small and/or medium enterprises (SMEs) having Udyam Registration as
members.
The creation of SPV for MSME clusters can follow the SPV creation under MSE-CDP:
It is necessary to form an SPV before setting up and running the proposed CFC. An SPV
is a clear legal entity (Cooperative Society, Registered Society, Trust or a Company) with
evidence of prior experience of positive collaboration among its members. The SPV should
have a character of inclusiveness, wherein provision for enrolling new members to enable
prospective entrepreneurs in the cluster to utilise the facility should be provided. In addition
to the contributing members of the SPV, the organizers should obtain written commitments
from ‘users’ of the proposed facilities so that their benefits can be further enlarged. The SPV
should ideally have one State Government official as members of the SPV. There should be
a minimum of 20 MSE cluster units serving as members of the SPV. There is no ceiling on
the maximum number of members. In special cases, where considerations of investments,
technology or small size of the cluster warrant a lesser number of units, a minimum of 10 MSE
units may be considered for the SPV.
42Roadmap for
Green Transition of MSMEs
(ii) Demand Aggregation:
• Once the clusters have been selected based on the EoI received,
demand aggregation will be conducted by the NPMA under one or all
levers identified under the national programme. Demand aggregation
is a key enabler of the green transition in the MSME sector. While it is
possible to drastically reduce emissions in MSMEs, scaling these low-
emission equipment alternatives comes with a high initial cost and
a large upfront investment (Kajol 2020). All these high initial costs
can be reduced if demand aggregation is effectively undertaken in
the cluster. Demand aggregation involves bundling the demands of
single or multiple energy-efficient equipment or technologies across
multiple MSME units into a single demand for procurement. This will
lead to sending a strong demand signal for low-emission products
and subsequently help OEMs and ESCOs/RESCOs accelerate new
investments. Aggregating demand can speed up the process, even
though MSMEs can and will independently source demand from
interested parties bilaterally.
Building more consensus around voluntary standards and other
market infrastructure that MSMEs need to purchase and evaluate
the environmental impact confidently is another important
benefit of demand aggregation. Aggregation can help MSMEs and
implementing agencies align on high-quality standards and product
definitions, guidelines, and tools by using their combined purchasing
power. This will harmonise and streamline processes within these
sectors. Demand aggregation platforms can effectively assist in
directing purchasing power towards technologies with higher
emission reduction potentials and faster payback periods that can
lead to a prosperous MSME segment.
(iii) Training and Capacity Building:
• Supporting green transitioning investments in the MSME sector
requires more than just financial and technological inputs – it demands
dedicated capacity building and project development assistance.
These projects are often complex and typically implemented by
actors with limited administrative capacity. Long-term, ongoing, and
intricate process of capacity building depends on the involvement
and ongoing communication for all parties involved (national and
local governments, non-governmental organizations, academic
institutions, etc.).
• There is no one-size-fits-all solution to capacity building. Instead,
capacity building strategies must be adaptive and iterative,
incorporating regular assessments, corrective actions, and
adjustments based on evolving needs. Capacity building strategies
and approaches should be flexible given the diverse and dynamic
demands across nations, regions, and sectors. Roadmap for
Green Transition of MSMEs 43
»When viewed holistically, capacity building should address the
following dimensions:
»Institutional and legal framework development: Creating enabling
environments that allow organizations, institutions, and agencies
at all levels to strengthen their capabilities.
»Organizational development: Developing management structures,
processes, and procedures within and across sectors - public,
private, and community.
»Human resource development: Equipping individuals with
knowledge, training and access to information, required for
effective performance.
The NPMA will also be required to drive capacity building efforts on
the benefits of green technologies particularly in terms of cost savings,
adherence to international and national regulations, energy savings,
impacts on emissions, and greening of the products, by closely working
with the MSME National Level Institute for Energy and Greening stated to
be created under the RAMP-S Programme by Ministry of MSME.
Once capacity building and demand aggregation activities are conducted
in the selected MSME cluster, a bilateral agreement must be signed
between the Ministry of MSME and cluster SPV for the preparation of
DPR under one or all levers identified. A bilateral agreement will be a
legally binding agreement wherein the Ministry of MSME and cluster SPV
exchange mutual obligations to perform specific actions in programme
implementation. The agreement will necessarily include:
• Specifics on rights, obligations, and expectations of the parties
involved.
• Inclusion of remedies for any breach.
• Addressal for violation of any rights, dispute, or wrongdoings.
• Penalties for non-adherence to specifications and implementations.
• Usage of precise terms to avoid misunderstandings.
(iv) Other administrative responsibilities of the NPMA will also include:
• Provide technical consulting services to MSMEs and state authorities
on decarbonisation solutions e.g., highlighting of pilot installations
of new technologies.
• Anchoring decarbonisation pilot projects focused on MSMEs for
multilaterals and donor organizations such as UNIDO, GEF, JICA,
etc.
• Setting up framework for model documents, e.g., prequalification,
contract document, bidding process, concession agreement, tripartite 44Roadmap for
Green Transition of MSMEs
agreement, PPA, monitoring & evaluation model document, etc.
• Tracking and monitoring subsidy disbursement for risk mitigation
under the programme.
• Provide advisory services to state governments on establishing new
MSME clusters with low-carbon pathways in built in their design,
e.g., build cogeneration facilities, with a scalable service model (e.g.,
steam-as-a-service).
• Support MSME clusters in enhancing resource efficiency and
integrating circular economy principles into their production
processes. These will also contribute to non KPI targets, that will
make MSMEs more resilient and efficient.
• Create a bridge between the RAMP-S and National Programme.
The RAMP-Sustainable (RAMP-S) programme will enable MSMEs to
accelerate their energy transition with a specific focus on the adoption
of green energy through an aggregation model. It will also facilitate
access to clean technologies at the individual and cluster levels and
supports EPR compliance. The National Programme and the RAMP-S
programs share complementary objectives that collectively support
the green transition of MSMEs. By fostering collaboration and learning
between the two programmes, a more cohesive and enabling ecosystem
can be created – one that empowers MSMEs to adopt green energies,
enhance resource efficiency and become sustainable.
3.1.2 Implementation:
(i) NPMA will prepare Detailed Project Reports (DPR) that allow for the
floating of a tender under one or all levers identified in the Programme.
The DPR can ideally be prepared by NPMA in its own capacity or
through empanelling an expert agency; however, this can also be done
on the lines of Swiss Challenge Methodology (SCM).
Box 4: Swiss challenge methodology (SCM)
SCM is a type of public procurement where an interested party submits an unsolicited
bid to the deciding authority. The project preparation cost is included in the unsolicited
bid that has been submitted to the authority. After accepting an offer, the deciding
authority reviews the bids for counteroffers and selects the best one. This could
be better than the original submission. Most of the time, the right of first refusal is
granted to the original submitter. The original submitter is awarded the bid if their
offer matches the challenging proposal; if not, the challenging bidder is awarded.
If the project proponent i.e., the original bidder, is not awarded the bid, the costs
involved in the preparation of project documents including DPR are compensated.
This regime is preferred as the most competitive bid of all the ones received will
be selected for the final implementation. Any fee encountered for the preparation
of DPR will be compensated by the NPMA to the successful bidder if the DPR is
prepared by a private agency. Roadmap for
Green Transition of MSMEs 45
For each project, the NPMA can assist in onboarding the implementing
agencies through a two-stage tendering mechanism in line with the
SCM to implement green transition projects as explained:
• Prequalification: The NPMA can create a list of pre-qualified
implementing agencies that match the requisite criteria, including
a good services track record, number of projects implemented
successfully, years of operations, past empanelment by relevant
agencies, prior experience in executing projects of similar value,
etc., and finalise the scope after consultations with potential bidders
on their proposals. This practice will include:
• Financial bid parameter: This comes after giving bidders sufficient
time to prepare the final project scope. The NPMA will evaluate this
based on specified timelines. The L1 bid with the lowest quantum of
the subsidy required from the NPMA will be selected. The maximum
subsidy as a risk compensation amount can be either:
»An amount that is lower than the defined absolute amount in the
bidding document.
OR
»A fixed percentage of expected sales (X years for typical
implementing agency payback) by assessing the risk profile of
MSMEs in the particular cluster based on past loan delinquency
rate (national delinquency of approximately 3 %). 46Roadmap for
Green Transition of MSMEs
A detailed bidding and tendering process is described as follows:
Box 5: Proposed Bidding Methodology
Step 1: Preparation of the project report and undertaking demand aggregation
a) The Participating Entity (PE), in this case the NPMA, can undertake the
preparation of the DPR. The PE shall bear the entire cost.
Or
b) The PE may hold talks with a potential bidder to request them to submit an
unsolicited DPR. Upon submission, the DPR will be vetted by the technical
experts, and the cost of preparing the DPR will be released to the consultant
once the DPR is technically accepted by PE.
Step 2: Request for technical proposal (RTP) stage
The PE is to evaluate the eligibility and technical capabilities of bidders, and only
technically qualified bidders can participate in the next stage of bidding:
(i) Issuance of RTP Document:
The PE issues an RTP, inviting bidders to submit their technical proposals, which will
include the following information:
• Background and objectives of the consultancy services.
• Scope of work and deliverables.
• Eligibility criteria for bidders.
• Evaluation criteria i.e., technical qualification criteria.
(ii) Submission of RTP responses:
Bidders submit their technical proposals, which are evaluated based on technical
criteria such as experience, turnover, qualifications, and methodology.
(iii) Opportunity to the consultant: prepared DPR
The bidder who prepared the DPR will also be allowed to participate in the bidding
process, and shall not be given any preference over other bidders.
(iv) Evaluation of RTP responses:
Technical Evaluation: The PE evaluates the technical proposals and shortlists only
technically qualified bidders to the second stage of bidding (RFP).
Step 3: Request for proposal (RFP) stage:
(i) Issuance of RFP document:
Only technically qualified bidders from the second stage (RTP) are invited to submit
their financial proposals
(ii) Financial evaluation:
The PE evaluates the financial proposals based on pre-specified financial criteria.
The bidder with the lowest evaluated financial bid will be recommended for award.
RTP timeline:
30 days for document submission, 30 days for technical evaluation.
RFP timeline:
Within 15 days from the completion of technical evaluation, 30 days for bid submission,
30 days (max) for financial evaluation, 30 days negotiation and contract signing. Roadmap for
Green Transition of MSMEs 47
The bidding process can essentially follow the bus tendering process under FAME
II scheme by the Ministry of Heavy Industries (MHI):
Box 6: Electric bus procurement under FAME-II
MHI mandated the opex procurement model under FAME-II, which resulted in all bus
agencies adopting the Gross Cost Contract (GCC) procurement model for e-buses.
The tendering process for bus procurement under GCC involved cities issuing an
RFP, accompanied by a Model Concessions Agreement (MCA), that outlined the
terms of procurement. Interested service providers could submit their bids, out
of which the least cost (L1) bidder is selected and contracted. All the cities were
mandated to adopt, draft MCA was issued by NITI Aayog, Government of India, after
incorporating any necessary changes according to their local needs. The following
factors determined the selection of the bidders:
• Eligibility criteria for service providers: Annual turnover, manufacturing capacity,
operating experience, adherence to timelines, etc., were considered.
• Contractual obligations: Performance bank guarantee amount and duration,
subsidy bank guarantee amount and duration, payment in the case of contract
termination, taxes, third-party insurance, and asset ownership at the end of the
contract influenced the cost of FAME-II bids.
• Functional and technical specifications: Charging strategy, battery capacity
requirements, and bus specifications in determining the cost-of-service provisions.
• Payment terms and penalties – The terms of payment and penalties are at
the heart of the payback period for the service providers who invested in the
GCC operations. Assured kilometres of payments, periodicity, charges for late
payments, and payments for additional and underutilized kilometres of operation
were key payment terms that varied between cities and hence could have
impacted their costs significantly.
3.1.3 Framework and Guidelines:
(i) The overall framework for green transition that revolves around the
3 levers of energy efficiency, green electricity and alternate fuels is
described in detail in the forthcoming sections of the report.
3.1.4 Project Monitoring and Risk Aversion:
(i) Once the projects are in the pipeline and implemented as per the stipulated
terms, the NPMA would be responsible for performing the monitoring,
reporting, and verification (MRV) functions to determine the efficacy of
the overall objective, which has been described in the following sections.
(ii) Since the implementation of several of the levers identified under the
National Programme does not involve any upfront payments to selected
implementing agencies and contains service-based payments, there is a
possibility of MSME units defaulting on scheduled payments. To mitigate
the perceived risk of MSMEs defaulting on payments to implementing
agencies – arising from the implementation of one or all the levers
identified under the National Programme – financial security and risk
mitigation measures will be extended to the NPMA as outlined below: 48Roadmap for
Green Transition of MSMEs
• Financial support: The NPMA will closely monitor all implemented
projects and work toward releasing funds to implementing agencies
if there have been any payment defaults by MSMEs. A risk-sharing
mechanism is proposed to mitigate any financial losses in the project
implementation and monitoring phase, considering the poor credit
ratings usually found in MSMEs that lead to a risky investment status
for the implementing agencies. Two strategies can mitigate the risks
associated with these payments, as elaborated:
»Payment guarantees: If the applicant (MSME) does not pay for
the goods or services rendered, a payment guarantee gives the
beneficiary (implementing agencies) financial security. This form
of guarantee is particularly critical in international trade and high-
value contracts where the credibility and reliability of parties can
be difficult to ascertain. Sometimes, a payment guarantee helps
protect the seller by acting as collateral to ensure they’ll get paid
later. These guarantees often cover the beneficiary up until the
last day of the payment schedule and include a grace period to
allow for any follow-ups if needed.
This regime has been deployed in all solar and wind projects that
are financed and tendered by SECI for DISCOMs. It is perceived
that in a scenario where an MSME defaults, an independent
M&V agency can be deployed to assess the situation and
provide recommendations to disburse pending payments to the
implementing agencies involved. Payment guarantees may not
be favorable for the Programme as it can reduce the collection
efficiency of implementing agencies and increase the overhead
cost for the authority.
»Concessional agreement: A concession agreement is a contract
between a government and an implementing agency (also known
as the concessionaire) that grants the company the right to operate
a business within the government’s jurisdiction or on another firm’s
property, subject to specific terms. These agreements often include
performance payouts, which are financial incentives tied to the
achievement of specific performance targets.
Key elements of concession agreements with performance payouts
include the scope and duration, performance metrics, roles and
responsibilities of all the parties involved, termination clauses, and
incentives and penalties for failing to meet performance targets.
This agreement has several benefits that lead to a surge in efficiency
and accountability and further promote innovation. These types
of agreements have been drafted by the NHAI for several projects
across India. Herein, the exchequer may prefer to pay upfront, and
annuity grants as a concession based on the perceived risk of MSME
payment defaults that may vary from one cluster to another. Roadmap for
Green Transition of MSMEs 49
It is recommended that a tripartite concessional agreement
with performance payouts be employed for the Programme
implementation. This agreement will be signed between the
Ministry of MSME, the implementing agency and MSME cluster
SPV before executing any project under the levers identified
in the roadmap. The concessional agreement will incentivise
implementing agencies to improve collection efficiency, as annuity
payouts will be linked to targets such as units of energy saved,
emissions reduced, or revenue collected.
3.1.5 There are 2 ways in which these funds can be provided to implementing agencies:
(i) Achievement linked periodic payments: These payments are provided
upon achievement of target KPIs, for example, Scope 1 GHG emissions
intensity reduction from baseline, wherein the targets are set in line
with global Science Based Targets (SBTi) standards. Once these
targets are met by an MSME unit where an implementing agency is
engaged, and the MSME unit defaults on payments, the NPMA can roll
out the agreed-upon subsidy to the implementing agency.
(ii) A hybrid model: This involves part upfront and part annual payout
linked to delivery targets (as described above) as set by the NPMA.
The funds required to remove the risk of payment defaults by MSMEs will be
provided through the Credit-Guarantee Fund (8-9 %) under the MSME Credit
Guarantee Scheme. 8-9 % of the fund value to be allocated specifically for the
National Programme.
Box 7: MSME Credit Guarantee Scheme
The MSME credit guarantee scheme, approved on January 29, 2025, helps MSMEs
secure term loans for machinery and equipment without collateral. It offers 60%
guarantee coverage to Member Lending Institutions (MLIs) for loans up to Rs. 100
crore, through the National Credit Guarantee Trustee Company Limited (NCGTC).
The scheme creates a self-financing guarantee fund combining MSME credit risks,
with guarantees for loans over Rs. 100 crore. The term loan and guarantee cover
under the MSME credit guarantee scheme will play a vital role in modernising the
MSME manufacturing sectors by enabling MSMEs to invest in advanced infrastructure
and technologies. This scheme will also help MSMEs grow and compete globally. As
per the Budget 2024 speech, all MSMEs in the manufacturing sector requiring term
loans to purchase equipment and machinery are eligible for the credit guarantee
scheme. The government has yet to release the detailed guidelines for this scheme.
The MRV platform and online tool, as described in the MRV subsection of the report
will be utilized to track the status of all projects that have been implemented or
currently under implementation within the roadmap. The online platform will also
contain the risk mitigation module, which will follow the guidelines of the Credit
Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to manage and
facilitate any payment defaults. 50Roadmap for
Green Transition of MSMEs
Upon ratifying a trilateral agreement, a comprehensive database will be established
on the Cluster SPV, its constituent MSME members, and the selected implementing
agency. All the agreements that are mutually agreed upon will be adhered to
including payments by the MSMEs to implementing agencies on achievement of
specific KPIs. However, in an event that the MSME does not release the payment
even when the specific KPI is achieved, the following redressal mechanism aligned
with CGTMSE protocols will be activated:
• Implementing agencies are required to report the date on which the
account for a particular MSME Cluster SPV was classified as Non-
Performing Assets (NPA) within a calendar quarter. This information must
be submitted through the designated option in the online system by the
subsequent quarter.
• The cluster SPV database will include all member MSME units. In case
of payment defaults, the classification of NPAs will be attributed to
the specific units, which have defaulted on scheduled payments to the
implementing agencies.
• The online platform will include a dedicated access for logging in and
registering NPA details structured as follows: Member Login Area >>
Guarantee Maintenance >> Periodic Information >> NPA Details).
• The lending institution may invoke the guarantee for a credit facility within
a maximum period of 3 years from the date of the NPA classification or
lock-in period, whichever is later.
• Specific guidelines for classification of any asset as an NPA will be issued
at a later stage of the program’s implementation.
• Accounts classified by the implementing agency as fraudulent/willful
defaulters/non-co-operative borrowers shall not be considered eligible
for claim settlement.
• Accounts that slip into NPA status within 90 days from the material date
shall not be considered eligible for claim settlement.
• Claims submitted by the implementing agency will be settled to the
extent of 2 times the fee including recovery remitted during the previous
financial year. Any claim exceeding this threshold including recovery
remitted should be suspended until the payout is brought within the cap
limit.
• Upon submission of an eligible and complete claim by the implementing
agency, the trust shall release 75% of the guaranteed amount within 30
days, provided the claim is found in order and complete in all respects. In
case of delays beyond 30 days, the Trust shall pay interest on the eligible
claim amount at the prevailing bank rate for the delayed period. The claim
for the remaining 25% of the guaranteed amount can be claimed after the
completion of 3 years from the settlement of initial claim. Once a claim
is paid, the Trust shall be deemed to have fulfilled its obligations under
guarantee for the respective borrower. However, implementing agencies
require refunding any amount received from the borrower after the full
guaranteed amount has been paid by CGTMSE. Roadmap for
Green Transition of MSMEs 51
• In the event of default, the implementing agency shall exercise its rights,
if applicable, to take possession of the assets. Any amount recovered
through the sale of such assets, or any other means shall first be credited
in full by the implementing agency to the trust. Only thereafter may
the implementing agency submit a claim for the remaining 25% of the
guaranteed amount.
• The implementing agency shall be liable to refund the claim released by
the Trust along with penal interest at the rate of 4% above the prevailing
bank rate, if such a recall is initiated by the trust.
• Implementing agencies will have option to opt for a single instalment claim
settlement with reduced guaranteed coverage of 15% in cases where legal
action has been waived. For example, if the original guaranteed coverage
was 75%, the reduced coverage would be 60%; for 80% it would be 65%
and so on.
A more detailed mechanism of the risk mitigation will be outlined with the model
documents that will be prepared by the NPMA at later stages of National Programme’s
implementation. It is recommended that stakeholders adhere to web application
user guide created for the National Credit Guarantee Trustee Company (NCGTC).
Figure 8 provides the workflow of the National Programme from inception and
selection of MSME cluster to Monitoring Reporting and Verification (MRV) mechanism: 52Roadmap for
Green Transition of MSMEs
Figure 8: Proposed flow for the implementation of green transition across MSME clusters Roadmap for
Green Transition of MSMEs 53
For an effective uptake and robust mechanism, NPMA may look at the following
specific tasks under different pillars of the Green Transition Roadmap (Figure 9):l]P?? ?

Demand
aggregation
•CollectmicroleveldemandestimationdataofMSMEswithpeak&non-peakhour
distribution(forGreenelectricitypenetration).
•Conductsitesurveysandperformfeasibilitystudies.
•UndertakeongroundawarenessgenerationandsecuresignupsfromMSMEs.
•Detailoutprojectdesigns(preparedetailedprojectreports).
Support for
financing and
contracting
•Runtheend-to-endbiddingprocessforonboardingimplementingagencies.
•Supportimplementingagenciesifneededtoaccessrequisitefinancingfortheproject
(SIDBI,NonBankingFinancialInstitutes(NBFCs).
•Helpredirectanyexistinggovernmentsubsidiestoreduceprojectcostandimprove
viability.
Project
management
•OverseeEPC/O&Mwithstrictadherencetothetimelinesandenforcesthebidclausesif
thereareanyirregularities.
•Monitormonetaryandemissionimpactofusingenergyefficiency/green
electricity/alternatefuelssolutions.
Figure 9: Specific tasks for NPMA to enhance the efficiency and outreach of the National Programme
Roadmap for Implementation of the Programme:
Table 4: Roadmap for implementation of the Programme
Phase Phase 1 Phase 2Phase 3
Timeline 2025-2030 Only upon successful
implementation of
Phase 1; 2030-2032
Only upon successful
implementation of
Phase 2; 2032-2035
Responsible
agency
NPMA NPMANPMA
Agencies to be
consulted
MSME cluster associations
MSME DFOs in states to be galvanized for demand aggregation
and capacity building exercises.
Interministerial Committee, State Committee.
Key activities by
Ministry of MSME
• Target shortlisted clusters for energy efficiency and green
electricity for implementation
• Galvanize cluster associations/ MSME DFOs/ DICs to get more
MSME participation from the cluster through focused awareness
programs.
• Empanel NPMA to drive the green transition effort
• Disburse concessions based on achievement of target KPIs
(MtOe saved through energy efficiency measure, units of
green electricity produced) for payment defaults through
Credit Guarantee Scheme 54Roadmap for
Green Transition of MSMEs
• Phase I will focus on MSME clusters identified for implementation
in the later sections of the report. These clusters have been selected
based on findings from reports on ‘Energy and Resource Mapping
of Bricks, Foundry, Pharma, Textile, Leather, Chemical, Glass, and
Paper Subsectors’ sectoral roadmaps for MSMEs from the years
2021-2023. These selections are based on key criteria including
energy consumption, employment generation, export orientation,
and potential for green transitioning.
• Phase II will expand the focus on the remaining 170 high-energy
intensive clusters as defined by BEE. These clusters contribute
significantly to India’s manufacturing GDP and will be targeted after
the successful implementation of green transition in the 20 odd
clusters identified under Phase I. This phase will also include other
moderately energy-intensive MSME sub-sectors including glass, food
processing, glass, leather, chemical and fertilisers, pharmaceuticals
and the other lower emission intensive clusters for textiles, paper,
forging, foundry and steel re-rolling.
• Phase III will include smaller MSME clusters that may contribute
less to national manufacturing output but hold substantial regional
significance. Inclusion of these sectors is essential to ensure holistic
decarbonisation of the MSME sector. Roadmap for
Green Transition of MSMEs 55 56Roadmap for
Green Transition of MSMEs Roadmap for
Green Transition of MSMEs 57
4. Recommendations
4.1 Recommendations for Enhancement of Energy Efficiency
When it comes to quick and affordable ways to mitigate carbon emissions,
reduce energy costs, and improve energy security, energy efficiency is referred
to as the “first fuel” in clean energy transitions. It has been estimated that in
the next 10 years, while the Programme is in force, the overall GHG emissions
reduction potential through the application of energy efficiency lever is around
36 MtCO
2
e of carbon emissions, and a potential to impact around 17 million MSME
units. Five key subsectors, namely textiles, paper, steel re-rolling, foundry and
forging, can contribute significantly towards this reduction potential and have
been identified for immediate action. 10 MSME clusters from these subsectors
have been identified (Table 5) to reduce around 12 MtCO
2
e (around 33% of the
total reduction potential identified). These clusters have been shortlisted based
on high emissions reduction potential, high export orientation, strong cluster
association presence and influence, and homogenous nature of the clusters to
increase scale. More details are provided in Annexure 5.
Table 5: Emission reduction and investment potential in 10 MSME sectors across India
due to enhancement of energy efficiency
S. No.
Cluster/
Locations
Sectors
Energy
consumption
(in MtOe)
Current
emissions
(Mt)
Reduction
potential
(Mt)
Investments
(in Cr.)
1 Surat Textile 2.95 11.15 6.35 7,837
2 Bhiwandi Textile 0.40 3.79 2.16 2,664
3 Vapi Paper 0.32 1.16 0.13 370
4 Tirupur Textile 1.30 0.98 0.56 692
5 Jalna Steel Rerolling0.25 2.2 0.48 644
6 Ludhiana Textile 0.34 0.52 0.30 365
7 Morbi Paper 2.95 2.41 0.28 433
8
Mandi-
Gobindgarh
Steel Rerolling0.25 1.3 0.29 400
9 Raipur Steel Rerolling0.18 1.13 0.24 331
10 CoimbatoreForging 0.06 0.46 0.12 209
Total8.99 ~25.1 ~12.0 14,639
4.1.1 Primary Approach:
The Energy Service Companies (ESCOs) provide a robust ecosystem for
MSMEs to adopt energy efficiency. ESCOs offer zero-investment, risk-free
models that are tailored for cash-strapped MSMEs to implement energy
efficiency solutions on a Pay-As-You-Save (PAYS) payment model. The
existing business models in the ESCO markets have been provided in
Annexure 6. 58Roadmap for
Green Transition of MSMEs
The PAYS model, which has been largely employed by ESCOs, is elaborated
in Figure 10:
(i) ESCOs initiate by conducting energy audits at the MSME unit(s).
These are detailed surveys conducted by a certified energy auditor to
determine the amount of energy a building uses and identify ways to
reduce energy consumption.
(ii) Once the audit recommendations are made, the ESCO purchases
energy-efficient equipment from OEMs and sells it directly to MSMEs
who agree to implement the recommendations.
(iii) MSMEs who purchase the energy-efficient equipment do not have to
pay any upfront capital cost for the technology being offered. The
ESCOs charge the MSMEs based on shared savings models, wherein
a monthly instalment is released for services rendered by ESCOs in
terms of savings obtained in monthly electricity and energy bills, and
have a usual payback of 2-4 years.
(iv) The ESCO provides additional after-sales services and warranties on
the product that are directly obtained from the Original Equipment
Manufacturers (OEMs).
(v) The regulatory authorities rate the products and services of the OEMs
to instil a sense of trust in the whole ecosystem and provide policy
measures to the MSMEs to encourage uptake of energy efficiency
technologies.
(vi) ESCOs also drive awareness creation, project design, and
implementation of energy efficiency technologies.
(vii) Financial institutions are the other part of the regime that provides
finances to the ESCOs to meet their business requirements.
Figure 10: ESCO-MSME business model
However, the model has not seen the growth it was supposed to deliver
due to several reasons, both on the supply as well as demand side of the
technology. The ‘no upfront investment’ models are attractive for MSMEs Roadmap for
Green Transition of MSMEs 59
to adopt; however, risk perceptions about MSMEs’ ability to generate
reliable cash flows often mean that these haven’t taken off as expected.
The ESCOs and OEMs tend to avoid working with MSMEs due to their
lower-than-expected credit ratings. A brief of the issues is outlined in
Figure 11:

Demand side
Lack of process-wise energy
consumption benchmarks for MSMEs
MSMEs prefer deploying capital for
business expansion rather than for
installing EE solutions (cost saving)
Lack of market enablers to push MSMEs
to adopt EE solutions, such as Perform,
Achieve and Trade Schemes
Supply side
MSMEs often lack the technical expertise
and manpower required to handle energy
savings projects
OEMs do not prefer giving performance
guarantees as it significantly increases
their risk of payment collection for
MSMEs
OEMs typically do not target MSMEs
directly as customer acquisition costs are
high and order size is low
Figure 11: Problems in implementation of MSME-ESCO business model (Source: Expert Interviews)
To enhance energy efficiency in MSME clusters, the application of this
lever will be done in 2 ways:
A. Demand side
To maximise the enhancement of energy efficiency in MSMEs on the
demand side, it is pro\posed that NPMA facilitates the implementation.
The procedure for its implementation will be as the description provided
in the institutional mechanism chapter. The step-by-step procedure and
details on a few specifications for an effective enhancement of energy
efficiency on the demand side will include-
(i) NPMA identifies MSME clusters with EE potential through Expression of
Interest (EoI) and subsequent demand aggregation, capacity building,
bilateral agreement, and Detailed Project Report (DPR) creation, with
elaborated steps mentioned in the institutional mechanism chapter
under the administrative support subsection.
(ii) ESCOs are selected based on the two-stage bidding regime as specified
in the institutional mechanism chapter under the implementation
subsection.
(iii) ESCOs will employ the PAYS model under the National Programme. 60Roadmap for
Green Transition of MSMEs
(iv) Once the bidder has been selected, a service agreement must be
signed between the MSME cluster SPV and ESCO on mutually agreed
terms and specifics, including equipment to be supplied, retrofitting
schedule, expected savings, etc. A tripartite concession agreement,
is also signed thereafter between the Ministry of MSME, cluster SPV,
and selected ESCO, and will follow the guidelines for risk mitigation
and disbursement of specific funds as mentioned in the institutional
mechanism chapter under the project monitoring and risk aversion
subsection.
Considering that demand aggregation may not be carried forward in
a cluster due to several reasons, individual MSME units can also adopt
energy efficiency and avail subsidies from the Central Government under
the RAMP-Sustainable (RAMP-S) programme. The Programme envisions
providing a capital subsidy to individual MSMEs to encourage the adoption
of energy-efficient technologies. These technologies will be made available
at affordable rates within industrial clusters and include community
boilers, centralized air conditioning or refrigeration systems, greywater
recycling units, material recovery facilities (MRFs), and desalination or
demineralisation plants. Upto 15% capital subsidy on the system cost
will be offered to support the deployment of such technologies for both
individual and community-level facilities. This will assist in resource
efficiency through cost sharing by leveraging the success of schemes like
GIFT, SPICE, and CLCS.
B. Supply side
Several emerging as well as new energy efficiency technologies currently
operating at lower Technology Readiness Levels (TRL) or haven’t seen much
uptake in the country due to high capital costs. To acquire these technologies,
customers must pay an additional amount (including marketing charges,
duties, etc.). These extra expenses usually make low-emission alternatives
more expensive than their conventional counterparts, particularly in the early
stages of the market. Technologies that have a high potential for energy
savings and equivalent emission reduction need rapid adoption among
the five high-energy and emission-intensive MSME subsectors to magnify
the green transition journey. The Programme recommends a Viability Gap
Funding (VGF) mechanism directly credited to the Original Equipment
Manufacturers (OEMs) for significant uptake of these technologies. Bureau
of Energy Efficiency (BEE), in close consultation with the Ministry of MSME,
will shortlist 5-7 emerging technologies that can provide enhanced energy
savings (more than 20% from the current equipment) if applied across the
five energy-intensive MSME subsectors. The VGF scheme aims to support
this manufacturing project which is economically justified but falls marginally
short of financial viability. Support under this scheme is available only for
OEMS selected through a competitive bidding. The total VGF under the
scheme does not exceed 15 percent of the total project cost. The details for
the VFG scheme will align with the VGF scheme under Invest India. Roadmap for
Green Transition of MSMEs 61
Box 8: VGF Scheme
Process for Availing VGF:
• Proposal submission: The government or statutory entity must submit a project
proposal containing all requisite information.
• Model document preference: Projects based-on model documents would be
preferred over standalone documents.
• Eligibility criteria: Empowered Institutions (El) may seek required details for
satisfying eligibility criteria.
• Eligibility notification: The El will inform the sponsoring government/statutory
entity whether the project qualifies for financial assistance within 30 to 60 days.
• Referral to Empowered Committee: The El may refer the case to an Empowered
Committee (EC) for further clarity on eligibility.
• Approval and implementation: Approved projects will be implemented in
accordance with procedures notified from time to time.
Eligibility Criteria:
• Sponsoring authorities: PPP projects may be proposed by central ministries, state
governments or statutory authorities (like municipal corporations and councils)
that own the assets.
• Private sector implementation: Eligible projects must be developed, financed,
constructed, maintained and operated by a private sector selected by the
government or a statutory entity through a transparent and open competitive
bidding process.
• Bidding criterion: The primary criterion for selection should be the amount of
VGF required by the private company assuming all parameters are comparable.
• User charge requirement: The project must deliver a service against payment of
pre-determined tariff or user charge.
• Private sector mandate: This scheme applies only if the contract/concession is
awarded to a private sector company.
• Approval and disbursement: Projects approvals must take place prior to
invitation of bids, while actual disbursement takes place after the private entity
has contributed to the equity share.
• Final VGF amount: The final VGF support is determined through a bidding process.
Through the VGF scheme, the Programme envisions developing a robust
manufacturing capacity of innovative energy efficient technologies in the country
with specific incentivisation for domestic manufacturing and technology sourcing.
Considering how battery energy technologies and Electric Vehicles (EVs) have
exponentially penetrated the Indian markets after the introduction of FAME
and PLI-ACC schemes, the roadmap envisions similar provisions for the rapid
indigenisation of innovative energy-efficient technologies that are currently sourced
from international markets. The roadmap recommends a government outlay of Rs.
6,000 crore (Annexure 6) that facilitates the sourcing of innovative energy efficient
technologies and scaled across the MSME clusters by leveraging the demand side 62Roadmap for
Green Transition of MSMEs
of energy efficiency enhancement. Approximately 19,283 units from top 5 energy-
intensive MSME subsectors are being targeted under Phase I for the deployment of
emerging energy efficiency solutions. The following are the recommendations for
an effective uptake of emerging and innovative energy efficient technologies:
(i) BEE to regularly publish a list of decarbonisation technologies that have the
potential to scale and define the subsidies that may be given to OEMs developing
the technologies.
(ii) OEMs to get their products tested with designated testing agencies as
onboarded by BEE and to provide proof of sale and service to NPMA to avail
the subsidies under VGF.
(iii) The NPMA must verify the proof of sale to Udyam-registered MSME units before
disbursing suggested subsidies.
(iv) It must be noted that the proposed subsidy and funds do not aim to support
emission reductions covered under the Carbon Credit Trading Scheme, as those
technologies are already proven, commercially viable, and can be mandated.
These are hereafter called Best Available Technology (BAT). The present fund
focuses on facilitating and manufacturing technologies that go beyond BAT,
which can help India accelerate towards its net-zero goal.
Recommendations for the effective uptake of EE in MSME clusters:
(i) Establish a consortium consisting of members from BEE, Niti Aayog and Ministry
of MSMEs to classify proven and emerging technologies.
(ii) Certify OEMs and associated energy efficiency equipment.
(iii) Extending energy audits, DPR creations, MRV etc. support under the ADEETIE
Scheme to the National Programme. It must be noted that the MSME units cannot
claim dual benefits under any overlapping provisions of the ADEETIE Scheme
and the National Programme. By closely working with Ministry of Power and
BEE, NPMA will monitor the beneficiary MSME units under both the schemes to
avoid any duplicity in availing the benefits.
4.1.2 Secondary Approach:
While the primary approach outlines specific activities across 10 initial
export-oriented clusters identified and top 5 energy intensive subsectors
in the MSME space, there are many MSMEs outside of these spaces that
are also looking at energy transition and require additional hand holding
support for a green transition. Specifically, small and medium enterprises
(SMEs) are well positioned to initiate a green transition in their facilities.
These SMEs are highly energy intensive when compared with their micro
counterparts, and are also looking at alternative and efficient forms
of technologies to ramp up their businesses for ease of compliance,
sustainability and progress. Through this approach, all Udhyam registered
SMEs will be targeted for reduction in specific energy consumption by
at least 20% from the baseline by using high energy efficient equipment
(boilers, heat pumps, motors, waste heat recovery systems, energy
monitoring systems, heat exchangers, rolling, milling, cooling devices
etc.). This approach will be governed by the Ministry of MSME. The
implementation of this approach will be carried out as follows: Roadmap for
Green Transition of MSMEs 63
(i) Technologies to be covered: The identification and selection of energy
efficient equipment or technology to be covered under this approach
will be carried out by BEE and Ministry of MSME. While technologies
could differ from one SME to another, and one subsector to another,
the overall aim would be to reduce the energy consumption by a
factor of atleast 20%. The SMEs must aim and identify technologies
that will result in the stipulated reduction to avail the benefits of
the scheme. The technology could be a standalone technology or a
group of technologies that result in the achievement of the target. A
detailed list of the technologies covered, and their Original Equipment
Manufacturers (OEMs) will be published during the National Programme
implementation.
(ii) Disbursal of Subsidies: The subsidies to be provided under this
approach will either be available directly for the SMEs employing
these technologies or to the OEMs supplying the technology. It will be
available to the SMEs in form of financial incentive or a capital subsidy,
or as Production Linked Incentive (PLI) to the OEM. The PLI will result
in reduction of manufacturing costs for the OEMs, and this benefit will
directly be passed on to the SMEs buying it.
(iii) Qualification: SMEs registered on the Udyam portal can only apply
for benefits under the said approach. Preference will be given to the
highest energy intensive and polluting SMEs present in any region.
The selection of SMEs under the approach will be governed through a
qualifying criteria basis, for which details and guidelines will be shared
by the Ministry of MSMEs at later stages of implementation.
(iv) Energy Audit- The implementation of this approach for SMEs
necessitates both pre-audit (baseline) and post-audit (verification)
assessments. These audits will serve as critical mechanisms to ensure
that investments in energy efficiency technologies and process
improvements yield measurable and verifiable energy savings. The pre
audit will establish a baseline for current energy consumption patterns
within the SME, identify energy inefficiencies, overconsumption areas,
and losses. It will also quantify technical and economic feasibility of
proposed energy-saving measures. The post audit will not only validate
and verify energy savings after implementation, but also assess the
technology effectiveness to determine performance versus planned
energy savings and identify corrective measures if savings fall short.
(v) Budgeting: A sum of INR 6000 crore has been allocated for the
implementation of this approach. Any SME who installs a listed energy
efficient equipment under this approach will be eligible for a maximum
capital subsidy of upto 15% on the total cost of the requisite plant and
machinery for a period of maximum 5 years. The approach will be
implemented for a period of 5 years and will be considered for an
extension only on an effective turnaround and high interest show from
the SMEs during the initial 5 years. 64Roadmap for
Green Transition of MSMEs
4.1.3 Impact of proposed recommendations
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Green Transition of MSMEs 65
4.2 Recommendations for Uptake of Green Electricity
Green energy technologies, including solar, wind, geothermal, biomass, and
hydroelectric power, are common sources of green electricity. MSMEs can
adopt electricity generated from these green sources, that will lead to their
green transition. There are several ways in which MSMEs can adopt green
electricity, which have been described in the following sections. It has been
estimated that during the Programme, the overall emissions reduction potential
as MSMEs adopt green electricity will be 27-36 Mt over the next 10 years, with
a potential to impact around 16 million MSME units across the country. The
top 10 electricity-intensive clusters have been identified for immediate action
in the first phase of implementation, which have a GHG emission reduction
potential of around 12.9 MtCO
2
e (around 37% of emissions reduction potential
under green electricity lever). Annexure 7 provides insights on the calculations
performed in Table 6.
Table 6: Emissions reduction and investment potential in 10 MSME sectors across
India due to green electricity adoption
S.
No.
Clusters
/Locations
Sub-
sector
States Current
electricity
consumption
(mtOe)Solar
capacity
required in

MW (appro-
ximate)
Emission
reduction
potential,
(million
tonnes)
1 Bhiwandi Textile Maharashtra 0.4 1764 3.8
2 Jalna Steel
rerolling
Maharashtra 0.21 922 2
3 Jagadhri Foundry Haryana 0.2 882 1.9
4 Surat Textile Gujarat 0.14 631 1.3
5 Muzaffarnagar Paper Uttar
Pradesh
0.12 545 1.2
6 Rajkot Forging Gujarat 0.1 451 1
7 Tirupur Textile Tamil Nadu 0.07 288 0.6
8 Ludhiana Foundry Punjab 0.06 243 0.5
9 Jamnagar Steel
rerolling
Gujarat 0.04 154 0.3
10 Coimbatore Textile Tamil Nadu 0.03 150 0.3
Total1.37 6031 12.9
4.2.1 Primary Approach:
MSMEs have several avenues in India by which they can access green
electricity. NPMA, in its sole discretion, can choose the most convenient and
effective way through which an MSME cluster can adopt green electricity. The
various ways of adopting green electricity have been elaborated as follows:
(A) The Behind the Meter (BTM) RESCO model and/or Green Open
Access: This model for adoption of green electricity allows the MSME
customers to obtain:
• A part of the electricity requirements through locally installed renewable
energy plants, particularly rooftop or ground-mounted solar plants,
while sourcing the balance electricity from the grid. 66Roadmap for
Green Transition of MSMEs
OR
• Sourcing all electrical needs through renewable energy plants present
anywhere in the country via the Green Open Access (GOA) rules, 2022.
(i) Behind the Meter (BTM) model-
The BTM model provides an avenue for MSMEs to source part of their
electricity through locally installed renewable energy plants in the
form of rooftop or ground-mounted solar installations. Two financing
models for BTM solar adoption are provided in Figure 13:
Aggregated Asset Finance (Capex)Build, Operate, Transfer (Opex)
• MSMEs finance the setting up of RE plants
in their vicinity.
• Captive RTS has been the most go to
technologies; and projects generate around
20% Internal Rate of Return (IRR) on
average on a BTM setup.
• Micro and Small units may require credit
enhancement to access loans for capex
requirements for asset installation.
• While around 90% of MSMEs fall under <100
kW load category and hence miss out on
the advantages of demand aggregation by
not negotiating on better pricing.
• MSMEs adopt RE (specifically solar) through
RESCOs.
• The potential landed RTS tariff has been
found between Rs. 3.8-6.5 per unit while
DISCOM tariff ranges between Rs. 5.6 to 9.9
per unit depending on location, thus being
an attractive proposition for the MSMEs.
• RESCOs have been found to be reluctant in
working with MSMEs due to perceived risk
of default and may require risk mitigation
mechanism to incentivise them.
Figure 13: Comparison between capex and opex models of BTM adoption
While both models give considerable savings (capex model giving
Rs. 3-4 per kWh vs 2-3.5 per kWh for opex model) (Deloitte 2019),
opex model will be the preferred mode for driving the Programme
under this lever. Operations under the capex model can be adopted
on a case-by-case basis and have been provided in the forthcoming
subsection.
To increase BTM plant penetration in MSMEs under the opex financing
model through Renewable Energy Service Companies (RESCO), the
Programme proposes a mechanism similar to that suggested for the
demand-side energy efficiency application lever:
• NPMA identifies MSME clusters with green electricity potential
through Expression of Interest (EoI) and subsequent demand
aggregation, capacity building, bilateral agreement, and Detailed
Project Report (DPR) creation, with elaborated steps mentioned
in the institutional mechanism chapter under the administrative
support subsection.
• RESCOs are selected based on the two-stage bidding regime
as specified in the institutional mechanism chapter under the
implementation subsection. Roadmap for
Green Transition of MSMEs 67
• RESCOs will employ the Rent-A-Roof model under the National
Programme.
• Once the implementing agency is selected and DPR is prepared, State
Electricity Regulatory Commissions (SERCs) can be approached by
NPMA/RESCOs to set the Power Purchase Agreement (PPA) prices
at which MSMEs will purchase electricity from RESCOs to protect
all stakeholders involved (DISCOMs/RESCOs/MSMEs). The same
can be finalised by the respective SERC before the finalization of
tripartite concessions agreement between the MSME cluster SPV,
the Ministry of MSME and RESCO (implementing participant).
Alternatively, Rs. 3.50 per unit discovered in RAMP-S transition to
green electricity projects (aggregation model) can also be opted for
based on mutual agreements between the SERC, NPMA, selected
RESCO, and the Ministry of MSME.
• Once the bidder (RESCO) has been selected, a service agreement
must be signed between the MSME cluster SPV and RESCO on
mutually agreed terms. This agreement will also include specifics of
equipment to be supplied, schedule of retrofitting, expected savings,
etc. A tripartite concession agreement is also signed thereafter
between the Ministry of MSME, cluster SPV and selected RESCO,
and will follow the guidelines for risk mitigation and disbursement
of specific funds as specified in the institutional mechanism chapter
under the project monitoring and risk aversion subsection.
• Figure 14 elaborates on the opex BTM Model for green electricity
adoption in MSMEs:&]P?? ??

NPMA
Step 1: Demand Aggregation
Electricity
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MSME Portfolio
Green electricity adoption under Green Transition Roadmap
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and M/o MSME
Step 4: Tariff decided as
per SERC
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Figure 14: Opex BTM model for green electricity adoption in MSMEs 68Roadmap for
Green Transition of MSMEs
(ii) Green Open Access
The Green Open Access Rules (GOA), 2022 were notified in June
2022 to promote generation, purchase, and consumption of green
electricity, through open access. GOA registry is a transparent platform
through which long-term, medium-term and short-term open access
transactions will be managed and performed on both interstate and
intrastate transmission systems. This platform is accessible to all the
stakeholders present in the Indian power market. MSMEs can opt for
green electricity under the said rules if their connected load (or the
total of all loads across several MSMEs) is equal to or greater than 100
kW.
Box 9: Development of open access regime in India
Open access to power was first incorporated in the 2003 Electricity Act to encourage
competition and raise the standard and dependability of the power supply. To
accelerate the expansion of India’s renewable energy (RE) projects, the Ministry of
Power notified the Electricity (Promoting RE through green electricity open access)
Rules, 2022 on 6 June 2022. These regulations permit consumers with connected
loads greater than 100 kW to participate in open access to RE through a variety of
means, such as installing their own RE plant or signing a Power Purchase Agreement
(PPA) with an RE developer, or establishing a captive power plant. As the GOA
regulations evolve, industrial and commercial consumers can benefit significantly
from increased opportunities to adopt green energy. Notably, a key amendment
allows consumers with an aggregate demand of at least 100 kW, spread across
multiple connections at different locations within a defined operating area, to pool
their demand and become eligible for open access to green energy sources. Green
Open Access can be of two types. (MERCOM 2023)
The Group Captive model is highly capex-intensive and may involve leasing/
purchasing land for setting up the renewable energy plants, and thus can be
unattractive for MSMEs given their tight financial situations. While third-party open
access offers a promising route for MSMEs to adopt green electricity, the model has Roadmap for
Green Transition of MSMEs 69
not seen much adoption from these consumers since they do not come forward and
seek GOA on aggregated demand due to a lack of awareness. NPMA will facilitate
the application of GOA for selected MSME clusters under the said lever, based on
requirement and interest.
(B) PM Suryaghar like initiative for MSMEs:
(i) The Programme recommends the creation of PM Surya Ghar Muft Bijli
Yojna (PMSGY) (PIB 2025b) like scheme for the MSMEs. Currently,
PMSGY is the world’s largest domestic rooftop solar initiative, and is
transforming India’s energy landscape with a bold vision to supply
solar power to one crore households by March 2027. It aims to
provide free electricity for households, reduce electricity costs for the
government by promoting the widespread use of solar power, increase
the use of renewable energy, and reduce carbon emissions. MSMEs,
specifically the micro and few small units, need additional support for
adopting solar rooftop installations on their available rooftops and a
provision of subsidy is envisioned to maximise uptake among these
users. The subsidy provided for installation will follow the domestic
consumer pattern for every increase in kW up to a maximum of 3 kW,
and the intervention aims to benefit approximately one-fourth of all the
MSMEs registered in the country. The outline for the recommendations
is as follows:
(ii) It is assumed that MSMEs lack the necessary funds to implement such
projects. Therefore, it is proposed that subsidies are directly disbursed
to MSME units, particularly in cases where RESCO-led demand
aggregation under the BTM model, Green Open Access or green tariff
mechanisms have encountered implementation challenges.
(iii) The subsidy mechanism should only be implemented where earlier
solutions provided under the green electricity interventions have
failed to achieve the desired impact.
(iv) The scheme will require financial support from the government in
terms of capital subsidy for each solar rooftop installation. The total
expected outlay is estimated at Rs. 28,672 crore over a 20-year period,
based on the projected capex of INR 21,109 crore. In phase I, over the
next 5 years, Rs. 7,000 crore have been allocated to support MSMEs
with solar rooftop adoptions. Detailed calculations and assumptions
considered supporting this estimate have been provided in Annexure
8.
(v) Subsidy levels are structured as follows: a 1 kW system will receive Rs.
16,040; systems up to 2 kW will get Rs. 48,120, and systems up to 3
kW will receive Rs. 80,200.
To drive the adoption of PMSGY like scheme for MSMEs, which adopts the capex
financing model, the Programme proposes a similar model of implementation as
suggested for BTM solution under the RESCO model. The demand aggregator i.e.
the NPMA can follow transparent bidding process to identify vendors that provide
the aggregated demand of a RTS at the lowest prices. Further, to ease the access
to finance for the MSMEs for financing these projects, the following changes are
also proposed to SIDBI’s Green Loan scheme (SIDBI 24b): 70Roadmap for
Green Transition of MSMEs
• The subsidy offered to MSMEs under initiatives like the PMSGY, is
intended to cover micro and small units that have limited rooftop space,
and were unable to adopt any of the previously recommended green
solutions due to unforeseen circumstances. To prevent misuse of the
subsidy, a cap on the maximum connected load for the MSMEs could
be introduced.
• The subsidy will be provided only when the demand is aggregated
under the capex model. Individual units applying for the subsidy outside
of aggregation will be evaluated on a case-by-case basis.
• Specific guidelines and detailed procedural measures for initiatives like
the PMSGY under the roadmap, will be issued at the later stages of
implementation.
4.2.2 Secondary Approach:
A sizeable number of micro units exist in the country. These units
are very important considering the entire product value chain and
provides for crucial parts and operations without which the operations
of the larger small, medium and large industries cannot be sustained.
Considering the importance of these units, the specific approach calls
for the extension pf PM Suryaghar yojana to the micro units, or a new
scheme that subsidies the adoption of RTS plants by micro units. This
will provide inclusive access to renewable energy since these units lack
the financial or roof space resources to adopt large solar installations
and extension of subsidy to these units ensures equitable access to
clean energy solutions. It will also promote decentralization of energy
generation, enhance energy security and reduce transmission losses in
urban clusters and remote or under-served areas. This will also provide
support for low-cost, scalable installations to micro units, who are
oftenly neglected while planning for energy transition. The approach
will be implemented by the Ministry of New and Renewable Energy. The
details of the scheme are provided as follows: Roadmap for
Green Transition of MSMEs 71
(i) Reach: The subsidy amount will only be available to the Udyam
registered micro units. The subsidy will only be available upto
3kW of RTS systems that are installed on these units. Micro units
usually have connected loads between 1-30 kW and RTS can
effectively reduce their electricity requirements. The subsidy will
act as an additional mauver that increases interest of micro units
towards adoption of RTS systems.
(ii) Empanelment of Vendors and Development of user-friendly
interface: The RTS adoption in micro units through subsidization
will follow the residential model currently being implemented
under the PM Suryaghar Yojna. A dedicated portal will be created
in line with the current PM Suryaghar model to track the RTS
installations. The vendors will be empanelled to certify only
credible and reliable vendors be available for installation of RTS
systems in the micro units.
(iii) Allocation: INR 7000 crore will be allocated under the said
approach for the solarisation of micro units for a period of 5
years. A total number of 1-1.5 million MSMEs are initially targeted
to be solarised under this approach.
(iv) ‘Rent-A-Roof’ RESCO model: The approach will also look at the
RESCO model applicability among the micro units. Interested
RESCOs will be contacted for RTS installation in micro units and
preference will be given the aggregating demands of several micro
units in a geographical area for RESCO model implementation.
The process will initiate the assessment where RESCO evaluates
the rooftop space, shading, and micro unit energy demand,
followed by contracting, where the micro unit signs a rooftop
lease agreement and a PPA with the RESCO. This will be followed
by the installation, operation and maintenance, and monitoring
of the system. Finally, the micro units pays only for electricity
consumed, usually at rates below traditional grid tariffs, while
earning indirect financial and sustainability benefits. 72Roadmap for
Green Transition of MSMEs
4.2.3 Impacts of Proposed RecommendationsFig 15

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Green Transition of MSMEs 73
4.3 Recommendations for Alternative Fuels
4.3.1 Background
Alternate fuels represent the third lever that can enable deep decarbonisation
of the MSME sector. Coal, which is used for in-process thermal energy,
and grid electricity are the two primary sources of energy used in the
top five energy intensive MSME subsectors accounting for approximately
54% of the total energy demand. In contrast, zero-emission interim fuel
sources such as agricultural residue, firewood, and biomass cumulatively
account for around 35% of the total energy needs. To understand the
usage of different emission-intensive fuels in the five MSME subsectors,
the respective emission shares have been provided in Figure 16 for the
year 2022. Coal, with its high emission intensity, is heavily employed in
the sector and is followed by other high-emission fuels like pet coke and
furnace oil. Pumped Natural Gas (PNG) and Liquified Natural Gas (LNG),
which are low-emission fuels, are primarily used in metalworks industries
such as steel re-rolling, foundry, and forging. Their applications in other
industries remain limited.
Figure 16: Share of Scope 1 emissions by fuel type in top 5 MSME subsectors in the year
2022
Considering the scenario provided above, a techno-commercial survey of
the current availability of alternate fuels was conducted to understand the
economic viability of each of these fuels if adopted by MSMEs, which has
been provided in Figure 17: 74Roadmap for
Green Transition of MSMEs
Biomass Natural gas (NG)
Compressed biogas
(CBG)
Green electricity
• Biomass is the most
cost competitive
alternative to coal
as a fuel.
• However, the annual
subsidy for biomass
procurement
required to
accelerate its
adoption is around
Rs. 1.2 per kg of
biomass (or) Rs. 5
lakh per boiler.
• Availability of
biomass with
consistent
composition is
challenging due
to varying crop
harvest seasons.
• An increase of
around Rs. 186
is estimated to
produce one tonne
of water to steam
using biomass with
respect to G2 grade
of coal.
• 50% of India’s
natural gas
requirement is
imported with the
price ranging from
$11-12 per Million
Metric British
Thermal Units
(MMBTU); but
CGD prices are
available to MSMEs
at ~$10 per MMBTU
as regulated by
the Petroleum
and Natural Gas
Regulatory Board
(PNGRB).
• Natural gas
adoption by MSME
clusters such as
Tirupur, Morbi,
Surat, Ludhiana,
etc. is still not
adequate.
• An increase of
around Rs. 724
is estimated to
produce one tonne
of water-to-steam
using natural gas
with respect to G2
grade of coal.
• Compressed biogas
(CBG) is a derivative of
biomass having an Oil
Marketing Companies
(OMC) retail outlet
tariff of Rs. 46 per kg
(~15% more expensive
than landed tariff of
imported natural gas).
• Pipeline for CBG and
natural gas could
be made common,
but natural gas
connectivity to
MSMEs is limited.
• An increase of around
Rs. 1740 is estimated
to produce one tonne
of water-to-steam
using compressed
biogas gas with
respect to G2 grade
of coal.
• Around 700 units of
electricity is required
to convert one tonne
of water-to-steam at
low pressure.
• Although the capex
cost of electric boilers
is 0.5 times a coal-
based boiler, the
operational costs
is 7-8 times than a
conventional coal-
based boilers.
• The availability of
Round The Clock
(RTC) supply of green
electricity is still a
challenge with peak
availability attained
so far is around 90%
with solar + wind (55-
60% CUF and battery
+ pump hydro giving
additional 25-30%.
• An increase of around
Rs. 3880 is estimated
to produce one tonne
of water-to-steam
using green electricity
with respect to G2
grade of coal.
Figure 17: A comparison of different alternative fuels
4.3.2 Challenges for Uptake of Alternate Fuels:
There is a huge potential for alternate fuels to be scaled up in the MSME
sector, however, several problems limit this growth. By taking into
account all the considerations for each of the alternate fuels listed above,
the current challenges for the use of alternate fuels are:
(i) At the national scale, most alternate fuel sources, e.g., biomass and
derivatives such as compressed biogas (CBG), biofuels, etc., natural
gas and green electrification of existing equipment’s are around Rs.
200-4,000 more expensive per calorific value of each of the fuels. Roadmap for
Green Transition of MSMEs 75
(ii) Resources for using biomass, biofuels and CBG for MSMEs currently
clash with national agenda for blended fuels (ethanol blending for
petrol/diesel, CBG blending for natural gas and biomass for power
generation).
(iii) Uptake for biomass-based boilers are still in nascent stages due to the
seasonal availability of crops and technical limitations in delivering
consistent steam/heat.
Given these challenges, natural gas is potentially a viable solution for
delivering low-emission fuels to MSMEs. Whereas alternate fuels are
currently not economically viable for widespread adoption across all
MSMEs, existing market mechanisms such as City Gas Distribution (CGD)
networks, can enable MSMEs to adopt preferred alternate fuels based on
cluster demand with natural gas acting as an initial enabler.
It is recommended that the NPMA act as facilitator, mobilizing CGD
licensees and MSMEs within respective geographical areas to consider
the uptake of natural gas as a transition step towards the broader uptake
of alternate fuels. Under Phase I, the PNGRB should be consulted to
help build an enabling ecosystem for natural gas adoption among MSME
clusters. This support may include:
• Extension of the interest subvention scheme for natural gas projects
and onboarding project financing partners to drive down interest
costs for capital infrastructure.
• Provision of a risk mitigation mechanism for CGD networks to cover
potential payment defaults by MSMEs adopting natural gas.
• Allocation of budgetary, financial, and decision-making powers to
PNGRB for the disbursement of subsidies or government funds.
Further, the following key interventions are required to enhance the
adoption of natural gas among MSMEs:
• Standardising Right of Way (RoW) charges across states: This can
be achieved by implementing a uniform RoW pricing framework that
reduces cost disparities (currently hovering between Rs. 100/km
to Rs. 100,000/km from one geographic location to another) and
enable faster, more cost-effective infrastructure development.
• Introducing targeted financial incentives for natural gas projects:
Direct capital subsidies and green financing options (e.g., green
loans), like those available for solar and renewable energy projects,
can be provided to stimulate private sector investment.
• Making low-cost alternatives such as Administered Pricing Mechanism
(APM) and High Pressure, High Temperature (HPHT) gas available
for MSMEs.
• Transitioning natural gas from the VAT regime to GST (at 5-%, like
LPG) to eliminate inter-state pricing inefficiencies and ensure a robust
mechanism to compensate state governments for potential revenue
losses. 76Roadmap for
Green Transition of MSMEs
• Introducing a cess on polluting fuels (coal, pet coke, etc.), which may
aid in fast-tracking the switchover to natural gas.
In the next 10 years, the overall potential GHG emission reduction through
the alternate fuel lever is approximately 9-16 million tCO2
e
largely driven
by shifts in using natural gas/biogas and biomass instead of fossil fuel-
based fuel sources. Key sectors that contribute mostly to exports and has
high emission intensity such as textiles, steel, forging and foundry may be
considered for immediate action in the first phase of implementation.
Considering the proposal calls for amendments to several acts and
changes in rules and regulations across the power and regulatory sector
at the centre and in states, following actions are proposed for the overall
implementation of the alternate fuels lever (Table 7):
Table 7: Takeaways for action and implementation from the alternate fuels lever
adoption in MSMEs
ActionsResponsible Entity
Evaluate the feasibility of providing connections to
MSME clusters through CGDs based on technical
parameters such as pressure requirements,
demand balancing, etc.
Ministry of Petroleum and
Natural Gas (MoPNG)/ PNGRB
Create national guidelines to enable CGDs in their
allocated geographical areas to aggregate and
assess demand in MSME clusters that require NG
solutions.
MoPNG/PNGRB
Develop a list of MSME clusters (export-oriented
clusters to begin with) to prioritise during the first
phase of implementation.
Ministry of MSME
Considering the subsidisation of natural gas supply to MSME clusters, a
few guardrails are recommended to protect against pilferage of any of
these provisions:
• Subsidised price should not be above domestic supply rate: Subsidized
price of the natural gas shall not be less than the price at which it is
offered to the domestic/ household sector as this will deter pilferage
to the domestic sector.
• Incentivising MSMEs to ensure there is no pilferage: MSMEs should
receive subsidies periodically. The disbursement of subsidies should
be linked to units of consumption. NPMA, in consultation with
state committee, should carry out audits to ensure that there is no
pilferage. If any pilferage is found, then MSMEs and CGDs should
both be penalised, and penalty amounts should be deducted from
the subsidy payouts.
• The PNGRB should monitor energy consumption levels: PNGRB
should devise industry-specific energy requirement index by tracking
historical energy consumption and production levels using proxies
like GST returns, etc. The actual consumption of natural gas should Roadmap for
Green Transition of MSMEs 77
be tracked against the industry-specific consumption benchmarks
computed.
• Mandating MSMEs to forego a share of conventional energy sources:
PNGRB, while sanctioning the subsidy request for MSMEs, can take
an undertaking from MSMEs to forego other conventional energy
sources to the extent of subsidised natural gas supply by CGDs in a
phased manner.
• The NPMA can track emissions reduction: The NPMA should monitor
reduction of emissions in clusters where natural gas is supplied at
subsidised rates. If a given cluster does not deliver the expected
reduction in emissions, the domain ministry should review the supply
of subsidised natural gas connections in that cluster. 78Roadmap for
Green Transition of MSMEs
4.4 Recommendations for Monitoring, Reporting, and Validation
4.4.1 Background
Developing and maintaining standardised MRV frameworks is critical to
driving the progress of decarbonisation initiatives. With increased global
pressure on account of climate mitigation, there is a need for India to
develop robust MRV frameworks, which can enable businesses to retain
their economic competitiveness and thereby safeguard themselves
against changing regulatory norms that can adversely impact their
operations, while delivering on net-zero commitments and Nationally
Determined Contributions (NDCs). Non-tariff barriers such as CBAM will
also place additional pressure on export-led MSMEs, as they will now
have to disclose their emissions prior to trade. Considering this, MSMEs
that form a part of supply chains need to develop their capability to
report GHG emissions, particularly their Scope 1 and Scope 2 emissions,
on account of CBAM and in response to the demands of investors.
Hence, through this section, we are proposing recommendations to
standardise MRV mechanisms, which can thereby enable targeted
decarbonisation interventions and extend support to enterprises, that
might struggle with changing regulatory norms. Globally, MRV mechanisms
are gaining traction as they allow continuous tracking of emissions in
key sectors, encourage businesses to align emission reductions with
their country’s NDCs, and provide a foundation for future market-based
mechanisms. The GHG Protocol, initiated in 1998 and jointly developed by
the WRI and the WBCSD, is the most widely used international accounting
tool for governments and businesses to understand, quantify, and manage
GHG emissions and many countries, including India, are now developing
GHG-emission reporting standards based on the GHG Protocol. Roadmap for
Green Transition of MSMEs 79
Box 11: GHG Protocol Corporate Standard
Global warming and climate change have come to the fore as key sustainable
development issues. Many governments are taking steps to reduce GHG emissions
through national policies that include the introduction of emissions trading programs,
voluntary programs, carbon or energy taxes, and regulations and standards on
energy efficiency and emissions. As a result, companies must be able to understand
and manage their GHG risks if they are to ensure long-term success in a competitive
business environment, and to be prepared for future national or regional climate
policies. GHG Protocol Corporate Standard provides standards and guidance for
companies and other types of organisations preparing a GHG emissions inventory.
It covers the accounting and reporting of the six greenhouse gases covered by
the Kyoto Protocol – carbon dioxide, methane, nitrous oxide, hydrofluorocarbons,
perfluorocarbons and sulphur hexafluoride. The standard and guidance were
designed with the following objectives in mind:
• To help companies prepare a GHG inventory that represents a true and fair
account of their emissions, using standardised approaches and principles.
• To simplify and reduce the costs of compiling a GHG inventory.
• To provide business with information that can be used to build an effective
strategy to manage and reduce GHG emissions.
• To provide information that facilitates participation in voluntary and
mandatory GHG programs.
• To increase consistency and transparency in GHG accounting and reporting
among various companies and GHG programs.
Both business and other stakeholders benefit from converging on a common
standard. For businesses, it reduces costs if their GHG inventory is capable of meeting
different internal and external information requirements. For others, it improves the
consistency, transparency, and understandability of reported information, making it
easier to track and compare progress over time.
4.4.2 Components of MRV:
(i) Monitoring and measuring the amount of GHG emissions reduced by a
specific mitigation activity, undertaken by companies, in a reliable manner.
(ii) Reporting these findings in a robust, transparent and consistent
manner encompassing key factors standardised to ensure
consistency in the way MSMEs measure and report progress against
targets. This can also include types of information that MSMEs should
disclose to support investors, lenders, and insurance underwriters in
appropriately assessing risks.
(iii) Verifying the report by third parties so that the results can be
certified for accuracy and reliability, and disbursements in the form
of subsidies or carbon credits can be issued. This will also enable
entities to make credible decarbonisation claims across different
activities and emission sources. Assurance and verification must
be provided to ensure the reliability of data for stakeholders –
government, investors, financial institutions, etc. 80Roadmap for
Green Transition of MSMEs
Based on this, MSMEs require MRV standards, which can be developed based on the
following framework specified in Figure 18:
Figure 18: MSME MRV framework to track GHG emissions
As MSMEs adopt the measures provided in the earlier chapters, their emissions will
be reduced. The MRV mechanism will ensure that these emissions are effectively
monitored, reductions are reported, and best practices are applied. This will also act as
a trust-enabling factor for the disbursement of risk related financials to implementing
agencies at different parts of the projects.
4.4.3 Challenges for MRV implementation in MSMEs:
(i) Lack of awareness- Awareness of sustainability measures and reporting
mechanisms is low amongst MSMEs. Around 70% of MSMEs are only
partially aware of the opportunities from implementing sustainability
measures and relevant sustainability factors for their business, sector,
and geography.
(ii) Complexity of current reporting methodologies- MSMEs struggle
to adapt the current available reporting frameworks due to high
complexity and numerous indicators often exceeding the capacity
of their in-house resources. According to a recent survey, only 4 %
track emissions (scope 1-3), and 5% measure renewable energy use
(Financial Express 2024).
(iii) Lack of standards/frameworks in India- No framework for MRV
in India has been notified for all companies. SEBI has recently
introduced the Business Responsibility and Sustainability Reporting
(BRSR) framework for Environmental, Social and Governance (ESG)
reporting by listed entities along with an assurance framework; Roadmap for
Green Transition of MSMEs 81
however, a clear set of simplified standards, disclosure and assurance
framework customized to MSMEs is needed.
(iv) Upfront investment for setup- Mechanisms to measure and report
emissions involve significant upfront costs (e.g., hiring dedicated
specialists for report preparation, certification by accepted bodies,
purchasing and installing monitoring hardware and software etc.)
which may be beyond the scope of MSMEs.
(v) Lack of incentives- There are currently no targeted incentives for
adoption in India (e.g., tax benefits, lower cost of financing compliance
requirements etc.) for MSMEs to produce emissions reports, beyond
the direct requests for disclosures from limited global MNC suppliers.
(vi) Capability gap- There is a lack of internal talent with capability or
access to talents that are trained in helping MSMEs measure and report
emissions or trade in carbon markets. This is partially due to lack of
dedicated training programs from governments or industry/cluster
bodies.
(vii) Disclosure concerns- There is a perception amongst MSMEs that
voluntary / regulated disclosure of certain metrics can expose
MSMEs to legal and commercial risks (e.g., competitors might be able
to access business information) and thus may act as an additional
operational burden. This prohibits them for being part of the exercise.
4.4.4 Benefits of a robust MRV framework:
While MSMEs face these problems, several benefits can accrue to the
MSMEs and the governments if a robust and scalable MRV framework
is implemented. An MSME delivering a product produced sustainably
can attract a 20 percent premium in India (Bain Global Consumer Lab
2023). At least 60% of consumers in India are willing to pay a premium
for sustainability products, while 52% in urban India expect to increase
spending on planet-friendly brands in the next three years (The Times of
India 2022). For MSMEs, it has been reported that MSMEs saw increased
sales growth or had access to low-cost financing when they declared ESG
parameters on their products (Curry 2023). MSMEs could also use the
database of process energy consumption and emissions to benchmark
and improve their efficiency. As for the governments, the benefits include-
(i) Evidence-based policymaking- Maintaining a data repository during
multiple climate-related policy changes, like revising emission norms
on motor vehicles, Diesel Generating (DG) sets, etc., could help in
making impact-driven policy changes using RIA tools.
(ii) Socio-economic benefits- MRV mechanism could improve uptake in
energy efficiency technology and GE adoption mechanisms creating 50K+
jobs and an annual tax revenue of around Rs. 800 Cr from encouraging
ESCO/RESCO services to MSMEs (as elaborated in earlier sections).
(iii) Access to funds for green financing- There is a potential to access
funds from multilateral organizations such as Climate Investment
Fund (CIF), GEF, Japan International Cooperation Agency (JICA), 82Roadmap for
Green Transition of MSMEs
United Nations Industrial Development Organisation (UNIDO), etc.
to help the GE transition.
MRV mechanism remains the key for disbursement of risk aversion
guarantees identified under the interventions of energy efficiency and
green electricity. It is essential that it is implemented in a way that does not
disturb the sensitive nature of the MSMEs. A few case studies of effective
MRV implementation in GHG emission reduction and sustainability across
India and the world is provided as follows:
Box 12: Business Carbon Calculator-SME Climate Hub
The SME Climate Hub has launched a dedicated landing page for India to empower
MSMEs to take climate action. The SME Climate Hub is an initiative of the We Mean
Business Coalition, the Exponential Roadmap Initiative, and the United Nations Race
to Zero campaign, which simplifies and aids the decarbonisation process for MSMEs.
This enables them to commit to and act upon climate targets aligned with limiting
global temperature rise to 1.5°C.
Available virtually and free of charge, the SME Climate Hub helps MSMEs make a
globally recognized climate commitment, and measure, report and reduce their
emissions through a suite of tools and resources, including Business Carbon
Calculator, which enables MSMEs to identify priority sources of emissions within
their business operations; Climate Fit education course, which offers short, digestible
modules as an introductory primer for MSME climate action. A reporting tool,
through which signatories of the SME Climate Hub can report their emissions data on
a yearly basis, to track progress on their climate commitment and communicate their
action to key stakeholders such as consumers, buyers and investors. In collaboration
with Normative and the Net Zero team at Oxford University, the SME Climate Hub
provides tools and resources to enable small and medium-sized enterprises (SMEs)
to make a climate commitment, act and measure their progress towards emissions
reductions in line with the latest science. Over 6,500 businesses across 125 countries
have already made the commitment.
Box 13: CII Climate Action Charter (CCAC)- MSME Toolkit
The MSME Toolkit by CII Climate Action Charter (CCAC), provides MSMEs with
a platform for assessing their vulnerability to climate-related hazards, raising
awareness, and developing short- and long-term resilience measures. The toolkit
helps in GHG foot printing through an easy-to-use tool for calculating Scope 1
and Scope 2 emissions, allowing MSMEs to assess their carbon footprint and take
appropriate mitigation measures across different scopes. The toolkit also addresses
the climate-related risks that Indian MSMEs face by taking a comprehensive and
collaborative approach.
The toolkit enables MSMEs to take ownership of their climate action transition by
mapping climate change as a material risk across their value chains. It allows them
to build resilience, develop sustainable practices and showcase best practices. The
toolkit promotes a collective assessment of climate-related vulnerabilities, with a
focus on collaboratively finding solutions for a just, equitable, and resilient transition. Roadmap for
Green Transition of MSMEs 83
Box 14: Clean Energy Emission Reduction (CLEER) Tool
The CLEER Tool provides simple, standardized methodologies for calculating
emission reductions from clean energy activities. The tool enables users to estimate,
track, and report GHG reductions from clean energy, which may help users identify
high impact activities with cost effective GHG reductions, assess emissions reduction
potential of planned activities or alternatives, and measure benefits from indirect
clean energy activities. CLEER is also publicly available for general use by any
organisation that wants to estimate GHG emission reductions or projections for
their purposes. CLEER tool clean energy activities include renewable energy (e.g.,
solar photovoltaic, wind turbines, geothermal, hydroelectric), EE (e.g., building and
appliance efficiency), biomass energy, fuel switching, as well as additional technology
types. It also supports reporting on projected GHG emissions reduced or avoided
through 2030 from adopted laws, policies, regulations, or technologies related to
clean energy.
CLEER supports users that know basic information about their activities, such as the
amount of energy generated or saved, or the amount of new technology built, adopted,
or deployed. Users can input data and information, select responses from drop
down menus, answer questions, and document assumptions related to the following:
activity information (e.g., location, activity type and name), energy information (e.g.,
whether the activity replaces direct fuel consumption and electricity, amount of
electricity generated by the system, installed capacity, and type and amount of fuel
replaced. The Tool also contains default data embedded into the calculations (e.g.,
country electricity grid and fuel emission factors, renewable energy capacity factors,
unit conversion), and users can provide alternate values to default data if more
accurate data is available. This default data comes from internationally accepted
sources, such as Intergovernmental Panel for Climate Change and the International
Energy Agency. After inputting the necessary information, users are provided with
an activity information summary, results on annual emissions reductions, and an
energy consumption comparison.
4.4.1 Recommendations for development of MRV framework under the Green
Transition Roadmap:
(i) Simplified reporting standards and target-setting framework for
MSME linked to global standards: At the initial stages, fewer indicators
and readily available data sources may be required to be reported
by the MSMEs. The MSMEs can also be asked to voluntarily declare
overall net-zero targets, interim milestones, and make disclosures on
roadmap, etc. Compliance can be considered in a phased manner,
for example, with the year 2030, the medium units start disclosing,
with small and micro units to follow subsequently in Phase II and III
of the Programme. The GHG emissions reporting being discussed
can be framed in the following steps-
• An annual fuel, electricity, and process emission consumption reporting
for MSMEs can be taken up in line with large, listed companies. This
will be compatible with the existing sustainability reporting system
for large companies and further lead to an enhancement in the ease
of compliance for MSMEs. 84Roadmap for
Green Transition of MSMEs
• MSMEs usually have better control over internal process costs,
such as fuel and electricity expenses (scope 1 and 2 emissions) and
may lack access to resources needed to assimilate information on
upstream and downstream players (scope 3 emissions). It is highly
recommended that reporting focuses on two emission categories:
scope 1 emissions, which include thermal fuel source emissions and
process emissions, and scope 2 emissions, which consist of electricity
consumption based on grid electricity usage.
• Voluntary reporting with phase-wise mandate may be issued to
ensure adequate training and resources are provided to MSMEs to
understand the mechanism.
• The development of simplified standards for annual scope 1 and 2
emissions reporting must be aligned with global protocols (such as
IFRS standard for financial reporting by SMEs) to help MSMEs reduce
complexity and costs (International Financial Reporting Standards
2024).
• The reporting requirements can be streamlined by omitting indicators
that are not relevant to typical MSMEs, requiring fewer substantial
disclosures than prevailing global frameworks and SEBI’s BRSR
standards, and enabling easy and simplified reporting methods.
• The reporting should simplify measurement, disclosure, and data
use by embedding simplified measurement principles, focussing on
disclosures that can be made using readily available data sources,
and enabling easy-to-use digital platforms to make disclosures.
• The MRV should encompass development of a customized approach
for voluntary commitments to reduce emissions towards achieving
net zero by 2070. This can include designing a target-setting
approach with achievable milestones/roadmap in line with India’s net
zero goals and global frameworks such as the Science Based Target
initiatives (SBTi) (Science Based Targets initiative 2024), UN Race to
zero (UNFCCC 2024) which are in line with India’s NDCs (emission
reduction by 45 % by 2030). For example, the targets are based on
broad goals such as reducing 1/3
rd
of the emissions by 2030, halving
your emissions by 2050 and achieving net zero by 2070.
(ii) Development of free user-friendly GHG accounting digital tool to
ease MSME reporting: A free-of-cost digital tool should be created
that can capture data, measure emissions, set targets, and report
them in the new proposed format. Add-on services such as industry
analytics and other related dynamics could be provided to the MSMEs
on payment of fee; however, report generation could be retained
free of cost to reduce cost of compliance. The tool could have the
following features:
• Carbon calculator for MSMEs to calculate emissions accurately in an
easy-to-use format. The emissions could be calculated by entering
fuel sources, equipment names, energy consumption, etc. The inputs
should be contextualized according to Indian conditions and across
sectors. Roadmap for
Green Transition of MSMEs 85
• The tool could have a feature providing a personalized dashboard
with a detailed breakdown of current emissions and targets to
continue the carbon reduction journey based on the target-setting
approach defined earlier.
• An automated setup of a “carbon account” for participation in Indian
carbon market scheme could be enabled. Linkages to data from other
markets for ease of comparison and assessing CBAM impacts could
also be provided.
• An example to calculate GHG emissions from different types of fuels
(KPMG 2024):
• A sector-specific guidance on best practices and interventions
can be undertaken for reduction from current levels, by taking into
considerations from BEE could be included for building awareness.
• An additional and important feature that contains educational
resources embedded to learn how to use the tool effectively.
• The digital tool could use a pre-specified list of fuel sources which is
based on current fuel mix of MSMEs and its carbon content. It will be
important to link the electricity bill generated with the tool through
GST/Udyam registration.
• The tool could also provide an ability to download standardized
reports that is accepted as valid format for international and domestic
ecosystems.
• For data privacy, it is proposed that only analytical support, such
as overall emission trend of sector/process, best practices in
implementation etc. can be made public. This will be in line with
existing sustainability reporting system for large companies and
remove any apprehensions since companies may want their
individual data protected.
(iii) Capacity building for higher take up in MSMEs: It is proposed
that industry bodies such as the Federation of Indian Chambers
of Commerce and Industry (FICCI), The Associated Chambers of
Commerce and Industry of India (ASSOCHAM) and Confederation
of Indian Industry (CII) could raise awareness regarding the
digital tool among the MSME clusters. They could be included as
investors in the digital platform – e.g., on the lines of SAMEEKSHA
website for reporting energy consumption, investments in the
National Skill Development Council (NSDC) supported skilling
platform, etc. This could lead to maximizing the adoption of the
MRV mechanism since building awareness through industrial 86Roadmap for
Green Transition of MSMEs
bodies, cluster associations could accelerate the adoption of the
standards. This could include-
• Awareness programs: Educating MSMEs about sustainable
practices and the importance of emission reporting and target
setting through online or in-person awareness programs.
• Train the trainer programs: Providing specialized training to MSME
employees and consultants on new emissions reporting, target
setting framework, and digital tools.
• Partnerships: Partnering with educational institutions, think tanks,
non-profits, and cluster associations can assist in developing an
ecosystem that provides impetus for maximizing the adoption.
(iv) Incentivization to encourage widespread adoption: Carbon
account setup and reporting could be done free of cost, and
an incentive can be directed towards export-oriented users to
drive adoption. Sustainability-linked loans and additional credit
guarantee under schemes like the SIDBI green scheme could be
provided for MSMEs. Besides, cross-ministerial initiatives could be
taken to promote MSME decarbonisation. For example, the Ministry
of Railways could offer preferential rates or waive demurrage
charges for MSME goods for units that declare emissions.
(v) Assurance and validation- Assurance and verification of disclosures
is a key step to ensure the accuracy and credibility of data.
They aid all stakeholders make better decisions by maintaining
transparency. However, assurance and external verification of
climate disclosures are currently nascent. SEBI’s BRSR standards
for sustainability reporting require mandatory disclosure by listed
entities only. Further, most ESG information collected globally
is subject to a limited assurance, which means assurance of no
negative observations. Also, the capacity and capability available
for sustainability emissions assurance are limited. This is scheduled
to reduce as the Institute of Chartered Accountants of India
(ICAI) issued a globally adapted sustainability assurance standard
to guide auditors. It is proposed that voluntary verification of
emissions and adherence to targets be recommended in line
with the verification mechanism proposed by the Indian Carbon
Markets scheme.
The implementation of the MRV standards based on the details provided will be
essential for the implementation of the three levers and reduction of GHG levels.
The institution implementing the MRV mechanism must own and drive end-to-end
implementation and coordinate with the responsible agencies. Support from ICAI
is recommended for the development of an MRV accounting tool and creation of a
dashboard. The key responsibility of the institution is to drive development, ensure
compliance, and debottleneck constraints in the MRV implementation. The proposed
timeline and agencies responsible for the development of MRV framework roadmap
is as follows: Roadmap for
Green Transition of MSMEs 87
Table 8: Roadmap for implementation of MRV in the MSME sector
Task/Details Simplified
emissions
reporting and
target setting
framework
Free user-
friendly tool
Incentives to
encourage
adoption
Awareness
and capacity
building
Responsible
agency
Ministry of
Corporate
Affairs
Accounting,
Standards
Board (ASB)
Ministry of
MSME/NPMA/
tool builder
Ministry of
MSME/NPMA
Ministry of
MSME through
NPMA and
MSME National
Level Institute
for Energy
and Greening
(under RAMP-S
Programme)
Agencies to be
consulted
Ministry of
MSME,
Bureau of India
Standards
(BIS), Quality
Council of India
(QCI). Bodies
setting global
frameworks
and protocols:
SBTi, ISSB,
SASB, TCFD,
TPT, GHG

protocol

National
Information
Centre (NIC),
BEE,
Ministry of
Electronics
and
Information
Technology,
Cluster
associations,
SME Climate
Hub
Ministry of
Finance,
SIDBI,
NABARD,
CGTMSE,
Line Ministries
such as
Ministry of
Railways,
Public Sector
Undertakings
(PSU)
Sector
Ministries
(Textiles, Food
Processing,
Steel etc.)
Cluster
Associations,
MSME industry
bodies
CII, FICCI
Implementation
timeline
6 months 3 months 3 months Ongoing: After
the launch of
the reporting
framework and
tool, for 3-year
period 88Roadmap for
Green Transition of MSMEs Roadmap for
Green Transition of MSMEs 89
5. Regulatory Impact Assessment (RIA)
Regulations have several intended and unintended consequences for a wide range
of stakeholders. Despite their widespread impact, regulations may not always
achieve their intended goals. Thus, it is critical to estimate the potential impacts
of regulatory proposals and adopt the proposal that is most likely to achieve the
objectives, which the RIA supports in doing. Several expert bodies in India have
recommended RIA over the years. These include the Working Group on Business
Regulatory Framework (Erstwhile Planning Commission, 2011), the Financial Sector
Legislative Reforms Commission (Department of Economic Affairs, 2013), the Tax
Administration and Reforms Commission (Department of Revenue, 2015), etc.
Government agencies use the RIA process to assess the potential effects of new
or amended regulations. RIA is intended to weigh the costs and benefits of various
regulatory options, as well as the potential consequences for businesses, individuals,
and society. The goal of RIA is to ensure that government regulations are effective
and efficient while minimising negative effects on the economy, public health, and
the environment. Regulators such as the Telecom Regulatory Authority of India
(TRAI) have established a reasonably robust public consultation process that
includes soliciting and responding to public comments, providing essential data
for RIA. It is therefore suggested that RIA be included in the proposed regulation-
making process under this roadmap.
Box 15: Regulatory Impact Assessment
There can be several ways to about RIA, however the methods have standage
adherence guidelines that can streamline the overall process of conducting RIA:
• The monetary method has several approaches to proceed including-
o Financial analysis: This approach involves assessing the financial costs
and revenues associated with alternative regulatory options. It focuses on
analysing the potential financial implications for the decision-making body.
o Cost-effectiveness analysis: This approach evaluates the costs of different
regulatory options that can achieve the same objective. It aims to identify
the most cost-effective approach among the alternatives. Cost-benefit
analysis: This approach involves assessing both the costs and benefits of
alternative regulatory options. It seeks to assign monetary values to the
expected impacts of each option.
o Cost-benefit analysis relies on well-developed economic theories of
valuation to quantify the benefits in monetary terms. These approaches
within the monetary method allow decision-makers to quantify the financial
implications and potential benefits of regulatory options, aiding in informed
decision-making processes.
• The non-monetary involves Multi Criteria Analysis (MCA). MCA establishes
preferences between alternative options based on a predefined set of
objectives identified by the decision-making body. MCA relies on the judgment
of the decision-making team in defining objectives and criteria. MCA involves a
performance matrix, where different policy or regulatory options are evaluated
against the same criteria including direct analysis of the matrix, linear additive
models, analytic hierarchy process etc. 90Roadmap for
Green Transition of MSMEs
RIA plays an important role in improving rulemaking quality and promoting
good governance. International organisations such as the World Bank have
strongly advocated for RIA because it allows governments to ensure that
the laws and regulations they develop and implement are of high quality—
efficient, transparent, and accountable. Observation of RIA practices is one of
the OECD Council’s official policy recommendations, and 32 of the 35 OECD
countries now include RIA in their regulatory framework.
Any regulations made for the MSMEs can create long term effects on the
effective functioning of MSMEs. MSMEs are naturally prone to economic
distress, business metrics, and policy changes, which makes this segment
more important for conducting RIA. MSMEs are the backbone of the economy
and employ a larger number of citizens, and any significant changes in the
business ecosystem can be catastrophic. Even lockdown measures introduced
during the COVID-19 pandemic had considerable effects on MSMEs in the
country.
Box 16: Impact of Covid-induced economic lockdown on MSMEs in India
The world witnessed Covid-19 form 2020-2022. The adverse impact of this pandemic
is globally recognized, and it spread as a contagion affecting trade across nations
undesirably. The lockdown, one of the means to contain the spread of this pandemic,
was implemented in the country since March 2020. Though the lockdown was effective
in containing the spread of pandemic, it enabled economic slowdown. Industries in
manufacturing and services sectors faced several challenges, and a sizable number
of enterprises suffered huge losses.
The MSMEs sector has been one of the most
vulnerable sectors during the pandemic because of its size, scale of business and
availability of financial resources. Studies and surveys showed that approximately
95 percent firms were impacted negatively due to the national lockdown imposed
in April 2020, and 70% of businesses remained disrupted till August 2020. Even
after progressive unlocking, reports suggest that almost 40% businesses remained
interrupted till the end of February 2021. Factors responsible for MSME vulnerability
included capital crunch, high transaction costs, and risky perceptions by banks and
financial institutions. Roadmap for
Green Transition of MSMEs 91
Regulatory changes that reduce emissions from MSMEs have significantly
impacted these businesses in the past:
Box 17: Ban of Diesel Gensets in Delhi NCR
With air quality worsening in NCR, the Commission for Air Quality Management
(CAQM) has barred the use of polluting gensets in processions, functions,
exhibitions, and other such events in Haryana districts falling under the NCR.
Since 2021, CAQM has been banning the production of pollution-causing,
diesel gensets for use in industries and commercial areas, while directing them
to be used only for back-up. To ensure compliance, the CAQM established
a robust Enforcement Task Force (ETF) comprising 40 flying squads. These
teams conducted over 10,000 surprise inspections across industrial and
commercial units in NCR during 2022-23, issuing closure notices to hundreds
of facilities for non-compliance with air pollution norms. To ensure compliance,
the CAQM established a robust Enforcement Task Force (ETF) comprising 40
flying squads. These teams conducted over 10,000 surprise inspections across
industrial and commercial units in NCR during 2022-23, issuing closure notices
to hundreds of facilities for non-compliance with air pollution norms. But
this has severely impacted businesses. It is estimated that more than 50000
large and MSME units were affected. Concerns about the economic impact
and financial stability
arise due to potential shutdowns. Furthermore, potential
closure of MSME units and micro units could lead to job losses and impact the
labour force.
Considering the above studies demonstrating how environmental and health
guidelines severely impacted MSMEs, it is recommended that a committee
of Secretary-level executives be established to address regulatory changes
that adversely affect businesses or industries. This NPMA should lead this
RIA process, with the inter-ministerial committee serving as the first point of
contact to identify any adverse policy or regulatory impacts of the National
Programme and approach the government with solutions. The core committee
members could include Secretaries from the Ministry of MSME, MOEFCC, MoP,
MSME, NITI Aayog, Ministry of Legal Affairs, DIPP, MHI, and other relevant
departments to assess climate change impacts on industry. The main role of
this committee would be to report the effects of regulations and policies on
the industries while recommending policy or regulatory actions that mitigate
these impacts. An effective RIA is essential for the successful implementation
of green transitions in MSMEs. 92Roadmap for
Green Transition of MSMEs Roadmap for
Green Transition of MSMEs 93
6. Conclusion
The MSME sector is the backbone of the Indian economy. However, the world is
entering an era where traditional business models are being challenged by a global
shift toward sustainability. The Roadmap elaborates on the core themes of the
green transition, exploring how MSMEs can transform from vulnerable entities into
resilient, global competitors. The modern business environment is no longer static.
Regulatory frameworks are tightening globally, with mechanisms like the Carbon
Border Adjustment Mechanism (CBAM) penalize carbon-intensive exports. The
green transition of India’s MSMEs is not merely a moral or environmental
obligation
, it is a strategic imperative that aligns with the country’s broader
goals of sustainable development, climate resilience, and inclusive economic
growth. Domestically, India is moving toward stricter environmental audits and
product ratings that reflect a company’s ecological footprint. For a small enterprise,
keeping pace with these shifting dynamics requires more than just intent; it requires
a structural overhaul of how they perceive value and risk.
To navigate these challenges, the Green Transition Roadmap focuses on three
critical pillars: Technology Adoption, Financial Accessibility, and Capacity Building.
By modernizing machinery and adopting clean energy solutions, MSMEs can lower
operational costs. Improved competitiveness is a natural byproduct of these
efficiencies. Furthermore, by adhering to general wellbeing standards, businesses
ensure a safer, healthier environment for their workforce, which in turn reduces
turnover and boosts productivity.
India has ambitious targets to reach Net Zero by 2070. Since MSMEs contribute
nearly 30% of the country’s GDP and a vast portion of industrial emissions, they
are the ground zero for climate action. When a single MSME adopts a solar rooftop
or a water-recycling plant, the impact is localised, however when clusters do that
across geographies, it alters the national energy trajectory. This is inclusive growth
in its truest form ensuring that the smallest players are not left behind in the race
toward a modern, green economy. These initiatives are designed to make
green transitioning both accessible and economically viable. By embracing
sustainability, MSMEs not only contribute to India’s climate commitments
under India’s Nationally Determined Contributions (NDC), the Paris Agreement
and SDGs but also become more resilient, future-ready businesses that can
thrive in a rapidly evolving global economy.
Transitioning to greener operations enables these enterprises to reduce their
carbon footprint, conserve resources, and minimize waste, while enhancing
productivity and cost-efficiency. In an increasingly sustainability-driven
global market, MSMEs that align with international environmental standards
and secure green certifications can gain a competitive advantage, access
new business opportunities, and integrate more seamlessly into global value
chains. The journey toward green transition is not just beneficial, it is essential
for the long-term survival and success of India’s MSME sector. 94Roadmap for
Green Transition of MSMEs Roadmap for
Green Transition of MSMEs 95
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survival. 98Roadmap for
Green Transition of MSMEs
8. Annexures
8.1 Annexure
List of individuals from private organisations and ministries contacted for building
the National Programme for green transition in MSME decarbonisation roadmap.
NameDesignation and Organisation
Anil BharadwajSecretary General, Federation of Indian Micro and Small
& Medium Enterprises (FISME)
Rakesh ChhabraPresident, Rai Industries Association
Ajit ShahManaging Director, Yantra Harvest (ESCO)
Praful DadhichExpert, Secure Meters
Sakhti GaneshMurugan Textiles, Tirupur
Jitendra P Vakharia Surat Textile Association
Professor Ashwin Tai Ahmedabad Textiles
Lalit BohraJS, MNRE
Suman ChandraDirector, MNRE
Sujata SharmaJS, MoPNG
Ashok KumarDy. Director General, BEE
S.C. GuptaDirector, PNGRB
Ateesh Kumar Singh JS, MoMSME
P. Shyam Sunder Director- BEE
Ajay SethSecretary (EA), Department of Economic Affairs, Mo
Finance
M. NagarajuSecretary (FS), Department of Financial Services, Mo
Finance
Challa Sreenivasulu SettyChairman, State Bank of India
Prem PrabhakarMD & CEO, State Bank of India Ventures (cc)
Manoj MittalChairman & Managing Director, Small Industries
Development Bank of India
S.C.L. DASSecretary, Ministry of MSME
Shrikant Nagulpalli Director General, BEE
Jaydeep ModiPresident, Federation of Small Scale Industries (FSSI)
CA. Shashidhar Shetty President, Karnataka Small Scale Industries Association
(KASSIA)
Shri Biswanath
Bhattacharya
President, Federation of Small & Medium Industries
(FOSMI)
Dr. (CA) Harindra Kumar
Garg
Chairman, SIDCUL Manufacturers Association of
Uttarakhand (SMAU)
Baldevbhai PrajapatI President, Laghu Udyog Bharti Roadmap for
Green Transition of MSMEs 99
StakeholdersRemarks
NITI Aayog Scheme is a timely intervention as it focuses on access to green energy,
technology and circular economy which is aligned with MNRE’s EPR
scheme.
Green Institute should be a permanent set up with adequate and
qualified staff to function beyond the scheme period.
Renewable energy integration for MSME clusters needs to be
emphasized more.
The subsidy is limited to the tariff proposals. The aggregated demand
is handled under RPO regime, not directly subsidizing MSME energy
procurement.
15% green energy subsidy supply impact emissions per output unit
need to be studied before finalising the Scheme.
Efforts should be made to ensure that the proposed RAMP Sustainable
program (RAMP-S) aligns with the NITI Aayog study findings.
While Niti Aayog proposal consider OEMs, the same is not considered
in RAMP – S proposal.
MNRE The Ministry should consider a Grant for open access.
Going forward, the Ministry should keep RCO / RPO pathways.
BEE The Ministry of Power is implementing the Aditi Scheme in 60 clusters
by providing an interest subsidy of 3-5%. MoMSME should ensure that
the clusters covered under the Aditi Scheme do not overlap with the
RAMP – S scheme.
Brick Sector accounts for 250 billion bricks annually, matching cement
sector emissions due to coal dependency. It was recommended to
depict emissions from the brick sector separately.
World Bank The proposed RAMP–S program aligns with the World Bank goals.
It enables private capital mobilisation which is a priority area for the
World Bank. It was informed that the World Bank would come out
with actionable steps for the RAMP – S program in a few weeks.
SIDBI The proposal of RAMP – S was appreciated and it was suggested that
the institutional framework established for MSE GIFT and MSE SPICE
initiatives be utilised for RAMP – S also.
IamSME
of India
Association
They highlighted EPR as an opportunity for MSMEs to build competitive
advantage rather than a challenge. While Aditi Scheme focuses on
a few specific trades, MoMSME’s program is sector-focused and
geographically comprehensive.
MCCIA
Association
They appreciated the design of the RAMP – S programme which would
allow the States/ UTs to develop their own greening agenda, as per
their requirements and priorities.
KIIT Supported the proposed RAMP – S Scheme. 100Roadmap for
Green Transition of MSMEs
MOEFCC Concessional Audit Fees at 25% of Application fees to be considered
Trading Platform charges: Registration, Transaction and Annual fees
Reduced GST at 5% for recycled plastic (For MSME Recyclers)
Technical/financial assistance for setting up recycling facilities
Setting up of EPR Helpline
CPCB may consider grant of Auto approval for MSME producers
DC MSME The learnings from RAMP & UNIDO projects to be incorporated
It should be ensured that the maximum flow of funds in the scheme
may be directly utilised by the MSMEs to create maximum value out
of the scheme.
With respect to the EPR component, the actual requirement over &
above what has been provisioned in the scheme must be checked up
and the same may be suitably included.
List of schemes of MNRE & MOP may be checked up for similar
schemes/duplication.
Justification for capital subsidy component may be built in the
proposed scheme. Roadmap for
Green Transition of MSMEs 101
8.2 Annexure
Details of calculations for Figure 3: Sub sectoral emissions and Specific Energy
Consumption (SECs) (derived from BEE energy and resource mapping of MSME
clusters in India for different MSME sectors)
Sector Overall
Energy
Consumption
(MtOe)
% Fuel Wise Energy
Consumption
Emission
Factor of
Different
Fuels
Resulting
Overall
Emissions
(Mt)
SEC
(toe/
tonne)
Textile 8.7 Coal=37%, Agro
Residue=24%,
Firewood=19%, Pet
coke=PNG=2%,
Electricity (Grid)=12%,
Electricity (RE)=4%
Lignite
Coal=4.02,
Imported
Coal=
4.54, Agro
Residue=
Firewood=
RE
Electricity=
Biomass=0,
PNG=1.97,
LPG= 2.54,
Electricity
Grid= 9.42,
HSD= 2.90
24.7 1.1
Paper 6.6 Coal=80%, Electricity
(Grid)=10%
30.3 0.2
Foundry 1.4 PNG=7%, Pet
coke=34%, Furnace
Oil=3%, Electricity
(Grid)= 56%
9.7 0.2
Forging 1.6 PNG=21%, Furnace
Oil=38%, Electricity
(Grid)=41%
9.6
Steel
Rerolling
2.1 Coal=60%, PNG=1%,
Pet coke=1%,
Electricity (Grid)=35%,
Electricity (RE)=3%
12.4 0.2
Food
Processing
5.67 -3.2 0.3
Chemical 4.93 -1.8 0.2
Pharma 1.48 -1.8 0.2
Leather 0.14 -1.6 0.1
Glass 0.10 Coal=64%, Pet
coke=35%, HSD=0.3%,
Electricity (Grid)=
0.7%
0.7 1.1
Brick --0.7 0.9 102Roadmap for
Green Transition of MSMEs
8.3 Annexure
Fuel consumption in the top 5 MSME subsectors and resultant emissions-
• Total MSME energy consumption in year 2022- 65 (MtOe)
• Total MSME emissions in year 2022- 135 Mt
• Fuel wise consumption for 5 MSME subsectors provided in Annexure 2
Fuel Type Energy Consumption
Units (MtOe) (Derived
from BEE Reports)
Energy
Consumption
(%)
Resultant
Emissions
(Mt)
Resultant
Emissions
(%)
Coal 9.64843.6 50
Agro Residue 2.0100 0
Firewood 1.780 0
PNG0.631.6 2
Pet coke 0.732.7 3
Biomass 0.730 0
Furnace Oil 0.632.9 3
Electricity (Grid)3.81935.7 41
Electricity (RE)0.320 0
Total 2086.5 Roadmap for
Green Transition of MSMEs 103
8.4 Annexure
The reduction in MSMEs emissions is described as follows-
Total MSME emissions in year 2022= 135 Mt
Top 5 MSME sub sectoral emissions in 2022= 86.5 Mt
MSME Emissions due to Other Sectors expect the 5 listed= 48.5 Mt
MSME
Subsector
Energy efficiency
potential (%)-derived
from EE initiatives
mentioned in BEE
reports)
Sectoral emissions
(Before energy
efficiency
interventions) (Mt)
Sectoral emissions
after application
of energy
efficiency (Mt)
Textile 6024.7 9.9
Paper and Pulp730.328.1
Foundry 219.78.6
Forging 229.67.5
Steel Rerolling1212.49.6
Total86.563.6
Assuming similar levels of energy efficiency is expected across the segment, the
emissions for other sectors would be=48.5*((86.5-63.6)/135) =12.9 Mt
Emissions after application of energy efficiency lever across other MSME subsectors
besides the 5 =48.5-12.9=35.7 Mt
Total Reduction from energy efficiency lever= (86.5-63.6) +12.9≃36 Mt
Both Line of Sight (LoS) and Aggressive scenarios have been considered under two
conditions- with Electrification and Without Electrification. A with-electrification
scenario allows for replacing energy intensive process by buying equipment that
requires electricity. This electricity may be sourced through the grid with the
following assumptions-
• Both scenarios allow for zero/low emission intensive fuels like PNG, biomass
gradually being adopted in replacement of high emission intensive fuels like
coal, grid electricity (brown power), pet coke, furnace oil, diesel etc.
• The usage of other zero-emission intensive fuels like Agro residue and firewood
biomass remains the same.
• In a scenario with electrification, following the LoS assumptions, the usage
of energy-intensive fuels was reduced to 65%, usage of PNG increased by 15
percent, usage of biomass increased by 10%, and that of electricity by 1%from
the baseline.
• In a scenario with electrification, following the Aggressive assumptions, the
usage of energy-intensive fuels reduced to 45%, usage of PNG increased by 20
percent, usage of biomass increased by 20%, and increased usage of electricity
by 15 percent from the baseline.
• In a scenario without electrification, following the LoS assumptions, usage of 104Roadmap for
Green Transition of MSMEs
energy-intensive-fuels reduced to 75 percent, usage of PNG increased by 15
percent and usage of biomass increased by 1%.
• In a scenario without electrification, following the Aggressive assumptions,
usage of energy-intensive fuels reduced to 60%, usage of PNG increased by 20
percent and usage of biomass increased by 20%.
Subsectors Emissions
after
energy
efficiency
(Mt)
Emissions Without
electrification (Mt)
Emissions with
electrification (Mt)
LoS Aggressive LoSAggressive
Textile 9.9 8.9 8.29.69.3
Paper and Pulp 28.1 24.5 21.8 26.925.4
Foundry 8.6 8.3 8.18.68.5
Forging 7.5 7.1 6.97.26.9
Steel Rerolling 9.6 8.9 8.39.39.1
Total63.6 57.6 53.2 61.559.1
The maximum reduction in emissions is being obtained without electrification,
which has been prioritised for calculations under the alternate fuel lever-
• Emissions reduced without electrification after application of alternate fuel
lever in LoS scenario across the 5 MSME subsectors = 63.6-57.5=5.9 Mt
• Emission factor= 5.9/63.6 =0.09.
• Assuming similar levels of achievements across other MSME subsectors besides
the 5, resultant emissions=35.7*0.09=3.3 Mt
• Total emissions=5.9+3.3 ≃9 Mt.
• Emissions reduced without electrification after application of alternate fuel
lever in Aggressive scenario across the 5 MSME subsectors = 63.6-53.2=10.3 Mt
• Emission factor= 10.3/63.6 =0.16.
• Assuming similar levels of achievements across other MSME subsectors besides
the 5, resultant emissions=35.7*0.16=5.8 Mt.
Total emissions=9+5.8 ≃16 Mt.
• The maximum reduction in emissions is being obtained with electrification
under the alternate fuel Lever-
• Emissions reduced with electrification after application of alternate fuel lever in
LoS scenario across the 5 MSME subsectors = 63.6-61.5≃2 Mt
• Emission factor= 2/63.6 =0.03.
• Assuming similar levels of achievements across other MSME subsectors besides
the 5, resultant emissions=35.7*0.03=1.13 Mt
• Total emissions=2+1.13 ≃3.1 Mt.
• Emissions reduced with electrification after application of alternate fuel lever in
Aggressive scenario across the 5 MSME subsectors = 63.6-59.1=4.5 Mt
• Emission factor= 4.5/63.6 =0.07. Roadmap for
Green Transition of MSMEs 105
• Assuming similar levels of achievements across other MSME subsectors besides
the 5, resultant emissions=35.7*0.07=2.51 Mt
Total emissions=4.5+2.5≃7 Mt.
In the green electricity lever, the LoS scenario calls for electrical needs fulfilled
by 45 percent RE, whereas aggressive scenario raises this to 60% of electrical
needs provided by RE. Assuming RE electricity takes precedence over adoption
of alternate fuels (due to market availability, lower calorific value, costs etc.), the
following scenario is considered for further calculating emission reductions under
green electricity lever.
The LoS and Aggressive scenarios for RE adoption are provided as-
Subsectors Emissions after
alternate fuel
adoption (Mt) (LoS
Scenario)
Emissions after
alternate fuel
adoption (Mt)
(Aggressive
Scenario)
Emissions after green
electricity Adoption
(Mt)
LoS Aggressive
Textile 9.69.36.7 5.8
Paper and Pulp26.925.419.6 17.7
Foundry 8.68.55.3 4.2
Forging 7.26.94.6 3.9
Steel Rerolling9.39.16.1 5.1
Total 61.559.142.3 36.7
Emissions reduced after application of green electricity lever across 5 MSME
subsectors in LoS scenario= 61.5-42.3= 19.2 Mt
Emission factor= 19.2/61.5 =0.31.
Emissions in other sectors besides the 5 after application of alternate fuel lever
(with electrification) in LoS Scenario=35.7-1.13=34.5 Mt
Assuming similar levels of achievements across other MSME subsectors besides the
5, resultant emissions=34.5*0.31=10.8 Mt
Total emissions=19.2+10.8 ≃30 Mt.
Emissions reduced after application of green electricity lever across 5 MSME
subsectors in Aggressive scenario= 61.5-36.7= 22.4 Mt
Emission factor= 22.4/59.1 =0.38.
Emissions in other sectors besides the 5 after application of alternate fuel lever
(with electrification) in Aggressive Scenario=35.7-2.51=33.2 Mt
Assuming similar levels of achievements across other MSME subsectors besides the
5, resultant emissions=33.2*0.38=12.5 Mt
Total emissions=22.4+12.5≃35 Mt. 106Roadmap for
Green Transition of MSMEs
8.5 Annexure
Clusters identified for initial stages of energy efficiency implementation: The energy
efficiency potential and cluster emissions across sectors have been formulated
from BEE reports.
S.
No.
Clusters/
Locations
Sector
Current
Emissions (ton)
Reduction
Potential (ton)
Investments
(in Cr.)
1 Surat Textile 1,11,47,947 63,54,330 7,837
2 Bhiwandi Textile 37,88,978 21,59,717 2,664
3 Panipat Textile 15,14,666 8,63,360 1,065
4 Tirupur Textile 9,83,970 5,60,863 692
5 Jalna
Steel Re
Rolling
21,95,600 4,83,032 644
6 Ludhiana Textile 5,19,861 2,96,321 365
7 Morbi Paper 24,07,000 2,88,840 433
8
Mandi-
Gobindgarh
Steel Re
Rolling
13,62,200 2,99,684 400
9 Raipur
Steel Re
Rolling
11,28,800 2,48,336 331
10 Vapi Paper 11,60,000 1,39,200 209
Total2,62,09,022 1,16,93,683 14,639 Roadmap for
Green Transition of MSMEs 107
8.6 Annexure
Calculation of outlay required by the government for enabling supply side of energy
efficiency lever:
• The calculations have only considered the adoption of technologies in the 5
most energy-intensive/polluting MSME subsectors- Textile, Paper, Foundry,
Forging, and Steel Re-Rolling with Technology Readiness Levels (TRL) greater
than or equal to 7.
• The total fund requirement has been taken from the BEE-accredited list of
Energy-Efficient technologies for 2023.
• Applicable cross-sectoral technologies have not been considered.
• It has been assumed that all technologies requiring an investment of more than
`25 crore will not be taken up by MSMEs, considering their financial status and
affinity. These technologies must be developed in India so that the overall costs
can be reduced and the uptake can be increased.
• Further, technologies that provide enhanced potential savings (>20%) are
selected as technologies to maximise MSME energy savings and emission
reductions.
• It is further assumed that none of the technologies specified in the list have
been adopted by MSMEs, and the subsidy is aimed at promoting the adoption
of all these technologies in all the MSME units specified as per the reports by
BEE for each subsector.
• These are recommendations, and modifications can be considered based on
changes in assumptions and the underlying criteria defined for achieving the
said numbers.
SectorsTextileForging Foundry Paper Steel
Amount Required
for energy
efficiency measures
implementation in
each MSME unit (in
Lakhs)
238 212 261 325 200
Amount in crore 2.4 2.1 2.6 3.3 2
Number of MSMEs- As
per report
10509 1550 4500 324 1200
Investment potential in energy efficiency
Total
(In Cr)
Amount Required 25011 3286 11745 1053 2400 43495
Subsidy @15%6524
Subsidy @20%
8699
Subsidy @30%13049 108Roadmap for
Green Transition of MSMEs
8.7 Annexure
Clusters identified for the initial stages of green electricity implementation-
• It is assumed that 50% of electricity demand will be met by RE.
• Solar Rooftop CUF is assumed to be 21%.
S.
No.
Clusters/
Locations
Current
electricity
consumption,
in MtOe
Electricity
Consumption
(in kWh)
50%
Electricity
Demand
(kWh)
Approximate
Solar
Capacity
(MW)
1 Bhiwandi 0.4 4544000000 2272000000 1764
2 Jalna 0.21 2374240000 1187120000 922
3 Jagadhri 0.2 2272000000 1136000000 882
4 Surat 0.14 1625616000 812808000 631
5 Muzaffarnagar0.12 1404096000 702048000 545
6 Rajkot 0.1 1160897292 580448646 451
7 Tirupur 0.07 742489600 371244800 288
8 Ludhiana 0.06 624800000 312400000 243
9 Jamnagar 0.04 397600000 198800000 154
10 Coimbatore 0.03 386240000 193120000 150
Total1.37 15531978892 7765989446 6031 Roadmap for
Green Transition of MSMEs 109
8.8 Annexure
PM Surya Ghar like initiative for MSMEs
The following assumptions are noted:
• Ratio of subsidy to actual loss computed for the domestic sector based on the
state of Tamil Nadu.
• LOCE of solar for the domestic sector is assumed at Rs. 3 per unit.
• LCOE of domestic sector solar is assumed to be 0.21.
• Cost per unit of RE RTC taken from Techno economic analysis report (CEA
2024).
• Price escalation of RE and conventional power is assumed at 3% for the period
of 20 years.
• Efficiency loss due to degradation of machinery for RE is assumed at 2% for the
period of 20 years.
• RESCO profit margin for RE is assumed at 10%.
• Discounting rate of 8%is assumed to be provided by the RESCO for aggregated
solar rooftop installations.
• CUF for RE Round The Clock (RTC) is 0.48 (CEA 2024).
• Power consumption of MSMEs taken from General Review report by Central
Electricity Authority.
• Power consumed by MSMEs is 25% of total C&I consumption (Deloitte 2019).
• Ratio of Micro, Small, and medium enterprises is 90%,8%,2%for overall numbers
of MSMEs in the country.
• Percentage of micro, small, medium enterprises opting/eligible for subsidy is 20
percent, 30% and 30% respectively.
Now, ratio of subsidy given to actual loss for domestic solar scheme (for the state
of Tamil Nadu)-
• Assuming per annum power consumed by one house is 3000 units.
• Now, per unit cost of electricity in Tamil Nadu DISCOM is Rs. 1.17.
• Hence total cost of electricity is 3510.
• Now assuming 2000 units is generated from 1 kW solar (at LCOE of Rs. 3), then
cost is Rs. 6000. Balance 1000 units from the grid which amounts to Rs. 1170.
• Calculating the Net present value by inferring loss incurred for the DISCOM (i.e.
total subsidy required) at a discounting rate of 8% for a period of 20 years is
Rs. 35934.
• If the subsidy provided for 1 kW solar is Rs. 30000, then the ratio of subsidy
given is 30000/35934= 0.83.
Now, average cost of conventional electricity- 110Roadmap for
Green Transition of MSMEs
StateCost per unit (INR)
Andhra Pradesh7.10
Delhi9.28
Gujarat5.51
Karnataka9.44
Maharashtra10.63
Rajasthan8.10
Tamil Nadu10.32
Telangana8.10
Uttar Pradesh9.17
West Bengal9.09
Average cost per unit 8.67
Considering the benchmark rates of green energy projects, which is I Rs. 4.23
crore/MW for solar, Rs. 6.50 crore/MW for wind and Rs. 5.60 crore/MW for biomass
(from the concept paper on SBDS scheme).
Weighted average of 1 MW RE capacity = Rs. 5.41 crore per MW
Now the power consumption for MSMEs is tabulated as-
Total power consumed by MSMEs in IndiaMn Units (Mn kWh) 1,33,730
MSME opting and eligible for subsidy scheme %21%
Total power consumed by MSMEs that opt and are
eligible
Mn Units (Mn kWh) 28,083
Hence total capex required= (28083/1000/24*300) *5.41= ` 21109 crores
Model for power consumption and Net Present Value (NPV) for 1 MSME (With
calculations for 20 years) Roadmap for
Green Transition of MSMEs 111
Year1
Cost of conventional electricity8.67
Net cost per unit of RE RTC6.80
Cost per unit (taken from Case 2 of Techno Economic Analysis report)4.97
Efficiency loss due to depreciation of machinery-
Transmission loss (assumed at 1.5%)0.07
Tariff5.04
Banking charges (assumed flat `1.25 per unit)1.25
10% profit margin of RESCO0.50
Per unit Benefit/(loss) on account of switching to RE1.87
Units consumed by MSMEs2,110
Total cost of power consumption3,956
NPV of benefit/(loss) on account of switching to RE(19,213)
Ratio of subsidy to loss ratio for domestic solar 0.83
Subsidy required for 0.5 KW(16,040)
Computation of subsidy required-
Capacity# MSME
(Crs)
# of MSMEs
opting for
subsidy
scheme
(# Cr)
Subsidy per
MSME unit
(INR)
Total subsidy
(INR Cr)
Subsidy required for
0.50 KW (0-1 kW
range)5.70 1.14 19,918 36,603
Subsidy required for
1.5 KW (1-2 kW range)0.51 0.15 48,120 7,321
Subsidy required
for 2.5 KW (2-3 kW
range)0.13 0.04 80,200 3,050
Total subsidy
required6.34 1.33 46,974 NOTES NOTES 114Roadmap for
Green Transition of MSMEs