Energy Efficiency for the Rural Entrepreneur

In the past two months, I have started working part time as a consultant with the SELCO Foundation policy team. There are a couple of projects I’m working on at the moment. I’ll talk about one of them in this blog – Energy Efficiency for the Rural Entrepreneur.

There’s a lot of talk about energy efficiency playing a big role to reduce energy consumption at the global as well as national levels. Many governments and large corporations have taken on this head on and have introduced policies to define energy consumption standards across all sectors. This trend has definitely had its impacts in terms of energy consumption and there’s no doubt that this is a good trend.

In India, the Bureau of Energy Efficiency (BEE) is the department which has been set up to assist in developing policies and strategies to reduce the energy intensity of the Indian economy. The Ministry of Micro, Small and Medium Enterprises (MSME) has partnered with BEE to incorporate energy efficiency into the MSME sector. Many of the high power consuming MSME clusters like Glass, Foundry, Coir, Tiles (mainly the small and medium enterprises) have been selected for interventions.

However, the link between basic livelihood generation in the micro enterprises sector in rural areas and energy efficiency has not been looked into as an important aspect and entrepreneurs like silk reelers, powerloom workers, jaggery makers, small tailor and sugarcane juice vendors have been left out of this exercise. The policy team of SELCO Foundation identified this gap and decided to intervene.

For most of the above mentioned entrepreneurs, the expense on their energy bills is a major component of their overall business expenses and eats into their savings to a large extent. For example, silk reelers spend 26% of their revenues on their energy bills and 18% in the case of sugarcane juice vendors, if they use fossil fuel back up like diesel generators. In case they don’t use backup, this percentage reduces, but their revenues come down as well, as they get to be productive for only half or two-thirds the amount of time than they’d wish to be. In contrast, an MNC or a large scale factory spends only about 1 to 5% of their revenues on energy bills (varies from industry to industry) and even lesser when they incorporate energy efficiency measures!! This is due to two reasons – The small entrepreneur’s profit margins are obviously way lesser than that of the MNC/large factory (in fact he/she earns just enough to sustain him/herself and his/her family, whereas big businesses are able to focus on profit maximization) and his/her dependence of back up power like diesel/petrol/kerosene is a lot more due to larger power outages in the rural areas as compared to cities.

By bringing in energy efficiency (and backing the systems with renewable energy sources if it makes sense to), we hope to bring down these energy expenditures, which will benefit them immensely.
Based on our learnings from these interventions, which will require involvement of SELCO Labs for technical tests and implementation, financial institutions for loans, interest/capital subsidies to reduce the investment burdens for the entrepreneurs (we hope these subsidies are easily available), we plan to come out with a policy recommendation paper suggesting the required changes in the present policies so that these micro entrepreneurs are made aware, included and serviced for their energy efficiency needs.
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