CSTEP Report Highlights Pathways for Decarbonising India's MSME Manufacturing Sector

The Centre for Study of Science, Technology and Policy (CSTEP) has released a comprehensive report titled ‘Scope for Deep Decarbonisation in the MSME Manufacturing Sector.’ This two-year scoping study evaluates the potential for decarbonising the Micro, Small, and Medium Enterprises (MSME) manufacturing sectors and mitigating greenhouse gas (GHG) emissions.

The study's objective was to assess the overall scope for implementing decarbonisation technologies through demand electrification and fuel switching. It estimated the potential for reducing GHG emissions and analysed the techno-economic feasibility of various decarbonisation technologies.

The research covered seven clusters, encompassing 66 MSME units from five energy- and emission-intensive sectors. A detailed techno-economic analysis was conducted to evaluate the feasibility of technologies such as process electrification and fuel switching.

CSTEP found that implementing a combination of Energy Efficiency (EE) measures, Renewable Energy (RE) solutions, and advanced technologies could potentially save 136,581 tonnes of CO₂ emissions and reduce energy usage by 385,383 GJ. The report highlights that MSMEs could save up to INR 37 crore by adopting these measures. Notably, all clusters, except for Asansol-Chirkunda, experienced decreased energy costs.

The report suggested that for the aluminium die-casting cluster, an electric resistance furnace is a more efficient and cost-effective option compared to piped natural gas (PNG)-fired furnaces, offering reduced GHG emissions. However, electric boilers are not financially viable for the pharmaceutical cluster due to higher capital costs and lower utilisation rates. In the refractories sector, an electric kiln promises a 29 percent reduction in emissions, but high capital costs hinder its financial feasibility.

The study promotes bio-compressed natural gas as a viable alternative for PNG-fired furnaces in the aluminium die-casting cluster, despite its nascent development stage. Biodiesel blending with 80 percent diesel in diesel generator sets and boilers is also highlighted as a viable fuel option for the MSME sector. While converting boilers to green hydrogen shows emission reduction potential, high fuel costs and the expense of adopting hydrogen boilers limit its widespread use.

Energy Efficiency (EE) measures for electric drives, heating, ventilation, air conditioning (HVAC) equipment in the pharmaceutical sector, boilers and thermic fluid heaters in the textile sector, furnaces and die-casting machines in the aluminium die-casting sector, kilns in the refractory sector, and ovens in the bakery sector offer the highest energy-saving potential.

The report noted regional differences in energy use: the Delhi-NCR cluster showed higher usage of natural gas-based melting and holding furnaces, while the Bengaluru cluster predominantly used electricity-based furnaces. This indicates the need for tailored decarbonisation roadmaps for each location.

In Bengaluru, pressure die-casting for aluminium die-casting exhibited the highest energy-saving potential with a 4.36 percent reduction in energy consumption. For Delhi, furnaces showed the highest potential, with a 3.35 percent reduction.

The study underscores the importance of adopting renewable energy and advanced technologies. It recommends creating industrial and MSME policies for each state or sector to analyse local clusters and identify their challenges. This includes defining energy and emission reduction targets and developing roadmaps to achieve them. Additionally, the report highlights the importance of increasing financial access for MSMEs to facilitate the widespread implementation of decarbonisation measures and suggests policy measures to boost biofuel usage.

This report from CSTEP offers a clear and actionable path towards decarbonising India's MSME manufacturing sector, providing both environmental and economic benefits.