The MSME sector in India is a major contributor to the nation’s GDP at 30%. Being dealt with playing the role of the nation builder, sustainability then becomes one of the key focus areas for MSMEs. It is imperative to develop a sustainable economic development plan, which includes the consumption of key resources, delivering output at par with the global competition and also tackling the issue of climate change.
With India participating in the Glasgow Climate Pact, a major impetus has been put upon India’s MSMEs to carry the torch of net-zero emissions in support of India’s sustainability goals. This added responsibility is not what MSMEs had wanted to be added to their plate. Many players are already striving to survive through the Covid pandemic, and matters are made increasingly difficult with many enterprises facing cash flow problems. They depend heavily on the government to help them tide through this crisis. These factors indicate that focusing on the climate change commitments and adopting carbon-neutral practices would not even be in the top 10 of the MSMEs’ priority list.
A Baton to be Carried by Large Enterprises?
A significant number of major enterprises have set their green pledges to contribute to India’s net-zero commitments. They can afford to do so because they have the capital on hand to invest and adopt new technologies to achieve the goal. However, no one has been addressing the challenges MSMEs will be facing to implement the sustainability goals. The unfavorable economies of scale are a major challenge for MSMEs with managing the obsolete technologies, skill requirements, regulatory burdens, and finances.
The environmental crisis has impacted the MSMEs badly through damage to property, inventories and disruptions in the supply chain. Not to mention the impending impact from the damage to public infrastructure – utilities, transportation, communication and so on. This has a direct impact on input and output costs, driving them up substantially. At the end of it all, the overall cost of climate change is mammoth.
Cost of climate change in India report suggests that by 2100, climate change will cost India approximately 10% of its GDP, pushing poverty rates by 3%. So, for India to achieve a $5 trillion economy by 2030, the GDP growth rate needs to be 12.5%, which clearly India is not close to achieving yet. How can MSMEs be enabled? It is up to the large enterprises to share the knowledge with the MSMEs such as environment audit compliance requirements, carbon emission details, carbon positive value drivers, and the guidance to replace them with net-zero drivers.
Long Term Net Zero Emissions Goal Funding for MSMEs
Small Industries Development Bank of India (SIDBI) recently announced its second phase of the Swavalamban Challenge Fund (SCF), a scheme to provide loans to MSMEs and new startups to not only achieve sustainability but to also address the climate change problem by using the finances to invest in net-zero technologies. It aims to enable MSME to achieve complete net-zero emissions by 2070.
MSMEs can submit their financing proposals to SIDBI with Rs 20 lakh being the upper cap for new installations and pilot projects and Rs 35 lakh for scaling the current systems in place. It has further introduced the 59 minutes loan scheme for MSMEs where enterprises can receive an in-principle loan approval with a short turnaround time. As per the latest figures, SIDBI has approved 2.35 lakh loans worth Rs 78,738 crore.
With funding and technology intelligence sharing in place, Indian MSMEs can take their first steps towards achieving the net-zero emissions vision. While the government can set up green industrial clusters and provide the infrastructure needed, the technology and funding support is definitely a start.