Small-Scale Businesses Forestall a Green India

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By Rama Lakshmi
Washington Post Foreign Service
Thursday, December 27, 2007

FARIDABAD, India -- Ashok Gupta's modest plastic-packaging factory is the oldest in town, and its age shows. The root of all his problems is electricity.

Gupta is stuck with a 32-year-old machine that consumes huge amounts of power, while the new machines available in the nearby market produce twice as much plastic packaging and use 25 percent less electricity. But his business is too small for him to be able to afford the $18,000 energy-efficient model. Gupta's problems are compounded by frequent cuts in the electrical supply here in the power-starved northern Indian state of Haryana.

The machine at Ashoka Plastics Industries "needs to be heated for 1 1/2 hours before it can work," said Gupta, 53, whose factory does about $12,000 worth of business a year. "We face power cuts every other hour, cooling down the machine, and it has to heat all over again. This uses a lot of electricity."

Analysts say cash-strapped small industrial operations such as Gupta's pose one of the biggest challenges to achieving energy efficiency and curbing carbon emissions in this country.

With one of the world's fastest-growing economies, India is expected in the coming years to produce ever more of the greenhouse gases that contribute to global warming. But many business owners in small industries either fail to understand the relevance of climate change or are unable to afford the changes necessary to become more energy-efficient. According to a World Bank study, India's 4.5 million small and medium enterprises, with their obsolete technology, produce 70 percent of India's industrial pollution.

"Appropriate climate-friendly technology is not available for industrial units of smaller size," said Ajay Mathur, who heads the Indian government's Bureau of Energy Efficiency. "Their financial constraints and scale of operations limit their access to newer technological innovations. A majority of them, in textiles, light engineering, glass and foundries, are in smaller towns and less aware of climate change issues. Individually, they cannot even afford an engineer for an energy audit."

In recent years, India's commercial energy consumption has grown by less than 4 percent annually, a rate it needs to increase to sustain its economic growth rate of 9 percent. But India has a huge population of 1.1 billion, and half of its energy needs are met by coal. The country is ranked fifth in the world in terms of the amount of carbon it emits; according to a recent report by the Paris-based International Energy Agency, India will leap to third on that list around 2015.

India is also one of the few countries where electricity rates for industrial users are almost 50 percent higher than for residential users. Policymakers cite this imbalance as a strong incentive for industries to shape up.

At the international climate change conference in Bali, Indonesia, this month, delegates from New Delhi resisted efforts by industrialized nations to set mandatory targets for reductions in carbon emissions, arguing that India's per-capita emissions are far lower than those of wealthier, developed countries. Countries with emerging economies have also argued that climate change goals should not be imposed at the cost of growth.

India's severe power shortages are already forcing some business owners to look for energy-efficient solutions -- both to cut costs and to remain globally competitive. In the past two years, the government has introduced energy-efficiency labels for some consumer goods and trained architects how to meet new, environmentally friendly building codes. The government has also mandated energy audits for large factories this year and is proposing tougher fuel economy standards.

"We have been engaging in energy-efficiency activities on our own because of our energy security concerns and the need to be competitive. It is not just a response to climate change," said Pradipto Ghosh, a member of the Indian Prime Minister's Council on Climate Change and a participant in the Bali summit. "Why is India being targeted when even without targets we are doing better than many rich nations?"

When it comes to curbing pollution in small-scale industries, some officials say that the solution lies in what are known as clusters -- groups of factories that come together to jointly hire energy auditors, buy new machines in bulk and apply for collective loans.

But business owners see barriers to that solution as well.

"They say, 'We are competing against each other. Why should we come together?' " said Harinder Singh of the Confederation of Indian Industry. "We tell them: 'Your real competition is global. It is China.' We sell it as a money-saving drive. We would lose them if we start telling them about global warming."

Two years ago, an exorbitant electricity bill landed on the desk of Rajiv Chawla, an automobile component manufacturer here. It was almost 50 percent more than his usual monthly bill, and it hurt, badly.

After a grueling two-day energy audit of his factory by Singh's team, his $2.5 million business was declared "energy inefficient." He has now replaced his old energy-guzzling power motors, installed new timers and meters and changed all the light bulbs in his office, factory and home.

"Energy efficiency is now a lifestyle choice for me, like being a vegetarian," Chawla said. "My electricity bills dropped, and I recovered my investment in six months."

Mathur, of the Bureau of Energy Efficiency, said that many of India's large industries, such as cement, steel and aluminum producers, are already among the world's most energy-efficient. As a developing country, he said, India has the advantage of being able to incorporate new, cleaner technologies into its infrastructure as it grows, while wealthier countries have to supplant existing infrastructures.

Meanwhile, there are signs that any change in energy habits, whether among ordinary Indians or among businesses, could come slowly. Last year, Mathur's bureau introduced power-saving labels for refrigerators and air conditioners. The consumer response has been tepid.

In an upscale household appliance store in southern Delhi, salesman Praveen Jain was trying to peddle all manner of products on a recent day, including refrigerators with red and yellow tags indicating energy-saving models.

"Customers don't seem to be even aware of the labels," Jain said. "It is still too early to make an impact."

Staff researcher Robert E. Thomason in Washington contributed to this report.

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