Ranking of Barriers to Energy Efficiency in Small Industry Clusters Using Analytic Hierarchy Process: An Empirical Study of Three Indian Clusters

Article excerpt

Energy is a vital input to many Small Scale Industry (SSI) units and it acquires special significance when these units exist in clusters. Energy efficiency improvement is crucial for the survival and growth of such clusters - not only to improve their competitiveness through cost reduction but also to minimize the adverse environmental implications. But, it is easier said than done due to a variety of barners faced by tlie SSIs. This paper identifies the various dimensions of relevant barriers for energy efficiency in SSI clusters. Further, the perceptions and experiences of entrepreneurs, the main stakeholders of SSI, are considered in ranking these barners using Analytic Hierarchy Process (AHP). The analysis is based on the pnmary data pertaining to three energy intensive SSI clusters in South India, viz., Foundry, Textile dyeing and, Brick and Tile. The results ascertain that in all the three clusters, Financial and Economic Barrier (FEB) and Behavior and Personal Barrier (BPB) are the top two obstacles for energy efficiency improvements.

INTRODUCTION

While energy is an indispensable input in every sector of an economy, it is crucial for the industrial sector, which accounts for almost half of the total energy used around the globe (Ross, 1997). This is true even in the case of Indian industrial sector (Reddy and Balachandra, 2003), which has a large number of Small Scale Industry (SSI) units apart from medium-and large-scale industries. As per the prevailing definition in India, Small Scale Industry is an industrial unit with original investment in plant and machinery up to Rs. 10 mn. SSI, with a lion's share in total industrial establishments, is of strategic importance in Indian economy due to its contribution to GDP, employment generation, exports and production. In 2002-03, the SSI sector comprised 3.57 million units, generated Rs. 7420.21 bn worth of production and employed nearly 20 million people. The exports by this sector stood at Rs. 697.97 bn in 2000-01 (MoF and CA, 2003). The SSI sector has a diversified and prominent presence in Indian economy by producing over 7500 products and accounts for about 40% of industrial production and close to 7% of GDP (DCSSI, 2003).

A significant feature of SSIs in India is that they have clustered naturally and spontaneously in different regions of the country (Expert Committee, 1997). In fact over 400 small industry clusters and about 2000 artisan clusters exist in India (UNIDO, 2001). Many of these small industry clusters are energy intensive as well. Though individual SSI units may not consume large amounts of energy and cause severe pollution, collectively, their energy needs and associated environmental pollution in such clusters cannot be ignored. Improving energy efficiency is necessary for the survival and growth of these clusters because higher energy efficiency not only improves their competitiveness through cost reduction but also minimizes the adverse environmental consequences.

However, many of the energy efficiency and environmental improvement initiatives in SSI sector are not successful in India (Dasgupta, 1999). This can be mainly attributed to the presence of various obstacles existing in this sector related to: Lack of awareness and information, financial and economic aspects, structural and institutional aspects, policy and regulatory features, behavioral and personal attitudes, etc. Before initiating any steps to eliminate/reduce these barriers to improve energy efficiency, it is necessary to analyze and prioritize them keeping in mind the socioeconomic circumstances of the Indian SSIs. The perceptions and experiences of entrepreneurs are to be duly incorporated in the prioritization scheme, as they are the main stakeholders of any efficiency improvements. In addition, such prioritization process must also adopt multiple criteria such as existing level of barrier intensity, effort level required for barrier removal and the positive impact expected due to barrier removal, etc. …