The Hindu Business Line : SIDBI facilitates Rs 50-cr carbon credits to Ludhiana cluster

Chennai, Feb. 25 The Small Industries Development Bank of India (SIDBI) has facilitated Rs 50-crore worth of carbon credits to the 300-odd forging units in Ludhiana. The SIDBI’s new Chairman and Managing Director, Mr R.M. Malla, sees this as the first among many such initiatives.

Mr Malla told Business Line recently that SIDBI’s study of the units — many of which are its customers — revealed that it was possible to bring down consumption of furnace oil by anywhere between 20 per cent and 50 per cent — by replacing the burners and/or furnaces.

On SIDBI’s advice, the units set up a special purpose vehicle, christened Ludhiana Enviro Clean Pvt Ltd. SIDBI, then, worked with the World Bank. Consultants have determined that the SPV would get tradeable certified emission reductions (CER) worth Rs 50 crore.

The units would need to make upfront investments of between Rs 25 lakh and Rs 50 lakh, depending upon the equipment that each unit would need to replace. The investments would be funded by loans from the SIDBI. Mr Malla reckons that loans could be paid back out of cost savings within two years.

Now, SIDBI is looking at other small scale clusters for similar opportunities. SIDBI would get additional lending opportunities while the units would get process efficiencies for free — the investments would be more than paid back by carbon credits.

Credit guarantee scheme

Mr Malla said that ‘credit guarantee scheme’ operated by SIDBI has become successful, with over 20,000 units availing themselves of the scheme benefits in the current year. Under the scheme, bank loans up to Rs 25 lakh given to small industries are guaranteed by a fund, so that banks do not demand collateral for the loans. The Union Government contributes 80 per cent of the corpus, while SIDBI gives the rest.

So far, 95,000 units have availed themselves of the benefits. Mr Malla expects that next year, about 50,000 more units will benefit from the scheme.

He sees Basel-II – the protocol which determines how much of own-funds a bank has to bring into its business — as a key driver. As banks realise that the risk weight for loans given under the credit guarantee scheme is only 25 per cent, they will rush to lend to small scale units, Mr Malla said.

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