In order to prevent erosion of their bottom lines, Indian companies would have to take serious action to maximise energy efficiency in the wake of the new energy-conservation legislation passed by Parliament recently.
The new legislation — Energy Conservation (Amendment) Bill 2010 — aims at giving a push to the energy-efficiency drive in the country. It has provisions for kick-starting the Perform, Achieve and Trade (PAT) scheme, which lays down efficiency targets for energy-intensive industries over a period of three years.
According to the Confederation of Indian Industry (CII), companies unable to achieve the target will suffer erosion of bottom lines as they would have to pay for the price of energy-saving certificates. Failing that, they would attract a hefty penalty.
The proposed Mandatory PAT scheme will cover 714 installations (termed as designated consumers) in nine energy-intensive Indian industrial sectors (thermal electric power generation, fertilizers, steel, cement, pulp and paper, aluminium, chlor-alkali, textiles and railways). The government has notified the designated consumers covered by the scheme. Alongside major industrial energy consumers (downstream), the PAT scheme also includes large power stations (upstream) as these are large users of energy in their own right.
A CII study shows the textile sector has the highest number of designated consumers at 225 (32 per cent of the total), followed by power plants at 131 (18 per cent), cement at 104 (15 per cent), iron and steel at 98 (14 per cent) and pulp and paper at 94 (13 per cent). These five sectors together constitute 92 per cent of the total designated consumers. The regional spread of designated consumers is also uneven. Tamil Nadu, Maharashtra, Gujarat and Rajasthan are the most important states for the PAT scheme with 345 designated consumers (48 per cent) belonging to these four states.
The PAT scheme provides for issuing energy-saving certificates to industries that consume less than the specified quantum of energy and allowing them to sell their earned credits to those industries whose energy consumption exceeds the standard specified.
As the PAT scheme becomes operational, the energy-intensive manufacturing companies will necessarily have to exploit process-oriented changes to achieve the energy-conservation goals mandated,said CII.
The companies that fail to achieve their targets and buy compensatory credits will be liable to pay an increased penalty once the provisions of the Bill come into operation.
Under the amended Act, fines have been enhanced from Rs 10,000 to Rs 1 million and from Rs 1,000 to Rs 10,000 for each day the offence persists.
The new legislation confers a power upon the Bureau of Energy Efficiency (BEE) to appoint its own energy auditors rather than depend on government-nominated audit officers. It also provides for establishing Energy Conservation Funds.
According to the government’s estimate, saving power through the energy-efficiency route could save investments of up to Rs 120,000 crore in the power sector, power minister Sushil Kumar Shinde had said recently. The sector has been facing a funding shortage of over Rs 500,000 crore.
