Msmes Could Cut Their Power Costs by Up to 34% by Aggregating Demand for Renewable Electricity, According to a Report Released at the CII

The savings would translate into annual gains of ₹2.2 crore to ₹2.4 crore per unit. Electricity accounts for up to 40% of operating costs for secondary steel producers, the report said. Renewable power is available at ₹4.5-6 per unit in several states, compared with grid tariffs of ₹7-8, creating a significant opportunity to reduce production costs while cutting emissions.

The report, 'Powering India's Secondary Steel Transition: The Business Case for Cluster-Based Renewable Electricity Procurement', has ranked 22 secondary steel clusters on their attractiveness for renewable energy integration. Raipur, Belgaum, Shimoga, Rajkot and Bhavnagar emerged as the top five. The group captive model was identified as the most viable option for MSMEs, under which several units jointly own a renewable energy plant and draw power in proportion to their equity contribution.

In Rajkot, a foundry taking a 5 MW share in a group captive solar project would require about ₹1.4 crore in equity and could lower its electricity tariff by around 20%. In Raipur, a 10 MW share for an integrated furnace and rolling-mill unit would require about ₹2.7 crore and reduce tariffs by around 34%. The initial investment could be recovered within one to two years.

The full-capex model offers higher lifetime savings but requires substantial upfront investment, land and maintenance capabilities. Third-party open access requires no capital expenditure, but surcharges limit the savings. India's secondary steel sector accounts for about 44% of crude steel production and comprises more than 1,000 MSME units, generating an estimated 50-60 million tonnes of carbon dioxide equivalent annually.

However, renewable adoption among secondary steel MSMEs remains around 11%, roughly half the 22% share of renewables in India's overall electricity mix. The report recommends time-bound open-access concessions, portfolio-level credit guarantees through SIDBI or IREDA and a standardised framework for group-captive projects across states.