Energy efficiency in sustainable development of Small and Medium Enterprises: An empirical study

Abstract

The Small and Medium Enterprises (SMEs) are an integral component of the Indian economy. SMEs consists of many energy intensive industries such as foundry, forging, steel re-rolling mills, glass and ceramics, bakeries, brick manufacture, food processing etc. The primary source of energy for these industries is coal, biomass, petroleum and electricity. Energy consumption in each of these industries is of high intensity and magnitude. Among them, the brick making units are generally confined to rural and semi-urban areas. Though they make an important contribution to the economy in terms of employment and rural development, majority of them are traditionally operated using energy inefficiently at the cost of environmental degradation. Hence, efficient use of energy is one of the pre-conditions for sustainable development of such units. The improved Energy-Efficiency helps not only in enhancing competitiveness through cost reduction, but also in minimizing environmental degradation. In this backdrop, the current paper probes various issues pertaining to energy and environment in an energy intensive brick industry cluster in India. Based on the primary data from 50 randomly selected units, the importance of energy input is established using a Cobb-Douglas production function. The energy consumption pattern and associated environmental pollution are also studied. The results revealed that energy as the most important contributor to the value of output amongst all inputs. Further, the results of this study have useful policy implications for ensuring sustainable growth of the SME sector.