INDIA: SME'S HOLD KEY TO APP SUCCESS

UNCLAS SECTION 01 OF 02 NEW DELHI 003436 SIPDIS SENSITIVE BUT UNCLASSIFIED SIPDIS E.O. 12958: N/A TAGS: SENV ECON ENRG TSPL TRGY BEXP IN SUBJECT: INDIA: SME'S HOLD KEY TO APP SUCCESS REF A: NEW DELHI 3262 NEW DELHI 00003436 001.2 OF 002 ¶1. (SBU) Summary: Indian Small and Medium Enterprises (SMEs), which make up the bulk of Indian industry, do not understand the goals and processes of the Asia Pacific Partnership (APP). Reaching this segment of industry through better publicity, engagement, and a revised proposal process will reap lasting rewards in promoting clean technology and reducing emissions. End Summary. Current APP publicity has been lost on SMEs -------------- ¶2. (SBU) While road shows and workshops have successfully publicized the APP to key Government of India (GOI) officials, APP task force participants, and large scale enterprises, Indian firms, especially SMEs, which represent 60% of Indian GDP, 35% of all exports, and 80% of total employment, lack awareness of the APP's goals and processes. Many are unfamiliar with the purpose of the APP and confuse it with the Clean Development Mechanism of the Kyoto Protocol according to both K.P. Nyati, Head of the Environment Policy Division at the Confederation of Indian Industry (CII),and Rita Choudhury, Team Leader of the Environment Division at the Federation of Indian Chambers of Commerce and Industry (FICCI). In addition, K. Mukherjee, Deputy Director at the Associated Chambers of Commerce and Industry of India (ASSOCHAM),stated many Indian firms believe APP is a cost-sharing initiative whereby 50% of clean technology-related project costs would be covered by government agencies, in particular the USG. Ironically, these are the only conduits to reach the Indian business community at large, including SME's. ESTHOffs believe these issues led to the fact the majority of the 181 APP project proposals for India originated from U.S. entities such as NGOs, consultants, and academia. Those that did come from India were from large, well known NGOs, industry groups and large corporations. Clearly, there has been an information bottleneck, namely the industry bodies, in the effort to engage the whole of the Indian business community. Enormous Potential for Emissions Reduction among SMEs -------------- -------------- ¶3. (SBU) The majority of Indian businesses, particularly SMEs, operate on outdated technology that is both harmful to the environment and operationally inefficient. While environmental impact could be reduced by incorporating end-of-pipe clean technologies, which aim at removing or transforming wastes emitted from the production process, these technologies do not improve operational efficiency and therefore add to manufacturing costs. Cost-effective retrofits, however, could reduce the country's energy use today by at least 25% and advanced technologies could reduce energy use growth projected through 2030 by at least 10%, according to Robert Taylor, a World Bank Lead Energy Specialist. Examples of these energy retrofits include high efficiency lighting, air conditioners, boilers and waste heat recovery systems for commercial and public buildings, industrial plants and other facilities. In May 2007, The GOI's Bureau of Energy Efficiency, in cooperation with the Ministry of Power and USAID, announced Energy Conservation Building Codes for India that set minimum guidelines for energy efficiency in commercial buildings. The great number of SMEs, typically inefficient, provide a burgeoning market for these technologies while the APP could serve as a potential technology transfer catalyst. APP Needs Greater Publicity -------------- ¶4. (SBU) In the absence of market drivers for clean technology (Ref A),the APP will struggle to garner interest among Indian SMEs and will need improved information dissemination and outreach efforts. Increasing participation will first involve a mechanism that will provide accurate information to SMEs as well as to large corporations. In addition to providing industry bodies such as CII, FICCI, and ASSOCHAM with the proper APP literature - in both Hindi and English - that stresses the increased profitability and efficiency gains of clean technologies, a delineated, action-oriented communication strategy must be developed and tracked. Instead of relying on business conferences and summits in major cities, the usual approach of the industry bodies which seem to attract the same multinational corporations and senior GOI crowds NEW DELHI 00003436 002.2 OF 002 each time, a grassroots effort directed at SMEs, smaller industry groups, and trade cooperatives is needed. In addition, links to the APP website should be created on GOI hosted websites such as the Right to Information Act site as well as those of the Ministries of Environment and Forests, New and Renewable Energy, and Non-Conventional Energy Sources. According to K. Mukherjee, these sites are often visited by SMEs looking for answers to their policy-related questions. The APP could also be advertised in trade journals as well as national newspapers. While the APP will have to devise a way to raise funding for this strategy, developing an effective method to engage the SME community will enable future trade and technology transfer initiatives to tap into this viable customer base. Increasing APP Response via the Proposal Process -------------- --- ¶5. (SBU) The proposal process itself, which was thought to be cumbersome by several potential applicants, could be simplified to capture the SME market which is not accustomed to English grant writing or may lack access to the internet. The APP could provide for regional contacts that can answer applicants' questions and in addition, applicants could be given the option to mail their proposals rather than applying online. Nyati stated that several firms had expressed their frustration with the lengthy online application process, which, at times, would crash due to local connectivity issues as well as website technical problems that would require them to begin the application anew. In addition, a Hindi version of the APP website would bring in a much broader audience. WHITE