MSMEs are central to India's industrial decarbonisation but face unique financing and technical barriers. Analyse with reference to recent government schemes.

MSMEs form the widest base of Indian manufacturing and still meet most of their process heat needs from coal, furnace oil and pet coke. MNRE identifies them as a priority segment for decarbonising industrial heat [3] — a centrality matched by barriers large industry does not face.

Why MSMEs are central

• Diffused emissions: abatement lies across thousands of small units in clusters — textiles, food processing, metals, artisan industries — where biomass or electric heat can displace fossil fuels [3].
• Outside the carbon market: the Carbon Credit Trading Scheme, which replaces PAT under the Energy Conservation (Amendment) Act, 2022, sets emission-intensity targets on roughly 490 large units in seven sectors [2]. MSME abatement must therefore come through schemes, not compliance mandates.
• Competitiveness: fuel is a major operating cost, so efficiency insulates small firms from price volatility and tightening export-market carbon scrutiny.

Financing barriers and the policy response

• Informality, thin collateral and low credit penetration make banks treat retrofits as unbankable; long payback periods deter first movers.
• ADEETIE (Ministry of Power/BEE, 2025; ₹1,000 crore) offers 5% interest subvention to micro and small and 3% to medium enterprises across 14 energy-intensive sectors, rolling out through 60 industrial clusters in phase one [1].
• The Mutual Credit Guarantee Scheme for MSMEs covers 60% of credit up to ₹100 crore for plant and machinery, with repayment up to eight years [4].

Technical barriers and the policy response

• Thermal systems are rarely metered and few units employ energy managers; ADEETIE therefore bundles Investment Grade Energy Audits, DPRs and post-implementation monitoring and verification [1].
• Alternative fuels face supply constraints — MNRE–GIZ work shows biomass can substitute fossil heat, but supply chains remain fragmented and seasonal [3].

MSME decarbonisation is thus less a technology gap than a problem of finance, information and aggregation. Converging cluster-level delivery under ADEETIE with credit guarantees, and opening the CCTS offset route so small units can monetise verified reductions [2], would turn a compliance burden into a competitiveness gain — advancing both India's net-zero-2070 pledge and SDG 9 on sustainable industrialisation.