Call Us 📲8800102216📞 Call Girls In DLF City Gurgaon
Pat scheme a blessing in disguise (tata strategic thought note)
1. Energy
PAT Scheme (Perform, Achieve & Trade):
A Blessing in Disguise
The PAT Scheme introduced by the Bureau of Energy Efficiency (BEE) under
the purview of the Ministry of Power aims to reduce the energy consump-
tion in 8 energy intensive sectors by 6.68 million toe by 2015. With the PAT
Scheme becoming a reality, organizations should develop a strategic ener-
gy management plan to comply with the PAT targets for each cycle. In reali-
ty PAT Scheme is a blessing in disguise, an intuitive way to move towards
the Triple Bottom Line and overall Energy Excellence, say Shardul Kulkarni,
Amit Kumar Singh and Pranab Medhi of Tata Strategic Management
Group.
2. The PAT Scheme (Perform, Achieve and Trade) is one of the
four energy efficiency improvement initiatives spelt out
under National Mission for Enhanced Energy Efficiency
(NMEEE).
The genesis of the PAT mechanism is the Energy Conserva-
tion Act, 2001 which empowers the Ministry of Power
(MoP) to notify industrial units consuming energy more
than the threshold in 9 sectors namely Thermal Power
Plants, Fertilizer, Cement, Pulp and Paper, Textiles, Chlor-
Alkali, Iron & Steel, Aluminum and Railways as Designated
Consumers (DCs).
PAT scheme is currently being implemented in 2 cycles,
Cycle I (2012-2015) and Cycle II (2015-18).
It is targeted at increasing energy efficiency across identi-
fied sectors and aims to save 6.68 million toe of energy at
the end of Cycle I.
Bureau of Energy Efficiency (BEE) conducted sector specific
studies to arrive at the acceptable band of Specific Energy
Consumption (SEC) within an industrial sector. The wide
band of SEC within an industrial sector is indicative of the
large energy-savings potential and the differences amongst
plants because of their varying vintage, production capaci-
ty, raw material quality, and product-mix. Due to these
differences SEC improvement targets are plant-specific. The
targets are decided using a baseline which is the arithmetic
average of the last 3 years (2008-10) SEC and normalized as
per a methodology specified by BEE. It is observed that
higher the energy efficiency (lower the SEC), the lower are
the energy-saving targets.
The SEC of a plant is calculated based on Gate-to-Gate con-
cept (Only energy used within the boundary walls of the
plant for producing the final product is considered) and
expressed in terms of the metric ton of oil equivalent (toe)
per unit of product. The total energy input to the plant is
converted into a single unit and all products produced are
converted to equivalent of the major product.
A total of 478 DCs have been identified across 8 sectors for
the first cycle of PAT. Each of the plants has been given an
energy saving target for 2015. At the end of 2015, Designat-
ed Energy Auditors will conduct energy audits to ascertain
the achieved SEC. Inability to meet the targets would
attract penalty while overachievement would be rewarded
with Energy Certificates (ESCerts) which can be traded in
the designated exchanges (IEX and PXIL). The value of 1
ESCert has been set to the value of 1 MTOE of energy (~Rs
12,500/MTOE as per BEE pricing formula).
In short, the PAT scheme is a perfect example of rewarding
the overachiever and penalizing the underperformer.
The PAT Scheme has generated a lot of ripples in the ener-
gy intensive process industries and is perceived as a source
of capital outflows in tough economic times. Though there
are some disputes over the target setting methodology and
skepticism as associated with any new regulation about it’s
implementation, some proactive firms have used this regu-
lation to initiate comprehensive energy management and
improve their margins. We, at Tata Strategic, believe that
this is the right time to view the PAT scheme in a fresh per-
spective; as a blessing rather than another regulatory road-
block.
Figure 1: PAT Mechanism
The PAT scheme is in fact an indirect way to approach the
elusive triple bottom line. The triple bottom line (TBL) cap-
tures an expanded spectrum of values for measuring organ-
izational success: profit, planet and people. In the private
sector, a commitment to corporate social responsibility
(CSR) has been traditionally viewed as a commitment to
some form of TBL reporting. But a closer look reveals that
the PAT scheme actually allows organizations to move to-
wards a true TBL reporting. See Figure 2 below:
Figure 2: Triple Bottom-line Concept
Profit : The PAT scheme aims at reducing the energy con-
sumption per unit of output product. In the current situa-
tion when increasing competition is already putting pres-
sure on margins, reduction in energy cost will help boost
the bottom line. E.g. Energy cost accounts for ~30-35% of
total manufacturing expenses for DCs in the cement sector.
10% reduction in the energy cost could potentially boost
operating profit margins by ~20%.
Planet : Reducing energy consumption will not only benefit
the DC but would also have a lasting impact on the
planet. 1 toe reduction in energy consumption can poten-
tially reduce carbon dioxide emissions by ~3.18 tons.
Many progressive Indian Groups (e.g. Tata, Essar) have vol-
untarily taken carbon emission reduction targets in the
larger interest of community and Planet. PAT provides an
excellent opportunity for such Groups to achieve their plan-
Introduction
Target Setting Methodology
PAT and the Triple Bottom Line
4. About Tata Strategic
The largest Indian owned Management Consulting firm
500+ engagements, 100+ clients, across countries, across sectors
Increasing presence outside the Tata Group & India
50+% revenue outside Tata Group
20% revenue outside India
Our offerings
Contacts:
The Energy Practice at Tata Strategic has in-depth understanding of Indian Power Sector and has focus on Energy Man-
agement, Renewable Energy, Services and Smart Grid. We have been associated with private sector utilities, large cor-
porates & MNCs and supported them in areas of strategy, market assessment and strategic performance improve-
ment. USP of Energy Practice is a pool of consultants in areas such as EM, RE, generation, distribution & transmission.
We are also a part of Core Group on Smart Grid at CII.
Energy
Shardul Kulkarni is Principal of Energy practice. He has about 11 years experience. His areas of specialization include Strate-
gy Formulation, Project Finance and Energy Management. He is Certified Energy Auditor from Bureau of Energy Efficiency,
an offshoot of Ministry of Power, India. (shardul.kulkarni@tsmg.com)
Amit Kumar Singh is an Associate Consultant. He has about 4 years of experience in the power sector and has worked on
several engagements across segments in power (conventional & renewable), oil & gas and petrochemicals at Tata Strategic.
Pranab Medhi is an Associate Consultant. He has about 3 years of experience and has worked on several engagements
across segments in areas of Strategy Formulation, Energy Management and Organization Restructuring at Tata Strategic
Authors
Our Domains
Auto
Engineering
Technology
Infocomm, Education
Healthcare
Infrastructure & EPC
Functional Areas
Strategy
Organizational Effectiveness
Delivery Excellence
Logistics
Sourcing
Sales Effectiveness
Mumbai
B - 1001, Marathon Futurex,
N.M. Joshi Road
Lower Parel (East),
Mumbai 400 013. INDIA
Tel: +91 22 66376789
Fax: +91 22 66376600
Delhi
Level 12, Building No.8, Tower C
DLF Cyber City, Phase II
Gurgaon – 122002
Haryana, INDIA
Tel: +91 124 4696692
Fax: +91 124 4696970
Set Directions
Drive Strategic
Initiatives
Support
Implementation
Durables
FMCG
Retail
Hospitality & Tourism
Chemicals
Energy
Vision
Market insights
Growth Strategy/Business Plans
Scenario Planning
India Entry
Alliance & Acquisition Planning
Strategic due diligence
Manufacturing Strategy
Strategy
Operations
Supply Chain Optimization
Throughput enhancement
Superior Fulfillment
Project Excellence
Procurement Transformation
Strategic Cost Reduction
Energy/Water Management
Revenue Enhancement
Product Innovation
Market Share Growth —
Rural/Urban
Dealer Effectiveness
Sales Effectiveness
Organization Effectiveness
Organization Structure
Corporate Center Design
Roles & Decision rules
Culture Transformation
Performance Management
Capability Assessment
Talent Management
Marketing & Sales
Implementation Support
Implementation Plan
Program Management
Refinements/Course Corrections