Energy Management in Kerala Tile Industry

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ENERGY
MANAGEMENT IN
SMALL AND MEDIUM
ENTERPRISES A CASE
OF TILE INDUSTRY IN
THRISSUR DISTRICT
KERALA

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ABSTRACT
Two external forces in the early 1990s spurred a revival of interest in
promotion of energy efficiency and facilitation facilities: international understanding
to control the amount of greenhouse gases and the dramatic increase in worldwide
industrial competitive pressures. In view of the policy, financial and technical barriers
to the accelerated introduction of energy efficient technologies and measures in
industry, a need was felt to address these barriers, at both the national and industrial
plant levels (top-down and bottom-up). It was in this context the Government of India
enacted the Energy Conservation Act (ECA) 2001 and accordingly established the
Bureau of Energy Efficiency (BEE) to promote energy efficiency in all sectors of the
economy through fixation of minimum energy performance standards for notified
equipment and regulated energy audits conducted by accredited energy auditor firms,
followed by the formulation of mandatory action plans containing financially attractive
recommendations.
The Small and Medium Enterprise (SME) sector is one of the backbones of
the Indian development process mainly because of its greater employment potential,
lesser capital intensiveness and scope for flexible and decentralized operation even in
rural environment, contributing greatly to rural industrialization with a contribution of
40% to the country's industrial output and 35% to direct exports. Till the opening up of
the Indian economy in 1991, through liberalization-privatization-globalisation, these
SMEs, particularly those loosely classified under the rural/ traditional industry category
were all enjoying the protectionist industrial regime of the Central and State
governments. Though it was a known fact that without modernization and quality
improvement coupled with cost reduction efforts, it would be difficult to survive in the
globalised economic environment, there was complacency in preparedness by many
industries and for a pro-active intervention in this direction by the good number of
public institutions created for the upliftment of SMEs. An area where significant cost
reduction is possible, though often overlooked, is in the field of Energy Efficiency.
Among others, government policy has a major role to play in the promotion of energy
efficiency. This is particularly true in the context of small industry because small

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industry units individually may not take any initiative for enhancing energy efficiency
due to lack of awareness, prohibitive costs or lack of competence.

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This research study attempts to address some of the existing research
gaps and has the objectives to identify the impact of energy management on the
profitability indices or financial ratios of energy efficient and less efficient facilities,
taking a particular SME sub-sector - the Tile Industry; to analyse the motivation for
certain units to improve their energy efficiency and the impediments for others not
to innovate or modernize; to understand the preparedness of the industry to
implement a successful energy management program and the extent of government
support / facilitation and to suggest measures and means to improve energy
efficiency as applicable to the number of actors and institutions with this
responsibility. The study was conducted in 53 tile units (census method of data
collection) in Thrissur district of Kerala during 2008 November to 2009 July. Findings
are limited to the Thrissur Clay tile industry sector and may not be strictly applicable
to the Indian SME clay tile sector. Outcome of this study has been presented in six
chapters.
Findings suggest that the Kerala Government Energy Management Centre,
in association with the tile industry association, research and development
institutions like CSIR, Certified Energy Auditors and Dept of Industries and Commerce
should offer a number of new services to the industry like preliminary energy audits
(at full subsidy), worker training with a syllabus focussed to their needs, detailed
energy audits and Implementation contract service. These need to be started initially
on a grant or subsidy basis. After that has been demonstrated to a number of firms,
say ten, the subsidy element can be reduced. The support institutions must ensure
that their services are redesigned to meet client concerns which will inter alia
primarily be focused on reluctance to turn over information to third party,
difficulties in establishing the baseline, etc. An effective strategy to break through
one of the major barriers identified - the lack of easy availability of affordable
finance - need not be through a plethora of discussions and studies as currently
undertaken, all of which culminating in the recommendation that “innovative
financing schemes” may be identified, but through experimenting the classic
example India created in the housing sector finance by reducing the interest rate for
loans to an attractive scale. The Energy Conservation Fund (ECF) being created in
Kerala, by virtue of being a small amount compared to the enormous needs, has to

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be properly administered with great focus in one or two sector-based programs in a
year, without diluting / spreading, for better results.

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HAPTER I
SYNOPSIS OF THE STUDY
Introduction
Energy should be viewed as an essential commodity like any other
valuable raw material required to run a business, not as mere overhead and part of
business maintenance. Energy has cost and environmental impacts. It needs to be
managed well in order to increase profitability and competitiveness of business
organizations and to comply with certain regulations and to mitigate the negative
environmental impacts. Energy is treated as a development tool which provides for
basic energy needs of humanity and promotes human development inputs such as
education, health, sanitation, etc. It does not only serve as mere raw material
required to run a business but also helps to build life supporting systems. Thus it
must be managed well in order to (a) pave way for sustainable development which
could lead to a prosperous economy for communities, a healthy environment for
current and future generations and a vibrant and equitable society; (b) provide
energy security for the nation to avert future commodity crises so as to protect
mainly the disadvantaged populations that are most affected by commodity volatility
and commodity scarcity and to cater to minimum basic energy needs of the deprived
of the right quality at affordable price (the Total Energy Security Mission launched by
the Government of Kerala specifies a minimum electrical energy delivery of one unit
of electricity per household per day and a minimum cooking energy equivalent to
eight domestic LPG (Liquefied Petroleum Gas) cylinders per household per year); and
(c) maintain the corporate social responsibility, subscribing to the view that revenues
generated from or using a precious non-renewable commodity (fossil fuel) should be
used to fulfill the economic and social development needs of the whole population,
particularly of the most needy among them.

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Following the first world oil crisis of 1973, India, like many other nations,
became more and more concerned with energy security, pricing and usage issues and
has taken a few major initiatives in the energy conservation front (Mohanty and Rao,
2001). Two external forces in the early 1990s spurred a revival of interest in
promotion of energy efficiency and facilitation facilities -- international
understanding to control the amount of greenhouse gases and a dramatic increase in
2

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worldwide industrial competitive pressures. Climate change has shed new light on
energy issues, including industrial energy consumption: they evolved from a mainly
financial and developmental issue and transformed into a more global environmental
concern. As such, the issue of promoting the efficient use of energy, including
energy-saving technologies, has gained growing international importance. In view of
the policy, financial and technical barriers to the accelerated introduction of energy
efficient technologies and measures in industrial sector, a need was felt to address
these barriers, at both the national and industrial plant levels (top-down and bottom-
up).
It was in this context the Government of India enacted the Energy
Conservation Act 2001 (ECA) and accordingly established the Bureau of Energy
Efficiency (BEE). The ECA stipulates the following major mandates (Government of
India, 2002): establishment of an energy management system, appointment/
designation of an energy manager in notified energy-intensive industries, execution
of energy audits through accredited energy auditors and implementation of
technologically and economically viable recommendations and meeting specific
energy consumption norms. Additionally, it promotes energy efficiency in all sectors
of the economy through fixation of minimum energy performance standards for
notified equipment and appliances and display of the same in the form of labels to
give the consumer an informed choice. As a concrete measure, mandatory certified
energy managers for 14 energy-intensive industries have been designated. They are
backed by regulated energy audits conducted by accredited energy auditor firms,
followed by the formulation of mandatory action plans containing financially
attractive recommendations. Finally, reporting the result to BEE is obligatory.
Given recent trends in energy and the environment, industrial customers
are increasingly recognizing the connections among energy performance,
profitability, and future competitiveness. It has been recognized globally that
advances in environmental energy technologies are now playing a critical role in
helping organizations face the complex and rapidly changing dynamics of the market
scenario world over. These technologies are aimed at reducing energy consumption,
and reducing harmful emissions to meet the environmental standards, and in turn

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enhancing the marketability of products and processes. Competing and succeeding in
today’s business environment requires clear strategies of managing cost by improving
energy efficiency. Energy management, the process of understanding and
3

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managing energy cost to energy efficiency and energy generation strategy has
become a significant management issue. Energy management involves organizations
and people as much as technology (Turner, 1990). All organizations can save energy
by applying the same sound management principles and techniques they use
elsewhere in business for key resources such as labour and raw materials. These
management practices must include full managerial accountability for energy use.
The management of energy consumption and costs reduces waste and brings in
ongoing, cumulative savings.
The Small and Medium Enterprise (SME) sector is one of the important
sectors of the development process mainly because of its greater employment
potential, lesser capital intensiveness and scope for flexible and decentralized
operation even in rural environment, contributing greatly to rural industrialization.
With a contribution of 40% to the country's industrial output and 35% to direct
exports, the SME sector has achieved significant milestones for the industrial
development of India. Till the opening up of the Indian economy in 1991, through
LPG, these SMEs, particularly those loosely classified under the rural/ traditional
industry category, were all enjoying the protectionist industrial regime of the Central
and State governments. Though, it was a known fact that without modernization and
quality improvement coupled with cost reduction efforts, it would be difficult to
survive in the globalised economic environment, there was complacency in
preparedness by many industries and for a pro-active intervention in this direction by
the good number of public institutions created for the upliftment of SMEs. With the
arrival of better quality products at lower price to the domestic market due to LPG
and consumers preferring the same, the local industries started feeling the pressure
to compete in the market. Cost reduction has become the most crucial factor in
generating profits or even for the very survival of a business when one considers the
stiff competition in the market. SMEs, in this liberalized era, often find themselves
pre-occupied with looking for various new avenues of cutting down costs. An area
where significant cost reduction is possible, though often overlooked, is in the field
of Energy Efficiency. Among others, government policy has a major role to play in the
promotion of energy efficiency. This is particularly true in the context of SMEs
because such enterprises individually may not take any initiative for enhancing

208004
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energy efficiency due to lack of awareness, prohibitive costs and lack of
competence.
4

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Statement of the problem
Research attempts are not found made to explore the relative economic
value to firms of the various energy efficiency improvements made in their facilities/
operations nor to identify the impact of energy management initiatives on
profitability indices of an energy efficient and not-so-efficient firms, with micro-
level evidences. Nearly all national and international studies on energy consumption
in industrial sector have been based on aggregated data. Information about individual
factories level can be very rich and helpful to the target group of similar factories,
particularly in SMEs and to the policy makers. Such information is often lost when
aggregating data, leading to less pragmatic recommendations. It is also important to
understand the motivation for certain units to improve their energy efficiency and
the impediments for others not to innovate / modernize. Though many research
studies made attempts to identify the non-technical aspects for bettering energy
management in industry as a whole, the perspective of different stakeholders at the
different levels of industry is not seen captured. This would certainly help to identify
the weaknesses existing in the system, which has a fairly good network of facilitating
agencies / institutions with the mandate to enhance the technological capabilities of
SMEs, and then reveal opportunities for strengthening them.
Objectives
This research study undertaken to address some of the existing research
gaps has the following objectives:
o to identify the impact of energy management on the profitability indices
or financial ratios of energy efficient and less efficient factories under
study;

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o to analyse the factors of motivation for certain factories under study to
improve their energy efficiency and the impediments for others not to
innovate or modernize;
o to understand the preparedness of factories under study to implement a successful
energy management program and the level of government support /facilitation;
and
o to suggest measures and means to improve energy efficiency as applicable to
the number of actors and institutions with this responsibility.
5

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Methodology
As part of achieving the above stated objectives, the propositions (given
in the following section) after formulating into appropriate hypotheses, were tested
based on the micro-level data. There are fifty three registered clay based tile
factories* in the organized sector functioning in Thrissur district under the SME
category. All the small and medium tile factories in Thrissur district were selected
for the study. It is to be mentioned here that Thrissur district in Kerala has the
highest concentration of clay tile industry in the SME category in the country. An
extensive literature review was carried out to understand the energy and economic
situation in Indian SMEs, research activities in this field, research gaps useful enough
to explore ways and means to enhance energy efficiency in this sector, etc.
Propositions were framed to aid in preparing the interview schedule and a data
collection protocol was arrived at with clear focus on utilization of data being
collected for further analysis. This helped in designing a very compact but
complementary interview schedule after pre-testing so as to collect data from the
enterprises under study. Both primary and secondary data were collected during the
field work. Secondary information includes reports of the Kerala State Planning
Board, Department of Industries and Commerce, etc. Primary data were gathered
through interviews with various functionaries within the company and some external
stakeholders viz., marketing agents, financial institutions, local residents and
Government Departments. Each interview lasted 1-2 hours. Participatory Rural
Appraisal was also conducted in the field with the entrepreneurs to identify the
strength, weakness, opportunities and threats in tile industry. Based on the primary
data gathered from the field the extent of profitability indices vis-a-vis energy
management practices in the industry was studied. Quantitative and qualitative
methods have been employed depending on the research issues and purposes. The
strengths of qualitative research derive primarily from its inductive approach and its
emphasis on words rather than numbers. The influential roles of non-technical
aspects in the energy management philosophy of the industrial sector were examined
using t-test.

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’ The terms, industriesand factoriesare used interchangeably in this thesis
6

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Proposition 1: The following are the drives for energy efficiency and energy
management in SMEs:
• educational background of entrepreneurs;
• technology modernisation outlook;
• energy information system, integrated into the Management
Information System (MIS);
• broad awareness on energy efficiency and need for energy conservation;
• human resource development, which includes periodic training programs for
employees and workers on the shop floor; and
• financial incentives like subsidies I low interest loans.
Proposition 2: Among the major operating costs, like raw material, labour and
energy, with a given amount of resource, energy cost reduction is the most
feasible and cost-effective option.
Proposition 3; Energy efficiency improves profitability.
Map 1.1
India, Kerala and Thrissur

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Hypotheses
Hypothesis 1: - The mean of each profitability index (as given below) of energy
efficient and energy inefficient tile factories are the same,
/ Profit margin (Profit I Sales) index
/ Return on Asset (Profit / Total Assets) index
/ Asset Turn (Annual Sales / Total Assets) index
/ Contribution (Sales - Variable Cost) index
/ Labour Productivity (Contribution per employee) index
Hypothesis 2; - The mean of awareness level and qualification of entrepreneurs of
energy efficient and energy inefficient tile factories are the same.
Testing of the hypothesis separately for Group A and Group B (refer to
the classification below) was done using t-test for two samples (energy efficient and
less energy efficient categories) assuming unequal variances.
Figure 1.1
Hypotheses testing: classification of tile factories

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Note: - EEI is the Energy EfficiencyIndex expressed as grams of tile processed per unit of energy (unit as kilo
Joule). The more the EEI, the higher is the energy efficiencystatus of that factory. In fact, EEI is the inverse of
Specific Energy Consumption (SEC), which is the energy consumed per unit of product).

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Period of the study
Data for the study were collected from the study area during 2008
November to 2009 July.
Scope of the study
The findings of the study would give inputs to (a) the Government
agencies (including the financial intermediaries) on areas to be addressed in their
policy measures aimed at enhancing the viability of tile units and increasing the
energy efficiency in these units resulting in reduced emissions per unit of production
and (b) the tile industry and its association on the benefits and methodologies in
optimizing energy cost and conducive policy measures they need to demand from a
democratic government using their lobbying power/ strategy. The study would
identify the existing flaws in the energy efficiency enhancement strategies of the
Government agencies, mostly developed with skewed visions for want of data and
information on the actual situation, vis-a-vis the current status of the industry and
their perspectives on micro and macro energy-environment-economy issues.
Limitations of the study
The findings are applicable mostly to the Thrissur clay tile SME sector and
may not be strictly applicable to the Indian clay tile SME sector. The information
gathered from the stakeholders’ interviews was instrumental in understanding the
general attitude of these stakeholders towards the enterprise’s energy management
strategy. But it cannot be assumed to be sheer representative of the situation in
SMEs in India. As the objective of this study is not to identify technical proposals on

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energy efficiency enhancement, discussions on technical proposals are not
attempted.
Organisation of Thesis
The outcome of this study has been presented in six chapters. Chapter I
gives a brief introduction and statement of the problem, the objectives,
methodology, hypothesis, scope and limitation of the study. Chapter II presents an
overview of energy scenario, discusses energy and development with conventional
9

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wisdom and philosophical perspective, energy use in Indian industry and elaborates
the role of industries in Indian economy with special reference to SMEs. Chapter III
provides a brief on the concepts used in this study along with review of literature
leading to identification of gaps in research. Chapter IV depicts the profile of the
study region -- the Thrissur district -- tile making process and describes the energy
scenario in Kerala, the State in which the study is conducted along with highlights of
Kerala economy. Chapter V discusses Energy Management in tile industry in Thrissur
district based on the analysis of the data, both qualitative and quantitative, along
with testing of hypotheses. Chapter VI presents the summary of findings and
suggestions for enhancing energy efficiency in tile industry.
References
Government of India (2002): Energy Conservation Act 2001, Ministry of Power, New Delhi.
Mohanty B, Liu R S, Krishna Mohan Rao U V (2001): Energy Audit and Management for the Indian
industry; The Institute of Chartered Accountants of India, New Delhi.
Turner W C (1990): Energy Management Handbook; John Wiley & Sons, New York.

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SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION
Introduction
Competing and succeeding in today’s business environment requires clear
strategies on managing cost by improving energy efficiency. Energy management, the
process of understanding and managing energy cost to energy efficiency and energy
generation strategy has become a significant management issue. Energy management
involves organizations and people as much as technology. All organizations can save
energy by applying the same sound management principles and techniques they use
elsewhere in the business for key resources such as raw materials and labour. Energy
saving through better management of resources results in cost savings,
environmental benefits through reduction of carbon dioxide emissions and in many
cases productivity enhancement through better process controls employed for energy
conservation and quality improvement.
With a contribution of 40% to the country's industrial output and 35% to
direct exports, the SME sector has achieved significant milestones for the industrial
development of India. Till the opening up of Indian economy in 1991 through LPG,
these SMEs, particularly those loosely classified under the rural/ traditional industry
category, were all enjoying the protectionist industrial regime of the Central and
State governments. Cost reduction has become the most critical factor in generating

208004
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profits or even for the very survival of a business when one considers the stiff
competition in the post-reforms market. Often SMEs, in this liberalized era, find
themselves pre-occupied with looking for various new avenues of cutting down costs.
An area where significant cost reduction is possible, though often
overlooked, is in the field of Energy Efficiency. Among others, government policy has
a major role to play in the promotion of energy efficiency. This is particularly true in
the context of small industry, because, small industry units individually may not take
any initiative for enhancing energy efficiency due to both lack of awareness or
prohibitive costs and lack of competence.
158

208004
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This research study attempts to address some of the research gaps and
has the following objectives: to identify the impact of energy management on the
profitability indices or financial ratios of energy efficient and less efficient factories,
taking a particular SME sub-sector - the Tile industry; to analyse the factors of
motivation for certain units to improve their energy efficiency and the impediments
for others not to innovate or modernize; to understand the preparedness of the
industry to implement a successful energy management program and the extent of
government support / facilitation; and to suggest measures and means to improve
energy efficiency as applicable to the number of actors and institutions with this
responsibility.
It was in the year 1915 that the first clay roofing tile manufacturing
factory came into existence in Thrissur district. This was essentially a follow up of
what began in Calicut (Kozhikode) and Mangalore almost two decades back. The 70s
were the golden period of this industry in Thrissur. There were more than 400 SMEs
in Thrissur and nearby areas. That was the time of innovation in product range and
new markets emerged. But unfortunately in the 90s factories in this area started
falling sick one by one mainly due to unscientific planning and consumption of
resources like raw material and firewood leading to sharp rise in production cost and
restriction from the people on clay mining. Increasing awareness on environmental
degradation during the time fuelled this situation. The last decade has witnessed few
entrepreneurs and investments coming into this sector.
There are fifty three registered clay based tile factories in organized
sector functioning in Thrissur district under the SME category. A census method data
collection in Thrissur district in Kerala, which has the highest concentration of tile
factories in the SME category, has been employed for this study. Based on the
analysis of the primary data, the surveyed factories were classified into
(comparatively) energy efficient (having a higher energy efficiency index, EEI, than

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the average) and not so energy efficient units (with EEI less than average) for testing
the hypotheses.

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in
di
ng
s
Energy cost is the major production cost
The major cost of production is the energy cost with a share of 56% of the
operating cost. Tile factories use firewood (two units use saw dust also) as the fuel in
their kilns, which is the heart of the tile making process. Firewood is becoming
scarce and its cost is continuously rising. Entrepreneurs attribute this to the stiff
environmental regulations which curtail wood cutting from forests, rise in transport
cost and rising demand from other traditional small scale industries. However, there
is a less known truth of firewood usage in terms of its new customers which is certain
to cause serious ramification on the fuel economics of such traditional industry
sector.
Less understanding on the impact of the recent trend of fossil fuel substitution
by biomass in Kerala
Firewood at a cost of Rs 1500/- per tonne and average calorific value of
4000 kcal/kg while provides energy output at 1600 kcal/ Re with an efficiency of
60%, furnace oil (the fossil alternative, which is the main fuel in medium and large

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industries) at a cost of Rs 30,000/- per tonne and average calorific value of 10500
kcal/kg provides an energy output of only 280 kcal/Re with an efficiency of 80%. This
makes replacement (at least partial) of furnace oil by firewood a cost effective
option in industries to increase profitability and there is widespread changeover
happening in the State, either through the direct combustion route or the
gasification route (which is quite common in crumb rubber industries, for generating
hot air in their dryers). This trend will contribute to rising firewood cost as well as
further fuel its scarcity, along with the environmental pressure restricting wood
felling in the forests. In these days good quantity of firewood finds its way from the
rubber estates after slaughtering the rubber trees aged above economic life. There is
no sign of such an understanding on the side of policy makers or energy agencies or
traditional users of firewood to deliberate on alternative options or the impact of
this trend in the near future.
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Raw material tops in the “issue” list
There are ways and means to reduce energy consumption in these
factories by adopting energy efficient processes and practices, incurring some
expenditure for its implementation. But the majority factories prefer to address the
issue of raw material rather than energy, even if funding assistance is provided to
them to take care of the investment requirements. Recently with the reporting of
lowering of water table in areas where clay is mined and erstwhile agricultural land
being converted into clay mining area (due to less returns from agriculture, lack of
agricultural labour and more returns when leased / sold for clay mining) turning this
into barren land eventually, clay mining has turned out to be the single largest issue
for tile factories. When they are forced to travel long distances for clay and when
new mining areas are not being identified they end up excavating poor quality clay
which leads to more breakages and poor quality products at kiln outlet. Thus, though
cost-wise energy finds the top position demanding concerted attention, the tile
factories and their association are seen fighting for government permissions and
concessions in clay mining, which is the raw material required to run the factory. As
the objective of this study is not to analyse the impact of raw material scarcity and
associated problems, this aspect has not been examined in detail further.
Entrepreneurs not appreciative enough of energy-environment issues
Though the entrepreneurs are not very ignorant of different pertinent
energy - environment management issues, the majority factories (rather the
management) are not quite appreciative as well of such aspects. Most of the
entrepreneurs do not show the right aptitude, comprehension and drive required to
tackle multi-dimensional problems such as energy efficiency, which requires
attention and intervention in all the major three elements of a business enterprise -
the people, the technology and the organization.

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A few entrepreneurs seek short-cuts to reduce electricity costs
To take advantage of exemption of electricity duty and insulation from
tariff hike for five years for new industries as per the Industrial Policy 2001 of
Government of Kerala, new units are registered by the same entrepreneurs running
an old factory in a different name.
16
1

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Labour amenities - best in any traditional cluster in the country
Facilities provided to workers, like separate toilets for male and female
employees, EPF and ESI services, electrified shelters for workers from outside the
State; one month wages as bonus in an year, minimum wages as per Government
rules, etc., is understood to be the best in the country in any traditional industry
cluster. One of the main reasons attributed to this is the high literacy rate in Kerala.
Product diversification calls for better quality - a hitch for entrepreneurs
Kerala, Tamilnadu and Karnataka are the major markets. Due to the
change in life style and housing styles (concrete roofs replacing tiles ones), there is a
considerable drop in the number of traditional customers of roofing and flooring
tiles. However, with the rise of tourism in Kerala catalysed by its greenery and
unique ayurvedic treatment systems, buildings of such enterprises started using
nature friendly clay tiles for roofing (above the concrete roofs for aesthetics),
flooring (for better health conditions) and terracotta artifacts. Even such demand is
found from neighbouring states and far off areas like the Middle East, particularly
UAE. Sensing this demand and seeing the success of a few entrepreneurs in
diversifying their product range to suit the modified taste of customers, around 60%
of the factories have gone in for product diversification and marketing in such niche
segments.
This changeover from the traditional customer base to the new group has
also caused a radical shift in the quality sense of the stakeholders, thanks to the
quality consciousness of the new customer group which do not hesitate to pay more
for better quality products. With least process controls, share of first quality
products (which fetch maximum price) became lesser and led to increased rejections
and last quality products. Rejections in terms of broken pieces in a clay factory,

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since it comes after baking inside the kiln, cannot be reused due to change in its
internal structure which is non-reversible and therefore is a waste which occupies
space and needs to be taken out from the factory, mainly used as landfills.
Entrepreneurs are not aware of how quality can be improved in their traditional low-
tech process except that their keen attention in all steps of tile making process
would make the worker more attentive and would make him/ her put in efforts to
see that each unit operation is performed the way it should be done. This increased
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attention of the owners in the unit operations has lead to local level innovations
after rigorous research and development. Though lot of hard work has been done in
many units, since high quality products fetched more revenue, such quality
enhancement activities are done in strict isolation and maintaining utmost privacy,
which resulted in many failures due to the trial and run methodology. Many units
have undergone the same trials done by others before perfecting, particularly in pre-
drying of green tiles before entry to the kiln.
Professional rivalry prevails
Professional rivalry something like an oligopolistic market (in terms of
number of factories and competition but not on size) prevails and there is no much
scope for a co-operative competition. Product differentiation and interdependence
are not seen in this cluster. However, some of the characteristics of an oligopoly like
ability to set price, barriers to entry and exit and good knowledge of own costs are
witnessed in this cluster. Recently the cluster development program of Government
of India has led to the formation of a consortium and resulted in developing a
common centre housing testing and blending facilities. Probably the enhanced
dialogues between the owners who are members of the consortium could lead to
better co-operation among units in future.
IT tool for process control a success but could not carry on
There was a conscious intervention of the EMC Kerala in 1997-1999 to
demonstrate the usability of cost-effective tailor made IT based process control and
optimization tools, so far believed to be a high-tech sophisticated system, which do
not have a conducive atmosphere or utility in traditional industry sector. In the year
2003-2004, four to five factories installed this system. However, for want of system

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providers, this could not be marketed in more tile factories and they could not go in
for this tool.
Entrepreneurs resorting to low interest home loans
There have been many cases in which the entrepreneur has taken loans
from nationalized banks stating the purpose as renovation of an existing house and
routed this money for financing a modernization program in the factory, due to
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Phone: 0512-2328181
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lesser interest rates for home loans. Taking into account the credit worthiness and
customer profile, bank managers help them in such activities. It is also a fact that
due to lack of rapport with the tile entrepreneurs, government energy agencies or
the industries promotion agencies are not fully aware of such actions.
Government not so keen to facilitate professional support services
Though energy cost is hounding the entrepreneurs, they don’t have a
proper professional managerial outlook or preparedness to address this problem in
appropriate ways. It is a common feeling that the government, with the largest
repository of wealth, having established agencies / organizations to support such
traditional sector in terms of elevating its capability to effectively address the
business demands of the post-reforms quality conscious regime, is not keen on such
efforts.
No financial incentive for energy conservation
There is no subsidy program or incentive scheme on energy conservation
suitable for the tile factories to avail either from the agencies / department of
industries or energy (subsidy exists for pollution control devices). The easiest
traditional way to tackle the rising cost of energy, as done by many other energy
consuming categories (mostly consumers with commercial tariff, hotels, hospitals,
etc) is to pass on this to the customers. This approach enables them to stick on to
their claim that they are pre-occupied with day-to-day problems like raw material
shortage/ delivery, labour issues, etc., and therefore have neither the time nor the
curiosity to address energy efficiency issues.

208004
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Energy conservation potential
The estimated energy conservation potential of this tile industry sector in Thrissur
district consisting of 53 operational factories is Rs. 2.15 Crores per annum with an
initial investment of Rs 7.5 Crores making the simple pay back period of 3.5 years.
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The hugging spree of technological advancements in tile industry
However, it would be a false deduction to summarise that tile factories
are averse to modernization, considering the following hugging spree of technological
advancements by the same entrepreneurs, particularly in the area of communication
tools being employed now and the mechanization brought to clay mining,
transportation and preparation. Interestingly, most of these changes are made
without the usual minimum financial analysis — simple payback period -- employed
for other investment options like energy efficiency. While in and around the kiln (the
heart of the factory) various modernization activities are happening, the kiln stood
alone without any real technological intervention.
No service provider in Kerala for workers’ training
In this small state of Kerala, training programs are being organized by
government and non-government agencies in the area of energy conservation and
management, once in a month, on an average. But neither Government nor non-
government agencies organize regular training programs for workers. According to
NGOs, there is no budgetary support from government agencies for such a task and
small and traditional sector do not like to pay for such events.
No business development service for tile industry and no proposal as yet
Business development services have not grown much in this traditional
sector as it has in other clusters like hand tools, bicycles, glass, food processing, etc.
While it is learnt that the Tile Industry Association has not given any proposal or
memorandum for setting up any business development services to the Government,

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there is no evidence of any proposal in this regard from the Government side as well,
based on recommendation from any energy/ industry promotion agencies.
Awareness level not significantly different in an energy efficient factory
The awareness level is not seen as a significant criterion which
determines the energy efficiency of a factory in the tile industry in Thrissur district.
Entrepreneurs do not attach considerable importance to the macro level energy-
environment interface issues for their decision making on being energy efficient;
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rather, the profitability of their action is more significant. According to them, to
curb the carbon emissions by switching over to energy efficient technologies, it is not
the traditional industries which should take the lead role, but it is the Government
that should assume the responsibility of providing energy efficient techniques/
practices at affordable or reduced cost; and there is no great need to convey the
context or reason for being energy efficient, but the requirement is to convey how to
be energy efficient, from where energy efficiency services -- technical, managerial
and financial - can be availed, what are the schemes in vogue to apply for, where to
apply, etc.
Qualification level significantly different in an energy efficient factory
The mean Qualification Level of energy efficient factories for both Group
A (>8000 tiles per day) and Group B (<8000 tiles per day) is significantly different
from energy inefficient factories in the respective groups. It is observed that to a
great extent, qualification relates to the level of: -
o language command of the entrepreneur, which in turn plays a
significant role in his discussions with other stakeholders, including the
technology service provider, the new generation customer more
worried about the quality rather than the incremental price for that,
the Central/ State Government agencies, research and development
institutions, etc.;
o acceptance of change - organizational, technological, political and
socio-economical, which demands a changeover from certain
conventional practices within a stipulated timeframe to take
advantage of the new opportunities and

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o monitoring and evaluation of certain progressive interventions
attempted and the extent of professional documentation required for
that purpose (It is a fact that the tile industry employ 90% unskilled
labour, significantly increasing the responsibilities of the entrepreneur
to find cost reduction options).
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Motivation for energy efficiency
It is clearly acknowledged by the majority of the factories that energy
cost reduction is their topmost priority (if the problems related to raw material
availability, which is an external factor not considered) to reduce operating cost and
reap more profits. Those qualified entrepreneurs able to discuss their energy related
issues with research and development centres and energy agencies have taken
advantage of their help in improving energy efficiency, for example the IT tool for
temperature control developed by EMC. Some of them having access (through library
and attending seminars) to literature on energy efficiency improvement in similar
factories outside the State have experimented certain things, like the drying of green
tiles using exhaust heat from kiln.
Profitability ratios significantly different in an energy efficient unit
The mean Profit Margin of energy efficient factories for both Group A
(>8000 tiles per day) and Group B (<8000 tiles per day) is significantly different from
energy inefficient factories in the respective groups; having a difference of 15% more
in Group A (ee) and 24% more in Group B (ee). The mean Return on Assets of energy
efficient factories for both Group A (>8000 tiles per day) and Group B (<8000 tiles per
day) is significantly different from energy inefficient factories in the respective
groups; having a difference of 37% more in Group A (ee) and 82% more in Group B
(ee). The mean Asset turn of energy efficient factories for Group A (>8000 tiles per
day) is not significantly different from energy inefficient factories in that group;
however, the mean Asset turn of energy efficient factories for Group B (<8000 tiles
per day) is significantly different from energy inefficient factories in Group B. Asset
turn need not be a parameter having considerable difference for (comparatively)
energy efficient and energy inefficient factories.

208004
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The mean Contribution of energy efficient factories for both Group A
(>8000 tiles per day) and Group B (<8000 tiles per day) is significantly different from
energy inefficient factories in the respective groups; having a difference of 50% more
in Group A (ee) and 32% more in Group B (ee). Labour Productivity of (comparatively)
energy efficient and energy inefficient tile factories are both different, having a
difference of 49% more in Group A (ee) and 43% more in Group B (ee).
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Environmental impacts of tile industry
Key environmental impacts associated with tile industry are discussed below:
Resource extraction and depletion: Excavation of clay for tile production can alter
the landscape in ways that are harmful to the environment and may invite local
wrath. In earlier days, irrational ways of clay mining has created clay pits, leading to
decrease in ground water level, becoming safety hazards, erosion of soil and
rendering the land unusable for farming or other productive purposes. Some such
land pockets got slowly converted to waste disposalsites, rainwater and waste water
accumulation areas leading to pollution associated with municipal garbage and
habitat for mosquitoes.
Inefficient use of fuel: High fuel use increases pollution - particularly carbon dioxide
and particulate matter emissions. Wood being the main fuel, this also increases
deforestation and associated environmental impacts, leaving less fuel wood for
future use. Inefficient production technologies and techniques and excessive fuel
consumption are typical in tile industry.
Inefficient use of non-fuel inputs: Inefficient production techniques like the one
followed in most of the tile factories without any process controls reduce
productivity and create excessive waste. Added to non-availability of controls,
improper tile formation and low-quality inputs results in breakage of more number of
tiles during firing and must be discarded. This leads to decreased output and
increases waste disposal costs and/ or using scarce space inside the factory for
dumping this waste.
Dust: Dust is most prevalent and most dangerous when clay is extracted and finished
tiles are transported following the firing process. Inhaling dust can lead to
respiratory diseases.
Chemical pollution: A few tile factories have recently started glazing some of their
tiles. Glazing requires materials that contain acids or metals and improper handling
or excessive contact can lead to metal poisoning, skin irritations or lung disease.

208004
Phone: 0512-2328181
Mobile: 7753818181, 9838033084
Tile Industry: SWOT Analysis
The main products of tile industry such as roofing tiles, flooring tiles, ceiling tiles,
etc, are used for construction of buildings, both residential and commercial. Main
raw material is clay. Major operating cost is fuel and power. Therefore, the future of
tile industry would depend largely upon on the demand for its products, availability
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of good quality raw material and prudent use of costly fuel. A SWOT analysis
attempted below would provide a comprehensive outlook on this.
Tile Industry: SWOT Analysis
Strength Weakness
• Strong hold in domestic market • No process control; leading to
• Developed good trust and increased fuel consumption and
relationships decreased productivity (high
• No import of clay products breakage and rejection rate)
• Proximity to market • Lack of rational clay mining strategy
• Wide choice of shapes, size and • Obsolete technology in many unit
colours tailored for each end use operations; Inefficient and old
• Products diversified to terracotta systems
artefacts, glazed tiles, etc • High dependence on labour and less
• Good marketing network of automation
• Good transportation facilities • Lack of quality standards/ policy,
product standardisation and energy
management system
Opportunities Threat
• Recent trend of clay roofing tiles • Resistance from people on clay
paved over concrete roofs for mining
aesthetics and preventing solar heat • Availability of imported and domestic
ingress into roof (alternative choice less cost ceramic flooring tiles
being the costly aluminium truss • Rising cost of fuel, power, chemicals
work) and labour
• Clay flooring tiles widely used in • Firewood and other biomass fuels
ayurvedic resorts and hospitals as which are comparatively cheaper

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they are very safe and healthy, being widely used by other medium
mainly for people suffering from and large industries leading to rise in
rheumatic disorders cost
• Cluster development program • Government agencies shying away
enabling creation of common facility from providing support services to
centres and testing facilities the sector considered to be on its
negative growth phase
Source: - Deduced f rom the Participatory Rural Appraisal conducted on the spot with the entrepreneurs
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Suggestions
Based on the detailed study of the energy management practices in tile
industry, the extent of their preparedness in addressing one of the major cost
reduction avenues and taking note of the existing status of different stakeholders
having direct and leadership role in enhancing energy efficiency, the following
suggestions are presented, with due justification, to make them more pragmatic.
Government agencies engaged in promotion of energy conservation and
renewable energy
The following are the Government agencies / groups created for
promoting energy conservation and renewable energy usage in the State, established
as per the provisions of certain national regulations, guidelines, etc., in different
time periods when priorities were slightly different towards energy conservation,
renewable energy, environmental protection, economic gains through energy
management, etc.
• EMC Kerala, the State Designated Agency of Bureau of Energy
Efficiency, Government of India;
• ANERT, the State Nodal Agency of Ministry of New and Renewable
Energy, Government of India;
• Demand Side Management Cell of the Kerala State Electricity Board;
• Environmental Management Institute under the Forest Department,
looking after the CDM (Clean Development Mechanism) projects;
• Total Energy Security Mission of Government of Kerala;

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• Kerala State Council for Science, Technology and Environment, under
the Department of Science and Technology; and
• Local Self Governments (3-tier panchayats) having vast powers under
the Panchayat Raj Act and co-ordinated by the Department of Local
Self Government
The task of an institution charged with developing energy efficiency
programs is not to carry out the energy efficiency projects themselves, but to
create the conditions which permit projects to be executed and have a maximum
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impact in terms of technical, economic, social and environmental efficiency. It is a
role which requires considerable skills in leadership, dialogue, prompt intervention
and assessment of the problems and constraints which affect a very wide range of
partners. In particular, as decentralization of decision-making is a prerequisite for
the success of an energy efficiency strategy, the institution must be skilled at
empowering others to make decisions. The institution must have sufficient financial
resources to give direct financial incentives (subsidies) for some operations (energy
audits, preliminary studies, demonstration operations, innovation aids, aids for
diffusion of advanced equipment). This is not strictly the case now and it is highly
imperative to review its policies and programs.
EMC Kerala reviews the energy audit reports received from the industries,
though conducting an energy audit is not strictly verified nor any penal provisions
imposed for non-compliance. Energy audit is not mandatory for the tile industry
sector as this falls under the SME category. The Government agency does not possess
a database on sector-specific energy consumption indices or patterns. Nor has it a
comprehensive database/ information on the end-use demand pattern or estimated
saving potential in any of the energy consuming sectors (domestic/ agriculture/
industry - SME or large) in the State. Preliminary energy audits need to be made
compulsory by the Government of Kerala. A panel of energy auditing firms is to be
announced based on the criteria of their expertise in this field (evaluated with the
help of previous audit reports and feedback from client) and infrastructure possessed
(including certified energy auditors, instruments, field offices and support staff) to
carry out preliminary energy audits as per the quality standards prescribed. 75% of
the cost of a preliminary energy audit needs to be subsidized. This would encourage
industries to undertake the audit and the consultants need to be advised to
electronically file the audit report in proper formats developed. Once appropriately
compiled, a good database can be generated and reports created in different
formats, like specific to industry sub- sector, districts, industry category (small,
medium and large), etc. Such a good database would enable the agency to properly
commission studies to identify areas and strategies for appropriate intervention.
This is particularly important in view of the fact that changes are fast happening in
the consumer behaviour which has direct bearing on the energy consumption trend,
for example, fuel switching from fossil fuels to biomass including firewood. The

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government agency needs to have the right information on such changes,
commission studies to assess its impacts,

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identify appropriate intervention measures through participatory means for
attempting implementation. The energy agency needs to have good rapport with the
industry associations and professional bodies, not only treating them as a channel to
reach stakeholders but also considering them its partners or supporters to lobby in
the political decision making and bureaucratic circles for getting clearance for its
energy efficiency promotional proposals. This is currently lacking.
EMC Kerala was instrumental in introducing the concept of Information
Technology (IT) based monitoring systems in traditional industrial sector, through a
model demonstration program in the tile industry in Thrissur district, through active
participation of the Tile Industry Association. The IT based temperature monitoring
and control system enables proper process control inside the kiln, the heart of the
tile making process without making any major modifications in the existing kiln
structure/ hardware. For lack of technology providers to manufacture such systems
using the available designs (which could be improved upon) and provide after sales
support, this IT intervention could not move ahead after its demonstration in around
four units in Thrissur. This program - IT intervention in traditional industry sector -
which is almost wound up, needs to be reviewed and other private/ public research
and development centres involved in IT based activities encouraged to continue this
activity which was found very beneficial. This is a classical example where the
techno-financial viability of a project is established through a demonstration program
by the Government and even if widely publicised, will alone not suffice to achieve
major progress in energy efficiency. It would be worthwhile exploring partnerships
from academic institutions, preferably the large number of engineering colleges
recently come up in Kerala, scattered throughout the State. Such academic
institutions, if properly oriented and motivated, can be empowered to provide
technical advisory services to SMEs. The market for services and technologies in the
field of energy efficiency will develop too slowly without Government intervention.
The key to success is local service providers who can convincingly convey the concept
of energy efficiency and make a living from such services. In order to develop this
service market, some form of Government intervention seems to be necessary.

208004
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As the EC Act 2001 mandates nomination of Energy Managers and
conducting mandatory Energy Audits in designated consumers (designated as per the
notification by BEE on a national level), it would be too optimistic to consider that

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traditional small and medium industry sector like the tile industry would fall in that
ambit quite soon. Therefore, to make available the benefits envisaged as per the
provisions of the EC Act 2001, the State Government should consider announcing an
“Energy Efficiency Policy” for the State after proper consultations with the different
stakeholders. It would be worthwhile exploring enticing the SMEs to commit to a
certain percentage of reduction (which is measurable with not-so-complicated
verification protocols) in their specific energy consumption (energy consumed per
unit of production) over a time-frame against a commensurate concession from the
Government side, by way of concessions for energy audits and
/ or soft loans/ subsidies for implementation as short term measures and considering
tax reliefs as medium/long term measures, for which necessary consents from
different department are needed. Such voluntary agreements are less costly for the
administration than the traditional approach which implies announcing regulatory
standards (inviting criticisms from the industry) and checking compliance, tasks
which are quite demanding. From the industry perspective, they should be very
receptive as they also have a say on the extent of reduction they need to do and
when; they could decide on the appropriate means to achieve this - the
management, the internal regulations and the know-how.
It is a common feeling that higher energy costs alone will trigger
widespread introduction of measures related to energy efficiency. Working with the
small and medium-sized industry often gives a very different picture. They tend to
resort to the easiest traditional way of tackling the rising cost of energy, as done by
many other energy consuming categories (mostly consumers with commercial tariff,
hotels, hospitals, etc), namely, passing the same to their customers. This approach
enables them to stick on to their claim that they are pre-occupied with day-to-day
problems like raw material shortage/ delivery, labour issues, etc., and therefore
have neither the time nor the curiosity to address energy efficiency issues.
Government agencies in charge of industrial promotion

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There are umpteen agencies as mentioned in this section in Kerala
engaged in industrial promotion. However, none of these agencies possess a valid
current database on the tile industry in Thrissur, which is the only district in the
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whole country with a population of more than 100 clay tile manufacturing units,
though only 50% of them are currently operational.
• Small Industries Development Corporation (SIDCO)
• Kerala Bureau of Industrial Promotion (K-BIP)
• Kerala State Industrial Development Corporation (KSIDC)
• Kerala Financial Corporation (KFC)
• Kerala Power and Infrastructure Finance Corporation (KPIFC)
• Regional Research Laboratory of National Institute of Science and
Technology (former Central Scientific and Industrial Research)
• Department of Industries and Commerce
• District Industries Centre (under Department of Industries and
Commerce)
• Small Industries Service Institute, Thrissur (a Government of India
body)
• Kerala Infrastructure Development Corporation Limited (KINFRA)
• Bureau of Public Enterprises (under Department of Industries and
Commerce)
It is understood that with the support of UNIDO, a diagnostic study was
conducted in this sector along with other small and medium industry clusters. It is
astonishing to find that none of the agencies listed above readily possess this
diagnostic study report. It is highly satisfying that, as a result of the diagnostic study,
a common facility centre for mining, testing and blending clay and testing clay
products as per BIS specifications has been commissioned in Thrissur district.
With close coordination with the energy agencies, regular skill
upgradation programs need to be designed and organized through professional

208004
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associations/ bodies / selected non-governmental agencies exclusively for
workers including technicians and supervisors, both from the production and
maintenance field. These programs need to be structured so as to impart necessary
hands-on skill to them on different process optimization techniques, apart from the
classroom sessions for sensitizing the basic theoretical aspects. Government should
come forward to bear 100% expenses for such programs, making the industries pay
for the trainees’ travel, boarding and lodging expenses as token of their
commitment. It needs to be noted here that Government do not possess good /
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descent residential facilities to organize continuous programs like this for this
category, as the present facility at Kerala Institute of Local Administration (KILA) at
Mulankunnathukavu, Thrissur is exclusively being utilized (almost to its maximum
capacity) for training of Panchayat officials, volunteers, etc.
The Government should also think in terms of establishing Business
Development Services facilities as indicated below in Public-Private Partnership
(PPP) mode or attaching this to an already existing agency, after carefully assessing
its capacity to deliver the services. Of late, it is being observed that Government
finds it easy and eager to build new agencies rather than reforming the already
created ones. The business development facilities need not be made sector-specific
for want of optimum economic size for its operations, but can be established for
SMEs, with priority to the traditional industry sector in Kerala.
Business Development Services now absent in Kerala
State specific for clay tile processing
• Technical training institutions
• Research and Development Laboratory
• Management institutions
• Testing facility
• Incubation centres
• Marketing expertise
• Product design and development institute

208004
Phone: 0512-2328181
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Government Financial Authorities and Financial Institutions
Enormous literature is available for various means of funding energy
efficiency actions. Subsidy or direct grant is one of them. However, the latest
observation, commonly prevailing or made prevailing among different stakeholders
except the beneficiary is that subsidy is disgraceful. Government agencies, of late,
has started administering subsidies in different names as incentives or (partial)
financial support. Discussions with the tile industry entrepreneurs reveal that there
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is no subsidy at present prevalent in Kerala for aiding energy efficiency actions.
Through the EMC Kerala, subsidies or direct grants may be given to:
• Research, Development and Demonstration programs in new
technologies (like in tile industry - ceramic fibre lining in the kilns,
better insulating bricks for the kiln walls, process controls, utilization
of fly ash to partially substitute clay, partial fuel switching from
firewood to saw-dust, pre-drying / pre-heating of green tiles,
renewable energy applications like solar drying, group monitoring of
selected motors, etc). These programs may involve upstream
organizations (private and public sector research institutions) or
downstream players (equipment manufacturers and design offices).
Reimbursable grants can be provided for successful projects which
offer the advantage of recuperating the subsidy and thus permits an
efficient use of available funds.
• Energy audits, feasibility studies and demonstration operations to
accelerate dissemination of proven technologies in another sector, but
not tried out in tile sector.
While providing subsidies, against the present practice followed in many
other areas, the fund management should be kept simple in terms of procedures.
Normally, when subsidies are provided (in other areas), it is found that the
government agencies which manage this fund consider the disbursement as a means
to achieve their target of utilization and the impact is neither measured / projected
/ reported. This unprofessional way of fund management would be taken as the
excuse to stop the subsidy regime claiming non-receipt of intended goal. When the
subsidy or grant scheme is implemented, to achieve the intended result, the
Government should ensure that the program management is tight with good

208004
Phone: 0512-2328181
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monitoring and it should work very closely with the beneficiaries which would help
limit procedural complexity.
One of the strategies EMC employed while providing grant to its earlier IT
intervention program in the tile industry sector is to limit the subsidy to 25% of the
system (project) cost so as to extend this scheme to four willing units on first come
first served basis. This strategy was successful for the particular project as the total
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cost of one system was less than a lakh of Indian Rupees and the beneficiary could
afford investing the balance project cost. When the total project cost is above a
threshold value which the investor cannot afford after the subsidy element of 10% to
30% of the project cost, then the grant/ subsidy scheme would not work as in many
initiatives of Government of India, as the beneficiary cannot find the remaining
funds. In that case, appropriate types of loans are therefore needed. In this situation
soft loans have to be devised with a maximum interest rate of 6%, to its consumers
in the traditional small and medium industry sector like the tile industry, through a
host of financial institutions in public domain headquartered in Kerala. It is to be
noted here that MNRE provides soft loan for installing solar water heaters to
domestic consumers @2% interest rate and commercial consumers @3% interest rate.
While soft loans are offered, the cost of interest subsidy needs to be covered from
the Energy Conservation Fund or through a separate budget allocation till the fund
is constituted.
There are various other options like leasing contracts, third party
financing schemes, equity capital through venture capital companies, government
guarantees for operation of energy service companies, tax allowances, accelerated
depreciation, etc., which are not being discussed here as these are considered highly
extraneous for the state agency to address in a short term period. It is to be noted
here that though very many financing schemes are experimented in energy efficiency
and renewable energy field in India with the involvement of international agencies
like the United States Agency for International Development (USAID), a model
financing policy is yet to be emerged. USAID is very active in providing consultancy
services to the Kerala Government for creating the Energy Conservation Fund. On the
other hand, India is very successful in terms of accelerating its house construction
business sector by the single financing scheme of providing the least interest rate for
home loans @7%-8% along with income tax rebate when the prime lending rate is in
the range of 16%-12%. It still remains unknown the real reason for not adopting this
success story in the energy efficiency business sector. The draft EC fund rules being
developed also do not look into this successfulfinancing example. It is suggested that

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Mobile: 7753818181, 9838033084
at least on an experimental basis, this way of financing energy efficiency projects
through an interest subsidy may be explored.
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Phone: 0512-2328181
Mobile: 7753818181, 9838033084
While inviting financial institutions (FIs) into this energy efficiency
financing foray to disburse funds at less interest to beneficiaries with no financial
commitment to the FIs as the difference in their prime lending rate and the interest
rate for the soft loan is reimbursed, care should be taken to make them aware that
this is not another Government effort/ scheme to reach its financial target alone,
but an important socio-economically relevant intervention required at this juncture
when the whole world is discussing on combating the impacts of global warming
caused due to indiscriminate energy conversion. It is a fact that when customers are
made aware of the low interest car loan/ house loan / gold loan scheme through
catchy banners and frequent promotional campaigns, participating banks in the MNRE
soft loan scheme for solar water heaters seldom show any concern to make its
customers aware about this scheme, though there is no net financial loss for the
operating bank, but they gain an additional transaction.
Tile industry association
Though the economic and ecological importance of energy efficiency
seems sufficiently well-proven for appropriate political decisions to take place for its
implementation, when it really comes to making decisions, considerable delays are
being observed. For example, though the Energy Conservation Act 2001 stipulates
creation of an energy conservation fund (EC Fund), Kerala State or for that matter
any state in India is yet to create an EC Fund. Though, there are complex reasons for
this ‘policy delay’, it is due essentially to ignorance of the policy’s economic value
and pressure from energy users. It is, therefore, essential to develop special
information campaigns on business potential and social impacts due to energy
efficiency and lobbying strategies aimed at bureaucrats and political decision makers
to make conducive policies for energy efficiency promotion including allocation of
necessary funds. Memorandums of Tile Industry Association have seldom addressed
this issue or being aimed at the energy ministry / agencies in charge of energy
efficiency promotion.

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Training and putting staff in charge of internal professional energy
management (as additional responsibility) backed by an external service provider
(certified energy auditor) is a good recipe to enhance energy efficiency. Energy
conservation is a state of mind that starts in everybody’s head and is not necessarily
brought about merely with better equipment or process technology. Therefore

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periodic awareness camps for workers can be organized under the banner of the
association with support from government agencies to solicit participation from all
quarters to this move.
Tile industry employees association may also take up this issue of energy
efficiency as part of their agenda and co-operate with the management to provide
necessary sensitization to the workers. They can also debate and come out with
innovative proposals demanding reward for workers in an energy efficient unit, if
using a few measurable parameters, it can be established that workers in that unit
has contributed towards this achievement.
Linkage between these agencies
In line with the fragmentation of families (joint family into nuclear
families) and land (combined holdings into smaller divisions), institutions are also
either created for very specific narrowed purpose or highly disintegrated leading to
incoherent decisions or policy announcements. There is seldom any formal
continuous communication channel between these institutions listed above except
that heads of the institutions at times find themselves as members of a few
committees. Plethora of institutions often leads to the confusion as to which agency
should take the lead in coordination. When the key subject is that of energy
conservation, the agency created for that purpose - the EMC Kerala, should take this
important role and devise a strategy of having a continuous and deep link inter alia
with the following well-targeted contacts making maximum use of them as
information clearing houses or intermediaries for its promotional schemes.
o Other Government Agencies engaged in energy conservation and
renewable energy promotion;
o Government agencies engaged in industrial
promotion;o Research centres, Academic bodies and
institutes;o Chambers of commerce and industry;

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o Professionalassociations and trade unions; and
o Press, Consumer associations, societies, non-
governmental organizations, etc.

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The support institutions must ensure that their services are redesigned to
meet client concerns which will primarily be focused on:
• Finding time for initial discussions and making an informed choice;
• Reluctance to turn over information to third party;
• Confidentiality of process and company information;
• Credibility of technical advice;
• Client knowledge on the reasonableness of proposals;
• High cost of finan e;
• Fitting the services into company's experiences;
• Lack of knowledge about what the providers can do;
• Difficulties in establishing the baseline; and
• Confirming the real savings with ongoing measurement.
The scope for increasing efficiency in the use of energy and other inputs is
very large and technical services combined with performance contracting approaches
can potentially make a contribution to improvement. But progress in this area faces
a classic dilemma. Without coordinated and systematic effort there is not enough
evidence to convince the different policy actors to increase the focus on efficiency
investments and the energy agency should take that lead role and this requires
focussed dialogues with many stakeholders.
Areas identified for further research
The intention in this thesis is not to imply that energy efficiency indices
are alone sufficient to explain industrial performance in any production system.
Analysis of organisation, human resources, productivity, finance and marketing are
also important. However, the energy efficiency dimension is both a necessary and

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often misunderstood component. Future research on SMEs or industrial clusters
would benefit from analysis of: -
• knowledge acquisition models for enhancing production capacity,
technological capabilities including productivity and energy efficiency;
institutions which play a technological role in clusters, such as training
schools and research centres;
• aspects like business awareness, alliances and networking of factories and
their impact on economic efficiency;
• quality of tertiary education, which is important in building a technology
base, is normally characterized by outdated curricula, insufficient practical

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training and little contact with the needs of industry posing as barriers to
enhancing export competitiveness, increasing local content and technological
deepening which is important in order to reduce dependency;
• rapport of sub-sectoral centres and research institutes with the SMEs and how
effective they were in assisting SMEs to upgrade their technologies; and
• strategic action plans of government energy agencies and industry promotion
organisations vis-a-vis the growing needs of government support for the SMEs.
Conclusion
The results from this research study have relevance, in one way or other, to a number of different
actors and institutions. These range from individual factories in Thrissur to other tile factories in
India and to industry associations. There are issues that are relevant to the intermediary research
and technical support agencies, EMC Kerala and agencies under Department of Industries. There
are other issues that are of relevance to policy level institutions such as the Ministry of Micro,
Small and Medium Enterprises and BEE. EMC Kerala in association with the Tile Industry
Association, research institutions, Certified Energy Auditors and Department of Industries can
suggest and offer (through other identified partners from educational institutions and industry
associations) a number of new services to the industry. These need to be started initially on a
grant or subsidy basis to check that the advice or service in fact works as predicted. After that has
been demonstrated to a number of factories, say ten, the subsidy element can be reduced to a
reasonable figure in consultation with the Tile Industry Association, possibly over a period of one
to two years. New services may include Preliminary energy audits (at full subsidy), Worker training
with a syllabus focussed to their needs, Detailed energy audit and Implementation contract
service. An effective strategy to break through one of the major barriers identified - the lack of
easy availability of affordable finance - need not be through a plethora of discussions and studies
as currently undertaken, all of which culminate in the recommendation that “innovative financing
schemes may be identified”, but through experimenting the classic example India created in the
housing sector finance by reducing the interest rate for loans to an attractive scale. The Energy
Conservation Fund being created in Kerala, by virtue of being a small amount compared to the
enormous needs, has to be properly administered with great focus in one or two sectors in a year,
without diluting / spreading, for better results.

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Energy Management in Kerala Tile Industry

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