File image of steel rods at a factory.
Credit: iStock Photo
Mumbai: For India, steel is as critical to the nation’s economic growth as it is to its decarbonisation goals, and nowhere exemplifies this more than Jharkhand, states a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).
Jharkhand’s thriving yet fragmented steel sector is divided along lines of scale and technology; major producers are far better placed for the energy transition than the state’s myriad micro, small and medium enterprises (MSMEs), shackled with outdated technologies and lack of access to capital, according to the report, Financing the MSME Transition in Jharkhand’s Steel Sector.
“Among industrial subsectors, steel is one of the most energy and emissions intensive, contributing 12 per cent of the country’s total carbon dioxide (CO₂), making it a critical focus area for mitigation efforts,” says co-author Shantanu Srivastava, IEEFA’s research lead, sustainable finance and climate risk.
While the Ministry of Steel’s decarbonisation roadmap offers a clear pathway for both large integrated steel producers (ISPs) and MSMEs, several finance and efficiency schemes targeting MSMEs have had limited impact.
To address this issue, a targeted Project Preparation Facility (PPF) can bring together steel MSME clusters and Energy Service Companies (ESCOs), often MSMEs themselves, to help them access existing financial mechanisms. Jharkhand is the ideal proving ground for a Green Financing Facility for Just Transition (GFF-JT), a PPF pilot scheme, that could be replicated in other states.
Steel sector MSME decarbonisation is also critical from a socio-economic perspective as they are significant employers in economically vulnerable regions, and could be left behind as the global race to produce low-carbon steel intensifies.
“Without targeted support, they risk being excluded from India’s low-carbon transition, threatening jobs, deepening regional disparities and undermining the broader goals of a just energy transition,” co-author Labanya Prakash Jena, Sustainable Finance Consultant, IEEFA, says.