Environmental Technologies Industries
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Market Plans

India Environmental Export Market Plan
Chapter 10 - Market Strategies for U.S. Exporters

India is recognized as one of the most challenging environmental markets in the rapidly growing Asian region. Since 1990, the market has experienced annual average growth in excess of 15 percent (including the slowdown from 1996 until 1998). The strong fundamentals of India’s economy, massive environmental infrastructure needs, and favorable market drivers (in particular the level of regulation and the improving level of enforcement) create an optimistic scenario. The growing interest of foreign businesses is the strongest indicator of future market potential.

There is also a growing interest in Indian firms seeking joint ventures and licensing arrangements with U.S. firms. The number of strategic partnerships/collaborations in the environmental sector ranged from 300 to 350 in 1998. The United States is the single largest participant, with 33 percent of environmental collaborations. Table 10.1 helps to illustrate the fragmented distribution of foreign collaborations in India’s environmental technologies sector after accounting for the leaders.

In terms of technical capabilities, U.S. firms enjoy a higher level of acceptability in most of the environmental sectors among end users. There is a strong perception among Indian end users that the Indian regulatory regime and environmental standards are being developed with the U.S. regulatory regime and standards in mind. Proven experience and strong financial capabilities are the other key advantages U.S. firms have in the Indian market. U.S. firms are perceived as the suppliers of high-end environmental technologies and services.
Table 10.1 - Leading Sources of Foreign Partners in the Indian Environmental Technologies Sector
Country
Percentage of Technology Sector
United States
33
Germany
13
United Kingdom
13
Canada
7
France
5
Source: Indian Investment Center, September 1999; figures approximate.

Market Barriers

As is the case with other Southeast Asian environmental markets, there are some barriers that U.S. business must overcome. Some of these key barriers are described below.

Lack of Specificity in Government Programs

In the past, the Indian government has announced a number of policy initiatives to define its intent and the direction of its environmental programs. One of the most significant documents released by the government of India is the Environmental Action Programs in 1993, which lists the various programs and actions aimed at the environmental sector. In most cases, however, these programs mention only the broader objectives and are not very clear on key issues such as the nature of such programs, how they will be implemented, and what the monitoring and evaluation mechanism will be once they are enforced. Therefore, such initiatives often do not translate into concrete actions, particularly at the state and local levels. This, in turn, results in a reduced pace of market development. As mentioned earlier, the Ministry of Environment and Forests (MOEF) is in the process of formulating a National Environmental Policy (NEP) in which these issues are expected to be addressed.

Willingness/Ability to Pay

Although recent regulatory trends have brought more environmental spending by large and medium-sized firms, the willingness of small firms to incur environmental costs is still limited. Large private and public sector firms are better managed both technically and financially to address environmental concerns. The increased risk factor associated with noncompliance for larger operations is a major driver pushing environmental investments. The high cost of capital is an important factor restricting the willingness of smaller operations to invest in the installation of pollution control equipment. The prime lending rate of major public sector banks for the corporate sector is around 15 percent. At the government level (central and state), the high fiscal deficit (11 percent of GDP in 1998–1999) is an important factor restricting the government’s ability to invest in urban environmental infrastructure. To assist firms in adopting pollution control measures, a number of environmental investment incentives are being provided.

Price versus Quality

Price is a key factor in the Indian environmental marketplace. Often, imported environmental technologies are perceived as being too expensive. Consequently, end users often look for domestic, low-cost equipment and service suppliers. However, there is a growing trend among large firms to seek, acquire, and adopt international technologies and services even at international market prices.

Communication Linkages and Access to Technology Information Data Bases

While environmental awareness is gradually rising among all segments of end users, they experience great difficulty in identifying the best available environmental technologies and services. At the state level, the information linkages for selecting suitable equipment and technologies are grossly inadequate and ineffective. At the national level, the MOEF recently established an Indian Center for the Promotion of Cleaner Technologies to bridge this information gap. There is an urgent need to shrink this gap by increasing knowledge about the range of technologies available. The U.S. Agency for International Development (USAID) has promoted the establishment of an Environmental Information Center through the Federation of Indian Chambers of Commerce and Industry (FICCI) in New Delhi and Synergy Centers at Mumbai, Hyderabad, and Calcutta. Centers such as the Clean Technology Center (CTC) have been established at regional industrial estates. These centers may be good sources for U.S. firms to route information about environmental promotions and services at a minimal cost.

Administrative/Procedural Problems

The economic reforms launched in 1991 have reduced bureaucratic and procedural delays to some extent, yet there is a need for making procedures simple and rational. Procedural hurdles appear to be more cumbersome at the state levels. Procedural delays slow the pace of environmental investments.

Informational Barriers

While there has been an appreciable increase in the availability of funds through bilateral and multilateral donors and financial institutions, low utilization of these funds by firms is a key concern. One reason for this is the lack of local expertise in assessing and developing proposals for financing by the financial institutions. There is a strong need to improve awareness about available funds, including the capacity of Indian industries to understand, analyze, and access capital.

Suggested Market Outreach Strategies for U.S. Firms

This section presents suggested market outreach strategies to strengthen the U.S. market share in India’s environmental market.

Partnering with Indian Firms

Forming a strategic alliance with the “right” Indian partner is the most important step in establishing a presence in the local market. Affiliation with a reputable and knowledgeable local partner helps considerably in building relationships with end users, adapting to local business cultures, keeping abreast of vital market information,and dealing with local issues. Many Indian firms seek to form alliances or consortia of firms that include international names. A number of American firms have established a strong market presence in India through joint ventures and strategic alliances (Door-Oliver Inc., Snyder General Corp., American Air Filter, Envirex Inc., Anderson, and General Resource Corp. are a few examples). Long-term strategic alliances can create a competitive advantage and sustainable business growth. Partnering with Indian firms permits U.S. firms to bid for domestic tenders at locally competitive rates. (The “appropriate” type or form of business alliance, such as a joint venture, a technology collaboration, a partnership, licensing arrangements, and an acquisition of a local firm, varies from case to case and is beyond the scope of this report.)

The manufacturing joint venture approach can offer better market returns because imported equipment may be more costly than locally manufactured equipment. The joint venture may create opportunities to offer environmental products and services at competitive prices because imported equipment may cost 30 percent more than locally manufactured equipment. Table 10.2 presents a comparative cost analysis for imported and locally manufactured equipment.

Table 10.2 also indicates the tariff barriers for U.S. equipment imports. It is expected, however, that duties on imported goods will be lowered in the near future.
Table 10.2 - Comparative Cost Analysis for Imported and Locally Manufactured Equipment
Item
Imported
Locally produced
Cast, insurance, freight1, or base price$100.00$100,000
Landing price/Wharfage (1 percent)1.000
Subtotal101.00100
Effective duty2 for imports (25 percent of cast, insurance, freight)25.250
Special duty3 (5 percent of cost in full)5.050
Subtotal131.30100
Countervailing duty4 on imports (10 percent of cost in full)13.130
Subtotal144.43100
Special additional duty5 (4 percent of cost in full)5.770
Landed Cost150.200
Excise duty6 for local products (8 percent of cost in full)08
Subtotal150.20108
Octroi7 (4 percent of cost in full)64.32
Subtotal156.20112.32
Sales tax8 (4 percent Central Sales Tax)04.49
Total Cost9156.20116.81
Notes:
1. The cast, insurance, freight, and local base price are assumed to be the same for comparative purposes only.
2. Effective duty is basic duty, which is subject to change from time to time as notified by the Indian Ministry of Finance.
3. Special duty of 5 percent (in addition to basic duty) was introduced in FY1997-1998 and is calculated on cast, insurance,
freight + landing commission/wharfage only.
4. Countervailing duty (also known as CVD) is applicable only on certain products and is equal to excise duty for similar products
manufactured locally. There are three slabs of CVD-8, 16 and 24 percent - that are levied depending upon the item being
imported.
5. An additional duty of 4 percent was introduced in the fiscal year 1998–1999 budget to provide a level playing field to domestic
manufacturers. Foreign traders are exempted from paying special additional duty.
6. Average excise duty is 8 percent; charged only on locally manufactured goods.
7. Octroi is an entry tax charged by most municipalities on final destination. Four percent is the average tax.
8. If the end user imports directly from the overseas vendor, sales tax is not applicable. When an agent or distributor resells
imported goods, sales tax is applicable. Central sales tax ranges from 8 to 13 percent. Interstate tax is 4 percent.
9. The calculation does not account for exchange-rate fluctuations. Also, the duty for imports on pollution control equipment is
levied at a reduced rate of 25 percent, which is a fiscal incentive provided by the Indian government.
Source: EQMS India Pvt., Ltd.


Pre-Market Analysis

For successful entry into the market, it is essential to comprehend the market potential for a particular product, technology, or service, the level of competition and the U.S. firm’s strength and weakness relative to its competitors. The most appropriate strategy is to conduct focused pre-market analysis for a product and to develop strategies accordingly.

Ensuring Adaptability

One of the potential reasons for failure of foreign firms in India is related to the adaptability of environmental equipment and technology to Indian conditions. In fact, some foreign ventures fail mainly because products are not modified to meet Indian requirements prior to launching marketing efforts. It is therefore crucial to ascertain the compatibility of a proposed equipment or technology that is to be exported to India. One way to do this is to either undertake a demonstration project or to seek the views of local environmental research institutes.

Enhancing Price Competitiveness

From a cost perspective, the up-front costs (capital costs) of products/services offered by suppliers affect considerably the decision of Indian end users to buy. To counter the price barrier, U.S. firms should emphasize strongly the operational cost benefits of their products. For example, if a slightly higher capital investment for equipment produces lower daily operating costs, the equipment might be preferred by end users. Good after sales services and maintenance services also allow supplies to sell at a higher price. It may be valuable to encourage potential end-users to look at the economic benefits of the total package, including initial outlay, operating/maintenance cost, and the level of after-sales services offered.

Integrated Project Management Approach for Long-Term Market Presence

The future thrust of Indian government environmental programs is reportedly to promote common effluent treatment plants, common hazardous waste storage treatment and disposal facilities, and municipal wastewater treatment and sanitary landfill facilities. End users in these sectors are state industrial development corporations, municipal corporations, and local industry associations. Central and state governments are actively promoting public-private partnerships in upcoming projects. The trend is to launch a special purpose vehicle entity to execute the project. These special purpose vehicles are increasingly demanding project management services from environmental firms in an integrated fashion (i.e., engineering, procurement, construction, and operation). Having proven expertise in these areas, American firms have good prospects for participating in these projects on a build-own-operate or build-own-operate-transfer basis.

American firms should actively consider the above described approach to ensure a long-term market presence. For this purpose, interested firms need to establish close communication linkages with urban infrastructure financing institutions (in particular, Infrastructure Leasing and Financial Services, East Court Zone, 4th Floor, India Habitat Center, Lodi Road, New Delhi 110003) and state industrial development corporations. Numerous avenues are available for project financing in these areas.

Selection of Geographical Locations for Doing Business

The right choice of business location is important for being cost-competitive and for providing easy access and prompt services to clients. The type of technology or product being offered and the proximity to demand centers are important criteria for the selection of the geographical location of a firm. From a broader perspective, the States of Gujarat, Maharashtra, Andhra Pradesh, Tamil Nadu, Delhi, and Karnataka offer promising business climates and opportunities.

Making the Presence of the Firm Known

It is essential to make the presence of a firm known to end users. U.S. firms can achieve this goal by advertising in leading environmental journals, arranging product demonstrations, or participating in environmental trade shows. The Office of Environmental Technologies Industries in the U.S. Department of Commerce maintains a list of trade promotion events it plans to support. The trade specialists in that office are also a good source of initial information. For a current list of events and office staff, go to www.environment.ita.doc.gov.

While most marketing is naturally aimed at end users, it could also be desirable to establish a firm’s credibility among enforcement agencies. These proactive relationships are very important and often prove productive. Lists of important in-country environmental contacts are provided in Appendix A.

Registering with Technology Dissemination Information Centers

The MOEF has established an Indian Center for the Promotion of Cleaner Technologies (ICPC) with assistance from the World Bank. A key mandate of the ICPC is to evaluate and rank technology options in a particular sector and disseminate this information among enterprises. It may be worthwhile for U.S. firms to provide profiles of their technologies to these data banks as a part of their marketing strategies. The National Cleaner Production Center (NCPC) is another such prominent data bank that may be considered by U.S. firms for cost-effective dissemination of information about their technologies. Some other sources that will help U.S. firms to expand and enhance their presence include the following organizations: Environmental Information Center (EIC), Federation of Indian Chambers of Commerce and Industry (FICCI), United States-Asia Environmental Partnership (US-AEP), and Clean Technology Center (CTC).

Routes of Entry and Forms of Foreign Businesses in the Indian Environmental Market

This section presents key details on routes of entry and forms of foreign businesses in India’s environmental market. Because economic reforms are underway in India, guidelines for promoting foreign investments are regularly reviewed and updated. Accordingly, firms should refer regularly to the Secretariat for Industrial Assistance, Department of Industrial Policy and Promotion, Ministry of Industry, Udyog Bhawan, Government of India, New Delhi 110011; Telephone No.: +91 (11) 301 1983; Fax: +91 (11) 301 1034; e-mail: jssia@del3.vsnl.net.in; Web site: http://www.nic.in/indmin.

Foreign Direct Investment Guidelines

Under the new foreign direct investment policy, two routes are available for foreign investors to invest in India. Which route an investor uses depends upon the industry and the levels of investment contemplated:

1. Automatic Route. Firms proposing foreign direct investment under the automatic route do not require government approval provided the requisite documents are filed with the Reserve Bank of India (RBI) within 30 days of the issue of shares to the foreign investors. The automatic route encompasses the following types of proposals:

These types of proposals are also applicable for existing firms wishing to raise foreign equity up to 50, 51, 74, or 100 percent. If the increase in equity is proposed as part of an expansion program, the expansion program must be in a high priority industry. Where the increase in equity is not proposed for purposes of an expansion, however, the firm must be predominantly engaged in high-priority industries.

The automatic route for foreign direct investment or technology collaboration is not available to firms that have or had previous joint venture or technology transfer/trademark agreements in the same or an allied field in India.

2. Government Approval. The Foreign Investment Promotion Board (FIPB) considers on merit all other proposals for foreign direct investment that are not covered by the automatic route for approval. Composite proposals (i.e., proposals seeking other industrial approvals such as industrial license and technical collaborations), along with approval for foreign direct investment, are given a composite clearance by the FIPB.

Forms of Foreign Business Presence - Entry Options

Following are ways U.S. firms may establish their presence in India’s environmental market:

Foreign firms may invest in trading firms engaged primarily in exports. Such trading firms are treated the same as domestic trading firms in accordance with India’s trade policy.

The RBI accords automatic approval for foreign equity of 51 percent for establishing trading firms engaged primarily in exports. All proposals that do not meet the criteria for automatic approval can be addressed to the FIPB.

Foreign firms may also establish a wholly owned subsidiary that is an Indian firm with an independent legal status distinct from the foreign parent firm. Under the current foreign investment policy, a wholly owned subsidiary can be established either under the automatic route or by obtaining an approval from the FIPB. Applications for establishment of wholly owned subsidiaries (other than under the high-priority industries where automatic approval is available) are approved by the FIPB on a case-by-case basis. They take into account factors such as credentials of the foreign parent, nature of the industry, export commitments, and whether proprietary technology is sought to be protected or sophisticated technology is proposed to be brought in.

Foreign firms may establish joint venture firms (i.e., financial collaborations with Indian businesses). Joint ventures must include an Indian firm with an independent legal status distinct from the foreign parent firm. Under the current foreign investment policy, a joint venture can be established either under the automatic route or by obtaining approval from the FIPB.

Foreign firms engaged in manufacturing and trading activities abroad may open branch offices in India for the following purposes:

The project office is an ideal method for firms to establish a business presence in India if the objective is to have a presence for a limited time. It is essentially a branch office with the limited purpose of executing a specific project. Foreign firms engaged in turnkey construction or installation normally establish a project office for their operations in India.

A foreign firm can also open a liaison office in India to look after its Indian operations and promote its business interests, to spread awareness of the firm’s products, and to explore further opportunities. Liaison offices are not allowed to carry on business or earn income in India, and all expenses must be borne by remittances from abroad.

Obtaining Permission from RBI

Application for permission to establish trading firms, project offices, and liaison offices are to be made on Form FNC 5 and sent to the Chief General Manager, Exchange Controls Departments (Foreign Investment Division), Central Office of the Reserve Bank of India in Mumbai (see Appendix A for address). To establish branch offices, the application is to be made on form FNC 4.

Registration Requirements

There are three principal forms of business organization in India:

Firms incorporated in India and branches of foreign corporations are regulated by the Companies Act, 1956. The act defines foreign firms as those that have been incorporated outside India and conduct business in India.

All foreign firms are required to comply with certain rules and provisions of this act. As a result, even liaison, project, and branch offices are regulated by the act. Such firms have to register with the Registrar of Companies (ROC) within 30 days of establishing a place of business in India.

For wholly owned subsidiaries or joint venture firms, the procedure for incorporation is shown in Figure 10.1.

Industrial Licensing

Only the following industries must obtain an industrial license to perform manufacturing activities:

All other industries (including environmental goods manufacturing and service providing firms) are exempt from licensing, subject to certain locational restrictions in metropolitan areas.

Government Procurement Procedures

In India, international bidding procedures are open to domestic as well as foreign firms or their alliances and follow three stages:

1. Seeking expressions of interest (pre-qualification);
2. Selection of firms for tender documents; and
3. Submission and evaluation of bids.

For large engineering and construction projects (e.g., municipal water, wastewater treatment, solid waste management, common effluent treatment, and hazardous waste management), international bids are normally invited for engineering, procurement, and construction. Consequently, selected project contractors become the buyers of environmental equipment and services from suppliers when they offer complete turnkey project packages to end users. Project contractors play a major role in deciding commercial matters such as price, warranty, and delivery schedules. In the power/petrochemical/oil and gas sector, however, there are large engineering firms that have in-house capabilities (e.g., Asea Brown Boveri and Bharat Heavy Electricals, Ltd.).

Selective bidding procedures are generally open to suppliers of various equipment and construction contractors that are registered with end users (e.g., state electricity boards, municipal corporations, and pollution control boards). Registration is normally performed on the basis of applications made to these end users.

For both bidding procedures, the actual tender is divided into two parts: the technical bid and the commercial bid. Tenders are usually evaluated first on the basis of technical aspects and then on commercial aspects.

In the case of international bids and projects that are funded by bilateral or multilateral financial institutions, bidding procedures are specified by the institution concerned.
Figure 10.1 - Procedure for Incorporation of a Firm in India

START
–
Obtaining approval for the proposed name of the firm from the Registrar of Companies (ROC)
–
Preparing a Memorandum of Association
–
Preparing Articles of Association
–
Arranging for appropriate persons to subscribe to the memorandum (a minimum of seven for a public firm and two for a private firm)
–
Payment of Registration fee to the ROC
–
Receipt of Certificate of Incorporation
–
Obtain "certificate of commencement of business" from ROC (for public firm)
–
END

Fiscal Incentives for Environmental Management

There are a number of fiscal incentives for sound environmental management practices in India. These include:

Equipment eligible for 5 percent excise duty (as of September 2000) includes:

U.S. Government Programs

U.S. government programs assist U.S. companies in exporting their environmental products and services through several agencies. The following information briefly describes the agencies:

U.S. Department of Commerce (DOC)

The International Trade Administration (ITA) is a division of the DOC that helps U.S. companies participate in the growing global marketplace. The ITA provides information to help a company select a market for its product, ensures access to international markets as required by trade agreements, and safeguards companies from unfair competition from dumped and subsidized imports. Headed by the under secretary for international trade, the ITA consists of four units: the U.S. and Foreign Commercial Service (USFCS), Trade Development, Market Access and Compliance, and the Import Administration.

As part of the ITA, Trade Development (TD) focuses on promoting U.S. products in the global market. Through counseling, businesses benefit from TD’s experience and knowledge. TD works to keep businesses informed of opportunities abroad while helping to ensure the fairness of the trade. Through industry analysis, TD gains an understanding of key issues such as product standards or statistical trade data and can help firms through each stage of the trade process from market information to individual business counseling. (Contact: Project Managers, Tel: (202) 482-5226; Fax: (202) 482-3954.)

Environmental Technologies Industries (ETI) is a division of ITA with the goal of facilitating and increasing exports of environmental technologies, goods, and services. It is the principal resource and key contact point within the DOC for U.S. environmental technology companies. ETI trade specialists focus on environmental market sectors (such as waste management, water treatment, and environmental services) as well as geographic regions. Contact with a trade specialist can provide information on a variety of trade shows, conferences, and seminars. Specialists may also have knowledge of market or developmental trends that could prove useful to exporters. ETI can also help a firm to access the support of the U.S. government through the DOC’s Advocacy Center when bidding on foreign contracts. (Contact: ETI, Tel: (202) 482-5225; Fax: (202) 482-5665; Web site: www.environment.ita.doc.gov.)

The Advocacy Center is part of the TD division of the ITA that works to ensure fair treatment for U.S. companies in international markets. Using the status and support of the U.S. government, the Advocacy Center assists companies in dealing with unfair treatment that can prevent U.S. firms from competing fairly. Advocacy assistance can come in many forms, from helping to access key decision-makers to sending official letters of interest from the U.S. government. (Contact: Advocacy Center, Tel: (202) 482-3696; Fax: (202) 482-3508.)

The U.S. and Foreign Commercial Service (USFCS) extends the reach of ITA services. The USFCS’s worldwide network includes offices in more than 100 U.S. cities and at more than 80 overseas posts. This presence brings professional trade assistance to U.S. firms both at home and in more than 95 percent of the world market for U.S. exports. The USFCS provides a full array of trade assistance, including trade counseling, trade contact services, product and service promotion, essential market research, customized market research, trade leads, advocacy on behalf of U.S. business interests, trade finance information and support, promotion and management of trade shows, organization of international trade missions, credit checks on potential overseas business partners, and certification of established trade events. (Contact: For the address and phone numbers of a DOC district office near you, or a list of USFCS contacts, call (800) USA-TRADE.)

The Multilateral Development Bank Operations (MDBO) is a division of USFCS devoted to aiding businesses in the pursuit of Multilateral Development Bank financing opportunities. Through individual counseling, on-line access to all Multilateral Development Banks, and business outreach throughout the United States, MDBO provides U.S. companies with information on all Multilateral Development Bank opportunities available. The MDBO specialists are backed by USFCS staff who are on location at the Multilateral Development Banks. Working on site provides an inside track ensuring accurate information for the businesses. MDBO also acts as an advocacy program working to help U.S. companies compete and obtain contracts at Multilateral Development Banks. (Contact: MDBO, Tel: (202) 482-3399.)

International Company Profiles (ICPs) are designed by US&FCS staff abroad to help U.S. firms locate and evaluate potential foreign customers before entering into a business commitment. Through these reports, companies can check a firm’s business activities, its credit worthiness, its reputation in the business community, and its overall reliability and suitability as a trade contact for U.S. exporters. (Contact: (800) USA-TRADE.)

As part of the USFCS, U.S. Export Assistance Centers (USEACs) seek to increase overseas trade opportunities for small and medium-sized U.S. firms. To make it more convenient for businesses, the Office of Domestic Operations in the USFCS consolidated the export promotion and trade finance services of federal, state, and local into one, creating USEACs. USEACs combine the services of the USFCS, USAID, U.S. Trade and Development Agency (TDA), the Export-Import Bank of the United States, and the Small Business Administration (SBA) in one location, making it easier for businesses to find all the information they need to enter and expand into the global marketplace. (Contact: For the address and phone number of a USEAC convenient to you, call (800) USA-TRADE.)

The overriding objectives of Market Access and Compliance (MAC) are to obtain market access for U.S. firms and workers and to achieve full compliance by foreign nations with trade agreements they sign with our country.

Country officers with expertise in nearly 200 countries provide U.S. businesses, policy-makers, and legislators with crucial information for U.S. business, especially the small and medium-sized ones, when entering or expanding into world markets. These offices maintain comprehensive, up-to-the-minute information, profiles, and analyses on commercial markets worldwide to benefit American businesses and policy-makers. In addition, they provide export counseling, develop international trade and investment policies to reduce trade barriers, monitor foreign compliance with U.S. trade agreements and intellectual property rights and international agreements, and seek prompt, aggressive action when foreign violations occur. Country desk officers collect information on assigned countries such as the country’s regulations, tariffs, business practices, economic and political developments, trade data, market size, and growth. (Contact: For India, call desk officer for Africa, the Near East, and South Asia, Tel: (202) 482-4925.)

Operated by the ITA, the Trade Information Center (TIC) offers a comprehensive data bank of all U.S. government export assistance programs. TIC provides general export counseling as well as country-specific counseling through which it offers companies everything they need to know about exporting. Companies gain access to information on everything from U.S. government and foreign contact information related to sources of export assistance, to data bases of information including sources for financing. Also included in TIC services are a list of opportunities for companies in individual markets, a calendar of international trade events, sources for international market research and trade leads, advice on export licenses and controls, import tariffs and taxes, customs procedures, and a list of trade publications and software. (Contact: Tel: (800) USA-TRADE or (202) 482-0543; Fax: (202) 482-4473. If using a TDD machine, (800) TDD-TRADE.)

The National Trade Data Bank (NTDB) is a computerized source for export promotion and international trade data collected by 17 U.S. government agencies. The data bank includes information such as the Export Yellow Pages, monthly trade leads, country-specific trade practices, and marketing insights. The NTDB also provides U.S. import and export statistics, as well as more than 75 other reports and programs. The data bank is updated monthly and provides users with access to 190,000 trade-related documents, including trade statistics, market research, the Foreign Traders Index (FTI), country guides, and economic reporting. (Contact: NTDB, Tel: (202) 482-1986; Fax: (202) 482-3508; Web site: http://www.stat-usa.gov.)

The U.S. Census Bureau is the preeminent collector and provider of timely, relevant, and quality data about the people and economy of the United States. The Census Bureau strives to provide the best mix of timeliness, relevancy, quality, and cost for the data it collects and services it provides. It offers the following two data bases:

U.S. Agency for International Development (USAID)

USAID plays an important role in providing technical and financial assistance to promote technology transfer to India. It supports market-based and private sector led solutions to environmental and energy problems. USAID has trained numerous Indians in the United States in environmental technologies and systems. The major focus areas for USAID are in global climate change, energy efficiency, reforms and restructuring, clean coal technologies, and renewable energy.

The following programs are only illustrative of USAID’s involvement in India. For a complete listing of USAID activities, contact the Center for Trade and Investment Services (CTIS), which serves as a central point of contact for information on USAID programs, policies, projects, procurement, and contracting opportunities. (Contact: USAID, G/IBD/CTIS, SA-2, Room 100, Washington, DC 20523-0229; Tel: (800) 872-4348; Fax: (202) 663-2670.)

The Greenhouse Gas Pollution Prevention Project
(Project Life: 1995–2002) is divided into two components: Efficient Coal Conversion (ECC) and Alternative Bagasse Co-generation (ABC). It is designed to reduce the emission of greenhouse gases related to energy generation in India. The U.S. Department of Energy’s Pittsburgh Energy Technology Center provides all technical assistance; GEP is part of the U.S. contribution to the Global Environmental Facility (GEF). Specific activities under the ECC component include feasibility studies and investment grants for pilot-scale demonstration of selected advanced coal-conversion technologies, state-of-the-art monitoring and maintenance techniques, and commercialization of large-scale ash utilization techniques. Specific activities under the ABC component include bagasse co-generation in sugar mills and other agro-based industrial sectors.

Clean Technology Initiative (CTI) (Project Life: 1999–2002, $3.2 million) is the third phase of USAID’s Trade in Environmental Services and Technology (TEST) program. The program is designed to improve the environmental performance of Indian industry at reducing greenhouse gas emissions through environmental management systems and other management tools; for example, benchmarking, greening of supply chain management, ISO (International Standards Organization) 14001, environmental information networking, and financing demonstration projects in major industrial sectors.

The U.S.-Asia Environmental Partnership (USAEP) is a comprehensive service to help U.S. environmental exporters enter markets in the Asia/Pacific region. The US-AEP program is a coalition of public, private, and non-governmental organizations that promote environmental protection and sustainable development in 12 Asian economies. The partnership also mobilizes U.S. environmental technology, expertise, and financial resources and links them to businesses, communities, and governments across the Asia/Pacific region in public and private sector partnerships.

As one of its services, US-AEP manages the Environmental Technology Network for Asia (ETNA), which matches environmental trade leads sent from US-AEP technology representatives located in nine Asian countries with appropriate U.S. environmental firms and trade associations that are registered with ETNA’s environmental trade opportunity data base. U.S. environmental firms receive the trade leads via a broadcast facsimile system within 48 hours of the leads being identified and posted electronically from Asia. As of November 1995, ETNA reported approximately $64 million in sales through its trade lead programs. On average, ETNA disseminates 25 trade leads each week to about 5,000 companies. So far, India has generated more than 125 trade leads that have been disseminated to nearly 20,000 U.S. companies. The total number of trade leads from all nine Asian countries is well over 20,000. (Contact: US-AEP, Tel: (202) 663-2695 or (800) 818-9911; Fax: (202) 663 2760; e-mail: usasia@usaep.org, Web site: www.usaep.org.)

The U.S. Trade and Development Agency (TDA) provides funding for U.S. firms to conduct feasibility studies related to major projects in developing countries. TDA also considers funding for both public and private sector projects including joint ventures in which U.S. companies plan to take equity. In all cases, TDA requires cost-sharing by the U.S. firm. TDA provides funding to promote economic development while helping U.S. firms get involved in projects that offer significant export opportunities. TDA also funds technical seminars and orientation visits to the United States. Up to 1999, TDA had funded 29 feasibility studies totaling $9.2 million in India, and ranging from $36,000 to $1 million per study. The portfolio of projects includes solar energy, water treatment, waste management, and power projects. (Contact: Regional Director, TDA, SA-16, Room 309, Washington, DC 20523, Tel: (703) 875-4357; Fax: (703) 875-4009; e-mail: info@tda.gov; Web site: www.tda.gov.)

The U.S. Environmental Protection Agency (EPA)
provides a leading advisory role in providing export assistance through its Office of International Activities (OIA). It also coordinates with other agencies to promote improved levels of health and environmental protection by accelerating the development and use of innovative environmental technologies. The EPA also provides guidance to regulatory agencies in adopting standards, methodologies, and standard models.

The U.S. Technology for International Environmental Solutions (U.S. TIES) promotes the application of technologies and expertise in solving international environmental problems, thereby promoting and establishing U.S. technologies in the world. U.S. TIES has approved one project for India to demonstrate advanced electrostatic precipitators for sub-micron fine particulate emissions. (Contact: U.S. TIES, EPA Research Triangle Park, Tel: (919) 541-2973; Fax: (919) 541-5227.)

The OIA serves as the national focal point for INFOTERRA, a network of more than 140 United Nations Environmental Program (UNEP) member countries that share technical expertise on more than 1,000 environmental topics. Foreign companies can also contact the EPA for directories and a data base on U.S. companies offering environmental goods and services. One such data base, Vendor Technologies (VISITT), contains information on more than 300 U.S. companies offering technologies to treat contaminated groundwater, oils, sludge, and sediments. (Contact: Office of International Activities, Tel: (202) 260-0424.)

EPA, USAID, and TDA established the U.S. Environmental Training Institute (USETI) to build environmental management capability in developing and transitional countries. USETI facilitates training courses at U.S. firms for qualified public and private sector officials from these countries. As of December 1995, USETI had trained 51 participants from India focusing on landfill management, wastewater treatment technologies, demand-side management, solid waste disposal, hazardous waste management, and pollution prevention. (Contact: USETI, Edie Cecil, 1000 Thomas Jefferson Street, N. W., Suite 106, Washington, D. C. 20007, Tel: (202) 338-3400; Fax: (202) 333-4782.)

U.S. Department of Energy (DOE)

The DOE’s main focus is ensuring clean, affordable, and dependable energy supplies. To do this, the diversity of energy, fuel choices, and sources must be increased. This, in turn, brings renewable energy sources into the market, strengthens domestic production of oil and gas, supports commercial nuclear energy research, and increases energy efficiency. As part of its mission, the DOE sponsors the following various export promotion activities:

The Office of Industrial Technologies (OIT) is part of the DOE’s Office of Energy Efficiency and Renewable Energy. Its goal is to improve the resource efficiency and competitiveness of materials and process industries. OIT creates partnerships among industry, trade groups, government agencies, and other organizations to research, develop, and deliver advanced energy efficiency, renewable energy, and pollution prevention technologies for industrial customers.

The Committee on Renewable Energy Commerce and Trade (CORECT) is an interagency committee whose 14 federal agency members, in conjunction with representatives of private industry, develop and implement strategies for the enhancement of U.S. exports of renewable energy technologies. CORECT coordinates its efforts with the Trade Promotion Coordinating Committee (TPCC) chaired by the Department of Commerce. (Contact: Tel: (202) 586-8302; Fax: (202) 586-1605.)

The DOE has also supported the president’s export promotion efforts through its Office of Energy Exports (OEE). This effort covers a broad range of commercial, foreign policy, and technical activities. (Contact: Tel: (202) 586-5800; Fax: (202) 568-0823; Web site: www.energy.gov.)

The Office of Fossil Energy supports U.S. energy technology exports by providing international market information. (Contact: Tel: (202) 586-6503; Fax: (202) 586-5145.)

Financial Incentives and Funding Opportunities

This section describes the most important international, national, and state level funding sources that can be used to finance environmental projects.

Multilateral Donor and Lending Agencies

The United Nations Development Program (UNDP) assists countries in their efforts to achieve sustainable human development by building their capacity to design and carry out development programs in poverty eradication, employment creation and sustainable livelihoods, the empowerment of women, and the protection and regeneration of the environment. UNDP provides developmental assistance through its own resources and synergies with other U.N. resources and funds the Indian government through grants to promote the activities. The following are two environment programs connected with UNDP:

The United Nations Environment Program’s (UNEP) mission is to provide leadership and encourage partnerships in caring for the environment by inspiring, informing, and enabling nations and people to improve their quality of life without compromising it for future generations. Currently, UNEP funding assistance to India is through the Global Environment Facility (GEF) program. GEF is a financial mechanism that provides grants and low-interest loans to developing countries to help them conduct programs to relieve pressures on global ecosystems. The facility supports international environmental management and the transfer of environmentally benign technologies. GEF is a cooperative venture among national governments, the World Bank, UNDP, and UNEP to co-finance activities that address the loss of biodiversity, depletion of the ozone layer, and the degradation of international waters and global ecosystems. GEF also directly finances projects that address reducing the long-term costs of low greenhouse gas-emitting energy technologies. This project is designed to increase production of select technologies to provide energy in a carbon-neutral manner. The MOEF is the contact point for this facility in India.

The Asian Development Bank (ADB) extends loans and market equity investments for the economic and social development of its developing member countries. It also provides technical assistance for the preparation and execution of development plans and programs.

The ADB’s energy sector policy focuses on increasing private sector participation in large-scale energy investments, improving energy efficiency on both supply and demand sides, and integrating environmental considerations into energy development. A major portion of the bank’s lending and technical assistance for the power sector is directed to developing member countries committed to increasing efficiency and mobilizing resources from the private sector. In general, the ADB considers financing of new capacity additions if it is satisfied that the utility firm involved is paying adequate attention to supply efficiency and demand management. The ADB encourages power utilities (by providing training assistance) to incorporate into their planning models key elements of integrated resource planning, including demand-side management and internationalization of environmental costs. Developing member countries are encouraged to phase out subsidies to the power sector and minimize cross-subsidies. In the hydrocarbon sector, the ADB plays an important role in funding natural gas development, processing, transportation, and distribution. It actively promotes environmentally sound mining practices and clean coal technologies.

Regarding the environment, the ADB is committed to promoting environmentally sound development in the region. The bank takes the following steps to fulfill this objective:
1. Reviews the environmental impacts of its projects, programs, and policies.
2. Encourages developing member countries’ governments and executing agencies to incorporate environmental protection measures in their project design and implementation procedures.
3. Provides technical assistance for the purpose of achieving step 2.
4. Promotes projects and programs that will protect, rehabilitate, and enhance the environment and the quality of life.
5. Trains bank and developing member countries’ staff in and provides documentation on environmental aspects of economic development.

In regard to lending, the ADB’s major project emphasis ranges from pollution control and energy efficiency in the energy and power sectors to integrated urban environmental development, tropical forestry management, and biodiversity conservation. The ADB is currently involved in a project promoting energy efficiency in India, which is a $150 million letter of conduct with the Industrial Development Bank of India (IDBI) at 50 basis points cheaper than IDBI’s normal lending rates. The ADB also has a letter of conduct with Industrial Credit and Investment Corporation of India (ICICI) and Industrial Finance Corporation of India (IFCI) jointly and with the Indian Renewable Energy Development Agency (IREDA). The bank prefers to finance private industry through the public sector window (at concessional rates). In the near future, ADB is considering a disbursement of $300 million for the reduction of pollution caused by industries in and around Agra and Mathura.

The World Bank provides technical and financial assistance for infrastructure and social development projects. It addresses developmental problems through international cooperation and partnerships. The principal objective is to help donors, governments, governmental institutions, multilateral organizations, and the private sector to identify broad opportunities for financial cooperation. The objective of the bank in India is poverty reduction. India is the World Bank’s largest single borrower, with cumulative lending of more than $45 billion as of June 1999. At the end of that period, the bank’s lending portfolio of ongoing projects for India comprised 70 projects valued at $12.3 billion. The World Bank is a major source for financing environmental and energy projects in India. The World Bank operates through the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA). It also has a private lending arm that caters to projects in the private sector. The World Bank disburses financial assistance through a representative agency of the Indian government. The bank encourages reforms, restructuring, and privatization by helping to develop capabilities leading to investments in the respective sectors.

The major priority of the bank on the environmental front is integrating environmental concerns into the economic mainstream. The bank has supported projects for forestry and biodiversity protection, soil and water conservation, industrial pollution prevention, and sewage disposal and sanitation. The bank is also supporting initiatives to strengthen institutions and agencies that formulate and implement environmental policies and legislation. Projects in energy and the environment constitute 26 percent of its lending portfolio in India. ICICI and IDBI are currently administering a $150 million line of credit from IDA under an industrial pollution prevention program. Out of the $150 million, $50 million will be disbursed by ICICI, while the remainder will be disbursed as a single currency loan by IDBI. The funds will be lent to IDBI as a single currency loan in U.S. currency for 20 years, including a five-year grace period at the bank’s standard variable rate. The loan to ICICI will be from proceeds in the World Bank’s currency pool and will also be for 20 years, including a five-year grace period at the bank’s standard variable rate. IDBI and ICICI will provide sub-loans to sub-borrowers at rates determined by the borrower based on market conditions and the lending policies of each and set at levels not lower than the prevailing minimum lending rates with a 10-year repayment period, including a two-year grace period. The objective of the line of credit is to assist in the implementation of the Indian government’s policies on pollution abatement from industrial sources. The project has three components: an institutional component: an investment component, and a technical assistance component.

Bilateral Donor Agencies and Financial Institutions

The Overseas Private Investment Corporation (OPIC) provides insurance for U.S investments through political risk management. It also facilitates project financing and investment funds. OPIC services are applicable only for facilitating U.S. businesses. It provides medium- to long-term financing for overseas projects through loan guarantees and direct loans and coverage for new investments and for investments to expand or modernize existing operations. The financing commitment may range from 50 percent of total project costs for new ventures and 75 percent for expansion of existing successful operations, with final maturity of 5 to 15 years or more. Direct loans generally range from $2 to $10 million and loan guarantees generally range from $10 to $200 million. Equity, debt, loan guarantees, leases, and other forms of long-term investment, however, can be insured by OPIC. OPIC has financed projects in the power and manufacturing sectors but has not financed any environmental projects in India to date. Global Environmental Emerging Markets Fund is an OPIC guaranteed fund that can be tapped for equity investments in environmental markets.

The Export-Import Bank of the United States (Ex-Im Bank) is an independent government agency that facilitates exports of U.S. goods by providing loans, guarantees, and insurance for export sales. The Ex-Im Bank has placed India on its priority list for developing countries. Its short-, medium-, and long-term programs support U.S exports to India. It has an Environmental Export Program that provides enhanced levels of support for a broad range of environmental exports. The main features of this program include a short-term environmental insurance policy and enhanced medium- and long-term support for environmental projects, products, and services. The features of the short-term insurance policy include coverage for small business environmental exporters with 95 percent commercial coverage and 100 percent political coverage with no deductible. The features for long-term coverage include local cost coverage equal to 15 percent of the U.S. contract price, capitalization of interest during construction, and maximum allowable repayment terms permissible under the guidelines of the Organization for Economic Cooperation and Development.

According to the Overseas Economic Cooperation Fund’s (OECF’s) revised environmental guidelines, implementation of environmental impact assessments is a prerequisite for all loans. The Japanese government offers concessional interest rates for environmental projects. This new initiative is known as “reduced interest rate on environment-related ODA loan.” The range of eligible environmental projects under this initiative includes projects for global environment problems as represented by global warming (e.g., afforestation, energy conservation, and the development of alternative energy resources); projects for pollution control (e.g., air pollution, water pollution, and waste disposal); hydroelectric power generating projects; natural gas power generating projects; geothermal power generating projects; rehabilitation projects for energy; and resource conservation. Loan conditions for such projects have been eased to an interest rate of 0.75 percent and a repayment period of 40 years (including a 10-year moratorium).

In India, OECF has supported afforestation projects involving local residents and has provided 71.428 billion yen ($715 million) in loans for seven projects in Rajasthan and Gujarat. It has also provided loans for projects to improve the environment, such as water supply and sewage development projects, a lake conservation project, and a regional comprehensive environmental conservation project.

The European Commission (EC) in the European Union has implemented development cooperation programs with India for more than two decades. Since the inception of India’s operation flood, the EC has funded a large number of development projects. The total of EC’s development assistance to India, all in the form of grants since 1976, has exceeded $1.6 billion. The objective of the EC’s development cooperation program is to contribute to India’s efforts to improve the quality of life of the poorest and most disadvantaged members of society. The EC’s development activities also focus on projects and programs in the agricultural and rural sectors aimed at development of irrigation, forestry, and environmental rehabilitation and integrated watershed management.

The EC’s development assistance to India currently involves an expenditure of roughly $100 million per year. A major part of this assistance is for large bilateral projects implemented by government departments. However, the EC also supports many smaller projects undertaken by NGOs and is expanding its support for larger projects implemented by competent NGOs and the private sector.

The EC’s project identification and management approach insists on a preliminary environmental impact assessment for all projects. In addition, the EC supports a number of projects specifically aimed at environmental rehabilitation with community involvement in the sustainable management of natural resources such as land, water, and forests.

The EC also has projects aimed at integrating environmental protection, renewable energies, recycling, and long-term management of natural resources. The current portfolio consists of three projects with a budget of $2.8 million.

The overall aim of the German Agency for Technical Cooperation (GTZ), as defined by the Federal German Ministry for Economic Cooperation and Development, is to improve the living and working conditions of the urban poor and limit the negative ecological impacts of urbanization. Therefore, GTZ has been particularly concerned with assisting local governments in the process of formulating and implementing environmental strategies and action plans for sustainable urban development.

GTZ works in various regions of the world, including Africa, the Asia-Pacific, Eastern Europe, the Middle East, and Latin America. Its main constituents are community-based organizations, NGOs, local/regional governments, and national governments.

GTZ has executed technical cooperation projects and programs in India on behalf of the Federal Republic of Germany for 40 years. It has funded projects in numerous sectors, including agriculture, energy, and forestry. At present, there are 33 ongoing projects in the country. GTZ is working on a letter of conduct arrangement with Small Industries Development Bank of India (SIDBI), but it has been put on hold because of sanctions imposed by Germany against India. One of the ongoing GTZ-assisted projects is the Indo-German Energy Efficiency Project.

Australian Aid for International Development (AUSAID) focuses on developmental assistance to industrial and urban sectors. Some of the projects implemented by AUSAID are in the steel sector and in urban development in Andhra Pradesh. AUSAID contributed $10.6 million from February 1992 to June 1996 to Steel Authority of India Limited (SAIL) for producing cleaner steel with a massive restructuring and pollution control program. It was a training project that emphasized the benefits and techniques of pollution control. Managed by BHP Engineering and Kinhill Engineers, the training gave workers the skills to activate and maintain existing pollution control equipment, which reportedly often was idle because of poor maintenance or lack of understanding of the equipment. This training program is being cited as a model for further aid-training activities. It has facilitated technology transfer and forged links between Indian and Australian industries. The training program has advanced SAIL’s plan to make Indian steel productivity more competitive and more environmentally safe.

The Indo-Canadian Environment Facility (ICEF) is a joint project between the Indian and Canadian governments for undertaking environmental projects in the water and energy sectors. Funding is provided by the Canadian International Development Agency (CIDA) through a counterpart fund. Indian organizations working in the environmental sector, in addition to NGOs, government agencies, and private sector firms, may apply to ICEF for a grant to implement a project consistent with the specific priorities and criteria set by the ICEF.

The criteria for evaluating project proposals include institutional qualifications; direct contributions to sound environmental management; social and cultural effects, with particular emphasis on the role of women in the development; technical feasibility; economic and financial feasibility; and sustainability of project activities and results. Project selection emphasizes proposals that address specific water and energy issues while contributing to institutional capacities, public awareness, national policy dialogue, and adoption of environment technologies. ICEF is particularly supportive of applications that can demonstrate community participation in the planning, design, implementation, monitoring, and evaluation of the direct environmental benefits of the projects through physical improvements and integrated resource management approaches. Projects implemented by ICEF so far have focused on watershed management. Future projects will focus on water quality and energy. One of the recent projects approved under this program is diffusion of efficient biomass utilization technologies in non-formal industries in Karnataka and Kerala. ICEF does not fund infrastructure projects, capital activities, recurring costs, projects not directly related to environmental management, or research projects that are not applied in the field to address practical environmental problems.

For other bilateral agencies that provide funding for environmental projects, see Table 10.3.
Table 10.3 - Bilateral Agency Environmental Assistance Programs
Funding Group
Environmental Focus
Canadian International Development Agency (CIDA)Partner with Indian government for funding NGOs and research associations on environment projects.
Swiss Agency for Development and Cooperation (SDC) Partner with Indian government for funding NGOs and research associations on environment projects.
Danish International Development Agency (DANIDA)Partner with Indian government for funding NGOs and research associations on environment projects.
Swedish International Development Cooperation Agency (SIDA)Exploring establishment of a dedicated environment division.
Norwegian Agency for Development Cooperation (NORAD)Partner with Indian government for funding NGOs and research associations on environment projects in three states: Karnataka, Orissa, and Himachal Pradesh.
Embassy of the Netherlands Partner with Indian government for funding NGOs and research associations on environment projects in three states: Karnataka, Orissa, and Himachal Pradesh.

Indian Government Initiatives

One initiative of the Indian government is environment-related research. The government of India funds research in multidisciplinary areas of environment and ecological protection, conservation, and management at various universities, research and development institutions, and NGOs.

The following projects were conducted in the past year with an effect on industry:

These projects are taken up based on yearly budget allocations that vary each year.

Other initiatives taken up by the Indian government are in association with GEF, UNDP, and ICEF and are described earlier in this chapter.

The Ministry of Non-Conventional Energy Sources (MNES) provides incentives such as interest-rate subsidies for projects employing alternative energy systems. This subsidy program is executed at the state level via the state financial and development corporations. The MOEF also provides a number of fiscal incentives to the private sector.

Indian Financial Sector

The Indian financial sector is broad-based with rapidly developing capital markets. India has 21 stock exchanges, including a National Stock Exchange with a total market capitalization of more than $60 billion. Firms can have access to equity and the debt markets through a variety of available financial instruments. During the past financial year, the capital markets did not perform well because of a slow economy and external factors. To increase liquidity in the financial sector and promote industrial growth, the government announced a credit policy in April 1999 that stressed the need to reduce interest rates to encourage growth. Since April 1999, the major public sector banks have reduced the prime lending rates by 50 basis points to around 12.5 percent to 13 percent, while term lending institutions have cut rates by 100 basis points to 13.5 percent.

The financial sector includes a large network of banks and development finance and investment institutions, with an array of financial instruments that can be used to finance imports of U.S. goods and services. Most of the medium- and long-term financing for environmental projects, including multilateral and bilateral lines of credit, is routed through developmental financial institutions such as ICICI, IDBI, IFCI, Infrastructure Development Finance Company (IDFC), SIDBI, and IREDA. In addition to these institutions, other nationalized banks and state-level financial institutions co-finance environmental and pollution control projects with developmental financial institutions. The EX-IM Bank of India also provides financial assistance to firms that export their goods. Energy service companies have also come into existence offering innovative financing mechanisms to implement energy efficiency projects.

Industrial Credit and Investment Corporation of India (ICICI) is a diversified financial institution providing medium- and long-term project financing and other types of financial and advisory services to private industry. The sources of funds vary from loans, debentures, and equity to lines of credit from inter-country cooperation programs. ICICI also provides specialized assistance, namely technology financing for technology development/demonstration/commercialization projects through various USAID and World Bank programs.

ICICI and USAID are implementing the TEST program, which has been restructured to the CTI program for the industrial sector. CTI targets rapidly growing energy-intensive industrial sectors that are high greenhouse gas emitters to improve their environmental performance. Technical and financial assistance is provided to those firms that are most likely to accelerate the use of cleaner, climate-friendlier technologies and that adopt certified environmental management systems as a means to reduce greenhouse gas emissions.

ICICI is also responsible for disbursing the World Bank’s Industrial Pollution Prevention funds, OECF pollution control program funds, and Norwegian lines of credit to firms.

The Industrial Development Bank of India (IDBI) primarily provides financing to large and medium-sized industrial enterprises. IDBI has been assigned a special role in coordinating the activities of institutions engaged in financing, promoting, or developing firms. It also provides technical, legal, and marketing assistance to firms in addition to undertaking market surveys, investment research, and techno-economic studies.

IDBI provides financing for establishing new industrial projects as well as for expanding and modernizing existing industrial enterprises. It also undertakes a wide range of promotional activities such as entrepreneur development programs, consulting services for small and medium-sized enterprises, and upgrading of technology. In the environmental sector, IDBI offers credit for project financing, pollution prevention, demonstration projects, technology upgrades, and equipment financing for energy conservation.

The Industrial Finance Corporation of India (IFCI) is a public limited firm that gives medium- and long-term credit to industrial concerns. IFCI financing includes project finance, financial services, and comprehensive corporate advisory services. Financial assistance is provided to firms by way of rupee loans, foreign currency loans, and direct subscription to issues of shares/debentures. Financing for prospective projects is evaluated on the basis of technical feasibility, commercial viability, financial soundness, and economic justification. IFCI has a technology upgrade program for the textile sector that emphasizes improved technology for energy saving.

The Infrastructure Development Finance Corporation (IDFC) was created in 1997-1998 to lead private capital into core infrastructure projects. IDFC plans to make private financing of infrastructure a feasible activity in India. IDFC’s major operations are in power, telecommunications, ports, and roads. It has also established an internal environmental group that will assess all projects from an environmental risk perspective and address all short-, medium-, and long-term environmental risks. IDFC plans to provide technical input for environmental studies and management plans to address risks that may impair projects’ viability, and to address land acquisition and income issues. It will also develop studies to meet requirements of foreign lenders. IDFC plans to design various market-based instruments and incentives to help integrate environmental and social concerns into the economic development framework. It plans to explore financial mechanisms that will provide concessional funding for environmentally sound developmental initiatives.

The Small Industries Development Bank of India (SIDBI) functions as the principal financial institution for financing, developing, and promoting the small-scale industrial sector. SIDBI provides financial assistance programs for technology upgrades, equipment refinancing, and renewable energy or energy-saving systems. The environment management initiatives of SIDBI are aimed at increasing environmental awareness and supporting the establishment of demonstration projects in homogenous clusters of small-scale industrial units. The awareness programs are conducted by specialized environmental agencies hired by SIDBI. These agencies conduct focused programs to educate small-scale industrial units about environmental issues and operational strategies. The demonstration projects not only reduce pollution levels but also help to improve product quality, reduce processing time, and conserve materials. Funding for the awareness programs is provided by SIDBI, with small-scale industrial units paying a token participation fee. For demonstration projects, the bank not only subsidizes the consultant’s fee, but also provides the beneficiary units with financial assistance to meet the cost of equipment. SIDBI has conducted 49 awareness programs, a presentation on treatment of wastewater from dyeing units at Tirupur in Tamil Nadu, and a presentation on recycling municipal solid waste into organic fertilizer in Andhra Pradesh. It has supported the National Environmental Engineering Research Institute (NEERI) for restructuring suitable environment management measures for the starch industry cluster in Salem and Dharmapuri Districts in Tamil Nadu.

The Export-Import Bank of India is the principal financial institution in the country for coordinating exports and imports. The bank’s focus is on export financing. It provides information and advisory services to enable exporters to evaluate international risks, export opportunities, and competitiveness. It has a unique grant program for supporting ISO 140001 certification in firms with an export market. This grant is intended to help Indian firms enhance their international competitiveness and ensure adherence to international quality systems and standards.

The Indian Renewable Energy Development Agency (IREDA) was incorporated as a public limited government firm in 1987, primarily to promote the development and financing of new and renewable sources of energy technologies. IREDA offers project financing, equipment financing, and loans for manufacturing, market development, energy centers, business development, and financial associations. The sectors that are eligible for assistance include solar energy, wind energy, hydro power, biomass power generation, energy efficiency/energy conservation, biomass gasifiers, biomass-based cogeneration, new and emerging technologies, hybrid systems, and establishment of energy centers. IREDA is also a recipient of World Bank, OECF, and other multilateral and donor lines of credits, which it distributes.

Generally, IREDA sanctions projects within 90 days of receipt of complete proposals provided the projects are found viable from technical, financial, and legal points of view. Loan applications submitted to IREDA are valid for a period of six months. Applications pending beyond six months from the date of registration are automatically withdrawn or lapse and fresh applications must be submitted. Loans for working capital are not provided.

Under its Project Finance Division, the Bank of Baroda (BOB) has established an Environment Management Center in Mumbai. The main responsibility of this center is to keep track of the environmental compliance status of its clients as a risk prevention measure and to provide consulting services in the environmental sector; for example, environment impact assessments; environment audits; environment management plans; hazardous waste management; comprehensive risk management; insurance planning and management; and research and technological development through financing, sponsoring, and monitoring.

BOB is a signatory of UNEP’s Environment Protection and Sustainable Development statement. The environment compliance studies conducted by the bank comprise independent reviews of current effluent treatment programs and plant facilities of firms, identification of deficiencies vis-à-vis regulatory liabilities, and prioritization of environmental causes with suggestions for corrective actions.

State-Level Financial Institutions

Most state-level financial institutions provide funds for environmental and pollution control and pollution prevention programs for technology upgrade and modernization. The following paragraphs describe institutions that have some level of financing available for such projects.

Andhra Pradesh Industrial Development Corporation Limited (APIDC) undertakes joint financing with other financial institutions (e.g., Andhra Pradesh State Financial Corporation (APSFC), IFCI, ICICI, IDBI, and commercial banks). The new equity policy of APIDC proposes to give special impetus to industrial development. The corporation has identified renewable sources of energy, energy-saving devices and appliances, energy efficient and waste reduction technologies, pollution control equipment and devices, and waste utilization and recycling as special focus areas for investment. APIDC has equity financing programs, term loans, and equipment financing programs.

Andhra Pradesh State Financial Corporation (APSFC) disburses financial assistance for establishing industrial and service enterprises in the tiny, small, and medium-scale sectors in the state of Andhra Pradesh. APSFC has extended financing assistance in the areas of environment and pollution control under its modernization, equipment financing, and technology development programs. Modernization program assistance includes upgrading of process, technology, and products; energy saving and anti-pollution measures; and conservation or substitution of scarce raw materials. APSFC undertakes joint financing with other financial institutions (e.g., APIDC, IFCI, ICICI, IDBI, and commercial banks).

Karnataka State Financial Corporation (KSFC) extends financing assistance for pollution control, pollution prevention, or clean technologies under its modernization, equipment financing, and technology development programs within the state of Karnataka.

Karnataka State Industrial Investment and Development Corporation (KSIIDC) promotes industrial growth in the state of Karnataka, especially among medium and large-sized firms. KSIIDC has extended financing assistance in pollution control, pollution prevention, or clean technologies under its equipment financing and direct equity participation programs. Recently, KSIIDC participated in an equity program to establish a common effluent treatment plant in the leather industry.

Other national and state-level financial institutions having financing programs for environmental projects are provided in Table 10.4.

Venture Capital Organizations

The venture capital market has limited programs for environmental projects. Some organizations that may consider financing environmental projects are the Risk Capital and Technology Finance Corporation (RCTC), which does not have a focused environment-funding program, but may provide funding as part of a comprehensive project (e.g., establishing a common effluent treatment plant), and the Swiss Tec Venture Capital, which considers investments in green technologies (resource saving, non/less polluting), manufacturing equipment, and cleaning equipment.

Energy Service Companies (ESCOs)

ESCOs are in the infancy stage. Some energy service firms such as Thermax and DSCL Energy Services (a unit of DCM Shriram Consolidated Limited) provide funds and energy services for the installation of energy saving equipment.
Table 10.4 - More Indian Government Finance Programs for Environmental Technologies
Organization
Environment Focus
Delhi Financial Corporation (DFC)No specific environmental financing program on offer. Funds pollution control equipment via an equipment-financing program. Has a concessional corporate program for replacing old vehicles.
Gujarat Industrial Investment Corporation (GIIC)Has a special environment program for small-scale industries offering inducements such as a 2 percent lower interest rate, a repayment period of 10 years instead of the standard seven years, and relaxed collateral requirements. No project had been funded under this program as of June 2000.
Housing and Urban Development Corporation Limited (HUDCO)Funds sewage treatment plants.
Industrial Finance Corporation of India (IFCI)Negotiating a letter of conduct with Asian Development Bank for project financing. The environmental impact assessment component in the appraisal process is expected to become dominant. The institution is not likely to adopt a dedicated
program on environmental promotion.
Industrial Reconstruction Bank of India (IRBI)Funds common effluent treatment plant projects.


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