Role of energy efficiency in sustainable development of small-scale industry clusters: an empirical study

Small-scale industry (SSI) is a crucial component of the Indian economy with strategic importance. SSIs exist mostly in geographical clusters and many of them are highly energy-intensive. Their survival and growth needs efficient use of energy, a key input in their operations. Empirical studies on energy use and related issues like environmental impact, energy conservation potential, and the consequences of higher energy efficiency on SSIs are rare. This paper analyses energy consumption and associated issues in the textile dyeing cluster of Tirupur in the Indian state of Tamil Nadu. The energy consumption pattern showed dominance of biomass. Air pollution and CO2 emissions were estimated using standard, international emission factors by fuel and technology used. The importance of energy among the inputs was established by estimating the Cobb-Douglas production function which indicated energy as the second most important input. There was a statistically significant association of energy efficiency with all the economic performance indicators adopted in the study. Overall, it appears that energy-efficient firms are also likely to perform better on the economic front and hence experience higher returns to scale. The outcome of this study underscores the value of enhancing energy efficiency in SSI clusters, providing multiple benefits and ultimately contributing to sustainable development.