Japanese ODA Loan
Ex-Ante Evaluation (for Japanese ODA Loan)

1. Name of the ProjectCountry: India
Project: Micro, Small and Medium Enterprises Energy Saving Project (Phase 3)
Loan Agreement: September 1, 2014
Loan Amount: 30,000 million yen
Borrower: Small Industries Development Bank of India (SIDBI)
2. Background and Necessity of the Project(1) Current Status and Issues of the Energy Sector and Micro, Small and Medium Enterprises(MSMEs) in India
With its recent rapid economic growth, India, the world’s fourth largest energy consumer, hasbeen consuming increasingly large amounts of energy. To ensure a stable energy supply andconserve the environment, it is urgently necessary for the country to promote efficient use ofenergy (energy saving). MSMEs play an important role in the country’s economy, accounting forabout 45% of the nation’s industrial output and 43% of total exports (2011). However, theirenergy efficiency is low mainly due to aging equipment. They also lag behind large enterprises
in making energy-saving efforts because of their limited finances for equipment investment andlimited skills and know-how regarding energy saving as well as lower awareness of theimportance of energy saving.
(2) India’s Development Policies for the Energy Sector and MSMEs and the Role of the Current
ProjectThe Government of India set the policy objective of “improving the efficiency of energy use by
20% by 2017” in the 11th Five-Year Plan (April 2007 to March 2012) and showed a policy offurther restraining energy demand through energy conservation in the 12th Five-Year Plan (April2012 to March 2017). As a development policy for MSMEs, in 1990 the government establishedthe Small Industries Development Bank of India (SIDBI), which is the executing agency of theProject, to promote the development of MSMEs. Under the 2006 MSME Development Law, thegovernment further expanded the scope of MSMEs eligible for assistance. To achieve inclusive
growth for all, the 12th Five-Year Plan emphasizes the importance of growth strategies forMSMEs as an important sector for job creation.
(3) Japan and JICA’s Policy and Operations in the Energy Sector and Micro, Small and Medium
Enterprises
The Government of Japan places importance on the development and promotion of energy
saving technologies to strengthen national energy security and realize a low-carbon society; itplans to assist in introducing such technologies in the industrial sector. In the 7th Japan-India
Energy Dialogue held in September 2013, both countries confirmed the importance of bilateral
cooperation in the area of energy saving, where the Japanese Country Assistance Program for
India states the importance of assistance with “improvement of poverty and environment issues”
as a priority area. JICA also sees “response to environmental problems and climate change” asa priority area for India. The Project, which will assist MSMEs in the development ofenergy-saving technologies, reflects the Government of Japan’s policy and JICA’s view.
Examples of recent technical assistance efforts include JICA’s training program to develop smalland medium enterprises in the Project for Visionary Leaders for Manufacturing Programs(2007-2012) as well as projects, such as the Research Partnership for the Application of Low
Carbon Technology for Sustainable Development (SATREPS) (2010-2014) and theEnergy-Saving Technology Training (2008-2010 and 2011-2014). The Project’s predecessors

are MSMEs Energy Saving Project in 2008 and MSMEs Energy Saving Project (Phase 2) in2011, which are both Japanese ODA loan projects.
(4) Other Donors’ ActivitiesSIDBI also received loans from the World Bank in 2005, 2009 (jointly with the Department forInternational Development (DFID), Kreditanstalt für Wiederaufbau (KfW) and Gesellshaft fürInternationale Zusammenarbeit (GIZ)), 2010 and 2011; the Asian Development Bank (ADB) in 2010;
KfW in 2006 and 2013; and L'Agence Française de Développement (AFD) in 2010.
(5) Necessity of the Project
The Government of India is working to improve the Country’s energy efficiency by enacting
energy-saving laws and establishing a general energy policy in order to meet demand for electricity
that has been increased by recent economic growth and the increase in the population. As part of its
efforts, the government makes preferential loans to MSMEs under the MSME Development Law
because MSMEs have more room for improvement in energy efficiency than large enterprises.
Assisting India’s MSMEs in their energy-saving efforts by providing them with mid- to long-term
funds through SIDBI, the Project’s Executing Agency, meets the country’s development needs andis consistent with the assistance policies of Japan and JICA. For this reason, it is highly necessaryand appropriate for JICA to assist the Project.
3. Project Description(1) Project Objective
The Project provides medium- to long-term financial assistance to MSMEs in India primarily tomake energy efficient facilities, which will improve energy efficiency in the MSME sector,
thereby contributing to environmental improvement and sustainable economic development in
the country, as well as mitigating climate change. The Project will also aim to promote highenergy-efficiency equipment, and will allocate part of the funds to the health care sector for pilot
projects.
(2) Project Site / Target Area: Throughout India(3) Project Components (Including Procurement Methods)
Provide MSMEs (end users) with the funds necessary to invest in energy-saving equipment(and some medical equipment) in the form of two-step loans through SIDBI or three-step loans
through intermediary financial institutions.
(4) Estimated Project Cost (Loan Amount)
33,060 million yen (Loan Amount: 30,000 million yen)
(5) Project Implementation Schedule
April 2014 to March 2019 (60 months). The Project will be deemed complete when the entire
amount of loans has been disbursed (March 2019).
(6) Project Implementation Structure1) Borrower: SIDBI
2) Guarantor: The President of India
3) Executing Agency: Same as 1)
4) Operation and Maintenance System: Same as 1)(7) Environmental and Social Considerations / Poverty Reduction / Social Development
1) Environmental and Social Considerations(i) Category: FI(ii) Reason for Categorization: According to the “JICA Guidelines for Environmental andSocial Considerations” (put into effect in April 2010; hereinafter, the “JICA Guidelines”),
the Project is classified as Category FI because no sub-projects can be identified before
approval for JICA’s loans (such sub-projects are estimated to have an environmental

impact).
(iii) Other Aspects/Monitoring: In the Project, SIDBI shall categorize sub-projects and takenecessary measures for the relevant categories according to India’s domestic laws andthe JICA Guidelines. Since the Project mainly aims to invest in energy-saving
equipment, no sub-projects fall under Category A.
2) Promotion of Poverty Reduction: None
3) Promotion of Social Development (e.g. Gender Perspective, Measures for Infectious
Diseases Including HIV/AIDS, Participatory Development, Consideration for Persons withDisability, etc.): None
(8) Collaboration with Other Schemes or Donors: Through technical assistance, the Project willhold seminars to raise awareness of energy saving among MSMEs and improve the abilityof financial institutions to screen loan applications for energy-saving efforts. The Project will
use the Energy Saving Equipment List prepared for Phase 1 and Phase 2 of the Project.
Through technical assistance, JICA will proactively communicate with other donors
assisting SIDBI to avoid duplication of assistance by other donors and strengthen mutuallycomplementary relationships.
(9) Other Important Issues: None
4. Targeted Outcomes(1) Quantitative Effects
1) Performance Indicators (Operation and Effect Indicators)
Indicators

Baseline(2013)

Target (2021)(two years after projectcompletion)

OutputNumber of sub-loan cases committed
and disbursed
2,000(cumulative)
Number of seminars held to raise
Fixed at the beginning ofawareness of energy saving among
the project
MSMEs
Number of participants in seminars to
Fixed at the beginning ofraise awareness of energy saving
the project
among MSMEs
Fixed at the beginning of
Reduction in energy consumption
the project(oil equivalent tons/year)
Reduction in greenhouse gas
Fixed at the beginning ofemissions
the project(CO2 equivalent tons/year)
2) Internal Rate of Return: Not calculated(2) Qualitative Effects
Increased awareness in energy saving among MSMEs; improvement in the ability of financial
institutions to screen loan applications by MSMEs for energy-saving efforts; improvement inenergy use efficiency; environmental improvement; sustainable economic growth; mitigation ofclimate change
5. External Factors and Risk Control
Risk of fluctuation in energy-saving demand, risk of system changes

6. Results of Evaluations and Lessons Learned from Past Projects(1) Evaluation Results of Similar Projects
The following lesson has been obtained from the results of ex-post evaluations of projects todevelop small and medium enterprises (MIDF, BITMB and BPIMB) in Malaysia: if there is morethan one executing agency (financial institution) involved in the provision of development loans,
it is effective to be flexible about the size of the sub-project as well as the terms and conditionsof sub-loans so that the financial needs and sizes of targeted end users are grasped well byeach financial institution.
(2) Lessons for the Project
To benefit from the above lesson, JICA will secure flexibility of loan conditions and of decisions
at each intermediary financial institution.
7. Plans for Future Evaluation(1) Indicators for Future Evaluation
1) Total number of approved and disbursed sub-loans2) Number of seminars held to raise awareness of energy saving among MSMEs
3) Number of participants in seminars to raise awareness of energy saving among MSMEs
4) Reduction in energy consumption (oil equivalent tons/year)
5) Reduction in greenhouse gas emissions (CO2 equivalent tons/year)(2) Timing
Two years after project completion