Group captive renewable power can cut electricity costs for India’s secondary steel MSMEs by up to 34%, with participating companies able to recover their initial equity investment in one to two years, according to a new report by JMK Research & Analytics, in collaboration with WWF-India, Climate Catalyst and CII-Green Business Centre (CII-GBC).
In group captive procurement model, several units jointly own a renewable plant and draw power in proportion to their stake. Pooling demand across the units brings the project to a viable size that a single MSME steel unit would not reach on its own.
The report states that for an integrated steel producer in Raipur, a 10-12 MW AC allocation from a 50-70 MW AC Group Captive solar installation is expected to generate average annual cashflow savings of around INR 2.4 crore over the project’s 25-year life against an equity contribution of INR 2.7 crore, with landed tariffs approximately 34% below prevailing grid tariffs and a payback period of one to two years. The project also abates approximately 12,500 tonnes of CO₂ annually.
“For units of this scale, for instance in Raipur, a saving of INR 2.4 crore a year is significant, particularly in a sector where margins are narrow. The investment is recovered within two years, which makes it a sound commercial decision,”said Siddharth Agrawal, chairman, Steel Subcommittee, CII Eastern Region, and managing director, Godawari Power & Ispat Ltd.
The savings vary with each unit’s share of the group captive RE project. In Rajkot, the report estimates that a foundry taking a 5 MW share of a group captive solar project would need to put in about INR 1.4 crore in equity and lower its electricity costs by around 20%. In Raipur, where units (integrated furnace and rolling mill) are larger, a unit taking a 10 MW share would put in about INR 2.7 crore and lower its tariff by around 34%. In both these cases, the initial investment is repaid within one to two years.
The report evaluates three ways a secondary steel MSME in Raipur and Rajkot can buy renewable electricity over a 25-year project life: full capex, group captive, and third-party open access. The report finds that group captive is the only model that combines an affordable equity outlay with real savings at MSME scale.
The full capex model offers the highest savings over the project’s life, but requires substantial upfront investment, dedicated land and in-house maintenance capacity. Third-party open access requires no capital outlay, though applicable surcharges significantly limit the net savings it delivers.
Electricity constitutes up to 40% of operating costs for induction furnace and electric arc furnace-based units. Across most states, grid electricity tariffs range from INR 7–8/kWh, while RE can be procured for INR 4.5–6/kWh.
The report ranks 22 clusters on a Renewable Energy Attractiveness Index, with Raipur, Belgaum, Shimoga, Rajkot and Bhavnagar emerging as the top five. The index scores each cluster on state policy, cost-saving potential, electricity consumption, untapped renewable market potential and land availability. The report then takes Raipur and Rajkot as case studies, modelling in detail what a representative unit in each would invest and save if it chooses to integrate renewable electricity.
“A cluster-based approach can fundamentally change how MSMEs access renewable energy. Aggregating demand through industrial associations makes projects more bankable, enables optimal plant sizing, and spreads equity participation across multiple consumers, reducing the investment risk borne by any single unit,” said Prabhakar Sharma, senior consultant, JMK Research & Analytics.
“For India’s secondary steel sector, renewable energy is not just a decarbonisation strategy, it is a business competitiveness strategy. This report shows that models like group captive procurement can help MSMEs reduce electricity costs while lowering emissions. As India develops Green Steel Clusters, access to round-the-clock renewable power will be critical to sustain operations and drive emissions reductions. In this context, such models offer a scalable solution to meet continuous demand while accelerating the shift away from coal-based pathways,” said Vishal Dev, Director – Sustainable Business, WWF-India.
To scale group captive procurement, the report calls for time-bound open access concessions for steel clusters, portfolio-level credit guarantees through the Small Industries Development Bank of India (SIDBI) or the Indian Renewable Energy Development Agency (IREDA), and a standard framework for group captives across states.
“MSMEs account for a significant share of India’s secondary steel production, and are central to decarbonising the sector. India is well placed to support that shift. Renewable energy integration is one of the few levers that lowers production costs and emissions at the same time, allowing units to reduce their carbon footprint while becoming more competitive and CBAM compliant. We are committed to supporting initiatives of this kind, which can help unlock renewable energy access at scale for small producers,” said Sakshi Balani, co-Acting CEO and director, India, Climate Catalyst.
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