Subsidy spoiling green image of Indian companies
The
report by BSE-GREENEX, the co-creators of India’s first energy efficiency index
with the Bombay Stock Exchange, says Indian companies show a lower revenue
earning per unit of carbon emitted due to subsidies.
NEW DELHI: Government policies on subsidy are preventing
Indian energy-intensive companies from improving their carbon image globally
even though comparable firms in the developed world on an average have higher
overall emission figures, according to India
Market and Environment Report.
The report by BSE-GREENEX, the co-creators of India's first energy efficiency index with the Bombay Stock Exchange, says Indian companies show a lower revenue earning per unit of carbon emitted due to subsidies. This distorts their emission intensity profiles and lowers their position in the global green index.
In contrast, the top 100 global companies exhibit lower mean emission intensity even though they have higher overall emissions on an average due to size of operations. In other words, these companies generate more revenue per unit of carbon emitted.
As an illustration, the report compares India's biggest generation utility NTPC and E.ON, the world's largest investor-owned company in the sector. While NTPC's emission is around half of E.ON's, it earns about a 10th in revenue because of subsidy in power even though the company has cut its emission intensity by over 21% from 2008-09 levels.
Market analysts said continued poor carbon image could impact Indian companies' ability to access overseas funds as global lending increasingly gets linked to green rankings. India is committed to reduce by 2020 its greenhouse emissions per unit of GDP by 20%-25%.
Outlining the energy efficiency performance of over 300 companies from India and abroad, the report shows wide gap in energy efficiency performance of sector leaders and the rest.
One of the trends, the report points out, is that the largest companies in the energy-intensive sectors tend to occupy the most carbon real estate.
In the steel sector, for example, the top five companies in terms of market cap, including state-run SAIL, private sector Jindal Steel and Power Ltd, Tata Steel, Sesa Goa and JSW Steel, account for around 85% of the total emissions for steel companies listed on the BSE 500.
In contrast, companies with relatively higher market caps in the oil sector, spend proportionately much lower amounts on power and fuel as a percentage of revenue.
The report sites state-run ONGC and private sector Reliance Industries Ltd as examples of increased efficiency of power and fuel consumption at higher relative market caps to the rest of the sector competitors. Hindustan Petroleum, another public sector company, exhibits the lowest ratio of emission per unit revenue in the sector.
An aberration is, however, seen among power utilities indicating that there are still significant efficiency gains to be made by larger companies such as NTPC. Coal makes up half of India's energy basket. Thermal power accounts for over 65% of generation, which is largely consumed by industry.
"It is clear that any market-based mitigation and awareness efforts that include the largest listed firms in the Indian markets will be able to target a significant proportion of total greenhouse gas emissions," the report says.
The report has ranked both largest Indian and global companies using emission intensity and Rural Electrification Corporation Limited and Power Finance Corporation Limited are two public sector enterprises that make it to the top of the ranking pile. HDFC, Sun Pharmaceuticals and ACC Ltd. are some of the private sector companies that have outperformed the rest on a balance of financial and efficiency parameters assessed by the report for fiscal 2011.
The report by BSE-GREENEX, the co-creators of India's first energy efficiency index with the Bombay Stock Exchange, says Indian companies show a lower revenue earning per unit of carbon emitted due to subsidies. This distorts their emission intensity profiles and lowers their position in the global green index.
In contrast, the top 100 global companies exhibit lower mean emission intensity even though they have higher overall emissions on an average due to size of operations. In other words, these companies generate more revenue per unit of carbon emitted.
As an illustration, the report compares India's biggest generation utility NTPC and E.ON, the world's largest investor-owned company in the sector. While NTPC's emission is around half of E.ON's, it earns about a 10th in revenue because of subsidy in power even though the company has cut its emission intensity by over 21% from 2008-09 levels.
Market analysts said continued poor carbon image could impact Indian companies' ability to access overseas funds as global lending increasingly gets linked to green rankings. India is committed to reduce by 2020 its greenhouse emissions per unit of GDP by 20%-25%.
Outlining the energy efficiency performance of over 300 companies from India and abroad, the report shows wide gap in energy efficiency performance of sector leaders and the rest.
One of the trends, the report points out, is that the largest companies in the energy-intensive sectors tend to occupy the most carbon real estate.
In the steel sector, for example, the top five companies in terms of market cap, including state-run SAIL, private sector Jindal Steel and Power Ltd, Tata Steel, Sesa Goa and JSW Steel, account for around 85% of the total emissions for steel companies listed on the BSE 500.
In contrast, companies with relatively higher market caps in the oil sector, spend proportionately much lower amounts on power and fuel as a percentage of revenue.
The report sites state-run ONGC and private sector Reliance Industries Ltd as examples of increased efficiency of power and fuel consumption at higher relative market caps to the rest of the sector competitors. Hindustan Petroleum, another public sector company, exhibits the lowest ratio of emission per unit revenue in the sector.
An aberration is, however, seen among power utilities indicating that there are still significant efficiency gains to be made by larger companies such as NTPC. Coal makes up half of India's energy basket. Thermal power accounts for over 65% of generation, which is largely consumed by industry.
"It is clear that any market-based mitigation and awareness efforts that include the largest listed firms in the Indian markets will be able to target a significant proportion of total greenhouse gas emissions," the report says.
The report has ranked both largest Indian and global companies using emission intensity and Rural Electrification Corporation Limited and Power Finance Corporation Limited are two public sector enterprises that make it to the top of the ranking pile. HDFC, Sun Pharmaceuticals and ACC Ltd. are some of the private sector companies that have outperformed the rest on a balance of financial and efficiency parameters assessed by the report for fiscal 2011.
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