An ESCO makes investments for equipment necessary to save energy in a company and recovers the cost from the savings generated over the years. The advantage of this concept is that the industrial unit need not make any investments for power or utility services like steam, air-conditioning and compressed air. The ESCO will not only invest, but also manage, generate savings and guarantee repayments. The concept of outsourcing utilities, widely popular in the US, the UK and Europe, is yet to take off in India as most Indian companies do not want outsiders to monitor local operations, says MKRC chairman MK Raju.

Also, the procedural problems involved in getting the projects funded by financial institutions were also a major deterrent. However, an ESCO which will make the investments on its own will solve the problem. MKRC plans to do just that and take a lead in realising the potential of this concept in India, he said.

The ESCO will among other things use CHP (combined heat and power) systems to generate power at half the cost. The potential of CHP, efficiency in power generating plants and distribution to the best international standards will enable India save 15,000 mw of power from the existing facilities, said Raju. And this would save investments of around Rs 120, 000 crore for new generating capacity, transmission and distribution.