Abstract

The underlying research has threefold objectives: (i) to explore the energy conservation status of the textile sector SMEs in Faisalabad, (ii) impacts of the energy conservation on firms’ energy productivity, and (iii) to identify what are the major challenges these firms are facing? To estimate aforesaid objectives, primary data has been collected by conducting a survey to the SMEs of weaving and finishing sector. Basically, energy conservation is the concept of engineering field, and there are different measures to conduct energy audit of the firms, which is quite hard for a student of economics to conduct it. Nonetheless, after getting the training and expert opinion, we designed a questionnaire related to the energy conservation through energy audit, and containing the questions pertaining to the motor efficiency, lightening efficiency, and firm’s awareness. In addition to energy audit, to explore its economic impacts, we obtained information of capital and labor employed, wages, electricity consumption, firms’ output, and total cost, and problems they face regarding achieving energy efficiency. Energy productivity is measured by dividing the output with electricity consumption (in units)—it is per unit output. The data is collected from 204 textile sector SMEs in Faisalabad by using cluster random sampling technique—first stage, two clusters are formed: (i) weaving, and (ii) finishing, while at stage, firms are selected randomly based on proportionate to size sampling. For empirical purpose, situational analysis and regression based analysis (OLS estimation) is conducted. The findings of the study obtained through situational analysis demonstrates that on the whole, 46 percent of the sampled firms contain supper efficient motors, around 26 percent firms comprise motors which are meeting standard criterion of efficiency, while around 27 percent of the sample firms have least efficient motors. Likewise, sector level analysis indicates that weaving sector is relatively more efficient than finishing sector. Moreover, in terms of lighting efficiency, around 76 percent firms are using energy efficient lights while 24 percent firms are found using inefficient lights. In addition, the OLS estimation demonstrates that those firms who are using energy efficient motors and lights are yielding higher per electricity unit output as compared to those firms which are inefficient. Further analysis reveals that both capital and labor significantly contribute to energy productivity, emphasizing the significance of strategic investments and efficient utilization of resources. Firm- specific features such as age, category also plays important roles, with older firms and those in specific categories representing higher energy productivity. The findings highlight the critical role of targeted investments in capital and labor, the adoption of energy efficient technologies. The survey results further show that rising electricity prices, taxes, costly raw material, and increasing cost of production are the key challenges which SMEs of textile sector in Faisalabad are facing, and even these factors are forcing some firms to shut down their units. These insights are valuable for policymakers and industry stakeholders targeting to promote the sustainable measures and improve competitiveness of textile sector.