Water, waste & will: How India’s MSMEs can lead the sustainability revolution

India’s 63 million micro, small and medium enterprises (MSMEs), which contribute 30% to the country’s gross domestic product (GDP) and employ over 110 million people, find themselves at a crucial juncture. Their relationship with water and waste, particularly in textile dyeing, tanning, food processing, and paper, presents an opportunity for transformation rather than an obstacle. With the right technologies, policy incentives, and community accountability structures, MSMEs can become the backbone of India’s sustainable industrial future by focusing on water management right now.

India accounts for 18% of the global population but possesses only 4% of the planet’s freshwater resources, making industrial water stewardship a national priority. Nearly 70% of our surface water already shows signs of stress from discharge. Urban centres generated 72,368 million litres per day (MLD) of sewage in 2020-21, yet operational sewage treatment plant (STP) capacity barely managed to treat only 28% of wastewater. Though focused data is limited, the textile industry, largely MSME-scale, accounts for 20% of global industrial water pollution and yet holds the highest potential for water recycling innovation.

Technology to aid
MSMEs must be encouraged to adopt proven water recycling and waste management technologies. IIT Madras deployed Electrochemical Ozone Oxidation Systems at Tirupur’s textile cluster, purpose-built for smaller units, in December 2023, cutting RO infrastructure costs by 75%. Membrane Bioreactors (MBRs) that combine biological treatment with membrane filtration for high-quality water reuse are ideal for food processing and dyeing MSMEs. Zero Liquid Discharge (ZLD) systems recover and recycle virtually all wastewater on-site, eliminating effluent discharge entirely. Low-cost, nature-based treatment systems suited for smaller clusters in semi-urban areas hold a lot of potential too. Deploying AI-enabled water auditing tools for real-time monitoring of consumption and discharge patterns helps identify inefficiencies at the unit level.

Waste-to-Energy (WtE) technologies also offer a compelling dual solution of managing waste while also generating value. Incineration with energy recovery converts solid waste into electricity and heat, suitable for large MSME clusters with common facilities, while gasification methods to thermally convert organic waste into syngas (synthesis gas) for electricity generation are ideal for agro-processing units. Pyrolysis, another WtE technology, converts plastic and biomass waste into fuel oil and char without combustion, which is relevant for packaging-heavy industries.

Anaerobic digestion, also a WtE technology, breaks down organic effluents to produce biogas (methane), which can power the unit itself, a model gaining traction in food-processing clusters. Cluster-level WtE plants, supported by the government’s PPP models, can simultaneously address waste disposal and energy costs for MSMEs.

Natural fibres and community ownership
A structural solution lies upstream, in material choice. Encouraging MSMEs, especially in textiles and packaging, to shift toward natural fibres, such as jute, hemp, coir, and organic cotton, significantly reduces the chemical load in wastewater. Natural fibre processing requires fewer synthetic dyes, consumes less water, and generates biodegradable waste that integrates well with anaerobic digestion systems. India’s rich agrarian base makes natural fibre adoption both ecologically sound and economically strategic.

Without community ownership, technology and policy alone may come across as insufficient. A “Citizens Control Room” (CCR) in every district, modelled on a participatory governance framework, can bridge the gap between regulation and reality with individuals affected by industrial pollution, i.e., farmers, fisherfolk, and residents near MSME clusters, local NGOs, panchayats can register as members. The CCR would function as a real-time grievance and monitoring hub, equipped with a digital dashboard linked to the Central Pollution Control Board’s (CPCB) and State Pollution Control Board’s data.

A citizen-reporting mechanism for visible pollution events, with timestamped photographic evidence as well as a district-level nodal officer accountable to both the administration and CCR members, are important steps for the proper functioning of such CCR. It will democratise environmental accountability and create a live feedback loop between industry, government, and community—far more effective than top-down inspection regimes alone.

The Path Ahead
Water efficiency, if handled wisely, could very well be the next competitive advantage for Indian MSMEs. The above strategies provide a comprehensive and inclusive roadmap where MSMEs need not choose between growth and sustainability. With the right policy architecture, these two goals are inseparable. Subsidised technology access, cluster-level infrastructure, and empowered communities are not costs to the exchequer but investments in India’s long-term industrial and ecological resilience. The government’s role here is critical; subsidising the cost of adoption through targeted credit-linked technology or infrastructure upgradation schemes or tax holidays for the community of any region can make this transition economically viable for even micro-enterprises.

The author is Executive Director, National Small Industries Corporation Ltd (NSIC). Views are personal