New Delhi, Aug 24 - The government is setting up a risk guarantee facility and a venture capital fund to improve energy efficiency in India as part of the National Mission on Enhanced Energy Efficiency approved by the Prime Minister's Council on Climate Change here Monday.

A new 'Perform, Achieve and Trade' (PAT) mechanism which will assign energy efficiency improvement targets to the country's most energy-intensive industrial units is being set up under the mission. Under a provision, they will be allowed to retain any energy-efficiency improvements in excess of their target in the form of Energy Savings Certificates, called ESCerts. Units will also be allowed to use purchased ESCerts to meet their targets.

Other mission initiatives include expanded use of the carbon market to help achieve market transformation towards more energy-efficient equipment and appliances, and the creation of two funds to help channel investment into energy-efficiency projects.

One of the funds, the Partial Risk Guaranty Facility, will provide back-to-back guarantees to banks for loans to energy-efficiency projects so as to reduce the perceived risks of these projects. The other fund, a Venture Capital Fund, will support investment in the manufacturing of energy-efficient products and provision of energy-efficiency services.

Another major goal of the Mission is the promotion of Energy Service Company (ESCO) based upgrades to energy efficiency in buildings, municipalities and agricultural pumps. ESCOs will invest in energy-efficiency investments, and will be paid over several years from the resulting energy savings.

Prime Minister Manmohan Singh said: 'This mission will enable about Rs.