Energising Microenterprise Led Economic Development in Rural India

Gulshan Thakur, the business head of Mahaurja Grameen Ltd, an energy service company operating mini-grids in the rural hinterlands of India, is looking over the latest customer data and is concerned to see that several of his plants are under-utilised by the very communities they are meant to be serving.

The question is - what’s the best way to increase the adoption of electricity in a way that can also drive economic opportunities for the local community?

An idea comes to him when he sees one of the most ubiquitous sites in rural India - a woman walking with two jugs of water balanced gracefully on her head. He knows most of these women can spend two hours a day fetching drinking water for their families - which might not even be safe to drink and he ponders why clean water isn’t more easily available.

Like most mini-grid energy service companies (ESCOs) Mahaurja Grameen Ltd was set up to provide sustainable electricity to rural India - where 237 million people live without electricity. Even in places with good central grid infrastructure, many households often have no connection or poor-quality supply for only a few hours a day. This is the gap companies like Mahaurja Grameen Ltd have been trying to bridge; now more than ever with the Government of India’s focus on driving up renewable energy. Since it began in 2005, Mahaurja Grameen Ltd has expanded to more than 35 plants across 3 states. The company knows sustainability and ease of access are key and so has embraced renewable energy. But Gulshan is also a mindful businessman keen on making his company strong and viable.

There are many factors at play, but one of them is electricity. Or the lack of it.

He already has tight control over key operating expenses - like diesel fuel usage for backup power and staff costs - which has improved his unit-level profit margins. He also understands his existing market wants expanded hours of electricity and more attractive pricing packages, so he’s adapted accordingly. But he knows what will really drive his business forward is increasing the uptake in electricity, especially in mini-grids that are being under-utilized.

That’s the moment Gulshan thinks about setting up a water treatment unit (WTU) in one of the villages where he operates a solar mini-grid that has only 40% plant utilization. With the support of Smart Power India (SPI), an agency set up by the Rockefeller Foundation to spur economic development among underserved rural India by providing access to reliable electricity, he decides to identify the right location for the WTU and outline the right micro-enterprises (ME) business and operating model.

Gulshan is enthusiastic about the idea of a water treatment ME because the benefits are three-fold: the community has easy access to safe drinking water, one WTU can give employment to 2-5 people, and demand for Gulshan’s mini-grid electricity increases. It’s a win, win, win!!

Electricity Demand of WTU
The electricity consumption by the WTU is driven by seasonal demand for water with an average consumption of 14-kilowatt hours (kWh) per day. The peak demand months for water are the hot summer months of April to June with the daily electricity demand of 17 kWh per day. Winter months, from November to February, have the lowest electricity consumption at 12 kWh per day (see figure 5). Energy consumption may drop further in the winter months due to reduced usage of the chilling unit.
 

The Power to Replicate
Seeing how successful one WTU can be, Gulshan wonders if this model can be replicated.

In discussions with SPI he finds that there is indeed massive growth potential - with a need for almost 25,000 new WTUS in three energy-deprived Indian states alone. That’s a new WTU in every four to five villages in Bihar and UP - two of India’s most populous states - as well as Jharkhand.
 

Gulshan is excited by the massive expansion potential of WTU micro-enterprises and notes that there are certain key enablers that can play a critical role in replicating WTUs across geographies.

a) Creating ME Portfolio Management Unit (PMU) within ESCOs’ organizational structure (operational factor) - The PMU would be responsible for the replication, scale-up, and performance of the various MEs connected to the ESCO mini-grids, thereby improving the success rate of replication and scale-up of OES. A PMU would consist of one or two senior personnel from the ESCO who would manage a team of regional ME representatives. These regional representatives would be responsible for the day-to-day operations of the WTUs. The senior ESCO members would be involved in strategic activities such as knowledge transfer between WTUS; training of the ME personnel (including entrepreneurs); and aligning with SPI (or other facilitators) with the support required. PMUs can find the most efficient ways of working, which can lead to increased profitability of MEs at a portfolio level. For example, PMUS could encourage the sharing of resources between similar MEs in the same region (e.g. transport vehicles and staff) and across different MEs (e.g., training modules), which would lower costs for MEs and drive profitability and efficiency.

b) Access to finance for both capital expenditure and working capital (financial factor) - This holds true for both the entrepreneur model and COCO model. In fact, ESCOs with a larger share of COCO model Mes may need access to more working capital than compared to those with more entrepreneur-led WTUS.

c) Marketing and branding (marketing and knowledge factors) - A portfolio of WTU MEs would benefit immensely from branding and marketing efforts, particularly if there is competition from other RO water service providers in nearby regions. Improving the brand and awareness of the water from WTUs at a portfolio level will also improve profitability by 1) increasing the demand amongst customers and 2) fetching a higher price from customers.

Impact on the local community
Gulshan knows that on average one WTU serves safe drinking water to 500 households. SPl informed him that the WTUs have the potential to provide 4.6 million households in Uttar Pradesh, Bihar, and Jharkhand access to safe water. This could lead to a significant drop in the number of water-borne disease cases in these states.

WTU micro-enterprises, supported by SPI and investments from other interested parties, helps in the overall growth of the water treatment industry.

As each WTU micro-enterprise has the potential to create sustained employment for 2-4 people from the local community, that means at state-level employment could be created for around 30,000 people, which is a huge impact.

- A case study by Smart Power India on Water Treatment Unit