A vast majority of the Indian population lives at the base of pyramid (BOP). If one takes underdeveloped countries across the world, a majority would have no have access to basic facilities. Their dependence on natural resources for cooking and lighting needs is very high, thus exerting pressure on the environment.

Typically, a family of five needs to pay around Rs. 315 per month to buy wood while using traditional three-stone stoves. Even if they collect wood from their surroundings, it is a challenge during the monsoon and winter. Inefficient burning of fuel results in higher emissions that cause respiratory illnesses to which women and children are especially susceptible. Apart from the adverse impact on health and the environment, biomass fuel collection is time consuming and this time can be used better for generating income, study or leisure.

Mukundan Parthasarathy, an entrepreneur with over four decades of industrial experience in both industry and social sectors, realised the need to provide this segment with energy-efficient products for cooking and lighting to enhance the quality of life in tier-II India. In 2002, he founded Servals Automation Pvt. Ltd. (SAPL) in Chennai to give back “something” to the community and create a business model that touched two aspects: improve the lives of those at BOP and provide them with an opportunity for entrepreneurship.

“The focus is on promoting environment–friendly practices at the grass-roots level that help in conservation of fossil fuels and reduction of carbon emission, indoor air pollution and deforestation,” he explains. SAPL achieves this by providing products that use alternate and renewable energy sources.

High standards

Realising that the existing products targeted at the BOP are usually focused only on affordability because of the price sensitive nature of the market, there is limited innovation and material substitution. “As a result, there is a compromise on quality and design, the products are difficult to maintain and do not meet personal and environmental safety and health standards,” Parthasarathy points out.

To address this problem and introduce quality products that meet international standards, SAPL has established a 12-member team with a special focus on research and development. It has also partnered with leading organisations across the globe such as IIT-Madras and IIT-Guwahati, Rockefeller Foundation, U.S. and Delft University, Netherlands among others to develop a range of products that include kerosene burners and stoves, TLUD (top lit updraft) biomass stoves; wood chulahs and plant oil stoves. Each of these products is designed for energy conservation and cost saving without compromising on quality and design. This is vindicated by the several global organisations such as Aprovecho Research Centre, U.S., and Biochar Research Project, Australia.

In addition to developing products, SAPL is also focused on enabling local communities to be self-sustained where energy requirements are concerned. Therefore, it has created an energy stream for the wood stoves in canister-sized fuel packets; plant oil stoves/lamps can use unrefined plant oil that is locally extracted and distributed.

Meeting challenges

Since its inception, SAPL has managed to corner seven per cent of the market share in India for kerosene stoves and is present across the country and also exports to countries like Nepal, Kenya, Australia and the U.S. Around 20 per cent of urban households and three per cent of rural households use kerosene stoves while 75 per cent of the households in India co-use biomass and cow dung as a household fuel.

“While we’ve made good progress, it hasn’t been easy to achieve this in a price sensitive market that is concerned with tangible and measurable benefits of energy efficiency – namely, the amount of money saved through reduced fuel usage,” says Parthasarathy. The intangible benefits such as reduced indoor air pollution and carbon footprint and improved health are not perceived as pluses for the product. This market also has high barriers to change with regard to lifestyle or cooking habits even if the changes represent an improvement over the current state of affairs.

As a majority of the customers are low-income households and are illiterate, communicating the value proposition was another challenge. Therefore, SAPL chose the social entrepreneurship model of keeping its own team small, employing only 12 people currently. While this keeps the company’s own overheads low and thus, pass on the cost benefit to the end consumer, relying on self help groups for sales also enabled it to use them as testimonial advertisers as well as sales agents. “Nobody else can describe the product and persuade the target audience as well as they can,” points out Parthasarathy.

The marketing message across the years has consistently focused on how the product will ‘pay for itself’ over a year of use because of its energy efficiency. SAPL has stayed away from directly advertising its products, but has supported sales partners in formulating their marketing and communications plans. Networking and visibility are important, as are continued product innovation and material substitution. The company is trying to mobilise carbon funds. “We have established the carbon finance eligibility for our products and are trying to tap carbon subsidies for our products to make them affordable to the poor,” shares Parthasarathy.

Bright future

The company, which was started with seed funding from Mumbai-based Aavishkaar Micro-Venture Capital Fund, has received Rs. 60 lakh from Environment Resources Management, U.K. in 2008 and Rs. 45 lakh from Grassroots Business Fund, U.S. in 2010. These rounds have been used for scaling up production capacity across its product range, research and development, expanding SAPL’s marketing reach geographically and getting product accreditations.

“By 2015, we see ourselves as a pioneering and influential player in the cooking energy space. Our energy solutions represent an integrated approach to the global concerns around cooking energy, especially in taking the technology advancement to BOP,” says Parthasarathy. The commercial emphasis has been on two products – kerosene burner/stoves and TLUD wood gasifier stoves. SAPL aims to increase its market share from the current seven per cent to 15 per cent by 2015, thereby touching around 1.5 million households and increasing its current turnover of Rs. 4.5 crore to Rs. 15 crore.

Getting the product mix right, its sales strategy in place and expanding production are going to be the key focus areas for this social venture that has networked extensively with the people at the BOP segment to understand the pulse of the market it operates in.

Concept in brief

The vast majority of the population across the globe live at the base of pyramid, struggling to find affordable solutions for basic needs such as cooking and lighting. Realising that the existing products targeted at this group compromises on quality and are difficult to maintain, Mukundan Parthasarathy started SAPL with seed funding from Aavishkaar Micro-venture Capital Fund in 2002. With a focused research and development team, and tie-ups with leading institutions for partnership in product development, it has introduced a series of cooking and lighting solutions that ensure conservation of resources at affordable prices. To keep its costs low, the company uses the NGO and SHG network extensively for manufacturing and marketing. It continues to innovate so that it can address the visible need for low-cost solutions, and also pass on the indirect benefit of reducing indoor air pollution and energy consumption.