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Kundapura: India's new solar town

By Praveen Bose in Bangalore
April 28, 2009 13:47 IST
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Padmakshi, who lives in Kundapura, in coastal Karnataka, never had any fear of gadgets. At least, she didn't show any in her eagerness to make her job in the kitchen easier.

Perhaps she was a touch too eager, and ended up being an easy prey for salesmen. One of them sold her an electric heater for Rs 4,000, which should have cost no more than Rs 2,200. And she could not even use it much, because the power supply was no more than four hours a day, and that too not necessarily when she needed it.

In the normal course, Kundapura, with a population of some 30,000, would have gone unnoticed despite its 92 per cent literacy rate. But Padmakshi's heater has begun to run whenever she wants it to, and along with it all the other things in Kundapura that need electricity.

Described as the 'town of the sun', it has been transformed by some of the 95,000 solar lighting installations by Selco Solar, a Bangalore-based social enterprise that is determined to illuminate the poorest of the poor areas in the country.

Harish Hande, 39, who co-founded Selco with Neville Williams in 1995, started it in the face of a cold shoulder from 'experts' who told him of the futility of the effort; that the cost of his products was prohibitive and villagers just wouldn't take to them.

Driven more by ideals and less by finances, Hande took heart from the success of micro finance and rural banking. One could leverage the model to sell solar lighting among villagers, he thought. When he started to test this belief, he was still writing his PhD thesis on rural electrification.

The seeds of Selco were planted on a trip to the Dominican Republic while Hande was pursuing his studies in energy engineering at the Center for Sustainable Energy at the University of Massachusetts. He saw the poor there using solar lighting.

Soon, Hande was in touch with Neville Williams, who had founded an NGO, Solar Electric Light Fund, or SELF, to promote solar energy in developing countries. In 1993 SELF received $40,000 from the Rockefeller Brothers Fund to install solar lights in 100 rural Indian houses. It asked Hande, still studying, to run the project.

But Hande was concerned about the servicing of the lights in the long-run, which only a company could ensure. A sustainable supply chain was a concern. Bringing the $40,000 grant into India proved complicated, given the capital controls at that time.

After managing to get a single solar lighting system on credit from Tata BP Solar, Hande sold it to a betel nut farmer, raising his first cash. "We were desperate for money," he says.

For over two-and-a-half years, Hande travelled the length and breadth of Karnataka, explaining how solar lighting worked and installing it in homes of wealthy farmers who could afford the Rs 10,000 system. He convinced rural banks to lend to poor families who wanted to buy the lights. All this while he was on, as he puts it, "a subsidised living"; he lived with friends and relatives while travelling.

After Hande had installed some 400 solar light systems, Selco received $128,000 from USAID, through its partner Winrock, to finance the first three rural service centres that sold, installed and serviced solar lights. With this, he took his first step towards building a sustainable rural delivery system. "This can succeed if you provide service and financing at the doorstep," he says.

Over two years, 1999 and 2001, Selco saw equity infusion of $750,000 after Williams raised funds in the US to promote solar lighting in India and Vietnam. The ownership of Selco was transferred from SELF to a US for-profit firm. With the new investors, Hande got a 2.5 per cent stake. Meanwhile, Selco received a $1 million loan from the International Finance Corporation, the soft lending arm of the World Bank, in 2003.

Selco broke even in March 2001 and earned cash surpluses for several years. Come 2004, and he was under pressure from shareholders over profits, which peaked in March 2005.

As providence would have it, Germany, with its solar power subsidies, ended up creating a global shortage of solar cells, and prices rose 47 per cent in just six months during 2005-2006. Since then, profits have been elusive. 

The commodity price inflation didn't help matters. What did was the recent equity infusion of $1.4 million from the Good Energies Foundation, the Lemelson Foundation and E+Co, social investors supporting development of solar energy to cater to the rural poor.

Hande now aims to sell solar lights to 200,000 more rural families in four years. The company provides regular after-sales service and aims to respond to breakdowns within 24 hours.

It supplies technology and know-how to many NGOs and is assisting Small Scale Sustainable Infrastructure Development Fund, or S3IDF, in development of collaborations with local financial institutions.

Since that first sale in Puttur in Dakshina Kannada district of Karnataka in September 1994, Selco, which was not even registered when the first sale was clinched, has come a long way. "We started with Rs 1,000 because that is all the money we had," says Hande.

But his model of social enterprise is equally important. He wants to prove that one can make profits while trying to meet social objectives. So there is still some way to go.

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Praveen Bose in Bangalore
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