Three companies show why providing safe drinking water in India can be a sustainable business
- Started in 2008
- Investment so far Rs 40 lakh
- Customers per day 100,000
- Started in 2006
- No. of villages 4,000
- Cost of a filtration unit Rs 2-20 lakh
- Started in 2013
- No. of villages 165
- Water sold in a month 3.4 million litres
Bansi Dhar Yadav of Pacheri Khurd in Buhana tehsil of Rajasthan’s Jhunjhunu district is mostly confined to a chair these days. It started about 10 years ago as a pain in his lower back. The pain would steadily increase by the day, until one day when he tried lifting something and couldn’t.
“I began to get numbness in my fingers, and soon it spread to my entire body,” the 63-year-old recalls. His younger brother had died after similar symptoms, so, in 2006, Yadav’s son took him to Delhi. After an MRI scan that showed nerve compression, the doctor said it was the increased fluoride level in the water that was causing his problems. “I couldn’t move or eat food or even turn.
“I tried many treatments, including Ayurveda and yoga in nearby Sikar, but nothing seemed to work,” says the former forest contractor. He admits that since Sarvajal brought its purified water system to nearby Bagar in 2008, there has been an improvement. “I can now walk for a few metres. Earlier, someone had to help with everything.”
Against a normal acceptable TDS (total dissolved solids or impurities) level of 50-150 ppm for packaged or purified water, TDS levels in Pacheri’s ground water have been at 2,500-3,000 ppm, according to a Sarvajal officer. Mahendra Singh, 51, and Raj Singh Yadav, 53, together run the local franchise for Sarvajal at Pacheri Khurd. They sell purified water at 25 paise a litre, less than the 30 paise per litre price stipulated by the company. “That’s what it costs us. My objective was to do social work,” Singh says of his decision.
For companies in the water business in India, the social aspect is an inevitable corollary. The numbers speak for themselves: the per capita water availability is about 1,545 cubic metres per year according to the 2011 Census, and declining progressively, where a country is considered water-stressed if less than 1,700 cubic metres is available per person per year. Importantly, the World Health Organisation estimates that around 97 million Indians lack access to safe water, while newspaper reports say only two Indian cities have continuous water supply; all others get water for a few hours every day. It is a crisis waiting to explode but, meanwhile, it is also a business opportunity for companies such as Sarvajal, Waterlife and Spring Health, among many others.
“Water and health linkages are not easily understood in rural areas,” says Sarvajal COO Anuj Sharma. He points to the presence of bacterial contaminants as well as chemicals such as arsenic and fluoride due to agricultural and industrial pollution. “These are hard-to-remove chemicals and cause irreversible damage. Prevention is the only cure,” he says, adding that it takes time to convince villagers of the dangers of contaminated water and gain acceptance for water projects. “You can fall sick in one day, but the positive effects take time to show.”
Sarvajal was launched in 2008 as a CSR project by the Piramal Foundation in the family’s ancestral village of Bagar, Rajasthan. It is now a growing business with 179 installations of its RO-based purification system, which serve around 100,000 customers every day. The foundation has invested Rs 40 lakh in the venture, which is yet to show a profit, although Sarvajal is currently recovering its service and operational costs. “It is seeded and funded by the Foundation as a for-profit to prove the point that this is a self-sustaining model,” says Sharma. Over the years, the business model has evolved and the 179 locations now include 124 locations where the filtration unit is owned by Piramal Foundation, another 20 where the franchisees own the machines and the rest are corporate/CSR locations such as at AIIMS and DTC in Delhi, and HDFC Ergo, among others.
Started with a rural focus, Sarvajal now aims to replicate its hub-and-spoke model with a plant and dispensing machines — water ATMs — in urban areas as well, to address limitations with traditional piped water supply in serving the growing population in and around cities. It also works with other coporate organisations by installing filtration units in corporate campuses and for their CSR activities. Sarvajal’s project in Savda Ghevra, a resettlement colony near the Haryana border in the western fringes of Delhi, is “India’s first decentralised drinking water tender in an urban area,” says Sharma. With a source water TDS of 1500-1800 ppm, Sarvajal’s service, which started in 2013, already has over 400 paying members buying water from its 15 water ATMS here.
Sarvajal’s purified water is sold at 30 paise per litre. Many NGO-driven projects in water offer purified water at even lower prices, but Sharma says the machine operators in those cases aren’t incentivised, with the result that the unit isn’t viable and soon shuts down. “While philanthropic money goes into filtration plants, nobody knows how many hours they actually work on the field.”
The answer is technology. Sarvajal’s water purification plants are equipped with a GSM-based remote sensing equipment called Soochak. It interacts with a backend control system, enabling remote monitoring of the purification plants from its Ahmedabad call centre. A cloud-based system, it also allows monitoring to be done remotely from a laptop or computer. The local Sarvajal manager, too, is informed of any malfunction or issues with the purification system or water refills in the dispensing machines through alerts on his mobile phone. To prevent cash leakages, the water ATMs allow cashless transactions through an RFID card.
Sarvajal’s treatment plant for a 1,000-household community comes for less than Rs 10 lakh and has an average lifespan of eight to 10 years. The water ATMs are priced between Rs 50,000 and Rs 1.25 lakh and the revenue share varies on the ownership model: with company-owned machines, the franchisees pay 12 paise per litre of water that’s filtered; those franchisees who own the machines pay 6 paise per litre of water filtered.
Sarvajal expects to see increased demand from companies that would like to set up clean water facilities as part of their CSR initiatives. Sharma is most bullish about Sarvajal’s technology and the fact that the plants and ATMs run on solar power, which gives the company access to markets deep in rural and power-starved areas. “We are also trying to connect entrepreneurs with banks for preferential lending rates to get more people on board.”
Like Saravajal, Waterlife, too, operates RO-based water purification systems in rural areas of Kerala, Andhra Pradesh, Karnataka, Maharashtra, Rajasthan, UP, Bihar, Jharkhand and West Bengal. It also works in the slums of Puducherry, Bengaluru, Ranchi and Kolkata. Funded by Aavishkaar and Matrix Partners, Waterlife was started in 2006 by three senior corporate executives — Sudesh Menon, formerly GE’s South East Asia head, and Mohan Ranbaore and Indranil Das from Xerox. “The key was the business model, not so much the technology; how to make it work in rural areas and execute in difficult conditions,” says Menon. “We have been profitable from the first year of operations.” That’s been possible because Waterlife partners with local governments to fund the cost of its filtration systems, which cost between Rs 2 lakh and Rs 20 lakh. It has over 100 projects in operation where it helps set up community water stations and units for treatment of water for fluoride, nitrate and other high TDS contaminants, which reach out to over 4,000 villages with population between 500 and 20,000. In remote areas, Waterlife provides contamination removal units that can be attached to handpumps.
With users paying Rs 3-5 for a 20-litre can of water, Waterlife plans to grow at a CAGR of 70% over the next few years. “We can scale rapidly. We are trying to solve a social problem with the discipline of a business,” says Menon.
Back to basics
Not all drinking water initiatives are capital intensive. Spring Health is creating an alternative option through the simple and basic process of chlorination. Spring Health is part of Windhorse International, founded by US-based social entrepreneur Paul Polack. It is funded by a group of investors, including First Light Ventures, Acumen Fund (which had invested in the pilot stage and has now exited), Calvert Fund, Phil Friedmann Foundation, Chris Goggin, Mal Warwick, Rianta Capital and Stone Foundation, who have brought in $550,000 to the venture, so far. The project is spread across 107 villages in six districts of Odisha, where drinking water is sold at 40 paise per litre. After months of testing, the commercial rollout for Spring Health began in June 2013. The franchisee, usually a popular kirana, mobile or medical store, is signed on for two years. “In the past four months, we have added 73 villages, averaging around one village a day,” says Spring Health CEO Kishan Nanavati.
Photograph by Sandipan Chatterjee
Spring Health purifies water removing bacterial contamination using chlorination. “We are not in a position to address chemical and mineral contamination, so we look at water table depth of not more than 30 ft,” points out Nanavati. The water is tested at government-approved labs for pH level, presence of iron, nitrates, sulphur, fluoride, arsenic and bacterial contamination before it is considered for use. At the franchisee’s location, the water runs through two filters into a storage tank above, where it is treated with chlorine oxidants and tested before being made available for drinking. Spring Health’s team also carries out random tests at point of consumption in customers’ homes.
Typically, a deliveryman takes 20 jars of 10 litres each in jerry cans on an autorickshaw or cycle rickshaw and goes on a beat schedule on a daily basis. Ideally, he serves a catchment of 500-600 homes, including tiny hamlets, within a 2 km radius of the village kiosk. So far, Spring Health has established its water kiosks in 165 villages of Odisha, serving about 17,400 families, and selling 3.4 million litres of clean drinking water in December 2013 alone, says Nanavati. The plan is to reach 6,000 villages in the state in five years, and 10,000 villages across India by 2018. This year, Spring Health will expand into either Bihar, Jharkhand or eastern Uttar Pradesh.
It won’t be easy, Nanavati admits: there’s a fair bit of resistance to selling of water. “The first question they ask is, ‘Why should we buy your water when we have ponds, wells and rivulets behind our homes from where we have been drinking all our lives?’” To address this, it conducts water testing melas, taking village water samples, incubating and showing villagers the bacteria in regular water, and comparing with the purified water. “We show them cue cards, visually informing them about the presence of bacteria and E.coli in their village water — which they drink straight — and the side effects.”
Photograph by Sandipan Chatterjee
Spring Health often partners with local self-help groups (SHGs) to reach out to its rural customers. “Odisha has the largest number of NGOs in the country. Some health awareness is already there,” says Nanavati. A dedicated marketing team stays on in the village for a couple of days after installation to promote the service door-to-door, and performs a skit in the evenings on safe water for a healthy family. There have been some surprises along the way too. Spring Health expected the predominantly Muslim residents of Kerang village in Khurda to be very conservative in taking to this project. It was quite the opposite. “It is now one of our top five villages in terms of sales.”
Spring Health works with franchisees on a staggered revenue share plan. From launch to reaching 1,250 litres, it makes 75% of the revenues generated from sale of the chlorinated drinking water. Once the franchisee crosses 1,250 litres and up to 2,000 litres, the share is 50:50. Over 2,000 litres of water sold, the franchisee makes 75% of revenues generated.
Currently, it is reaching one household in five in the villages it serves. “In the next year, we should reach 33% and in three years, we aim to reach 50%,” says Nanavati. In FY13, the company made close to Rs 30 lakh and the business is expected to turn in profits by FY16.
The rural market has its own challenges, though. Caste considerations can be a trigger point. To avoid any conflict between upper and lower castes (who are often not permitted to share common water resources), Spring Health started home delivery of water to the Dalit households in one village. The other communities then promptly demanded home delivery for themselves. Today, 95% of the water is delivered at customers’ homes. The jerry can stays with the customers, reassuring them that no one else has touched the water. For the company, it is a time-saving move, since customers are responsible for cleaning their own jerry cans.
India’s drinking water problem will take more than a few projects to crack, given its scale and complexity. “The market is big and there is no single player who can solve it,” says Menon. But if these social enterprises are any indication, there’s plenty of hope.