Page 4 - Supply-side Financing of Improved Biomass Cookstoves in India
P. 4
Discussion Paper
support of their parent organisations and funding agencies for for testing, some of which are already being disseminated in
creating a viable market for their products, new entrants in the large numbers, do not fulfil the quality parameters set for ICS
cookstoves market find it challenging to put together requisite in India. At the same time, many cookstove suppliers who have
resources and capacities to establish a thriving business. More developed superior quality cookstoves find it difficult to enter
than 6514 improved cookstove manufacturers, operating at the the cookstoves market due to limited availability of capital to
local, regional, and national levels were identified during the set up a manufacturing and marketing infrastructure.
National Programme for Improved Cookstoves. However, it
was observed that majority of these suppliers discontinued TERI conducted a qualitative assessment of six
operations after the closure of the programme, or due to improved biomass cookstove suppliers (see Appendix for
limited operations to very small scales due to lack of further list) through interviews and focus group discussions to
programme support for scaling up, and delayed payments understand their activities, constraints, and perceptions of
from the government. Some of the suppliers which established the cookstoves market over the period of four months.
a market for their stoves after the programme (e.g., Oorja, The suppliers selected for the interview were those who
Philips, Envirofit, Grameen Greenway) have had the advantage have sold more than 1,000 ICS since commencement of
of strong organizational skills; capital infusion through grants, their business operations. It must be noted here that we
awards or loans; well-defined marketing strategy; and efficient differentiate ‘manufacturer’ from ‘supplier’ on the basis of
manufacturing facilities. Unsure demand for improved the precondition that ‘suppliers’ would engage in marketing
biomass cooking technologies, lack of capital and disorganized of ICS by establishing forward linkages with retailers/buyers,
market infrastructure have made small entrepreneurs wary as opposed to firms which only manufacture ICS. Figure 4
of entering the ICS market. Disorganized markets and a shows the percentage of capital invested in various activities
significant information gap has also resulted in sub-standard performed by the interviewed suppliers.
stoves being disseminated to ill-informed end-users, which
has further deteriorated the confidence of rural buyers in Most of the suppliers interviewed had alternative
improved biomass cooking technology. The Bureau of Indian businesses or sources of income. They observed that while
Standards has fixed quality benchmarks for both natural the capital investment required for setting up a manufacturing
and forced draft stoves, which is now used as the primary facility for ICS is high, returns from sale of stoves is not assured
yardstick by the Ministry of New and Renewable Energy due to deficient demand. As is evident from Figure 4, a large
for empanelment of improved cookstove manufacturers in proportion of their initial capital was spent in procurement
the National Biomass Cookstoves Initiative. The Energy and of raw material and marketing-related activities. While
Resources Institute (TERI) has established a Rural Technology most suppliers were unsure of what market opportunities
and Knowledge Centre (RTKC) in association with the Indian await them in the coming days, they were generally hopeful
Institute of Technology (IIT), Delhi, with support from the that the new ICS initiative of the Government of India may
Global Alliance for Clean Cookstoves for performance testing help recover some of the costs incurred during setting up
and evaluation of improved biomass cooking technologies. It their business.
has been observed that majority of the cookstoves submitted
The costs incurred by manufacturers in developing a
cookstove design was generally low, as research institutions
engaged in development of improved cooking technology were
Supplier F
Supplier E
Supplier D
Supplier C
Supplier B
Supplier A
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
R&D Procurement of raw materials Machinery & production Line
Manpower Overheads Warehousing & logistics
Marketing
Figure 4: Percentage of invested capital utilized for various activities carried out by six improved cookstove suppliers
4 MAY 2015
support of their parent organisations and funding agencies for for testing, some of which are already being disseminated in
creating a viable market for their products, new entrants in the large numbers, do not fulfil the quality parameters set for ICS
cookstoves market find it challenging to put together requisite in India. At the same time, many cookstove suppliers who have
resources and capacities to establish a thriving business. More developed superior quality cookstoves find it difficult to enter
than 6514 improved cookstove manufacturers, operating at the the cookstoves market due to limited availability of capital to
local, regional, and national levels were identified during the set up a manufacturing and marketing infrastructure.
National Programme for Improved Cookstoves. However, it
was observed that majority of these suppliers discontinued TERI conducted a qualitative assessment of six
operations after the closure of the programme, or due to improved biomass cookstove suppliers (see Appendix for
limited operations to very small scales due to lack of further list) through interviews and focus group discussions to
programme support for scaling up, and delayed payments understand their activities, constraints, and perceptions of
from the government. Some of the suppliers which established the cookstoves market over the period of four months.
a market for their stoves after the programme (e.g., Oorja, The suppliers selected for the interview were those who
Philips, Envirofit, Grameen Greenway) have had the advantage have sold more than 1,000 ICS since commencement of
of strong organizational skills; capital infusion through grants, their business operations. It must be noted here that we
awards or loans; well-defined marketing strategy; and efficient differentiate ‘manufacturer’ from ‘supplier’ on the basis of
manufacturing facilities. Unsure demand for improved the precondition that ‘suppliers’ would engage in marketing
biomass cooking technologies, lack of capital and disorganized of ICS by establishing forward linkages with retailers/buyers,
market infrastructure have made small entrepreneurs wary as opposed to firms which only manufacture ICS. Figure 4
of entering the ICS market. Disorganized markets and a shows the percentage of capital invested in various activities
significant information gap has also resulted in sub-standard performed by the interviewed suppliers.
stoves being disseminated to ill-informed end-users, which
has further deteriorated the confidence of rural buyers in Most of the suppliers interviewed had alternative
improved biomass cooking technology. The Bureau of Indian businesses or sources of income. They observed that while
Standards has fixed quality benchmarks for both natural the capital investment required for setting up a manufacturing
and forced draft stoves, which is now used as the primary facility for ICS is high, returns from sale of stoves is not assured
yardstick by the Ministry of New and Renewable Energy due to deficient demand. As is evident from Figure 4, a large
for empanelment of improved cookstove manufacturers in proportion of their initial capital was spent in procurement
the National Biomass Cookstoves Initiative. The Energy and of raw material and marketing-related activities. While
Resources Institute (TERI) has established a Rural Technology most suppliers were unsure of what market opportunities
and Knowledge Centre (RTKC) in association with the Indian await them in the coming days, they were generally hopeful
Institute of Technology (IIT), Delhi, with support from the that the new ICS initiative of the Government of India may
Global Alliance for Clean Cookstoves for performance testing help recover some of the costs incurred during setting up
and evaluation of improved biomass cooking technologies. It their business.
has been observed that majority of the cookstoves submitted
The costs incurred by manufacturers in developing a
cookstove design was generally low, as research institutions
engaged in development of improved cooking technology were
Supplier F
Supplier E
Supplier D
Supplier C
Supplier B
Supplier A
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
R&D Procurement of raw materials Machinery & production Line
Manpower Overheads Warehousing & logistics
Marketing
Figure 4: Percentage of invested capital utilized for various activities carried out by six improved cookstove suppliers
4 MAY 2015
