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BW Businessworld

Power To Empower

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Growing up, Gyanesh Pandey hated his home state Bihar. Today, the 33-year-old doesn’t want to step out of the more underdeveloped villages of the eastern state. Pandey, the co-founder and CEO of power generation and supply start-up, Husk Power Systems (HPS), is driven by a consuming passion to light up every rural home in his state.
HPS’s micro power plants, which burn rice husk to generate gas to run generators, supply electricity to 80 villages. The per watt installation cost is Rs 50. Since the company provides power mostly in off-grid locations, where state electricity boards don’t reach, the company has not faced any regulatory hurdles so far.
While this environment-friendly biomass gasification technology is not new, what makes HPS’s business model attractive is the low cost. One power plant uses three quintals of rice husk per day to generate 32 kilowatts of power, enough for 500 households. The rice husk costs Rs 60 per quintal. The production cost per plant per month is about Rs 20,000. So, HPS is able to sell electricity at Rs 40 per 15 watts. 
“Electricity is the first step towards development. Education and healthcare will follow,” says Pandey from his makeshift office at Tamkuha, a village in West Champaran district. This is where HPS set up its first plant two years ago. Now, there are 24 plants with an installed capacity of 0.8 MW. Along the way, HPS has also sent 200 children from Tamkuha to school and paid their tuition fees. “The plant has become a part of the local community; we also make it a point to hire locally,” says Pandey.
The team at Tamkuha, which includes co-founder Ratnesh Yadav and four others, works mostly at night when the plants are operational. The plants run for about six hours from 6 pm. “This is a residential area, so we don’t need to run the plant during the day,” says Sanjay Kushwaha, a cluster manager (6-10 plants make a cluster), who started as a plant developer, the bottom rung manager. It is the plant developer who decides where to set up new plants. 
BUSINESS: Cleantech (Power)
FOUNDERS: Gyanesh Pandey, Ratnesh Yadav, 
Charles Ransler, Manoj Sinha
HQ: Patna
CAPITAL RAISED: Over Rs 5 crore
INVESTORS: Shell Foundation, Govt. of India, 
Draper Fisher Jurvetson, Acumen 
Fund, Bamboo Finance, Cisco, LGT, 
Venture Philanthropy, Dasra
KEY CUSTOMERS: Rural consumers
KEY COMPETITORS: Government power sources
and diesel gen-set providers
HPS also sells in rural commercial hubs, where consumption is up to 100 watts per customer. It sets up a plant in an area only after collecting Rs 100 each in connection charges from 350-400 customers. HPS’s social relevance is hard to miss, but Pandey and Yadav prefer to play it down: “Bihar is the hardest place to start anything. If it works here, it can work anywhere.”
There are 125,000 un-electrified villages in India and enough husk to power over 200,000 villages. HPS wants to set up 10,000 power plants by 2014. This will be financed in part by the $375,000 (Rs 1.71 crore) that it raised from US-based Acumen Fund. “Their scale-up has exceeded our expectations so far, and we think the founders have the skills to sustain the momentum,” says Raj Kundra, director of capital markets and energy portfolio at Acumen. So far, HPS has raised about Rs 5 crore from various sources including grants from the Shell Foundation, prize money from business plan contests, government subsidies and venture capital from the likes of Draper Fisher Jurvetson, Bamboo Finance and LGT Venture. HPS’s US-based co-founders, Charles Ransler and Manoj Sinha, have been instrumental in the fund-raising.
Pandey knows the challenges ahead. Hiring local talent means spending heavily on technical training. “I can get 15 IITians to work with us, but what I need most are skilled local mechanics and plant operators, and those are hard to find,” he says. HPS runs a training centre in Patna. The most critical challenge will be to keep its dynamic but strongly individualistic founder-team together for the long haul. Year 2014 could be a watershed in more ways than one.
(This story was published in Businessworld Issue Dated 29-03-2010)