Husk Brings Electricity to Power-Hungry Indian Villages

Published: May. 21, 2017

By Anjuli Bhargava for Business Insider

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If you start a new business, how many would think of starting in one of the most troubled parts of the country? Tamkuha in Bihar in 2005-06 was famous for its regular kidnappings, looting, rapes and dacoity. Lawless – like many other parts of the state – it could not be called an ideal place for businesses to thrive.

Yet in 2007, it was one of the first villages Husk (earlier called Husk Power Systems) decided to light up through its gasification technology that could generate electricity from agricultural waste such as rice husk, mustard seeds or corn cob. For anyone familiar with Bihar and the way its residents think, the next question that arises is what motivated the entrepreneurs to start this at all? Why would two engineers – among the lucky ones to have managed to escape the state – something most Biharis would give an arm and a leg for – decide to actually come back and set up shop there? Who wants to return to Bihar – let alone base himself there after having tasted the land of opportunity?

Manoj Sinha, now 39, finished his master’s in electrical engineering in the United States, worked with Intel for five years and then did his MBA (again in the US) and was set on the usual path of investment banking, an oft-treaded, safe path with rich pickings. Gyanesh Pandey, his partner (they had done their engineering together at BHU, now IIT Varanasi), had also finished his studies in the US and looked set for a great career overseas.

The answer is that it all goes back to childhood. Both Sinha and his partner did their schooling all over Bihar and constantly lived with the erratic power in their state. They recall how they and many of their classmates all studied with candlelight – especially during examinations - since regular electricity was quite a luxury in Bihar during their growing years. And unlike others who leave the state, the duo came back to solve the problem they lived with for years. They found that the passage of time had changed very little. Bihar in the early 2000s was still quite backward. Many villages still didn’t have full time or even half time electricity. A third of the world’s 1.4 billion energy poor – 400 million people – live in India and at least 60 million of those are in Bihar and Eastern UP (it has a mini-grid policy in force now).

They came back and did an experiment with their rice husk technology, setting up a small 30 Kw power plant. “We generated some electricity, added some wires and poles and started supplying power - mostly at night – to many households in the villages, ” says Sinha, who at some point relocated to Patna after having spent 14 years in the US. He shuttles between the two countries now as his wife is still living in the US.

What, however, took the entrepreneurs by surprise was that – unlike rural population all over the country - a lot of the villagers were willing and quite happy to pay for a regular and reliable power supply. The fact that people were willing to pay for power meant that a business model existed here. “To our surprise, we were getting paid for the service we were providing. What we learnt is that if you provide a service they value and what you promised, people would pay, ” adds Sinha. Based on this experiment, the partners wrote a business plan and presented it to many forums and competitions in the US. They ended up winning around $100,000.

So, they brought the money back and invested it in the business and to open a company.

In 2008, they registered a company and to start with the company had four founders Manoj Sinha, Gyanesh Pandey, Ratnesh Yadav and Chip Ransler. The Shell foundation put in $250,000 in 2008.

In the first five years, Husk reached 10,000 customers using this technology. In 2010, it raised more funds through a few investors, including IFC (International Finance Corporation), amounting to $1.56 million. Between 2010-12, the company added 60 new sites in the state.

By 2013 (they had 80 sites serving 400 villages in Bihar and UP), they saw two major trends. One, solar prices had started falling and two, customers’ aspirations had changed quite a bit - they were no longer happy with 6 hours of night-time power. They saw a doubling of demand for power from customers in just a nine-month period. In 2014, the company raised another half a million in funds.

So, at the end of 2015, Husk launched a solar-biomass hybrid plant. By using solar energy to generate power in the day and biomass at night, Husk is now able to offer low-cost power 24 hours a day, seven days a week. It has a smart pre-paid meter with prices that vary depending on the time of the day with surge pricing coming in post 10 pm.

Sinha cites a few examples of what this has done for small businesses in the area. A shop owner who was spending Rs 5,000 a month on his single freezer which allowed him to sell his Cola products (no milks products or ice creams) has been a customer with them for 18 months. He now has ten freezers, sells 2,000 ice creams a day in summer and milk in addition. One of their customers has a set up a new RO water purification unit and is selling 2,500 liters of water every day.

Along the way, Sinha's partners have moved on to other things and he is the only one out of the founders who has stayed with the venture (although others still have ownership). He has, however, built a strong team - 220 employees in India and 20 in Tanzania - along the way, including some former Suzlon employees.

But even as he lost some of his partners' support, he has raised his ambitions. The company has expanded to Tanzania and is looking at other regions where it can supplement or replace the grid supply. It is now looking at raising $60 million ($25 million in equity and the rest in debt), mostly from large utility companies in Europe by the end of this year. He wants Husk to be a global rural power utility over time. He's hungry for power too – although of a different kind.

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