BRINGING WATER TO THE BOTTOM OF THE PYRAMID

Indian Institute of Management Calcutta, India

Participants: Soubhik Chatterjee David Touthang Brij Bhushan Garg Joyjit Gorain Madhur Agarwal

CONTENTS

EXISTING PRACTICES KEY PROBLEM AREAS WHAT SHOULD A SUSTAINABLE BUSINESS MODEL ADDRESS?

OUR PROPOSED BUSINESS MODEL: OVERVIEW

ANALYZING KEY COMPONENTS OF OUR BUSINESS MODEL & ASSESSING SUSTAINABILITY PHASED IMPLEMENTATION THROUGH A PILOT PROJECT AND ESTIMATED TIMELINE

Existing Methods Unsustainable for All Stakeholders Financially & Infrastructure Wise The good (but insufficient) and bad ways of current water infrastructure in slums Bottled water companies currently
distribute water @ Rs. 12 per litre

Too small a source to

handle community based demand Lack of effort to scale up bore wells or increase the numbers Pond water is unhygienic Credits extended to

The municipal currently

provides water at economic rates High cost of extension of in-home pipes makes it an unsustainable model Current single water pipes create congestion in water sharing

1 6
Optimize Bore wells & organizational ponds structure and governance Reduce Bottled demand Water

2
Consolidate and Corporation centralize Supply support services

entrepreneurs and small organizations to build infrastructure or directly distribute Unsustainable due to insufficient demand generation and lack of later stage funding
A class of merchants buy water from the corporation or other sources in bulk Subsequently they sell it to inconvenienced slum dwellers at high premium

7
Develop Private credit capabilities model and mindsets

5
Water Enable IT Mafia

3
Off-shoring and Point-of-use outsourcing water treatment

Largely depends on the

factor that slum dwellers collect dirty and nondrinkable waters from other easy sources Provides point-of-use treatments to that low quality water collected by villagers themselves A dependant model and hence unsustainable

4
Rainwater Lean optimization harvesting

Essentially provides free water if stored in an

informal way Difficulty in formalizing the model owing to storage & distribution issues

CONTENTS

EXISTING PRACTICES KEY PROBLEM AREAS WHAT SHOULD A SUSTAINABLE BUSINESS MODEL ADDRESS?

OUR PROPOSED BUSINESS MODEL: OVERVIEW

ANALYZING KEY COMPONENTS OF OUR BUSINESS MODEL & ASSESSING SUSTAINABILITY PHASED IMPLEMENTATION THROUGH A PILOT PROJECT AND ESTIMATED TIMELINE

Numbers speak for themselves. The problem is grave and escalating!!! (1/2) Quantity

On an average, 30% of the city

population are currently without access Quantity of water to in-home piped water

Quantity of water Water per capita per day (in litres)

50

About 60% do not have access to home

sanitation; lack of water being a principal reason

30

Only 30% of slum population manage

water from community taps, the rest manages it from other sources

Rural population manages water from

unsafe bore-wells and unprotected ponds/lakes which run the risk of getting dried in extreme summers

Many slum dwellers have to walk for

BOP consumpti on
WHO standar ds
hours to collect and bring back drinking water to their homes.

Deep wells in villages provide

intermittent supply as the depth of water is erratic in maintaining the right levels

Issues with the existing model of water supply are large difficult to ignore (2/2) Quality, Access & Management QUALITY About 13% of slum taps are probably contaminated with disease vectors like viruses and bacteria Every year, water borne disease causes 6,300,000 cases of illness which leads to 5,600 deaths Slum dwellers manage other activities with highly polluted water Rural ponds/lakes are unprotected, tube-well water is ACCESS In most slums, only about 5 hours of water services is provided per day Hence women & children who line up are forced to wait in long queues Results in loss of work time for women and education for children Villages do not suffer from such access problems, but face crisis during summers MANAGEMENT Population density makes it difficult to efficiently distribute water to all households Cost recovery practices are poor Significant percentage of water theft and pilferage happens Presence of illegal water middle-men who poses a competitive threat to any existing model Difficult to switch rural consumption patterns and generate consumer base

CONTENTS

EXISTING PRACTICES KEY PROBLEM AREAS WHAT SHOULD A SUSTAINABLE BUSINESS MODEL ADDRESS?

OUR PROPOSED BUSINESS MODEL: OVERVIEW

ANALYZING KEY COMPONENTS OF OUR BUSINESS MODEL & ASSESSING SUSTAINABILITY PHASED IMPLEMENTATION THROUGH A PILOT PROJECT AND ESTIMATED TIMELINE

A sustainable and acceptable solution would be the one that addresses the following social, moral and business obligations
Help address the lost opportunity
Bridge the Demand Vs Supply Gap & other social issues

Urban slums are largely unstructured

and unplanned in nature making distribution of water a complex task - A proposed model should therefore look for an optimal strategy that would help address the large wait time issues at minimal cost for the business Focus should be on door-to-door water distribution as that would help address the wait time issues the best

A feasible infrastructure backed with feasible financing solutions

cost due to large wait times for water in urban slums Avg. of 5 Hrs. lost daily, equivalent to an earning opportunity of ~INR 100/- for urban women Childrens education suffers due to such large wait times Replace illegal water supply method s (e.g. water mafia) at high premium Replace the currently unhygienic water collected from different sources Door-to-door distribution should however at minimal cost for the service provider Extending pipelines not a solution as that would involve large capital costs and recurring maintenance costs Appropriate division of labour to separate water harvest from transportation to households as that would increase stakeholder interests

The right distribution methodology

The water should come at an

The right pricing and a sustainable cost recovery method

optimal price for the slum dwellers compared to existing water facilities A systematic collection method from slum dwellers so as to avoid default risk for the business An established cycle of cash-flow generation from consumers as well as other financing methods to enable scaled up solutions and further investments

CONTENTS

EXISTING PRACTICES KEY PROBLEM AREAS WHAT SHOULD A SUSTAINABLE BUSINESS MODEL ADDRESS?

OUR PROPOSED BUSINESS MODEL: OVERVIEW

ANALYZING KEY COMPONENTS OF OUR BUSINESS MODEL & ASSESSING SUSTAINABILITY PHASED IMPLEMENTATION THROUGH A PILOT PROJECT AND ESTIMATED TIMELINE

Summarizing the 5 implementation parameters of our proposed business model Distribution being the key value addition towards a sustainable business model
Source Primary sources of water rain, ground, and lakes Not a big bottleneck in our proposed model Sources might be altered based on seasonal availability or on hydro -geographic nature of the land and meteorological patterns (e.g. Desert regions may not always Purificationhave rain water) One time investment in infrastructure to purify water to be supplied to cluster of slums; Technology available readily Distribution Door-to-door supply in bottles of 20 litres Ensure optimal supply to reduce reversal cost Central to local distribution agency to consumers model Market & Pricing

To be priced at 50 paisa per litre and made available

Source and Purification are not the bottlenecks. Focus on distribution, market creation and financing.

in 20 lt bottles Demand Pull system: Water Card (Kanban) system Incremental charges to ensure consistent usage & Financing demand Initial financing through USD 1 Bn from Water.org Revenue generated from consumers to fund subsequent growth via revenue bonds

Distribution, Market and Financing

Involving local entrepreneurs in the distribution via a

Distribution

FRANCHISE model Distributor would transport 20 L can of purified water to the consumers door Distributor trucks will follow planned travel routes to maximize distribution system potential

Water to be priced at 50 paisa per liter Incremental charges for consumption above the pre-fixed
Market

benchmark to ensure judicious use of water; Water Cards to be issued to the consumers to guarantee the same Demand Pull system: Each family to be given a fixed number of 20 L cans (say 2). As and when a can empties out, it can be exchanged with a filled one from the distributor truck

Water.ORG to issue REVENUE BONDS; revenues collected

Financing

from distributor to used to service the intersect payments of the bonds; Methodology used by Municipal Corporations Revenue bonds can be swapped with LIBOR bonds to increase liquidity Principal from the bonds used to SCALE UP the model Scalability via replicability

Summarizing the overall flow of our model: distribution is the focus again

Flow of water Purification and Bottling at the central location Distribution by local entrepreneur Door-to-Door delivery to consumers

Water Collection

Flow of money

A Pilot effort will help get a better understanding of our model!

Pilot effort: Get a better feel for our model

Location: Slum in Mumbai Target population: 10, 000 Source Mapping: Since the area receives plentiful rainfall and possess a already depleted ground water reservoir, choice of source: RAINWATER Purification: Rainwater needs to be purified; Initial investment (Bottling machine, Rain water harvesting, Purifying machine; ~5 year life): 1 Million USD

Distribution System: 300 Thousand liters of water to be supplied every day; ~24 Trucks needed
Suggested pricing: Rs. 0.50 / litre = 33 cents / day Net Revenue generated (considering distribution costs, private player margin, initial fixed costs, operation and maintenance costs):~ 0.5 million USD / year (for those interested: computation in the last slide) Financing: If used to service interest of the revenue bonds, can generate 10 million USD (5% coupon rate) which will fund 10 more such projects

CONTENTS

EXISTING METHODS & Its FALLACIES KEY PROBLEM AREAS WHAT SHOULD A SUSTAINABLE BUSINESS MODEL ADDRESS?

OUR PROPOSED BUSINESS MODEL: OVERVIEW

ANALYZING KEY COMPONENTS OF OUR BUSINESS MODEL & ASSESSING SUSTAINABILITY PHASED IMPLEMENTATION THROUGH A PILOT PROJECT AND ESTIMATED TIMELINE

Analyzing the key steps of the model

Map source of water by conducting a hydro-geological and meteorological study of the target area Government support: Leasing land to install the purification and bottling Source mapping machines / Infrastructure

Distribution / Market

Appoint local entrepreneur as distributor Distribution of bottles from central location to slum centers in trucks Water Card system and incremental pricing to ensure judicious use of water Revenue collection by the distributor

Financing

Leverage financial markets; Water.ORG to issue revenue bonds Revenues collected from the distributor to be utilized to service interest payments of Revenue Bonds Revenue bonds can be swapped with LIBOR bonds to increase liquidity Principal of the bonds to use to replicate the model in other cities

STAKEHOLDERS How do they interact with the system?

Consumers Get access to clean water at their door step Pay for 20 L cans of water Incremental charges to ensure judicious use Water Card system to monitor the consumers

Distributor Collect 20 L cans from the central facility Supply the cans door to door Collect money from the consumers Assured returns Commodity swaps with Water.org Fund

Water.org Commodity swaps: Embracing the risks associated with revenue collection Revenue bonds: Get more money in the systems Revenue bond swaps with LIBOR bonds to increase liquidity Principal used by Water.org to replicate the model in other cities

CONTENTS

EXISTING METHODS & Its FALLACIES KEY PROBLEM AREAS WHAT SHOULD A SUSTAINABLE BUSINESS MODEL ADDRESS?

OUR PROPOSED BUSINESS MODEL: OVERVIEW

ANALYZING KEY COMPONENTS OF OUR BUSINESS MODEL & ASSESSING SUSTAINABILITY PHASED IMPLEMENTATION THROUGH A PILOT PROJECT AND ESTIMATED TIMELINE

ACTION PLAN Aiming for a phased implementation Our current project feasibility

Future scale-up plans (Year 2 onwards)

Revenue in the short span (<6 months) Initial considerations (start-up)

Identify city based

consumer base and also clusters of villages with pure water demand Distribution has to be expanded from just bottle based sale to pipe extended household facilities Arrange for local agencies for handling water distribution and sale

Create a demand pull with

local consumer base by advertising on abundant but cheap water Work on word-of-mouth publicity about easy water Once the first wave of water is harvested, transfer it to local distribution centres through trucks Involve local community based youth to increase direct participation and promote sale Transformation journey Stress on cleanliness and easy availability as the main

Secure finances from

market Secure land with a high water table and in proximity to a potential customer base Purchase machinery/build storage tanks at minimal cost (get Govt. Help if necessary)

18

Week Background Research - need analysis -source mapping -water analysis -project planning Negotiations -land acquisition -permits Plant set-up Recruitment Distribution set-up

Month 1 1 2 3 4

Month 2 1 2 3 4

Month 3 1 2 3 4

Month 4 1 2 3 4

Month 5 1 2 3 4

Month 6 1 2 3 4

Marketing
Test run

Today
SOURCE

COST Breaking down the overhead components

Fixed cost (pro-rated per year) + Operational cost ( in $ 000)

62.6 12.9 49.7 4.7 43.2

Assumptions (if any): XYZ

11.4

23.4

Net Investment

InfraOperstructure ational Cost

Extraction

Storage

Other PuriOperat- fication Ional cost

TransLocal Interest portation distribut- payment ion

Other