CSR or Corporate Solar Responsibility

By M Ramesh

Corporates could fund the capital costs of rural solar schemes to make them viable.

Its expansive but expensive and hogs the headlines; it could even make the nation proud. We are talking about the real ‘solar story’. It is not about the clean power it produces, but its transformative role in society. The impact of a small, say, 10KW solar project in a village is far greater than several 100 MW projects elsewhere.

Let us call it ‘social solar’. It can provide energy where it is most-needed — for livelihood and providing basic facilities such as drinking water and health. But this is not happening. Not, at least, on the required scale.

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Why? Because it is not yet viable.

Solar story

The typical story goes like this: An entrepreneur puts up a small, battery-backed 10 KW plant and provides electricity to a village. Result: Children study longer hours under a solar lamp; the women take up some entrepreneurial activities such as grinding; a refrigerator in the panchayat office stores some essential medicines.

The village hand pump is replaced by a solar-powered one and the villagers are spared of the drudgery of having to pump water. The entrepreneur who has put up the solar plant gets paid by the villagers, usually less than what they paid earlier for kerosene, and everybody is happy.

SunEdison has done it in the Meerwada village of Madhya Pradesh; Minda in Mangaldhuli near Agra and the transformation that has happened in these villages is on record.

You would imagine that such an absurdly simple idea would in quick time spread across the length and breath of the country and India would be glowing. This has not happened, and obviously there is a good reason: Economics.

What the entrepreneur gets paid is good to meet his running expenses, but often not enough to cover the capital costs. If only there was a system of taking the capital costs out of the entrepreneur’s hands, India would be a much brighter country.

Tapping CSR funds

It should not be difficult to bring in capital. The quantum of funding needed for social solar is not much — from a few lakhs of rupees to a few tens of lakhs of rupees — and can easily be met by one source: CSR funds.

To examine this further, let us look at the example of SELCO, a company set up and run by the Magsaysay Award winner, Harish Hande. SELCO has helped set up ‘Integrated Energy Centres’ in a few places. The IEC has a solar panel and a battery pack. Solar power provides energy for charging solar LED lamps (which villagers take on rent during nights) and mobile phones.

Of course, other facilities such as refrigerator space, a computer point or even electric stoves can be rented to villagers for a fee. But at the moment, SELCO’s IECs are mostly used for charging lanterns during the day and renting them out during the nights and for charging mobile phones.

The entrepreneur earns Rs 200 a month from each household. For a village of 40 families, he earns Rs 8,000. Another Rs 300-400 a month from mobile-charging services.

Viability gap

It has worked well because SELCO Foundation provides 20 per cent of the capital cost and helps to arrange debt. (SELCO is a for-profit company which sells solar lamps.) However, typically, a village entrepreneur may be hard put to find the 3-lakh-odd rupees needed to start an integrated energy centre. The problem intensifies when you look at other social solar systems, such as electrification of an entire village or provision of community drinking water, which could cost Rs 20-30 lakh. There is always a viability gap.

This is exactly where the Indian corporate sector can chip in with its ‘corporate social responsibility’ funds.

According to one estimate, 2 per cent of the net profits of India’s top 1,000 companies can form a pool of Rs 12,000 crore. Even 1 per cent of this can transform the lives of millions.

Here is also where a CSR spender can get the biggest bang for his buck. The social transformation is palpable, monitor-able and measurable. The corporate sector can also handhold the village entrepreneur in areas such as maintenance of the equipment and book-keeping.

The corporate sector has much to gain by spurring activity in villages. For instance, by providing electricity to the villages, television sets can be sold to them. In villages where electricity has been provided, the people have engaged themselves in entrepreneurial activities and prospered.

The Government is bringing in a legislation to make companies spend at least 2 per cent of profits on CSR initiatives. The revulsion this imminent legislation has caused is misplaced — if you spend the money wisely, you only gain in the long term.

Source: The Hindu Business Line

(This article was published on March 26, 2013)