Unitus Seed Fund is a venture seed fund supporting startups innovating for the masses in India. Unitus invests in healthcare, education, mobile commerce & value-added services, marketplaces & e-commerce, retail & distribution, agriculture, and water & energy sectors. Founded in 2012, Unitus Seed Fund is part of the Unitus Group, a financial services group operating in India and other emerging markets since 2000. Unitus Seed Fund is based in Bangalore and Seattle.
Drinking water straight out of a tap is a common practice in developed countries. But does anyone in an Indian city do that? Most water from taps in India needs some sort of treatment before it is consumed. While tap water is often (but not always) treated at centralised facilities, it has a high risk of recontamination before it reaches homes due to old and badly maintained pipes. While this is a problem faced in urban India, it is also the crux of India’s rural drinking water problem. There are a plethora of technologies to treat water, and there are projects being implemented at the expense of the taxpayer. And the situation is not getting better. Why?
Reverse osmosis, coagulation, ultra-filtration, activated alumina, chlorination… there are well-known technologies available across India. These treatments vary from traditional methods to complex membrane-based systems such as reverse osmosis (popularly called RO) which is perhaps the most effective in removing all kinds of contaminants. Indians are bombarded with television ads showing RO filter systems giving “shudh paani” (pure water). However, while RO provides sparkling clean drinking water, it has a dark side.
In a nutshell, RO is too expensive and wasteful to be used in rural India, and too wasteful to be used in cities with stressed water supplies. Yet, RO is the incumbent go-to technology in India; it has a well-entrenched ecosystem with a number of operators and equipment vendors serving everyone from middle-income and up consumers to governments to NGOs to public-private partnerships.
The consumption of contaminated water is the reason why millions of Indians, mostly children, are affected by waterborne diseases. Diarrhoea alone causes more than 1,600 deaths a day in India. So many Indians could be saved from this if only two non-trivial things could be delivered at scale. The first is consumer demand for affordable safe water and the second is a viable business model to meet this demand. Given the downside health affects, this should be easy, but obviously is not.
The fundamental obstacle to the deployment of any of the widely available technologies is the lack of a viable business model. The challenge lies in three areas: High capital expenses, recurring operating costs and maintenance expenses, and low willingness to pay on the part of consumers. Even with organisations that get government or NGO funds to cover some or all of the capital expenses, the viability of rural water providers is dubious at best. Most often, the consumers are not willing to pay enough to cover operating expenses and provide an acceptable return to investors.
While private companies are struggling to survive in the drinking water space, the government’s efforts also have not translated into viable solutions. Large cities like Mumbai, Delhi and Bengaluru receive an average of only 4-5 hours of water supply per day. A Survey 2013 survey (by Outlook) of 30 public-private partnership water projects concluded that every single one of them had failed to deliver on their objectives and that water prices had doubled. The issue seems to lie in the focus on purely quantitative objectives: Water systems are set up based on the tendering process that inherently favours lower cost over viability or sustainability.
The fundamental game-changer relative to water will come from an organisation (private or public) that figures out how to activate consumer demand in a sustainable way. Once the demand is there, coupled with a willingness to pay the small price that’s clearly affordable to the masses, businesses or public-private-partnerships that provide consumers with safe water can proliferate and thrive. But how does one change consumer behaviour? In September 2013, The Safe Water Network described insights from research that they had conducted in Andhra Pradesh, and published early results from a campaign aiming to “activate consumers”. While the exact return on investment (ROI) is unclear, it seems like the expensive tactics they employed to drive demand and improve the generally low consumer price points show their efforts to be uneconomic, despite being effective in at least the short term. There have been many such campaigns and experiments across the country.
While it’s encouraging to see that consumer buying behaviour can be influenced and changed, we are not aware of any programmes that provide a positive ROI when accounting for water system capital and operating expenses along with the cost of the behaviour change intervention campaigns.
Does the government’s Swachh Bharat campaign provide a ray of hope? The campaign allocates Rs 2 million to each village panchayat for improving water and sanitation facilities. While the campaign focuses heavily on improving sanitation, let’s hope that, alongside cleanliness, people in Indian villages will stand a better chance to get safe drinking water on a sustained basis, a bare necessity.
Ultimately it will take sustained outrage, activism and expense prioritisation from consumers for things to improve. They will have to demand that viable public-private-partnerships be tendered, and make their demands known through their voices and votes. And they will have to be willing to spend a few more rupees on private suppliers to get water that will protect their family’s health where community and municipal systems are not available or up to basic standards. How outraged can we get?
- By Sneha Rajan, Senior Associate, Unitus Seed Fund