Case Study Analysis on Husk Power System MP130** | Name | 71 | Mr. Vivek Banka | 59 | Mr. Somen Dutta | 30 | Mr. Kumar Amitabh | 18 | Mr. Ashutosh Prasad |

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(A) Case summary

India has a serious shortage of electricity, and people living in villages suffer the most. this is particularly acute in the state of Bihar, where even for those that are connected, the supply is very unreliable. Most households have to use kerosene for lighting, and businesses turn to diesel generators for power. The founders of HPS looked for affordable ways to address this shortage of electricity, and identified the potential for making gas from rice husk – a plentiful local resource – and using this for power generation at village level.

The objective of HPS was to provide a comparatively cheaper, eco friendly, reliable power system for the poor living in the rural and remote areas of Bihar (initially), while making sufficient profit to ensure that the business model could function smoothly in the long run. To achieve its objectives, HPS carried out a detailed study before setting up the husk power plant. It first tried to understand the types of electricity, existing source of energy, and the per kWh (kilowatt hour) cost to the target customers.

The business model of HPS was well suited for Indian environment and the country’s demographics and geography spoke loudly to the market size and to the potential entry barriers and operational challenges. So the market’s size and scope were enormous. The energy supply was sustainable and the growth potential was attractive. So it was an environmentally conscientious energy company capable of providing electricity to the millions of rural Indians in a financially sustainable, scalable and the most profitable way.

The founder of the company now wanted to expand its business and increase its footprint at many more rural locations. It required capitals and so they thought to attract investors. GreenPoint, a green energy oriented and emerging markets focused firm asked for a convertible note security in return for a $2.5 million capital infusion.

(B) Problem identification

Some of the problems and dilemmas as discussed in the case are following:- 1.) Did this offer by Green Point as mentioned above fit their business needs and ability to generate returns? 2.) To hire right mix of people at different location facing the hierarchical caste system that Indian village typically has. 3.) Transportation and implementation of the mini plants at various locations which were very remote. 4.) To make the business look lucrative and attractive to the investors.

(C) Analysis

These plants were able to produce 760 KW of electricity supply for each tons of rice husks. The 35 – 100 KWH plants were built at no cost to villagers with the collaboration of Village Panchayat. Relationship with the elders ensured better fee collection, maintenance and fraud management. For a small village of 2000 people, 1500 tons of milled rice produced around 250 to 300 tons of rice husks. These raw material viz. rice Husks were purchased from rice mill owners at a throwaway price.

Currently households and the small businesses use diesel or kerosene for the power. It was costing $0.30 to $0.35 per KWH. HPS offered the same product at $0.25 per KWH to farmers and $0.15 per KWH to villagers for domestic uses. This is a Win Win situation for both the parties. So these were the two important source of generating revenue.

Apart from these prime sources of revenue there were few alternate sources of generating revenue. The first in the list is moneytizing the Rice Husk Ash (RHA) , a waste product of gasification process. This was used in various applications owing to the high levels of Carbon and the silica content. It was used in organic fertilizers, replacement for coal in stoves and in cement production. It was also used in producing Incense sticks for worship purposes. This alone represented an annual market opportunity of almost $2 billion.

HPS was carbon negative so it also raised revenue through Carbon trading in the form of carbon credits called certified emission reductions.

(D) Findings and recommendations

Since the opportunity for raising revenue was huge in gigantic market with no competition hence I think Investors would have invested in this firm. It was using a renewable source of energy so the business was sustainable and profitable. It was also very attractive investment because the other sources of energy for e.g. diesel, petrol was limited and also very harmful to the environment unlike the Husk Power systems which was unlimited and eco friendly.