[Stoves] Do "market-based", "results-based" distribution strategies get in the way of the poor.? (Taken from Re: GACC Webinar (that was, Paul, Ron))

[Nikhil Desai]

Dear Paul:

Thank you. It has to be more than "paying the bills". There has to be a
"smell of success"; as Oli of Eco-Zoom put it at the webinar, 35+% gross
profit margin.

And that is at the retail level. A retailer has to worry about inventory
and the ability to vary prices, depending on the location - 50+% margin on
"new models", only 15% margin on "old models" for clearance. Offering
multiple technologies - solar-charged batteries and appliances (small
lanterns to DC televisions or low-head water pumps), biomass stoves for
different fuels and sizes - makes this inventorying and pricing enormously
challenging,

And that is at the "city" - capital, district HQ - level. How the product
and after-sales service can reach village populations that are reachable by
road and some local final retailer exists. (India LPG has this problem,
which is why Kirk Smith writes off some 50 million households after Prime
Minister Modi's current promises of granting "connections" but reducing
subsidies are met.

I remember throughout my life that kerosene lanterns were sold in "cities"
- state capitals in India or national capitals I started wandering to some
25 years ago - and kerosene was delivered to distant shops and then by
bicycle or handcarts or on foot.

Efforts to start and run "energy stores" have floundered in India (a few
going on still), and trying to sell solar lanters or cookstoves, clay
coolers, via large supermarket chains.

++++++++++

I have observed some 25+ years of these difficulties. A mass market for new
energy technology products at the bottom of the pyramid households seems
impossible except for gas and electric appliances.

What then is the alternative?

FWIW, my thought is: a) market to the bankable non-household customers (and
middle-income households, of course) for any range of energy services,
including cooking services (Anil's idea of rural restaurants and to me,
generally, "outsourcing the kitchen") ; and b) once such a technology
demonstration has been made and the products turned into "aspirational"
items for the less fortunate, try expanding to that.

Who would do this and how? Entrepreneurs with local knowledge, skills and
capital base. Even so, there are many "pre-conditions" - infrastructure
services, skill-base, social stability and openness to new business or new
ways of doing business - that appear necessary. What can be done in some
parts of India may be unthinkable in other parts of India.

If interested, there should be a thread on this "Challenge to Biomass
Stoves Community" by Kirk Smith. What will it take, short of
governments-driven highly subsidized distribution, to reach the 500
million?


Nikhil

------------------------------------------------------------------------
Nikhil Desai
(US +1) 202 568 5831
*Skype: nikhildesai888*


On Sun, Sep 10, 2017 at 9:28 AM, Paul Anderson <psanders at ilstu.edu> wrote:

> Dear Nikhil,
>
> Your reply is thoughtful and informative (at least it is to me).
>
> Economics terminolgy:  "Supplier finance is critical from manufacturing to
> distribution/after-sales service,"
> If the suppliers (including the person who supplied the sales work) are
> not paid sufficiently, the system will break down (eventually, if not
> soon).  So, "paying all the bills" is ultimately the name of the game of
> success.
>
> I am interested in carbon offsets for paying the bills.  And that is a
> crucial "demand" issue.  ("Supply" will follow demand, in this case.)   And
> demand for carbon credits is very much "in the eye of the beholder."
>
> The financial part of the TLUD stove situation (IMO) keeps coming back to
> the value of carbon offsets generated.   But it is too thinly related to
> the purpose of the Stoves Listserv.   So I will send ANOTHER  message about
> this.
>
> (I will stay active on the Stoves Listserv, but not about carbon finance
> issues of stoves -- except to give appropriate updates, if with merit.
> And I will post appropriate messages about stoves and carbon in the EPosts
> section of my website   drtlud.com  )
>
> Paul
>
> Doc  /  Dr TLUD  /  Prof. Paul S. Anderson, PhD
> Email:  psanders at ilstu.edu
> Skype:   paultlud    Phone: +1-309-452-7072 <(309)%20452-7072>
> Website:  www.drtlud.com
>
> On 9/9/2017 4:40 PM, Nikhil Desai wrote:
>
> Paul:
>
> I have had some experience with the use and abuse of terms "market-based"
> and "results-based" in the aid business. "Market-based" does not exclude
> taxes and subsidies; in fact, it is a code word for using taxes and
> subsidies rather than command-and-control.  Sometimes the costs are hidden;
> e.g., it takes money and skills to administer taxes and subsidies.  Hence
> my distress.
>
> "Results" have become quite a fad in the last 20 years -- output, outcome,
> and identification of "benefits" are all buzzwords on which a small cottage
> industry burns inferior data fuel in inefficient models to produce
> intellectual smoke. So long as the donor and the donnee agree which expert
> to put in charge of Monitoring and Evaluation (M&E) and get the desired
> ratings on the project, career promotions are guaranteed all around. Those
> who ask questions are thrown out.
>
> 1. Reliable, efficient last mile distribution chains to poor households
> are difficult to develop. I can write many personal stories on these.
> Micro-finance for the users is not the answer; too high-cost. Supplier
> finance is critical from manufacturing to distribution/after-sales service,
> and that is not easy. Several things have to just "go right" in the
> procurement, inventory, and human resources chains.
>
> 2. Massive free or near-free distribution is indeed a good idea, provided
> the upper and middle classes are taken care of first and weaned off
> subsidies. This is being done with the Indian LPG scheme. though I am
> skeptical that Kirk Smith's dream of "complete and permanent transition".
> Not only are the costs too high, I support a Woman's Right to Choose
> (stacking). And even then the subsidy burden is high and not transparent.
> (There is GOI subsidy under Direct Benefit Transfer L(?) or DBTL and on top
> of it there is a product-based "unrecovered loss" for public sector oil
> companies. It is complicated) Distribution to the poorest who don't have
> permanent homes, and/or collect woodwaste and such, or don't even have food
> to cook or time to cook, is a serious problem.
>
> Yes, these two problems limit effective, quick action to reach the poor
> (esp. those who are remote and whose income/cooking is not regular).
>
> Please do keep at these questions. I haven't yet found a sure-fire
> alternative, or rather, it takes enormous knowledge-base and TLC to foster
> entrepreneurship among the poor that leverages local knowledge and capital
> (financial, human, physical) in order to develop successful technology
> innovators. (I would be happy to converse about this on the phone.)
>
> Like many others in such business, I have some fantasies on how
> small-scale local businesses can be fostered with a combination of
> subsidies, knowledge intermediation, to build transformative biomass supply
> and use industries. But I haven't yet figured out how to do this on a large
> enough scale for the "stoves" projects. Definition of economic and
> agro/animal/forest contexts is key.
>
> Nikhil
>
>
>
>
>
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