In the kitchen of a restaurant on Bangalore's Mathikere Main Road, Prasanna is busy making dosas on a rectangular plate, while colleague Rajanna works on the vegetable biriyani. Nothing unusual, except that almost all the cooking here is carried out on a common stove, fuelled by pellets made from farm waste.
These stoves, branded Oorja and made by Pune-based First Energy, are helping many restaurants partially switch to a new fuel, which, the company, claims is 30-40 per cent cheaper than liquefied petroleum gas (LPG). As of now, a total shift to this model isn't possible because the flame on the stove cannot be regulated and, therefore, this isn't suited for all kinds of cooking.
Yet, a restaurant using such a stove even twice a day (about three hours each in the morning and evening) can save up to Rs 7,200 a month, or Rs 86,400 a year, in fuel costs. This has helped First Energy lease out 5,000 of these stoves to commercial establishments and account for about half a million domestic consumers in states such as Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu. This also helped the company record a turnover of Rs 30 crore for the year ended March 2013.
Seeding the stove
First Energy was set up as BP Energy in 2006, as a fully owned subsidiary of BP, to provide an alternative, cheaper and cleaner source of cooking. In 2009, BP decided to focus on its core businesses and exit all non-core areas. This led to the company exiting its renewable energy businesses in India. Mahesh Yagnaraman and Mukund Deogaonkar, who worked on the project at BP, teamed with Pune-based consulting firm The Alchemists Ark to buy the business from BP, renaming it First Energy. In the early 2000s, at the behest of BP, scientists at the Indian Institute of Science (IISc), Bangalore, were roped in to improve the pellets, which were made of agri-waste and served as fuel for the stoves. Unlike charcoal or firewood, these pellets hardly produce any smoke.
Though agri-waste has been used to generate power, this was the first time it was being used for cooking. In 2011, the World Economic Forum identified First Energy as one of 25 firms globally "whose cutting-edge technologies are transforming business and society". IISc professor S Dasappa, part of the team that developed the stoves, says the company processes about 2,500 tonnes of agri waste to make pellets, adding this is an industry in itself. "At First Energy, we have tried to create a cost-effective, clean and convenient cooking solution for those who have no access to clean energy, or cannot afford it," says Yagnaraman. His primary targets are restaurants, caterers and canteens. Oorja also appeals to rural consumers, as it saves women the drudgery of collecting firewood.
Initially, the company focused on the domestic segment, selling half a million stoves. However, through the last two-three years, First Energy changed tack and started focusing on the commercial segment, in which it has slowly made inroads.
But its domestic business became commercially unviable, as the market shrank. Many domestic users who bought these stoves did so as a backup for LPG. An analysis of the unit economics reveals fuel costs made customers shy away from Oorja stoves. The fuel (pellets) costs Rs 225 for a 15-kg bag; a family of four-five needs two such bags a month. That's Rs 450 a month, while a subsidised LPG cylinder costs Rs 410-420.
The company has been trying to reduce the price of the pellets by standardising their size. It has three processing plants - at Nagpur and Islampur in Maharashtra, and Dharwad in Karnataka. As LPG prices have risen (and a cap of nine subsidised cylinders a year is applicable), demand has risen for First Energy's stoves, especially in rural regions and areas where people have to buy LPG in the black market.
"It is increasing in popularity in the rural and semi-urban areas of Maharashtra and Karnataka. Every time LPG prices rise, the demand for these stoves also rises," said Kadolkar Shalan Manohar, a distributor of First Energy stoves. Half his customers are domestic users; he has sold about 2,500 stoves for domestic use. The numbers tend to fluctuate, he says.
New models developed by the company for domestic use are starting to attract customers, the distributor says. The company has 35 distributors catering to about 2,500 dealers, who are backed by a service network.
Not all is fine with the stoves. "We cannot use it for cooking many Chinese and North Indian food items," said the manager of a hotel that uses three Oorja stoves. "It produces too much heat and is perfect for cooking lentils and a few other food items that take a lot of time to be cooked well through LPG."
"It needs 18 kg of pellets to work continuously for about three hours," said an official from New Shanti Sagar, which runs a chain of restaurants in Bangalore, as well as a catering service. A supervisor at a restaurant that uses an Oorja stove complains: "The stove cannot be switched off in the middle to be restarted later… One cannot control the heat much. We use it only in the mornings and evenings for about two and half hours each. Hence, we cannot wean ourselves away from LPG."
With the help of IISc scientists, the company has now integrated Oorja's flame with an inbuilt thermal fluid that transfers the heat to a surface. A First Energy official said, "It's a breakthrough in cooking technology and it's like providing a heat-on tap." It uses a pumping mechanism. "We transfer heat to the cooking surface and so, have better heat control. Since the flame is not close to the user, it gives us the same results," the official added.
A domestic stove costs between Rs 900 and Rs 3,000, while a bigger stove costs about Rs 18,000, depending on the customisation. To make it an attractive proposition, First Energy has adopted a leasing model, with the rates depending on the capacity of the stoves. A restaurant pays a rent of Rs 1,500 a month for bigger stoves and Rs 1,200 a month for smaller ones. A 15-kg bag of pellets costs about Rs 225. Running the stove for six hours costs a commercial user Rs 540, or Rs 1,080 for 12 hours. Considering a 19-kg commercial LPG cylinder, which often lasts a day (12 working hours) at a restaurant, comes for Rs 1,620-1,900, even if one includes a rent of Rs 50 a day for the stove, First Energy's cooking solution is 30-40 per cent cheaper than LPG.
While the company offers a cheaper alternative for commercial users, for Oorja to have a wider appeal, it needs to quickly improve its value proposition for domestic users.
First Energy products are good; else, market forces would have thrown these away. There's a well-established biomass industry. Biomass is traded on a large scale. Earlier, we looked at the ITC Choupal to procure biomass from those who traded their goods there. Now, First Energy alone processes about 2,500 tonnes. Earlier, agri-waste had never been used for cooking, though it has been in use by the industry for long. So, First Energy would have to fight it out in the market.
Any new technology needs handholding and a little training. Perhaps some handholding was necessary in this case, too. There's a market for the product. The best thing about the product is you are not depleting the forests.
The market will decide the price structure of the stoves and fuel. Since biomass is an issue, as it is not stored, the government could provide for storing biomass and help optimise or reduce the cost of the fuel. On certain capacities, First Energy sells the stoves. It also has franchises. The consumers can amortise on LPG. With micro-credit, anything can be sold. As long as you meet user requirements, even outright buying is a possibility.