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Oorja stoves: Bringing down cooking fuel costs in Rural India

Sep 20 2012, 11:55   |   By SME Mentor

Gargi Banerjee

The timing couldn't have been more perfect. With LPG prices set to skyrocket, here's how you can cut cooking fuel costs by at least 30 per cent. If you don't believe that, try this - a biomass-based, energy-efficient and environment-friendly stove priced at Rs 1,200-1,500 and whose fuel pellets cost Rs 15-16 per kg.

Marketed under the brand name Oorja, this innovative cooking solution is courtesy Pune-based First Energy, whose stove has already created ripples in the lower-income category, replacing firewood and kerosene. According to the company, cooking a meal for a family of five with Oorja costs less than Rs 6.

The Opportunity
Mahesh Yagnaraman and his partner Mukund Deogaonkar had not planned on becoming entrepreneurs. They simply responded to a need that presented itself during the economic slowdown in 2008-2009. They rejuvenated a company they had worked for, called BP Energy, once owned by British oil and gas major BP.

When the economic crisis hit, BP wanted to exit the alternative energy space and set up First Energy to facilitate the process. Yagnaraman, who was CEO and Managing Director of BP Energy, took over as CEO of the new company along with Deogaonkar. The enterprising duo then collaborated with the Bangalore-based Indian Institute of Science (IISC) to develop the Oorja stove.

Fresh Start
"When we took over First Energy, we had some serious cost-cutting to consider, and as recessionary pressures began to increase, it was tough to convince investors. Nobody wanted to back innovation in difficult times," recalls Yagnaraman, an MBA from XLRI Jamshedpur and who has worked across Strategy, Sales, Marketing, Supply Chain and IT implementations with Unilever, Castrol and BP.

Finally, Yagnaraman and Deogaonkar pooled their own resources along with Pune-based consultants Alchemists Ark and First Energy resumed operations in 2009 with a capital of Rs 2 crore. Former colleagues of BP, who had worked with Yagnaraman and Deogaonkar, were now with Alchemists Ark, and they believed in the grit of these two bravehearts. Besides, there was a huge void to fill, as far as alternative energy sources in India were concerned.

But it wasn't easy. "From a staff of 35-40, we scaled down to around 8 to 10 and moved from Mumbai to Pune to save costs. In fact, we initially had to share office space with Alchemists Ark. We also had to scale up quickly, to stay afloat," says Yagnaraman.
 
Second Innings
After making a mark in the rural and semi-urban markets, First Energy trained its sights firmly on the commercial segment and found opportunities galore. "The HoReCa (Hotel, Restaurants and Catering) segment has grown by leaps and bounds in the last decade because eating out has become a habit since people are out working all day and there's no one home to cook. Enter hotels, restaurants and catering outfits that serve packed meals."
 
Hotels and other commercial establishments were receptive to First Energy because the company did not suggest replacing conventional cooking stoves with the Oorja stove. Instead, it pointed out that using one or two Oorja stoves would cut energy consumption by a third. With no subsidies for LPG, the prospect was irresistible!

The company now caters to the needs of 2,500 commercial establishments, including some big names in this sector, in Hyderabad, Bangalore and Chennai. Mumbai is the latest feather in its cap and Kolkata is on the anvil. "Our vision is two-fold," explains Yagnaraman. "First, we want to reclaim the domestic opportunity, as and when the subsidy environment in India changes. Second, we aim to become an essential partner in commercial kitchens by providing a cleaner, more economical source of energy."

Road Ahead
If the economic crisis of 2008-2009 provided First Energy its first breakthrough, another looming crisis might offer the company its second big break - the prospect of the government withdrawing the subsidy on LPG, which will hit consumers below the belt. "When this happens, we will be prepared to reclaim the domestic segment," says a confident Yagnaraman.

Also on the cards are plans are taking their footprint overseas, to countries such as Sri Lanka, Bangladesh, Indonesia, Vietnam and even some Latin American and African nations. "The idea is to grab the opportunity in countries that are moving from a very traditional form of cooking with conventional fuels to new-age, alternative fuels," Yagnaraman points out.

The company's revenues are pegged at around Rs 15 crore now but First Energy plans to reach the Rs 100-crore mark in a couple of years. And why not? Serendipity seems to favour Yagnaraman, who has never failed to seize an opportunity. First Energy is also listed among the top 25 Technology Pioneers of 2012 by the World Economic Forum, a vote of confidence that the humble Oorja stove has the potential to shape the future.

smementor@moneycontrol.com


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