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close this bookBoiling Point No. 30 - April 1993 (ITDG - ITDG, 1993, 48 p.)
View the documentSales & Subsidies
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View the documentNEWS

A Commercial Drop in an Ocean of Subsidy

by P D S Gusain, Development Alternatives, Energy Division, 22 Olf Palme Marg, Vasant Vihar, New Delhi 110 057, India

Summary of a paper presented at the Stove Commercialization Workshop- December 1992

Development Alternatives (DA) is an Indian nongovernmental organization which believes that in the long run rural technologies can only be self-sustainable if a commercial approach is followed in which the client will have to pay the full cost of the product. As such the aim of the stove project in DA is to make the stoves on a commercial basis and sell them in the market in large numbers through various marketing channels. For us stoves are just like any other product which have to compete in the open market without subsidization.

Although full commercialization is the long term goal of DA, it has not yet been able to fully realise this objective. The peculiarities of the Indian situation with respect to stoves in particular and renewable energy technologies in general has made it very difficult to operate without subsidy, at least initially The low purchasing power of the rural masses has been a contributing but not the deciding factor.

Stoves

Design: Since the inception of DA in 1983, 3 designs of improved cooking stoves have been developed, tested and marketed:

· metal, one pot, portable, biomass fuel stove, efficiency rating 30%, 30,000 sold at production cost or subsidized 50-75%

· two-pot, chimney, fired clay liner/mud, fixed, biomass fuel stove, 6,000 sold, user paid 1530% of total cost of liner and installation

· community stove- sheet metal with chimney and aluminium pot, efficiency rating 40-45%, 200 sold, no subsidy.

The two metal stove models are being manufactured on a commercial basis either on job contract basis or in a self-owned small workshop in Delhi.

The ceramic stove liners or kits are manufactured by local potters. The stoves have been exhibited in local Melas (fairs), shops and in public exhibitions. They were also demonstrated in villages, schools and urban settlements.

The ceramic stoves need to be installed in-situ. Installation in all cases was done under our own responsibility even under the NPIC programme. We first selected the villages and then the household who showed a willingness to install the stove and pay for its installation. Generally local women and men were engaged for installation and were paid for their services. These installers were first trained and these training programmes were also used to advertise and demonstrate the operation of the stove to villagers and other clients.

When the stoves are sold directly by us or our partner Non-Government Organizations (NGOs), we take the full responsibility of marketing and after sales services and also decide what level of subsidy is to be provided and to whom. In a few cases, we have also undertaken follow-up studies on stoves distributed under the NPIC.

The long term commercial sustainability of stove projects depends on a number of factors. Among these, the institutional factors and government policies play crucial roles.

If stoves are to have a real impact on the fuelwood and energy situation, they must reach a large number of people. This is only possible if the models being propagated are of high quality (both in terms of their physical attributes and functional performance or efficiency) and are within the paying capacity of the people who generally belong to low or middle income groups.

One way is to subsidize the stove. The dangers of subsidy are now well documented. Nothing has been so damaging to stove programmes in the past as the proliferation of bad quality products which were forced upon the people in order to achieve targets set by various subsidized programmes. This has given a bad name to improved stoves and undermined the evolution and acceptance of better models.

Finance: another way is to have financing and marketing arrangements which allow people to pay in instalments or allow them to have credit facilities on easy terms. There is need to evolve a marketing and delivery system which is commercial and financially self-supporting but at the same time is flexible enough to allow payments over a longer period.

In many countries, including India, some types of government sponsored stove programmes are in operation. They were started with very laudable intentions but unfortunately in many cases the government policies and procedures have stifled the stove programmes.

It is difficult to compete with the government and in any case it is neither desirable nor necessary. In our experience, fully commercial marketing of stoves clashed with the Government programme. It was difficult to convince people to pay Rs 100 or so when they knew that somebody else had got a so-called improved stove at Rs. 25 or so. It is initially difficult for purchasers to judge, at least in the case of household stoves, the functional performance of the stove and in any case the price differential was too great to bridge.

Fully commercial marketing approach may not be the best approach in case of ceramic or mud fixed stove models with a chimney! These will always have a large training component because of the need to install them. Perhaps there is scope to evolve new approaches in these cases. The production system and also the users training and after-sales services must be strengthened. In fact, if a subsidy is-to be provided it should be for ensuring the quality of the product and after sales service provided to the client.

Our experience suggests that the commercial marketing approach has a fair chance of being accepted as the most sustainable system but it is also possible that we may synthesize an approach which can do better justice to the twin objectives of social responsibility and commercial viability. This is a challenge which we must face squarely if stove programmes are to achieve the lofty goals which they proclaim.