William Davidson Institute - Case Study

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Bringing Sae Water to Indias Villages and Communities:

The Naandi Foundation

case1-428-987December 30, 2009

Published by GlobaLens, a division of the William Davidson Institute at the University of Michigan.

2010 William Davidson Institute. This case was written by Josh Katz and Sheel Mahnat under the supervision of

Allen Hammond with Jim Koch and Sherill Dale as the basis for class discussion rather than to illustrate either effective

or ineffective handling of an administrative situation. This case study was supported by a generous grant from the

Skoll Foundation.

A recent survey o national opinion revealed that when asked what would make respondentsproud o India, a staggering 73% said that availability o sae drinking water to all our peoplewould truly make them proud o being an Indian

Indian Prime Minister Dr. Manmohan Singh1

In 2002, Dr. K. Anji Reddy, Naandis chairman and ounder, was staying at the Imperial Hotel in Tokyowhen he was struck by the sight o a sign that said, simply: the tap water in this toilet is potable. Hethen came back to India and ound the same sign at an Oberoi property in India. Realizing that the auentpeople o India have access to clean and drinkable water even in the toilet, yet the majority o Indiaspublic health expenditure goes to treating waterborne diseases, Dr. Reddy became determined to bring saedrinking water to Indias villages. As a doctor and a armers son, Dr. Reddy was also acutely aware how manyproblems stem rom unsae water.

Water and Poverty

According to the World Water Development Report (WWDR), problems o poverty are, on most occasions,inextricably linked with those o waterits availability, its proximity, its quantity, and its quality. Worldwide,over 1 billion people lack access to a reliable supply o clean water. The problem is especially acute in thedeveloping world, with waterborne ailments accounting or 80% o disease and deaths and an estimated2% drag on developing countries GDP

2. It is beyond debate that improving the access o poor people to

sae water has the potential to make a major contribution toward poverty eradication. In act, access toclean water has actored into each o the eight United Nations Millennium Development Goals

3, and top

technologists have begun searching or improved technological solutions.

India suers a particularly large health burden due to poor water quality. The WHOs Sae Water, Better

Health report in 2008 suggested that 780,000 deaths in India are directly a result o poor water andsanitation4. Diarrhea alone causes more than 1,600 deaths each daymore than any other disease. It is

estimated that 37.7 million Indians are aected by waterborne diseases annually and 73 million workingdays are lost due to waterborne disease each year. WaterAid estimates an economic burden o $600 million

Unauthorized reproduction and distribution is an infringement of copyright. Please contact us for permissions: [email protected] or 734-615-9553.


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Bringing Sae Water to Indias Villages and Communities: The Naandi Foundation 1-428-987

in India each year. The Indian constitution proclaims sae water as a undamental right o its citizenry, yetprovides no explicit provision or making that right a reality or the majority.

As Indias population and wealth (and per capita water demand) grow so will the strain on the countrysnatural resources and inrastructure. According to a 2006 World Bank report, by 2020 Indias water demandwill exceed all sources o its supply

5. Exacerbating this problem is water pricing. Where piped water is

available, it is signifcantly underpriced, ar below both developed and developing country prices. Where notpiped, pricing can all on the other end o the spectrum with monopolistic practices, greed, and corruptionplaying an additional role.6

History o Water Development Policy

The desire or pure drinking water is not a modern phenomenon. Nomadic tribes based their entire liearound ollowing water supplies, and the ather o medicine, Hippocrates, invented Hippocrates sleeve,which was a cloth bag and used or water purifcation, which was helpul in removing hardness and badodors rom the water. The Greeks and Romans too developed various methods or treating water in order tocontrol tastes and odor.

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As early as the 16th century, philosopher Sir Francis Bacon wrote extensively about desalination in hiscompilation A Natural History o Ten Centuries. He mentioned that seawater could be purifed i allowedto percolate through sand, though sand fltration was not utilized successully until the 17th century whenItalian physician Lucas Antonius Portius desalinated water with three pairs o sand flters.

Municipal water treatment began in Scotland and England in the early 1800s. Slow sand fltration wasthe primary method used in these early water treatment plants, eventually adding charcoal fltration toimprove taste. In places where these slow sand flters were used around London, ofcials noticed a decreasein cholera deaths during the epidemics o 1849 and 1853, the frst established relationship between cleandrinking water and health. Ater London ofcials realized contaminated water had been the culprit in thesedisease outbreaks, London enacted the Metropolitan Water Act o 1852, which required the fltration o all

water supplied to the London area. This legislation is one o the frst instances o government regulation oa water supply. As municipal water treatment acilities sought to increase the quality and healthulness opublic water supplies, more and more cities began to implement chlorine into their water treatment process.This application o chlorine resulted in a sharp decline in deaths rom typhoid as well.

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Ater the tremendous success o drinking water chlorination in England, chlorination was institutedin New Jersey and soon spread through the entire United States. Chlorination o drinking water, combinedwith the use o sand water flters, resulted in the virtual elimination o such waterborne diseases as cholera,typhoid, and dysentery in the developed world. Chlorine was so eective at eliminating the outbreak andspread o waterborne diseases that Lie magazine in 1997 named water chlorination as probably the mostsignifcant public health advance o the millennium.

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Sae drinking water came on the agenda o multilateral institutions in the 1950s and 1960s, aterthe decolonization period created government-owned boards or several sectors including agriculture,water, power, and utilities. The multilateral institutions provided unding and loans or capital-intensiveprojects such as trunk sewers, water pipes, large-scale irrigation, large dams, and river basin developmentin developing nations. In the 1970s, the World Bank began to make serious eorts in expanding waterdevelopment to rural areas. In a 1973 speech to the Board o Governors o the World Bank, Robert McNamarasaid: The basic problem o poverty and growth in the developing world can be stated very simply. The


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growth is not equitably reaching the poor. And the poor are not signifcantly contributing to growth.Development o major irrigation works is not enough. Too many small armers would be let unaected.Tube-wells, low-lit pumps, and small dams can make major contributions to productivity.

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The UN and World Bank began supporting the use o pumps to give rural areas access to groundwater,and began projects to dig tube-wells around the world. Millions o tube-wells were dug in Bangladesh

and West Bengal, India, fnanced by UNICEF and the World Bank in an eort to provide enough water oragricultural purposes and to combat poor quality surace drinking water that was causing atal diarrhea.

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In 1976, the UN Decade or Women was declared, and access to sae drinking water was a part othe declaration. In 1977, the UN held its frst conerence on water, in Mar del Plata, Argentina. At theconerence, the UN ofcially recognized water as both a human right and a basic need that requireseconomic instruments or efciency. The 1980s were declared the UN Drinking Water Supply and SanitationDecade with an initial goal o providing every person with access to water o sae quality and adequatequantity, along with basic sanitary acilities, by 1990.

12During the decade, the proportion o households

with access to drinking water rose rom 38% to 66% in Southeast Asia, rom 66% to 79% in Latin America,and rom 32% to 45% in Arica. In total, during the International Drinking Water Supply and SanitationDecade (1981-1990), an additional 1.2 billion people gained access to sae water, and about 770 million

to adequate sanitation. This trend continued into the 1990s and by 1994 an additional 780 million gainedaccess to water.

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In the 1990s, it was ound that the wells dug by the UN and World Bank in Bangladesh were dugwithout testing or metal impurities in the environment, as the tests were not mandatory until years laterand the wells became contaminated with arsenic. Around 75 million people were exposed to arsenic-ladenwater and 200,000 to 270,000 deaths rom cancer will be seen in the uture,

14thought to be the worst mass

poisoning in history. This had an eect on development, as it was realized that hand-pump water is notnecessarily sae, and new methods were needed to tackle the issue o sae drinking water.

The United Nations again addressed the topic in the 1992 Report o the United Nations Conerence on

Environment and Development, in Rio de Janeiro. Participants afrmed the need to develop environmentallytailored legislation that would aid in human development, extending to water management. This is wherethe UN and World Bank began to diverge. The World Banks stated goal is a strategy based on sustainablewater resources management. It realized that the governments and international aid agencies could notmaintain the millions o hand-pumps around the world, and made a shit in thinking toward market-orientedreorms, decentralization, and disengagement o state inrastructure/privatization. The UN and the WorldBank continue to see water dierently. The UN sees water as a basic human right vs. the World Banks viewo water as an economic good. In that manner, the World Bank has signifcantly encouraged privatization owater acilities, even making it a requirement or new loans under the structural adjustment programs.

Current thinking is relatively balanced regarding public versus private provisions (both are acceptedas long as they are efcient and recover costs). However, the past 20 years has seen massive growth in

private investment into sae drinking water, and governments are increasingly ceding control o water,either through partial or ull divestures, management contracts, or Build Operate Transer schemes. Despitethe signifcant gains in private interest in water, investment remains ar below that made in other privateinrastructure needs (see Exhibit 14).

Although commercial approaches to water treatment have been on the rise, commercial urban-scaledwater treatment acilities have encountered many difculties in reaching beyond the city limits and intorural areas, where many o the worlds poor reside. On the other end o the spectrum are point-o-use water


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systems, designed to serve an individual or household. Technologies such as the LieStraw portable puriferand sachet-based purifcation tables have gained some traction.

15For consistent use, those technologies

are yet to prove cost-eective, and there remain signifcant distribution challenges or both the devices aswell as the replacement flters.

A new wave o social entrepreneurs is tackling the problem at an in-between, community scale, with

products and services aimed to ulfll the needs o a community or village. Their eorts in bringing downtechnology-related costs, working closely with local governments and with communities to inuence theway they relate to this resource, have resulted in willingness to pay or clean water even in very poorcommunities, as experiences in India and rural Arica have shown. Naandi is a leader in this space. (Fora summary o the three models o clean water fltration and distribution, along with pros and cons, seeExhibit 15.)

The Naandi Foundation

Naandis ultimate vision is eradicating poverty. The Naandi Foundation, a nonproft organization, wasounded in 1998 by Mr. Chandrababu Naidu, then chie minister o Andhra Pradesh province, with Dr.

Anji Reddy, the driving orce behind Dr. Reddy Labs, a NYSE-listed pharmaceutical company, as its co-ounder and chairman. Naandi, which means new beginning in Sanskrit, has developmental eorts inthree sectors: child rights, sae drinking water, and sustainable livelihoods. Naandis ideology revolvesaround building sustainable models within the social sector that deliver critical services efciently andequitably to underserved communities. Naandi works together with governments, communities, corporateentities and NGOs to channel their fnancial, technical, and human capital resources. The aim is to createsustainable, yet aordable, public-private partnership models to create new approaches to solve widespreadpoverty-related issues across the country by making efcient use o unds.

While a nonproft by its constitution, Naandi is run like a corporation with business principles inmind. Its chie operating ofcer, Amit Jain, maintains an entrepreneurial environment and has spearheadedeorts to establish business processes through the documenting o standard operating procedures and the

consistent measurement o impact and results. Naandi is guided and overseen by a very prominent Boardo Trustees that includes Mr. Anand Mahindra, the vice chairman o one o Indias largest automobile,arm equipment, and inrastructure companies; Dr. Isher Judge Ahluwalia, a leading Indian developmenteconomist; Mr. Rajendra Prasad, chairman o Soma Enterprises, a leading inrastructure frm with a numbero public-private partnership projects; and Dr. Chiranjeevi, a renowned Telugu flm star.

Naandi Sae Water Program

Water provision in India is the mandate o state governments and is oten perceived by the generalpublic as a public responsibility. Despite the general ailure o the public sector to provide quality services,the high level o government intervention and control and the political risks associated with the sector

have led ew private players to step in and fll the gap. Private initiatives have ocused on household-levelproducts or middle- and high-income urban households, such as with Eureka Forbes and its Aquasure flters.The ew players working to provide sae water at the community level have primarily ocused on commercialsegments and have struggled to attract proessional talent and unding.

The Naandi Sae Water Program was created in 2006, aiming to encourage villagers to drink and useclean water daily. The partnership between Naandi Foundation and US-based Water Health Internationalthat began in 2006 was a turning point. Focusing on the underserved, they developed a replicable design or


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water plants and identifed a viable PPP model combining their own unding, donations, and contributionsby local communities.

The provision o sae water has several recognized health and societal benefts, including improved dailyproductivity, minimized time lost by illness, and overall improvement o the immediate and long term healthprospects o communities. The Naandi model integrates the purifcation and distribution o chemical-ree

and pathogen-ree water with education on health and hygiene. Naandi develops a community-scale watertreatment whereby villages each have a clean water point where municipal water is cleaned using eitherreverse osmosis (with Tata Projects, Malthe Winje Norway, and Permionics India as technical partners) orUV technology (with WaterHealth India as technical partner), and then sold to customers at very aordableprices through a subscription model.

The subscription model ensures that customers use sae water daily, reducing the risk that they willmix contaminated water with their clean water. By not allowing customers to buy single servings or smallquantities, Naandis subscription model nudges consumers to consistently use clean water and thereoregain the benefts o using sae water.

Naandi identifes villages based on various actors such as demography, purchasing power o the villagers,

quality o current water available to the villagers, health epidemics in the village, and the availability osupport (fnancial and non-fnancial) rom the community and other donors.

Naandi has dubbed its model The Tripartite Partnership Model, with the Gram Panchayat (the villagecouncil) and donor primarily providing the physical assets except or the technology, Naandi leadingpromotion, distribution, and education, and a technical partner providing technology, maintenance, andquality assurance. The community must support Naandis eorts, providing water, land, and general support.Technology, quality assurance, and, in some cases, fnancing, come rom private sector partners. Naandicoordinates all parties while also mobilizing the community and external unding sources, and uses itsexpertise in social marketing to ensure that community members subscribe.

Key or this model to work is an eective relationship with the local village governing body, calledthe Gram Panchayat in India. The Gram Panchayat ofcials, headed by the Sarpanch, are elected every fveyears. In the Naandi model, the Panchayat is responsible or providing Naandi with land to set up the watertreatment unit and distribution center, access to a local water source, and access to electricity. In exchange,Naandi will not only provide sae, clean water at aordable prices but, in some states, will actually turn overthe business to the Gram Panchayat ater fve to seven years. Maintaining positive relations and providing afnancial incentive to the Gram Panchayat are essential actors in enabling Naandi to scale at such a pace.

The unit draws water rom the local water resource, purifes it o contaminants and oers it to householdsat a ee o 0.1 rupee (0.2 cents) per liter, typically in increments o 20 liters per day.

16Villagers purchase

monthly subscription cards that entitle them to 20 liters o clean water every day, or 60 rupees.17

Customersmust bring their own container, which they fll at one o the taps (typically six-eight) located on the

outside o the Naandi building. Initially at oor level, the taps and receptacle platorm are now raised othe ground, an adjustment made ater observation and customer eedback reported difculty in flling andliting the container. The majority o customers arrive by bicycles and motorbikes. Naandi encourages theuse o ood-grade 20-liter jerry cans, which Naandi also sells to customers at cost (~150 rupees). In somecases, Naandi will oer an installment payment plan or the jerry can to ease the upront cash requirement.The ee charged to fll water makes the project sustainable, as all maintenance and servicing o the plant,including the salary o the sta (plant operator and sae water promoter, both recruited rom the village),are covered by the revenues o the project.

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The model would not be successul simply by oering sae drinking water at aordable rates.19

Tocreate a long-term reduction in exposure to environmental risks that lead to waterborne diseases, it isessential to market the importance o sae water. To that end, Naandi creates intensive campaigns onhealth and personal hygiene to educate rural communities on the need to store water careully, adopthygienic sanitation practices and avoid contaminating water resources. This helps to inuence conventionalrural mindsets to adopt sae water and creates demand rom villages/Panchayats to implement the Sae

Water Program or their villages. Each plant employs a sae water promoter (SWP), typically a woman romthe village community, who ensures that villagers are made aware o the plant and service (see Exhibit11.2 or FAQ) and who encourages them to make the transition to sae drinking water. The SWP is alsoresponsible or promoting hygienic sanitation practices among villagers through an Inormation, Education,and Communication campaign (IEC).

Experimentation and Innovation at Naandi

Experimentation is a deliberate piece o the culture that COO Amit Jain has instilled. He hasdeveloped a charged up environment, that backs experimenters ensuring against ailure.

The jerry can

Refning the jerry can has been an ongoing project or Naandi since the inception o the clean

water initiative. Naandis jerry can is designed such that cups or ladles cannot easily be dipped in thevessel, reducing the risk o contamination. The 20-liter size is also deliberately heavy enough thatmen are more likely to collect the water, reducing the burden on village women. However, the currentrectangular design with a built-in handle is being refned. Villagers have ound that it is not shapedcomortably to be carried or used in the home. Naandi has partnered with IDEO, the San Francisco-based design frm, to pilot a newly redesigned jerry can called the whistle, so named because o itsshape.

RFID Remote Site

Naandi also encourages experimentation with improvements among its operators and sta. Forexample, in June 2009, a pilot site was launched in Punjab that uses RFID-based cards to dispense water.

This remote site, located more than one kilometer away rom a water purifcation plant, will eventuallyautomatically dispense water to customers without the need o an operator present. Customers willadd credit to their smart card in the same one-month allotments and scan the card at the remote site,which will automatically dispense water. The site contains a 2,000-liter storage tank that is flled dailyrom a vehicle that brings water rom the nearby plant. The project was initiated in partnership withUS-based Acumen Fund, a nonproft global venture und that uses entrepreneurial approaches to solvethe problems o global poverty.

Delivery

In evaluating why villagers are not subscribers to the Sae Water Program, Naandi has ound thatthe pickup rom the water point is the primary reason or not subscribing. In some villages, Naandi hasestablished relationships with locals to deliver the water to subscribers. By becoming Naandi deliverers,

the drivers are able to increase usage o their autorickshaws (or other transportation vehicles) andsupplement their income. Customers are typically charged between two and three rupees or delivery.


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Achieving Scale

Naandi has consistently surpassed its aggressive growth targets. To achieve and continue this trajectory,Amit Jain, COO, points to our attributes required or scale.

First, an organizational structure that supports growth yet continues to allow or experimentation

and the sharing o best practices including a strong perormance review mechanism (See Exhibit 5 or acomplete organizational chart).

Second, Naandis constantly refned marketing eort implemented by experienced rural marketerscontinues to expand the customer base and improve penetration.

Third, by enhancing Naandis visibility through partnerships (technical and non-technical) and publicrelations, the Sae Water Program is able to expand its partner and unding base.

Fourth, by proving the concept that community-scale drinking water at aordable subscription ratescan be successul, Naandi is able to expand its relationship with the public sector.

As Naandi considers expansion to additional states, positive relationships and success stories will beessential to gain avor with new public sector partners.

Technology

Naandis mission is to provide sae drinking water to as many people as possible, and to that end, theorganization is technology neutral, and has experimented with dierent technologies in dierent areas inan aim to provide the most appropriate technology at the best price.

There are three types o contaminants that Naandi seeks to eliminate to create sae water:

Bacterial: pathogens, viruses, and microorganisms not seen by the eye

Chemical: uoride, dissolved solids, nitrates, sulates, pH, odor, color

Biological: visible organisms carcasses, ies, etc.

The technologies commonly used to deal with these contaminants are ultraviolet (UV), ultra fltration(UF), nano-fltration, and reverse osmosis (RO), and each presents a unique set o advantages. Each o themhandles biological contamination and they have varying levels o success with fltering out bacterial andchemical contaminants. Ultraviolet completely flters out bacterial contaminants but does not address thechemical contaminants, making it suitable or areas where bacterial contamination is o greatest concern.Ultraviolet light inactivates the microorganisms in the water, reeing it o pathogen contamination. UFtakes care o both bacterial and chemical contaminants, though it ails to ully address the total dissolvedsolids. Nano-fltration is not as commercially developed, though it may emerge as the uture o water

fltration. Reverse osmosis technology addresses both bacterial and chemical contaminants, though it hashigher up-ront and maintenance costs than most ultraviolet systems.

At the outset o the Sae Water Program, Naandi exclusively partnered with WaterHealth International anddeployed its ultraviolet technology systems. The technology was frst piloted in 2005 in the Bomminampaduvillage in the coastal Krishna district o Andhra Pradesh. The village had a history o waterborne diseasesand contaminated water-linked debilities, and or generations, residents o the village have been dependant


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on pathogen-contaminated village water sources such as wells, tanks, and canals. The UV technologysupplied by WaterHealth allows the villagers access to drinking water that is 99.9% bacteria ree. As Naandibegan to expand away rom the coastal region o Andhra Pradesh and into northern regions like Punjaband Haryana, it began to ace the issue o brackish water with high concentrations o dissolved solids.Because the UV process does not reduce the dissolved solids o brackish water, Naandi began looking oranother solution. Naandi decided to partner with Tata Projects Limited in the use o a reverse osmosis plant.

Reverse osmosis (RO), also known as hyper-fltration, is a purifcation process used in desalination plantsto eliminate concentrated solutions like dissolved minerals and salts in water. Tata Projects installs andmaintains the plants or the frst year o operation. The plants use whatever water is available in the region,typically either pond water or bore-wells. The RO technology helps Naandi provide drinking water ree ochemical contamination to villagers. In addition to providing a much cleaner bottled water-like taste, theRO system addresses arsenic, nitrate, sulate, and other chemical contaminations.

Naandi does not deploy the same plant in every location; there are a number o village parameters thatare considered, and each plant is customized to the individual village.

In building the reverse osmosis system, three main parameters are used to determine the right systemor a village, categorized as ollows:

Village population


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All programs include school and community programs, flm screenings, and a general inormationcampaign. The school programs typically target elementary schools and are very interactive. For example,ater a short lesson on illness and the dierence between contaminated and clean water, children are askedto draw pictures representing the two dierent types. In other cases, children are directed through a playusing masks showing the benefts o clean water.

Naandi will also typically host two flm screenings and provide the content to the local cable operator.The flms, translated into the local language, discuss the benefts o clean water and speak more broadlyabout the Naandi Foundation. Included in the flms is a eature newscast done by TV9 about Naandis CleanWater Initiative, which establishes credibility by a third party. Following the flm session is a question andanswer session hosted by the sae water promoter (SWP).

The structure itsel is painted bright blue, which attracts new customers. In most units, the waterpurifcation unit is clearly visible, demonstrating to customers the high technology in place to create theproduct. In the village, this creates urther excitement around the Naandi Sae Water Program and positionsthe product as aspirational even or those earning an average income o under $2 per day.

Naandi has also begun providing unds or wall paintings and other visual advertisements to raiseawareness and act as a reminder and reinorcement media.

Post-Launch Activities

Post launch, the SWP becomes the primary fgure in the marketing campaign. S/he will continue tointeract with sel-help groups, schools, and door to door contacts, working with amilies who are eithernot registered users, dropouts, or inrequent users. S/he perorms demonstrations, answers questions (otencovered on the Naandi FAQ worksheet). Using standardized surveys, ongoing assessments are conductedwith customers to understand their needs, especially those that have chosen to not subscribe to date.Analytics and multivariable assessments o customers are used to refne and target campaigns to increaseadoption rates.

In addition, post-launch activities are being refned at a national level to become more interactive. Theoverall goal is to both increase the number o households using the sae drinking water and to encourageexisting customers to use the water or more than just drinking. For example, demonstration manuals orcooking classes are under development that will showcase the benefts o using sae water in both cookingand washing o the ood. One immediately demonstrable beneft is the reduced boiling time o water withewer dissolved solids and higher digestibility o ood.

Project Financing

Naandi has a diversifed approach to locating start-up capital, working with a broad range o partners.In the Naandi model, nearly all capital and startup costs or the projects are raised beore project initiation,with the operating revenue covering operational expenses. Startup unds come rom our main sources:Naandi (typically around 2030% and unded internally or through debt), community contributions(typically a minimum o 10%), external donors, and technical partners (as in the case o WaterHealth India)and in some cases lenders. Individuals such as wealthy non-resident or resident Indians donate to supportdevelopment in their native place or as part o their planned giving.


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Major external partnerships or start-up capital include:20

Global Giving

Through its website, individuals around the world donate to specifc projects. Naandi water projectsare posted on this website and aggregated unds have supported several projects, primarily in Punjab atthis stage. The initial project aimed to provide sae drinking water to 25,000 Indians in ten sites in Andhra

Pradesh and close to $100,000 was raised or the projects.21

The World Bank Global Partnership and Output Based Aid (GPOBA)

The World Banks GPOBA program has provided a grant o $850,000 to support 25 coastal sites inAndhra Pradesh, using exclusively UV technology. The program began in May 2007. Also in partnership inthe program is WaterHealth International, the UV technology supplier and provider o a $200,000 supportingloan, which will be repaid rom user ees.

22The communities are also contributors to the project, providing

20% o the startup costs in each village. The World Bank disperses unds to Naandi upon completion o threemilestones, linked to service delivery: plant inauguration, registration o a set number o below-poverty-lineusers, and continued use by a set number o users. In the interim, Naandi fnanced the projects throughcommercial borrowing, using the World Bank agreement as collateral.

FRANK Water

UK-based charity FRANK Water supports clean water projects in the developing world. Founded byKatie Alcott ater she had contracted dysentery by drinking dirty water in a visit to India, FRANK donatesthe profts rom its afliated bottled water business in the UK to support community access to sae waterin rural areas. FRANK donates to specifc sites based on village demographics, water quality, and health/hygiene conditions. FRANK projects tend to target the most challenging areas. To date, FRANK unds havesupported over 60 sites.

State Government Funds

In Punjab and Haryana states, Naandi projects are largely fnanced with state unds. Expansion inthose two northern states has been aggressive because o the strong public private partnership (PPP).Naandi replied to open tender oers published by the state governments requesting bids or sae water

projects in various blocks throughout the states. To date, Naandi has won two out o three bids submitted.The government pays Naandi the majority o the startup cost 15 days ater the site has been inaugurated.Ater fve years, the plants become property o the state, rather than the Gram Panchayat as is the caseelsewhere.

Local Government Funds

In addition to unds raised by the community, local governments in some cases contribute unds or theconstruction o the Naandi water plant. Local elected ofcials will allocate unds as part o the capital costso the project, either directly rom legislative assembly unds or through an afliated NGO.

Debt Financiers

Naandi is increasingly using debt fnancing to und startup capital costs, paying back the debt over the

fve to six years that each project is Naandi operated. Revenue rom operations would service and pay downthe debt. Naandi has tentative agreements in place with an Indian Agricultural Bank and a oreign lenderthat will und multiple sites.

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Pre-Launch Activities

A member o the project management team oversees the installation and inauguration o the plant.Despite rapid decline in costs over the last several years, the typical installation requires an average o675,000 rupees (USD 13,500) in startup costs. The project manager oversees the ollowing activities:

Installation o the Reverse Osmosis or UV UnitSourced rom one o Naandis partners and acquired typically at below market rate pricing, these units

range rom 500 liters per hour capacity up to 5,000 liters per hour at the largest sites. Selection o theappropriate unit is based upon the results o an initial water sampling ater site selection. Recently, Naandihas avored reverse osmosis technology as discussed above. Costs or units have allen rapidly over the pastseveral years, especially or RO units.

Construction o the Structure or Storeront and Unit Housing

Naandi will place units in either pre-abricated or complete locally built structures. Pre-abricatedstructures require a locally built basement, which requires roughly 10 days to construct and costs between48,000 and 55,000 rupees. The pre-abricated structure is then delivered and erected in two days, at a costo 150,000 to 170,000 rupees.

In the case o a complete locally built structure, expected construction time is 45 days, with morevariation during monsoon season. Costs are slightly lower, typically around 200,000 or the complete civilstructure. Naandi accepts bids rom local contractors to construct several units and selects its partner basedon price and reputation.

The design o the structures has evolved since Naandis frst project in 2005. For example, initially theceiling height was such that the storage tank could be cleaned only ater removing it rom the acility.With more ceiling height, this monthly cleaning could be done inside the structure, simpliying the processmarkedly.

Installation o the Plumbing and Tanks

Along with the purifcation unit itsel, each water point requires two tanks, piping, and a disbursementarea. Tanks range in size based on expected demand and can be upgraded or a tank can be added should itbe required. Though early sites used stainless steel and other materials or tanks, current tanks are typicallymade o polyethylene, chosen because it is readily available, lightweight, strong, and hygienic. The tankor pre-fltered water is placed on the roo o the structure, while the clean water tank is housed inside thestructure.

Pre-Launch Marketing

Described in detail above, social marketing about the benefts o clean water begins beore the projectis completed. Naandi budgets 50,000-100,000 rupees in initial project costs or marketing materials,depending on the project area.

Operational Roles and Requirements

Ater the launch o the product, retail sales managers oversee the unction o all units, with reportscoming rom assistant managers, who are in turn inormed by feld coordinators. Operators and SWPsare reporting to the feld coordinators and drawing upon them when maintenance or other needs arise.While Naandi continues to expand, overhead costs are not yet allocated to sites individually, as executiveattention is ocused on the rapid scaling.


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The Operator

At each site, an operator runs the plant, conducts routine maintenance and tests, maintains thecustomer book, and oversees sales. He (the operator is typically male) opens the plant typically rom 7 to11 a.m. and rom 4 to 7 p.m., seven days per week. He is responsible or ensuring that there is sufcientclean water available to customers and must adjust his schedule accordingly. In many villages, power canbe intermittent or only during certain hours. The operator may have to run the plant during o hours to

ensure a supply o water or the ollowing day. Operators are also monitoring and logging the perormance othe unit, logging daily outputs rom the system and customer fles. These are compiled into weekly reportsgiven to their feld coordinator.

Sae Water Promoter (SWP)

As discussed in the post-launch marketing section, the SWP has a set o duties to increase the numbero registered amilies and the usage o those already registered. She will work closely with the operator aswell to understand customers and their needs.

SWPs are paid a salary equivalent to operators as well as incentives based on increases in the numbero households over the initial baseline.

Electricit

Powering the unit requires a signifcant amount o electricity. The Gram Panchayat is required toprovide the Naandi acility with an electricity connection but does not cover the cost o electricity. InIndia, electricity prices vary dramatically. In Andhra Pradesh, a typical 1,000 liter per hour (LPH) plantrequires about 1,000 rupees per month o electricity. The same plant in Punjab, or example, costs nearly2,0002,500 rupees per month in electricity.

Routine Maintenance

The operator is trained to perorm routine maintenance on the flter. He will change flter cartridgeswhen certain levels are noted on the instrument panel. The requency o changes varies based on thecondition o the incoming water. Each cartridge costs about 300 rupees and on average a cartridge lasts

about two weeks. Non-routine maintenance is perormed by dedicated proessionals when needed, includingthe changing o membranes ater three years or an RO system. Membrane replacements cost roughly 10,000rupees each, with six required or a 1,000 LPH plant. Thus, ater three years o operation, 60,000 rupees inmembrane replacement charges is expected.

In addition, the water rom each unit is tested monthly at a lab in Hyderabad to assess the waterspurity. Samples are sent through the feld coordinators back to Hyderabad where a private lab conductstests. Each test costs approximately 400 rupees (USD 8).

Impact

Consistent with its proessionalism, Naandi is not content with anecdotal evidence that clean water iseradicating poverty and improving lives. Naandi is conducting surveys beore and ater a plant is installedand in adjacent communities without plants to establish control groups or comparison. In the surveys,Naandi will establish baselines and track improvements in fve categories: 1) health; 2) aspirations; 3)school attendance; 4) medical expenses; and 5) loss o wages. The surveys are being conducted by externalpartners to ensure independence and accuracy.


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Discussion Questions

1. What is the Naandi value proposition and how does its value chain work through the pre-launch,operating, and ongoing maintenance phases o its activities?

2. What strategic resources and organizational competencies does Naandi need to execute its business

plan? What knowledge, skills, and abilities does Naandi require to achieve its rapid growth plans? Whatadditional partnerships should it consider? How should it structure and manage those partnerships?

3. What alternatives could Naandi pursue or its fnancial structure? Should it consider developinga ranchise model like Piramal Water? Should it consider becoming a hybrid organization thatcombines a nonproft structure or capitalizing new plant expansion with or-proft status orits operating units? Should Naandi consider taking on additional debt to support its plans oraccelerating growth?

4. Is the cost model sustainable when considering overhead and indirect expenses? What scale oradjustments are necessary or the model to be sustainable?

5. How would you adapt this model to ft local conditions in other countries? Urban or semi-urbanareas?


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Appendices

Appendix 1

Financial Analysis

The Naandi Sae Water Program has grown incredibly rapidly and has proven results in improving the lives

o its customers. But are its fnancial structure and business model sustainable? Under what conditions is ittruly possible to deliver sae drinking water to millions o people? Though Naandi is a nonproft, this analysisevaluates its model as i were a or-proft entity, looking at revenue and cost structure and its scalability.

Naandis Sae Water Program is almost entirely a fxed cost business. With the exception o some addedcosts o electricity or running a plant longer or potential additional membrane and cartridge replacements,all costs are fxed (salaries, plant deployment, corporate overhead, etc). It is thereore a volume business,not only or each plant in its water sales but also when overheada signifcant fxed costis considered.Thereore scale is essential on two levels. First, each plant must sell enough subscriptions to cover fxedcosts, and the overall organization must have enough plants to sufciently spread its overhead. The belowanalysis assesses Naandis revenue model and cost structure in more depth.

The most straightorward way to analyze the business rom a fnancial perspective is by examining thebusiness at the plant level and then conducting an overhead cost analysis to charge each plant. As inany distributed business, there are variations and ranges o costs across regions and localities based onlocal conditions, and thereore this analysis is based on average fgures. In uture site selection, fnancialeasibility should be a frst level consideration.

Plant Revenue

To date, Naandis revenue comes rom one source: sae water subscriptions.24

As a result, Naandisrevenue is a simple unction o the price o water and quantity o sales. Naandis success to date hasbeen a direct result o its ability to achieve high customer penetration rates in each village.

25Naandi has

done so with its sophisticated, highly specialized marketing campaigns. However, Naandi has not adjustedthe other input o the equation, price. The elasticity o demand or the water is not known, thoughanecdotal evidence hints that non-subscribers are less concerned by the price than convenience o theplant. Assuming that anecdotal evidence is true, Naandi could increase price to raise revenue, making themodel more fnancially viable. The below table shows the revenue eects o a rise in price and/or a rise inthe number o customers.

Raising prices could be viewed as antithetical to the overall mission o Naandi, eradicating poverty.

Any price increase has an opportunity cost or the Naandi customers, who could have used those undsor another purpose. Or, i increased price means that certain customers can no longer aord Naandis saewater, then again fnancial targets are in conict with the mission. Pricing the poor out o the market doesnot eradicate poverty.

Costs

Direct Costs

The structure o direct costs is considered using the example plant in Exhibit 9. For this analysis, a singleyear is the unit o analysis because costs are constant or the lie o the plant. For the membrane replacement,equivalent annual cost is used with a 10% cost o capital and an assumed fve-year liespan.

26


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While salary and maintenance costs are generally consistent and stable, electricity costs can varymarkedly by region. In Punjab, electricity rates and requirements can result in costs three times thoselisted. As explained below, this variation is not as fnancially material as changes in debt quantity or scale(or overhead reasons).

Debt Financing

The portion o the initial fnancing paid or using debt and the rate have material impact on thefnancial viability o a plant. For a 675,000 plant, 30% debt fnancing at 10% paid over the fve years ooperations costs over 50,000 rupees per year, more than the salary o one o the workers and equivalentto more than one-third o operating costs. Thus the startup costs and the structure o the payment areessential in determining viability. The chart below shows annual payment or debt based on size o the loanand interest rate, assuming a fve-year repayment schedule. Percent equivalent debt fnancing is also shownor a 675,000 plant.

The quantity o debt required to fnance a project is the most important actor in determining fnancial

viability. The interest rate is important, but pales in comparison to total debt burden. Naandi has typicallyused internal unds (or debt) to cover roughly 30% o up-ront costs.

Overhead

The fnal major cost to consider is overhead. Because this analysis is at the plant level, an overhead equivalentshould be determined based on a) a cost structure or corporate and managerial time, and b) the number oplants. In this analysis, every 12 plants are overseen by one feld coordinator and 60 sites per regional manager.This analysis assumes a static corporate cost structure and a fxed cost or our state-level operations.

Because o the requisite corporate and state level employee base, scale must be achieved to make themodel viable. The below chart demonstrates the declining overhead charge based on an increased numbero plants. (See Exhibit 11 or assumptions used and details.)

SummarThe Naandi model is viable at scale and with limited debt burden. Direct operating costs account or

a viable portion o revenues--roughly hal. Increases in certain components o operating costs such aselectricity or salaries unless sizable will not undercut the success o the model as written. However,quantity o debt (and interest rate) requires careul attention. A 675,000 plant fnanced with 30% debt,the typical Naandi contribution, requires annual payments just about 50,000 Rs, or one-fth o revenue.Adding direct costs and debt burden, roughly 75,000 rupees are available to cover overhead costs (assuming


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the goal is break even). For burden rates to all to that level, Naandi must achieve scale o over 1,000plants, which it is slated to do in 2010. The model is viable but only i Naandi can continue its success inachieving scale both in penetration rates at the plant level and scaling out the number o plants to spreadthe overhead costs.


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Exhibits

Exhibit 1

India Country Profle

2000 2005 2006 2007

Population, total (millions) 1,015.92 1,094.58 1,109.81 1,123.32Population growth (annual %) 1.7 1.4 1.4 1.2

GNI, Atlas method (current US$) (billions) 458.08 805.64 914.74 1,069.43

GNI per capita, Atlas method (current US$) 450 740 820 950

GNI per capita, PPP (current international $) 1,510 2,210 2,470 2,740

Econom

GDP (current US$) (billions) 460.18 808.71 916.25 1,170.97

GDP growth (annual %) 4.0 9.2 9.7 9.0

Ination, GDP deator (annual %) 3.5 4.1 5.6 4.3

Agriculture, value added (% o GDP) 23 19 18 18

Industry, value added (% o GDP) 26 29 29 29

Services, etc., value added (% o GDP) 50 52 52 53

Exports o goods and services (% o GDP) 13 20 22 21

Imports o goods and services (% o GDP) 14 23 25 24

Gross capital ormation (% o GDP) 24 35 36 38

Revenue, excluding grants (% o GDP) 11.9 12.6 12.6 ..

Cash surplus/defcit (% o GDP) -3.9 -3.3 -2.7 ..

Time required to start a business (days) .. 71 35 33

Market capitalization o listed companies(% o GDP)

32.2 68.4 89.4 155.4

Merchandise trade (% o GDP) 20 30 32 31

Source: World Bank World Development Indicators database, September 2008

Exhibit 2

Selected Water Standards

Allowable Particulates

World HealthOrganization

Bureau o IndianStandards

(requirement)

Bureau o IndianStandards

(permissible)

Naandi Water

Flouride (milligram/liter) 1 1 1.5 1

Nitrates (milligram/liter) 45 45 100 45Total Hardness (As CaCo3,milligram/liter)

50 300 600 300

Total Dissolved Solids(miligram/liter)

1,500 500 2,000 500


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Exhibit 3

Diagram o Naandi RO Water Purifcation Technology

Tata Projects Limited Reverse Osmosis Sstem

RO technology uses a membrane that is semi-permeable, which allows only pure water to pass throughit. During the process it rejects large contaminants passing through the membrane. Quality RO systems use

a process known as crossow, which allows the membrane to continually clean itsel. RO requires a drivingorce to push the uid through the membrane and, as some o the uid passes through, the rest continuesdownstream, thereby sweeping the rejected contaminants away rom the membrane.

The unit, which is skid-mounted and designed or indoor installation, comprises a raw water pumpthat supplies water to the micron cartridge water fltration system and to the high pressure pump. Microncartridge flters control the silt density beore water enters into the membrane. The high pressure pumpexists to boost water pressure as required.


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Exhibit 5

Naandi Sae Water Program Organization Structure

Behind the expansion o Naandi is an ofce team divided by region and unction, supporting the growtho Naandi across India. There are national level managers in each o the unction areas, and mirroring positionsor each state. The state level managers report to both their state director and the national managers.


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State Directors

Each state has a single director who reports to the national director. This individual manages the ullteam o state level managers.

Retail Manager

The primary point o contact or the assistant manager, the retail manager is responsible or the states

units during their operation.

Business Development Manager

This individual is in charge o securing capital or the expansion o the number o sites. S/he works tofnd and secure unding rom all available sources.

Project Implementation Manager

With a site selected and unds committed, the project implementation manager oversees the entire set-up o a plant rom soup to nuts. At the inauguration o the plant, the role o the project implementationmanager is complete or that plant.

Marketing Manager

This individual oversees all communications, campaign, and public relations required to increasecustomers at the plant. S/he will target communications to each site while also working with the nationalmarketing manager to develop new materials.

Maintenance

Part o the technical team, the maintenance manager ensures the consistent operation o all plantsacross his/her state. To date, much o the maintenance has been perormed by Naandis technical partners(i.e. Tata Projects Limited, WaterHealth International, Malthe Winje), partially because the frst year omaintenance is typically included in the price o the RO or UV unit. However, going orward, maintenanceon units will become a challenge or Naandi. Consideration o the launch o a separate water system serviceentity, possibly or proft, which could service both Naandis and other companies units, is under way.

Assistant Manager

The intermediary between headquarters and the feld coordinators, the assistant manager works withfeld coordinators overseeing collections, maintenance calls, and support to plants as needed. Each assistantmanager is responsible or several districts and multiple feld coordinators.

Field Coordinator (FC)

For each 12 plants (on average), a feld coordinator is appointed to oversee the activities at the sites.The feld coordinator serves as an intermediary with reports directly to an assistant manager, who liaiseswith state level. The FC is expected to visit two villages per day, checking in and collecting the weekssubscription payments. These payments are deposited daily at the local bank. FCs are hired locally, stayingtypically in the larger town in the region. In some cases FCs also serve as translators between village-level

dialects and Naandi headquarters.


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Exhibit 8

Naandi Example Plant Sources and Uses

Exhibit 6

Naandi Sae Water Program Growth

Exhibit 7

Naandi Sae Water Program Pro Forma Income Statement

Projected Income Statement (thousands USD)

2008 2009 2010 2011 2012 2013

# o plants 300 1,000 2,200 ,4300 4,300 4,300

Population o villages served 1,500,000 4,000,000 9,000,000 15,000,000

Revenue rom sales 1,782 6,358 15,765 37,469 37,469 37,469

Total expenses 2,161 4,871 8,492 17,411 20,893 25,071

Net income (379) 1,487 7,273 20,058 16,576 12,398

Capex required 5,625 14,438 27,225 52,408Naandi contribution 4,219 9,096 16,335 31,445

Ending cash (1,677) (5,532) (9,149) (10,054) 6,522 18,920

NotesCapex per village estimated to increase because o materials costs and other actorsNaandi contribution includes debt fnancing

Example 1000 Liter Per Hour Naandi Plant, Startup Sources and Uses (Rupees)

Sources UsesNaandi Foundation 202,500 Plant & Machinery 375,000

Community Contribution 100,000 Civil Structure 175,000

Private Donor (NRI) 372,500 Storage Tanks & Piping 75,000

Project Coordination &Community Mobilization

50,000

Total 675,000 675,000


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Assumptions

Startup Costs (Rs) 675,000

Sales (l/d) 6,500

Price (Rs/l) 0.1

SWP Salary (Rs/year) 36,000

Operator Salary (Rs/year) 36,000

Electricity Cost (Rs/year) 12,000

Cartridges (Rs/year) 12,000

Membrane Replacement (Rs) 75,000

Inormation Education Communication Program 36,000

Miscellaneous 6,000

Field Coordinator Apportionment (Rs/year) 12,000

% Financed by Naandi Debt 30%

Total Debt 202,500Interest Rate 10

Term (years) 5

year 1 2 3 4 5

Revenue

Liters Sold 2,372,500 2,372,500 2,372,500 2,375,500 2,372,500

Rs/l 0.1 0.1 0.1 0.1 0.1

Total Revenue 237,250 237,250 237,500 237,500 237,500

Direct Operating Costs

SWP Salary 36,000 36,000 36,000 36,000 36,000

Operator Salary 36,000 36,000 36,000 36,000 36,000

Electricity Cost 12,000 12,000 12,000 12,000 12,000

Cartridges 12,000 12,000 12,000 12,000 12,000

Membrane Replacement 75,000

IEC Program 36,000 36,000 36,000 36,000 36,000

Miscellaneous 6,000 6,000 6,000 6,000 6,000

Field CoordinatorAppointment

12,000 12,000 12,000 12,000 12,000

Total Operating Costs (150,000) (150,000) (150,000) (150,000) (150,000)

Annual Gross Proft 87,250 87,250 12,250 87,250 87,250

Debt Payment Due (53,419) (53,419) (53,419) (53,419) (53,419)Net 33,831 33,831 (41,169) 33,831 33,831

Exhibit 9

Naandi Example Plant Pro Forma Income Statement


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Annual Overhead Charge Per plant (Lakh Rupees)

Number o Plants Number o

Assistant Managers

Number o Field

Coordinators

Overhead Impact/

Plant200 4 17 3.575

400 7 34 1.903

600 10 50 1.342

800 14 67 1.069

1000 17 84 0.901

1500 25 125 0.677

2000 34 167 0.568

2500 42 209 0.500

3000 50 250 0.455

3500 59 292 0.424

4000 67 334 0.4004500 75 375 0.381

Exhibit 10

Naandi Overhead Calculation Per Plant


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Exhibit 11

Selected Naandi Documents

11.1: Primary Inormation Report


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11.2: Frequently Asked Questions Used by Sae Water Promoters (selected)


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Exhibit 12

Piramal Water Profle28

Piramal Water Private Limited is another community-scale water provider in India and is running amodel similar to Naandis. The company was established in mid-2008, with a or-proft aim to fnd viablemass-market solutions to Indias drinking water crisis. Piramal Water operates under the brand Sarvajal.

The enterprise has its roots in the work o the Piramal Foundation, a charitable trust established byAjay G. Piramal. The oundation initially piloted the Bagar Drinking Water Initiative as part o the nonproftgroup Indicorps Grassroots Development Laboratory in the Shekhawati region o Rajasthan, where uoridecontamination in drinking water has led to many premature health problems. The successul pilot in Bagarproved to the Piramal amily that development interventions could work via a sustainable business model.

Piramal Waters operations rely on a ranchise model (there are both entrepreneur-owned and company-owned outlets) that enables rural entrepreneurs to start businesses that provide purifed drinking waterto their communities. Customers purchase prepaid cards in 10L and 20L denominations; they come to theoutlet to purchase water either in their own containers or in jerry cans purchased rom Sarvajal. Someranchise locations also oer economical daily delivery o water.

Piramal Water owns, installs, services, and maintains the water purifcation plants that are customizedby location and source water quality. They currently employ reverse osmosis systems that have been sourcedrom a global supply chain.

Franchisees are water entrepreneurs who are trained to operate the units, ensure the highest standardso hygiene, and promote the benefts o pure drinking water to their communities. As a part o theirranchise ee, they are provided with a business startup kit that includes health promotion materials,operations manuals, marketing collateral, branding tools, and business development resources. In addition,a Sarvajal representative is available to assist new ranchisees on-call and on-site during the frst ewmonths o operation to ensure that each outlet generates a reliable customer base by promoting the benefts

o clean drinking water.

Like Naandi, Sarvajal is testing out new technologies to improve the experience or the consumer aswell as helping to make the low-cost, distributed business model viable or its deployment conditions. Thisincludes developing cutting-edge technological solutions that help keep track o Sarvajal machinery, theperormance o each ranchisee, and the way end customers use the products and services.


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Exhibit 13

Water Treatment Plant Projects with Private Participation

in Developing Countries by Region, 19902008

Source: World Bank and PPIAF, PPI Project Database

Exhibit 14

Private Investment in Developing Countries by Sector

Source: World Bank and PPIAF, PPI Project Database


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Exhibit 15

Treatment o Contaminated Waters or Human Consumption

Overview o Alternatives

Source: Hammond, Al, Jim Koch, and Francisco Noguera. Sae Water Drinking or All. The Global Social Beneft Incubator. Santa Clara University and New Ventures, WorldResources Institute. November 2008. p. 5. .


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Endnotes

1 Excerpted rom a speech o Dr Manmohan Singh at the Conerence o Ministers in Charge o Rural Drinking Water Supply andSanitation. January 2006. .

2 Hull, Je. Water, Water, Everywhere. Fast Company. .3 .4 Prss-stn, A., R. Bos, F. Gore, and J. Bartram. Saer water, better health: costs, benefts and sustainability o interventions to

protect and promote health. World Health Organization. Geneva: 2008.5 Briscoe, John. India's Water Economy: Bracing or a Turbulent Future. The World Bank. 2006. .6 Ferguson, Kevin. Indias Water Woes, Continued. The New York Times. 17 July 2009. .7 Building From the Past. National Driller. 1 Dec. 2000. .8 Ibid.9 Chlorine Disinectants Critical to Combating Global Inectious Diseases. American Chemistry Council. 2 May 2005.10 .11 Mehovich, Jasmin, and Janaki Blum. "Arsenic Poisoning in Bangladesh." South Asia Research Institute or Policy and

Development. 8 Sept. 2004. .12 .13 .14 Gilbert, Steven G. "A Small Dose o Toxicology: The Health Eects o Common Chemicals." CRC Press. New York: 2004.15 Additional inormation on LieStraw is available at . PUR, a division o

Procter & Gamble, has developed a sachet o chemicals or purifcation or individual and small-scale use. Additional inormationis available at .

16 20 liters was chosen because it allows an average amily o fve to have our liters o water each per day.17 Because o the varying needs o amilies, Naandi is currently experimenting with 5- and 15-liter subscription plans in some districts.18 This will o course vary by village because o input costs and number o customers. SeeExhibit 9 or a modelpro forma income

statement o a plant.19 Academic research has shown that education and awareness have nearly equal eect as price in purchasing decisions o drinking

water. See or example Jalan, Jyotsna, et al. Awareness and Demand or Environmental Quality: Drinking Water in Urban India.Indian Statistical Insitute. September 2003. .

20 This is not an exhaustive list. There are several other partners not mentioned, including The Eleos Foundation, Global Water

Challenge, The Coca-Cola Foundation, AAPICF & APMGUSA, various state governments, members o Parliament and legislativeassemblies, as well as Rotary Club International.

21 .22 . See also the GBOPA Note, Output-Based Aid in India: Community Water

Project in Andhra Pradesh, available at .23 Early projects partnered with WHI did use a orm o debt. At that time, WHI would borrow money rom a local bank to pay or

the startup cost o the project. WHI controlled collections at the site ater plant inauguration and used collected unds to payback the initial loan. Naandis role was largely social marketing toward the use o sae water in the villages. In certain cases, theAcumen Fund would guarantee a portion o the loan. For urther detail, see the Institute or Financial Management and Researchcase study Community-owned Sae Water ProjectNaandi, WHI and ICICI, available at .

24 Naandi also sells jerry cans but essentially at cost. For the purpose o this analysis, that revenue is ignored. In the uture, Naandimay be able to increase revenue and profts by increasing the number o products and services on oer by either selling throughthe storeront directly or through partnerships with other vendors.

25 Rate o adoption in the village is an additional actor to consider, though not included in this analysis. Naandi has achievedhigh penetration in villages airly quickly, limiting the potential impact on revenue o adoption times. However, in othercircumstances, this could signifcantly impact the cash ow o the plant.

26 Equivalent annual cost is used because when scaling this analysis to the multiple plants, replacements should spread more evenlyacross years. The membrane lie is also closer to three years on average. However, the initial unit includes a membrane andbecause the plant is handed o ater fve years, only one replacement is needed.

27 .28 and company executive interviews.


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William Davidson Institute - Case Study

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