With spirits down and low in urban areas (largely because they have reached a saturation point, and partly due to the credit crunch), the next phase of development in India will come from the tier II cities and the rural parts of the country.
Whether it’s the retail, banking or telecom sector, everyone has their eyes glued on the next billion users of their facilities and services.
What is fueling this phenomenal growth? Micro finance. Two simple words that promise to change the rural landscape.
Let’s begin with telecom itself, where close to 60% growth is expected from rural India. By collaborating with micro finance institutions (MFIs), telecom operators, and equipment and handset manufacturers are helping benefit the self employed population in Indian villages. Anytime, anywhere connectivity now enables rural entrepreneurs to deliver their services on call.
More specifically, rural entrepreneurs have chosen to use credit provided by MFIs to start their own ventures or to become associated with established corporates that aim to reach the rural hinterland through local partnerships.
In the last couple of years, banks such as ICICI have also made headlines for reaching out to rural customers through its customized loan portfolio. Microfinance is seen as a mutually profitable venture that provides new business opportunities for banks, and opens up new avenues of opportunities for the rural banking customer. For example, the Financial Information Network and Operations (FINO), in association with the World Bank, is expected to run pilot projects with microfinance institutions, banks and government agencies to make use of IT in rural banking.
To ensure that microfinance is successfully implemented, it is also important for rural bankers to understand its true role. In fact, in Philippines, there are foreign-funded programs that aim to teach the rural bankers how to effectively design their microbanking-related business.
Anticipating the retail boom in the country, various agri-business consultancies and big names in the retail sector have opened the doors to microfinancing and are inviting people from rural regions to join them in taking the business of retail to hinterland. Apparently, Reliance Retail is eyeing partnerships with existing MFIs as part of its supply chain with rural and semi-urban markets. Retail biggie Bharti is also believed to have shown interest in exploring the MFI route for supporting the retail supply chain, contract farming operations and dairy sourcing.
There are as many opportunities in the rural sector, as there are industries in our country. With external factors such as the sub-prime crisis affecting our bread and butter, perhaps focusing on our internal strengths and opportunities is a good option!
“We don’t usually associate telecommunications with power. But cellular towers don’t work on love and fresh air (and fresh air is not something that you can take for granted, anyway.) They require power and in areas where the grid is unreliable, you have to spend fairly large sums on diesel generator sets. That, among others, is a major problem in rural India. The cost of energy accounts for a third of the operating costs of a cellular network, I am told. Higher costs means higher prices. So what’s to be done.
I am a firm believer in the market. The market figures out a solution. Recently I came across a firm that has developed cellular technology that is miserly in the use of electricity. It does not require grid and can do without diesel generator sets. It is VNL, a Swedish Indian company.”
Mobile operators demand that the Indian government maintains diesel subsidies, underlining that telecom is a public utility and higher fuel costs impacts the consumers.
Business Line reports that “Cellular Operators Association of India and the Association of Unified Telecom Service Providers of India are planning to approach the Government seeking a total exemption or only a marginal increase in diesel price…”
Why? Because power costs are astronomically high; “…cellular operators spend nearly 35 per cent of their operational expenditure on procuring diesel for running generator sets that power their base stations”.
Since mobile infrastructure equipment has high power demands, it is impossible to deploy it without power support in areas where electricity is scarce. This means diesel generators are so far the only solution to provide coverage.
The need for diesel generators holds true for both urban and rural areas – multiple daily power cuts are commonplace in Indian metros, and basically all sites are equipped with generators that run several hours every day. In fact, it’s not uncommon for these generators to run 24/7/365, since shutting down and powering up a generator wears more (and costs more) than leaving it running.
So, while providing mobile coverage to everyone is a top priority, and telecom is truly a public utility, is the solution really to deploy more traditional, power-hungry mobile infrastructure?
From the article:
“…Some companies even deploy helicopters to transport diesel to remote places in order to keep the mobile networks running.”
Clearly, this is not a sustainable practice. And besides the high cost of fossil fuel, the environmental impact is enormous. According to our estimates, Indian mobile operators burn upwards of 2 billion litres of diesel every year, just to power diesel gensets. This translates to 5,24 billion kilogrammes – 5,24 million metric tonnes – of carbon dioxide emitted every year.
There’s a dire need for mass deployment of renewable energy sources and sustainable technology. But clean energy is only one part of the picture.
As we’ve previously underscored, rolling out mobile networks in rural and remote areas requires a complete re-engineering of technology, business models and approach. The solution is actually to let profitability and sustainability go hand in hand.
Quoting Thich Nhat Hanh from yesterday’s Times of India;
“Protecting the environment is protecting ourselves.”
The case for WorldGSM™ has never been stronger.
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