The Amul model can be extended to solar power generation.

Could the Amul milk cooperative success serve as a model for solar-based electricity in rural India? I believe the “white” revolution can extend to the “light” revolution for 400 million Indians without electricity, who burn kerosene for cooking and illumination. Just as they daily contribute milk to the cooperative, farmers could lease their rooftops or land for solar panels.

Some electricity generated will be for personal use, and the excess may be sold, or stored in community micro-grids for use at night or when clouds block sunlight. Just as a cow is a local, standalone source for milk, solar panels are local, standalone sources of electricity.

Verghese Kurien, as chairman of the Gujarat Cooperative Milk Marketing Federation (GCMMF), wrote “Cooperative dairy development on the Amul Pattern has been instrumental in securing rural livelihoods in many parts of India through income generation, agricultural diversification, risk distribution, female empowerment and assured employment.” Cooperatives could augment these benefits by getting into the solar business.

Spark it off

India experimented with rural electricity cooperatives in the 1960s; five pilot cooperatives were established in Andhra Pradesh, Gujarat, Karnataka, Maharashtra, and Uttar Pradesh. The movement did not take off. One reason: absence of autonomy.

Focused on distribution, electricity cooperatives relied on the State Electricity Boards (SEB) for generation and transmission. SEBs are plagued by mis-governance and burdened by “free power for farmers” type political schemes. In 2005, India launched the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). The programme also has made limited dent in rural electrification.

In contrast, the US has 1,000 rural electric cooperatives serving 30 million Americans. They own nearly half of all distribution lines and cover three-fourths of the nation’s land. In 1932, 10 per cent of America’s farms had electricity compared with 70 per cent of urban homes.

Says a cooperative’s Web site: “While his urban brethren basked in electricity’s glow, the American farmer lingered in the past, toiling by kerosene lamp … The farmer’s desire for electricity was passionate but the means elusive. The vast distances between farms made stringing lines and setting poles costly …”

A fresh look at electricity cooperatives is warranted, whatever reservations one may harbour about cooperatives as an organisational form. This is because solar-based distributed generation is poised to liberate any new power company from dependence on state-controlled grids. Power generated on rooftops may be delivered to rooms from standalone systems, cost competitively with fossil fuel power. Cooperatives gain control over their own destinies as a result.

Cusp of a Revolution

As users, we do not care whether electricity comes into our homes over wires across distances, or by magic from panels on rooftops. We only need illumination, cooling, heating, and motion at the press of a switch. Only rarely in industrial history has a substitute so radically challenged the existing network topology, and therefore the industry structure and economics of utilities, as distributed solar is poised to do.

China has made massive investments in solar panel production and has driven out costs; we acknowledge their contribution to affordable electricity. Significant problems remain, e.g., high storage costs due to batteries. Yet for community micro-grids, complementary technologies — wind, bio-fuels, and diesel — can compensate in the absence of sunlight.

The fundamental problem for rural electrification (and telephony) has been: network economics does not work in the hinterlands with sparse populations. To cover infrastructure costs, populations need to be large and concentrated. With telephones, the wireless revolution made it economical to reach rural customers because no costly digging was necessary to lay cables. India had an explosion in telecom services.

Can the wireless telecom analogy extend to electricity? Not in any traditional way of thinking. Electricity is pre-dominantly a wired, network service. But now, photovoltaic solar can be deployed as a network-independent service, and a parallel may be drawn between wireless telephony and electricity. When electricity becomes less of a networking business, there are no transmission losses, no copper wires or electricity to steal — total costs come down.

Leadership issue

Whereas technological advance, a low cost network topology, and hard economics favour distributed generation, this is insufficient. Business acumen and managerial skills are essential too, which Amul and its sister cooperatives have.

The three-tier Amul Model of dairy development comprising the cooperative societies at the village level, federated under a milk union at the district, and member unions at the State level maps well with the solar value chain comprising generation and distribution.

Enlisting the participation of societies; setting up operations involving over 12 million farmers, more than a lakh villages, and over 200 diary plants; establishing new work methods; managing the brand; maintaining public-spiritedness — these are accomplishments hard to find in the private sector, let alone the government. The cooperatives are, therefore, positioned to leverage their expertise to launch self-sustaining micro-grids in many communities.

To do this, as Verghese Kurien said, “Cooperatives must be headed only by professionals armed with tenures long enough to achieve meaningful changes and to put in place comprehensive systems. An officer deputed with ad hoc powers and subject to sudden transfers … can hardly be expected to measure up to the task. As a corollary, no political consideration must colour the policies, objectives, strategies and functioning of a cooperative.” Leadership, vision, entrepreneurial spirit, and commitment are essential to drive electricity cooperatives — difficult and doable.

Government Role

The state has an important, limited role in catalysing the process — policy framework, seed capital, soft loans. Almost no regulation is needed. The market and cooperatives can determine prices. The micro-grids may remain self-sufficient and off-grid.

The milk cooperatives may participate in this dynamic field by forming motivated teams, establishing prototypes, and exploring business models to gain a “feel” for what works.

We know diversification efforts in unrelated sectors often fail, less because the concept is wrong, but more due to the absence of leaders around whom to build the business. Caution is in order alongside experimentation. With luck, cooperatives can empower rural India.

(The author is visiting professor, strategy, IIM Kozhikode.)

(This article was published on November 2, 2012)
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