The Toilet Board Coalition (TBC) and Aavishkaar-Intellecap Group convened key stakeholders in India’s sanitation sector on 23rd April, 2018 in Mumbai, India. The roundtable discussion was attended by over 70 participants from leading corporates including Hindustan Unilever, Firmenich, Lixil and Novozymes; impact leaders like Tata Trust, NASSCOM Foundation, UNICEF, India Sanitation Coalition, and Samhita Social Ventures ; and social enterprises like Saraplast, Blue Water Company, Tiger Toilets and GARV Toilets.

The Toilet Board Coalition’s Sanitation Economy in India report estimates that the Sanitation Economy will be a $62 Billion industry in India by 2021 indicating significant benefits for business and society. TBC categorises the sanitation economy into three segments: the toilet economy (installation, maintenance and repairs of toilets), the circular sanitation economy (toilets and products designed for reuse of resources) and the smart sanitation economy (user experience and product applications designed for information capture). To realise the benefits of the ‘sanitation economy’ opportunity, business ecosystems will need to be accelerated and the sector will need to become more attractive to capital providers and new talent. There is significant impetus being provided by the Indian government’s Swachch Bharat Abhiyan (SBA) campaign to make the country Open Defecation Free (ODF), but the sector is still in its nascent stages when it comes to private capital and quality talent.

“India uniquely holds the most ideal conditions now to accelerate the Sanitation Economy, a new market place for innovation, entrepreneurship and investment, making sanitation self-funding, and turning human waste into valuable organic resources and real-time information about human health and behaviour. Businesses large and small have a significant and new role to play. Working collaboratively across businesses and sectors is the only way to unlock this multi-billion dollar opportunity.” said Cheryl Hicks, Executive Director, Toilet Board Coalition.

According to Vineet Rai, founder and chairman, Aavishkaar-Intellecap Group and an early investor in sanitation, “The time to invest in sanitation has been right for quite long and if the investments are not made we will have to let go of a huge opportunity. This problem is monstrous and if we don’t solve it, the sanitation issue will become un-manageable.”

This paper presents key takeaways from the convening:

1. Need to glamourize the sector: The sanitation sector is currently perceived to be infrastructure heavy, low on revenues and in need of a long gestation period, elements which do not excite investors or entrepreneurs. Innovative and sustainable business models around technology, opportunities for digitization of health, and innovative waste management have not highlighted enough. Since the sector is not “glamorous” enough it is facing difficulties in finding the right talent. It is difficult to find people who can work in core operations, strategy and other important functional verticals of the businesses.

Participants unanimously expressed the need to make the sector more attractive by associating it with other sectors like agriculture, energy, health and financial inclusion. For example linking health insurance with sanitation is one opportunity. Alternatively, linking energy and sanitation is another: one participant suggested that municipal corporations could make use of a steady supply of dry waste for clean energy generation operations and the potential for sanitation businesses to step in.

Another participant narrated his experience of “selling a toilet along with a bathroom had increased the likelihood of toilet use by 5 times and can also increase future revenue opportunities via later upgrades.” Since the sanitation challenge is not limited to India, investors can also look at business models from a global perspective. India can be a market leader in manufacturing sanitation products that address sanitation challenge locally and globally. Entrepreneurs can transfer products and business models to other developing countries and earn higher ROI for investors.

2. Investors need to be convinced that sanitation is a service and not a scheme: Most private investors perceive the sector as a public scheme than a service with business potential. Yusuf Kabir, WASH Specialist, UNICEF remarked that “even though the sanitation sector falls under the Priority Sector Lending (PSL) category as declared by the Reserve Bank of India (RBI) in 2015, the actual private funding into the sector has been low. Funders need to de-link their investment plans from the subsidies given by the government and focus on benefits for the end consumer.”

Investor education is a crucial missing link in driving more investments to the sanitation sector in India. Investors are not aware of the potential the sector has in terms of scale. As a participant candidly said, “It is a business that has no seasons and can operate every single day.” Rajeev Kher, founder of Saraplast, a portable toilet enterprise, emphasized, “There is an urgent need to educate investors on the broad prospects of the sector. It is not only about constructing toilets but rather a service opportunity that creates recurring revenues. It’s vital to convince investors that through sanitation a product is not being sold, but rather a service opportunity is generated.’

There is a need to engage with investors and show investors that there is value in sanitation. Vineet Rai highlighted, “This sector will be attractive for investors if businesses can disrupt at scale. If entrepreneurs can choose a business model that creates value, utilization of resources to create a service model and align it to the developmental challenges being addressed, then everyone takes notice.”

Mark Peters, Team Lead-WASH at USAID India shared that there are a lot of solutions available and can be effective but they need to be comprehensive to be commercially viable to get support from the private sector. USAID can play a larger role through blended finance and donors can coordinate better to facilitate patient capital.

3. Supply has not been able to create its own demand: Today, there are more toilets being created than are utilized. In many places existing toilets have been converted into storage rooms. Though significant funding has been provided for building infrastructure, there is a great need to focus on behaviour change. It becomes important to listen to the needs of the consumers, understand their motivation, driving factors and create a solution that they will embrace. Behaviour change should be the starting point of the process, not the end.

Prabhat Pani, Head-Partnerships and Technology Platforms, Tata Trust shared insights into why behaviour shifts have not complimented the infrastructural build up: “According to a study done by Samhita Social ventures, a total of INR 9,000 crores has been spent in CSR by corporates in three years. Although 90% of corporates have done a project in the WASH sector (Water, Sanitation and Hygiene), most of the work is in the area of infrastructure and very little in education of people to demonstrate how they can change their lives with better sanitation.”

Moreover, more of the solutions are focussed on urban areas rather than rural areas where 70% of Indians live. Prasanjit Debroy, State Coordinator for Swach Bharat Mission added, “There are many innovators within rural areas who have come up with solutions that work for the consumer, however, without support these solutions are not brought to the mainstream. Most of this work has been restricted to states such as Gujarat, Maharashtra, and Tamil Nadu and has not been able to reach other states.”

4. Patient capital will have to be really patient: Implementing sanitation solutions is not a short term task. Plans have to cover all aspects including infrastructure, engineering systems, behaviour change communication, and other amenities under the WASH umbrella. This demands patience from investors. It also requires flexibility in capital allocation. Different capital types and structures (debt, equity, grants, mezzanine, etc.) are needed across the value chain.

Several corporates have been doing noticeable work in the sector and are paving the way for increased private engagement, however the progress is slow and silo’d in relation to the magnitude of the issue.
• LIXIL corporations’, Amit Konlade, shared that they have pledged US$1.5 million to impact 100 million lives in India and Africa.
• Veolia worked with the Delhi Jal Board to provide safe drinking water to 4.5 million people and have partnered with the Sulabh group to fund toilets.
• TBC has launched the first smart sanitation project in Pune as a pilot for cities all over the world where a data driven approach and applying IOT is used to provide smart solutions to the sanitation challenge. This could be a road map for other smart cities on completion.
• The Tata group which has been a formidable partner in India’s growth story plays a catalytic role working with the government directly through the funding of a fellowship program called the Zila Swach Bharat Prerak Scheme. The program recruits fellows with the required academic background and skills and puts them with the district collector in order to find solutions that create visible impact, implement these solutions in ground and create help in creation of policies backed by data analytics and facts.

5. Capital, knowledge, networks and government need to come together to build the ecosystem: “Everyone is working on innovative initiatives, optimizing and making them effective pieces of this long chain (sanitation value chain). If we put these pieces together through collaboration, we will be able to come up with a sustainable solution for the problem,” said Vikas Bali, CEO, Intellecap Advisory Services. Parag Aggarwal, Founder of Janajal, a water ATM enterprise expressed, “We need to work in conjunction and collaborate. The sector as a whole will not attract attention and funding if everyone does their work in silos. To ensure that the sector attracts the right investment and talent, it is crucial for the ecosystem to work together and find what the missing pieces are.”

The call to action for stakeholders to make the sanitation economy successful includes:

• Investors will get results if they stay patient with their investments in sanitation.
• Entrepreneurs will be able to attract investments if they develop scaleable and commercially viable solutions.
• Private sector should not just look at sanitation as a CSR initiative but also as part of core business with an aim to provide services and products including demand generation activities like Behaviour Change Communication (BCC) to the last mile and to create shared value in the process. Improving customer’s health not only increases their longevity as a customer but also their buying power in the market of private sector products and services.