Why Private Capital Investment is a necessity in the clean cooking sector?
By Mr Vimal Kumar, Director, Finovista and India Team Lead MECS programme
In the quest for a sustainable future, the global community has set its sights on a seemingly simple yet profoundly transformative goal: ensuring access to clean cooking for all. With a staggering 2.4 billion people worldwide still lacking this basic necessity, urgent action is required. The path to achieving universal access to clean cooking by 2030 is not without its challenges, chief among them being the substantial funding gap that currently plagues the sector. While the estimated annual requirement stands at a daunting USD 10 billion, current funding levels fall short by a wide margin, in the mere tens of millions. This stark disparity highlights the pressing need for private capital investment to propel the clean cooking revolution forward.
In recent years, India’s clean cooking market has emerged as a shining example of the potential for transformative change. Fueled by a surge in government focus and initiatives like the Go Electric campaign and UJWALA Yojana, the adoption of clean cooking solutions in India has witnessed remarkable growth. The Indian government’s recognition of the manifold benefits of clean cooking technologies has not only ignited domestic innovation but has also paved the way for a robust “Made in India” campaign, promoting locally manufactured clean cooking appliances. This confluence of factors has positioned India as a beacon of hope, proving that policy-driven support can catalyze an entire sector’s growth.
Furthermore, the export prospects for Indian clean cooking solutions have expanded, particularly in energy-deprived regions like Sub-Saharan Africa (SSA) and Southeast Asia (SE Asia). These regions, grappling with energy poverty and the imperative for cleaner cooking alternatives, present a fertile ground for Indian companies to make a meaningful impact. Armed with expertise and technologies honed in their home market, Indian modern energy-based cooking solution providers have the potential to drive the global transition towards sustainable cooking practices.
Despite the favorable market conditions and the undeniable promise of clean cooking, Indian companies in this sector continue to face a formidable barrier: the challenge of securing investment and finance. Access to capital remains a critical hurdle for entrepreneurs and enterprises aiming to scale their operations. The crux of the issue lies in the limited understanding of the clean cooking sector among financial institutions and investors. This lack of knowledge often translates into reluctance to provide loans or other financial services, due to misconceptions about the technologies, business models, and perceived risks associated with the sector.
Clean cooking solutions, while indispensable for a sustainable future, grapple with longer payback periods and lower profit margins compared to conventional alternatives. Moreover, their upfront costs can be steep, creating further hesitance among investors. Overcoming these financial barriers is a non-negotiable imperative to ensure the continued expansion and impact of clean cooking solutions in India. While the government has introduced various schemes to support the growth of clean energy startups, additional efforts are indispensable to foster a conducive investment environment. Attracting both domestic and international funding for Indian clean cooking ventures necessitates concerted action.
In this backdrop, the global clean cooking sector is undergoing a remarkable transformation, driven by technological advancements, growing recognition of its importance within the clean energy access domain, and the rise of startups, innovators, and SMEs. Access to finance, a crucial determinant of success, has rightfully taken center stage. Private capital investment emerges as the missing piece of the puzzle, injecting the sector with the resources it direly needs to realize its potential.
Private capital investment brings more than just financial backing; it infuses the sector with expertise, innovation, and a sense of urgency. With private capital at play, the clean cooking sector can rise above its challenges and propel itself towards a future where clean, sustainable, and accessible cooking is the norm, not the exception. It’s time for investors and financial institutions to recognize the potential of the clean cooking revolution and step up to bridge the funding gap.