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Module 1: Leontief's Input/Output Analysis

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Tutorial Problem and Primary Energy Analysis

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0 to 400 rupees over about 5 years. The financing and repayment options were tailors made to the end-users. So, one of the interesting things which Harish Hande, Doctor Harish Hande talks about, he is the person who started Selco is that a street vendor is not able to pay 300 rupees per month but the street vendor is easily able to pay 10 rupees per day. So, if you have a collection mechanism for a street vendor, where you collect daily, then that is a benefit. In some cases, if you had a farmer which had 2 crops, then you could have a payment schedule which is twice a year, coinciding with the crops being sold in the market. And then they also arranged for funding from different agencies to meet the margin amount for poor customers. One of the biggest benefits that they could do is they made customers bankable by providing them with an incentive and by providing them with some guarantees and ensuring that they interface with the bags. (Refer Slide Time: 35:57) There is another model which is DESI Power, predominantly in Bihar. And their model was to aggregate, have local distributors and then they got government funding, they got some equity which they put in and they looked at energy efficiency, they tried to tie up with enabling micro-enterprises and tie-up with telecom towers to increase the capacity factors. And so, they many of the cases instead of putting meters they just charged the monthly rate and then based on the number of bulbs or loads, and they had a circuit breaker to limit the consumption. So, that means if you exceeded that limit over a couple of months you will be disconnected from the supply. (Refer Slide Time: 36:40) There is this concept of an energy service company. Now as we saw, you know, we do not need energy per se, but we need the service that energy provides and energy service company essentially comes into the industry or commercial organization and says we will supply you the energy you are currently paying a certain amount for your energy, continue to pay that amount we will invest in energy efficiency or renewables and out of the savings, you share some of the savings with us and so we take some of the risks, and then we do this. So, this is of course dependent on a whole host of things including contracting. It is an interesting concept, but it has not taken off much in the Indian context for a variety of reasons. But just to tell you that the energy service concept ESCO energy service company concept is not old. The earliest known record of an ESCO is James Watts company, and his proposal was, we will leave a steam engine free of charge for you. We will install these and we will take over for 5 years the customer service. So, that means 5-year annual maintenance contract of customer service. We guarantee you that the coal for the machine costs less, then you must spend at present as fodder on the horses, which do the same amount of work. So, this, if it is horse-driven and then you are feeding the horses the amount of money that is paid to feed the horses, the number of horses, you get saving by, when we look at this kind of machines where we are looking at coal and then using that o get the steam engine. And so, what is required in this case to what the agreement is, everything that we require of you is to that you give us a third of the money which you save. So, one-third of the saving will go to James Watts' company and this was the kind of model as I told you the first known ESCO. (Refer Slide Time: 38:54) We talked about Desi Power and the other model was Husk Power. Husk Power, of course, started by getting funding for their idea in terms of prize money and then they started directly reaching the end-user and looked at doing the estimation of the demands accurately. (Refer Slide Time: 39:18) So, with this, we end the portion on financing. We are going to look at these concepts in terms of doing a couple of examples. So, with this, we have seen the overall history of project financing, we have looked at the different sources of finance, we have looked at debt and equity, risks and returns. We have also looked at how you have either, you have recourse and non-recourse kind of financing. We have looked at a couple of examples of how this financing is done. In the next module, we will take this forward and then do some calculations in terms of when we look at a loan how much do we have to repay and then take an example to decide how do we decide the debt-equity ratio.