April 2, 2009 — If you live in the "Knitwear Capital of India," your water probably doesn't taste very good, if you can drink it at all. That's because dyeing cotton for Banana Republic T-shirts, Reebok socks and truckloads of similar clothing bound for Europe and the United States requires tons of water, and the small textile firms that dominate the industry in the South Indian state of Tamil Nadu cannot afford traditional wastewater treatment, so they simply dump toxin-filled water into the local rivers.
That's the problem that a team of University of Virginia business students has a plan to solve. And their plan has been getting some validation recently.
Darden School of Business students Baijnath Ramraika, Ravi Yekula and Chip Ransler won two business plan competitions in the past week, raking in $5,000 at Wake Forest University last weekend and pocketing $10,000 on Tuesday from the Darden-U.Va. Business Plan Competition. The top finish in the Social Entrepreneurship category at the Wake Forest Elevator Competition also netted the team a share of $65,000 in legal and marketing services. This week's success follows three other wins in the past six months that garnered a total of $3,000.
The business, called Clean India, will use algae and sand filtration to treat and recycle wastewater as a "pay-for-use" service.
The garment makers of Tirupur, India generate about 100 million liters of chemical dye-laced wastewater per day, and generally face no penalties for dumping it into the local water supply, Yekula explained. To make their pollution less obvious, the companies typically add toxic de-coloring chemicals to the water before discharging it. The resulting contamination has caused such a shortage of clean water that the local price of clean water has doubled in the past five years. Many places in India, China and other developing countries face similar water supply challenges, giving Clean India lots of long-term growth potential.
But several factors make Tirupur an ideal spot to launch the business, Yekula said. For years, many Tirupur businesses got water by drilling wells, but the growth of this practice has completely depleted the local groundwater. The local municipal water supply is poorly developed, and so manufacturers purchase 60 percent to 70 percent of their water needs from private suppliers, who typically deliver it by the truckload. Clean India will also use tanker trucks to shuttle contaminated water to their treatment facility, and to deliver the cleaned and recycled water.
The large, up-front costs of traditional wastewater treatment equipment are not economically viable for these small garment makers, Yekula said, so Clean India plans to sell them recycled and cleaned water as an on-demand service, costing slightly less than they now pay for delivered clean water. The first target customers are a number of textile firms that are clustered together in a Tirupur industrial park. Three of the firms have already signed on as ready customers whenever the business gets online.
Clean India will use algae and sand filtration to treat the contaminated water. The algae is grown in a patented bioreactor, and then introduced to open ponds of wastewater. The algae breaks down the toxic elements in the water into nonharmful elements. Then a sand filter captures any remaining sediments and particulates. The whole process takes about five days for a given batch of wastewater. The process can be customized by identifying strains of algae that are best suited to removing particular pollutants.
The process is labor-intensive, as workers must move water from pond to pond and separate the algae every day. This harnesses India's low-cost labor as a substitute for the high capital costs of traditional wastewater treatment equipment costing hundreds of thousands of dollars, Yekula said.
The modular system can be expanded as new customers are added. A 5-million-liter pilot treatment facility will cost $1.5 million. It should pay for itself in 18 months, Yekula said, and produce $4 million in revenue and $1 million in profits by the end of five years. By year five they hope to expand to 26 plants.
"India has a scarcity of water," Yekula said. "This problem is huge, but we think Clean India has a solution that actually makes a difference. ... It's not only solving a social problem, it's doing it in a very profitable way.”
Clean India has not yet lined up financing for the pilot facility, but investors and venture capitalists have expressed interest, Yekula said. "With the global economic meltdown, people are looking for places to invest where there will still be at least some growth, and India is still growing."
"I'm from India myself, so I feel a deep empathy for any kind of problem-solving in India," said Saras Sarasvathy, an associate professor at Darden who has been an adviser to the team.
"If Ravi and Baijnath can show their model works in one place, they could go lots of places, and they now have the education and vision to think about how to scale it up," Sarasvathy said. "That's what separates them from being just another successful entrepreneur in India. But I tell them, 'You have to get that first piece done. But if you can get it done, it could be a big solution.'"