Politics and Government

The pace of progress is summed up by the National Water Resources Council, which was formed to address urgent state and national water issues. It has met four times since 1983 and no decisions have yet been made on updating the 1988 national water policy.

India’s National Water Policy of 2002 places drinking water as its chief priority (ADB, 2007). The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) aims to channel USD12billion of central funding into 63 identified cities between 2006 and 2012, with an emphasis on urban infrastructure planning and capacity building and O&M cost recovery by 2012. India aims to achieve 100% urban water coverage during its 11^th Five Year Plan (2007-12).

India originally planned to have universal access to water by 1997, the 50^th anniversary of its independence. According to WHO and UNICEF data, urban water coverage was 81% in 1991 and 89% in 2004, while the 2001 Census of India found 50% of households had a tap within their premises, 19% with a tap near their premises and 16% had access to a hand pump. The revised National Water Policy of 1987 was adopted by the National Water Resources Council on 1^st April 2002. It states that “adequate drinking water facilities should be provided to the entire population” (Article 8) and that PSP “should be encouraged…wherever feasible” (Article 13). Source: ADB (2007) Country Paper: India. Asian Water Development Outlook, ADB, Manila

For cities, water and sewerage policy is carried out at three levels: central government, the member states and city government. Central government directs overall policy. The Ministry of Environment and Forests (MEF) oversees the Central Pollution Control Board (CPCB) and the National Rivers Conservation Directorate (NRCD). The CPCB is backed by the 1974 Water (Prevention and Control of Pollution) Act and sets national environmental standards (individual states are free to exceed them) and policy. Each State Pollution Control Board in turn reports to the CPCB, while being responsible for ensuring compliance with the government’s environmental law. The Water (Prevention and Control of Pollution) Cess Act 1977 compels specified industries to pay fees to the relevant State Pollution Control Boards for water consumed. The 1995 Water Information Act puts the centralisation of water data on a statutory basis. The NRCD is involved in the various River Action Plans designed to improve the water quality of India’s 14 main water basins.

The MUD (Ministry of Urban Development) advises all state level plans. It examines proposals and provides guidance. Plans, when approved are forwarded to the Ministry of Finance and the Department of Economic Affairs for external support, for example via the World Bank and the Asian Development Bank, along with the ODA on a more local basis. Cities are autonomous from central government with regard to PSP policy. The MUD is positive about PSP on an O&M and BOT basis, reflecting their concern about the pace of sanitation projects. The cities of Delhi, Bombay (Mumbai), Calcutta, Hyderabad, Bangalore and Madras can set their own tariffs.

The MUD water provision targets are 110L/day for cities and 270L/day for Delhi. In 1992, it was found that the average per capita water supply for Class I towns (100,000 and above) was 147L/day and 78L/day for Class II towns (50,000 to 100,000).

Only connect?

The Indian Government is considering a scheme to link 37 of the country's rivers into the canal network at a cost variously estimated in 2003 at USD116-200billion against an estimate of USD68billion in 1995. To date, nine years of feasibility studies have taken place and construction would take a further 14 years to complete. Bangladesh has raised objections about the losses that the project would entail.

Infrastructure development

According to the Ministry of Rural Development, 1.2million out of 1.4million villages, or 89% had access to water in 2002, with RS340billion (EUR7.45billion) having been spent on various drinking water projects across the country. The UNICEF 2000 estimate for access to safe drinking in rural areas in India was 79%. The Government had set a target of providing universal rural drinking water connections by March 2005, drinking water for the urban population by March 2007 and improved sewerage for 75% of the urban population by March 2007. 

According to the WHO/UNICEF reports in 2004 and 2006, this is most unlikely as data from the Governmental Planning Committee of India found that the coverage of rural water in 1991 was about 55% and in 2004 it had risen to just above 73%.

Water and sanitation, India (million people)

Data is from the 2001 Census of India.

Urban households: Sanitation

Urban households: Drinking water

For Class 1 cities, 73% of water is abstracted from surface water, 23% from groundwater and 4% from combined sources. For cities in major river basins, these are 68%, 30% and 2% respectively, and for cities in coastal areas, 87%, 3% and 10%. Overall, 32% of usable groundwater resources are currently being extracted.

Spending on water and sanitation has increased in recent years and this trend is set to continue. The estimated cost will be RS204,898million, with RS83,506million coming through the World Bank and RS18,060million from Hudco. Both the timings and the costs are likely to be on the optimistic side, with universal access to potable water unlikely before 2015 and sanitation taking another decade. The real cost for access to water is likely to be in the region of RS400-800billion and a further RS500-1,000billion for sanitation and wastewater treatment.

City utility performance

A study co-sponsored by the Asian Development Bank in 2007 has provided a significant amount of data about water and sewerage services in India’s leading cities.

Sewerage and sewage treatment

Sewerage services are defined as operating on two levels. 'Sanitation' refers to lavatories with a two septic tank composting system. 'Sewerage' refers to mains sewerage. Access means at least a public lavatory in the same street.

The sewerage connection figure stated refers only to the 212 Class I cities (a population of 100,000+, covering 102.9million people in 1988). In class 1 cities, 20% of effluents are treated (13% secondary and 7% primary). In Class II cities (50,000-100,000), covering a further 20.7million people, 0.4% sewage is subject to primary treatment and 1.7% to secondary treatment. There are no other identified sewage treatment works in India. Overall, 8 out of 3,119 towns and cities have complete sewerage and sewage treatment services. 20% of towns and cities have partial service coverage.

In 2002, 20% of people in urban areas had access to water-flush toilets connected to a sewerage system and 14% use water-borne toilets connected to septic tanks or leach pits. In rural areas, 20% have access to sanitary toilets.

Informal examinations of the 14 major river basins in the 1990s found that 30% of their length is of I-II quality and 70% is of III-IV quality. Some sources maintain that the 70% figure refers to Class IV only. Sewage effluents are estimated to account for 75% of the wastewater volume and 50% of the total pollution load.

The politics of PSP

India’s exceptionalist tradition means that the onus lies with foreign investors to argue the merits of their proposals in Indian terms. The National Rivers Conservation Directorate is willing to support BOT bids as part of its future policy. A number of states and cities, including Harayana state, Calcutta and the Ganges Basin are understood to be keen to look at STW BOTs. In contrast, the Government seeks private sector investment first in the area of drinking water.

The Congress Party has indicated that it supports international involvement for drinking water provision and sewage treatment projects. As part of the 2004 budget, the Government announced plans for a desalination plant in Chennai. This would be the first of a series of such plants to be built near Chennai, the coastal capital city of the southern Indian state of Tamil Nadu in 2004. The project will be financed through a public-private partnership. The RS10billion (USD217.39million) plant would have a capacity of around 300millionL per day. It was also emphasised that public-private partnerships will be encouraged for the expansion of water supply and sanitation. A Board for Reconstruction of Public Sector Enterprises (BRPSE) will advise the Government on the measures to be taken to restructure PSEs, including cases where disinvestment or closure or sale is justified.

The Accelerated Rural Water Supply Programme (ARWSP) was allocated RS26billion in 2004-05. A report on the programme’s performance in 2002-07 by the Comptroller and Auditor General in 2008 found many shortfalls, especially in cost and time overruns, and non functional and uncompleted projects.

The BJP at the national level has also stated that it supports the PSP of utilities, allied with foreign investment. Local BJP administrations such as the Mumbai Municipal Council will not necessarily support PSP. The Left Front remains ambiguous about foreign investment. Their stance is that foreign investors ought to demonstrate that India will benefit from their actions. The swadeshi (self-reliance) approach is losing favour, with only a small proportion of middle-income families supporting it.

Outsourcing work in progress

Progress has been made in some areas. Involving the private sector in the contracting out of operation and maintenance (O&M) work has been gathering in popularity in India. In Madras, contracting out sewerage O&M since 1993 has resulted in savings of 20%. In Ajmer (Rajasthan), a service contract for water piping, pumping and treatment O&M has been regarded as a success, while Hyderabad has contracted out staffing for water treatment O&M work. Proposals for private sector management in Goa and the cities of Tirupur and Dewas are also currently under active consideration. The partial PSP of Tirupur’s services has suffered from severe underfunding to date. The Tirupur water provision BOT was meant to get the go-ahead in March 1999, but has suffered from delays. This is due to a lack of support from industrial customers, who prefer irregular supplies of tankered water than the RS45 per 1,000L to be charged. The RS11.6billion project involves bulk water provision, followed by water distribution and sewerage with a 30 year concession period.  The Goa project is for abstracting water at source, transporting it 60km to a reservoir and handing it over to the municipality. In addition, the management of the sewerage network will be put out to private sector operation. This project has been under development since early 1997.

In Bangalore leakage detection and strategic planning is partially outsourced and private detectives – paid only by results – are employed to detect illegal water connections. Similarly Chennai Metro has also shared its use of service contracts. Such cities say they have contracted out between 50% and 100% of the management of water treatment plants, pumping stations and wastewater treatment plants and that this has generated cost savings of between 10% and 50%.

Water supply and demand

If current trends over the next 50 years continue, the Tata Energy Research Institute (TERI) predicts that India's rivers and lakes will no longer be able to meet the demand for water from the country's 1.57billion people. Water availability per person has already gone down from 6,000m³ in 1947 to 2,000m³ in 1997 and could fall to 760m³ by 2047. India currently has a national average of 2,464m³ per capita, although in some regions it is as low as 411m³. India will become a water-scarce nation by 2050 unless urgent steps are taken that go beyond government capital investment in irrigation projects. In three agro-ecological zones (Western plains and Kachch, Northern plains, and the Bengal and Assam plains), the availability of water in 2047 will be less than 75% of the demand. Although the greatest demand for water will still come from agriculture, domestic water demand will increase from 20,000million m³ in 1997 to about 41,000million m³ per year in 2047. Moreover, the demand will be concentrated in the cities and will be for water of higher quality.

Demand by industry

Pricing

Water was traditionally seen as God’s gift both by Hindus and Muslims. This means that there is considerable pressure at the local and rural level for it to be provided as a free (or nominally priced) resource, especially for domestic use. The 74^th constitutional amendment gives local authorities the responsibility for planning, operating, maintaining and upgrading water supply, sewerage and sanitation services. Funds have to be raised by the authority, which also has the right to determine and enforce its own charges. In many cases, attempts to start operating water services on a self financing basis have focused on using higher industrial charges to cross subsidise domestic fees. Given the small size and uneven distribution of India’s industry, this approach has not met with great success to date.

The Water (Prevention and Control of Pollution) Cess (Amendment) Bill introduced in 2003 seeks to strengthen the financial resources of pollution control boards and promote water economy by factories. The tax was last increased in 1991, resulting in a rise in annual income from RS81.3million to RS637.8million in 2000. The new charges are expected to bring in around RS2billion a year. State Pollution Control Boards will receive 80% of tax revenues, with Delhi retaining the balance for the central pollution control agencies. The tax will be applicable to all industries, except hydropower and seeks to encourage water conservation.

Delhi’s fundamental financial challenge

Annual operating costs for the Delhi Jal Board (DJB) had gone up from RS2.76billion (USD61million) in 1998 to RS7billion (USD154.7million) by 2003. DJB has annual revenues of RS2.30billion (USD50.8million) and debts of RS36billion (USD795million) and RS16.2billion (USD357.8million) in interest liability. Legislation will be sought in order to establish a Delhi Water Regulatory Commission, the first such water structure to be formed in any Indian state. About 85% of water supplies serve residential consumers who pay RS0.53 (GBP0.006) per m³. As 75% of municipal connections are unmetered, there is a need to consider metering before tariff rationalisation can be implemented. The unregulated private sector thrives under these conditions in Delhi, with 1,200 private tankers charging RS100 (USD2.20) per m³. Although DJB will be corporatised, politicians have ruled out any material private sector involvement.

The private sector and PSP

The Eighth Five Year Plan aimed for expenditure for water and sanitation services to increase from 0.56% to 3.80% of total public sector expenditure, with a total public sector outlay on water supply and sanitation for urban areas of RS57.6billion. The total investment requirements for water supply and sanitation based on various reports indicate that an investment of RS254.9billion is required for 100% coverage of urban water supply and sanitation. In consequence, there is a broad realisation that private sector financing and management is now needed in India. The average annual investment on O&M of urban water supply and sanitation systems has been estimated at RS23.87billion (for a population of 217million at RS110 per capita).

In 2002, the Tata Energy Research Institute recommended that the state of Gujarat considered some form of PSP in seeking to meet its RS8,600million spending needs for basic urban water supply. The institute believes that all PSP models are applicable under current state laws.

In 2003, the state government of Karnataka examined privatising urban drinking water supply and Jharkhand issued a notice seeking private investor participation of in water supply in Ranchi, Dhanbad, Chas, Mango and Adityapur towns.

Bulk water provision projects proposed to date

Indian companies noted

Fourteen water treatment, desalination and wastewater treatment contract awards to Indian companies have been identified, eleven of which are currently in operation.

JUSCO: Projects stemming from the Jamshedpur contract

JUSCO has been operating Jamshedpur’s water and sewerage services since the city’s inception. Four contract awards have been gained since 2007: Mysore (6 year management for rehabilitating water and wastewater services), Haldia (water treatment BOT), Jamshedpur (extension O&M contract) and Kolkata (industrial township water and effluent services BOT). 

VA Tech Wabag

As well as short term post installation operating contracts and the IVRCL contract, VA Tech gained two sewage treatment contracts serving Chennai in 2006, serving a total of 600,000 people.

IVRCL [1]: Alandur wastewater treatment

First STP Private Ltd (95% held by IVRCL) is a JV with VA Tech Wabag. It is developing a 12,000m³ per day (4.4million m³ pa) WWTW at Perungudi for Alandur Municipality, where IVRCL has installed the underground sewerage system. The WWTW has been completed and the households need to be connected to the system by the municipality.

IVRCL [2]: Chennai desalination

In August 2005, IVRCL was made the preferred bidder for the RS5billion contract to build a 100million L/day water desalination plant for Chennai Metro Water Supply & Sewerage Board, and operate it for 25 years. This is India’s first desalination project, the completion of which was delayed due funding and political issues.

BHEL: Chennai WWTW

In September 2003, BHEL gained a wastewater treatment construction and operations contract in Chennai. The RS364million (USD7.9million) contract was awarded by the Chennai Metropolitan Water Supply and Sewerage Board (CMWSSB). Construction took 18 months, with the facility entering into service in 2005. BHEL will also look after Operation and Maintenance (O&M) of the plant for ten years, post commissioning. The sewage treatment plant will have its own power plant which will be run by biogas, generated within the facility, making it self-sufficient and lowering operating costs.

Larsen & Toubro: Visakhapatnam bulk water

In Andhra Pradesh, work has started on the Visakhapatnam Industrial Water Supply Project. This is a 55.5km pipeline from the River Godavari to augment the 153km Yeleru Left Bank Canal. Some 15% of the output is going to domestic consumers. These are subsidised by Visakhapatnam Municipal Corporation for three years, charging RS8 per m³ against an actual cost of RS24 per m³. Larsen & Toubro has a 32 year concession for operating the pipeline, with equity financing from the municipality (Andhra Pradesh Industrial Infrastructure Corporation) and from the private sector; L&T Holdings and PSL Holdings, with a permitted return of 15% over the concession. Political changes in Andhra Pradesh may threaten the project.

Jindal Aquasource: 4 BOT and BOOT projects 

Four BOT and BOOT projects have been gained between 2007 and 2010, including two for municipal wastewater treatment serving Rajkot and Bhavnagar.

Radius: Cancelled bulk water project

In 1998, Radius Water Company signed a 22 year BOT contract to deliver 4millionL of water a day to a 23km industrial belt along the Seonath River in Chattisgarh state. The state wishes to terminate the contract, which was signed two years before Chattisgarh became a separate state from Madhya Pradesh (Source: GWR, 170, 2003). Some RS250million has been spent by Radius Water to date, but it is alleged that water demand is materially below what had been expected. In April 2003, the state of Chattisgarh cancelled the concession.

International contract awards

Degrémont: Delhi wastewater treatment DBO

Degrémont gained a 10 year DBO for a 136,500m³ per day wastewater treatment plant serving Delhi in 2008, entering service in 2010-11 and will be operated for 10 years by Degrémont in a EUR27million contract. The treated effluent will be used for agricultural irrigation.

Degrémont: Bangalore water treatment DBO

A 600,000m³ per day plant will be built to augment the city’s 400,000m³ per day facility, serving 3million people and will enter service in 2012.

United Utilities: Tirupur bulk water BOT

The Tirupur project is now in operation. The USD220million BOT (including USD140million in construction cost) water scheme, first proposed in 1994, aims to deliver 0.185million m³ per day, two-thirds of which will go to supply about 1,000 Tirupur textile mills, the rest to domestic customers supplied through the municipal corporation. Industrial customers will pay RS45 per m³ and domestic customers RS5 per m³, replacing around 400 water tankers. The BOT is being operated by Mahindra Realty and Infrastructure Developers Ltd of India, and United Utilities International, with funding from a USD222million rupee-denominated debt and equity package. In 2009, ownership of the project was vested to Manila Water (Philippines) and the Indian companies.

Degrémont: Chennai water O&M

Degrémont was awarded a contract for the construction of the 530,000 m³/day of drinking water treatment plant serving 4million people for the Chennai Metro Water Supply and Sewerage Board in July 2005. The total cost of EUR25.2million is being financed with EUR6.6million from a French State protocol and EUR18.7million from the Tamil Nadu Urban Finance and Infrastructure Development Corporation. This is India’s largest water treatment works and the first to be fully operated by Suez. The operating contract runs from 2007-14. 

Veolia: joint venture with Doshion

Veolia has been actively seeking to enter the Indian water contract market since the mid 1990s. The company entered into a joint venture with Doshion, an Indian water engineering company with revenues of USD50million in 2007. Doshian Veolia Water Solutions (70% Doshian, 30% Veolia Water) was formed in 2008 to provide a more effective market entry strategy.

Sources:

 ADB (2007) 2007 Benchmarking and Data Book of Water Utilities of India. Ministry of Urban Development, ADB, Manila 

 Munjee, N. (2000). Privatisation of water & sewerage projects in India. Presentation to IBC, Financing of Water & Sewerage Projects, IMB, London

 Narain, S (2002). Water & Wastewater International, 17 (2), 27-28

 Global Water Report 185, December 2003, pp 103

 Global Water Report 191, March 2004, p5