Download - PPPs in water sector
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PPPs in water sector
Ramanujam S.RDirector – Urban Practice
February 26, 2009
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2.
Contents
• Need for PPP - taking urban space as an example
• Forms of PPP that are relevant
• Learnings from experience
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3.
Indian water sector
• Water services are provided by
– local Governments or
– agencies reporting to regional Governments
• Capital investments have been largely funded by
– Revenue surplus (in very few cities)
– Regional Government budget support and
– Donor projects
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5.
Service levels are inadequate
Source: Benchmarking of utilities by WSP and Utility Data Book by ADB
0.0% 20.0% 40.0% 60.0% 80.0% 100.0%
Coverage
Supply Quantity
Hours of Supply
NRW
Cost Recovery (No oftowns)
Service Levels
Cost recovery and continuity of supply are poor
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6.
Sample of Class I Cities in a State
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
Coverageof watersupply
connections
Per capitasupply of
water
Extent ofmetering of
waterconnections
Extent ofNon-Revenue
Water
Continuityof watersupply
Efficiencyin redressal of
customercomplaints
Quality ofwater supplied
Costrecovery in
water supplyservices
Efficiencyin collection ofwater supply
relatedcharges
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Need for PPP
Taking urban space as an example
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8.
1. The financing gap
Required Investment Rs 6700 Crores
Annual Surplus Rs 47 Crores
Investment requirements for water supply and underground drainage for 128 towns with total population of 1.1 Crores
Annual Revenue Rs 636 Crores
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9.
2. Skill and strength gap
Gap in key skills for a sample state
0% 20% 40% 60% 80% 100%
Commissioners
Accounting
Revenue
Water and sanitation
Engineering
Availability Gap
Sample of towns with a population of above 1 lakh in a State. Only gaps in key functions are summarised.
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10.
Many technologies are new to local bodies
Sewage treatment plants
< 25 %
Solid waste disposal
< 10 %
Less than 25% of the towns in the sample state have sewage treatment plants. Less than 10% of the towns have scientific facilities for solid waste disposal. As a result these towns are not familiar with these technologies.
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11.
3. Accountability gap
Combined revenue efficiency of 43 %
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Coverage Reading Billing Collection
Data from a sample town of population around 9 lakhs. Most of the legal connections are metered. The actual percentage of functioning meters is not known.
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12.
Signs of success
A few projects grounded
Around 2000
Mid decade
Now
Way Ahead?
PPP timelines in water
Mid to Late 90s
First initiatives
High international interest
Poor results
Momentum subsided
Onset of pessimism
Efforts to prepare PPP projects
High NGO opposition
High profile projects run aground
Many ongoing initiatives
Waiting for first commercial results
PPP interest at tipping point
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13.
Mid 1990s, Failed projects
Pune
Goa
Hyderabad
Bangalore
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18.
Around 2000, Momentum subsides
Sangli
Bangalore DMA
Sonia Vihar TP
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22.
Mid decade, High profile projects run aground
BWSSB Project
DJB Pilot Circle
Mumbai K East
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23.
Around the same time early successes emerge
Salt LakeHaldiaChandrapur
Nagpur Pilot
Latur
Bhiwandi
Chennai desalKUWASIP
Mysore
Madurai
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31.
Key Characteristics
Placeholder for your own sub headline
Project Operator Size Duration Scope
Chandrapur Gurukripa 3 lakh popl 10 years O & M of city network
Latur Hydro Comp 3.5 lakh popl 10 years O & M of city network
KUWASIP Veolia 18,000 conn 3.5 yearsUpgradation and O &
M
Nagpur Veolia 10,000 conn 5 yearsUpgradatation and O
& M
Salt Lake JUSCO 14 mld 30 years BOT (WS & S)
Haldia JUSCO 230 mld 25 years BOT
Madurai Hydro Comp 10,000 connUpgradation and O &
M
Mysore JUSCO 9 Lakh popln 6 yearsUpgradation and O &
M
Chennai desal IVRCL-Befasa 100 mld 25 years Bulk water BOT
Bhiwandi SPML 6 lakh popln 30 years Bulk water + mgmt
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32.
Current successes – Scope of the PPPs
Investment Design Construction O & M Collection Tariff
Bulk water
Treatment
Distr.n
Rehab
Bhiwandi
Chennai desal
KUWASIP Latur, Chandrapur
MysoreMadurai, Salt Lake
Nagpur pilot
Haldia
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33.
Water sector is seeing increased success with PPPs
Around 2000
Mid decade
Now
PPP timelines in water – Change is visible
Mid to Late 90s
PPP concepts failed in the water sector
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34.
What has possibly changed
• Projects are increasingly focussing on distribution improvements
– Unlike in the earlier years when capacity addition and bulk water was the focus
– Hardly any pure bulk water project (with the exception of desal)
– The expectation is more on service delivery improvement, not capital infusion
from private sector
– Ready made PPP concepts failed to work when applied in water sector
– Bottom up efforts by water sector through PPPs are showing better results
• Is it finally a case of the dog wagging the tail?
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35.
What has possibly changed….2
• Domestic operator interest and success is high
– Atleast five Indian operators are common bidders in many projects
– International operators are aligning with domestic operators
– More comfortable with collection risks, generally have a higher
commercial risk appetite
– Gain higher political acceptability
– NGO activism less vocal as compared to international operators
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36.
What have been the key enablers
• Macro level - Strong public funding
– JnNURM support has been critical (Salt Lake, Mysore, potentially
Madurai)
– Public funding in other cases (KUWASIP, Latur)
• Ground level – Attention to detail
– Government of Maharashtra has a volumetric tariff policy, had financed
water audits and energy audits
– Karnataka had spent adequate time on preparation
– Balanced approach in contract design (Salt Lake, KUWASIP, Latur)
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37.
Still a question mark
• Which operator model will work?
– Wide range being tested in the early projects.
– Mysore – “ Build at near fixed budget” and “Operate”
– KUWASIP – “Construction Manager” and “Operator”
– Bhiwandi and Haldia – “Invest” and “Operate”
• Each model has varying characters of Investor, Construction Manager and Operator
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38.
Many initiatives are in the pipeline
Mangalore
KUWASIP Scale up
Nagpur Scale up
Naya Raipur
Gujarat
Ajmer
Nashik, Aurangabad
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39.
What are key issues to be considered?
• Policy level changes
– Public funding is necessary
– Operator model to be flexible, still no
conclusion on what will work
– Government should invest in surveys
and preparatory work (or) partner with
operator in a discovery phase
– Metering and volumetric tariff policy
should be in place
– Tariff revision is preferable, but not
necessary
– But tariff clarity is a must
• Project level support
– Invest in survey – water audit,
energy audit, household survey
– Decide level of support (and)
choice of contract model based on
sound financial analysis
– Consistent pre-qualification criteria
– Provide for a wide range of
consortia structure – International
operators may not always want to
come in as Lead (or) in Joint
Venture
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40.
Signs of success
A few projects grounded
Around 2000
Mid decade
Now
Way Ahead?
PPP momentum is at tipping point in water sector
Mid to Late 90s
First initiatives
High international interest
Poor results
Momentum subsided
Onset of pessimism
Efforts to prepare PPP projects
High NGO opposition
High profile projects run aground
Many ongoing initiatives
Waiting for first commercial results
PPP interest at tipping point
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41.
In Summary
• PPP momentum is at tipping point
– Early successes, many initiatives in pipeline
• Palpable interest from domestic operators, aligned with international operators
• Projects are deciding PPP scope, not the other way around
• Public funding, focus on distribution and volumetric tariff are key requirements for success
• Operator model still evolving
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43.
www.crisil.com
www.standardandpoors.com
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Crisil Infrastructure Advisory
PPP experience in water sector
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45.
CRISIL Businesses and CRISIL Infrastructure Advisory
Mutual Funds
SMEs
Executive Training
Global Analytical Centre
Corporate Sector
Financial Sector
Infrastructure Sector
Micro-Finance Institutions
Corporate Governance
Ratings
CRISIL Infrastructure Advisory
Infrastructure Advisory
Risk Solutions and Models
Credit Risk Market Risk Operational Risk Investment Risk
Investment Management Services
Risk Solutions
CRISIL Research
Economy
Industry
Company
IREVNA
Research
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46.
Demand and Project risk assessment for a concession in West BengalDemand and Project risk assessment for a concession in West Bengal
Demand assessment for a concession in West BengalDemand assessment for a concession in West Bengal
Demand assessment for a new township in ChattisgarhDemand assessment for a new township in Chattisgarh
PPP Projects -- For Developers
Assisted successful bidder in assessing the demand for an industrial water supply project in West Bengal
Assisted successful bidder in assessing the demand for an industrial water supply project in West Bengal
Assisting a developer in assessing water demand for a new township Bidding in progress A 10 year concession for water supply to a new township
Assisting a developer in assessing water demand for a new township Bidding in progress A 10 year concession for water supply to a new township
Assisted successful bidder in assessing demand and project risks Concession for water supply and wastewater collection in a large institutional area
dominated by IT industries
Assisted successful bidder in assessing demand and project risks Concession for water supply and wastewater collection in a large institutional area
dominated by IT industries
Due diligence on a Management Contract opportunityDue diligence on a Management Contract opportunity
Assisted a developer on commercial assessment of a potential opportunity Vetting of the project structure and financial model
Assisted a developer on commercial assessment of a potential opportunity Vetting of the project structure and financial model
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47.
Project structuring and contract design for a Lease contract in LaturProject structuring and contract design for a Lease contract in Latur
Transaction advisor for two water projects in MaharashtraTransaction advisor for two water projects in Maharashtra
Project structuring and process management for a DBO project (2001-02)Project structuring and process management for a DBO project (2001-02)
PPP Projects -- For Government
Transaction in design stage Project structuring and transaction management for PPP in two large cities (million plus
population) in Maharashtra
Transaction in design stage Project structuring and transaction management for PPP in two large cities (million plus
population) in Maharashtra
A 630 mld water treatment plant in Sonia Vihar, Delhi Project successfully commissioned
A 630 mld water treatment plant in Sonia Vihar, Delhi Project successfully commissioned
Assisted a Government agency to structure a lease contract for 300,000 population in Latur, Maharashtra
First city scale domestic PPP interface in India Bidding and contracting successful
Assisted a Government agency to structure a lease contract for 300,000 population in Latur, Maharashtra
First city scale domestic PPP interface in India Bidding and contracting successful
Structuring a developer conference for a management contract (2001-02)Structuring a developer conference for a management contract (2001-02)
Assisted a large city utility in structuring a developer conference to pursue PPP options Assisted a large city utility in structuring a developer conference to pursue PPP options