kuwasip - ministry of housing and urban...

KUWASIP

Karnataka Urban Infrastructure Development & Finance CorporationWorking towards better urban living

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World Bank assisted

Karnataka Urban Water Sector

Improvement Project

(KUWASIP) – Experience on

PPP for achieving 24X7 water

Supply and control of UfW

KUWASIP


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W.B. Loan No.4730-0-IN

Project Cities in Karnataka

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Objectives of the Project:

• Reforms & service improvements through Private SectorParticipation (PSP) in the water sector in Karnataka

• Implement the strategy enunciated in the Urban DrinkingWater & Sanitation Policy of GoK

• Phased approach

Project Cities & Phases:

• Belgaum, Gulbarga & Hubli-Dharwad (Phase I)

• Continuous water supply in selected Demonstration Zones ofPhase I cities

• Scaling up to the rest of the areas in the three cities and also tomore cities

Project Period:

• 2004-2008

• Extended up to 31.3.2011

Introduction

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Project Details Project Components:

• Technical Assistance (TA) studies

• Investments:

• demonstrating continuous (24x7) water supply through PSP in

selected demonstration zones [D.Z] of the three ULBs

• Bulk water improvement related investments (Priority Investments

[P.I]) including critical/urgent works to improve supply frequency

Executing Agencies:

• Technical Assistance studies-consultancy firms selected by

competitive bidding

• Priority Investments-KUWS & DB.

• Demonstration project-private entity called ‘Operator’

• Quality Certification:

– All Works & Operator’s performance: Technical Auditor

– Priority Investments: Third Party Inspection Agency.

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Rs. in crores

Project Details

Component Cost WB GOK ExpenditureOut lay

2010-11

Technical Assistance 12 11 1 3.4 3

Physical Investments

1. Priority Investment Works

2. Demo Zone Project.*

(a) Works, including O&M.

(b) Operator Remuneration-Fixed.

(c) Operator Remuneration-Performance

(Including Bonus).

217

147

42

13

15

164

110

32

10

12

53

37

10

3

3

190.45

129.80

29

19

12.65

16

16

0

0

0

Project Implementation Support 8 7 1 6.15 1

Total 237 182 55 200 20

Reimbursable amount $39.50m

Reimbursed amount $34.27m

Loan effectiveness on : May 2005

Loan Closure : March 2011 (Extension proposed upto 30.9.2011)

* O&M expenditure on the Demo Zone Project w.e.f 1.4.2010 met out of water charges

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Project Structure

Funding agency:

World Bank

Govt of Karnataka:

KUIDFC

Final beneficiaries:

Municipal corporations of

. Hubli-Dharwad

. Belgaum

. Gulbarga

Associated organization:

Karnataka Urban Water Supply

& Drainage Board (KUWS&DB)

Operator:

Compagnie Generale des

Eaux

Project

Implementation

Unit

Hubli Dharwad Belgaum S. Belgaum N. Gulbarga

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Establishment of Karnataka State Urban Water Supply

Council (KSUWSC)

Review and Establishment of Regulatory and Legal

Framework

Water and Sanitation Sector Investment & Tariff

Frameworks

Strengthening of Urban Water Supply and Sanitation

(UWSS) Service Delivery in ULBs

Creation of Water and Sanitation Information System

(WASIS) and Benchmarking of Service Provision

Tariff Design for Continuous Water Supply

Technical Assistance (TA) studies

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Key Aspects of Project

Core of the project is Performance Based Management Contract

(PBMC) with private sector firm for rehabilitation, operation and

management of water service in small areas in Belgaum,

Gulbarga and Hubli-Dharwad (called Demonstration Zones)

The role of private sector is limited to demonstration of

improved service. Assets remain with ULBs, staff continue on

ULB rolls though working under PSP, no investment risk to PSP,

no role in tariff fixation & bill collection (though the PSP would

develop a computerized billing & collection software system)

Fee based contract

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A leading law firm’s assistance taken in drafting the contract

document – since the private sector operator was to be involved

Review of the existing legal regime done prior to finalizing the

contract

Amendments :

Amendment to the KMC Rules made to facilitate PSP

involvement in delivery of water service.

Amendment to the KMC Rules made enabling deputation of

employees from the CC’s to the Private Operator

Emphasis: Gradual PSP, as envisaged in the urban drinking water

and sanitation policy – 2003 of GoK.

Contract Model

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Operator Contract period: 3 ½ years

Single contract for all three ULBs

Single contract between five parties Vs Operator

Distinct obligations for all parties Vs the Operator

KUIDFC authorized to act on their behalf vis-à- vis the

Operator

Prime contractual responsibility – Operator

Contract Details

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Performance based contract.

Total contract price Rs. 28 crore (Rs. 22.40 crore

Remuneration; Rs. 5.60 crore Max. Bonus).

60% of Rs. 22.40 crore i.e., Rs. 13.50 crore Fixed

Remuneration:

40% of Rs.22.40 crore i.e., Rs.8.90 crore Performance

Remuneration.

Fixed Remuneration: 15 equal quarters

12% of Performance Remuneration, if all targets achieved, 12

months after effective date; 28% of Performance

Remuneration spread over two year Operation & Management

Period, if targets achieved.

Penalties (max. 10%) for failure; termination.

Contract Price Details

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Preparatory Period A - Survey, Design, Estimation;

Preparation of Draft/Final Investment Programme.

Preparatory Period B - Selection of sub-contractors

(contract document preparation, tender process

management); meeting performance targets for

Preparatory Period B.

Demonstration of performance targets in preparatory

period B and O & M period.

Customer grievance redressal.

What the Operator will do?

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Operator Performance Targets

At the end of Implementation Period:

• To demonstrate Continuous Pressured Water Supply to

every Customer in each Demonstration Zone.

• Metering of minimum of 90% property connections.

• Maintenance of computerized records of readings.

• Reduction of the losses to 30 litre / connection / day

/ metre pressure in each Demonstration Zone.

• Operation on a 24 hour basis of the Customer service

centers established at Demonstration Zone.

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Operator Performance Targets

During O&M Period:

• Continuous Pressured Water Supply must be provided to every

connected property and stand-post.

• Emergency stoppages shall not exceed twelve hours and no more

than an average of four emergency stoppages in a period of 12

months.

• 100% of all property connections and public stand-posts must be

metered.

• 100% of Customer meters must be read and billed every month.

• Losses must be reduced to 20 litres per connection / day / metre

pressure by the end of 24 months.

• System connection requests must be fulfilled within 7 days.

• All Customer complaints to be responded to within 24 hours and

redressed within 7 days of such complaint.

• Leaks appearing at the surface must be repaired within 24 hours

of notification/observance.

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Volumetric Tariff

Sl. No.

Belgaum / Hubli-Dharwad

Demonstration ZonesGulbarga Demonstration Zone

Tariff

Slab

(in KL)

Tariff

(in

Rs.)

Monthly min

charges per

connection

Tariff

Slab

(in KL)

Tariff

(in Rs.)

Monthly min

charges per

connection

1. 0 - 8 6

Rs.48/-

0 - 8 6

Rs.48/-

2. 8 - 25 8 8 - 15 8

3. 25 - 40 12 15 - 25 10

4. >40 20 >25 12

Water Tariff for Domestic Consumers

For Non-Domestic and Commercial / Industrial consumers, the tariff is 2 times

and 4 times that of Domestic Consumers in the respective slabs.

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Services to the Urban Poor

Defined as those living in houses < 600 Sq. ft. built up area.

No deposit for water connection.

Minimum lifeline supply of 8000 litres per household.

Provide water free of charge through public kiosks to

vulnerable sections with involvement of NGOs and / CBOs.

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SICS Activities

Social intermediation and communication activities conducted in 3 ULBsthrough local NGOs to build credibility for the Demonstration Project &to address objections to PSP and tariff reforms.

SIC activities consist of:

• Socio economic survey

• Awareness programme

• Project orientation

• Jathas

• Communication campaign

• Women development programme

• Motivation camps

• Trainings

• Workshops etc.,

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Under 8 packages of Priority Investment works, 108Km of

transmission mains laid for augmenting bulk water supply to 3

ULBs

In Demo Zones, 238Km of distribution mains laid and 26045

House service connections with customer meters completed

Continuous pressured water supply operationalized in all the 5

Demo Zones

O&M for 2 years (3.4.2008 to 31.3.2010) completed.

Social Intermediation & Communication activities conducted

Expenditure upto February 2011– Rs 200 Crores.

Status of the Project

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House Service Connections

Sl.

No.Demo Zone

Target

(Nos.)

Achievement

(Nos.)

Date of Operationalisation

of Continuous Water

Supply

1. Belgaum (South) 3610 4566 6.7.2007

2. Belgaum (North) 3510 4314 13.11.2007

3. Hubli 6410 7834 1.12.2007

4. Dharwad 4900 5945 3.4.2008

5. Gulbarga 4020 3386 14.3.2008

Total 22450 26045

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Control of UfW

Sl. No. Demonstration Zone Real Losses

(in litres/connection/day/metre pressure)

1. Belgaum (S) 5.21

2. Belgaum (N) 10.52

3. Hubli 5.45

4. Dharwad 4.84

5. Gulbarga 2.36

Status of Real (physical) Losses in the Demonstration Zones

Month: February 2011

According to a rough assessment, prior to implementation of the project, NRW

was >40% in Belgaum and Hubli-Dharwad and > 45% in Gulbarga. The same

has come down to 5% to 17% in the Demo Zones.

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Abstract Consumption slab (in KL) 0-8 8-15 15-25 25-40 >40 Total

Number of Customers 4413 6631 6828 4477 3012 25361

Water Consumption (per month ) (KL)22691 79536 136598 141808 214601 595234

Demand (per month ) (Rs)221736 543107 1017333 1234056 3521326 6537558

Revenue (per month ) (Rs)243275 554363 883300 960734 2570838 5212510

Collection Efficiency 110% 110% 87% 78% 73% 80%

Cost of Water (Rs. per KL)

a. Cost of Bulk Water 5.09 3029741

b. O&M Charges 0.35 208332

c. Operator Remuneration 4.67 2779743

d. Technical Auditor Fee 0.78 464283

e. Debt recovery 1.70 1011898

Total 7493997

Cost Recovery

a. % of Total 70%

b. % of Bulk 172%

c. % of Bulk and O&M 161%

d. % of (Bulk +O&M +Operator Rem+ Technical

Auditor Fee)

80%

e. % of (Bulk +O&M +Operator Rem+ Technical

Auditor Fee + Debt)

70%

Financial Sustainability

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Control of Unaccounted for Water (UfW)

Improvement in public health

Reliable water supply

Improved water quality

Improved customer satisfaction

Customers are saving money since no pumping of water from

sumps

Improved data management –customer database and asset

database

Benefits

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First instance of a new model of PSP in water service -challenge

& opportunity.

People’s misunderstandings about PSP, tariff reform and doubts

about feasibility of 24x7 water supply

Pressures of differing expectations - even of partner agencies.

Impatience / unrest of non demo zone residents in chosen cities.

Contract model & document - grey areas.

Conservative mindset of client staff to many issues, differing

from conventional contracts.

Curbing un-authorized / illegal connections and transition from

flat to volumetric tariff.

Challenges

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Way Forward

All the 3 ULBs passed resolution for extension of 24x7 services to

entire areas of the cities.

Upscaling of 24X7 water supply to 3 ULBs on PPP basis approved vide

G.O. No. UDD 81 PRJ 2008, dated 6.10.2008.

KUIDFC is the Nodal Agency for implementation of the Project.

Approximate cost for Belgaum Rs. 220 crores; for Gulbarga Rs.

150 crores and for Hubli-Dharwad Rs. 360 crores .

Broad investment structure. (Rs. in crores)

• Investment by Private Operator - 367.50 (50%)

• GOI funding under VGF - 147.00 (20%)

• State Government Funding - 147.00 (20%)

• ULB contribution - 73.50 (10%)

Total - 735.00

Consultants appointed and preparation of project reports and structuring

in progress.

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KUWASIP


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National Urban Water Awards 2009Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC), Bangalore received the

“National Urban Water Awards 2009” under Public-Private Partnership category for the “Karnataka Urban

Water Sector Improvement Project (KUWASIP)”. Her Excellency the President of India Smt. Pratibha

Devisingh Patil presented the award at Vigyan Bhavan, New Delhi on 13th August 2009

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Thank you

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