Sustainable water management strategy in

India

Case Study of Mysore Water Distribution

Oct 13, 2011by

G S Basu, Jusco, India

Agenda

I. India Urban Water Scenario

II. JUSCO Mysore Experience

III. Future of Sustainable Water Management in India

2

Demand for water in India is expected to rise dramatically in the next few decades

Source: Ministry of Water Resources, National Hydrology Institute, Roorkee , 'The Himalayan Challenge: Water Security in Emerging Asia, Strategic Fore

1: As per international norms, if per capita water availability is less than 1700 m3 per year, country is water stressed and if the per capita availability is less than 1000 m3, the country is water scarce2: Using theoretical available water as a base for calculations

Drivers of water usage increase

Population Population increase from 1.2 Billion in 2010 to

1.6 Billion in 2030 will directly increase demand for water

Urbanization Increased urbanization from 30% to 50% will

create demand aggregation at select points in India, sometimes away from high water availability areas

Per Capita Income

Increase

Indian GDP is expected to grow causing per capita income to rise from $468 to $ 17366 by 2050. Increased per capita will result in lifestyle changes, requiring more per capita water. For e.g. water consumption in US is 582 litres/person / day compared to India’s ~90

Industrialization India’s industrialization increase will increase

demand for water – especially increase in power, steel and other heavy industries

13 75

1.3%

Others

Power

Industrial

Domestic

Agricultrue

2050

1180

37

87

119

863

2025

843

21 3571

66

650

2010

710

20 3946

592

1,730 1,401 1,200Per Capita Availability1,2

Water Demand in India; 2010 - 2050Cubic KM or Trilion Liters

3

Resulting in a potentially significant demand supply gap in the near future

Source: Ministry of Water Resources, National Hydrology Institute

2010 2012 2014 2016 2018 2020 2022 2024 2026

750

850

0

1,000

950

900

800

700

+12%

Current useful water supply

Expected issue by 2015

Water Supply and Demand in India; 2010 - 2050Cubic KM or Trilion Liters

River Basins in India, with water shortage, 2030Percentage

DemandCurrent

Supply

12% gap by 2025

4

2: EFR – Eastern Flowing Rivers; WFR – Western Flowing Rivers (non major rivers)

7,044

26,254

-73%

TreatedGenerated

186

305

544

+67%

2025

93

146

2006

325

50

89

Tier 3 < 1 M

Tier 2 1-4 M

Tier 1 > 4 M

9,263

15,438

-40%

TreatedGenerated

56,750

82,450

-31%

SupplyRequirement

4

19

-15

Supply Hours

IndiaSupply Hours

Asia1Sewage and Waste Water Generation in Treatment, 2005Million Litres per Day

Source: Ministry of Urban Development, United Nations handbook of benchmarks, Central Pollution Control Board, Asian Development Bank

Domestic Industrial

Urban Water Requirement / Availability , 2007Million Litres per Day

1: 50 Asian cities benchmarked by ADB

Water Supply in a day on average, 2000Hours

Indian Population in Urban Areas, 2006 - 2025Millions

?

+

5

While India faces water shortage in near future, it already is facing significant issues in Urban areas

Several municipal water bodies have poor operational and financial health

Source: Urban Water India, report by McKenzie-Ray, Asian Development Bank

~45% of Municipal water supply is leaked - does not generate revenue

Connections not metered in ~40% cases

City City Size in India

(Rank)

Leakage (%)

Connections Metered (%)

Nashik 21 60 80

Delhi 2 53 56

Nagpur 13 52 40

Hyderabad 6 50 na

Bangalore 3 45 96

Kolkata 4 35 10

Rajkot 25 23 na

Chennai 5 17 na

Mumbai 1 13 75

Municipal Leakage and Metered Connections, 2010Percentage, Millions

6

Average Meter Connection per Employee, 2003Count

Operating Ratio, 2007 Operating Ratio is defined as

O&M Costs / Revenue Operating Ratio more than 1.0

indicates utility is not able to recover even O&M costs

Ideally a utility should have a operating ratio less than 1.0 to cover for capital expenditures

Most Indian utilities are performing poorly

This has led to increased realization for Private Participation in Water Management

Source: Ministry of Water Resources, National Hydrology Institute

TimelineMilestone for Private Participation in Water in India

2002

2004

2005

2006

2008

New Water Policy launched calling for Private Sector Participation - PSP

Guidelines defined for private participation in Urban Water and Sanitation projects on a PPP mode

Provision for Financial bridge for viability gap for private companies

PPP in Urban water supply linked to schemes like JNNURM

Formation of India Infrastructure Finance Corporation Limited for providing 20% funding to infrastructure projects

Increased projects involving private companies in Urban water and Sanitation

Private companies can participate in Urban Water Management in areas of Water Treatment; Distribution; Waste Management

7

Private participation is expected to help in the following areas

8

More efficient operations

Access to funds for capital improvement

Access to latest technology and tools including MIS

Experience of urban water management in other geographies

Knowledge and skill transfer to municipal body staff

Better consumer complaint handling systems

Agenda

I. India Urban Water Scenario

II. JUSCO Mysore Experience

III. Future of Sustainable Water Management in India

9

10

A TATA Enterprise

India’s only private sector integrated civic service provider

Services:

Water & Waste Water Management

Power Distribution and Infrastructure

Solid Waste Management

Construction Services

Integrated Maintenance

Environment Management

JamshedpurA town built on a promise

JUSCO – A Comprehensive Urban Infrastructure Service Provider

Purpose

11

National Urban Water Award for Consumer Satisfaction, 2009

Total Productive Maintenance (TPM) Excellence Award held at Kyoto, 2008

JUSCO received Global Water Intelligence Award in London, 2008

Asian Water Management Excellence Award 2008

JUSCO has been recognized for excellence in Urban civic services

12

Mysore – A Heritage city in South India

Karnataka

Mysore City Facts

• Area: 128.42 km2

• Population: 1,000,000• Location: 12°18′N 76°39′E• Climate: Temp: Min – 38.5°C, Max – 9.6°C• Elevation: 763 metres (203 ft.)

• Named after Demon Mahishasura •“Kannada” is the native language of Mysore•One of the princely states at time of independence•Strong Arts Heritage(“Cultural Capital of Karnataka”)

Mysore History

Mahishasura

Mysore Palace

• Tourism Hot spot within Karnataka •Second Largest Software exporter in Karnataka• Significant handicrafts industry •Sandalwood carving, Bronze work,

Mysore Economic Profile

Jayalakshmi Vilas

Mysore

13

Source of water Cauvery river fairly dependable

Current water production 214 MLD which means availability of 234 lpcd.

Civic Services administered by a Municipal Corporation (MCC)

City Council has a Mayor and Deputy Mayor; 65 elected Corporators each representing a Revenue Ward.

Core municipal area of 65 wards: about 84 sq km. City expanding and MUDA responsible for planning & development; Master plan covers 150 sq km.

Karnataka Urban Water Supply and Drainage Board (KUWSDB) is the main body responsible for water supply

Mysore Water Distribution Background

Mysore Urban Development Authority (MUDA Boundary)

Mysore City Corporation (MCC)

Cauvery River

Mysore Water Distribution Background

Mysore Water Distribution was facing significant issues…

Bulk water production assets have outlived age KUWSDB is implementing a bulk

augmenting arrangement

Distribution system in the city dates back more than 100 years

18 Boosting stations provided to provide pressurized water

Around 20,000 unauthorized connections over a base of 126,000

~ 80% meters not functional

Tap pressure ~ 3-5 m, as opposed to 7 m, as per norms in India

Background for Mysore Distribution

Water available for 3-5 hours per day in West Zone and every alternate day in East Zone

Water availability at erratic hours – middle of night, very early morning etc.

Inadequate water pressure, requiring people to install booster pump on water lines

Water contamination due to old / rusted pipes

Issues for Consumers Issues for KUWSDB

Inspite of a good water source (cauvery river) being close, there is additional cost borne for borewells and tankers to meet customer demand

NRW in excess of 40%

Poor collections from consumers

Low tarriff levels – many consumers billed on volumetric consumption because of non functional meters

14

+

15

Collecting water at odd hours in the morning

Old man collecting water at dawn

Waiting for turn to fill water at community tap

Mysore Water Distribution was facing significant issues (Contd)

16

Too little pressure for consumers… …While leakage and wastage at other parts

Mysore Water Distribution was facing significant issues (Contd)

Mysore Civic bodies envisaged a program to solve water issues through private participation

17

Name of Project……………

Job Description……………

Client………………………

Project Aim…………………

Contract Start Date………

Completion Time…………

Value………………………

Funding arrangement

24X7 Water Supply performance based management contract in Mysore city.

Conversion of intermittent to 24/7 continuous water supply system for 120,000 connections

Mysore City Corporation (MCC) & Karnataka Water Supply & Drainage Board (KUWSDB)

To enable a profitable Urban Local Body (ULB); Reduce losses and improve consumer experience by providing 24x7 water

28/01/2009

72 months

Rs. 1,620 Million (~USD 36 Million)

JNNURM:State Govt:MCC – 80:10:10

18

Abstraction / Treatment

Transmission DistributionWaste Water Collection

and Treatment

Party

Notes

KUWSDB/MCC Contractor

Around 240 MLD water bulk supply from Cauvery river tapped at 3 different areas

4 Water Treatment Plants (WTP) under management by KUWSDB

Bulk water to WTP and Treated water to Master Balance Reservoir (MBR) under scope of KUWSDB

6 MBRs to balance water supply having capacity of 126 ML

170,000 connections of which 120,000 authorized connections

1700 KM of piping network

Consumer complaint handling

Metering and Billing Revenue collection

improvement

Responsibility for entire water cycle to be shared between public and private parties

Urban Water Supply Cycle

Responsible for waste water collection and treatment before release to Cauvery waters

KUWSDB/MCC KUWSDB/MCC

Mysore Project to be executed in three phases

19

Phase 1: Preparatory

Phase 2: Rehabilitation

Phase 3: Management

• Study and documentation existing water infrastructure & service

• Prepare O&M plan • Topographical and customer

survey for mapping the network and water infrastructure details & for compilation of customer database

• Hydraulic network modeling & design for rehabilitating the intermittent Supply network to Continuous Water Supply

• Operation, maintain and improve facilities and provision of water services

• Implementation of Final Investment Plan involving procurement, construction (new network, valves, meters, customer connections, creation of DMA etc), commissioning

• Implementing Integrated Management Information System (IMIS) incorporating Customer Complaint Management, Billing & Collection Process and Network Management Modules

• Operation, maintenance and improvement of services to achieve the respective Performance Targets as laid down.

1 year 3 Years 2 Years

India’s largest PPP project covering a population of 1 Million

Rehabilitation of ~ 1700 KMs of pipeline, pump stations, electrical and allied work

Improved billing and collection

Establishment of 24x7 customer complaint centre

Salient Features of the Contract…

20

Tarriff fixed by Municipal body, Operator to bill consumers and pass the revenue to the municipal body

Risk sharing between Urban Local Body (ULB) and Contractor

Investment risk with ULB / Government (source of funds)

Tarriff risk with ULB Design and Construction risk

with Contractor Performance risk with

Contractor Operation risk with Contractor Collection risk with Contractor

Performance based management contract

Revenue and Risk Sharing Performance Gurantees

Contractor revenue linked to several performance parameters

30% of O&M revenue and 50% of Management fees (~ xx of total fees) tied to meeting performance targets

Performance Parameter Target Weightage

Number of connections with 24x7

Progressive 30%

Revenue Improvement % improvement over baseline revenue

30%

Revenue Water in 24x7 area

85% 10%

Complaint Resolution 98% 15%

Leakage Levels 25% 5%

Quality Compliance 100% 5%

Pressure Compliance 95% 5%

JUSCO Approach for Project Execution

21

Development of Capital Improvement Plan

Asset Mapping Measuring bulk inputs and

outputs Base lining of losses,

existing service levels Establishment of DMAs,

Water Balance Hydraulic Modeling &

Investment Plan

Customer centre with SLGs defined Standardization of O&M practices Active leakage management Meter Management Incentive based billing and revenue collection Integration of mapping, billing, customer care &

network management Safety Management Total Productive Maintenance (TPM) Practices

1

Rehabilitation of existing network

Operations and Maintenance of existing network

Work break down packages for execution Prioritizing the works for execution Implementation of Rehab plan Service level targets delivered in stages Manage Issues Relating to Change in supply

pattern to 24X7

2a

2b

Project close to mid point in duration, with good progress

Jan2009

Jan2010

Jan2011

Jan2012

Jan2013

Jan2014

Jan2015

Contract Agreement – 28 Nov 2008Contract Agreement – 28 Nov 2008

Project StartJan 2009Project StartJan 2009

First Performance Target – 10k 24x7 connectionsFirst Performance Target – 10k 24x7 connections

We are hereWe are here

Next 6 monthly milestone of 70k 24x7 connectionsNext 6 monthly milestone of 70k 24x7 connections

12 months Preparatory Phase12 months Preparatory Phase

24 months MaintenancePhase 24 months MaintenancePhase

36 months Operation & Rehabilitation Phase

Start of 6 monthly Performance MilestonesStart of 6 monthly Performance Milestones

Connections, 2009 – 2014Units

90

79 +14%

20102009

91

65 +40%

20102009

9477

2010

+22%

2009

5262

2009 2010

-16%

9580 +19%

2009 2010

Water QualityPercent

Water AvailabilityPercent

Customer ServicePercent

MeteringPercent

23

Consumer satisfaction score, 2009 – 2010Percent

Top factors in consumer satisfaction score*

*Out of 8 factors including others such as Collection, Billing, Safety Measures and Behavior of staff

95

76

68

60

x Importance to customers

And significant improvement in consumer satisfaction

Independent study by AC Nielsen India

Agenda

I. India Urban Water Scenario

II. JUSCO Mysore Experience

III. Future of Sustainable Water Management in India

24

India has one of the lowest water tariff and tariff hike is a very sensitive issue

With abundant rainfall and extensive river systems, India has historically been a water rich country

Water has been considered “God’s gift” leading to water not seen as critical or finite resource that needs to be managed

Need to have a national regulatory authority to regulate water consumption, as for other natural assets such as air spectrum, is not easily conceived

0.08

0.13

0.20

0.34

0.34

0.42

0.52

1.06

1.11

1.52GermanyUnited

Kingdom

Turkey

Indonesia

United

States

China

India

Mexico

Chile

South

Africa

Common public perspective to water in India

Price to customers, 2009USD per 1000 Litres

Common psyche about water as a “free resource

There is a lack of political will to consider increase in water tariff

Indian Municipalities rarely recover their costs of operations given low tariff rates

25

Indian Utilities face several challenges

26

Low water tariff resulting in poor recovery on investments

All connections to be metered Move from flat tariff to consumption based telescopic tariff

structure to reflect economic status of the connection and the usage, including subsidy tariff for “Lifeline supply” and facilitating demand management

1

Crumbling Infrastructure and limited funds for capital maintenance or improvement

Improved tariff and collections to improve funds availability Possible corporatization for revenue and cost management Support from State and Centre such as JNNURM* Efficient use of assets with periodic good maintenance practices

2

High operational costs and not satisfactory staff productivity

Adoption of technologies and management practices Meticulous benchmarking of good practices and processes Ring fencing of accounting system Structured skill enhancement programme for ULB staffs

3

High level of Network losses Track and report NRW for every urban ward Active Leakage Management Physical audits to address illegal connection

4

Weak focus on customer Consumer focus through 24x7 complaint handling and prompt

response Capture consumer data for decision making and providing

analytical support for solving issues KPI for customer service level guarantee

5

Challenges Possible Solutions

* Jawaharlal Nehru Urban Renewal Mission

Source: CRISIL

JUSCO has implemented a comprehensive urban water management in Jamshedpur with significant results

27* JUSCO Projects

Parameter UnitResults (2005)Baseline Results (2010)

Population Covered

Metered Connections

NRW

Service Guarantee Compliance

Failures in Water Systems

Operating Ratio

% of Total

% of Total

%

% of Total

No per Month

O&M Cost / Revenue

67%

~0

36%

77%

44

1.07

85%

30%

9.5%

99%

1.1

0.82

JUSCO was formed as a corporate urban utilities service provider for Jamshedpur town in 2004.

Staff/1000 connections

Nos > 8.0 4.03

Mid DecadeEarly 2000Mid 90s 2010 2015

Interest

Activity

Key Projects

Overall momentum for PPP in Water

Sector

High Interest by Foreign Players

New Concept for Indian Companies

First initiatives Poor results and

lack of momentum Many projects

grounded

Very little interest Ineffective push

from the Government

Few projects Onset of

pessimism on Water PPP

High Government focus

Domestic Interest

High level of Public and NGO opposition

High profile projects grounded

Renewed interest by International Cos.

Increased involvement by Domestic Cos.

Many ongoing projects

Commercial Success being closely monitored

Pune Hyderabad Goa Bangalore

Sonia Vihar WTP Mumbai Kurla East

DJB Pilot Bangalore DMA Sangli

Latur Madurai Chennai Salt Lake* Mysore* Haldia*

Source: CRISIL

Private sector participation in urban water management is becoming popular after initial reservations

28

Graph Indicative

* JUSCO Projects

Several companies are entering the PPP infrastructure space in India

18563

500

500

329

188

12th

514

1,000

10th

250

11th

India Infrastructure - PPP share, 2002 – 2017USD Billions

Five year plans

In the 12th Five year plan, investment in Infrastructure is expected around $1 Trillion, with 50% PPP participation

PPP

Investment

Source: PPP India; Ministry of Finance29

What Government should do to promote PPP

Develop regulations that assure certainity of future cash flows to the extent possible

Provide political commitment for PPP as warter is not perceived as a simple commodity by either the consumers or the Government

Align economic interest of all parties Accept that profit from water business is OKDefine PPP projects on a holistic basisEncourage plurality of approach and establish a framework that accepts failures

What Government should NOT do to promote PPP

Offer a project without detailed project due diligence including adequate stake holder engagement

Change goalposts after contract is signed or re-negotiate arrangements if there is no sufficient genuine justifications beyond control of the parties to sustain operation

Consider a PPP investment as an asset and not a business Superimpose public processes on private initiativesSplit a large projects into smaller parts and bid out, limiting economic returns

Source: ILFS

Private Sector Expectations from Government for Water Utilities Market Development

30

31

Thank You