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Cover
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The Flow of Money
With India in the grip of a water shortage water spells MONEY.
CW looks at the business opportunities that abound in the
sector and the way ahead.
Here's a simple equation: Water = Money. In an age where
the entire planet is scrambling to increase water supply for
the masses in the face of pollution of water bodies and dwindling
resources, the total Indian water market is estimated at about
$ 4 billion and growing at 12-15 per cent - some segments
even at 25 per cent.
"The most serious challenge of the 21st century is the
declining availability of freshwater resources," said
Maharaja Gaj Singh of Jodhpur and Marwar, and Chairman of
Jal Bhagirathi Foundation, speaking at the recently held international
conference, 'India's Water Economy: Law and Sustainable Development'.
"A 0.3 per cent increase in investment in household access
to safe water is associated with a 1 per cent increase in
GDP." True enough. And while BOT and public-private partnership
(PPP) are gaining ground for municipal water supply projects
and wastewater treatment, the government has loosened its
purse strings, allocating over $ 1 billion for rural drinking
water supply projects.
The government's role
However, we still have a long way to go. Consider Bharat Nirman,
the programme to develop rural India. A key component of the
scheme is water. The scheme proclaims, "Every habitation
must have a safe source of drinking water." But achieving
the targets set under the scheme has proven difficult. Take
Maharashtra, one of the recipients of the scheme. Out of 85,930
rural habitations in the state, 240 come under the category
of 'not covered' (NC), and 15,598 'partially covered' (PC)
- the remaining 70,092 habitations have been fully covered
(FC) under the rural water supply programme. When it comes
to actual coverage, though, little has been done on ground,
reveal government documents.
Irrigation projects also seem to eat into public funds, with
little to show for it. A recent report points to the gross
mismatch between the public investment in irrigation works
and the returns from them. There are apparently 388 incomplete
irrigation projects spread across the country and the government
spent nearly Rs 80,000 crore on them till 2003. Another Rs
90,000 crore is needed to complete them now. The shocking
part: 340 of them have been in the works since 1992! Indeed,
mega irrigation projects seemed to have failed Indian agriculture
with big dams and large canal networks turning out to be white
elephants and becoming cash cows for corrupt politicians,
bureaucrats and contractors. Analysts suggest all incomplete
projects should be completed on a war footing and decentralised
water management models focusing on local sources of irrigation
should be explored. Tanks, ponds and check dams have to be
revived and maintained by local bodies.
Meanwhile, the Centre is likely to provide an additional
funding of Rs 2,000 crore for the Accelerated Irrigation Benefit
Programme (AIPB) in the current fiscal as part of Bharat Nirman
in addition to the budgetary provision of Rs 3,580 crore during
2007-08. Although the government proposed to create an additional
1 crore hectare of irrigation capacity by 2008-09, a potential
of only 20.75 lakh hectare has been created so far. The government
is likely to extend the time period of the four-year project,
scheduled for completion by March 2009, by one year. According
to sources, it is also exploring the possibility of awarding
turnkey contracts and putting in place management information
systems to execute the AIPB projects without time and cost
overrun. And to achieve drinking water supply targets, the
government has proposed to synergise the programme with other
schemes like rainwater harvesting, restoration of water bodies
and groundwater recharge.
Sustainable management
Ultimately, the key to solving the water crisis will be sustainable
water management, a term on everybody's lips these days. "Though
India receives copious rainfall, growing population and improper
management of water bodies is making us vulnerable to water
shortages," rues Harshad Bastikar, Vice-President &
SBU Head, Water & Waste Solutions, Thermax Ltd, Pune.
"Managing water resources will require a holistic approach
that will address the pressures from various sources, which
include agricultural, industrial and domestic sectors. Going
by current trends, water demand for industrial, energy production
and other applications is estimated to rise from the current
level of 67 billion cu m to 228 billion cu m by 2025.
A radical reform of the water and sanitation sector is needed
to boost productivity and efficiency."
Bastikar suggests bringing in maximum private-sector participation
for setting up infrastructure plants and projects and service
providers mobilising distribution systems through SPVs. "Creation
of a 'Water Policy' and possibly a 'Water Bill' or a regulatory
body or authority would appear to be the next best step towards
sustainable water management in India," he adds.
Recycle, treat and manage
Essential to sustainable water management is recycling and
wastewater management. The good news: major Indian players
are on a par with the world's best in this area.
"Technology plays a major role in water recycling,"
says Bastikar. "Biological treatment followed by membrane
technology is the most widely deployed technology. Handling
of sludge and concentrated rejects is an area where cost-effective
solutions need to be developed and applied. Recycling of effluents
calls for process engineering expertise, application knowledge,
treatability and pilot plant studies to arrive at optimised
solutions. This is the strength of Thermax." The company
offers plant and equipment, design and systems for treatment
in the field of water. Apart from a spectrum ranging from
small-sized standard plants to custom-designed and large turnkey
projects, Thermax also offers operation and maintenance, annual
service contracts and water audit services in this field along
with revamp and augmentation of existing plants.
Agreeing that water recycling is the need of the hour, Mandar
Desai, DGM - Marketing, Hindustan Dorr-Oliver Ltd (HDO), says,
"It is becoming very popular among industrial users,
especially owing to the huge scarcity of fresh water. The
regulations enforced by pollution control authorities are
pushing industries to go in for water and effluent recycling."
A pioneer in the field of water and wastewater treatment,
over the past six decades, HDO has executed projects on an
EPC basis for a wide range of customer segments. It offers
one-stop solutions in water management and recycling, which
includes providing technology, manufacturing equipment and
executing turnkey projects.
"We foresee a huge potential in the sector of specialised
wastewater treatment for crude oil refineries and oil exploration
companies," he adds. "HDO has over 70 per cent market
share in this sector." Interestingly, HDO's parent company
IVRCL Infrastructures & Projects Ltd is executing India's
largest seawater desalination plant with a capacity of 100
million litre per day (MLD) in Chennai on BOOT basis (see
box) for which HDO is supplying some key pre-treatment equipment.
"We are also currently finishing our first project with
GE Infrastructures for seawater desalination in Gujarat,"
Desai tell us. "And we are currently in discussion for
many 'consortium projects' where HDO will come in as a pre-treatment
and EPC partner for a company providing reverse-osmosis (RO)
technology."
"Currently, India is in a very primitive stage of wastewater
treatment," says Goutham Reddy, Executive Director, Ramky
Infrastructure Ltd. Significant advancements are required
in the field leading to high quality of wastewater treatment
and discharge. Countries like Singapore have reached the level
of converting domestic wastewater into drinking water. Currently
India is investing very insignificant amounts in the sector
with an estimated expenditure of about $ 4-5 billion per year.
This is expected to grow at the rate of 10 per cent per annum."
Ramky has an exhaustive presence in all segments of water,
wastewater and agricultural and irrigation-related projects.
Its key focus is in water and wastewater-related areas. Ongoing
projects for the company include Srisailam Right Bank Canal
at Nandyal, Kurnool district; Sriramsagar Project Stage -
II, Suryapet, Warangal; Handri Niva Srujala Sravanthi, Ananthapur;
Vamshadhara Flood Banks, Srikakulam; Godavari Flood Banks,
Dhavaleshwaram, East and West Godavari; Godavari Canal Renovation
Works, Khammam district; Telugu Ganga Project, Cuddapah; and
Galeri Nagri Srujala Sravanthi, Nandyal - all in Andhra Pradesh.
"We have executed the Tirumala Water Supply Scheme, an
EPC project, in a record
77 days," says KV Rangaswami, President (Construction),
L&T. "The scope included pumping 1 mg of water to
Tirumala hills in two stages over a pumping head of 763 mWC
from the foot of the hill. This is one of the largest pump
heads installed for a water pumping station. We are presently
executing a prestigious project, Bisalpur Jaipur Water Supply
Project for the Rajasthan Urban Infrastructure Development
Project. The scope includes supply and laying of raw water
and clear water pumping mains and design and construction
of a 400-mld water treatment plant with pulsator technology.
We are planning to complete it four months ahead of schedule."
A dedicated strategic business unit of L&T - ECC offers
a wide range of EPC services for projects in in the water
sector covering water transmission and distribution; water
treatment; industrial effluents and wastewater collection,
treatment and disposal; rehabilitation of pipelines' and un-accounted
for water and leak detection and rectification. It has an
annual turnover of around Rs 1,000 crore in water-related
services.
"Wastewater treatment will be a key focus area not only
from a commercial viewpoint but also from a social responsibility
angle as it has huge health and sanitation implications,"
says Subhash Sethi, Vice Chairman, Subhash Projects &
Marketing Ltd (SPML). "It is essential to treat wastewater
before it ends up back in rivers. We construct sewage treatment
plants and effluent treatment plants that ensure the water
that goes into our water bodies is clean." SPML undertakes
water supply projects across India - both in rural and urban
sectors - on a turnkey basis. Their services include potable
water projects, lift irrigation projects and pipeline projects
and include the construction, operation and maintenance of
water treatment plants, pumping stations, cross country pipelines,
overhead reservoir distri-bution systems and even mini hydel
projects.
Beginning as a water pumps agency 25 years ago, SPML's distinctions
include construction of the world's highest single-stage pumping
station in Nurang at 12,000 ft above sea level and laying
one of the longest cross-country MS water pipelines in India.
"Fifty per cent of our current Rs 3,000 crore order book
is accounted by water projects and we have executed more than
200 projects in this sector till date," adds Sethi. "Our
turnover for 2005-06 was Rs 367 crore out of which water -related
projects accounted for Rs 150 crore. SPML's turnover till
third quarter of fiscal year 2006-07 was Rs 532 crore and
we estimate a very healthy growth led by water-related projects.
We are currently executing major water supply projects in
Rajasthan, Kerala, Karnataka and Delhi."
Partnering for water
Most people in the know believe that the PPP model holds the
most promise for water projects. "The PPP in water seeks
to introduce better technology and operations in transportation
and management," explains Pradeep Singh, CEO, Infrastructure
Leasing & Financial Services Ltd. "Operational efficiencies
can be maintained by injecting private capital, enabling higher
level of resource availability and creating greater commercial
discipline. Payments to private parties should be linked with
performance and the government should act as a purchaser of
services rather than a provider of them. By doing this, it
can transfer risks and achieve lifecycle efficiencies in design
and delivery."
Singh outlines the prerequisites for the success of a PPP:
tariff reforms, better cost recovery, volumetric charges and
targeted subsidies and cross subsidies. "Besides, pro-poor
strategies like incentives to the private operator to extend
coverage and service to the poor, better targeting of subsidies,
increasing block tariffs and targeted consumption can help
the government meet its social responsibilities and objectives,"
he adds.
Vishnu Sudarsan, Partner, JSA Advocates and Solicitors, has
his own blueprint for the way ahead. "PPP in municipal
institutions need reordering as private partnerships need
effective public institutions," he reasons. "Moreover,
interface of municipalities with urban development authorities
needs to be clear as the statutory framework with regard to
urban water projects is scattered and 'cross-sector' Infrastructure
Acts need to be linked with municipal laws."
Sudarsan recommends that the Water Supply and Sewerage Boards
under separate laws can enter into a contract with any person
or persons for discharging its functions. Recent Infrastructure
Acts in some states provide the framework for participation
by an entity other than the state government and government
agencies in financing, construction, maintenance and operation
of infrastructure projects, including water projects.
Pipeline to success
With the need for water occupying centre-stage, ancillary
industries like pipes are also becoming increasingly important.
"With the construction world accepting PVC pipes as a
proper and better replacement for traditional metal pipes
for plumbing and sanitation, the total volume of business
in this field is increasing day by day," says VV Khandekar,
President, Finolex Industries Ltd (FIL). FIL is India's largest
PVC pipe manufacturer. "As a whole, the pipe industry
in Maharashtra is growing at a double-digit rate and keeping
pace, FIL is growing 20 per cent annually for the past two
years." In fact, FIL has set up a backward integration
plant to manufacture 260,000 mtpa for PVC in suspension and
emulsion grade in technical collaboration with UDHE GmbH,
Germany, for Hoechst Technology.
Commenting on the water crisis in the country, Khandekar says,
"We need to deal with water shortages in a better way.
Basically, we need to properly handle flows of water from
existing water resources and take measurers to increase the
availability of water. This would include more allocation
of funds for dams and irrigation projects."
Future flow
Filling the gap between demand and supply is the imperative
that faces India right now. "The demand and supply gap
is increasing in the water supply sector, whether it is a
village, town, city or metro," says KHK Prasad, COO -
Water, IVRCL Infrastructures & Projects Ltd. "This
gap makes government authorities think in terms of long-term
futuristic financial models and many governments are opting
for design, build, own, operate and transfer (DBOOT) projects,
encouraging the private sector to invest more in infrastructure
sector projects. The present trend and government policies
throughout India can cover only 5 to 10 per cent of proposed
investments in the form of DBOOT basis in the next five years.
However, the dynamism exhibited by some bureaucrats may increase
this to 25 per cent of investments in the water sector. Everyone
is aware that even this 5 per cent of investment runs into
billions of rupees!"
"The water transmission and distribution market will
grow at a steady pace considering rapid urbanisation and increasing
per capita demand," believes Rangaswami. "We have
targeted a growth of 20 per cent CAGR, which translates into
an order booking of Rs 2,400 crore in 2009-10 with a turnover
of Rs 1,700 crore in the domestic sector alone. We have also
entered the Middle East markets and are consolidating our
presence." According to Rangaswami, there is a huge potential
for lift irrigation schemes in India. Also, the dilapidated
sewer network in Tier I and II cities will call for a widespread
laying of sewer lines in the next decade.
"Stringent pollution control norms, growth in infrastructure
and industry and awareness about water conservation will drive
growth in this sector," predicts Bastikar. "The
water equipment and plants industry, which is estimated at
about Rs 2,000 crore, is expected to grow at 9 per cent."
For his part, Sethi is even more optimistic about growth.
"We estimate that the Indian water and wastewater market
is worth more than $ 1 billion and is experiencing 15-20 percent
annual growth," he says. "The PPP model will be
crucial to accelerate growth and increase output and efficiencies
in the water sector. We need more foreign collaborations to
replicate models that have worked elsewhere after suitable
customisation to Indian conditions. Also, integrated solutions
are the need of the hour. We need to ensure the clients partner
with one party for construction, operation, maintenance and
management to ensure ownership."
Desai is in the same flow when he says, "The majority
of large recycling projects coming up in India are being executed
on BOO/ BOOT basis where the contactor not only has to procure
and install but also operate and maintain the project and
then transfer it to the owner. Revenues are earned by way
of selling the commodity, namely, water. Thus, growth prospects
for larger players are enormous in this field." In 2005-2006,
HDO's turnover was Rs 144 crore. "In 2006-2007, we have
achieved Rs 215 crore and our projection for the current year
is Rs 320 crore," he adds. "We are confident of
achieving this target based on strong order backlog position
and high value EPC projects received in this quarter. On the
part of government, stringent enforcement of pollution control
norms, which is already being done, and encouraging industries
to recycle water by way of implementing zero discharge standards
will further drive growth."
Another key driver: vision, and ambition. For instance, Sethi
says, "The future is integration of all water-related
services to offer end-to-end water solutions that would include
the entire cycle from source generation, intake and conveyance
of raw water to treatment, proper supply and distribution
to the end user. We would like to support utilities in meeting
their service level agreements in water supply to its users.
We believe in 24/7 water supply to all users." May his
tribe increase!
Hydel projects at a glance
o Gadre Marine Export is implementing the 1.5-mw Deogad project
at Sindhudurg in Maharashtra. The project will generate power
from irrigation releases from Deogad dam and envisages construction
of a small powerhouse at the foot of the dam.
o Birahi Ganga Hydro Power is setting up the Birahi Ganga
project at Chamoli in Uttarakhand. The project involves setting
up a 4.8-mw SHP (2 x 2.4 mw) run to generate and deliver electricity
to Chamoli substation.
o Dans Energy has reported progress on its Jorethang Loop
project coming in the Namchi subdivision in Sikkim.
o National Hydroelectric Power Corp (NHPC) is planning to
take up the 55-mw (2 x 27.5 mw) Khartoli Lumli Tulli project
in Dhamigaon in Pithoragarh district of Uttarakhand with an
investment of Rs. 4,151.2 million.
o NHPC will implement the 210 mw (3 x 70 mw) Lachen project
near Zema Chu in Sikkim.
o NHPC is setting up the 320-mw Kotli Bhel Stage - IB project
at Pali near Dev Prayag in Pauri and Tehri Garhwal districts
of Uttarakhand.
o DS Construction is implementing the 260-mw Kutehar project
in Himachal Pradesh.
o NHPC is implementing the 420-mw (3 x 100 mw + 2 x 60 mw)
Lakhwar Vyasi project in Luhari near Kalsi in Dehradun district
of Uttarakhand.
o Karmoli Lumti Tulli project is located on river Goriganga,
a subsystem of Sarda Basin. The Goriganga river originates
in the Himalayan ranges from Milam glacier at an elevation
of 3,600 m.
A study in success
KHK Prasad, COO - Water, IVRCL Infrastructures & Projects
Ltd, tells us more about India's largest seawater desalination
plant
The project: The Chennai Metropolitan Water Supply and Sewerage
Board (CMWSSB) is responsible for the supply of water to the
city of Chennai. The increasing demand for water supply each
year has resulted in identifying new water sources. As a result,
CMWSSB has conceptualised the utilisation of abundant seawater
as a reliable source of water to bridge the gap between demand
and supply. In this process, Chennai Water Desalination Ltd
(CWDL), promoted by IVRCL and Befesa CTA (Spain), has been
awarded the development of the 100-mld seawater desalination
project. A bulk water purchase agreement was signed by CWDL
and CMWSSB on September 13, 2005.
The vehicle: CWDL is an SPV formed to develop the project
on DBOOT basis for financing and constructing the plant and
operations and maintenance for a period of 25 years.
The money: When the project was awarded in September 2005,
the cost of the plant was estimated at Rs 470 crore. The levelled
tariff over 25 years, for 1,000 litres of water produced,
is Rs 48.66. The Tamil Nadu government has rendered its support
and signed an agreement to this effect. Lenders for the project
are a consortium of Canara Bank, United Bank of India and
Indian Overseas Bank. Financial closure for the project was
achieved on January 25, 2007.
Paving the way: Water supply projects including desalination
projects get customs and central excise duty exemptions. CMWSSB
has assured uninterrupted electrical supply to the project.
Land for the project was leased by CMWSSB without any hindrances.
As a developer, we had to put in our best efforts for obtaining
clearances, especially FIPB, MoEF and other such approvals,
consents, access roads, etc, and pay fees or charges like
any other developer pays for a project.
Machinery and equipment: IVRCL's technological collaborator
and EPC contractor is Befesa, established in the field of
desalination for four decades. Critical equipment includes
RO membranes, seawater intake pumps, high-pressure pumps and
energy recovery system (all imported). Other equipment that
is proposed to be imported includes valves, filtration media,
fire prevention system, eyewash showers, frequency converters,
emergency diesel generator, control system, and instrumentation-related
equipment equired for automation and communication system.
The process: A quantum of 237 mld of seawater is drawn for
the purpose through the submerged open seawater intake system.
The project uses RO with state-of-the-art membranes for desalting
and recovering energy out of the process for reuse. At 45
per cent conversion rate, 100 mld of potable water will be
produced. The processing of the raw seawater to product water
comprises preliminary treatment using sedimentation and filtration
techniques, the desalting process using RO technique and finally
post-treatment of desalted water to make it fit for city water
supply. Conveyance and distribution of product water from
the desalination plant to the end user falls in CMWSSB's scope.
CMWSSB proposes to use ductile iron pipes of suitable specifications
and necessary pumping equipment to convey the desalinated
water to the city water supply grid.
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