Improving Water & Sanitation Services: The ADB GOI PPP Initiative Anouj Mehta Head PPPs and Finance Unit (India), ADB 1
Status & Needs Huge Urbanisation Pressures Pressures on Water & Sanitation Systems 286 million urban population 35 Cities (1 million plus population) in 2001 to 50 cities in 2011 Estimated to grow to 38% or 600 million 2031 43 million - 640 cities slum populations Cities needed as engines of growth Huge Rural Pressures also Over 70% of India in rural areas Growing pressures industrialisation, water usage 2.9 HRS WATER SUPPLY PER DAY AVERAGE 40-60% NON REVENUE WATER LEVELS QUALITY OF WATER ISSUES INCREASING RELIANCE ON GROUND WATER SEWERAGE CONNECTIONS VARY 45%- 70% LESS THAN 20% WASTEWATER TREATED NO CITY 100% SEWERAGE CONNECTIONS 2
Current Service Delivery levels Parameter Coverage Duration Per capita supply Metering Non-revenue water Transmission losses Cost recovery Description 64% of urban population is covered by individual connections and standposts China 91%, South Africa 86% and Brazil 80% Ranges from 1 hour to 6 hours Brazil and China 24 hours and Vietnam 22 hours Ranges from 37 lpcd to 298 lpcd for a limited duration Paris - 150 lpcd continuously and Mexico 171 lpcd for 21 hours a day Most cities do not have metering for residential water connections Accounts for 50% of water production, compared with 5% in Singapore Leakage during transmission substantial as most of the cities need to source water from long distances (50 to 200 km) Water utilities typically recover only 30-35% of the O&M cost. While tariffs are low, cost of production is high considering the distance of source of raw water. In the Philippines and Cambodia, most water utilities recover the full O&M cost. Even in Bangladesh, water utilities recover about 64% of their O&M cost. 3
Challenges Funds Requirements are HUGE Many estimates for urban infrastructure investments over a 20- year period $ 784 billion - 20 years $ 163 billion shorter period - JNNURM Water and Sanitation ~ USD 115 billion towards capital investment, ~USD 160 billion towards O&M expenses Critically, the efficient management of assets is perhaps an even bigger problem ULB capacities No. of officials and knowledge on finance, institutional issues ULB finances Reliance on balance sheet financing 12 to 13 rated corporations only Low focus on sustainable projects on their own merit, accounting etc Need for PPPs 4
PPPs Many models and solutions can be prepared Tariffs need not be an issue Focus should be on efficiencies in management rather than just investment Allows a focus on LIFECYCLE COSTS - Operation and Maintenance 5
THE GOI-ADB PPP INITIATIVE, Mainstreaming PPPs in India An Overview Since 2006 In partnership with DEA, MOF The largest PPP initiative across any region and MDB CAPACITY BUILDING TOOLKITS AND GUIDELINES 22 PPP CELLS KNOWLEDGE DISSEMINATION TRANSACTION ADVISORY PANEL PROJECT DEVELOPMENT FUNDS PILOT PROJECTS INITIATIVE - CRITICAL FOR DEMONSTRATING - PRIVATE SECTOR PARTICIPATION - MODELS - CONFIDENCE 6
Pilot Projects being structured in several cities Aurangabad Water Panjim Water Indore Water Bhopal Water Kolhapur Sanitation Rajasthan 4 Cities Karnataka 3 Cities Guwahati Water Hardwar Solid Waste 7
A Recent Impact Story
Case Study: KMC Problem Untreated sewage dumped in river ( against the norms) Water pollution > allowable limits: dead fish, epidemic break out etc PCB issued a notice to KMC to control the quality of sewage Need Construction of 76 MLD STP to improve environment compliance DPR Prepared Grant obtained from National River Conservation Directorate (NRCD)- Rs. 52 Cr. (70% of estimated DPR cost) BUT FUNDS CRUNCH FOR CAPEX & FOR OPEX NEED FOR LATEST TECHNOLOGY NEED FOR EFFICIENT MANAGEMENT OF RESOURCES THE GOI-ADB PPP INITIATIVE Need for a PPP Solution
Case Study: Kolhapur Initiative s Assistance PPP Approach Paper & Discussions Engagement of a TRANSACTION ADVISOR Financial Modelling PPP Structure Environment & Social Impacts Legal Documentation Stakeholder Communications Bid Process Management 2 Stage (RfQ and RfP) Project Status RFQ Floated end 2009 RFP Floated mid-2010 16 bids received 11 shortlisted India and overseas 6 bids received Winning Bidder Awarded
PPP trends Momentum subsided Onset of pessimism Signs of success A few projects grounded Way Ahead? Now Mid to Late 90s Mid decade Around 2000 First initiatives High international interest Poor results Pune, Hyd, Goa, Bangalore Bulk water USD 20-60 million Failed Sonia Vihar, Delhi, Sangli Bulk water Bangalore Rehab, O&M ~USD 100 million Failed Efforts to prepare PPP projects High NGO opposition High profile projects in Delhi, Mumbai, Failed Successful projects also emerge Many ongoing initiatives Waiting for first commercial results PPP interest at tipping point
Focus Area of Ongoing PPPs
PPP Sector Snapshot 30 25 26 20 15 10 17 12 5 3 0 PPP projects attempted Contracts awarded Under Implementation Operational Parameters 1990s 2000-04 2005 Onward Attempted 5 8 13 Awarded 1 3 13 Current status 1 operational 2 operational Under implementation - 12 Model Bulk supply augmentation 75% distribution, 25 % bulk water & treatment PPP model 100% BOT/BOOT 75% mgmt. contracts, 25% BOT/BOOT Private Operator mix 100% international 65% international, 35% domestic 60% - distribution, 30% - bulk water, 10% - combined 38% management contracts 62% BOT/DBFOT and similar 80% domestic 20% international 13
Response to Bids 600 545 500 400 470 407 300 200 220 185 Number of Queries Raised Number of Bidders 100 0 34 41 8 8 4 6 11 10 4 List of Bidders is limited. 1. Jindal Water Infrastructure Ltd 2. Nagarjuna Construction Co.ltd 3. CASCAL-EA 4. Manila Water 5. Thames Water Bids received 5 to 6 Financial bids 1 or 2 6. Veolia 7. JUSCO 8. Suez Environnment 9. Ramky Infrastructure Ltd 10. Subhash Projects and Marketing Ltd. 11. Jain Irrigation 14
Key Issues Government Civic society Private Developer Huge investments Profit motives of private sector overrides the social objectives Sense of loss of control Resistance to increase tariff Ownership of asset Is there a substantial change in performance? Tariff implications especially on under privileged sector? Water a public good cannot be privatized Is demanding a fundamental right to water Lack of reliable baseline information Haste in bidding projects Inadequate technical studies undertaken while preparing DPRs Has impacted the due diligence exercise prior to bidding Payment guarantee Tariff risks Unrealsitic standards Political Will performance 15
Key Factors to enable investments Strong political will Adequate project development of PPP projects Balanced sharing of risks Strong public finding Institutionalizing Suggest appropriate regulatory and policy framework Amend the existing rules and regulations to accommodate PPP projects Capacity building and training of government staff to manage the contracts Tariff Determination Establishing a financially viable business model Development of model contracts
Elements of Strategy & Projects PPP Desirability Assessment What is the premise for private sector involvement? How do we establish the value for money principles? How do we get stakeholder buy-in and how do we sustain the same? Establishing Greater Transparency Open books technical & capital investment Information systems with central control unit? Strengthening of Public Authority Skills and information to enable decisions Responsibility for renewal of networks, investments Access to information - higher quality monitoring? Establishing Greater Accountability Measurable and verifiable performance standards, periodic public disclosure Performance based payments based on improvements in efficiencies and reduction in costs
Performance Targets- PPP Projects Performance Criteria Performance Standards Unit Target Number of connections with 24x7 % 100 Revenue Water % 85 Collection Efficiency % 90 Resolution of Complaints % 95 Leakage levels L/c/d/m 31 Quality compliance % 100 Pressure compliance % 98 Total 18
Service Level Benchmarks Performance Criterion Nagpur Water Aurangabad Water KUWASIP 5 towns Latur Water Supply Coverage and reach 24x7 water supply in 5 years, currently 2-12 hours supply per day 100% coverage in 5 years 100% coverage from 1st year post COD 24x7 water supply 24x7 water supply in 2 years NRW targets Technical efficiency from 66% to 75% (2014 onwards) Maximum 25% in Year 4 and to be brought down to 15% in Year 6 from 50% currently Loss : 20 litres/connection/day/ meter Loss: 80 litres/day/connection by year 4 from 137 litres loss currently Metering and billing Collection efficiency from 76% to 98% (2016 onwards) Installing 100% meters by 3rd year 100% metering and billing 100% metering Tariff changes To be set by NMC Shift from flat annual rate to volumetric tariff and fix it for 20 years. Fixed by Municipality 19
User fee in Aurangabad project Concession Period Water charges for household consumers Year 1to3 Pipe diameter in ½ inch Rs 1800/annum Year 4 to 6 Water consumption, KL/connection/month 0-8 9.00 Rate, Rs/KL 8-17 15.00 17-23 23.00 Above 23 30.00 The User Fee in the Service Area shall be fixed for the first 3 years of Concession Period and Concessionaire shall be in position to charge telescopic User Fee only after Commercial operation date Operation Date. 20
GOI-ADB PPP Initiative ADB has been assisting the Government of India (GOI) in its efforts to improve the PPP enabling environment in a programmatic manner since 2007. PPP projects have mostly been in roads, ports Direct ADB/DEA structuring for challenging sectors Quick response modality Complete hand holding of project sponsors from concept to bid closure Project development expenses- ADB + IIPDF (25%/75%) ADB Panel of ten expert transaction advisory teams in place Initial projects across key sectors Water Supply & Sanitation Primary Education Healthcare Urban Transport 21
Massive Response For Direct Assistance Initial aim was for only 23 Projects to be developed Over 30 Projects in pipeline Commenced in 2008 Tremendous Need for Developing PPP Models Water and sanitation pilot projects Indore Water Bhopal Water Gwalior Water Aurangabad Water Panjim Water Jaipur Water Kota Water Kolhapur STP Karnataka 4 towns 22
23 Thank You anoujmehta@adb.org