Transcript Document

PPPs in water sector
Ramanujam S.R
Director – Urban Practice
February 26, 2009
Contents
• Need for PPP - taking urban space as an example
• Forms of PPP that are relevant
• Learnings from experience
2.
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
3.
Service levels are inadequate
Cost Recovery (No of
towns)
NRW
Hours of Supply
Supply Quantity
Coverage
0.0%
20.0%
40.0%
60.0%
Service Levels
Cost recovery and continuity of supply are poor
5.
Source: Benchmarking of utilities by WSP and Utility Data Book by ADB
80.0%
100.0%
Sample of Class I Cities in a State
140.0%
120.0%
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
Coverage
of water
supply
connections
Per capita
supply of
water
Extent of
metering of
water
connections
Extent of
Non-Revenue
Water
Continuity
Efficiency
Quality of
Cost
Efficiency
of water
in redressal of water supplied recovery in in collection of
supply
customer
water supply water supply
complaints
services
related
charges
Aggregate
6.
GoO
SSLB
Need for PPP
Taking urban space as an example
1. The financing gap
Required Investment Rs 6700 Crores
Annual Revenue Rs 636 Crores
Annual Surplus Rs 47 Crores
Investment requirements for water supply and underground drainage
8.
for 128 towns with total population of 1.1 Crores
2. Skill and strength gap
Gap in key skills for a sample state
Engineering
Water and sanitation
Revenue
Accounting
Commissioners
0%
20%
40%
Availability
60%
80%
Gap
Sample
9.
of towns with a population of above 1 lakh in a State. Only gaps in key functions are summarised.
100%
Many technologies are new to local bodies
Sewage treatment
plants
Solid waste
disposal
< 25 %
< 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
10. disposal. As a result these towns are not familiar with these technologies.
waste
3. Accountability gap
Combined revenue efficiency of 43 %
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Coverage
Reading
Billing
Data from a sample town of population around 9 lakhs. Most of the legal connections are metered.
11. actual percentage of functioning meters is not known.
The
Collection
PPP timelines in water
Signs of success
A few projects
grounded
Momentum subsided
Way
Ahead?
Onset of pessimism
Now
Mid to
Late 90s
Mid
decade
Around
2000
First initiatives
High international
interest
Poor results
12.
Efforts to prepare PPP
projects
Many ongoing
initiatives
High NGO opposition
Waiting for first
commercial results
High profile projects run
aground
PPP interest at tipping
point
Mid 1990s, Failed projects
Pune
Hyderabad
Goa
Bangalore
13.
Around 2000, Momentum subsides
Sonia Vihar TP
Sangli
Bangalore DMA
18.
Mid decade, High profile projects run aground
DJB Pilot Circle
Mumbai K East
BWSSB Project
22.
Around the same time early successes emerge
Chandrapur
Nagpur Pilot
Bhiwandi
Latur
KUWASIP
Chennai desal
Mysore
Madurai
23.
Salt Lake
Haldia
Key Characteristics
Project
Operator
Duration
Scope
Placeholder forGurukripa
your own sub3 headline
Chandrapur
lakh popl
10 years
O & M of city network
Latur
10 years
O & M of city network
Hydro Comp
Size
3.5 lakh popl
Upgradation and O &
M
Upgradatation and O
&M
KUWASIP
Veolia
18,000 conn
3.5 years
Nagpur
Veolia
10,000 conn
5 years
Salt Lake
JUSCO
14 mld
30 years
BOT (WS & S)
Haldia
JUSCO
230 mld
25 years
BOT
Upgradation and O &
M
Upgradation and O &
M
Madurai
Hydro Comp
10,000 conn
Mysore
JUSCO
9 Lakh popln
6 years
100 mld
25 years
Bulk water BOT
6 lakh popln
30 years
Bulk water + mgmt
Chennai desal IVRCL-Befasa
Bhiwandi
31.
SPML
Current successes – Scope of the PPPs
Nagpur pilot
Rehab
Haldia
Mysore
Distr.n
Madurai, Salt Lake
KUWASIP
Treatment
Chennai desal
Bulk
water
Bhiwandi
Investment
32.
Latur, Chandrapur
Design
Construction O & M
Collection
Tariff
PPP timelines in water – Change is visible
Water sector is seeing increased
success with PPPs
Now
Mid to
Late 90s
Mid
decade
Around
2000
PPP concepts failed in the water
sector
33.
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?
34.
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
35.
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)
36.
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
37.
Many initiatives are in the pipeline
Ajmer
Gujarat
Nagpur Scale up
Nashik,
Aurangabad
Naya Raipur
KUWASIP Scale up
Mangalore
38.
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
39.
– 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
PPP momentum is at tipping point in water sector
Signs of success
A few projects
grounded
Momentum subsided
Way
Ahead?
Onset of pessimism
Now
Mid to
Late 90s
Mid
decade
Around
2000
First initiatives
High international
interest
Poor results
40.
Efforts to prepare PPP
projects
Many ongoing
initiatives
High NGO opposition
Waiting for first
commercial results
High profile projects run
aground
PPP interest at tipping
point
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
41.
Thank You
[email protected]
+91 99202 28448
www.crisil.com
www.standardandpoors.com
43.
Crisil Infrastructure Advisory
PPP experience in water sector
CRISIL Businesses and CRISIL Infrastructure Advisory
Ratings

Corporate Sector

Financial Sector

Infrastructure Sector

Micro-Finance
Institutions

45.
Infrastructure
Advisory

CRISIL
Infrastructure
Advisory

Risk Solutions and
Models
 Credit Risk
 Market Risk
 Operational Risk
 Investment Risk
Corporate
Governance

Mutual Funds

SMEs

Executive Training

Global Analytical
Centre
Research
Risk Solutions

Investment
Management
Services
IREVNA

CRISIL Research

Economy

Industry

Company
PPP Projects --
For Developers
Demand and Project risk assessment for a concession in West Bengal
 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
Demand assessment for a concession in West Bengal
 Assisted successful bidder in assessing the demand for an industrial water supply project
in West Bengal
Demand assessment for a new township in Chattisgarh
 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
Due diligence on a Management Contract opportunity
 Assisted a developer on commercial assessment of a potential opportunity
 Vetting of the project structure and financial model
46.
PPP Projects --
For Government
Project structuring and contract design for a Lease contract in Latur
 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
Transaction advisor for two water projects in Maharashtra
 Transaction in design stage
 Project structuring and transaction management for PPP in two large cities (million plus
population) in Maharashtra
Project structuring and process management for a DBO project (2001-02)
 A 630 mld water treatment plant in Sonia Vihar, Delhi
 Project successfully commissioned
Structuring a developer conference for a management contract (2001-02)
 Assisted a large city utility in structuring a developer conference to pursue PPP options
47.