Transcript Private Sector Participation in Water Supply and Sewerage : Experiences in India presentation at Strengthening Urban Management: India Unlocking the Potential of Indian Cities ASCI-WBI,

Private Sector Participation in Water Supply and
Sewerage : Experiences in India
presentation at
Strengthening Urban Management: India
Unlocking the Potential of Indian Cities
ASCI-WBI, January 20-24, 2003
V. Satyanarayana
Senior Infrastructure Finance Advisor
INDO-USAID FINANCIAL INSTITUTIONS
REFORM AND EXPANSION (FIRE) PROJECT
STRUCTURE OF PRESENTATION
• Global Experience - Glance
• Private Sector Participation (what happened
and what is going on)
• Need for Focus on Public Sector Reforms
• Way forward
INVESTMENT REQUIREMENTS
Investment Short Falls - Ninth Plan Period
For urban water and sewerage services
(at 1996-97 prices in crores)
Annual Requirements
10,000 to 30,000
Resource Flow Estimates
1800 to 3000
(Central, State, Local and Institutional Finance)
Requirements are 5 to 10 times the likely
resources
GLOBAL FINANCIAL MARKETS
• Private capital flows - $ 754 billion - for
infrastructure in developing countries (1991-2001)
• $ 38 billion for water and sanitation in private
sector projects in developing countries
• India - infrastructure attracted - around $ 4 billion
• India - urban water sector attracted - around 100
million dollars
INDIAN FINANCIAL MARKETS
• Primary markets (equity and debt) during last year
– Size well over Rs 1000 billion per year
• Only six cities accessed the market (6 billion
during last four years)
• Significant liquidity in the banking and financial
sector
• Too much money chasing too few projects
• Urban sector (HUDCO and others)
PSP:What has happened 1994-99 ?
• Strong local initiative for urban reforms including
private sector participation
• Approximately, 28 cities have attempted private
sector participation in variety of forms such as
BOT, BFT, etc
– Hyderabad, Tiruppur, Bangalore, Chennai, Pune, Goa,
Kolhapur, Surat, Cochin, Vijayawada, Vishakapatanam,
Nagpur, Kakinada, Baroda, Dewas, etc
• Excellent initiative and energetic and eager
leadership
PSP:What has happened 1994-99 ?
• Focus on capacity augmentation rather than
distribution
• Inadequate considerations for financial viability
• Lack of project development ability
• No state level commitment or support
• Only limited attention paid to institutional
restructuring and reforms
• Only Tiruppur, Jamshedpur and Alandur are
successful
PSP: What is going on 2000-03
• Change of mindset and moderate consensus
• Consensus on need to concentrate on distribution
and service quality rather than capacity
augmentation
• Emerging focus on public sector reforms
(institutional restructuring)
• Emerging state level support framework and
commitment for reforms
• Central level framework being put in place
What is going on 2000-03
(new initiatives)
• Bangalore management contract
– Vivendi and Lyonnaise have submitted proposal for two
pilot areas on MOU basis in April 2000
• Management contracts for 13 medium towns in
Karnataka
– Three year initiative
• Mumbai management contract
– Part of the city, Three year initiative
What is going on 2000-03
(new initiatives)
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Sangli municipal water supply
Jamshedpur (signed on November 16, 2002)
Vishakapatnam industrial water
Greater Noida
Navi-Mumbai Management Contracts
Delhi sonia vihar water treatment plant
Zahirabad in AP (Hyderabad metro water)
Some of these will emerge as models
What is going in Solid Waste
(new initiatives)
• Following Supreme Court regulatory intervention,
momentum is slowly building up
• PSP in solid waste is more pronounced than water
• Approximately 70 projects in several cities are
underway
– PSP in collection, transportation and disposal
• Slow but excellent progress
• Lesson is that regulatory framework is paving the
way for improvements
What is going on 2000-02
(New Initiatives - Sangli)
• Sangli Water Supply Project – Management Contract
with the support from the IL&FS and FIRE Project
• The general body passed a resolution to under take
the private sector participation for efficiency
improvements in November 2000
• Support from the State Restructured Capital Grants
Program
• Two Phases - Phase I Management Contract and
Phase II Concession
• Procurement is underway
• Dithering in decision making owing to elections
PARADOX
Of
Private Sector Participation
….those who are best able to manage themselves
will attract private sector participation and the rest
will be left out in the process
what is necessary is public sector reforms at state
and local level……
REFORM PROCESS IN
MAHARASHTRA
• Government of Maharashtra initiated
development of policy framework in
January 2000
• Sukthankar Committee for rural and urban
water established in Jan 2000
• The Committee submitted the report in
March 2001 after extensive consultations
• Concurrent implementation
Summary Recommendations
Urban Sector (1)
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Demonstration Projects (Sangli PSP)
Restructuring of WSS Institutions
Creating Incentives for Reforms
Support Framework for Capacity Building
Independent Regulatory Framework
Summary Recommendations
Urban Sector (2)
• Separation of roles for policy, regulation and
operations
• Accountability as the guiding principle for
institutional restructuring
• ULBs to be a facilitator rather than provider
• To set up independent and autonomous City Water
Supply Entities (CWSEs)
• Professionalise management with appropriate
incentives
Summary Recommendations
Urban Sector (3)
• Form of CWSEs may
– Municipal enterprise/undertaking
– Company (government ownership to private)
– Mutual co-operative (may be difficult unlike rural
sector)
– Form of long-term concessions with private sector
• Enhanced role for community
• Focus on efficiency improvements
Summary Recommendations
Urban Sector (4)
• Restructuring of existing state level water board to
create downward accountability
• Create Incentives for Reforms through restructuring
of State Grants (need and output based)
• Restructured Capital Grants Program to create
incentives for efficiency improvements such as
leakage reduction and energy savings (30 percent of
the state grants are reserved for this purpose)
– Issued guidelines for water and energy audit
– Issued guidelines for private sector participation
– Implementation in Sangli and Nashik
SUMMARY/LESSONS
• 90s have witnessed change – needs to be scaled up
• Numerous attempts at reforms across the country,
but very few isolated islands of innovation
• Lack of comprehensive reforms and address of
harder issues such as tariffs and coverage
• Lack of creditworthiness of cities
• Emerging State and Central Support (need to
move to implementation at state and local levels)
• Need to talk of 100s of “islands of innovations”
rather than few dozens
• Appropriate time to implement structural reforms
Critical Issues in Going Forward
• Leadership
– (with vision, conviction and courage)
• Mindset and communication
• Structures with accountability (Governance
reforms)
• Urgency (to initiate and complete action)