PPP and water management still don't jell

Private players have been shying away from PPP in water management due to lack of transparency in the system, longer gestation of return on investment and above all RoI is much lower compared to other infrastructure projects.

With upsurge in economic activities and rapid growth in urbanisation, proper water management system has to be in place. According to a recent PwC report, almost 590 million people are expected to live in Indian cities by the year 2030. As per the latest census (2011), decadal growth of urban population was 31 per cent compared to 12 per cent for rural population.

Urbanisation and water woes

Rapid urbanisation has created water stress in many cities. “The issues faced today in the urban water management relate to unclear institutional arrange­ments, weak financial and managerial capacity of Urban Local Bodies (ULBs), poorly defined tariffs, unreliable service delivery and high level of Non-Revenue Water,” the report states. Wastewater manage­ment has remained an even bigger challenge with only about 50 per cent coverage in big cities and even lesser coverage in small and medium cities. The situation is aggravated by poorly targeted subsidies, large capital requirements and inadequate cost recovery.

“Water supply is a complex system. So many things are involved in it. From water source to water distri­bution, the process itself is very critical,” said DT Dange, Principal Advisor, Water Supply Resource Management Cell, MMRDA. Generally, big sources are with government. Further, there are many segments such as managing the plant, the compensation, treat­ment unit, transmission lines, etc. Moreover, these projects could be pursued in public-private partnership (PPP). All these are capital intensive activities, which need a sizable investment and modern technology. Apart from that there is operation and maintenance (O&M) part. So from sourcing to distribution you need huge investment where private party should be involved.

“The government should invite private parties. But the right proposal has to be framed and accordingly you have to invite private parties. You should be able to give a clear picture of how things will grow,” Dange said.

It has also been observed that with the help of private participation, the state-run water management systems can become profit making entities. However, the government should come up with a transparent line of action, according to a senior official with a private company.

“The industry has to tune itself to provide water at an acceptable rate to the user and the tariffs should be open to audit. A regulatory authority is one of the solutions,” says Rajesh Srivastava, Managing Director, Meinhardt India.

A common question being raised by many people closely working with the industry is that why PPP is not actually working in water management. In this regard, private players and government authorities are blaming each other. Private players have not shown much interest into these water projects as profit from these project are smaller compared to other infrastructure projects. Except few major players there are hardly any infrastructure developers have presence in this segment. Besides, they have also found a huge gap in ULBs’ ability to implement PPP projects. On the other hand private players have another story.
“In water supply, it has various components from source development to treatment plant, water quality and water distribution. So, it is difficult for any private party to develop all these on its own, as a result private players stay away from these projects. In my opinion, government should take the responsibility to work as an authority with various private companies. This will help to attract more private players in the segment, says Harshad Bastikar, Founder and CEO, Greywater Technologies.

Besides, there are other reasons such as technical expertise in short supply, L1-L2 syndrome, user charges escalation and collection issues and land acquisition needs to be consider.