Arun Lakhani, Chairman and Managing Director, Vishvaraj Infrastructure sees more PPPs going the hybrid annuity model way, as it is better balanced both in terms of managing risks and cash flow.
According to you how can we avert India's impending water crisis?
India is on the verge of water crisis today. The crisis is twofold: major losses in potable water supply and inadequate sewage treatment facilities across the country. One of the important reasons is that the management of this precious resource, water, is missing. Water supply is insufficient despite adequate availability in most cities. Dilapidated supply networks and the subsequent high amounts of non-revenue water (NRW) are the major culprits. Sewage treatment is another neglected area which poses danger to the urban environment. An integrated holistic approach adopted for handling water and waste water management is the key to avert this crisis.
We have successfully demonstrated integrated water management techniques in Nagpur, where 24x7 water supply project and 200 MLD sewage treatment projects are completing the water cycle. The 24x7 project has also been recognised as the national best practice by the Hon'ble PM Narendra Modi at the launch of smart cities and AMRUT in 2015.
What are the key elements required to achieve a successful PPP?
- An inclusive business model that ensures sustainability, efficiency and accountability and people's participation
- A robust bankable contract to attract international investors to invest in this sector
- Effective citizen onboarding by adding a fourth P - referring to the People, who are the largest stakeholders - to the PPP.
- Long-term performance-based operator fee to ensure that the operator has skin in the game for a long term.
What are the challenges to implementing PPP in countries that are new to adopting this strategy?
Rule of law, lack of precedence and perception issues on the profit motives of the private industry are some of the major challenges. However, more projects are now being implemented on PPP and so this issue is overcome to a large extent. Other challenges that need to be addressed are strong and balanced contracts to ensure citizen welfare and revenue security for private operators to draw their interest to invest.
How do you determine the most viable PPP model for each project distinctively? What changes do you expect in the PPP arena?
The salient points are client's reputation and financial health. Other matters of importance to the PPP are the culture of governance, physical site viability (ROW land availability etc.) and overall financials to justify risk-reward balance. I see more PPPs going the Hybrid Annuity Model way, as it is better balanced both in terms of managing risks and cash flow.
How will the market develop over the next decade with regard to water and water recycling?
I think it will take some time before this sector really gets into stride due to limitations of resources and consumers' mindset in using treated water. Compared to fresh groundwater, the cost of recycling treated water is not controlled much in reality. I think it will take a long time for sewage treatment to be taken up on priority by the urban local bodies (ULBs).
How can our cities have better waste water management systems?
Treatment of waste water or sewage is a major challenge for ULBs today across the country. The available treatment facilities are as low as 30 per cent in A class cities, three per cent in B class cities and there are no facilities below that. ULBs give comparatively lower priority to sewage treatment than water supply or street lights, which impact the people directly. Also, sewage treatment is a cost centre for which the already cash-strapped ULBs do not have sufficient funding.
Hence, 100 per cent privately-funded projects for reuse or hybrid annuity model HAM is a good option Also, sufficient allocation of funds for operation and maintenance (O&M) is crucial. We have been neglecting this part all along. The infrastructure set-up is all that has historically been considered while the O&M has remained unthought of.
In Nagpur, a 200 MLD sewage treatment project is shaping up. It is a 100 per cent privately-funded project and the treated sewage will be sold to the NTPC and Mahagenco power plants. This will free up the water reserved for power plants for the drinking purpose of the city. It will also stop the contamination of water sources due to discharge of untreated sewage into them. The royalty received from the power plant will be an added source of revenue for the ULBs, turning the cost centre into a profit centre. It is thus a win-win for all.
What are your thoughts on creating replica of Nagpur model in other cities?
Nagpur model can be replicated depending on the local parameters like willingness to pay, physical challenges for meeting 24x7 water supply and sewage treatment. Reusing local parameters like distance of major water offtake etc., will be major factors. We are implementing the 24x7 water supply project in five towns of Karnataka, namely, Bidar-Basawkalyan, Magdi, Shahabad-Yadgir and Pimpri Chinchwad in Maharashtra. Many other cities have shown interest in taking up these projects and we are sure to see a lot of them implementing them successfully.
How did you achieve people's participation while implementing the Orange City water project in Nagpur?
People's participation has been most crucial in the success of Nagpur Project. Water projects are essentially social projects. People are the largest stakeholders and they should be actively onboarded to ensure inclusiveness and transparency in the implementation of these projects. In Nagpur, we used multiple platforms to reach out and onboard the fourth P, that is, people. We implemented My City My Water initiative in around 500 schools to spread awareness through students. We have also devised mechanisms like mohalla meetings, model slum development, health awareness, health check-ups, etc. Through these initiatives, we have reached people, beyond water.
Tell us about your initiative to reuse treated sewage in power generation.
Power generation uses up a large volume of fresh water today. In a situation where people are struggling to get potable water, it is unjust to reserve a large quantum for industrial use. At the same time, power generation is important and its water requirements need to be fulfilled. Reuse of treated water is a solution wherein fresh water is freed up for drinking purposes and the reuse of treated sewage fulfils the industrial requirement. It also saves fresh water reservoirs from getting contaminated due to pumping of untreated sewage into them. Also, as stated earlier, the cost centres for ULBs can be turned into profit centres. Another issue for the power plants is unavailability of water in summers, and this is resolved as the treated sewage is available round the year.
The central government has even passed a resolution that if there is availability of treated sewage in 50 km vicinity of the power plant, it is mandatory for the plants to reuse the treated sewage. This is a revolutionary decision that would positively impact the environment.
Which funding model works best for water and waste water management?
Hybrid annuity is the most suitable model for the water and waste water management sector. Private funding enables ULBs to take up these projects and implement them sustainably.
What is your stand on pilferage of drinking water and rainwater harvesting?
NRW, as we call it, includes pilferage, leakages and all the losses of the valuable treated water. By way of DMA formation and 100 per cent metering, we can detect and control, thus improving NRW. Communicating to society helps in achieving this goal in a major way. Rainwater harvesting is a necessary step towards long-term sustainability and water security, and we must adopt it in large scale.