PUBLIC PRIVATE PARTNERSHIP (PPP) FOR EFFICIENT WATER MANAGEMENT IN URBAN AND RURAL AREAS BY
M.S. AGRAWAL CHIEF ENGINEER (YAMUNA BASIN) CENTRAL WATER COMMISSION CO-CHAIR FOR THE SESSION
Urban Water Supply - Issues Deficit raw water availability Rapid population growth
High NRW
Inequitable distribution & Uncovered areas
Key Issues
Intermittent Supply: Contamination Ground Water: Suspect Quality
Low level of functional metering
High energy cost Water Quality 2
Rural Water Supply - Issues Source of water supply mainly ground water Unsustainability Rural habitations located in remote/ inaccessible areas are still uncoverd with water supply facility Problem of slipping back of covered rural habitation due to mainly drying up of water source Large number of habitations facing water quality problems
3
Un-sustainability • Deteriorating Assets • Declining Productivity • Increasing Operating costs
• Declining service levels •Customer unwillingness to pay
Result: Unsustainable Water Supply Schemes
• Declining revenues • No access to re-financing • Declining investment
National Water Policy, 2012 Institutional Arrangements (provision regarding PPP) “……… For improved service delivery on sustainable basis, the State Governments/ urban local bodies may associate private sector in public private partnership mode with penalties for failure, under regulatory control on prices charged and service standards with full accountability to democratically elected local bodies.” 5
PPP - Advantages Brings in innovative ideas Generate financial resources Bring in better management of water supply system Improves system efficiency 6
Principles for PPP Asset ownership to remain with Government Government/ULB to ensure availability of raw/ treated water Operator for operational efficiency and service quality Willing Government employees to be retained in project area o Technology transfer to Government employees 7
Principles for PPP
(contd.)
Operator payment independent of water tariff Tariff to be determined by Government: Political Sensitivity/ No regulator Simple, measurable & achievable Key Performance Indicators (KPIs) to judge performance o Inbuilt Incentive/ Penalty against performance Customer focus Contract within Government Acts and Regulations 8
Benefits for Private Operators ďƒ˜ Operational Efficiency & Service Quality o Payments linked to performance o In absence of performance-linked payments, Govt. has to chase Private Operator to ensure quality & timely delivery ďƒ˜ Government Strength: Policy, Regulation & Subsidy support o Heavy expenditure but customer satisfaction low o Government employees lack accountability 9
Rehabilitation Works Hydraulic re-designing Rehabilitation of existing infrastructure Pipeline replacement & upgradation Replacement of old house service connections o Biggest source of leakage Bulk & Consumer Meter replacement Use of modern leak proof material Providing pipelines in hitherto uncovered areas 10
Models of PPP ďƒ˜ Service Contracts: under which the private firm partner is responsible only for a particular function like billing, collection of fee etc. ďƒ˜ Management Contract: under which the private firm partner is responsible only for the management, operation & maintenance of the system ďƒ˜ Lease Contract: under which the private firm partner, maintains & operates the assets at its own commercial risk, deriving revenue from the tariff
Models of PPP
(contd.)
ďƒ˜ Concession: Private partner acquires the right to provide a service at a given standard or specification for a fixed time ďƒ˜ Build-Operate-Transfer (BOT): Normally done for new investments
Project Profiles of Failed Urban PPP Projects Project
Operator
Value Chain(VC)/ Operator’s risk
Status
Reasons for failure
Bangalore
Bi-Water
VC : Bulk water Risk : Investment, Design, Construction and O&M
Negotiations • Bulk water tariff abandoned unaffordable • Project generated controversy
Hyderabad
--
VC : Bulk water Risk : Investment, Design, Construction and O&M
Project abandoned
• Bulk water tariff unaffordable. • Credit quality of the Water Baoard
Pune
--
VC : Distribution, Tereatment, Bulk water Risk : Investment, Design, Construction and O&M
Project abandoned after some degree of preparation
• High political opposition
Project Profiles of Failed PPP Projects (contd.) Project
Operator
Value Chain(VC)/ Operator’s risk
Status
Reasons for failure
Goa
_
VC : Bulk water Risk : Investment, Design, Construction and O&M
• Bulk water tariff Project abandoned unaffordable. after bidding
Sangli
--
VC : Distribution and Bulk water Risk : O&M, tariff collection
Project abandoned after some level of preparation
Hydro Comp
VC : Rehabilitation and Distribution Risk : O&M and tariff collection
• Lack of Project Project abandoned preparation after 2 International firms submitted proposals
Bangalore Delegated Management Contract
• Council decided against the Project
Project Profiles of Successful Urban PPP Projects Project
Operator
Target Duration Value population Chain/ / quantity Operator’s risk
Reasons for success
Chandrapur Gurukripa 3 lakh
10 yrs
VC : Distribution, Treatment, Bulk water Risk : O&M, collection
• Operator does not have investment risk • Tariff curve prefixed prior to holding • All commercial risks with operator
Salt Lake
30 yrs
VC : Distribution Risk : Design, construction, O&M, collection
• Institutional clients with high credit quality • High growth area • Capital investment from JnNURM • Operator takes all commercial risks
JUSCO
14 MLD
Project Profiles of Successful Urban PPP Projects Project
Operator
Target Duration population/ quantity
Madurai
Hydro Comp
10,000 Upgradation VC : connections and O&M Distribution, Treatment, Bulk water Risk : O&M, collection
Chennai Desalination
IVRCLBefasa
100 MLD
25 years
(contd.)
Value Chain Reasons for / Operator’s success risk • Capital investment by Government • Favourable metering and tariff policy • Tariff curve for 10 years fixed before bidding
• Only VC : Bulk water production Risk : costs Investment, Design, construction, O&M
Rural PPP Projects – Through SHGs Village
Popula - tion
Scheme details
Khambegaon
1,314
Kambare
506
Year of commis sioning
GP resolution date
Functions performed by SHG
Period of engage -ment of SHG
Open-well, 2007 5 HP pump, OHSR, Distribution system HCs : 157/172 (91%)
25-6-07
Water tax One billing, year collection, after minor repairs, disinfection , payment of electricity bills
80:20
Not involved now
Open-well, 2009 5 HP pump, OHSR, Distribution system HCs : 73/107 (68%)
6-12-10
Water tax collection, minor repairs, payment of electricity bills
Voluntar y service
Continuing
Since Dec’ 2010
Water SHG tax current collecfunctions tion and sharing
Constraints faced in PPP and suggestive mitigation measures Constraint on
Description
Remedy
Supply side (Authority)
Investment in construction/ reconstruction
Government funding
Long term financing
Commercial borrowing with longer tenure/ take out financing
Fear of making super normal profits
Awareness, training on PP and successful studies in particular
Capacity to undertake PPP
Capacity building
Demand Side Regulatory risk of assessing (Concessionaire) stringent norms
Community side Political
Clearly defined TOR
Clarity in tariff levy/ collection
Pre-defined tariff policy
Lack of financially viable, bankable projects
Entire market risks need not be passed on
Lack of adequate and reliable database
Establish performance matrix
Low/No willingness to pay
IEC
Not amenable to metering
Mandatory metering
Water charges
Strong political commitment
Way Forward for PPP Model-1: Full O&M responsibility over a fixed time with limited capital investment Model-2: BOT for industrial / commercial water supply Model-3: Bulk water supply/ treatment and distribution Model-4: Decentralized community managed models with technical assistance from outside Model-5: PPP under CSR by Industrial Giants Model-6: Decentralized water quality testing and/or other Service contracts
Thank You