Study on Economic Partnership Projects in Developing Countries in FY2013

Study on the Water Recycling and Sludge Reduction Project

for the Industrial Clusters in Maharashtra Province, the

Republic of India

Final Report

February 2014

Prepared for:

The Ministry of Economy, Trade and Industry Ernst & Young ShinNihon LLC

Japan External Trade Organization

Prepared by: Fuji Electric Co.,Ltd.

The Japan Research Institute, Limited

Reproduction Prohibited

Study on Economic Partnership Projects in Developing Countries in FY2013 Study on the Water Recycling and Sludge Reduction Project for the Industrial Clusters in Maharashtra Province, the Republic of India

February 2014

The Ministry of Economy, Trade and Industry Ernst & Young ShinNihon LLC Japan External Trade Organization Prepared by:

Fuji Electric Co.,Ltd. The Japan Research Institute, Limited

Preface

Fuji Electric Co., Ltd. and The Japan Research Institute, Limited have been commissioned by the Ministry of

Economy, Trade and Industry to undertake a research as part of the “FY 2013 Revitalizing Japan Program through

Attracting the New Middle Classes in Emerging Economies (A feasibility research for implementing the action

plans of individual infrastructure development schemes). This report is the result of this research.

This research, called “Study on the Water Recycling and Sludge Reduction Project for the Industrial Clusters in

Maharashtra Province, the Republic of India ”, has been conducted to examine the feasibility of a project whose

total cost will sum up to about 250 million yen, to supply recycled water treated at an industrial park’s Common

Effluent Treatment Plant to occupying corporations and to reduce energy consumption at each company’s own

Effluent Treatment Plant. This project addresses the problems that the state of Maharashtra in India is facing,

namely: shortage of water resources, such as surface flow water and underground water; shortage of electricity

and high manufacturing cost due to rising electricity prices.

The research team wishes that this report will help realize the implementation of these projects and serve as

reference material for concerned parties in Japan.

February 2014

Fuji Electric Co.,Ltd.

The Japan Research Institute, Limited

Project Site Map

Source: created by the research team from the Google Map

Project site: Roha CETP

List of Abbreviation

Abbreviation Full Name

BOD Biochemical Oxygen Demand

BOT Built Operate Transfer

CAGR Compound Average Growth Rate

CDM Clean Development Mechanism

CETP Common Effluent Treatment Plant

COD Chemical Oxygen Demand

CPCB Central Pollution Control Board

DMIC Delhi-Mumbai Industrial Corridor

DPR Detailed Project Report

EIA Environmental Impact Assessment

EIRR Economic Internal Rate of Return

EPC Engineering, Procurement and Construction

ETP Effluent Treatment Plant

F/S Feasibility Study

FDI Foreign Direct Investment

FIRR Financial Internal Rate of Return

FY Fiscal Year

IA Industrial Association

IIT Indian Institute of Technoology

JBIC Japan Bank for International Cooperation

JETRO Japan External Trade Organization

JICA Japan international Cooperation Agency

JV Joint Venture

MIDC Maharashtra Industrial Development Corporation

MLD Million Liters per Day

MLSS Mixed liquor suspended solids

MoEF Ministry of Environment and Forest

MOU Memorandum of Understanding

MoUD Ministry of Urban Development

MPCB Maharashtra Pollution Control Board

NEERI National Environmental Engineering Research Institute

O&M Operation & Maintenance

Abbreviation Full Name

Ppm parts per million

PPP Public Private Partnership

RFI Request for Information

RO Reverse Osmosis

SEZ Special Economic Zone

SPV Special Purpose Vehicle

SS Suspended solid

STP e Sewage Treatment Plant

SVI Sludge volume index

TDS Total Dissolved Solid

TSDF Treatment Storage & Disposal Facility

WTP Water Treatment Plant

ZLD Zero Liquid Discharge

Table of contents

Preface

Project site map

List of abbreviations

Table of contents

Executive Summary

(1) The background and necessity etc. of the project······································································ S- 1

(2) Principle policies determining the details of the project ······························································ S- 2

(3) The overview of the project ······························································································ S- 3

(4) Implementation schedule ·································································································· S-11

(5) Feasibility of the project’s implementation············································································· S-12

(6) Japanese companies’ technological superiority ········································································ S-14

(7) Maps showing the location of the project site ·········································································· S-15

Chapter 1 Overview of the Host Country and Sectors

(1) Economic, Fiscal Data ····································································································· 1- 1

1. Overview ················································································································ 1- 1

2. Macro Economy ········································································································ 1- 3

(2) Overview of the Sectors Targeted by the Project ······································································ 1- 7

1. Industrial Park, Industrial Cluster Development ································································· 1- 7

a. Policy on industrial park, industrial clusters ···································································· 1- 7

b. Status of industrial park, industrial cluster development ······················································ 1- 7

c. Problems with industrial parks, industrial clusters ····························································· 1- 8

2.Industrial Water ··········································································································· 1- 8

a. Demand for industrial water rises ·············································································· 1- 8

b. Disposal of water used for industrial purposes ································································· 1-10

c. Promotion of the use of recycled water ·········································································· 1-10

3. Electric Power ········································································································· 1-10

a. Chronic shortage of electricity ···················································································· 1-10

b. Electric power at industrial parks and industrial clusters ······················································ 1-10

c. Energy-saving plan for industry ··················································································· 1-11

4. Treatment of Industrial Waste ······················································································ 1-11

a. Treatment of hazardous industrial waste in India ······························································· 1-11

b. Issues involving the disposal of hazardous waste in India ···················································· 1-11

(3) Locations under Consideration ··························································································· 1-12

1. Overview of Maharashtra ····························································································· 1-12

2. Industrial Policy of Maharashtra ····················································································· 1-13

a. 2013 Maharashtra industrial policy ············································································· 1-13

b. Delhi–Mumbai Industrial Corridor ··············································································· 1-14

c. Water-supply plans for Maharashtra ············································································· 1-14

3. Industrial Park Development in Maharashtra ······································································ 1-15

4. Information on the proposed site (Pune) ············································································ 1-15

5. Comparison of proposed sites and joint wastewater facilities ··················································· 1-16

Chapter 2 Study Methodologies

(1) Contents of Study ·········································································································· 2- 1

1. Study Items ············································································································· 2- 1

a. Market information ································································································· 2- 1

b. Assessment ··········································································································· 2- 1

c. Commercialization scheme ························································································ 2- 1

d. Others ················································································································· 2- 2

(2) Study Methodologies and Framework ·················································································· 2- 3

1. Study Methodologies ································································································· 2- 3

a. Market information ································································································· 2- 3

b. Assessment ··········································································································· 2- 3

c. Commercialization scheme ························································································ 2- 4

2. Study Structure ········································································································ 2- 5

(3) Study Schedule ············································································································· 2- 6

Chapter 3 Justification, Objectives, and Technical Feasibility of the Project

(1) The background and need of the project ················································································ 3- 1

(2) Considerations required for decisions on the project contents ······················································· 3- 2

1. Demand forecast ······································································································· 3- 2

a. Reclaimed water ····································································································· 3- 2

b. Waste (sludge) reduction ··························································································· 3- 3

c. Energy saving ········································································································ 3- 5

2. Understanding and analysis of problems that are required for review/decision on the project contents··· 3- 7

a. Selection of project sites ··························································································· 3- 7

b. Understanding and analysis of the problems with reclaimed water supply methods ····················· 3- 10

c. Understanding and analysis of the problems regarding environmental/social considerations ·········· 3- 10

3. Review of technical methods ······················································································ 3- 11

a. Understanding and analysis of the problems with reclaimed water ········································· 3- 11

b. Understanding and analysis of the problems with energy-saving ··········································· 3- 12

4. Subsidy Scheme for CETP ························································································· 3- 12

a. Outline of the Subsidy Scheme for CETP by the Indian Government ······································ 3- 13

b. Application process ································································································ 3- 13

(3) Overview of the project plan ···························································································· 3- 15

1. The basic policy of decision on the project contents ······························································ 3-15

2. Concept design and specification of applied equipment ·························································· 3-16

a. Concept design ······································································································ 3-16

b. Concept chart ········································································································ 3-16

c. Reclaimed water ····································································································· 3-17

d. Energy-saving system ······························································································ 3-19

e. Specification of applied equipment ··············································································· 3-21

3. Suggested project contents ···························································································· 3-23

4. Problems with the introduction of the proposed technologies/system and solutions ························· 3-23

a. No introduction at operating plants ··············································································· 3-23

b. Promotion of introduction to customers (companies) ·························································· 3-24

c. Compliance with regulations and obtaining certification ······················································ 3-24

Chapter 4 Evaluation of Environmental and Social Impacts

(1) Present State Analysis of Environmental and Social Impacts ······················································· 4- 1

1. Present State Analysis of CETP ······················································································ 4- 1

2. Effluent Standards for CETP ························································································· 4- 1

3. The State of Effluent Quality of Potential Sites ··································································· 4- 4

4. Future Prospects ········································································································ 4- 5

(2) Environmental Improvement Effects through the Project ···························································· 4- 6

1. Recycling of effluents generated at CETPs ······································································· 4- 6

a. Conservation of water source quality············································································· 4- 6

b. Securing water source ······························································································ 4- 6

2. Reducing power consumption of CETPs ·········································································· 4- 6

a. Reduction of power consumption ················································································· 4- 6

(3) Environmental and Social Impacts of the Project ····································································· 4- 7

1. Clarifying items for the environmental and social considerations ············································· 4- 7

a. Anti-pollution measures ···························································································· 4- 8

b. Natural environment ································································································ 4- 9

c. Social environment ·································································································· 4- 9

2. Comparison of the proposed project with other options that may have small environmental and social

impacts ··························································································································· 4-10

3. Results of consultation with implementing agencies ···························································· 4-11

(4) Outline of the Environmental and Social Considerations related Law and Regulations in India and Necessary

Measures for Compliance ····································································································· 4-13

1. Environment related regulations and policies ······································································ 4-13

2. EIA contents of India necessary for the project realization ······················································ 4-13

(5) What Should the Involved Countries (Implementing Agencies and Other Related Agencies) Do to Realize the

Project? ·························································································································· 4-15

1. IA of CETP ············································································································· 4-15

2. MIDC and MPCB ······································································································ 4-15

3. NEERI/IIT ·············································································································· 4-15

Chapter 5 Financial and Economic Evaluation

(1) Estimate of Operating Expenses ························································································· 5- 1

1. Water recycling plant ·································································································· 5- 1

a. Construction cost ···································································································· 5- 1

b. Operation & maintenance expenses ·············································································· 5- 2

c. Item setting conditions ····························································································· 5- 3

2. Energy saving ············································································································· 5- 3

(2) Summary of Results of Preliminary Financial and Economic Analysis ·········································· 5- 5

1. Project implementation structure ···················································································· 5- 5

2. Operating conditions of plant for financial and economic analysis ············································· 5- 5

3. Cases for financial and economic analysis ········································································· 5- 6

4. Postulate ················································································································· 5- 7

5. Results summary of financial analysis ·············································································· 5- 7

a. Price of recycled water：INR12/m3 ············································································ 5- 8

b. Price of recycled water：INR16/m3 ············································································ 5- 8

6. Review of economic analysis ························································································ 5- 8

7. Result details of financial and economic analysis ································································· 5- 9

Chapter 6 Planned Project Schedule ····················································································· 6- 1

Chapter 7 Implementing Organizations

(1) Implementing Organizations ····························································································· 7- 1

1. Central and state governments ······················································································ 7- 1

a. Ministry of Environment & Forests（MoEF） ································································· 7- 2

b. MIDC ················································································································· 7- 2

c. MPCB ················································································································· 7- 2

2. Operational body (RIA) ······························································································· 7- 3

3. Other institutions ······································································································· 7- 3

a. NEERI/IIT Bombay ······························································································· 7- 3

(2) Organizational, technological and financial capacities of the institutions ········································· 7- 4

1. Operational capacity of RIA ·························································································· 7- 4

2. Local consultants ······································································································· 7- 4

Chapter 8 Technical Advantages of Japanese Companies

(1) Forms of involvement open for Japanese companies (investment, material/equipment provision, facility

operation/management etc.) ··································································································· 8- 1

1. Investment (loan) ······································································································· 8- 1

2. Provision of materials/equipment ···················································································· 8- 2

3. Facility operation and management ················································································· 8- 2

(2) Advantages of Japanese Companies in Project Implementation (technology and finance) ····················· 8- 3

1. Technological Advantages of Japanese Companies in Project Implementation ······························ 8- 3

a. Water recycling (main component) ··············································································· 8- 3

b. Energy-saving ······································································································· 8- 4

2. Economic Advantages of Japanese Companies in Project Implementation ·································· 8- 4

a. Water recycling (main component) ··············································································· 8- 4

b. Energy-saving ······································································································· 8- 5

(3) Measures to Promote Orders to Japanese Companies ································································ 8- 6

1. Order procurement structure in a public-private partnership ···················································· 8- 6

a. Funding ··············································································································· 8- 6

b. Technology··········································································································· 8- 6

2. Development of Local Partnership ·················································································· 8- 6

a. CETP Industrial Associations and board member companies ················································ 8- 7

b. Local EPC providers ································································································ 8- 7

c. Local consultants ···································································································· 8- 7

3. Proliferation and awareness raising concerning energy-efficient water recycling systems ···················· 8- 7

a. Setting a clear strategic target by the government ······························································ 8- 7

b. Considerations for existing operators ··········································································· 8- 8

Executive Summary

S-1

(1) The background and necessity etc. of the project

As its economy grows, India is promoting industrial development and accordingly, industrial parks are being

increasingly extended / expanded. The state of Maharashtra, in particular, receives one of the largest FDIs (foreign

direct investments) in India, thanks to the success of its tireless efforts to attract foreign investment under the

state’s industrial development policy, leading the economic growth of entire India. On the other hand, India suffers

from insufficient water resources, such as surface stream water and underground water, and the facilities to

provide them, risking the possibility of discouraging foreign companies from entering the Indian market and

therefore affecting the growth of the Indian economy.

To this end, Japanese and other foreign companies have, in the past made various attempts to disseminate the

“water-recycling” technology in India with limited success. This is because the enormous capital investment to

introduce water-recycling technology was passed on to the price of recycled water. In other words, the high cost is

posing a big problem for companies which use this technology.

On top of inadequate water resources, an unsatisfactory investment environment in the state of Maharashtra, such

as insufficient electricity output and price hikes of electricity, are preventing foreign companies from entering the

Indian market, slowing down the economic growth in the state as a result (the electricity supply of the

Maharashtra state in FY2012: shortage of 16.7 % throughout the FY2012 and 22.1% at peak times).

The state government has been trying to upgrade and develop Treatment, Storage and Disposal Facilities (TSDFs)

within the state. However, TSDFs with sufficient capacity and capability are yet to be implemented due to the cost

of construction, acquisition of land and environmental and social considerations to the local residents. As a result,

illegal dumping of toxic waste is causing environmental pollution. In addition, bringing down the high cost of

sludge treatment is posing another challenge; sludge discharged from Common Effluent Treatment Plants

(CETPs) and Effluent Treatment Plants (ETPs) during treatment process is collected at TSDFs and disposed.

In this environment, it is necessary to provide solutions for various issues which could prevent Japanese

corporations from entering or further expanding their business in the Indian market. It is also of no small

significance to carry out this project in the state of Maharashtra considering the state’s importance in the Indian

economy. Furthermore, making such a progressive efforts in the state of Maharashtra will pave the way for

extending the project to many other states facing similar challenges.

For these reasons, a literature research and field studies including interviews of local concerned parties and visits

have been conducted to examine the feasibility of implementing improvement measures. These measures involve

utilizing recycled water as a new source of water and reducing the consumption of electricity at a CETP and ETPs

in an industrial park in the suburb of Pune in the state of Maharashtra.

S-2

(2) Principle policies determining the details of the project

This project’s implementer will take the form of a special purpose vehicle (SPV). This SPV project’s objective is

to sell recycled water and an energy-saving system for ETPs to corporations located within the industrial park. In

addition, the project also carries out energy-saving measures for the industrial park’s CETP to reduce the running

cost of the SPV and improve its profitability. The same energy-saving technology will be used for both the CETP

and ETPs.

·Form of business: SPV

·Clients of the SPV: corporations located in the industrial park

·The SPV’s source of income (products): recycled water and an energy-saving system

·The SPV’s profit improving measures (reduction of running cost): energy saving at the CETP

Figure 1 shows the overview of this project.

Figure 1 The overview of the project

Source: Study Team

The details of the project shown in Figure 1 are determined based on the principle policies 1) and 2) below.

1) Cooperation with the implementation policies of the state and concerned organizations

<Recycled water>

The state of Maharashtra has its own water policy in which the utilization of recycled water is mentioned. The

Maharashtra Industrial Development Corporation (MIDC) is considering making it compulsory to use recycled

water in industrial parks within the state where a sharp rise in demand for water is expected in the future. The state

S-3

provides a subsidy for the introduction of facilities for zero liquid discharge of waste water from CETPs.

Water-recycling measures are confirmed to qualify as zero liquid discharge.

For these reasons, this project’s water-recycling scheme can be said to fit with the water policies of the state of

Maharashtra, where this project is located, and of the MIDC.

<Energy saving in effluent treatment>

The state of Maharashtra is suffering from a chronicle shortage of electricity which was at 16.7% as of the end of

March 2012. To tackle this problem, the state has launched a program to reduce the consumption of industrial

energy.

For these reasons, this project’s energy-saving scheme for a CETP and ETPs can be said to fit the policy of the

state.

2) Effect on the host country

Insufficient infrastructure, such as water and electricity in industrial parks is a serious problem for those areas,

such as India and the state of Maharashtra, which are eager to attract foreign investment. The schemes of recycled

water and energy-saving could help solve the shortage of water resource and electricity, making contributions to

the industry clusters in India and the state and therefore to their economic growth.

(3) The overview of the project

1) Project’s site

The following industrial park has been selected from some candidate locations in the state of Maharashtra as

the site to carry out this project.

Table 1 Project’s site

Name ROHA / Roha Industrial Park

Name of the CETP Roha RIA CETP Co-op. Society Ltd.

Area in the industrial park (ha) Industrial area: 88.04

Commercial, residential and other area: 156.65

Main industries Chemical, pharmaceutical and others

Number of occupants 38

Amount of water flow from the

CETP

10 MLD

Unit purchase price of

electricity

INR9/kWh

Source: Study Team

2) The business range of the project

The business of this project includes:

S-4

a) Sale of recycled water to the corporations in the industrial park

Recycled water is to be sold to the corporations located within the industrial park. The corporations are to

pay the SPV.

Waste water treated at the existing CETP is recycled at a plant, which is to be newly built by the SPV, and

supplied as industrial water.

b) Sale of an energy-saving system for the ETPs of the corporations in the industrial park

An energy-saving system is to be sold to the corporations located within the industrial park. The corporations

are to pay the SPV.

The SPV is to undertake engineering work, procurement and setup on the location of the energy-saving

system.

3) The total cost of the project

The costs of the water-recycling plant for recycled water business targeted at the corporations in the

industrial park and the energy-saving business are shown below.

The calculation was made based on the following conditions:

• As it is difficult to predict the price changes of machinery and construction, the current market

prices are used for the calculation without taking future price rise into consideration.

• Analysis is conducted considering only import taxes for equipment but not other expenses.

a) Water-recycling plant

During the second field research, the MIDC mentioned that it would bear the costs of laying pipes from the

water-recycling plant to each corporation and of pipe maintenance. However, taking into account the risk that

MIDC becomes unable to bear these costs, these costs have been separated from engineering and

construction costs so that two separate calculations could be made and examined; one with these costs and

the other without.

The total cost of this project consists of the construction cost of a water-recycling plant and operation and

maintenance cost of the plant.

S-5

i. Construction cost of the water-recycling plant

Table 2 Construction cost of the water-recycling plant (excluding the costs of laying pipes)

*Exchange rates: INR1=¥1.67, INR1=$0.02, $1=¥103

Source: Study Team

Table 3 Construction cost of the water-recycling plant (including the cost of laying pipes)

*Exchange rates: INR1=¥1.67, INR1=$0.02, $1=¥103

Source: Study Team

ii. Running and maintenance cost of the water-recycling plant

The table 4 shows the running and maintenance cost. This cost does not include a rise in labor cost or

emergency cost arising from unexpected events, such as accidents, presupposing that proper maintenance

would be carried out. This cost does not include large repair works except for the planned 16th year

large-scale facility replacement work.

Items Cost Total cost

Cost arising in India

( local currency)

Cost of engineering

and construction

INR30,000,000 INR82,400,000

¥137,608,000

$1,336,000 Cost of implementing

electric machinery

INR52,400,000

Cost arising outside of

India (foreign currencies)

Cost of machinery and

materials

¥31,230,000 ¥31,230,000

$303,204

Total ¥168,838,000

$1,639,204

Items Cost Total cost

Cost arising in India (local

currency)

Cost of engineering

and construction

INR30,000,000 INR132,400,000

¥221,108,000

$2,146,680 Cost of implementing

electric machinery

INR52,400,000

Costs of laying pipes INR50,000,000

Cost arising outside of

India (foreign currencies)

Cost of machinery and

materials

¥31,230,000 ¥31,230,000

$303,204

Total ¥252,838,000

$2,449,883

S-6

Table 4 Running and maintenance costs of the water-recycling plant

Items Total cost

Running and maintenance cost (local currency) INR3,600,000/y

Utilities INR5,000,000/y

Total INR8,600,000/y

¥14,362,000/y

$139,437

*Exchange rates: INR1=¥1.67, INR1=$0.02, $1=¥103

Source: Study Team

iii. Factors determining the cost of each item

Each item within the construction and the running and maintenance cost of the water-recycling plant has

been determined at based on the factors below:

• Cost arising locally (cost of engineering and construction, electric machinery implementation

and a reserve fund) derive from a quotation submitted by Hydroair in India

• Running and maintenance cost is also an estimate made by Hydroair in India

• Cost arising outside of India is the cost of the research party’s (Fuji Electric) low-price

membranes. It is envisaged that 250 membranes are to be used for the water-recycling plant.

Fifty of these membranes are to be replaced for maintenance reasons every five years once the

plant starts operating.

• For this report, the cost of transporting membranes is included in the price of membranes.

b) Cost of energy-saving system

Table 5 shows the cost of introducing the energy-saving system. This cost all arises within India (local

currency).

Table 5 Cost of introducing the energy-saving system

Item Cost Total cost

Cost arising within India

(local currency)

Cost of engineering,

equipment, on-site setup

INR572,000 INR572,000

¥955,240

$9,274

Total ¥955,240

$9,274

*Exchange rates: INR1=¥1.67, INR1=$0.02, $1=¥103

Source: Study Team

4) Overview of the results of preliminary financial/economic analysis

S-7

This project is an upgrading of the existing CETP to handle more advanced treatment. Therefore, the initial

construction cost is expected to be eligible for a subsidy which is to cover 25% of the total cost. The rest, 75%,

is borne by the business operator, likely to be met by investment/loan from IA, Fuji Electric and a third party

financial institution.

Figure 2 shows how the project would work.

Figure 2 Implementation model of the project (supposition)

Source: Study Team

a) Operation conditions on which the financial analysis is based

Table 6 shows the supposed operation conditions on which the financial/economic analysis of this project is

based using the project’s implementation model shown in Figure 2.

Table 6 Supposed conditions of the plant operation

Item Conditions

Effective working days 365 d/y

Occupation area 200m2 *The site is expected to be offered by the MIDC

free of charge

Source: Study Team

b) Different cases for financial/economic analysis

For financial and economic analyses of this project, two prices were first assumed for recycled water sales:

INR12/m3 and INR16/m3, and for each price, two cases were analyzed: where building expenses of water

pipes to supply recycled water are included in SPV, and where the expenses are borne by MIDC, assuming the

expenses are not included in SPV. That is, four cases were analyzed in total.

S-8

As to the sales price of recycled water, it was determined according to the request made by IA (purchaser) that

the price was preferably less than half of the current mains water price. The request was made at the interview

with them during the local inspection at the industrial park of Roha.

Table 7 Cases for financial/economic analysis

Source: Study Team

c) Preconditions

Table 8 Overall conditions for financial/economic analysis

Source: Study Team

d) Overview of the financial analysis results

Cases Sales price of recycled

water

Water pipe building

expenses

1 INR12/m3 Included in SPV

2 INR12/m3 Not included in SPV

3 INR16/m3 Included in SPV

4 INR16/m3 Not included in SPV

Construction period 1 year

Business operation period 20 years

Owned / borrowed capital ratio 65% / 35%

In the case of bearing

the costs of laying

pipes

Total cost ¥252,340,000

Financing plan

Total amount of borrowing ¥88,320,000

Interest rate 8%

Repayment period 15 years

Method of repayment Equal monthly

payments with interest

In the case of not

bearing the costs of

laying pipes

Total cost ¥168,840,000

Financing plan

Total amount of borrowing ¥59,090,000

Interest rate 8%

Repayment period 10 years

Method of repayment Equal monthly

payments with interest

Depreciation Depreciation period 15 years

Manner of depreciation Straight line method

S-9

In table 9, the overview of the analysis results for the four cases mentioned above are outlined with the

following inflation rates taken into account.

Based on the inflation rates forecast data between 2015 and 2018, inflation rates have been assumed as

shown below (source of inflation rates: IMF WEO database)

• The inflation rate between 2015, when the project starts operating, and 2018 is set at 7%, the

average during this period.

• The inflations rate after 2019 is set at 6.7% as in 2018.

Table 9 Results overview of the financial analysis

Cases Case conditions

FIRR NPV Price of recycled water Cost of laying pipes

1 INR12 Paid by SPV 4.4% ¥75,238,000

2 INR12 Not paid by SPV 7.9% ¥34,006,000

3 INR16 Paid by SPV 9.6% ¥117,347,000

4 INR16 Not paid by SPV 13.5% ¥226,591,000

*The discount rate for the NPV (net present value) is set at 6.7% as in the inflation rate.

Source: Study Team

The results of the analysis are:

● Price of recycled water: INR8/m3

Although the price is affordable for the clients, the business is not viable as FIRR is as low as

-0.1% when the cost of laying pipes is added. Even if this cost is not added, the initial investment

cannot be recouped with the FIRR still at 7.0% and NPV being ¥4,136,000.

● Price of recycled water: INR10/m3

Although the price is slightly higher, it is still affordable for the clients. However, even with

this price, FIRR is still 5.5% if the cost of laying pipes is added, making the value of NPV negative.

At this price, the business is not viable if the SPV is to bear the cost of laying pipes. Therefore, it is

imperative that the cost of laying pipes is borne by the MIDC. On the other hand, if the price is set

higher than this, the business would no longer be viable as the price is above what the clients can

afford.

5) Environmental and social aspects

This project’s environmental and social impacts are assessed on the construction and operation stages. The

results of assessment are divided into the following categories: (-A) a serious impact is expected; (+A) a

significant improvement is expected; (-B) a slight impact is expected; (+B) a slight improvement is expected;

(C) impact cannot be predicted and (N) no impact is expected. The results are shown in Chart 10.

S-10

It will not be necessary to move residents and there will be no impact on cultural heritage as this project is to be

carried out in an existing industrial park. The construction process will have no impact on national parks and

natural environment.

Table 10 Assessment of environmental and social impacts

Source: Study Team

Assessment Items Construction stage Operation stage

Pollution

Air quality -B N

Water quality N +A

Waste -B N

Soil pollution N N

Noise/vibration -B N

Land subsidence N N

Offensive odor N N

Substratum N +A

Natural environment

Protected areas N N

Ecosystem N N

Hydrometer N +A

Topography/geology N N

Social environment

Resettlement of residents N N

Life/livelihood N N

Cultural heritage N N

Scenery N N

Minority races/ the

aborigines

N N

S-11

(4) Implementation schedule

Figure 3 shows the project implementation schedule from the examination of industrialization details, plant

construction, on-site test runs to the start of the operation.

Figure 3 Project implementation schedule

FY2013 FY2014 FY2015

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

Form the SPV

Examine the industrialization details

Select a basic design and consultants

Assessment (environmental, social and economic points of view)

Financing

Bidding ☆

Engineering, procurement of equipment and production

Plant construction

Setup on site

Test run on site

Operation begins

Source: Study team

S-12

(5) Feasibility of the project’s implementation

For this project, the cost of laying water pipes to supply recycled water is a key factor.

1) The case where SPV pays the cost of laying water pipes

� Prices affordable to corporations in the industrial park: INR12/m3, INR16/m3

In the case of INR12/m3, NPV is in negative in most variants of the rates of inflation and

recycled-water-price growth, which means it is impossible to recover initial investment. Therefore, the

business is not viable.

In the case of INR16/m3, recovery of initial investment can only be possible if the price growth rate of

recycled water exceeds the inflation rate. Again, it is difficult to make the business viable. Even if the

price growth rate of recycled water is set higher than the inflation rate, the business is not worthwhile as

NPV is smaller than initial investment.

� Prices exceeding the purchasing conditions of corporations in the industrial park: INR18/m3

The price growth rate of recycled water can be the same as the inflation rate, but NPV in this case is still

on a par with initial investment. Also, this price setting will compromise economic effects for

corporations in the industrial park as it surpasses the introduction cost of recycled water. Therefore, it is

difficult to make the business viable.

The case where SPV does not pay the cost of laying water pipes

� Prices affordable to corporations in the industrial park: INR12/m3, INR16/m3

In the case of INR12/m3, recovery of initial investment can only be possible if the price growth rate of

recycled water exceeds the inflation rate. Again, it is difficult to make the business viable.

In the case of INR16/m3, on the other hand, NPV reaches or surpasses the initial investment level even

if the price growth rate of recycled water is set short of the inflation rate, and the business has feasible

prospects.

� Prices exceeding the purchasing conditions of corporations in the industrial park: INR18/m3

It is possible to keep the price growth rate of recycled water lower than the inflation rate, and NPV

exceeds initial investment by far, making the business attractive. However, as mentioned above,

economical effects are low for the corporations in the industrial park with this price setting, which is

slightly higher than purchasing price of recycled water.

The project would be feasible when the pipeline installation cost is borne by MIDC and thus excluded from the

total cost of this project, but MIDC mentioned in the occasion of the final report meeting that it is difficult for the

institution to bear the cost for pipes construction. Therefore, SPV is required to incur such cost.

S-13

Considering these situation, this project will be feasible when the recycled water is set at INR16/m3 or above.

However, if escalation rates of the recycled water price become below the inflation rate, the NPV gets smaller

than the initial investment and the project will be less attractive.

As described above, this project may be feasible under the conditions that MIDC bears the cost of laying water

pipes and the purchasing price is set at INR16/m3.

The conditions of feasible corporate structure are indicated to Table 11.

Table 11 Feasible business conditions

Source: Study team

Item Condition

Scale of water-recycling plant 5,000 m3/day

Recycled water purchasing price INR16/m3 or over

Bearer of recycled water piping cost SPV

Installation location of water-recycling plant Within CETP premises

The plot to be provided by MIDC free of charge

Installation area of water-recycling plant 200 m2

Operational period of water-recycling plant 365 days/year

Operation and maintenance of water-recycling plant Anticipating to engage operators of the existing CETP

S-14

(6) Japanese companies’ technological superiority

1) Recycled water (main components)

a) The competitiveness of non-Japanese companies

The main components of the water-recycling system are RO membranes which remove salt from waste water.

Although the most common type of membrane is a high-pressure RO membrane which is used for

desalination of sea water, for the purpose of converting CETP-treated waste water into industrial water, a

low-pressure RO membrane (applied pressure: approx. 1Mpa) is considered to be most suitable. This is

because the salt level in CETP-treated waste water is only one tenth of sea water (electrical conductivity:

approx. 300 to 400mS/m)

Some non-Japanese companies, such as The Dow Chemical Company in the US and Woongjin Chemical in

South Korea, manufacture low-pressure membranes which can be used for recycling CETP-treated waste

water and therefore considered to have the required technology.

b) The competitiveness of Japanese companies

Japanese RO membrane manufacturers, such as Nitto Denko and Toray, are considered to have the same

technological standards as non-Japanese companies as they also produce low-pressure RO membranes of

similar specifications and performance to those made by The Dow Chemical Company.

In contrast, the research party (Fuji Electric) has the membrane technology to boost recovery rate in

exchange for a reduction in desalination rate. Although the desalination rate of membranes manufactured

using this technology is lower than that of other Japanese and non-Japanese companies mentioned above,

their performance is good enough to recycle CETP-treated waste water whose salt level is low. This means

that Fuji Electric’s membranes are doubly effective in reducing both the initial cost (when the facilities are

set up) and running cost (when membranes are replaced) as they offer a higher recovery rate and therefore

fewer RO membranes are needed.

2) Energy-saving

a) The competitiveness of non-Japanese companies

Non-Japanese inverter manufactures, such as Siemens and ABB, have good track records in the global

market. Therefore, they can be considered to have the required standard of technology.

b) The competitiveness

Japanese manufacturers’ inverters perform just as well as those of non-Japanese manufactures. This can be

deduced examining their technological documents and a past comparison with non-Japanese manufactures.

Japanese manufactures are differentiating themselves by offering products that combine water-recycling and

energy-saving.

S-15

(7) Maps showing the location of the project site

Figure 4 Project location

Source: created by the Study team from the Web Wikipedia

Figure 5 Project site (enlarged)

Source: created by the Study team from the Google Map

The state of Maharashtra

Project site: Roha CETP

Chapter 1 Overview of the Host Country and Sectors

1-1

(1) Economic, Fiscal Data

1. Overview

India, the world’s seventh largest country with a landmass of 3.28 million square kilometers, is composed of

seven districts directly controlled by the federal government and 28 states. The country shares land and

maritime borders with Bangladesh, Bhutan, Myanmar, China, Nepal, Pakistan, and Indonesia. The South

Asian nation is also in the vicinity of Maldives and Sri Lanka, which are separated by the Indian Ocean.

Figure.1-1-1 India and neighboring nations

Source: The World Fact Book, CIA

India’s population is 1.21 billion, making it the world’s second most populous nation after China, according

to the 2011 National Census. The country’s population growth has been at the 1% level for the past few

years.1 The urban population rate is at 31.1%, meaning that the country’s cities are still in the process of

development. The rate of urban growth is estimated at 2.47% between 2010 and 2015. The capital, New

Delhi, has 17 million people, 1.4% of the country’s entire population.

Table.1-1-1 Basic data

Index Overview

Landmass 3,287,263 square kilometers

Source: The Indian Government, includes disputed territories with Pakistan and China

Population 1.24 billion (2013 estimate)

Ethnic

composition

Indo-Aryan (72%); Dravidian (25%); Mongoloid, others (3%)

Language Hindi is the official language of the federal government. The constitution also

recognizes 21 state languages

1 The World Bank Databank, The World Factbook—Central Intelligence Agency

1-2

Index Overview

Literacy

rate

NA

Religion Hinduism: 80.5%, Islam: 13.4%, Christianity: 2.3%, Sikhism: 1.9%, Buddhism: 0.8%,

Jainism: 0.4% (2001 National Census)

Source: The Ministry of Foreign Affairs (Japan), IMF World Economy Outlook 2013

Table. 1-1-2 Changes in demographics and future estimates (1950–2050)

Source: UN, World Population Prospects: The 2010 Revision

As the above table shows, the percentage of young people is high, both for women and men. Therefore, the

country is expected to have enough labor for the primary and secondary industries in the future.

Figure. 1-1-2 Population pyramid

Source: The World Factbook, CIA

1-3

2. Macro Economy

India has been drawing international attention due to its rapid economic expansion and industrialization after

economic deregulation measures were implemented in 1991. The country, with more than 1.2 billion people,

is one of the fastest-growing economies among emerging nations. Many multinational corporations,

including Japanese companies, are establishing outposts in the nation, which has become an important

strategic location for their South Asian operations. Manufacturers, such as automakers and electronics

companies, as well as information technology companies and financial services, are building footholds in

India.

India’s nominal gross domestic product (GDP) was $1.8 trillion in 2012, making it the tenth biggest

economy after Italy. The country’s economy grew 3.2% in 2012 after adjusted for inflation, a decline from

6.2% a year earlier. Nominal per capita GDP was $1,509, 141th in the world.

Figure.1-1-3 Changes in nominal GDP, economic growth in real terms (1980–2012)

Source: IMF-World Economic Outlook Databases information processed by Study Team

Table.1-1-3 Comparison with ASEAN nations (per capita GDP)

Nominal GDP($100

million)

Population(10,000

people) Per capita GDP($)

Indonesia 8,457 24,103 3,509

Thailand 3,456 6,408 5,394

Malaysia 2,787 2,873 9,700

Singapore 2,598 527 49,271

Philippines 2,131 9,586 2,223

Vietnam 1,227 8,932 1,374

Myanmar 519 6,242 832

Brunei 155 43 36,584

Cambodia 129 1,510 852

1-4

Laos 79 656 1,204

India 16,761 120,692 1,389

Source: IMF, World Economic Outlook

India has a wide variety of industrial sectors, including agriculture, mining and manufacturing, information

technology, and financial services. The country has abundant natural resources, such as coal, iron ore,

manganese, and bauxite. India has the world’s fourth biggest reserve of coal.2 Changes in the GDP growth

rate by sector are as follows:

Figure. 1-1-4 Changes in the GDP growth rate by sector

(Unit: %)

Source: Economic Survey 2012–13 processed by Study Team

India’s economic growth has led to an expansion in the consumer market, which in turn changed the nature

and the quantity of the country’s imports. India increased its imports and exports in the 2000s. The volume of

the country’s international trade temporarily declined after the global economic crisis following the

bankruptcy of Lehman Brothers. However, the volume recovered in 2010 and 2011. About 36% of the

country’s imports are mineral fuels, indicating that the country, which is in chronic trade deficit, depends

heavily on foreign nations for its energy needs. Demand for energy in India is rapidly rising as the country

continues to grow.

2 CIA, The World Factbook

0

2

4

6

8

10

12

14

16

Agriculture, Forestry, Fishery, Mining

Manufacture, Civil, Energy, Water

supply

Foreign trade, hotel, transportation,

communication

Finance, Insurance, Real estate,

Business services

Public service, Defence, others

GDP

1-5

Figure. 1-1-5 Changes in international trade (in monetary terms, during the past decade)

(Unit: $1 million)

Source: Economic Survey 2012–13 processed by Study Team

Mauritius is the biggest source of direct foreign investments in India, comprising one-fourth of all such

investments. Immigrants from India comprise 70% of the population of Mauritius, and the government of

India provides preferential tax treatments to these investors. Companies based in Mauritius are eligible for

favorable tax rates based on an agreement between the two nations. Investors from Singapore also benefit

from a comprehensive economic cooperation agreement.

Japanese companies with operations in India numbered 926 as of November 2012. The country has

manufacturing and sales outposts for automakers, auto parts makers, and electronics and electric companies.

Japan’s direct investments in India were $10 million in 2012, only 0.04% of the $256-million total. Even so,

the amount was an increase of 35.5% from a year earlier.3 As for direct internal investments, Japan

comprised $19.1 million, or 8.4% of the $227.9-million total, a decrease of 37.6% from a year earlier.

3 JETRO J-File

1-6

Figure.. 1-1-6 Direct foreign investments for 2012 (by country, in million dollars)

Source: Reserve Bank of India data processed by Study Team

1-7

(2) Overview of the Sectors Targeted by the Project

1. Industrial Park, Industrial Cluster Development

a. Policy on industrial park, industrial clusters

The Indian economy, which has been driven by financial services and information technology companies

in recent years, is inflationary because of an expansion in demand caused by a population increase. The

central government in November 2011 announced a policy to strengthen the country’s manufacturing

sector. Under the plan, the country will raise the contribution of the manufacturing sector to 25% of the

GDP by 2022 from the current 16%, creating 100 million jobs. The emphasis will be placed on the

development of the auto, industrial machinery, pharmaceutical, and textile industries. The country will

create industrial zones where various tax benefits are provided. India still lacks infrastructure to meet the

rising demand for products and services. The establishment of such infrastructure is urgently needed to

attract investments.

b. Status of industrial park, industrial cluster development

India is a promising market for the multinational corporations, including Japanese companies, due to its

market size and potential growth prospects. Many Japanese companies have already established

operations in Delhi suburbs, Rajasthan, Maharashtra, Gujarat, and Chennai suburbs in Tamil Nadu.

These areas are also being targeted for further development by the state governments.

Recently, industrial parks aimed at Japanese companies have been developed, with the participation of

the Japan External Trade Organization (JETRO) and Japanese companies. The following table is a list of

industrial parks catering to Japanese corporations. Some of them are already being sold, while others are

still under development.

Table. 1-2-1 Development of industrial parks aimed at Japanese companies (as of October 2012)

State Rajasthan Gujarat Tamil Nadu

Location Neemrana (20 km from

Delhi)

70 km northwest of

Ahmedabad

1. 50 km south of Chennai

2. 45km southwest of

Chennai

Size 1,167 acres 1,235 acres 1. 1,500 acres

2. 280 acres

Developer

Rajasthan State

Industrial Development

& Investment Corp.

(RIICO)

RICCO has also agreed

to develop another

industrial park for

Gujarat Industrial

Development Corporation

(GDIC)

1. JGC, Mizuho Corporate

Bank, Ascendas (a

government-affiliated

company in Singapore)

2. Sojitz Corp., Motherson

Group (an Indian auto

parts company)

1-8

State Rajasthan Gujarat Tamil Nadu

Japanese companies near

Giloth, which is close to

Neemrana. Sales will

begin after the

environmental

assessment is complete

Development

Status

Subdivision lots being

sold (occupancy rate:

80%)

Subdivision lots being

sold

Supports development by

referring companies

seeking to move in

Subdivision lot sales to

begin

Occupancy 41 Japanese companies

(as of October 2012)

At least 51% of the capital

must be owned by a

Japanese company. A

50-50 venture is allowed

only if the president is a

Japanese national

Source: JETRO data processed by Study Team

c. Problems with industrial parks, industrial clusters

Many companies are establishing operations in India, an attractive market for multinational corporations,

including those based in Japan. However, India still has many challenges that must be overcome. For

example, companies often find it difficult to obtain land to build factories. Filing paperwork for starting a

factory is also cumbersome. At the same time, the country needs better infrastructure to create industrial

clusters. These and other problems are a major concern for companies that are considering establishing

or expanding operations in India. The country was the second most popular nation for two years in a row

in a survey taken by the Japan Bank for International Cooperation in 2013 concerning Japanese

manufacturers’ overseas expansion plans. However, 57.2% of the respondents said India lacked adequate

infrastructure. The lack of infrastructure was cited for five straight years as the biggest concern. A stable

supply of electricity and water is a pressing issue because these are essential for the establishment of

manufacturing plants and petrochemical factories.

2. Industrial Water

a. Demand for industrial water rises

Water is essential for manufacturing. Demand for industrial water, therefore, has been rapidly rising

along with the country’s economic development. Industrial water required /y is expected to rise from 42

1-9

km3 in 2000 to 92 km3 in 2025 and to 161 km3 in 2050.4 As shown in the following figure, demand for

water is the largest for agriculture and irrigation use. Still, the rate of increase in demand for such use has

been declining in recent years. Demand for industrial use, on the other hand, is expected to surge.

Figure. 1-2-1 Changes in demand for water by use (2000–2050)

Source: Global Water Intelligence 2014 data processed by Study Team

The power industry consumes the largest amount of water among industry users. In 2008, the industry used

95% of the water consumed by all industry users. This ratio is expected to decline over time. Even so, the

rate of decline will probably be slow, with the ratio expected to fall to 92% in 2020 and 87% in 2040.

Figure. 1-2-2 Changes in demand for water by industry (2008–2040)

Source: Global Water Intelligence Data 2014 processed by Study Team

4 “India, Global Water Market 2014,” Global Water Intelligence

605

675637

34 6610142

92

161

0

100

200

300

400

500

600

700

800

2000 2025 2050

Agricultural/Irrigation Domestic Industry

(km3/yr)

39,542 43,04849,842

0

10,000

20,000

30,000

40,000

50,000

60,000

2008 2020 2040

Power Paper & pulp Iron & steel Fertilisers Cement Aluminium

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2020 2040

Power Paper & pulp Iron & steel Fertilisers Cement Aluminium

1-10

b. Disposal of water used for industrial purposes

The government’s central pollution control bureau regulates the disposal of industrial water released

from factories. Each state also has its own regulations in accordance with central government rules.

However, these regulations are not strictly enforced at the state level. As a result, at least 70% of the

water used for industrial purposes is dumped without being treated.

Against this background, the country is in the process of installing the so-called common effluent

treatment plants (CETP) for wastewater management in industrial cluster areas. The CETP is a very

important system for small- and medium-sized companies with limited financial and technology

resources. The treatment of wastewater and industrial waste has become a major issue as industrial

clusters develop. There are regulations concerning wastewater, and the quality of water is monitored by

states’ pollution control system. Nonetheless, the water quality does not meet the criteria of effluent

quality.

c. Promotion of the use of recycled water

The water resource available in India is only 4% of the world’s water resources while its population

accounts for more than 20% of the world population. Thus it is important for India to recycle water for

industrial use. The 12th five-year plan mentioned earlier in this report also discusses effective use of

water in each industry and the introduction of CETPs at industrial parks. The national water policy also

emphasizes an introduction of PPP in water-supply services.

The state of Maharashtra, which has the biggest economy in India, and other industrialized states have

their own water policies, including the use of recycle water and the treatment of wastewater. (See “(3)

Locations under consideration” for Maharashtra’s policy.)

3. Electric Power

a. Chronic shortage of electricity

India’s energy consumption is on the rise as its economy grows rapidly. The country’s electricity use is

now the fifth largest in the world. However, the country’s power supply cannot keep up with demand.

India had an annual power shortage of 9.1% as of the end of March 2012. At peak periods, the shortage

was about 8.8%.

b. Electric power at industrial parks and industrial clusters

As the country actively develops industrial parks, securing electricity is a major concern. Many factories

have their own power-generation systems because the country’s power supply is unreliable.

1-11

c. Energy-saving plan for industry

India enacted an energy-saving law in 2001 and established the Bureau of Energy Efficiency. In 2007,

the country also began to require some companies to undergo energy audits. At the same time, the

environmental minister told the congress on December 3, 2009, that the government would reduce the

emission of carbon dioxide by 20–25% by 2020 compared with 2005. India is an active participant to the

UN Clean Development Mechanism; of the 2,848 projects registered as of the end of February 2011, 622

were from India, making the country the second biggest contributor after China. (These Indian projects

reduce a total of 440 million tCO2e a year.)

In April 2011, the country adopted an energy-efficiency certification system known as “Perform,

Achieve, and Trade.” Under the system, which oversees more than 47,700 businesses in nine industrial

sectors, certificates called ES-Certs are issued based on the amount of electricity saved (in tonnage of

oil). These certificates can be sold to businesses that could not meet the energy-saving targets. It is

expected that these and other measures by the central government will further spur energy-saving

efforts.

4. Treatment of Industrial Waste

a. Treatment of hazardous industrial waste in India

India does not make a distinction between industrial waste and household garbage. Industrial waste

produced at factories, if not hazardous, are treated the same way as municipal waste. However, the

factory operator is responsible for disposing of waste considered hazardous by the Central Pollution

Control Board. Guidelines issued in 2005 and 2006 clarified how to process and discard such waste.

Based on these guidelines, pollution control bureaus of state governments choose locations for

“treatment, storage, and disposal facilities (TSDF),” secure land, and conduct environmental assessments.

The construction of CETPs proposed by this project requires that a TSDF be chosen beforehand.

b. Issues involving the disposal of hazardous waste in India

India lacks enough facilities for disposal of hazardous industrial waste. As a result, illegal dumping of

such waste causes environmental pollution. TSDFs are being constructed in states with many industrial

clusters. However, there are states that do not have any such facilities at this time. The process has been

slow because the Ministry of Environment and Forests requires that environmental impact assessment

(EIA) be conducted in accordance with ministry rules. It takes a long time for some TSDF construction

projects to obtain environmental permits, leading to a shortage of such facilities and encouraging illegal

dumping. Indian companies or foreign corporations must dispose of industrial waste themselves if there

are no TSDFs in the states in which they operate. That requires huge costs. At the same time, sludge

produced during the process of CETP operations must be disposed of at a TSDF. Although the sludge is

harmless, it costs a huge amount of money to process it. It is possible to outsource sludge disposal.

However, care must be exercised in choosing the vender because hiring an illegal business would hurt

the company’s credibility. Thus, the cost is high.

1-12

(3) Locations under Consideration

1. Overview of Maharashtra

This project will take place in the state of Maharashtra. As described below, Maharashtra is aggressively

inviting foreign investments and pursuing the development of industrial parks and special economic zones

(SEZ). The state plays an important role in economic development and the promotion of industrial activities

in India.

Maharashtra, composed of six districts and 35 prefectures, has 10% of India’s population, making it the third

most populous state in the nation. It is the biggest state in India in terms of the size of the economy,

contributing 15% of the country’s GDP. The state’s capital, Mumbai, is the center of India’s economic,

financial, and commercial activities. The Reserve Bank of India is based in the city. Tata Group, a major

conglomerate, and Reliance Industries Ltd., the nucleus of Reliance Group, are also headquartered in

Mumbai.

The state’s major industries include chemical, electronics and electric equipment, and textile. At least 20% of

the state’s GDP comes from manufacturing sectors.5 Automakers, electronics and electric equipment

companies, and drugmakers from other countries have established operations in the state, often referred to as

the engine for India’s economic development.

The state is eager to invite foreign investments. Maharashtra Industrial Development Corp. (MIDC) is

actively seeking investors and creating an environment conducive for international businesses.

There are 218 Japanese companies operating in Mumbai. In May 2013, MIDC and JETRO signed a

memorandum to support the operations of Japanese companies in Pune, which has many automakers and

other manufacturing companies. The creation of industrial parts targeting Japanese companies has been

proposed. The state is expected to become a major center of business activities for Japanese companies.

5 JETRO “Indian States and Jurisdictions under Federal Government” http://www.jetro.go.jp/world/asia/in/regional/pdf/maharashtra.pdf

1-13

Figure. 1-3-1 Map of Maharashtra

Source: Maharashtra Government Website

Pune, one of the candidates for our project, is a district of Maharashtra. It is the second largest city in the

state after Mumbai. As mentioned above, the city has been attracting investments from manufacturers in

recent years and is now the center of the auto, information technology industries. Pune has been designated

as a focus area under the state’s industrial policy. In 2007, Draft Development Plan for Pune City (Old Limit)

2007-2027 was created for a comprehensive urban project.

2. Industrial Policy of Maharashtra

Maharashtra currently has 224 industrial parks. MIDC, which is pursuing the development of industrial parks

and special economic zones, is responsible for the overall planning and operation of the project, including the

acquisition of land and the establishment of infrastructure. The agency also provides utility services, manages

the environment, and operates water-processing facilities in the industrial parks.

a. 2013 Maharashtra industrial policy

The state, in addition to mapping out overall plans for the promotion of industry and investments,

also creates sector-specific development policies, such as those for the information technology and

textile industries. In 2013, the state released the Industrial Policy of Maharashtra, which calls for

the following objectives:

- Maintain Maharashtra’s leadership position in India’s industrial investments

- Accelerate investments in underdeveloped areas in the state

- Create more employment opportunities

Along these objectives, the state established more concrete targets:

1. Achieve 12-13% annual growth for the manufacturing sector

2. Raise the contribution of the manufacturing sector to 28% of GDP

1-14

3. Create 2 million new jobs

4. Attract 5 trillion rupees in investments

Other important measures include plans to support small- and medium-sized companies, create a

business environment conducive to investments, establish main infrastructure, build an industrial

structure that creates jobs, and promote industrial development. The state was in chronic power

shortage as of late March 2012; it had a shortage of 16.7% during normal hours and 22.1% during

peak hours. The state has created a program to make industrial energy-saving plan more efficient.

b. Delhi–Mumbai Industrial Corridor

Delhi–Mumbai Industrial Corridor is one of the major industrial promotion projects for the state of

Maharashtra.

MIDC, as a state institution, is a window and responsible for coordinating the DMIC project, in

which 21 priority projects are designated. In Maharashtra, the projects include two industrial

parks, multipurpose distribution outposts, distribution and telecommunications networks, and a

convention center.

c. Water-supply plans for Maharashtra

Maharashtra has its own water-supply policy, which calls for the protection of freshwater sources,

maintenance of water quality, monitoring of water quality and information disclosure, development

and management of water sources, and effective use of water.

At the same time, the state also lays out a plan for water recycling and wastewater disposal by the

industrial sector. The state encourages private enterprises to participate in water-related projects

and calls for the promotion of public–private partnership projects as follows:

Table. 1-3-1 Wastewater disposal, water recycling projects

Field Item Project

Participation in

Water Resource

Management

2.2.1 Expansion of responsibilities for the users of water resources, such as

water providers. Promotion of participation into the creation of plans

for water-related facilities and their development and operations

Wastewater

Disposal

2.2.5 New

industrial

parks

May require the installation of ETP/CETP

Existing

industrial

parks

Requires installation of within five to seven years

Water Promotion of use of recycled water, introduction of water recycling

1-15

Field Item Project

Recycling systems

Water Resource

Protection

2.7 Promotion or requirement of ETP/CETP to protect water resources, use

of recycle water in view

State Support 10.4 Promotion of recycled water for uses other than human consumption

Source:Water Policy of Maharashtra data processed by Study Team

As seen in the figure, Maharashtra is an engine for industrial development in India. The state is taking a

variety of measures to promote industrialization and attract investments. The state is seeking to encourage

investments in underdeveloped areas and in small- and medium-sized companies as a means of lifting the

state’s overall economy.

3.Industrial Park Development in Maharashtra

MIDC develops many of the industrial parks in the state and leases their lots to companies. In recent years,

there has been an increase in the number of public–private partnership projects in SEZs. MIDC provides

electricity, water, and sewage services at its own industrial parks. The cost of the use of these industrial parks

includes utility fees, in addition to rents for land.

The state requires that companies treat their own wastewater up to a certain level. Therefore, CETPs have

been installed by MIDC within the parks. MIDC promotes the installation of CETPs within industrial parks

from the standpoint of environmental management. The agency has also established safety standards for the

15 chemical and pharmaceutical industrial parks in the state regarding disposal of wastewater and refuse that

contain hazardous materials. MIDC cooperates with industrial parks in establishing disposal facilities.

The processing capacity of each CETP differs depending on the industrial park and its size. The quality of

wastewater is regulated by the Maharashtra Pollution Control Board, a Department of Environment agency

that monitors air, noise, and water pollution. The agency has 12 regional offices and seven research centers in

the state. It monitors air, water, and hazardous industrial wastes; inspects the processing capacity of

wastewater plants and their wastewater processing procedures; and imposes penalties when the level of water

pollution exceeds a certain level.

4.Information on the proposed site (Pune)

We have selected a site in the vicinity of Pune upon recommendation of MIDC, which suggested that we

choose a CETP located near the city, which has seen an increase in the number of Japanese companies. At the

initial stage of our research, it was also suggested that we look into Nashik, which is included in a DMIC

development plan. However, we chose Pune in light of the current development condition.

Pune, the second biggest city in the state, is about three hours away from Mumbai on National Highway 4.

The city had a population of about 4.93 million people as of 2010, making it the eighth most populous city in

1-16

the nation. There are many research institutes and well-known universities in the city, which excels in human

resources and industrial concentration. Many people study Japanese at national universities, such as the

University of Pune. Many Japanese companies have been establishing operations in the city in recent years.

However, automakers and electric equipment companies from Europe and the United States used to be

dominant before. Pune is also the third biggest site for domestic information technology companies after

Bangalore and Hyderabad.

5.Comparison of proposed sites and joint wastewater facilities

We made a comparison among three industrial parks within 100 km of Pune. These parks—Roha,

Ranjangaon, and Kurkumbh—are operated by MIDC.

1-17

Figure.1-3-2 Candidate Locations

Source: Google map, processed by Study Team

Table.1-3-2 Industrial Parks with CETP Facilities

ROHA Ranjangaon Kurkumbh

CETP Roha RIA CETP Co-op.

Society Ltd. Ranjangaon CETP

Kurkumbh Environment

Protection Coop. Society

Ltd.

Industrial Area

(ha)

Industrial: 88.04

Commercial , residential

and others:156.65

Industrial: 492.17

Commercial, residential

and others: 436.62

Industrial: 232.57

Commercial,residential

and others: 156.65

Principal Industry Chemical, Drugs Auto, Electric

Machinery Chemical, Drugs

Source: Study Team

Chapter 2 Study Methodologies

2-1

(1) Contents of Study

As has been seen in the previous chapter, India has been suffering from the worsening water shortage as well as

the chronic shortage of electricity.

Giving consideration to such a situation, we had a meeting with MIDC, a counterpart of the research team, and

examined the possibility of commercializing the project targeting Pune and Nashik in the state of Maharashtra

prior to the start of the study.

Through the preliminary study, it was confirmed that both areas are relevant in terms of dealing with the

macroscopic issues in India. Accordingly, we conducted the following investigations for this study in order to

obtain quantitative information on the market, to clarify the necessity of assessment and its contents, and to

understand essential items for drawing out a specific scheme (finance, local partners, etc.).

1) Study Items

a) Market information

i) Target district

Pune district (as mentioned in Chapter 1)

ii) Demand forecast

Carry out by business item (recycled water, energy saving)

- The trend of demand based on the past and future prospect

- Policy trend of Maharashtra regarding this project

iii) Information on the market of proposed site (Pune district)

Information to select a site from candidates

- Information on the existing CETPs (water volume, water quality, power consumption amount,

electric power unit price, etc.)

- The number of tenants and their sizes

b) Assessment

i) Bringing the idea of assessor of this state into shape

ii) Evaluation of the assessor from the environmental and social as well as economic aspects

c) Commercialization scheme

i) Finance

- Way of financing for SPV composition (state grand, capital injection, loan)

- Conditions and procedures for subsidies

- Creditors

2-2

ii) Localization partners

- EPC, O&M

d) Others

- Proposed technologies, system promotion method

2-3

(2) Study Methodologies and Framework

1) Study Methodologies

In this study, hearing and discussions will be conducted with MIDC in particular as well as CETP, which

was introduced by MIDC, IA and other governmental agencies.

Study targets and methodologies for items a) - c) mentioned in (1) are shown in Table 2-2-1.

a) Market information

i) Demand forecast

ii) Information on the market of proposed site (Pune district)

Market information such as water volume, water quality, power consumption amount, electric power unit

price will be collected for CETPs in the proposed site through field study (or studies). Demand forecast and

policy trend will be examined through hearing with concerned companies as well as literature and the

Internet research.

Table 2-2-1: Study targets, items and methodologies for a)

Study target

Market information Study Methodologies (Conduct based on the

presentation made by the Research Group)

Demand forecast, policy trend

Market information Information on the existing CETPs,

tenants

MIDC ○ ○ Discussion, Interview

CETP O&M ○ Field study

IA ○ Interview

Tenants ○ ○ Interview

Literature and the Internet

○ Examine documents and websites on CETP

Source: Created by Study Team

* IA: Industrial park Association. IA consists of tenants of the industrial park, and is in charge of operation

and management of CETPs.

b) Assessment

i) Bringing the idea of assessor of the state of Maharashtra into shape

ii) Evaluation of the assessor from the environmental and social as well as economic aspects

2-4

The study of the above assessment is carried out through hearing with MPCB, IIT, and NEERI which was

introduced by MIDC.

Table 2-2-2: Study targets, items and methodologies for b)

Study target

Assessment Study Methodologies (The followings will be carried out based on the presentation made by the

Research Group)

Bringing the idea of assessor into shape

Evaluation of assessor

MIDC ○ Interview

IIT ○ Interview

NEERI ○ Interview

MPCB ○ Interview

Source: Created by Study Team

* IIT: Indian Institutes of Technology. Technical review will be conducted regarding the necessity of applying

subsidies to the investment in upgrading CETPs.

* NEERI: National Environmental Engineering Research Institute. Same as above.

c) Commercialization scheme

i) Finance

ii) Localization partner

The study on financing will be conducted through hearings with financial institutions in order to develop a scheme

for commercialization. The possibilities of discovering localization partners and of partnership with them will be

examined through hearings with local EPCs as well as the Internet research.

Table 2-2-3: Study targets, items and methodologies for c)

Study target Scheme for commercialization Study Methodologies

(The followings will be carried out based on the presentation made by

the Research Group) Finance

Localization partner

MIDC ○ Interview

IA ○ ○ Technology exchange, interview

IIT ○ Interview

NEERI ○ Interview, the Internal research

Financial institutes ○ Interview

2-5

Local EPC ○ Discussion, hearing

Internet ○ Examine the websites of localization partners

Source: Created by Study Team

2) Study Structure

The implementation structure for this study and roles of each section are as follows.

Figure 2-2-1: Study implementation structure

Source: Created by Study Team

2-6

(3) Study Schedule

The entire schedule of this study is shown below.

Figure: 2-3-1 Study schedule

2013 2014

Sept. Oct. Nov. Dec. Jan. Feb. (Tasks in Japan) (1) Consultation with your agency for developing an implementation plan, kick-off meeting with related parties in Japan

(2) Coordination with candidates in the local target districts

(3) Preparation for site visit (4) Consideration of collaborating with local partners

(5) Studying the needs of potential client companies

(6) Development of a business model (Identification of issues and discussing solutions)

(7) Discussing business feasibility (Tasks in India) (1) Consultation with local partners, making presentations to potential client companies

(2) Survey of laws and regulations through local hearings, consultation with local partners, making presentations to potential client companies

(3) Closing collaboration agreement with local companies, making an action plan for the next year, local final report

Source: Created by Study Team

Table 2-3-1: First survey in India

Date Destination

Monday, October 7th, 2013 MIDC

Monday, October 7th, 2013 JETRO Mumbai

Tuesday, October 8th, 2013 Roha CETP

Wednesday, October 9th, 2013 Ranjangaon CETP

Thursday, October 10th, 2013 Malegaon Co-operatives Sugar Factory, Baramati

Friday, October 11th, 2013 Fuji Electric India Pvt. Ltd., Local consulate

Source: Created by Study Team

2-7

Table 2-3-2: Second survey in India

Date Destination

Monday, November 18th, 2013 MPCB

Tuesday, November 18th, 2013 Fuji Electric India Pvt. Ltd.

Wednesday, November 18th, 2013 NEERI/IIT

Thursday, November 18th, 2013 Local EPC

Friday, November 18th, 2013 Local EPC

Source: Created by Study Team

Table 2-3-3: Third survey in India

Date Destination

Monday, December 17th, 2013 MIDC、Local EPC

Tuesday, December 18th, 2013 Roha IA

Source: Created by Study Team

Chapter 3 Justification, Objectives and Technical

Feasibility of the Project

3-1

(1) The background and need of the project

The expansion of industrial park is in progress in India, where industrial development has been promoted as its

economy grows. In Maharashtra, in particular, a vigorous approach to attracting investment has been successful

under the industrial promotion strategy set up by the state government. Maharashtra has the largest FDI in India,

leading the country’s economy. On the other hand, India has a shortage of natural water resources such as surface

water and ground water and water supply systems, which may affect the economic development of the companies

that are planning to expand their business into India, and thus the development of India.

While Japanese and other foreign companies tried to disseminate “reclaimed water” technologies in India in

various ways in the past, this has not been successful. This is because large capital investment for the introduction

of reclaimed water was passed on to the price of reclaimed water. As a result, the companies that use reclaimed

water have to pay a high price.

Moreover, a major bottleneck for the expansion of foreign companies is the inadequate investment climate in the

state, such as insufficient power generation and increased power charges, which are as serious as the water issue.

This is a hindrance to economic development as well as the water issue described above (power supply in

Maharashtra in 2012: 16.7% shortage, 22.1% shortage at peak time).

The state government has also worked on the construction of Treatment, Storage, and Disposal Facilities (TSDF)

for disposal of waste generated by production activities of business in industrial park in the state. However, such

facilities with adequate capacity/performance have not been constructed due to construction cost, consideration

for land expropriation, and surrounding environment for residents living in the vicinity. As a result, there have

been environmental pollution problems due to illegal dumping of hazardous waste. The wastes (sludge)

discharged in the treatment process at the Common Effluent Treatment Plant (CETP) and the Effluent Treatment

Plant (ETP) are transferred to TSDF and disposed of. As the entrustment fees for treatment are high, a future

challenge is to find out how to cut down such cost.

Under such circumstances, it is necessary to provide solutions to various issues that can hinder further business

expansion of foreign companies including Japanese companies in India. It is worthwhile to implement this project

in Maharashtra, considering the economic position of the state in India as described above. Moreover, the

advanced approach taken in Maharashtra can lead to horizontal development in many other states that have similar

problems.

From this perspective, we conducted literature search and fieldwork including interviews among relevant local

associates and visits to industrial park near Pune in Maharashtra to review the implementation of improvement

plans, including the use of reclaimed water as a new water resource, reduction of cost for the wastes (sludge)

discharged from the CETP and the ETP, and reduction of power consumption through energy saving at the CETP

and the ETP.

3-2

(2) Considerations required for decisions on the project contents

1) Demand forecast

a) Reclaimed water

i. Changes in demand

As described in Chapter 1, the expansion of industrial park is in progress in India, which has seen significant

industrial agglomerations in recent years. Accordingly, the industrial water demand across India has been

increasing, as shown in Table 3-2-1.

Table 3-2-1 Industrial water demand across India

Year 1990 1997 2010

Industrial water demand

(100 million m3) 150 300 370

Source: Created by Study Team based on the information on Indian Infrastructure

Theprincipal use of the water are thermal power plants, steel industry, oil industry, pulp/paper

industry, fiber and food industry (Source: India Infrastructure).

ii. Policy trends

It is necessary to secure new water resources to accommodate the increased demand for

industrial water. However, as India has a shortage of natural water resources such as surface

water and ground water, it is required to use “reclaimed water” (reuse water).

Some advanced states, including Maharashtra, which is a target area of this project, have their own water policies.

The use of reclaimed water is referred to as Zero Liquid Discharge (ZLD).

iii. Reclaimed water demand at the project sites

The purchase amount of industrial water at each industrial complex varies depending on the type,

number, or size of resident companies. However, the amount of water treated at the CETP, where

effluent discharged from resident companies is collected and cleansed, is nearly the same as the

purchase amount of industrial water in the whole complex.

Table 3-2-2 shows the size of three CETP facilities (target sites of this project) in Maharashtra and the water

purchase unit price at each site. It was found that millions of cubic meters of industrial water /y is purchased and

used at an industrial complex. Therefore, there is a demand for reclaimed water at each industrial complex.

3-3

Table 3-2-2 Target CETP sites in Maharashtra

Item

(Unit)

CETP

Roha Ranjangaon Kurkumbh

Facility size

Treatment capacity [planned

value]

(MLD)

12 11.5 1

Treatment capacity [performance:

annual average]

(MLD)......(A)

10 3 0.37

Water

Purchase amount of water

[estimate]

(Million m3/y)…(C) = (A)*365

3.65 1.10 0.14

Purchase unit price of water

(INR/m3)…(D) 32 25 24

Water purchase cost

(million INR/y)…(C)×(D) 91.3 19.8 2.4

Water supplier MIDC MIDC MIDC

Effluent

Effluent entrustment fee

(price with CETP for accepting

effluent)

(INR/m3)

10 5.5

Small-scale:

15.5

Large-scale:

5.5

Source: Created by Study Team

iv. Future forecast

It is predicted that the expansion of industrial park in India will continue in the future. Industrial water demand is

estimated to reach 62 billion m3 in 2025, from a macro perspective. While the increase rate of industrial water

demand in 1990-2010 (average in 20 years) was 5%, that in 2010-2025 (average in 15 years) will be 4%. The

increase rate will remain the same.

On the other hand, India has a shortage of water resources. Although the increase rate of industrial water demand

will remain at the current level in the future as described above, water shortage will be a greater problem in the

future due to a shortage of water resources. Therefore, the introduction and dissemination of reclaimed water is an

urgent issue.

b) Waste (sludge) reduction

i. Current conditions of sludge at the project sites.

3-4

Sludge generated in the treatment at the CETP is transferred to TSDF and disposed of. When the CETP is

constructed, it is necessary to choose beforehand the TSDF to which the sludge would be transferred.

Table 3-2-3 Generated amount of sludge and treatment cost

3-2-3 Item

(Unit)

CETP

Roha Ranjangaon Kurkumbh

Sludge treatment entrustment unit price

（INR/t-sludge）････(A)

2,500 No

entrustment

1,750

Generated amount of sludge (t-

sludge/y) ････(B)

180 100 72

Sludge entrustment fees (million

INR/y）････(A)×(B)

0.45 0 0.13

Source: Created by Study Team

All CETPs generated from tens of tons to a hundred tons of waste (sludge) a year. This is about a half to one-fifth

of the amount generated at treatment plants of similar capacity (several MLDs) in Japan, as we previously

expected.

This could possibly be due to the fact that the CETPs in Roha deploy anaerobic microorganisms in the

pre-treatment process before treating effluent with aerobic microorganisms. A possible explanation is that most

organic elements are broken down to carbon dioxide during the initial anaerobic treatment before released from

the system, which reduces the organic load on the aerobic treatment. As a result, there is less sludge. Meanwhile,

the CETPs in Ranjangaon and Kurkumbh dry the sludge under the sun to significantly reduce its volume, keeping

the sludge generation to a minimum. The CETP in Ranjangaon, in particular, utilizes its vast land area for natural

desiccation and storage of sludge, and therefore it has never used TSDF for sludge treatment.

The sludge treatment entrustment fees paid to TSDF are 1,750-2,500 INR/t. Nevertheless, due to the small amount

of sludge generated, the annual cost is approximately INR450,000 even in Roha, where the entrustment fees are

the highest. There are also CETPs who do not incur treatment cost without needing to transfer sludge to TSDF, as

seen in the case of Ranjangaon.

We gave a presentation of solutions suggested by the research team to CETP and conducted interviews based on

the above results. However, according to the local staff’s responses, sludge treatment entrustment fees were not an

excessive burden to their business.

3-5

ii. Policy trends

The policy trends in waste (sludge) discharge are described in Chapter 1 (2), 4) Waste treatment.

However, there is no categorization of wastes in India. Therefore, treatment facilities managed by

the local government are responsible for treatment sludge generated at the CETP.

However, if it is defined as hazardous waste, the party who discharges the waste is responsible

for its treatment. Therefore, CETP are more aware of prevention and measures against

contamination of hazardous substances (i.e., heavy metal) than reduction of generated amount of

sludge.

iii. Future forecast

In Japan, we have regulations pertaining to contamination of heavy metals in discharged sludge

(delivery to contractors) for the purposes of reuse of sludge as fertilizer or construction materials,

in particular. In China, quantitative regulations pertaining to landfill disposal of sludge are under

review to take measures against river contamination and foul odor due to leachate discharged

from the landfill.

Based on such cases in other countries, regulations pertaining to quantitative restrictions

(reduction of discharge amount), detoxification, and reuse of sludge may be imposed in India in

the future. However, a large cost will arise to comply with any such regulations. Therefore, the

introduction of such regulations is highly likely to be postponed from a perspective of trade-off

with economic development.

From this fieldwork, it was found that the demand for waste (sludge) reduction has a lower

priority than demands for recycled water and energy efficiency, as we describe it below. One of

the reasons for this is that the amount of sludge produced is small enough to be negligent to

CETP operations despite the treatment entrustment fee of INR1,750-2,500/t. Therefore, waste

(sludge) reduction will be excluded from commercialization items this time. However, we

suggest that the timing for introducing technologies to reduce waste (sludge) should be discussed

in correspondence with the progress in legal/regulatory enforcement regarding sludge treatment

and recycling.

c) Energy saving

i. Changes in energy demand

As energy consumption is on the increase with a rapid development of the economy, India is now

the 5th highest energy consumer in the world. However, its energy supply capacity does not keep

up with its energy demand, with 9.1% shortage of annual supply and 8.8% shortage at peak time

as of the end of March 2012.

3-6

Maharashtra has a chronic power shortage, with 16.7% shortage of annual supply and

22.1% shortage at peak time as of the end of March 2012.

ii. Policy trends

After the Energy Saving Act was enacted in 2001 in India, the Bureau of Energy Efficiency was

established in the Indian Ministry of Power. Business operators have been required to take

energy-saving measures. Specified business operators have been required to conduct an energy

audit since 2007.

The “Perform, Achieve, and Trade (PAT)” scheme began in April 2011 as part of the targets for

energy efficiency improvement. This is an energy-saving achievement certification system based

on energy intensity and is applied to more than 47,700 business operators in 9 industrial sectors.

Under the PAT scheme, energy-saving certifications (ES-Certs) are issued based on reduction of

energy usage (ton of oil equivalent). Its feature is that business operators who achieve the

energy-saving targets can trade with those who could not achieve such targets.

iii. Demand at the project sites

The results of the interview in Roha show the annual energy consumption was INR26.5 million

at the CETP in Roha.

On the other hand, pumps and blowers, which are the main power consumption loads, account

for approx. 40% of the total power consumption in the whole CETP (calculated based on the

domestic performance).

We have visited each CETP and conducted a check on current conditions of machinery and

equipment this time. We found that energy-saving equipment, such as an inverter, was not

installed in pumps and blowers.

If inverters are installed in pumps and blowers, approx. 20% of energy saving can be achieved

(based on cases in Japan and other countries). It is estimated that INR2.1 million/y of

energy-saving efficiency in Roha (approx. 8% of energy consumption at CETP) will be attained.

Therefore, such demand can be high.

Also, ETPs are smaller than CETP in an operational scale, requiring less electricity. Therefore,

savings from reducing energy consumption for an individual ETP is not as great as that for CETP.

Nevertheless, the energy reducing efficiency of an individual ETP is as great as that of CETP.

Therefore, the impact gained from the energy saving is as great for ETPs as it is for CETP. It thus

transpired that there was a high demand for introduction of energy-efficient systems.

Moreover, although energy-saving effects on each ETP are very small compared to those on the

3-7

CETP, energy-saving effects across Roha can be enormous, considering most of ETP in industrial

park implement energy saving.

iv. Future forecast

The energy-saving policies initiated by the central government, as represented by the PAT

scheme, will continue to be promoted in India, where energy supply shortage is predicted with

economic development. Therefore, it is suggested the demand for the introduction of

energy-saving technologies will continue to increase.

This project aims to introduce energy-saving technologies to target CETP in industrial park.

Similar technologies can be introduced to ETP in industrial park based on this project as the first

case.

In particular, we will first introduce such technologies to large-scale ETP. Then we will introduce

them to small-scale ETP while presenting examples of investment vs. effects of such

introduction.

2) Understanding and analysis of problems that are required for review/decision on the project contents

a) Selection of project sites

Selection requirements for deciding on project sites were established as follows. They are listed in order

of importance, taking account of SPV composition and demand in India. Reclaimed water is given more

importance than energy saving for site selection in terms of demand in India and SPV income amount.

Requirement (1) The amount of solids contained in final effluent discharged from CETP is very small.

[Reclaimed water]

� The first treatment (MF/UF membrane filtration) removes suspended substances

from the final effluent. Then the second treatment (RO membrane filtration)

produces reclaimed water. If the final effluent contains a large amount of solids,

larger equipment for the first treatment is required and, as a result, EPC cost will

increase. In addition, as exchange of MF/UF membrane and cleansing are required

more often, the running cost will increase. Then the increase of EPC cost and the

running cost will result in the increase of reclaimed water cost. Therefore, it is

preferred that the final effluent contains a small amount of solids.

Requirement (2) The amount of the final effluent discharged from the CETP is 5-10 MLD

[Reclaimed water]

� Industrial water supply amount at most industrial park in India is 5-10 MLD

(MIDC comment). Therefore, this amount is preferred, considering further

horizontal development of sites that discharge final effluent amount required to

3-8

produce 5 MLD of industrial water supply. Specifically, as reclaimed water

production rate is 50%, 10 MLD or more of final effluent is appropriate.

Requirement (3) Power purchase unit price is relatively high [Energy saving]

� Sites where power charges are relatively high have more cost reduction effects

through energy saving. Therefore, it is easier for companies (ETP) to evoke the

motivation of introducing energy saving.

Requirement (4) The site has many resident companies. [Energy saving]

� The size of the energy-saving market is bigger at sites with many resident

companies that are target customers.

The following Table 3-2-4 shows the results of research at each site – Roha, Ranjangaon, and Kurkumbh

– based on the requirements described above.

Table 3-2-4 Research results at target CETP

Selection requirement (Requirement numbers

are shown)

CETP

Roha Ranjangaon Kurkumbh

(1) The amount of solids contained in final

effluent discharged from the CETP

good Many solids good

(2) The amount of final effluent discharged

from the CETP [performance value]

(MLD)

10 3 1

(3) Power purchase unit price (INR/kWh) 9 unknown 7

(4) The number of resident companies 38 129 39

[Reference] Average final effluent amount per

company (MLD/company)…(2)/(4) 0.26 0.02 0.03

Source: Created by Study Team

[The amount of solids contained in final effluent discharged from the CETP]

• Ranjangaon

When CETP flow was checked, it was found that a final settling tank for removal of sludge and solids

contained in treated water was not installed. Therefore, it was decided that this site is not suitable for

introduction of reclaimed water, as the final effluent contains insoluble solids.

• Roha, Kurkumbh

A final settling tank was installed and the final effluent contained few solids. Therefore, it was decided

that this site is suitable for introduction of reclaimed water.

3-9

[The amount of final effluent discharged from CETP]

• Ranjangaon

The treatment capacity (planned value) was 12 MLD. However, the fieldwork found that current received

water amount was much smaller than the designed value and the final effluent amount was as small as 1

MLD. Therefore, it was decided that this site is not suitable for introduction of reclaimed water in terms

of the final effluent amount.

• Kurkumbh

The treatment capacity (planned value) was 1 MLD. As this was too small, it was decided that this site is

not suitable for introduction of reclaimed water.

• Roha

The treatment capacity (planned value) was 12 MLD and the performance value was 10 MLD (designed

value). As this suits the required size, it was decided that this site is suitable for introduction of reclaimed

water.

[Power purchase unit price]

As shown in Table 3-2-4, it was found that the power purchase unit price in Roha was high.

References Power purchase unit price in Maharashtra: INR7-8/kWh

[The number of resident companies]

When only the number of resident companies was compared, it was the largest in Ranjangaon.

However, when the average final effluent amount per company was calculated (The amount of final

effluent (2) ÷ the number of resident company (4)), the amount in Roha was 10 times that in other CETP.

The number of resident companies in Roha was fewer than that in Ranjangaon, but the water purchase

amount in Roha was big. Therefore, it is suggested that the size of each ETP and power consumption in

Roha are larger than other sites. The power reduction amount by introduction of energy saving is

estimated to be large as well.

As a result, it was decided that Roha is suitable as an energy-saving applied site in terms of the power

purchase unit price and the power reduction amount described above.

In fact, resident companies in Roha include major companies such as PepsiCo India Holdings. We found

that they are very interested in the introduction of energy-saving technologies.

Therefore, it was decided that Roha is most suitable as a project target site.

3-10

The next page describes the analysis and measures for the problems in the project implemented in Roha.

Technical solutions are described in 3).

b) Understanding and analysis of the problems with reclaimed water supply methods

i. Review of reclaimed water supply methods

We reviewed supply methods of reclaimed water produced by reclaimed water sales business

under SPV. We conducted interviews and discussion regarding supply methods using a pipeline

and water trucks.

ii. Reclaimed water supply methods using water trucks

As a result of the interview with MIDC, it was found that a reclaimed water supply method using

water trucks is not likely to be approved due to a risk of accidents during transportation (i.e.,

supply suspension, time delay, and complaints from residents living in the area due to water leak

during transportation). Therefore, we adopted the reclaimed water supply method using a

pipeline as shown in Figure 3-2-1.

Figure 3-2-1 Reclaimed water supply method

Source: Created by Study Team

iii. Installation of reclaimed water supply pipeline

There was a comment that MIDC is responsible for installation of a pipeline and its maintenance

cost if a pipeline is used for reclaimed water supply. However, considering the risk that MIDC

will not be able to take this responsibility, the responsibility taken inside or outside of SPV

business will be discussed in Chapter 5.

c) Understanding and analysis of the problems regarding environmental/social considerations

Understanding and analysis of economic problems will be discussed in Chapter 5 and understanding and

analysis of environmental/social problems will be discussed in Chapter 4.

3-11

3) Review of technical methods

a) Understanding and analysis of the problems with reclaimed water

As a result of the interview with IA, we confirmed that the water purchase unit price at the industrial

complex in Roha was INR32/m3. We also ascertained their willingness to purchase recycled water if the

unit price were a half of the current price (i.e., INR16/m3).

The price level was slightly lower than the price range we had initially expected. Therefore, it is

necessary to lower the price for recycled water from the initially-expected level.

The methods to reduce “RO membrane cost,” “EPC cost,” and “O & M cost,” that are significantly

affected by the price of recycled water are listed below:

i. Reduction of RO membrane cost

Japanese and other foreign companies have been working on reclaimed water in various ways in

India. However, as the price of reclaimed water is not high enough to raise profits for companies,

the use of reclaimed water has not been disseminated. One of the factors is the high price of RO

membranes. It increases both the initial cost (at the time of installation of equipment) and the

running cost (at the time of membrane exchange).

On the other hand, the research team (Fuji Electric) has technologies to hold down the initial cost

and the running cost by the optimized design of the membrane system using low-cost membranes,

the optimized operation pattern, and reduced frequency of membrane exchange through

optimized membrane cleansing. As a result, the cost can be reduced.

ii. Reduction of EPC cost

We discussed cost reduction through localization of EPC in line with the reduction described

above. We explained about the technologies the research team (Fuji Electric) owns to KR and

Hydroair and then obtained a quotation of EPC.

As a result, it was found Hydroair has skill and experience for reclaimed water EPC and is able

to implement EPC. They also commented that they would continue to discuss EPC cost down

toward the implementation of this project.

iii. Reduction of O & M

In the reclaimed water sale business, the running cost will be reduced by carrying out the O&M

by the existing staff operating O & M at current CETP without employing new O & M staff.

This is a comment given by aforementioned Hydroair when we explained about the technologies.

3-12

b) Understanding and analysis of the problems with energy-saving

The energy-saving technologies used for resident companies (ETP) include an introduction of inverters

for pumps and blowers, which are the main power consumption loads at the sites. As the result of the

interviews with IA and companies, it was found the payback period would be 3 years if the

energy-technology were introduced to resident companies.

Therefore, we need to work on the reduction of the initial cost at the time of the installation of inverters.

i. Reduction of the inverter cost

We have enough experience in receiving orders of similar projects with this technology in Japan

and also low-cost markets including China, India, Thailand and Indonesia..

This is because we can provide products of Japanese quality with a local price by localizing the

production of inverters.

It was found that low-cost products manufactured in third countries are accepted in India as the

result of the interview with FEI, KR, and Hydroair. Therefore, the reduction of inverter cost has

already been conducted in India.

ii. Reduction of engineering and local setup cost

Energy-saving inverters require engineering and setup of electric equipment at existing ETP. This

cost can be reduced by entrusting engineering and setup to local engineering companies that own

technologies in this field. We explained about the technologies the research team (Fuji Electric)

owns to KR and Hydroair and then obtained a quotation of EPC.

In addition, FEI introduced some local engineering companies associated with FEI to us. It is

possible to reduce engineering and local setup cost by working with these companies based on

the skills and experience in this field.

4) Subsidy Scheme for CETP

This project presupposes a launch of SPV with local operators as well as utilization of subsidy for CETP

projects provided by the central government of India. There are a number of requirements to meet before

obtaining this subsidy, which are described below.

3-13

a) Outline of the Subsidy Scheme for CETP by the Indian Government:

The Ministry of Environment & Forests of India introduced the Subsidy Scheme of CETP in 1991. In

view of the fact that most CETP-users are small-scale plants whose economic and technological

capacities are limited, the scheme aims to achieve effective and efficient effluent treatment by backing

the installation of CETP, promoted by the central and state governments.

(1) Prerequisites for subsidy applications

� Construction of a new CETP in an industrial complex or for a group of small plants.

� In case of renovating/modernizing an existing CETP built with subsidy, the facility must be

operating for seven years or longer.

� The project must be executed using SPV established in advance.

(2) The scope of subsidy application

� Facility and plant equipment for primary, secondary and tertiary treatments.

� Laboratory facilities within CETP equipped with standard instruments.

� Installation of Zero liquid discharge (ZLD) technology and relevant technologies.

(3) Maximum grant level

� The project costs are born by the central government (50%), state government (25%), and

project operator (25%).

� The burden ratio of the central government’s subsidy is 50%, and it is restricted to up to

INR15 million per CETP or INR1.5 million/MLD.

*It is capped at INR200 million per CETP or INR45 million per MLD if they install

ZLD-enabled equipment/technology.

� Project operator must procure at least 40% of its share of contribution, while bank loans may

be arranged for the remaining 60%.

b) Application process

Applications for the subsidy undergo numbers of assessments and evaluations by the central/state

governments, technological specialist boards, national bank, and other relevant parties before approved

by the central government.

The application process is illustrated in the following.

3-14

Figure 3-2-2 Subsidy application flow chart

Source: Created by Study Team

The project operator prepares DPR for the CETP using local consultants. Also, SPV for the CETP management

must be established and registered before the application is submitted, and the time necessary for this must be

included in planning. There are many and diverse institutions involved in the application process, both on

applicant and assessment sides. Therefore, time management is very important throughout the period from the

commencement of operation to the subsidy approval.

Application Preparation

【Applicant】

•Project operator establishes and registers a SPV•It prepares project proposal and have DPR prepared by consultants•National bank conducts financial audit (loan guaranty)

Subsidy Application

【Applicant】

•Submission of the project proposal and DPR

Technological Assessment

【State Government(MIDC/MPCB)】

•Technological assessment is carried out by NEERI or IIT designated by MIDC•Project proposal and DPR approved by NEERI/IIT are forwarded to MPCB•MPCB sends the application up to MoEF

Technological Assessment 【MoEF】

•The project proposal and DPR evaluated at the state level are assessed by a technology specialist board summoned by MoEF

•National bank conducts an audit

Approval

•Assessments by the technology specialist board and national bank are followed by the ministry’s verdict (approved/dismissed)

3-15

(3) Overview of the project plan

1) The basic policy of decision on the project contents

The business form of this project is SPV. In this SPV business, reclaimed water and energy-saving

systems used at ETP are sold to customers–companies in industrial park. Energy saving is carried out at

the CETP by reducing the running cost of SPV and increasing their profitability. Energy-saving

technologies are shared by the CETP and the ETP.

Business form: SPV

SPV customers: resident companies in industrial park

A source of income of SPV (products): reclaimed water/energy-saving system

Increased profits of SPV (reduction of the running cost): energy saving at CETP

The overview of this project is shown in Figure 3-3-1

Figure 3-3-1 Overview of the project

Source: Created by Study Team

The following (1), (2) are the basic policies in decision on the project contents shown in Figure 3-3-1.

(1) Coordination with the implementation policies of the state and organizations in the target country

[Reclaimed water]

Maharashtra has its own water policies and refers to the use of reclaimed water. In addition, MIDC

considers making the use of reclaimed water compulsory at industrial park in the state where a rapid

increase of water demand in the future can be predicted. The state provides subsidies to CETP for the

installation of equipment to achieve zero discharge of water. It was also found that the work on reclaimed

water is applied to zero liquid discharge.

3-16

Therefore, the work on reclaimed water in this project complies with water policies of Maharashtra, which

is a target area and MIDC policies.

[Energy saving in effluent treatment]

Maharashtra has 16.7% shortage of chronic power as of the end of March 2012. As a result, the state has set

up a program to promote industrial energy saving.

Therefore, the work on energy saving at CETP and ETP in this project complies with the state policies.

(2) Effects on the target country

A shortage of important infrastructure such as water and electricity in industrial park is a serious issue in

the areas including Maharashtra in India, which is keen to attract companies. Meanwhile, the work on

reclaimed water and energy saving contributes to solutions of the problem with the shortage of water

resources and electricity. This also contributes to industrial agglomerations and economic development in

Maharashtra, India.

2) Concept design and specification of applied equipment

Overview of business

• Reclaimed water sales to resident companies

• Energy-system sales to ETP of resident companies

a) Concept design

i. Reclaimed water sales business

Reclaimed water is sold to resident companies in industrial park. Resident companies pay the cost to SPV.

Reclaimed water is produced from final effluent discharged from existing CETP as industrial water at

reclaimed water plants, in which SPV would make a new investment.

ii. Energy-saving system sales business

The energy-saving system is sold to resident companies in industrial park. Resident companies pay the

cost to SPV.

SPV conducts engineering, procurement, and local setup.

b) Concept chart

The concept of this business is shown in Figure 3-3-2

3-17

Figure 3-3-2 Business concept

Source: Created by Study Team

c) Reclaimed water

i. Process at reclaimed water plant

Figure 3-3-3 shows the overview of the process at a reclaimed water plant.

Suspended solids are removed from the final effluent discharged from the CETP at the first

treatment (UF/MF membrane). Suspended solids affect the subsequent second treatment (RO

membrane).

At the second treatment, the final effluent is treated using RO membrane to the level where it can

be used as industrial water and is stored in a treated water tank. Reclaimed water stored in a

treated water tank is supplied to each resident company through water distribution pipes.

3-18

Figure 3-3-3 Process flow at a reclaimed water plant

Source: Created by Study Team

ii. Specification of reclaimed water plant

Table 3-3-1 Specification of reclaimed water plant

Incoming water amount 10,000 m3/d

Incoming

water

quality

BOD 36-70 mg/L

COD 198-240 mg/L

SS 49-77 mg/L

pH 7.3-7.7

Supply water amount 5,000 m3/d

Supply

water

quality

*1

Conductivity 30 mS/m or less

Chloride ion 50 mg/L or less

Sulphate ion 50 mg/L or less

Alkalinity (acid consumption) 50 mg-CaCo3/L or less

Total hardness 70 mg-CaCo3/L or less

Calcium hardness 50 mg-CaCo3/L or less

Ion-containing silica 50 mg-SiO2/L

pH 6.0-8.0

*1: Supply water quality standards are based on the water quality guidelines for refrigeration air conditioners in

Japan (Source: Japan refrigeration air conditioning industry association)

Source: Created by Study Team

3-19

d) Energy-saving system

i. Examples of energy-saving structure

The following figures show the system structure of equipment (blower, pump) that is an

energy-saving target, before installation of energy-saving system (Figure 3-3-4) and after

installation of energy-saving system (Figure 3-3-5).

Figure 3-3-4 Before installation of energy-saving system

Source: Created by Study Team

Figure 3-3-5 After installation of energy-saving system

Source: Created by Study Team

This energy-saving system sensors treatment status at ETP adequately maintains treatment amount and

treated water quality, and controls a pump and a blower, which are the main power consumption loads to

3-20

conduct energy saving. Although currently the target equipment is operated manually by an operator, the

operator’s work will be easier after this automated system is installed.

ii. Examples of calculation of effects of energy-saving system at resident company’s ETP

We present an effect simulation of a case for installing energy-saving system for blower and a

pump as discussed above. For the purpose of calculation, ETP is considered to produce 260 m3/d

of effluent, based on an average daily disposal of effluent by a single corporation at the Roha

industrial complex.

(1) Inverter control of blower

We calculated energy-saving effects when an inverter attached to a blower at ETP control the

required water amount, which is consistent with the required water quality.

The specification and operation requirements for the blower motor used for the calculation

are shown below.

• Calculation requirements

• C

a

l

C

• Calculation results

(2) Inverter control of pump

We calculated energy-saving effects when an inverter attached to a water pump at ETP control

adequate pumping.

The specification and operation requirements for the pump used for the calculation are shown

below.

Motor Rated power: 7kW x 3

Operation

requirements

Always operate 2 motors , Operate with 80% of rated power with an

inverter

Operation time Operation time/y: 8,760 hours (operation days: 365)

Power charge INR9/kWh

Before installation of an inverter 122,640 kW/y

After installation of an inverter 98,112 kW/y

Reduced amount of power consumption 24,528 kW/y

Effects of power consumption reduction INR220,752/y

CO2 reduction effects 24 t/y

3-21

• Calculation requirements

a

• Calculation results

iii. Energy-saving effects across Roha

Table 3-3-2 shows the annual effects of reducing power consumption and CO2 emissions based

on a scenario where the energy-saving system described above is installed in seven out of 38

companies (20%) at the target site of Roha.

The rate of 20% is based on the rate of inverter-installed facilities based, due to the lack of access

to relevant data in India, on the rate of installing inverter-controlled blowers in Japan (Project of

promoting the deployment of energy-efficeint facilities FY 2009).

Table3-3-2 Energy-saving effects across Roha

Source: Created by Study Team

e) Specification of applied equipment

The specification of equipment is shown in Table 3-3-3.

O & M and finance are also described.

Motor Rated power: 1.5 kW x 2

Operation requirements Always operate 1 motors , Operate with 70% of rated

power with an inverter

Operation time Operation time/y 4,380 hours (operation days: 365)

Power charge INR9/kWh

Before installation of an inverter 6,570 kW/y

After installation of an inverter 4,599 kW/y

Reduced amount of power consumption 1,971 kW/y

Effects of power consumption reduction INR17,739/y

CO2 reduction effects 1.9 t/y

１ETP Reduced amount of power

consumption

26,499 kW/y

Effects of power consumption

reduction

INR238,491/y

CO2 reduction effects 26 t/y

Across

Roha

Reduced amount of power

consumption

185,493 kW/y

CO2 reduction effects 183 t/y

3-22

Table 3-3-3 Specification of applied equipment

Source: Created by Study Team

Equipment Specification Supplier

Facility Reclaimed

water

1st treatment equipment Pre-treatment equipment for production of reclaimed water (Removal of suspended solids) It consists of backwashing equipment for washing MF/UF membranes regularly

India

MF/UF membrane Japan

2nd treatment equipment Main filtration equipment for production of reclaimed water It consists of cleansing equipment and RO membrane for regular cleansing to produce reclaimed water

India

RO membrane Japan

Treated water tank Water tank to store reclaimed water reproduced as industrial water by RO membrane filtration equipment

India

Water distribution pipe Under control of MIDC －

Energy-saving Sensor Sensor treatment status at ETP India

Inverter Motor specification of pump and blower Japan

PLC Maintain the treatment amount and treated water quality and control a pump and a blower, which are main power consumption loads based on the program

India

Engineering Design applied to existing ETP and procurement of required equipment

Japan India

Other O&M Maintenance/operation of

reclaimed water plant

Shared with existing CETP India

Finance Investment 40% of all IA/Japanese companies Japan India

Loan 35% of all Japanese/local banks Japan India

Subsidy 25% of all (MIDC,MPCB) India

3-23

3) Suggested project contents

Table 3-3-4 shows the business budget scale of this proposed project including the budget for reclaimed

water supply and energy-saving system.

Table 3-3-4 Business budget scale of the proposed project

Source: Created by Study Team

4) Problems with the introduction of the proposed technologies/system and solutions

a) No operation results of operating plant

i. Issues

There have been a number of cases of introduction of energy-saving systems to ETP in third

countries as well as Japan. Therefore, it is suggested that this project could give similar effects to

those in the past.

Although validation on reclaimed water at plants within the research team (Fuji Electric) has been completed,

there are no cases of a continuous run by CETP effluent in India. There will be issues in clarifying problems and

solutions in assuring the quality of reclaimed water (i.e., water quality, water amount).

ii. Solutions

We will conduct continuous validation tests on reclaimed water produced from CETP effluent in

Roha with cooperation with IA, identify the problems, and take measures against the problems to

assure the quality of reclaimed water.

Business scope Sales of reclaimed water and energy-saving systems to resident

companies in Industrial park in Roha

Business form SPV

Funding scale ¥252.340,000

Subsidy ¥63,090,000

Investment ¥100.940,000

Loan ¥88,320,000

Business cost breakdown ¥252,340,000

Construction/installation of

facilities

¥252.340,000

Business operation period 20 years

Gross sales ¥1,784,500,000

Reclaimed water sales ¥1,776,140,000

Energy-saving system sales ¥8,360,000

3-24

b) Promotion of introduction to customers (companies)

i. Issues

As reclaimed water and energy-saving technologies are relatively new technologies in

Maharashtra, India where Roha is located, resident companies (customers) that are the target of

the introduction do not have enough understanding about the reliability and economic advantages

of these technologies. Therefore, there will be issues in securing steady sales at an early stage.

ii. Solutions

It is required to build up performance records and present successful cases in order to promote

the introduction and secure steady sales. We will choose one company in IA as the first company

to which we will introduce these technologies.

As IA is a customer for the energy-saving introduction as well as a stakeholder of SPV

(beneficiary in this business), there is a high incentive in securing income for SPV through

steady sales at an early stage. Therefore, we will use these technologies as a model customer and

report the effects to the companies across Roha to promote these technologies toward companies.

c) Compliance with regulations and obtaining certification

i. Issues

We are checking with assessors including NEERI and IIT, which are later described regarding

conflicts with regulations and requirements of certification through the presentation and

interviews by the research team.. There will be issues in obtaining assurance of conflicts with

regulations and requirements of certification.

ii. Solutions

We will improve accuracy of information of regulations and certification through the

presentation and interviews with experts at the assessment examination. We will deal with each

regulations and certification individually.

Chapter 4 Evaluation of Environmental and Social Impacts

4-1

(1) Present State Analysis of Environmental and Social Impacts

1) Present State Analysis of CETP

As of 2010, there are 26 Common Effluent Treatment Plants (CETPs) in the industrial parks in the state of

Maharashtra. With their total treatment capacity reaching 209 MLD/d, these CETPs receive effluents generated

from as many as 7,431 factories and industrial plants with a wide range of sizes. The qualities of effluents treated

at many of CETPs, however, do not meet standards. Accordingly, the Maharashtra Pollution Control Board

(MPCB), which is a water quality management authority, and the Maharashtra Industrial Development

Corporation (MIDC), which is a competent authority for CETP, have intensively been instructing the CETP

operators to ensure proper treatment of effluents, while attempting to improve treated effluents quality by

expanding CETPs and increasing their treatment capacities.

Lately, MIDC is also considering making the reuse of industrial effluents mandatory. In February 2013, the CEO

of MIDC made clear through the media that it was willing to consider making it obligatory that plants generating

industrial effluents reuse effluent from their plants and/or use rainwater. That an organization responsible for

industrial development as well as the promotion of industrial park establishment made such a comment indicates

that the nation recognizes securing domestic and industrial water as a pressing need when water shortage is

getting serious in India.

2) Effluent Standards for CETP

The effluent standards for CETP are prescribed by states in accordance with the policies of the Central Pollution

Control Board (CPCB), and in the state of Maharashtra, MPCB is taking that responsibility. Each CETP is obliged

to report to MPCB the figures of major effluent quality parameters (such as pH, BOD, and COD). The collected

data is published and updated daily on the MPCB website (see the figure below).

4-2

Figure.4-1-1 CETP status on the MPCB website

Source: MPCB

Table.4-1-1 Inlet effluent quality standards for CETP

No. Parameter Concentration

(mg/L)

No. Parameter Concentration (mg/L)

1 pH 5.5-9.0 12 Zinc 1.0

2 Temperature 45 13 Arsenic 3.0

3 Oil and Grease 20 14 Mercury 0.01

4 Phenolic 5.0 15 Cadmium 1.0

5 Ammoniacal 50 16 Selenium 0.05

6 Cyanide 2.0 17 Fluoride 15

7 Tervalent chromium 2.0 18 Boron 2.0

8 hexavalent chromium 2.0 19 Radioactive N/A

9 Copper 3.0 20 Alpha 10-7

10 Lead 1.0 21 Beta 10-8

11 Nickel 3.0 - - -

Source: Central Pollution Control Board (CPCB)

4-3

Table.4-1-2 Outlet effluent quality standards for CETP

No. Parameter Into inland surface waters On land for

Irrigation

Into marine coastal areas

1 pH 5.5-9.0 5.5-9.0 5.5-9.0

2 BOD 30 100 100

3 Oil 10 10 20

4 Temperature

Shall not exceed 40°C in any section of

the stream within 15 m downstream

from the effluent outlet

- 45°C at the point of

discharge.

5 Suspended Solids 100 200

(a) For process waste

water-100

(b) For cooling water

effluent 10% above total

suspended matter of

effluent cooling water

6 Dissolved Solids

(inorganic) 2,100 2,100 -

7 Total residue

chlorine 1 - 1

8 Ammoniacal

nitrogen 50 - 50

9 Total Kjeldahl

nitrogen 100 - 100

10 Chemical 250 - 250

11 Arsenic 0.2 0.2 0.2

12 Mercury 0.01 - 0.01

13 Lead 0.1 - 1

14 Cadmium 1 - 2

15 Total chromium 2 2

16 Copper 3 - 3

17 Zinc 5 - 15

18 Selenium 0.05 - 0.05

19 Nickel 3 - 5

20 Boron 2 2 -

21 Percent 60 -

22 Cyanide 0.2 0.2 0.2

23 Chloride 1,000 600 -

24 Fluoride 2 - 15

25 Sulphate 1,000 -

4-4

No. Parameter Into inland surface waters On land for

Irrigation

Into marine coastal areas

26 Sulphide 2.8 - 5

27 Pesticides Absent Absent Absent

28 Phenolic 10 - 5

Source: Central Pollution Control Board (CPCB)

3) The State of Effluent Quality of Potential Sites

As far as we could find out through the investigation, even published data shows many CETPs do not meet the

prescribed effluent quality standards. To deal with such a situation, MPCB and MIDC made recommendations for

improvement to CETPs while urging them to meet effluent quality standards as stated above. For some cases,

MPCB has even filed suits with the court against CETPs that keep discharging effluents not meeting the

prescribed standards.

On the other hand, some CETP operators and resident companies in the industrial parks, especially small plants

who are CETP main users, complain that they can’t improve functionality and efficiency of plants in a day due to

economic burden and other reasons.

Issues surrounding effluent treatment are piling up in India, and obviously, it takes time to solve if issues are

serious. In particular, small plants–more than 80% of resident companies in the industrial parks – have little sense

of obligation for proper effluent treatment because of economic and technological limitations, and that is

contributing to poor performance of effluent processing. In the case of large plants, they are also required to treat

effluents appropriately according to the prescribed effluent quality standards since they have significant impact on

the surrounding environment with their large volume of outlet effluents.

The table below shows three effluent quality parameters for Ranjangaon, Kurkumbh, and Roha that are the target

sites of this project. The values are average for the period from October to November in 2013. According to the

table, though pH values were within the standard, BOD for all CETPs were exceeding the maximum permissible

limit, which means no CETP should release treated effluents into rivers (surface stream water). Only Kurkumbh

meets the standards in terms of COD.

4-5

Table.4-1-3 Effluent quality for CETPs of Potential sites in the state of Maharashtra

(average values for October 21, 2013 - November 25, 2013).

Water

Quality

Criteria

Water quality standards for

CETP

Ranjangaon Kurkumbh Roha

pH 5.5～9.0 8.34 8.09 7.82

BOD 30 (release in the river)

100 (for sprinkling)

209.67 74.33 150

COD 250 590.67 189.33 309.33

Source: MPCB “Water Quality Criteria”

Roha has a population over 400,000 and many industrial complexes of chemical plants. The target industrial park

in Roha accommodates 38 tenant companies on its 88.04ha site. Many of them are chemical processing plants

dealing with the preparation/processing of organic chemicals, dyes/pigments, food colorants, pharmaceuticals,

inorganic chemicals, etc.

The Roha industrial park is one of the fifteen MIDC-designated chemical industrial complexes among 224

industrial parks in the State. MIDC is promoting effluent treatment systems to be installed at these designated sites,

and pursuing further efficiency improvement while working with them. One of the MIDC’s current initiatives is

the CETP expansion plan. The plan aims to upgrade CETPs’ treatment capacity to meet an increasing demand due

to a growing number of immigrating corporations as well as the facility/equipment development of existing

resident corporations. They have already decided on building CETPs with 5MLD and 7.5 MLD capacity in the

next two years, increasing total capacity to 22.5 MLD.

4) Future Prospects

As described above, the state of Maharashtra, which is an area of industrial agglomerations, is advanced in its

policies regarding the usage of water in the industrial sector, and officially acknowledged that it would consider

making the reuse of effluent obligatory before the central government. On the other hand, the reality is far from

what the state government aspires to, obviously requiring constant efforts to be made on site. It is highly

improbable that efficiency of the treatment process will improve or the use of recycled water will increase at the

initiative of the CETPs. Therefore, an impetus of a model project such as this one will probably be called upon to

make progress as the state government envisages, such as enhancing treatment processes at CETPs and promoting

a wide deployment of recycled water.

4-6

(2) Environmental Improvement Effects through the Project

1) Recycling of effluents generated at CETPs

a) Conservation of water source quality

By regenerating effluents from CETPs to a level usable as industrial water, it is possible to reduce effluents

discharged from CETPs by 50%. Accordingly, water-contaminating substances (BOD, COD, SS, nitrogen, and

phosphorus) can be decreased by 50%.

b) Securing water source

By securing the water source, the quantity of water intake for industrial water can be reduced, which enables

controlling over-pumping of surface and groundwater.

2) Reducing power consumption of CETPs

a) Reduction of power consumption

Installing an energy-saving device such as an inverter into pumps and blowers, which are major energy consuming

equipment of CETPs, can reduce power consumption by 20%. If applying this to CETPs and ETPs in Roha,

power consumption will be decreased by more than 602 MWh/y for the entire industrial park. This is equivalent to

594 t/y of CO2 reduction.

[Effects calculation condition]

Power generation unit in India: 0.986 kg-CO2/kWh

4-7

(3) Environmental and Social Impacts of the Project

1) Clarifying items for the environmental and social considerations

The assessment of possible environmental and social impacts of the project was conducted by dividing into 2

phases: construction and operation. The assessment items were decided based on “Appendix 4. Screening Format”

of “Guidelines for Environmental and Social Considerations” and “Environmental Checklists” from the Japan

International Cooperation Agency (JICA) as well as “Japan Bank for International Cooperation (JBIC) Guidelines

for Confirmation of Environmental and Social Considerations” and “Environmental Checklists” from JBIC.

With the environmental and social impact assessment, positive (+) and negative (-) impacts of the project were

evaluated using 4 categories of (A) expected to provide serious impacts or to improve efficiency significantly, (B)

expected to provide slight impacts or to improve efficiency slightly, (C) impacts unknown, and (N) No impact.

The result of the assessment is shown in Table 4-3-1.

Table 4-3-1 The Result of the environmental and social impact assessment

Source: Created by Study Team

Reasoning for the above evaluation results in Table 4-3-1 is as follows:

Assessment Items Construction Phase Operation Phase

Anti-pollution

measures

Air quality -B N

Water quality N +A

Waste -B N

Soil contamination N N

Noise and vibration -B N

Subsidence N N

Odor N N

Sediment N +A

Natural

environment

Protected areas N N

Ecosystem N N

Hydrology N +A

Topography and geology N N

Social environment

Resettlement N N

Living and livelihood N N

Heritage N N

Landscape N N

Ethnic minorities and

indigenous peoples

N N

4-8

a) Anti-pollution measures

Table 4-3-2 Reasons for anti-pollution measures assessment

Assessment Items Construction Phase Operation Phase

Air quality

-B Although the movement of vehicles delivering construction materials and equipment can emit gas and dust, they will not have significant impacts considering the size of construction and the construction site’s being limited in the industrial park.

N Recycled water desalination plants do not generate gas or dust that can cause air contamination.

Water quality

N Some muddy water may be caused during construction work, but no emission of chemical substances is expected.

+A Because of the improved water quality released from CETPs, it is anticipated that the water pollutant will be decreased by 50%.

Waste

-B Although industrial wastes (e.g., scrap material) will be produced during construction work, its impacts will be limited because the construction is small-scale.

N Recycled water desalination plants do not generate any wastes.

Soil contamination

N No such construction work that causes soil contamination is expected.

N Recycled water desalination plants will not generate substances that can cause soil contamination.

Noise and vibration

-B Although the movement of vehicles delivering construction materials and equipment can cause noises and vibrations, its impact will be small because the construction site is limited in the industrial park.

N Although some noises and vibrations will be caused by operating pumps, no impact is expected because the operation is limited in the industrial park.

Subsidence

N No impact is expected, as no heavy goods will be produced during construction work.

N Recycled water desalination plants do not include any heavy devices that may cause subsidence.

Odor N No odor will be caused during construction work.

N Recycled water desalination plants do not cause any odor.

Sediment

N No release of hazardous substances into water is expected during construction work.

+A Because of the improved water quality released from CETPs, it is anticipated that the water pollutants will be decreased by 50%. Consequently, impacts on water bottom are expected to be reduced significantly.

Source: Created by Study Team

4-9

b) Natural environment

Table 4-3-3 Reasons for natural environment assessment

Source: Created by Study team

c) Social environment

Table 4-3-4 Reasons for social environment assessment

Assessment Items Construction Phase Operation Phase

Resettlement N As the planned construction site is located in the existing industrial park, no problem is anticipated to occur.

N As the planned construction site is located in the existing industrial park, no problem is anticipated to occur.

Living and livelihood

N As the planned construction site is located in the existing industrial park, no problem is anticipated to occur.

N As the planned construction site is located in the existing industrial park, no problem is anticipated to occur.

Heritage N As the planned construction site is located in the existing industrial park, no problem is anticipated to occur.

N As the planned construction site is located in the existing industrial park, no problem is anticipated to occur.

Landscape N As the planned construction site is located in the existing industrial park, no problem is anticipated to occur.

N As the planned construction site is located in the existing industrial park, no problem is anticipated to occur.

Ethnic minorities and indigenous peoples

N As the planned construction site is located in the existing industrial park, no problem is anticipated to occur.

N As the planned construction site is located in the existing industrial park, no problem is anticipated to occur.

Source: Created by Study Team

Assessment Items Construction Phase Operation Phase

Protected areas

N The planned construction site is located in the existing industrial park and outside protected areas such as natural parks.

N The planned construction site is located in the existing industrial park and outside protected areas such as natural parks.

Ecosystem

N As the planned construction site is located in the existing industrial park, no problem is anticipated to occur.

N As the planned construction site is located in the existing industrial park, no problem is anticipated to occur.

Hydrology

N No release of hazardous substances into water is expected during construction work.

+A Recycled water supply will decrease the quantity of water intake for industrial water, and that is expected to reduce over-pumping of surface and groundwater.

Topography and geology

N While construction work requires land preparation and creation, no problem is anticipated to occur, as the planned construction site is located in the existing industrial park.

N As the planned construction site is located in the existing industrial park, no problem is anticipated to occur.

4-10

This project may have impacts, even though slight, on the environment for some of the items. However, it is

highly feasible to limit such impacts to the smallest. Thus, no items are considered to have important impacts in

terms of environmental and social considerations at present.

Specific solutions for items that may have slight impacts are as follows.

� Air quality (construction phase)

Thorough instruction will be provided to stop idling of construction vehicles when waiting.

Some measures such as regular sprinkling of water will be taken to prevent dust from being scattered during the

dry season.

� Waste

Industrial waste generated during construction work and sedimentation produced by civil engineering work will

be treated in a manner that will not have impacts on surrounding areas in the industrial park, or will be treated in

compliance with the manual for industry waste disposal prepared by the state government to minimize the

impacts.

� Noise and vibration (construction phase)

Some measures will be taken to minimize noise and vibration; for example, the operation of construction vehicles

during nighttime will be prohibited, and iron plates will be laid on rough roads.

2) Comparison of the proposed project with other options that may have small environmental and social impacts

One of the water desalination facilities acceptable at the planned site for the project is a water purification facility.

Table 4-3-5 is the analysis of impacts of such a water purification facility in terms of environmental and social

considerations.

4-11

Table 4-3-5 Environmental and social impact assessment of water purification facility

Source: Created by Study Team

3) Results of consultation with implementing agencies

As a part of this project, exchanges of views and hearing with the following implementing agencies were

conducted.

a) MPCB

MPCB is an authority that implements a range of environmental legislation and authorization for preventing

environmental contamination.

Assessment Items Water Purification Facility

Assessment Comparison

Anti-pollution

measures

Air quality -B Negative impact will

increase

Water quality -B Negative impact will

increase

Waste -B Negative impact will

increase

Soil contamination N No change

Noise and vibration -B Negative impact will

increase

Subsidence N No change

Odor N No change

Sediment N No change

Natural

environment

Protected areas N No change

Ecosystem N No change

Hydrology -B Negative impact will

increase

Topography and geology N No change

Social

environment

Resettlement N No change

Living and livelihood N No change

Heritage N No change

Landscape N No change

Ethnic minorities and

indigenous peoples

N No change

4-12

Some of the important functions of MPCB are to plan programs and develop guidelines for the prevention of air

pollution, water quality control, and waste treatment in the state of Maharashtra, and to implement environmental

assessment based on the developed guidelines.

Its activities also include environmental monitoring, facility inspection and control, and education regarding

pollution control and clean and healthy environment.

Through exchanges of views and hearings, MPCB appears to have concluded that, as parameters of environmental

impacts defined in MPCB’s Environmental Impact Assessment (EIA) guidelines for CETP operators would

improve, this project would not cause any significant problems in terms of environmental and social impacts.

Major parameters for environmental impacts are as follows.

� Plant location (in the river, near beach, national park, etc.)

� Impacts on rivers, lakes, and soils

� Impacts on residents living in the vicinity of proposed plants

� Contents of treatment and management of effluents as well as the reuse of effluents

4-13

(4) Outline of the Environmental and Social Considerations related Law and Regulations in India and Necessary Measures for Compliance

1) Environment related regulations and policies

Environment related policies mention the usage of water (treatment, reuse) in the industrial sector. As indicated in

the beginning of this chapter, there are some guidelines and recommendations for the usage of water, such as

treatment of industrial water, but no law or regulations.

At the moment, the National Water Policy developed in 2002 is being revised, and the new National Water Policy

(Draft) (2012) is anticipated to set rules on water treatment and other water related work in the industrial sector.

Regarding plant effluent, every plant is obliged to practice adequate effluent treatment regardless of releasing

destination based on the “Water (Prevention and Control of Pollution) Act 1974” and the “Environment

(Protection) Act 1986.”

It is assumed that this project will have little environmental and social impacts with its planned operations, as has

been seen in the previous sections in this chapter. In terms of the social aspect, resettlement is not required as the

target site of this project is in the existing industrial park. The project will also have no impact on the environment,

as the site location will not harm the national parks and nature.

2) EIA contents of India necessary for the project realization

In India, The Ministry of Environment & Forests (MoEF) issued a Notification in 1994 that requires conducting

an Environmental Impact Assessment (EIA). EIA is obligatory in eight business areas including mining and power

generation, resource processing, material production, manufacturing, services, infrastructure improvement such as

environmental services, and construction and town development. The subsequent “EIA Notification, 2006”

stipulates the implementation procedures as follows.

The necessity of EIA is judged based on the category of business to be implemented. Business operators should

determine if their businesses are in the category A or B based on the Schedule provided in the EIA Notification. If

their businesses fall in the categories A or B, they will be required to conduct EIA. EIA is not necessary if their

businesses are not of the categories A or B.

For businesses in the category A, the business operators will be asked to obtain Environmental Clearance (EC)

from the central government (MoEF), and for ones in the category B, EC from the state government. Businesses

in the category B are further divided into B1 and B2 as stipulated by the state government. In concordance with

the prescription, businesses in the category B will then receive EC from the state government after certain

procedures such as public hearing and review.

4-14

CETP business is classified into the category B according to the EIA Notification and needs to receive EC from

the state government. However, as this project does not require the construction of a new CETP, concerned

agencies in the state of Maharashtra such as MIDC and MPCB have never stated the necessity of EIA for this

project. (*During the business trip in December, we will get assurance that EIA is not necessary.)

In 2010, MoEF developed the implementation guidelines for EIA for CETP businesses. The guidelines provide

items to be investigated and reported when implementing EIA: business summary (purpose, necessity, and

business process), monitoring plan after CETP completion, detailed design of each CETP, detailed explanation

about plants using CETP and their equipment, planned volumes of effluents by plant, equipment and industry and

their reasoning, components of effluents, collecting method of effluents (e.g., tanker, effluent collecting pipe) and

monitoring method, details of treatment method and type (ETP or CETP), details of O&M when operating with

planned capacity, and additional functions of treatment facilities and devices (anti-rust finishing).

Besides this, the state of Maharashtra defines items for EIA (Terms of Reference: TOR) regarding CETP business.

TOR asks CETP business operators to investigate and report on 83 items in total including business summary,

environmental assessment, possible impacts on the environment and measures to minimize them, alternative

business and technologies for their projects, and environment monitoring program. In addition, the state of

Maharashtra made the EIA reporting manual available to public regarding key points such as chapter format,

contents, and scope.1

1 The website of the state of Maharashtra (https://ec.maharashtra.gov.in/files/TOR-CETP.pdf)

4-15

(5) What Should the Involved Countries (Implementing Agencies and Other Related Agencies) Do to Realize the Project?

For this project to be realized, it is indispensable, from the economical aspect, that subsidy for projects to repair or

upgrade CETP(s) is granted by the central/state government of India.

In order to receive such a subsidy, as explained in Chapter 3, it is necessary for implementing and other related

agencies to go through a range of procedures based on subsidization guidelines prepared by the Ministry of

Environment and Forests. The followings are such procedures to be followed by implementing and other related

agencies.

1) IA of CETP

- Procedures such as conclusion of contract and registration in order to realize SPV

- Preparation of DPR (by consultants) to be submitted to MoEF before claiming the subsidy for CETP

- Arrangement and negotiation with the state government (MIDC)

- Arrangement and negotiation with the technical review agencies

2) MIDC and MPCB

- Review of business applications (proposal and DPR) submitted by operators

- Examination of the business applications by the Ministry of Environment and Forests

3) NEERI/IIT

- Review of proposal sent from MIDC and MPCB

- Sending review results to the Ministry of Environment and Forests

Chapter 5 Financial and Economic Evaluation

5-1

(1) Estimate of Operating Expenses

In this section, the project feasibility is evaluated in financial and economic terms based on the conditions

mentioned above.

Projects to be evaluated are water recycling system and energy saving system for ETP.

Based on the project conditions described in Chapter 3, operating expenses are estimated assuming the projects

were implemented for Roha CETP. In addition, the estimate is made based on the following conditions.

� As it is difficult to forecast fluctuating market prices of equipments and construction works, this study

considers the current market prices but not future escalation of those prices.

� Analysis is conducted considering only import taxes for equipments but not other expenses.

1) Water recycling plant

a) Construction cost

i) Expenses in India (for domestic currency)

Expenses incur in India are shown in Tables 5-1-1 and 5-1-2, and the expense items are shown below.

On the occasion of the second field survey, it was stated that building and maintenance expenses of water

pipes from a water recycling plant to tenants would be borne by MIDC. However, considering the risk of

MIDC's becoming incapable to bear, the building and maintenance expenses were separated from the civil

engineering expenses so that two cases (including and excluding the building and maintenance expenses)

can be estimated.

� Civil engineering expenses

� Expenses for electromechanical work

� Expenses for mechanical work

� Expenses for electrical work

� Expenses for piping work

� Expenses for building water pipes

ii) Expenses in other countries (for foreign currencies)

Expenses in other countries (expenses incur outside India) are shown in Tables 5-1-1 and 5-1-2, and the

expense items are shown below.

� Equipments expenses (including transport cost)

� RO membrane

� MF/UF membrane

5-2

Table 5-1-1: Water recycling plant construction cost (excluding expenses for building water pipes)

Item Expense Total expense

Expenses in India

(for domestic currency)

Civil engineering

expenses

INR30,000,000 INR82,400,000

¥137,608,000

$1,336,000 Expenses for

electromechanical

work

INR52,400,000

Expenses in other

countries

(for foreign currencies)

Equipments expenses

¥31,230,000 ¥31,230,000

$303,204

Total ¥168,838,000

$1,639,204

* Exchange rate: INR1=¥1.67, INR1=$0.02, $1=¥103

Source: Created by Study Team

Table 5-1-2: Water recycling plant construction cost (including expenses for building water pipes)

Item Expense Total expense

Expenses in India

(for domestic currency)

Civil engineering

expenses

INR30,000,000 INR132,400,000

¥221,108,000

$2,146,680 Expenses for

electromechanical

work

INR52,400,000

Expenses for building

water pipes

INR50,000,000

Expenses in other

countries

(for foreign currencies)

Equipments expenses ¥31,230,000 ¥31,230,000

$303,204

Total ¥252,338,000

$2,449,883

* Exchange rate: INR1=¥1.67, INR1=$0.02, $1=¥103

Source: Created by Study Team

b) Operation & maintenance expenses

Operation and maintenance expenses are shown in Table 5-1-3. On the premise that the appropriate

operation and maintenance will be done, operation and maintenance expenses do not consider the increase

of labor cost or expenses for emergency response to sudden accident. Furthermore, operation and

maintenance expenses do not include repair costs except costs for replacing large facilities of 16-year-old.

5-3

Table 5-1-3: Water recycling plant operation and maintenance expenses

Item Total expense

Operation & maintenance expenses (for domestic

currency)

INR3,600,000/y

Utilities INR5,000,000/y

Total INR8,600,000/y

¥14,362,000/y

$139,437/y

* Exchange rate: INR1=¥1.67, INR1=$0.02, $1=¥103

Source: Created by Study Team

c) Item setting conditions

Setting conditions for expense items for operation and maintenance of water recycling plant are as follows.

� Expenses incur in India (civil engineering expenses, expenses for electromechanical work and

reserved fund) are the estimates by Company Hydroair in India.

� Operation and maintenance expenses are also the estimates by Company Hydroair in India.

� Equipment expenses incur abroad is for the low-cost membrane unit of the Research Group (Fuji

Electric Co., Ltd.), with the assumption that 250 membrane elements are used at the water

recycling plant. For the above membrane unit, 50 elements are assumed to be replaced annually

with the passage of 5 years after commencement of operations as a part of maintenance work.

� Membrane transport cost is included in the price of membrane when analyzed.

2) Energy saving

Here, we describe the costs of installing inverters into designated equipment for enhanced energy efficiency at

resident corporations’ ETP, and sales prices of the system as a single unit.

All expenses incurred through the introduction of a system for energy saving are considered to occur in India

(for domestic currency), and are shown in Table 5-1-4.

Sales prices are shown in Table 5-1-5. The sales volume of the energy saving system is based on the scenario

where they are installed in seven out of 38 companies (20%) at the industrial park of Roha.

The ratio of 20% representing the inverter installation presupposes the case in which the research team and

MIDC both estimate the number of units to be installed based on features and expected prices.

5-4

Table 5-1-4: Expenses incur for Energy Saving System

Item Expense Total expense

Expenses in India

(for domestic currency)

Expenses for engineering

and equipments, expenses

for local set up

INR572,000 INR572,000

¥955,240

$9,274

Total ¥955,240

$9,274

* Exchange rate: INR1=¥1.67, INR1=$0.02, $1=¥103

Source: Created by Study Team

5-5

(2) Summary of Results of Preliminary Financial and Economic Analysis

1) Project implementation structure

This project assumes the application of subsidies for initial construction cost as an advanced treatment work for

existing CETPs. The breakdown of the total project cost is: 25% is subsidies and 75% is borne by operators. We

consider that the cost burden by operators will be borne by financial contribution and financing from IA, Fuji

Electric Co., Ltd. and independent financial institutes.

Below is the assumed project implementation structure.

Figure 5-2-1: Assumed project implementation structure

Source: Created by Study team

2) Operating conditions of plant for financial and economic analysis

Based on the project implementation structure of Figure 5-2-1, operating conditions of plant for financial and

economic analysis of this project are shown in Table 5-2-1.

Table 5-2-1: Operating conditions of plant

Item Conditions

Number of plant operating days 365 d/y

Occupation area 200m2 *The site for the plant is assumed to be provided

free of charge by MIDC.

Source: Created by Study Team

5-6

3) Cases for financial and economic analysis

For financial and economic analyses of this project, two prices were first assumed for recycled water sales:

INR12/m3 and INR16/m3, and for each price, two cases were analyzed: where building expenses of water

pipes to supply recycled water are included in SPV, and where the expenses are borne by MIDC, assuming the

expenses are not included in SPV. That is, four cases were analyzed in total.

As to the sales price of recycled water, it was determined according to the request made by IA (purchaser) that

the price was preferably less than half of the current water price. The request was made at the interview with

them during the local inspection at the industrial park of Roha.

Table 5-2-2: Cases of financial and economic analysis

Source: Created by Study Team

Case Selling price of recycled

water

Water pipe building

expenses

(1) INR12/m3 Included in SPV

(2) INR12/m3 Not included in SPV

(3) INR16/m3 Included in SPV

(4) INR16/m3 Not included in SPV

5-7

4) Postulate

Table 5-2-3: Conditions of financial and economic analysis

Source: Created by Study Team

5) Results summary of financial analysis

The financial and economic analysis of the aforementioned cases considered the following inflation rate. The

results summary is shown in Table 5-2-4.

The inflation rate was assumed as follows based on the predicted data for inflation rate between 2015 and

2018.

(Source: IMF WEO database)

� Regarding the period between 2015, when the project starts, and 2018, the inflation rate was assumed to

be 7%, the average value for the period.

� After 2019, the inflation rate was assumed to be 6.7% that is the same as that of 2018.

Construction period 1 year

Project period 20 years

Ratio of own capital/debt 65% / 35%

Where the building

expenses are included

in SPV

Total project cost: ¥252.340,000

Financial plan

Total amount financed ¥88,320,000

Interest rate 8%

Repayment period 15 years

Method of repayment Principal and interest

equal repayment

Where the building

expenses are not

included in SPV

Total project cost: ¥168.840,000

Financial plan

Total amount financed ¥59.090,000

Interest rate 8%

Repayment period 10 years

Method of repayment Principal and interest

equal repayment

Depreciation Depreciation period 15 years

Depreciation method Straight-line method

5-8

Table 5-2-4: Result summary of financial and economic analysis

Case

Content

FIRR NPV Price of recycled water

Expenses for building water

pipes

(1) INR12 Included in SPV 4.4% ¥75,238,000

(2) INR12 Not included in SPV 7.9% ¥34,006,000

(3) INR16 Included in SPV 9.6% ¥117,347,000

(4) INR16 Not included in SPV 13.5% ¥226,591,000

* For the discount ratio of net present value (NPV), 6.7% (the inflation rate) was assumed.

Source: Created by Study team

The above results of analysis can be summarized as follows.

a) Price of recycled water: INR12/m3

The price is affordable for companies and competitive, but the commercialization of this project

becomes impractical if the pipeline installation cost were to be included in the project expenses, in

which case NPV becomes a liability. Even if the expenses are not included in SPV, FIRR is 7.9% and

NPV is 34,006,000 yen. This makes it possible to recover initial investment, but NPV does not reach the

level of initial investment, compromising the project

b) Price of recycled water: INR16/m3

Although this price is rather high, it is still affordable for companies after water price increased.

Nonetheless, FIRR is 9.6% when the pipeline installation cost is included in SPV, with NPV of

117,347,000 yen. This makes it very possible to recover initial investment, but NPV would be half of the

initial investment and the project would be small. Anything lower than this price level makes it

difficult to include the facility installation costs in the project expenses, making the commercialization

untenable. Therefore, it is necessary that MIDC bears the building expenses. On the other hand, prices

higher than this level are too expensive for corporations, resulting in the project being infeasible.

As for pipeline installation cost, MIDC mentioned, in the occasion of the final report meeting, it would be

difficult for the institution to bear it, and so SPV will be required to bear that cost

According to the analysis result above, it is considered that this project would be feasible, provided that the

price of recycled water is set at INR16/m3 or above and pipeline installation costs are borne by SPV.

6) Review of economic analysis

By supplying recycled water and energy saving systems, this project is expected to reduce environmental and

social impacts and expenses while increasing goods and services produced. However, there are not enough data

available for cost and benefit analysis to compare opportunity cost with social benefit associated with this

5-9

project at the present stage, and EIRR cannot be calculated. Therefore, the following qualitative analysis was

made.

Opportunity cost Social benefit

[Construction phase]

� Economic effects of injecting construction

cost

[Operation phase]

� Stable supply of recycled water will ensure

plant operation

� Water for drinking and agriculture and

stockbreeding will increase since recycled

water supply will decrease the amount of

water taken from natural water resource

This in turn will raise production

� Energy saving will reduce power

consumption, curbing planned outage and

thus mitigating operational loss during

outage

[Industrial effects]

� Reduction of electricity charges by energy

saving

� CO2 reduction

� Halving the final effluents from CETPs will

decrease environmental impacts, reducing

costs for environmental protection

[Environmental effects]

� Preservation of ecological system

� Mitigation of water pollution

7) Result details of financial and economic analysis

Cash flow sheet, gross margin (single-year and cumulative), free cash flow, and cash balance are illustrated

graphically in the following figures regarding case details of aforementioned financial and economic analysis.

Figure 5-2-2: Price of recycled water INR12/m3, Building expenses for water pipes are included in SPV)

Figure 5-2-3: Price of recycled water INR12/m3, Building expenses for water pipes are not included in SPV)

Figure 5-2-4: Price of recycled water INR16/m3, Building expenses for water pipes are included in SPV)

Figure 5-2-5: Price of recycled water INR16/m3, Building expenses for water pipes are not included in SPV)

5-10

Figure 5-2

-2: Price of recycled w

ater INR

12/m3, B

uilding expenses for w

ater pipes are included in SP

V)

Source: C

reated by Stud

y Team

Cash Flow Sheet Start 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year 11th year 12th year 13th year 14th year 15th year 16th year 17th year 18th year 19th year 20th year 21st year

Unit Start 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Sales (A) 1,000 yen - 4,990 9,317 17,599 25,639 38,408 50,296 53,665 57,261 61,097 65,191 69,559 74,219 79,192 84,498 90,159 96,200 102,645109,522 116,860 124,690 133,044

　Number of users installing - 2 2 3 3 5 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

　Cumulative total of users installing - 2 4 7 10 15 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19

　The amount of recycled water offered m3 - 520 1040 1820 2600 3900 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940

　Selling priceof recycled water yen/m3 - 20.0 21.4 22.9 24.5 26.1 27.9 29.8 31.8 33.9 36.2 38.6 41.2 43.9 46.9 50.0 53.4 56.9 60.7 64.8 69.2 73.8

　The number of installed energy saving systems 1 1 2 2 1

　Energy saving system 1,000 yen 1,194 1,194 2,388 2,388 1,194 0 0 0

Sale cost (B) 1,000 yen - 27,740 28,866 31,093 32,467 33,078 34,994 36,429 37,961 39,595 41,339 43,199 45,185 47,303 49,563 51,975 44,230 46,976 49,905 53,031 56,367 59,925

　O&M (Operation and maintenance of facilities) 〃 - 14,362 15,367 16,443 17,594 18,773 20,031 21,373 22,805 24,333 25,963 27,702 29,558 31,539 33,652 35,907 38,312 40,879 43,618 46,541 49,659 52,986

　Expenses for replacing membrane 〃 - 0 0 0 0 0 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250

　electric utility expense 〃 - 105 225 422 645 1,032 1,395 1,488 1,588 1,694 1,808 1,929 2,058 2,196 2,343 2,500 2,668 2,846 3,037 3,241 3,458 3,689

　Plant repair expense 〃 - 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

　Energy saving system occurance expense 〃 955 955 1,910 1,910 955 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

　Loan return 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 0 0 0 0 0 0

Depreciation expense (C) 〃 - 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 0 0 0 0 0

Gross margin(D) *D=A-(B+C) 〃 - ▲ 36,570 ▲ 33,368 ▲ 27,313 ▲ 20,647 ▲ 8,490 1,483 3,417 5,481 7,683 10,033 12,540 15,215 18,070 21,115 24,365 38,151 55,670 59,617 63,829 68,324 73,119

Cumulative gross margin (D cumulative total) million yen - ▲ 37 ▲ 70 ▲ 97 ▲ 118 ▲ 126 ▲ 125 ▲ 121 ▲ 116 ▲ 108 ▲ 98 ▲ 86 ▲ 71 ▲ 52 ▲ 31 ▲ 7 31 87 146 210 279 352

Gross margin ratio % ▲ 733 ▲ 358 ▲ 155 ▲ 81 ▲ 22 3 6 10 13 15 18 21 23 25 27 40 54 54 55 55 55

Depreciation adjusting cost (E) 1,000 yen - 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 0 0 0 0 0

Operating cash flow(F) *F=D+E 〃 0 ▲ 22,750 ▲ 19,548 ▲ 13,494 ▲ 6,828 5,330 15,302 17,236 19,300 21,502 23,852 26,359 29,035 31,889 34,935 38,184 51,970 55,670 59,617 63,829 68,324 73,119

Investing cash flow (G) 〃 ▲ 252,338 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ▲ 40,000 0 0 0 0 0

Free cash flow (H) *H=F+G 〃 ▲ 252,338 ▲ 22,750 ▲ 19,548 ▲ 13,494 ▲ 6,828 5,330 15,302 17,236 19,300 21,502 23,852 26,359 29,035 31,889 34,935 38,184 11,970 55,670 59,617 63,829 68,324 73,119

Cash balance (free cash (H) cumulative total) million yen ▲ 252 ▲ 275 ▲ 295 ▲ 308 ▲ 315 ▲ 310 ▲ 294 ▲ 277 ▲ 258 ▲ 236 ▲ 212 ▲ 186 ▲ 157 ▲ 125 ▲ 90 ▲ 52 ▲ 40 16 75 139 207 280

FIRR(calculated for the period between the start and the 20th year)

Ca

sh in

Ca

sh o

ut

4.4%

5-11

Figure 5-2

-3: Price of recycled w

ater INR

12/m3 (B

uilding expenses for w

ater pipes are not included in S

PV

)

Source: C

reated by Stud

y Team

Cash Flow Sheet Start 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year 11th year 12th year 13th year 14th year 15th year 16th year 17th year 18th year 19th year 20th year 21st year

Unit Start 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Sales (A) 1,000 yen - 4,990 9,317 17,599 25,639 38,408 50,296 53,665 57,261 61,097 65,191 69,559 74,219 79,192 84,498 90,159 96,200 102,645109,522 116,860 124,690 133,044

　Number of users installing - 2 2 3 3 5 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

　Cumulative total of users installing - 2 4 7 10 15 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19

　The amount of recycled water offered m3 - 520 1040 1820 2600 3900 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940

　Selling priceof recycled water yen/m3 - 20.0 21.4 22.9 24.5 26.1 27.9 29.8 31.8 33.9 36.2 38.6 41.2 43.9 46.9 50.0 53.4 56.9 60.7 64.8 69.2 73.8

　The number of installed energy saving systems 1 1 2 2 1

　Energy saving system 1,000 yen 1,194 1,194 2,388 2,388 1,194 0 0 0

Sale cost (B) 1,000 yen - 26,229 27,354 29,582 30,955 31,566 33,482 34,917 36,449 38,083 39,827 32,881 34,867 36,985 39,245 41,657 44,230 46,976 49,905 53,031 56,367 59,925

　O&M (Operation and maintenance of facilities) 〃 - 14,362 15,367 16,443 17,594 18,773 20,031 21,373 22,805 24,333 25,963 27,702 29,558 31,539 33,652 35,907 38,312 40,879 43,618 46,541 49,659 52,986

　Expenses for replacing membrane 〃 - 0 0 0 0 0 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250

　electric utility expense 〃 - 105 225 422 645 1,032 1,395 1,488 1,588 1,694 1,808 1,929 2,058 2,196 2,343 2,500 2,668 2,846 3,037 3,241 3,458 3,689

　Plant repair expense 〃 - 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

　Energy saving system occurance expense 〃 955 955 1,910 1,910 955 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

　Loan return 8,807 8,807 8,807 8,807 8,807 8,807 8,807 8,807 8,807 8,807 0 0 0 0 0 0 0 0 0 0 0

Depreciation expense (C) 〃 - 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 0 0 0 0 0

Gross margin(D) *D=A-(B+C) 〃 - ▲ 29,839 ▲ 26,637 ▲ 20,583 ▲ 13,917 (1,759) 8,213 10,147 12,211 14,414 16,763 28,077 30,752 33,607 36,652 39,902 43,369 55,670 59,617 63,829 68,324 73,119

Cumulative gross margin (D cumulative total) million yen - ▲ 30 ▲ 56 ▲ 77 ▲ 91 ▲ 93 ▲ 85 ▲ 74 ▲ 62 ▲ 48 ▲ 31 ▲ 3 28 61 98 138 181 237 297 360 429 502

Gross margin ratio % ▲ 598 ▲ 286 ▲ 117 ▲ 54 ▲ 5 16 19 21 24 26 40 41 42 43 44 45 54 54 55 55 55

Depreciation adjusting cost (E) 1,000 yen - 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 0 0 0 0 0

Operating cash flow(F) *F=D+E 〃 0 ▲ 21,239 ▲ 18,037 ▲ 11,982 ▲ 5,316 6,841 16,814 18,748 20,812 23,014 25,364 36,678 39,353 42,207 45,253 48,502 51,970 55,670 59,617 63,829 68,324 73,119

Investing cash flow (G) 〃 ▲ 168,838 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ▲ 40,000 0 0 0 0 0

Free cash flow (H) *H=F+G 〃 ▲ 168,838 ▲ 21,239 ▲ 18,037 ▲ 11,982 ▲ 5,316 6,841 16,814 18,748 20,812 23,014 25,364 36,678 39,353 42,207 45,253 48,502 11,970 55,670 59,617 63,829 68,324 73,119

Cash balance (free cash (H) cumulative total) million yen ▲ 169 ▲ 190 ▲ 208 ▲ 220 ▲ 225 ▲ 219 ▲ 202 ▲ 183 ▲ 162 ▲ 139 ▲ 114 ▲ 77 ▲ 38 4 50 98 110 166 225 289 358 431

FIRR(calculated for the period between the start and the 20th year)

Ca

sh in

Cas

h o

ut

7.9%

5-12

Figure 5-2

-4: Price of recycled w

ater INR

16/m3, B

uilding expenses for w

ater pipes are included in SP

V)

Source: C

reated by Stud

y Team

Cash Flow Sheet Start 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year 11th year 12th year 13th year 14th year 15th year 16th year 17th year 18th year 19th year 20th year 21st year

Unit Start 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Sales (A) 1,000 yen - 6,262 12,039 22,695 33,429 50,874 67,145 71,643 76,443 81,565 87,030 92,861 99,083 105,721 112,805 120,362 128,427 137,031 146,212 156,009 166,461 177,614

　Number of users installing - 2 2 3 3 5 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

　Cumulative total of users installing - 2 4 7 10 15 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19

　The amount of recycled water offered m3 - 520 1040 1820 2600 3900 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940

　Selling priceof recycled water yen/m3 - 26.7 28.6 30.6 32.7 34.9 37.2 39.7 42.4 45.2 48.3 51.5 55.0 58.6 62.6 66.8 71.2 76.0 81.1 86.5 92.3 98.5

　The number of installed energy saving systems 1 1 2 2 1

　Energy saving system 1,000 yen 1,194 1,194 2,388 2,388 1,194 0 0 0

Sale cost (B) 1,000 yen - 27,740 28,866 31,093 32,467 33,078 34,994 36,429 37,961 39,595 41,339 43,199 45,185 47,303 49,563 51,975 44,230 46,976 49,905 53,031 56,367 59,925

　O&M (Operation and maintenance of facilities) 〃 - 14,362 15,367 16,443 17,594 18,773 20,031 21,373 22,805 24,333 25,963 27,702 29,558 31,539 33,652 35,907 38,312 40,879 43,618 46,541 49,659 52,986

　Expenses for replacing membrane 〃 - 0 0 0 0 0 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250

　electric utility expense 〃 - 105 225 422 645 1,032 1,395 1,488 1,588 1,694 1,808 1,929 2,058 2,196 2,343 2,500 2,668 2,846 3,037 3,241 3,458 3,689

　Plant repair expense 〃 - 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

　Energy saving system occurance expense 〃 955 955 1,910 1,910 955 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

　Loan return 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 0 0 0 0 0 0

Depreciation expense (C) 〃 - 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 0 0 0 0 0

Gross margin(D) *D=A-(B+C) 〃 - ▲ 35,298 ▲ 30,646 ▲ 22,217 ▲ 12,858 3,977 18,332 21,395 24,663 28,151 31,872 35,842 40,079 44,599 49,422 54,568 70,377 90,056 96,307 102,977 110,095 117,689

Cumulative gross margin (D cumulative total) million yen - ▲ 35 ▲ 66 ▲ 88 ▲ 101 ▲ 97 ▲ 79 ▲ 57 ▲ 33 ▲ 5 27 63 103 148 197 252 322 412 509 612 722 839

Gross margin ratio % ▲ 564 ▲ 255 ▲ 98 ▲ 38 8 27 30 32 35 37 39 40 42 44 45 55 66 66 66 66 66

Depreciation adjusting cost (E) 1,000 yen - 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 13,819 0 0 0 0 0

Operating cash flow(F) *F=D+E 〃 0 ▲ 21,479 ▲ 16,827 ▲ 8,398 961 17,796 32,151 35,214 38,483 41,970 45,691 49,66253,898 58,418 63,241 68,388 84,197 90,056 96,307 102,977 110,095 117,689

Investing cash flow (G) 〃 ▲ 252,338 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ▲ 40,000 0 0 0 0 0

Free cash flow (H) *H=F+G 〃 ▲ 252,338 ▲ 21,479 ▲ 16,827 ▲ 8,398 961 17,796 32,151 35,214 38,483 41,970 45,691 49,66253,898 58,418 63,241 68,388 44,197 90,056 96,307 102,977 110,095 117,689

Cash balance (free cash (H) cumulative total) million yen ▲ 252 ▲ 274 ▲ 291 ▲ 299 ▲ 298 ▲ 280 ▲ 248 ▲ 213 ▲ 174 ▲ 132 ▲ 87 ▲ 37 17 75 138 207 251 341 437 540 650 768

FIRR(calculated for the period between the start and the 20th year)

Ca

sh in

Ca

sh o

ut

9.6%

5-13

Figure 5-2

-5: Price of recycled w

ater INR

16/m3, B

uilding expenses for w

ater pipes are not included in S

PV

)

Source: C

reated by Stud

y Team

Cash Flow Sheet Start 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year 11th year 12th year 13th year 14th year 15th year 16th year 17th year 18th year 19th year 20th year 21st year

Unit Start 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Sales (A) 1,000 yen - 6,262 12,039 22,695 33,429 50,874 67,145 71,643 76,443 81,565 87,030 92,861 99,083 105,721 112,805 120,362 128,427 137,031 146,212 156,009 166,461 177,614

　Number of users installing - 2 2 3 3 5 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

　Cumulative total of users installing - 2 4 7 10 15 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19

　The amount of recycled water offered m3 - 520 1040 1820 2600 3900 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940 4940

　Selling priceof recycled water yen/m3 - 26.7 28.6 30.6 32.7 34.9 37.2 39.7 42.4 45.2 48.3 51.5 55.0 58.6 62.6 66.8 71.2 76.0 81.1 86.5 92.3 98.5

　The number of installed energy saving systems 1 1 2 2 1

　Energy saving system 1,000 yen 1,194 1,194 2,388 2,388 1,194 0 0 0

Sale cost (B) 1,000 yen - 26,229 27,354 29,582 30,955 31,566 33,482 34,917 36,449 38,083 39,827 32,881 34,867 36,985 39,245 41,657 44,230 46,976 49,905 53,031 56,367 59,925

　O&M (Operation and maintenance of facilities) 〃 - 14,362 15,367 16,443 17,594 18,773 20,031 21,373 22,805 24,333 25,963 27,702 29,558 31,539 33,652 35,907 38,312 40,879 43,618 46,541 49,659 52,986

　Expenses for replacing membrane 〃 - 0 0 0 0 0 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250

　electric utility expense 〃 - 105 225 422 645 1,032 1,395 1,488 1,588 1,694 1,808 1,929 2,058 2,196 2,343 2,500 2,668 2,846 3,037 3,241 3,458 3,689

　Plant repair expense 〃 - 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

　Energy saving system occurance expense 〃 955 955 1,910 1,910 955 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

　Loan return 8,807 8,807 8,807 8,807 8,807 8,807 8,807 8,807 8,807 8,807 0 0 0 0 0 0 0 0 0 0 0

Depreciation expense (C) 〃 - 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 0 0 0 0 0

Gross margin(D) *D=A-(B+C) 〃 - ▲ 28,568 ▲ 23,916 ▲ 15,487 ▲ 6,127 10,707 25,062 28,125 31,394 34,881 38,602 51,379 55,616 60,136 64,959 70,105 75,596 90,056 96,307 102,977 110,095 117,689

Cumulative gross margin (D cumulative total) million yen - ▲ 29 ▲ 52 ▲ 68 ▲ 74 ▲ 63 ▲ 38 ▲ 10 21 56 95 146 202 262 327 397 472 563 659 762 872 990

Gross margin ratio % ▲ 456 ▲ 199 ▲ 68 ▲ 18 21 37 39 41 43 44 55 56 57 58 58 59 66 66 66 66 66

Depreciation adjusting cost (E) 1,000 yen - 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 8,601 0 0 0 0 0

Operating cash flow(F) *F=D+E 〃 0 ▲ 19,967 ▲ 15,315 ▲ 6,887 2,473 19,308 33,663 36,726 39,994 43,482 47,203 59,980 64,216 68,736 73,559 78,706 84,197 90,056 96,307 102,977 110,095 117,689

Investing cash flow (G) 〃 ▲ 168,838 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ▲ 40,000 0 0 0 0 0

Free cash flow (H) *H=F+G 〃 ▲ 168,838 ▲ 19,967 ▲ 15,315 ▲ 6,887 2,473 19,308 33,663 36,726 39,994 43,482 47,203 59,980 64,216 68,736 73,559 78,706 44,197 90,056 96,307 102,977 110,095 117,689

Cash balance (free cash (H) cumulative total) million yen ▲ 169 ▲ 189 ▲ 204 ▲ 211 ▲ 209 ▲ 189 ▲ 156 ▲ 119 ▲ 79 ▲ 35 12 72 136 205 278 357 401 491 588 691 801 918

FIRR(calculated for the period between the start and the 20th year)

Ca

sh in

Ca

sh o

ut

13.5%

Chapter 6 Planned Project Schedule

6-1

Figure 6-1 shows the timetable for this project, starting from SPV establishment, through detailed planning,

construction of plants, local pilot operation to commencing full operation.

Factors in relation to corporate social responsibility have been omitted as there are no recognizable critical issues

in relation to this project, as stated in Chapter 4. It is assumed, however, that appropriate precautions shall be

taken regarding minor items during construction period as per the same.

Figure 6-1 Project Implementation Schedule

FY 2013 FY 2014 FY 2015

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

Form the SPV

Examine the

industrialization

details

Select a basic design

and consultants

Assessment

(environmental, social

and economic points

of view)

Financing

Bidding ☆

Engineering,

procurement of

equipment and

production

Plant construction

Setup on site

Test run on site

Operation begins

Source: Created by Study Team

Chapter 7 Implementing Organizations

7-1

(1) Implementing Organizations

1. Central and state governments

There are several institutions at the central and state government levels that are mainly responsible for

environmental issues. These are relevant to the implementation of this project, and are listed in the following:

Figure.7-1-1 Institutions relevant to the project

MoEF MIDC

RIA

CPCB

MPCB

Project Operation

Technological Promotion

Social and Environment

Responsibilities

NEERI/IIT-Bombay

cCETP SubsidyAssessment Body

Consultants EPC

Role Executing/Related Agencies

7-2

Source: Created by the Study Team

a. Ministry of Environment & Forests (MoEF)

MoEF is responsible for planning, promotion, co-ordination and overseeing the implementation of India’s

environmental and forestry policies and programs.

The Ministry holds the authority to approve subsidies for CETP projects, which this project presupposes to

utilize.

b. MIDC

MIDC, aiming to promote industrial activities in Maharashtra, leads the development of industrial parks and

SEZ in the state. It actively promotes industrialization supporting the securing of land, infrastructure

construction, and provision of utilities. It also engages in enhancing environmental management, promoting

the introduction of CETPs at industrial parks.

In relation to this project, MIDC is involved in the assessment of project proposals and DPR technologies in

the CETP subsidy scheme.

c. MPCB

MPCB is an environmental authority in the State of Maharashtra. Its directorship, the Member Secretary, is

comprised of a Chairman at the top, and general managers responsible for several divisions. With its main

purpose being prevention of environmental pollution within the state, the body engages in regulation and

control through monitoring of the atmosphere, water sources and hazardous waste disposal, evaluation of

processing capacities and procedures at CETPs, and punishment for non-compliance with regulation

standards.

The organizational structure of MPCB is shown below.

Figure.7-1-2 Organizational Structure of MPCB

7-3

Source: MPCB website

2. Operational body (RIA)

The CETP at ROHA Industrial Park is managed by the park’s industrial association (RIA). RIA established

SPV in 1994 for installing and operating CETP and formed the RIA-CETP Co-op Society Ltd as a CETP

operator.

3. Other institutions

a. NEERI/IIT Bombay

NEERI is a public institution conducting research and investigation in the environment.

It also undertakes assessment of technologies within the subsidy scheme to be deployed for new building and

renovation of CETPs in Maharashtra. It uses a set of predefined technological requirements to assess project

proposals and DPRs submitted by MIDC, and determines the suitability for subsidy allocation.

IIT Bombay also engages in the technological assessment of projects applying for the CETP subsidy scheme.

7-4

(2) Organizational, technological and financial capacities of the institutions

1. Operational capacity of RIA

RIA has been operating CETP successfully so far.

It commenced operation of a CETP with a processing capacity of 10 MLD using the subsidy scheme of the

government of India. MoEF, MIDC and MPCB provided 25%, 20% and 5% of the operational cost

respectively, while RIA procured the remaining 50%.

Table.7-2-1 Funding of RIA (Unit: 1 lakh=100,000 rupees)

Total cost Subsidies

Self

procurement

MoEF MIDC MPCB RIA

1,250

312.5

(25%)

250

(20%)

62.5

(5%)

625

Source: Created by the Study Team based on MPCB website

We expect RIA to be valuable for its experience and knowledge, as evidenced by its previous success in

managing a project using the government subsidies.

In addition, RIA is planning to upgrade the CETP’s processing capacity in order to meet the current trend of

growth in the immigration of corporations and facility expansion of existing corporations. They have already

decided on building CETPs with 5 and 7.5 MLD capacity in the next two years, increasing total capacity to

22.5 MLD. They are also considering some measures to simplify CETP operations for greater efficiency.

It is evident that RIA plays an important part in SPV and thus it is equipped with the necessary operational

system. They are also capable of improving CETP operations according to the trends at industrial parks.

These observations support the view that RIA is organizationally qualified to undertake this project. Also

considering the fact that RIA is determined to reinforce its CETPs’ processing capacity, we expect the body

to be capable of deploying new technology and to procure the necessary funds appropriately.

2. Local consultants

This project envisages the establishment of an SPV with RIA, and aims to leverage the subsidy from the

government of India for funding. In order to apply for the subsidy, we need to produce a project proposal and

detailed project report (DPR). For planning, IAs usually employ external consultants, who produce proposals

and DPRs.

We conducted interviews with companies that were involved with RIA’s operations: Hydro Air, who

provided expertise to RIA for constructing the CETPs currently in operation, as well as funding for 10 years;

7-5

and KR, whom RIA employs for the CETP project currently under development. It transpired during the

interviews that they were technically qualified (past projects included deployment of ZLD technology at

CETP)and capable of realizing profitable operations, as well as having channels to a number of key figures

for subsidy application to organizations such as NEERI, MPCB and MoEF.

We have managed to identify prospective partners who could provide technological support in implementing

this project to reinforce CETPs of RIA. We consider that involving expert assistance from consultants who

have rich knowledge and experience in subsidy application will benefit us in keeping our preparations on

track.

Chapter 8 Technical Advantages of Japanese Companies

8-1

(1) Forms of participation for Japanese companies (investment,

material/equipment provision, facility operation/management etc.)

The following describes the Japanese companies’ possible participation in the project.

Table 8-1-1 shows the evaluation of possible participation in terms of investment (loan), material/equipment

provision and facility operation/management.

Table 8-1-1 Possible participation of Japanese companies

Form of participation Evaluation

Investment (loan) Investment + provision of materials/equipment

Investment that aims to secure SPV’s preference over procurement of materials and

equipment (components) from the Study Team (Fuji Electric).

Provision of

materials/equipment

Facility

operation/management

None

Source: Created by Study Team

1. Investment (loan)

There is a possibility for the Study Team (Fuji Electric) to participate with SPV funding.

The participation, however, is a means of securing the preference of SPV in procurement of materials and

equipment, not for investment dividends. Therefore, the investment size will be minimal.

There are investment risks, nevertheless, pertaining to currency fluctuation, poor performance of SPV due to

withdrawal or relocation of tenant companies, loss of income or profitability of SPV due to social and

economical changes in India.

Study Team (Fuji Electric) considers addressing the risk of uncollected dividends with the profit from

providing materials and equipment.

Participation by Japanese banks should also be considered. The interest rates of Japanese banks are lower

than those of Indian local banks at present, which is to the SPV’s advantage for profit growth. Nevertheless,

there are risks in this respect in relation to currency exchange fluctuation and also because low interest rates

of Japanese banks are not guaranteed long-term.

In either case, it is necessary to optimize funding plans both in terms of risks and profitability from a mid- to

long-term perspective.

8-2

2. Provision of materials/equipment

Possible participation is considered in provision of low-cost filters to water recycling EPC and providing

tenant companies with an energy-efficient system for their ETPs .

It is probable that the low-cost filter is acceptable in India as it has been developed to meet the price range

for the local market. The energy-efficient system, on the other hand, has already been introduced in the

Indian market, and is highly likely to be suitable to the local demands as its engineering and on-site

installation involve cooperation with local companies.

3. Facility operation and management

With regards the management of water recycling, a basic plan is to employ main personnel at existing

CETPs.

Japanese local authorities have excellent skills and knowledge in safe and stable management of such plants,

and they are progressively transferred to the private sector due to the recent trend of private delegation of

operations. However, the high cost of employing Japanese personnel would hinder the profitability of SPV,

and so would the cost of training Indian counterparts.

For these reasons, Japanese companies’ involvement in the operational management is not expected at this

stage.

8-3

(2) Advantages of Japanese Companies in Project Implementation

(technology and finance)

1. Technological Advantages of Japanese Companies in Project Implementation

a. Water recycling (main component)

i. Competitiveness of foreign companies

Reverse osmosis filter (RO filter), that removes salt and other minerals from effluent, is one of the

main components in a water recycling system. The high pressure RO system (at about 6 MPa) is

widely known to be applied to seawater treatment.

For the CETP effluent of this project to produce industrial water, a low pressure (about 1 MPa) RO

filter is considered more suitable. This is because the effluent of CETP contains approximately one

tenth of the salt (electrical conductivity: 300-400 mS/m) of seawater. Also, a high recovery rate (pure

water produced out of the original effluent in amount) is desired in order to reduce cost and provide

the industrial water at affordable prices for the project’s target clients.

The US company Dow Chemical Company has the world’s largest market share in RO filters (34% in

2011 with revenue of 24 billion JPY; Fuji-Keizai Group 2012, “Reality and Future Prospect of Water

Resource Market”). Their offerings in RO filters include SG30LE and HSRO-390 (both with a

capacity of producing 10 MLD of recycled water: 8 inches in diameter). According to the data

provided by the company, these products can be adapted for purifying plant effluent and brackish

water, at the recovery rate of 15% and desalination rate of 99.5%.

There are other companies such as Woongjin Chemical (S. Korea; 2011 share 9%), Koch Membrane

System (USA; 2011 share 4%) and General Electric (USA; 2011 share 3%). The low pressure RO

filters provided by these companies are of similar specifications to Dow Chemical’s products, with

recovery rates between 10-15% and desalination rates at 99%.

Therefore, foreign companies appear to have adequate technologies to provide low pressure RO filters

for CETP effluent purification and recycling.

ii. Competitiveness of Japanese companies

In Japan, Nitto Denko Corporation and Torey Industries, Inc. manufacture RO filters. The former

holds the second largest global market share (22% in 2011 with revenue of 15.6 billion JPY) while the

latter ranks third (17% with 12 billion JPY). Thus, Dow Chemical and these two companies account

for 75% of the worldwide share.

Both Nitto Denko and Torey also produce low pressure RO filters that are comparable with Dow

Chemical’s in terms of specifications and performance. Therefore, Japanese companies are also

8-4

technologically competent in manufacturing low pressure RO filters for CETP effluent purification

and recycling, equaling those of foreign companies. Dow Chemical’s strength in the market is

attributed to the company’s sales power and brand reputation gained through its comprehensive

product range including ion-exchange resin and adsorbent for other types of water treatment systems

(Fuji-Keizai Group 2011, “Outlook of Key Companies’ Business Strategies to Challenge the

Expanding Water Business”).

Study Team (Fuji Electric) possesses the technology to improve recovery rate of the filter (20%) with

the desalination rate of 80%. Although the desalination rate is lower than the filters of the foreign and

other Japanese counterparts, the filter has enough capacity to purify CETP effluent, that is of a low salt

content. On the other hand, it has an advantage of reducing the initial and running costs (installation

and filter replacement) as the high recovery rate require fewer filters. They also have component

technologies such as (a) optimized design of RO system and (b) optimization of filter cleaning (less

frequent filter replacement), that would work provided that the company’s specialized RO filter were

deployed, thus leading to an overall life-cycle cost reduction and lower price of recycled water as a

result.

b. Energy-saving

i. Competitiveness of foreign companies

Overseas, inverter manufacturers leading the global market include Siemens and ABB. Their

high-profile reputation in the global market underscores the credibility of their technological

capability.

ii. Competitiveness of Japanese companies

Inverters produced by Japanese manufacturers are considered equal to their foreign counterparts. The

comparable quality of these products is assumed based on reviews of technological data and past

comparisons with non-Japanese competitors’ products.

Japanese companies also differentiate themselves through integrated systems of water recycling and

energy-efficiency systems.

2. Economic Advantages of Japanese Companies in Project Implementation

a. Water recycling (main component)

i. Competitiveness of foreign companies

Through interviews with local EPC operators, we found that Dow Chemical’s mainstream low

pressure RO filters (SG30LE and HSRO-390 families, both with a capacity of producing 10 MLD of

recycled water: 8 inches in diameter) were considered affordable and actually purchased in India.

ii. Competitiveness of Japanese companies

The interviews also revealed that low pressure RO filters by Nitto Denko and Torey were in a similar

8-5

price range and on an equal deployment level With Dow Chemical’s products.

Study Team (Fuji Electric) is pursuing further cost reduction to be better accepted in the Indian market

(patent application in progress).

b. Energy-saving

i. Competitiveness of foreign companies

We have investigated cases of inverter installation in the industrial field in India, for there is no

precedent in introducing inverters in the water treatment industry as stated in Chapter 3 Section 2. As a

result, we found that foreign companies such as Siemens and ABB had good track records of

delivering their products in India, and we concluded that they were economically acceptable.

ii. Competitiveness of Japanese companies

Study Team (Fuji Electric) and other Japanese companies do have actual deployment examples (in the

industrial field) in India, but they do not perform as well as their foreign counterparts. Their late entry

to the market is assumed to be the reason for their underperformance.

Conversely, Japanese companies including Fuji Electric are advantaged in the ETP market by the

prospect of earlier entry and commencing provision before foreign companies.

8-6

(3) Measures to Promote Orders to Japanese Companies

1. Construction of the structure in a public-private partnership

Considering the prospective growth of the economy and national population in India, and particularly in

Maharashtra, it is probable that there will be an increased demand for industrial water. Therefore, more

investment will be mobilized for new CETP construction and renovation/reinforcement of existing CETPs.

Japanese companies are in a relatively advantageous position in terms of advanced technologies relevant to

the tertiary treatment process in the water recycling process, as opposed to easily obtainable

facilities/equipment required for the primary and secondary stages in CETPs. Japan needs to develop a

structure to promote orders for Japanese companies through funding and technology by cooperation between

the public and private sectors.

a. Funding

Firstly, it is possible to utilize a grant in aid offered by the government of Japan not for this project itself,

but for the Indian government’s subsidy scheme. The Indian subsidies for CETP are granted by the central

government (50%) and state government (25%). One idea is for the Japanese government to offer yen

loans to supplement these public funding frameworks. Alternatively, it is worth considering to arrange

loans with Indian local banks, as the above-mentioned guideline for the sponsored scheme stipulates that

local banks in India must be involved in CETP construction. In either case, it is a viable option for the

government of Japan to offer policy support through funding that reinforces the central government’s

subsidy scheme, rather than supporting individual CETP projects.

Although the investment size for one CETP project is in the region of several ten million yen to several

billion yen, judging from past cases, the CETP market in India as a whole, over 28 states, is not

insignificant considering the fact that there are 26 CETPs in Maharashtra alone, and it will continue to

grow in future. Furthermore, the Japanese government’s support will be effective to secure orders for

Japanese companies as it promotes CETPs that require advanced technologies such as industrial effluent

treatment, which Japanese companies excel at.

b. Technology

As to technology, it is desirable to invite policy-making officials at the central and state governments to

workshops on technologies, demonstration sessions and plant inspection tours in Japan through publicly

available schemes offered by public bodies such as The Overseas Human Resources and Industry

Development Association (HIDA) and Japan International Cooperation Agency (JICA). It is also

important to consider from the viewpoint of technology deployment and proliferation some approaches to

researchers at NEERI and ITT as well as the technological evaluation officers at MIDCs and MPCBs.

2. Development of Local Partnership

Partnerships with local agents are indispensable for various reasons including obtaining licenses and

8-7

authorizations, official processes, cost reduction, and development of sales channels.

a. CETP Industrial Associations and board member companies

CETPs are usually managed by industrial associations (IA) in respective industrial parks, represented by

tenant companies as board members. IA participant companies connect their ETPs to the CETP for

treatment, and are thus involved in the CETP operation both as management and user. Where this is the

case, it is crucial to gain each board member’s understanding to pursue capital injection in the CETP’s IA

and direct investment in the CETP.

Networking with these tenant companies is also important from a long-term perspective because they are

prospective clients that may consider deployment of the energy-saving technologies offered in this project

to their ETPs.

b. Local EPC providers

To locally realize the technology offered in this project, collaboration with local EPC providers is also

necessary. Particularly important are relationships with local consultants and EPC providers that work

closely with currently operational CETPs considering that this project proposes upgrading (reinforcing)

existing CETPs, which would require working with existing systems. Continued negotiations will be

necessary in view of future opportunities to sign agreements, depending on the progress of the project.

c. Local consultants

In order to utilize the Centrally Sponsored Scheme of CETP operated by the Ministry of Environment &

Forests of the central government of India, we need to prepare a detailed project report (DPR) in the

format designated by the government. In this regard, there is an advantage in employing local consultants

who possess knowledge and experience in the preparation and application processes.

3. Proliferation and awareness raising concerning energy-efficient water recycling systems

a. Setting a clear strategic target by the government

The water recycling system needs the government’s clear strategic target for its proliferation and

promotion. Table 8-1-2 lists recycle water cases overseas, outlining roles of main providers and their cost

burdens. It suggests that, in many cases, governments take initiative in setting a clear top-down target for

recycled water use from the viewpoint of water resource conservation and implement facility building.

Conversely, in a bottom-up approach, designing an incentive structure for both providers (offering system

installment) and purchasers through, for instance, a grant scheme may be effective. During the field

research, Indian officials expressed views which indicated their preference for incentives such as cutting

the cost on power through using recycled water.

Board members of the CETPs and representatives of the companies with their own ETPs expressed their

interest in energy-efficiency that would realize savings on energy consumption, which account for the

8-8

majority of the operation and maintenance costs. Therefore, we are hopeful that the system offered in this

project will meet with high demand from individual companies with ETPs, as it offers high efficiency in

operation and energy consumption. The system itself would be supplied at prices acceptable in the local

market with the quality equal to that for the Japanese domestic market. Proactive marketing and

promotion of these advantages in India will be effective for gaining mid-to long-term clients.

Table 8-1-2 Cases of recycled water use outside Japan

No. Region/country Usage Main

providers

Users Descriptions

1 Perth, Australia Industrial Public

company

Industrial

park

-Costs for recycling water are levied from the

industrial park proprietors.

-The project was instigated due to the depletion of

groundwater and decline of rainfall so that the state

government of Western Australia set a strategic

target of recycling 20% of treated sewage by 2012.

2 Prato, Italy Industrial Private

sector

Industrial

park

-The city offers land for water recycling facilities

and treated sewage water for free, and a

management union consisting of members of the

industrial park levies fees from users.

3 Tilburg, the

Netherlands

Industrial Public

company

Industrial

park

-Offices of water supply and sewage services

equally invested to establish a recycled water

supplier as the third main provider.

-The initial cost of the water recycling facility was

provided by public funding, and the private sector

is charged for its use.

4 Peterborough,

UK

Industrial

(Power

Generation)

Private

sector

(Power

Plant)

-A waterworks company operating in the east of

England recycles effluent from a wastewater

treatment plant to secure resources for water

supply, and providing power plants with the

recycled water.

Source: Information by Ministry of Land, Infrastructure, Transport and Tourism, processed by Study Team

b. Considerations for existing operators

It is inevitable that water suppliers from original sources suffer profit loss when their customers switch to

recycled water. This issue impedes the promotion of water recycling systems.

However, introduction of water recycling systems is an effective solution urgently needed by India, where

securing water resources is paramount. In fact, Maharashtra is considering making recycled water use

mandatory.

8-9

The government of India needs to clarify the benefits and disadvantages in both cases of implementing

water recycling business and otherwise (e.g., depletion of water resources in the long term) and consider

optimizing the redistribution of water by purpose such as industrial, agricultural and drinking water.