Water 24.03.08

Water

A position paperVentureast Tenet Fund

The primary problem

14% of India’s population does not use an improved water source1 implies roughly 200 million people are not served. Though the number is big enough, we believe it does not capture the full picture because of the following: Large regional disparity exists Presumes installed base is same as service provision It leaves downtime unaccounted for It says nothing about quality of water or hours of supply (quantity) Transmission losses are high (CPHEEO standard: 15%, Actual

UFW: 40% to 50%) Poor quality of infrastructure Unauthorized tapping

1. UN Human Development Report 2007/2008

Access to Clean Drinking Water

The associated problems

Predominant source of drinking water: ground water. 80% of rural towns and cities rely on ground water for drinking water 56% of metropolitan, tier-I and tier-II cities either fully or partially

dependant on groundwater Regional disparity example: 92% of Karnataka relies on ground

water despite having two rivers Kaveri and Tungabhadra Majority of the river water is used for irrigation purposes

India is projected to enter the ‘water scarcity’ zone (groundwater below levels of consumption) by 2011 according to UNDP estimates

5.6 Billion working days and 443 million schooldays are lost annually because of lack of access to safe water and sanitation2

Due to water-related diseases like diarrhea, etc.

2. WHO estimates

Ground water is fast depleting

Water-related diseases are affecting productivity

Current solutions to the problem

Service models Short-term (1-3 years) System/component wise contracts Usually non-transparent Eg.: Hebbali village, Karnataka (India)

(D)BOOT | (Design) Build Own Operate Transfer model Long-term (10-20 years) Infrastructure development by operator Requires large investments Eg.: Tiruppur (India), Cochabamba (Bolivia)

Divestiture model Long-term (10-20 years) Complete transfer of power to private companies Eg.: Shivnath river, Chattisgarh (India)

Current solutions to the problem

Public utility Lack coverage High per capita cost per connection Quality of water is suspect

Packaged water Good availability in urban areas High cost Not available in rural areas at appropriate cost and quantity

Parameters of a sustainable water business model

1. Institutionally: Does it have democratic accountability?

2. Socially: Does it take care of the poor and disempowered and provide access to all?

3. Technically: Can it be managed and fixed locally by the institution in charge?

4. Financially: Can it recover atleast its O&M costs, plus add a little each month to a sinking fund?

5. Ecologically: Can the source provide good quality and quantity of water for a substantial period, say 20 years?

2 out of 4 business models in India and abroad have failed due to insufficient focus on parameters #1 and #3.

The inherent nature of a business model is to concentrate on #4 mostly and #3 and #5 as an interested party.

Case Study 1: Shivnath river, 1998

The 1998 project, the first case of water privatization in India, a 22-year renewable contract, with total expected cost of Rs 256 crore

The Project Supply water to the Borai industrial area along a 23-km stretch of Shivanath

river Players

Radius Water (Kailash Soni ) Chhattisgarh State Industrial Development Corporation

Outcome Radius Water supplied 4 million litres daily of water at the rate of Rs. 12.60

per litre to industries, the railway station and a railway colony The river, they say, has become inaccessible there's water but they are not

allowed to fish and bathe. A monopoly on the water supply in an 18-km radius Government announced that the scheme is constitutionally illegal Contract revoked

Government's contact was unembarrassedly catering to corporate interests.

Reason for failure: lack of democratic accountability

Case Study 2: Degremont, New Delhi 2004 Degremont – a subsidiary of the French water giant Suez – was

awarded a Rs 2 billion contract under a 10 year BOT agreement with the Delhi Jal Board (DJB) for a drinking water treatment plant in Sonia Vihar near New Delhi

The water treatment plant is expected to yield 635 million liters of drinking water a day Free source of water1; land, electricity and treatment cost free Fee for treating the water will be in excess of what the DJB will

charge the consumers when selling the water Free from transmission losses and revenue collection

assured purchase of treated water and productivity incentives once the plant begins operations

The DJB does not rule out an increase in water price

1. Through pipelines from the Upper Ganga canal of the Tehri Dam project

Status as on Sep 19, 2006: Degremont would operate the plant built by it on the basis of a design-build-operate contract for a term of 10 years.

Plant inaugurated by Sonia Gandhi

Case Study 3: Bolivia, Cochabamba, 1999 1999, A 40 year concession in Cochabamba Players

World Bank Bechtel and another Italy based International Water Company

Water User fees to be constant in dollars Outcome

Fees went to $20 per month (Household income $65) as local currency fell. Required permits for collecting rain water on roofs. Mass local protests organized into a coalition in defense of water and life. After weeks of intense protests, the government canceled the contract.

Bechtel sued Bolivia for $25 million dollars for canceling the contract.

Reason for failure: lack of democratic accountability

Case Study 4: BOOT, Tiruppur, 1995

INR 13 billion (USD 325 Mn from USAID and WB), to transfer water over a 55km long pipeline from the river Bhavani and supply 185 million liters of water per day to nearly 1,000 textile units and more than 1.6 million residents in Tiruppur and its surrounding areas

New Tiruppur Area Development Corporation Ltd. (NTADCL) specifically set up by Govt. to execute this project

A consortium including Mahindra & Mahindra, United International, North West Water, Larsen and Tubro and Bechtel for a period of 30 years

Revenue model: "fixed operation and maintenance fee" that will be recovered entirely from Tiruppur municipality.

According to a report, Rs. 45 per kl (1,000 liters) – unclear if this is the industrial pricing or consumer pricing.

According to another report, Rs. 3.50 per kl for consumers. Hedge fund created to fund the interest and operating expenses in case of

river drying up with no stipulations on amount of water withdrawal from the river on the consortium.

Current status: Unable to stabilize operations. Pricing is unclear. Citizens hatred is growing.

Case Study 5: Hebballi, Karnataka

A Danish International Development Assistance (DANIDA) project Method of operation:

Village Water Supply and Sanitation Committee (VWSSC) under the Gram Panchayat is responsible for the system

Members of the VWSSC are elected on an annual basis by all the villagers.

The accounts are submitted on a monthly basis to the Gram Panchayat and are audited under the Gram Panchayat system.

Democratic accountability and specific job responsibility for water and sanitation has been ensured.

Social considerations: There are 236 houses and families in the village. One hundred and

forty five families are recognized as Below Poverty Line (BPL) families, and have identification cards to this effect.


185 individual water connections have been given so far, and 5 common taps cater to the rest of the households. There is access to the piped water supply to all.

Special care has been taken of the Dalit families in the village by waiving connection charges, providing group connections and ensuring timely release of the same quality and quantity of water to them as to everybody else.

Existing bore wells with hand pumps continue to be available, and provide water for those who need it free. These are also maintained in good condition by the VWSSC.

Technical details Two bore wells provide water to an OH Tank of 56,500 lts capacity The bore wells have a 7.5 hp pump and an electrical system with a

separate transformer has emerged to ensure adequate and high quality power when required.


Distribution is then by gravity. The entire system is managed by one pump operator who has the

requisite technical skills to trouble-shoot minor maintenance issues. Every connection is metered (VWSSC took dealership for the

meters to reduce cost) Six months to build the entire system

Finance Actual cost of the project: Rs. 17 Lakhs (budget: Rs. 12.50 Lakhs) 85% came from DANIDA, 10% from people’s contribution, 5% from

Gram Panchayat Connection charge when initiated: Rs. 650/-. Now: Rs. 850/-

This essentially is for the meter and the chamber which houses it securely, as well as for drawing one power line to the household from the main line. One connection per meter is ensured and the terms of the connection are explained on a card given to each family.


Water tariff: Rs. 30 for first 8 kl and Rs. 5 for ever additional kl Bills are provided at the end of every month regularly, and payment is

collected within the next 10 days. The largest expenditure item on the O&M side is the power bill,

which is easily covered by the revenues generated. Staff salary is the only recurring cost. In 30 months since the project commenced, a small sinking fund of

Rs.30,000 has been created.

Reasons for success:

1. Involvement of locals from beginning helped get their buy-in for the project

2. Accountability for the system was transparent

3. Pricing was cheaper than contemporary models

Gaps in the current system

Inclusive development perspective Water is not a commodity that is used to make profits; it is a

fundamental right of every citizen of the country. Support for operation and maintenance of existing systems

Once a system goes down, it begins a downward spiral of payment defaults and lack of money for maintenance.

Water is used as an election plank Certain areas get water once every five years, before each election

and are subsequently forgotten. The elected representative, sometimes, gains from some areas not

being served and acts as a hurdle during implementation. Lack transparency in operations Education regarding water and sanitation

Popular myth: Villagers are not willing to pay for water

Successful models in India

Byrraju foundation 4P Model (Panchayat, Public and Private Partnership)

Quality check done at plant level in partnership with local colleges Water delivered at Rs. 1.50 for 12 lt can. Home delivery by rickshaw also

possible. 5 jobs created. 1 Plant head, 2 local youth as operators and 2 helpers. AMC with plant supplier.

Panchayat People (community) Private (foundation)

Permission to draw raw water Cost of equipment (Part) Selection and supply of app eqpt (incl part cost)

Allotment of Land (Free) Construction of building (500 sq. feet)

Technical guidance and supervision in setting up the plant and its ops.

Obtain power connection at concessional tariff

Participation of operation of plant and distribution

Testing of water and quality assurance


Byrraju foundation Cost of setting up a water plant : Rs 9 lakh for filration; Rs 15 lakh for reverse

osmosis Can generate upto 15,000 litres of water/day Cost of operations : Rs 20,000 p.m Breakeven achieved in 15-18 months @ Rs 0.12/litre pricing Reverse osmosis water used for farming/sanitation 51 Plants installed, 155 villages served, 8 Lakh people Surplus generated from the plant is used for the good of the village Results

Drop in patient visits to foundation’s health centre: 30% Savings in cost of medicines incurred by foundation: 22% Livelihood generated for unemployed youth: 4-6 per plant


WaterHealth International projects The average WaterHealth Centre is designed to provide a community of

3,000 residents with up to 20 liters of safe, affordable drinking water per person per day

Bomminampadu, Akividu and Suryanarayanapuram villages in AP Services offered:

Site assessment and preparation Conveyance of raw water from source to treatment facility Turnkey assembly, installation and validation of water treatment equipment and

civil works A modern, aesthetically designed and landscaped civil structure that also serves

as a gathering place for the community Provision of specially designed water containers that minimize the potential for

recontamination during customer use and storage Extended maintenance contracts to keep quality and operating standards high Recruitment, hiring, and training of local residents to operate facilities Overall management of Centres Ongoing education programs on health and hygiene

Willingness to pay1

Legacy issues exist ‘Do not automatically pay money for water every month’

Are willing to pay only if they get assured supply of water in time. In case of shortfall there is unwillingness to pay the due amount. Unwilling to pay for use of a community tap.

The elite and well-off are willing to pay extra sum of money (more than their due monthly amount) towards keeping the system up (maintenance charges, etc.) to reduce the burden of workload on the womenfolk of their house.

Corruption is still a hurdle in these community-driven systems.

1. A Wateraid report on research in Rural Madhya Pradesh

Like any other customer, they want value for money

Perceived definition of quality1

Parameter Expression

Taste Water should be sweet

Water not potable because it is bitter/ salty

Water is so salty that a bird would die if it drinks water

Temperature Water should be cool

Odour Water should be odourless

Effect on cooking Rice and dal are not properly boiled

Colour of rice Rice turns black when cooked

Quenching of thirst Water is not able to quench thirst

Colour of water Water is red or yellow in colour

Physical Water has dirt/ presence of visible bacteria

Washing of clothes Clothes do not get clean/ clothes get torn

Deposits in water container

Leaves white deposit in the container it is stored

1. A Wateraid report on research in Rural Madhya Pradesh

A few numbers in perspective

Population to be served : 14% of 1.4 Billion = 196 million

Average Per capita water consumption

: 1 lt. per day (CPHEEO Norm: 80 lts for all purposes, drinking is more than 1%)

Total addressable rural market (@ 0.12 Re per litre)

: Rs. 846 crores

Total Industry size for drinking water (incl urban)

: Rs. 48,000 crores

%age being addressed now through packaged drinking water

: 6.25% (Rs. 3,000 crores)

Our Business Model

Create a BOOT business to supply water in HDPE cans Capital expenditure by parent company Own and operate till break-even point Transfer to locally trained people AMC will be managed by parent company Byrraju foundation can help in setup for equity stake in business

First steps Cover 2 villages with a population of around 5,000 each To validate:

Cost of installation Pricing BEP Time for adoption

Our Business Model

Cost structure Capital cost : Rs 50 lakhs

Rs. 9 Lakhs for filtration plant Rs. 15 Lakhs for RO plant

Operational cost : Rs 5 lakhs (for 1 year) Rs. 20,000 per month

Cost of promoter : Rs 15 lakh Other expenses : Travel/etc Rs 5 lakh Contingencies : Rs 5 lakh TOTAL: Rs. 80 Lakh for 2 locations (for 1 year)

Considerations before setting up

Early formation of a committee (adequate rep from village) Type of scheme Mode of water supply (pickup/ distribution/ any other) Method of construction Initial contribution – cash or labour? Method of payment to cover O&M expenses Daily maintenance and cleanliness of the system

Hygiene education Community contribution

Labour for constructing the plant Financial contribution towards initial cost/ fund for future

maintenance


Cost of O&M Salaries

Office staff and caretakers Maintenance

Labour costs Material for repairs Fuel Electricity

Office costs Maintenance – structure and

equipment Stationery and printing

Transport cost To ship people for repairs

Consultants – for setting up and management

Training Rickshaws (for delivery)

Maintenance Labour


Payment for water Essential that the community realises that water needs to be paid for Decision on payment system:

Payment per can means lot of day-to-day cash will need to be handled Payment per month gives rise to a lot of cash to be paid at once – might

lead to default

Water 24.03.08

Technology

Transcript of Water 24.03.08