Athena Combined

Public Private Partnerships In Urban Water Supply And Municipal Solid Waste Management Potential and Strategies
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Public Private Partnerships In Urban Water Supply And Municipal Solid Waste Management Potential and Strategies
Authors Arslan Aziz Ankit K Chatri Saloni K Shah
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Public Private Partnerships in Urban Water Supply and Municipal Solid Waste Managemet: Potential and Strategies All Rights Reserved, Athena Infonomics ISBN: Athena Infonomics India Private Limited Mena Kampala Arcade 113-114, 6th Flor B-Block Sir Theagaraya Road Chennai 600 017 Tamil Nadu Website: www.athenainfonomics.in Published by
Typeset by DSM Soft (P) Ltd., Chennai Printed at
The information contained in this book prepared by Athena Infonomics India Pvt. Ltd. is furnished for information purposes only. While every effort has been made to ensure the accuracy of information presented in the book, Athena Infonomics India Pvt. Ltd. makes no representations or warranties regarding the accuracy or completeness of such information and expressly disclaims any liabilities based on such information or on omissions there from. The material presented in the book can be used in academic or professional work with appropriate citation.
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Contents
List of Exhibits List of Figures List of Boxes Foreword Preface Methodology EXECUTIVE SUMMARY Part I Public Private Partnerships in Urban Water Supply: Potential and Strategies Chapter 1 1.1 1.2 1.3 1.4 1.5 Evolution of Urban Water Supply Sector
ix x xv xvii xix xxiii
1 3 3 4 9 10 11 15 15 15 18
Urban Water Supply Sector in India Institutional Framework Policy Framework Water Supply Value Chain Chronicle of Public Private Partnerships in Urban Water Supply Current State of the Urban Water Sector
Chapter 2 2.1 2.2 2.3
Service Level Benchmarks Sources of Drinking Water Non-Revenue Water
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ContentS
Chapter 3 3.1 3.2
Future Potential for PPPs in Urban Water
21 21 24 27 28 30 31 33 33 37 39 39 45 51 57
Future Investment Requirements Sources of Financing Strategic Framework for Successful PPPs in Urban Water Sector
Chapter 4 4.1 4.2 4.3 4.4 4.5
Role of Public Sector Role of Private Sector Community Participation Risk Allocation Financial Sustainability Concluding Remarks
Chapter 5 Appendix I 1. 2. 3.
The Tirupur Water Supply Project The Karnataka Urban Water Supply Improvement Project The Khandwa Water Supply Project
References Part II Chapter 1 1.1 1.2 1.3 1.4 2.1 2.2 Defining Municipal Solid Waste
xxix 61 64 65 67 75 75 78 85
MSW Quantities and Characteristics MSW Value Chain Institutional Framework for MSW Management MSW Management Partnerships by ULBs Current State and Gaps Existing Performance Standards Factors Contributing to Poor Service Delivery Private Sector Participation in SWM
Chapter 2
Chapter 3 vi
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ContentS
3.1 3.2 3.3 3.4
Need for Private Sector Participation Potential for Private Sector Participation Strategies for Private Sector Participation Public-Private Partnership Models: Issues and Lessons Conclusion and Future Measures
85 89 94 103 121 123 127 131
Chapter 4 Appendix II References Index
vii
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PART I
LIST OF EXHIBITS
Exhibit 1.1: Exhibit 1.2: Exhibit 1.3: Exhibit 1.4: Exhibit 1.5: Exhibit 1.6: Institutional Framework of Urban Water Sector Components of JnNURM Sample Institutional Structure of a State (Tamil Nadu) Broadening Scope of National Water Policy Value Chain of Urban Water Supply Evolution of Private Sector Participation in the Urban Water Sector 5 6 8 9 11 12 16 20 28 32
Exhibit 2.1: Service Level Benchmarks and Average Performance of ULBs Exhibit 2.2: Exhibit 4.1: Exhibit 4.2: Potential Annual Revenue Lost due to Non-Revenue Water Strategic Framework for Successful PPP Implementation Stakeholder Map of Byrraju Foundation of Drinking Water Supply
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LIST OF FIGURES
Figure 1.1: Figure 1.2: Figure 1.3: Figure 2.1: Figure 2.2: Figure 2.3: Figure 3.1: Figure 3.2: Figure 3.3: UIG Funds Allocation UIDSSMT Funds Allocation Investment Outlay & Source of Financing Urban Infrastructure in the 11th Five Year Plan Sources of Drinking Water for Indias Urban Households Sources of Drinking Water in India (2011) Non-Revenue Water Supply in a Typical Urban City in India Investment Requirements in the Urban Water Sector (In `Crores) Total Investment Required for Sewage Systems Per Capita Investment Required for Different City Classes (In `) 7 7 14 17 18 19 21 22 23 24
Figure 3.4: Investment Requirement in Class IA and IB Cities
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LIST OF BOXES
Box 1.1: Box 1.2: Box 4.1: Box 4.2: Regulatory Institutions 24*7 Water Supply is Possible Water Health Centres Pricing of Water 8 13 32 35
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PART II
LIST OF EXHIBITS
Exhibit 1.1: Exhibit 1.2: Exhibit 2.1: Exhibit 3.1: Exhibit 3.2: Exhibit 3.3: Exhibit 3.4: Exhibit 3.6: Exhibit 3.7: Exhibit 3.9: Exhibit 3.10: Exhibit 3.11: Forms of Partnerships by ULBS Centralized and Decentralized Waste Management Systems at a Glance MSWM Service Level Benchmarks and Average ULB Performance Pre and Post Private Sector Participation in SWM in a few Cities/Towns Major Determinants of Financial and Operational Model of MSWM Daily Waste Generation ion Class I Cities in India Waste Generation in Cities in India Strategy for large Cities (Population > 1 million) Strategy for Small Cities (Population > 1 million) Composition of Waste in India Centralized vs. Decentralized Solid Waste Management Systems Increasing Scope of PPPs in Hyderabad 68 73 76 88 95 96 96 97 99 100 101 101 104 112
Exhibit 3.5: Availability of Central and State Grants
Exhibit 3.8: Availability of Land in Indian Cities
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LIST OF FIGURES
Figure 1.1: Figure 1.2: Figure 1.3: Figure 1.4: Figure 1.5: Figure 1.6: Figure 1.7: Figure 2.1: Figure 2.2: Figure 3.1: Figure 3.2: Figure 3.3: Figure 3.4: Figure 3.5: Figure 3.6: Figure 3.7: Figure 3.8: Figure 3.9: Figure 3.10: Figure 3.11: Figure 3.12: Total and Per Capita Waste Generation Per Capita Waste Generation (2011): A Few Select Countries MSW Characteristics (1996 and 2005) MSW Value Chain Institutional Framework for MSW Management Stakeholder Map of Integrated SWM Project at Guwahati Community-Based For Profit Decentralized SWM Systems Status of MSW Management Class IA, IB & IC Cities Backlogs of Service Level Benchmarks MSW Generation: Past, Present and Future (MTD) Future Land Requirement for Landfill in India Combined Budgetary Transactions Centre and States (` Crores) SWM Projects at State Level undertaken as Public Private Partnerships Investment Requirement in SWM in India 2031 (In ` Crores) Sharing of Project Cost: JnNURM Funded SWM Projects State-wise Investment underway through JnNURM MSW Management Services Market: Revenue Forecast (200813) MSW Management Services Market: Revenue Breakup Value Chain Wise Financial Equilibrium Trap of ULBs Structure of the PPP model in Tirupur Value Chain for Processing and Disposal of Waste 62 63 63 64 66 70 71 77 78 86 86 87 90 92 92 93 94 94 98 106 110
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LiSt of figureS
Figure 3.13: Figure 3.14: Figure 3.15: Figure 3.16: Figure 3.17: Figure 3.18:
Value Chain for Collection and Transportation of Waste Stakeholder Model of a Reverse Integrated Solid Waste Management Project Timeline of ISWM in Hyderabad Stakeholder Map of MSW Management in Hyderabad Sharing of Solid Waste in Hyderabad Stakeholder Map of Timarpur-Okhla Integrated Waste Management Project
110 111 113 113 114 116
xiv
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LIST OF BOXES
Box 1.1: Box 1.2: Box 2.1: Box 2.2: Box 2.3: Box 3.1: Box 3.2: Salient Features of MSW (Management & Handling) Rules, 2000 Waste Concerns Integrated Resource Recovery Centre Solid Waste Management in Berhampur (Odisha) Solid Waste Management in Nashik (Maharashtra) Waste to Energy Plant- Municipal Corporation of Delhi Indias Experience with Composting Level of Citizens/Community Participation
65 74 79 80 83 102 105
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Foreword
Public Private Partnerships as a policy tool is finding increasing acceptance, as an alternate mode of service delivery, in India. The Government (both Centre and state) have been actively promoting PPP models for infrastructure development over the last decade and there have been more than 1000 PPP projects (in various sectors) for which concessions or other forms of contracts have been awarded. Most of the PPP projects awarded over the last decade are observed to be in key sectors such as power, highways, ports and airports, where the relative complexity of asset building has resulted in the formulation and standardization of workable PPP structures and risk allocation mechanisms. The experience gained from implementing PPPs in these sectors has provided governments with sufficient confidence to take such partnerships to newer sectors like Urban Water Supply and Solid Waste Management. While the Water and Sanitation sector in India is in dire need of service improvements through investment in infrastructure and managerial efficiencies, it continues to be seen as being less amenable to attract private finance and innovation, owing to a complex interplay of sector specific factors such as high upfront capital costs, operational criticalities, low willingness to pay for improvements in service, poor state of ULB finances and inadequate institutional reformatory measures. This book recognizes the key challenges associated with harnessing private finance and efficiencies in lagging sectors such as urban water supply and municipal solid waste management and outlines the key parameters that one must consider while exploring PPP opportunities in the same. It establishes that while PPPs present a useful alternative for governments to unlock critical bottlenecks, the choice of adopting the right mode of procuring or delivering the service, is one that must be made diligently, with great emphasis on the sustainability of the process and the value generated from the outcomes.
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foreword
The research outputs generated in this book, will in turn feed into detailed PPP toolkits for Urban Water Supply and Municipal Solid Waste Management. The toolkits will be designed as easy-to-use decision manuals that empower ULBs to better structure, design and implement PPP models in sectors like urban water supply and municipal solid waste management.
S. Narayan IAS (Retd.)
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Preface
This book is part of a broader research exercise that aims to provide implementation guidelines and policy recommendations for catalyzing PublicPrivate Partnerships (PPPs) in the social sectors viz., urban water supply, municipal solid waste management and skill development. This book attempts to describe the status of urban water supply (UWS) & municipal solid waste management (MSWM) in India, highlights key issues & challenges faced by various stakeholders in the space and gauges the potential for private sector participation in managing and delivering these municipal services. The book also describes strategies that can be pursued by ULBs while planning for management of water supply and municipal solid waste. The rest of the book is structured as follows: PART I OF THE BOOK DEALS WITH PPPs IN THE UWS SECTOR AND PART II DEALS WITH PPPS IN THE MSWM. In Part I, Chapter I discusses the governance structure, especially the role of the central & state government and the private sector in provisioning of water, maps the features of the National Water Policy along with the evolution of PPPs in the sector. Chapter II presents the current status of service delivery in terms of the Service Level Benchmarks prepared by the Ministry of Urban Development. Chapter III gives the estimated investment requirement for the future and also the plausible sources of financing the same. Chapter IV gives a strategic framework for implementing PPPs with efficient allocation of project risks. Lastly, Chapter V summarizes the main issues and concludes with future steps. THE PART II OF THE BOOK IS ORGANIZED AS FOLLOWS: Chapter I describes the definition and related concepts of MSW waste quantity and characteristic in India, maps the institutional framework for management of
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P r e fa C e
MSW in the country and discusses the existing waste management practices. In Chapter II, the current status of MSW management and the associated factors for poor service delivery has been discussed for each segment of the MSW valuechain. Chapter III gauges the potential for public private partnerships (PPPs) in municipal waste management sector and discusses the strategic framework to enhance PPPs for improving efficiency and leveraging private capital wherever required. Finally Chapter IV concludes with next steps and the way forward.
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Acknowledgements
This book would not have been possible without the cooperation of experts and practitioners of Public Private Partnerships in the Urban Water Sector and Municipal Solid Waste Management of India. Their willingness to share their experiences has helped us ground this book in practical insights. In particular we would like to thank all the participants at the National Conference on Public Private Partnerships in Urban Water Sector, held in Chennai on 20th March, 2012. These include, Dr. K.P. Krishnan, Secretary, Economic Advisory Council to the Prime Minister of India; Mr. Suresh Prabhakar Prabhu, Member of Parliament & Former Chairman, Task Force for Interlinking of Rivers; Mr. S. Krishnan (IAS), Secretary to Government, Finance Department (Expenditure), Government of Tamil Nadu; Prof. Ashwin Mahalingam, Assistant Professor, IIT Madras; Mr. R. Raghuttama Rao, Managing Director, ICRA Management Consulting Services Ltd.; Prof. V. Srinivas Chary, Director, Centre for Energy, Environment, Urban Governance, Administrative Staff College of India; Mr. K.. Rajivan, IAS (Retd.), Former Managing Director & CEO, Tamil Nadu Urban Infrastructure Financial Services Ltd.; Mr. A. Rajagopal, Project Director, PRIA Foundation for Research & Development; Mr. Anand Madhavan, Head Urban and Infrastructure Finance, ICRA Management Consulting Services Ltd.; Mr. Gourishankar Ghosh. IAS (Retd.), Former Executive Director, Water Supply and Sanitation Collaborative Council, WHO, Geneva; Mr. Vibhu Nayar, IAS, Project Director, Irrigated Agriculture Modernization & Water Bodies Restoration and Management and Ex-Officio Secretary, Public Works Department, Government of Tamil Nadu; Mr. R. Ragunathan, Chairman, Indian Water Works Association, Chennai Centre; Mr. Madhu Krishnamoorthy, Head Business Development, Water Health India Private Limited; Ms. Aparna Rajkumar, Member, Siruthuli, Coimbatore; Ms. Thangam Sankaranarayanan, IAS (Retd.), Chairman, New Tirupur Area Development Corporation Ltd.; Mr. Raman, IAS, Former Chairman and Managing Director, Ennore Port Ltd.; Mr. K.A. Joseph, Regional Director, Veolia Water India Pvt. Ltd; Mr. J. Venkatesh,
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aCknowLedgementS
Deputy General Manager, Fitchner Consulting Engineers India Private Ltd.; Mr. L.V. Keshav, Director, Ion Exchange Enviro Farms Ltd. and Mr. Pranab Kumar Majumdar, General Manager, VA Tech Wabag Ltd. We would also like to thank Mr. M. J. R. Chowdary, Zonal Manager, Veolia Water India Private Ltd. and Mr. K.S.N. Rao, Vice President (Projects), Vishwa Infrastructures. We also thank all the participants at the Workshop on Public Private Partnerships in Municipal Solid Waste Management, held in Chennai on 26th March, 2012. Mr. G. Dattatri, former Chief Urban Planner, Chennai Metropolitan Development Authority (CMDA), Dr. Ashwin Mahalingam, Assistant Professor, IIT Madras; Mr. T. Vijay Anand, Asst. General Secretary, ExNORA International; Mr. R. Sarto, CEO, Integrated Waste Management & Urban Services Company, (IWMUST); Mr. Narendra Babu, Managing Director, Venner Organic Fertilizer (P) Limited.; Mr. K.S. Ramachandran, CEO, Popular Carbonic Pvt. Ltd.; Dr. Sultan Ahmed Ismail, Head Department of Biotechnology, The New College; Ms. Naina Shah, Independent Environmental Services Expert, Mr. Swaminathan Krishnamoorthy, Associate Director, Climate Change and Sustainable Services, Ernst & Young Ltd.; Mr. Narasimhan Santhanam, Director, Energy Alternatives India; Mr. Amalan, Independent Solid Waste Management Consultant. We would like to thank Mr. Satya Adamala, Executive Assistant to the CEO, Ramky Enviro Engineers Limited; Mr. A. N. Satish Chandra, Vice Presidents (Projects), IVRCL; Mr. K. H. K. Prasad, Chief Operating Officer Water & Environmental Projects Division, IVRCL and Mr. Yogesh Rattan, Senior Executive of Business Development, A2Z Infrastructure Ltd.; Mr. M. J. R. Chowdary, Zonal Manager, Veolia Water India Private Ltd. and Mr. K.S.N. Rao, Vice President (Projects), Vishwa Infrastructures. for providing valuable information for preparing the case studies. We thank our advisors, Dr. S. Narayan, former Finance Secretary, Government of India; Mr. Devasahayam (IAS Retd.); Ms. Revathy Ashok, CEO and Founder Iris Consulting; and Mr. G. Dattatri, for their guidance. We thank Mr. A.S. Bhal, Economic Advisor, Ministry of Urban Development, Government of India for his inputs on key aspects pertaining to the policy and implementation of urban infrastructure programs. We also thank the British High Commission for their financial support for undertaking this study. In particular we thank Ms. Aarti Kapoor, Programme Manager, British High Commission, New Delhi for her constant encouragement during the project.
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Methodology
PART I This study began with extensive research on existing literature concerning different facets of the urban water sector in India. This encompassed the evolution of urban water supply and sewerage practices in India, the changes in the policy & institutional framework and the underlying problems in the sector, with special emphasis on the role of Public Private Partnerships in the delivery of urban water supply In order to assess the challenges and opportunities associated with the use of Public Private Partnership models in Urban Water supply, a series of experts such as the private concessionaires, operators, financiers, academicians, transaction advisors and among others were interviewed in addition to the collection and analysis of secondary information from previous case studies and documents. Further, to understand the potential and strategies for such public private partnership models in the urban water supply and sewerage sector, a national conference on Public- Private Partnerships in Urban Water Supply was conducted on 20th March 2012 in Chennai. 25 experts including policy makers, private water management companies, consultants, financial institutions, and non profit organizations presented their thoughts and shared their experiences in this sector. There were four panel discussions on different themes, focusing on policies and governance issues, financial sustainability of the project, relevance of community participation and project procurement and implementation issues. This book is an output of the various efforts described above. PART II The methodology adopted to assess Municipal Solid Waste Management (SWM) practices in the urban sector constitutes a well-balanced mix of theory and practice. The theory underlying the key conclusions/findings was developed by undertaking an extensive review of extant literature. In addition
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methodoLogy
to the inferences drawn from secondary research, insights were gathered from practitioners of Public Private Partnerships in Solid Waste Management, through a number of primary interviews and focused group discussions. Here four solid waste management projects undertaken via the PPP mode were chosen and the issues faced by stakeholders in each of the chosen cases were documented and lessons were drawn. A workshop on Potential and Strategies for Public Private Partnerships in the Municipal Solid Waste Management Sector was organized on 26th March, 2012 in Chennai, to discuss the issues and challenges faced by stakeholders in adopting PPPs. The workshop brought together a distinguished group of professionals comprising of private waste management companies, academics, environmental organizations and citizen representatives. A quick perusal of PPP practices in MSW and inferences gathered from our primary and secondary research, display the presence of two broad contending PPP approaches in the SWM sector namely centralized (technology driven) and decentralized (community driven) models. The specific pre-requisites and conditions that support one system/practice over the other has been analyzed in greater detail in the book and the merits and the demerits of centralized waste management approaches vis-a-vis decentralized community based waste management practices and their potential to co-exist in varying urban contexts has been explored.
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EXECUTIVE SUMMARY
Part I PPPS IN URBAN WATER SUPPLY Urban Water Supply in India The state of the urban water sector in India is abysmal a study undertaken by the Ministry of Urban Development (MoUD) on a sample of 28 cities observed that most cities received an average of 3.3 hours of water per day compared to a benchmark of 24 hours and also scored poorly on parameters such as coverage, quality and efficiency. With urbanization rates expected to witness a steep rise, the problem of delivering reliable and affordable water supply services in urban areas is expected to further deteriorate. Observations from secondary research display that the number of urban households, in India, grew at a Compounded Annual Growth Rate (CAGR) of 3.92% between 2001 and 2011. The recently released National Sample Survey Organisation (NSSO),2011 data on household amenities shows that in order to meet the requirement of the additional households over the last decade, the provision of drinking water via different sources increased at a CAGR of 4.2% for tap water, 1.69% for well water, 3.62% from hand pumps and tube wells and 4.9% from other sources1. Even though the number of access points for tap water has exhibited a higher growth rate than the rate of growth of urban households, only 60-70% of the households in the urban areas have access to tap water. This implies that while the number of urban households has been growing at 3.9% per annum, on average the provision of drinking water grew by 3.6% per
Other sources of water include spring water, river/canal, ponds, lakes, private tanks and bottled water.
1
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P P P S i n u r B a n wat e r S u P P L y
annum2, resulting in a growing deficit in the provision of urban drinking water supply. Another standard indicator used to assess the state of urban water supply is the percentage of water produced that does not reach the end consumers also popularly known as Non-Revenue Water (NRW). On an average, the extent of non-revenue water (NRW) in India is 44.1%. This is much higher than the NRW of 15% in developed countries and the 20% that is set as the benchmark for Indian cities by the MoUD. These statistics, among others, point to the need for a significant intervention in the urban water supply sector, to improve resource allocation, enhance service delivery and alter the current management paradigm. Institutional Initiatives In India, the implementation of the water policy through programs and schemes identified by the central government, such as development of water infrastructure, operating, maintaining and regulating the water supply system and setting and collecting water tariffs, is carried out by the state governments and by parastatal agencies such as the Urban Local Bodies (ULBs). However the devolution of the responsibility for urban governance to urban local bodies has not happened to the extent desired, which has led to the performance improvement being limited or absent. This in-turn traces itself to the lack of adequate capacity building and the non-accountability of urban local bodies in implementing reforms successfully. While the central government has attempted to drive the necessary reforms through conditional allocation of funds through the Jawaharlal Nehru National Urban Renewal Mission (JnNURM) program, a revised and upgraded JnNURM, with additional guidelines for ULB reforms that are aligned to the new Water Policy3, currently in the draft form, would be necessary to provide a much needed impetus for achieving Service Level Benchmarks in water supply and sewerage. Public Private Partnerships: An Alternate tool Public Private Partnerships (PPPs) are complex arrangements involving multiple stakeholders with divergent interests. Before embarking on a project through the PPP mode, the project objectives must be set through a careful assessment of
Source: NSSO Data (2011) MOSPI, GOI. The policy framework governing the usage of water and development of the requisite infrastructure has evolved and broadened over the years. The current draft National Water Policy, broader in scope than earlier versions, recommends treating water as two distinct goods based on its usage a minimum quantity per capita that is necessary for subsistence should be provided at a heavily subsidized rate or for free, while water over and above this is treated as a scarce economic good with a corresponding price
2 3
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eXeCutiVe Summary
the current state of physical infrastructure and the level of service delivery and achievement of service level benchmarks in a phased manner must be planned in detail. Next, the roles of the different stakeholders in a PPP government, private sector, community, financiers, consultants etc. - need to be clearly defined and enforced through an incentive and penalty structure that aligns with project objectives. Viability of the project and appropriate risk allocation and mitigation mechanisms must be put in place. A successful PPP project in the water and sewerage sector would require that the entire capital costs, and as much of the operating costs as possible, be covered by central and state grants. Under the JnNURM, the total availability of funds depends on the size of the city. The deficit can be generated via user charges for those who can afford them. Anecdotal evidence suggests that the poor often pay much more for water, in absolute terms and in terms of opportunity cost, than the rich. A system that cross-subsidizes costs but provides uniform and high quality service, and is managed, governed and regulated by an urban local body, is necessary to eliminate such inequities. Way Forward Much work needs to be done to revamp the crumbling urban infrastructure in the country and provide universal access to basic services such as water and sanitation. PPPs in the urban water sector, if undertaken in a well-planned manner, and for the right reasons, is a viable alternative for solving some of the chronic problems faced by the sector. PPPs, as has been emphasized in this book, are not appropriate for every situation and should not be implemented indiscriminately. Selection of the appropriate model of private sector participation either through Engineering Procurement Construction (EPC) and management contracts or through Build Operate- Transfer (BOT) Toll/Annuity models is an important step in the project identification phase, but one that often does not receive the necessary attention. A detailed process of arriving at the appropriate model of private sector participation that includes exhaustive assessment of existing physical infrastructure, current performance on service delivery benchmarks, and the technical, operational and financial capability of the ULBs, needs to be developed. Further, realizing the potential of PPPs require a strong focus on execution from all the stakeholders. It is particularly important to undertake intensive capacity building of urban local bodies and implement reforms that make them accountable and responsible for achieving service level benchmarks in water supply and sewerage. A programmatic approach that integrates planning for urban water supply and sewerage at the state level, which is further broken into targets and objectives xxvii
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for cities that are stratified according to their size, is the overarching method of implementing change. Full achievement of the service level benchmarks should occur in a phased manner, where intermediate targets are set, based on a number of parameters, such as the state of existing physical infrastructure, the technical and operational capacity of the ULBs and the private sector, availability of finance, etc. The next phases of our research will develop an approach to identify the appropriate private sector participation model and develop guidelines for phasewise implementation for PPPs at the urban local body level.
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eXeCutiVe Summary
Part II PPPs IN MUNICIPAL SOLID WASTE MANAGEMENT Background Waste is a major health hazard that undermines peoples right to a safe life.4 All forms of waste municipal, bio-medical, e-waste, or industrial, if not treated and disposed carefully are a threat to the health of people as well as the environment. Anaerobic degradation of waste at landfill sites produces methane a greenhouse gas that is 20 times more harmful than carbon dioxide. Filth and garbage on streets facilitate spread of diseases like malaria, plague; making a significant dent on a countrys prospects of achieving the Millennium Development Goals (MDG).5 With waste generation rates set to more than double over the next twenty years in low and middle income countries, the costs of managing the waste is also expected to witness a steep rise, with cost increases being most severe in low income countries (more than 5-fold increases) followed by middle income countries (more than 4-fold increases). Observations made from secondary research also show that developing nations lag behind the developed countries when it comes to the efficient delivery of waste management services, despite the magnitude of expenditure remaining similar /comparable.6 This can be traced back to the differences in waste management practices observed across low, middle and high income countries. Low-income countries continue to spend most of their SWM budgets on waste collection, with only a fraction going toward disposal. In developing and transitional countries, while large investments are being made to improve the delivery of solid waste management services, lack of sufficient emphasis on reduction and segregation
India is a party to United Nations Universal Declaration of Human Rights (UDHR) which states that everyone has a right to life, liberty and security of person. Rights that relate specifically to the ability to live in good health are embedded in the declaration. See, Introduction: Safety as a Human Right in Peoples Right to Safety Health & Human Rights, Mohan D., (2003). 5 India has the highest incidence of TB in the world accounting for 20% of the total cases and the incidence of malaria being 1.51%. Source: MDG - Status of India Report 2010, MOSPI, GOI. 6 MacFarlane in his study on expenditure pattern on urban waste management by ULBs in major cities of the world found that cities in both developing and industrialized countries did v not spend more than 0.5% of the per capita GDP. Please refer to What a Waste: Solid Waste Management in Asia, World Bank (1999), for further details.
4
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at source, insufficient allocation of funds for processing and disposal, poor accountability owing to weak regulatory frameworks, presence of a large informal sector and unregulated markets for recyclables, have led to sub optimal utilization of capacities and poor service delivery systems. On the contrary during the last two decades, high-income countries have taken up recycling as an integral part of their waste (and resource) management systems, and have invested heavily in both physical infrastructures and communication strategies to improve their processing and disposal capabilities. This has proven to be an efficient alternative to expensive landfills, incineration and other treatment and disposal options. Municipal Solid Waste Management in India Current Status In India, the responsibility of waste management lies with Urban Local Bodies (ULBs) due to the public and local nature of the service. Since MSW is inextricably linked to urbanization and economic development, the nature and constitution of MSW in India differs greatly, when compared to MSW in other high-income countries.7 The composition of MSW at generation sources and collection points in India is observed to mainly consist of a large organic fraction (4060%), ash and fine earth (3040%), paper (36%) and plastic, glass and metals (each less than 1%).8 However, with most cities/towns urbanizing rapidly there has been a marked shift in the quantities and quality of waste generated across the country, in turn contributing to a rising deficit between the demand for MSW services and the current capacities among ULBs to service the same. In India, segregation and storage of MSW at source is lacking and the decomposable and non-decomposable wastes are often disposed off at a common communal dustbin/disposal centre. The collection efficiencies are also seen to be poor, at around 70% in most Indian cities and continue to be predominantly manual in nature.9 Transfer stations are rarely used and the same vehicle that collects refuse from the individual communal bins is also responsible for taking it to the processing
Please refer to (Gupta et al., 1998; Shannigrahi et al., 1997; Jalan and Srivastava, 1995) for further details 8 For details, please see, http://www.unc.edu/courses/2009spring/envr/890/002/readings/ SolidWasteIndiaReview2008.pdf 9 A key trend in collection of MSW that is unique to low to middle income countries like India is the presence of a large informal sector that plays an active role in collection. The rag pickers work day and night to collect the recyclable materials from the streets, bins and disposal sites for their livelihood, thereby significantly reducing the role of the Government in recovering secondary materials form the waste.
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eXeCutiVe Summary
or the disposal site. Collection and transportation activities constitute approximately 8095% of the total budget of MSWM; hence, it forms a key component in determining the economics of the entire MSWM system. On the contrary, disposal and treatment of waste is an underinvested area and open, uncontrolled and poorly managed landfills are a common feature across most Indian cities and town.10 Institutional Initiatives The overarching framework for management of MSW in the urban areas was created by the Ministry of Environment & Forest in 2000 with the enactment of MSW (Management & Handling) Rules, 2000 under the Environment Protection Act, 1986 that entrusted the ULBs with the responsibility of managing MSW. These rules, along with other legislations pertaining to plastic, bio-medical, hazardous and other wastes, aimed at instilling waste management practices that are safe and environmentally sound. Further, the 13th Finance Commission has enhanced the share of ULBs in the divisible tax pool and state governments and external funding agencies have enhanced budgets to support ULBs improve their waste management systems. Also, since the launch of JnNURM in 2005, Central Government grants are being channelized through the Urban Infrastructure Governance (UIG), and Urban Infrastructure Development Scheme for Small & Medium Towns (UIDSSMT) under JnNURM and the Finance Commission Grants. Private Sector Participation Despite the increasing focus on MSW management by state and central governments, providing affordable and sustainable waste management services is among the largest municipal challenges in India. The presence of a large informal sector that remains un-integrated into the formal waste management system coupled by inadequate mechanization owing to the poor financial health of the ULBs has made the management and delivery of a well structured MSW system a herculean task. In order to overcome the technical and financial deficiencies associated with the current system, state and local governments in India are increasingly resorting to the use of private contractors for collection, transportation and disposal and private capital to supplement the mechanization/improvisation process. In fact, private participation in the provision of MSW services is not new to India and several corporation/municipalities have employed private contractors for secondary transportation from the communal bins or collection points to the
A recent pilot study by Ministry of Urban Development to assess the performance of the ULBs relative to certain benchmarks in select cities and towns in the country showed that only 8% of the total MSW generated actually underwent scientific disposal.
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P P P S i n m u n i C i Pa L S o L i d w a S t e m a n a g e m e n t
disposal sites since 1985. However, the services provided for by the private sector then were contractual in nature and were confined to one or two segments of the MSW value chain. In recent times, the engagement of private sector participation has increased from short-term contracts to long-term partnerships. Close to 31 long-term BuildOperate-Transfer concessions have been awarded to the private sector till March, 2011 to manage solid waste in the country. However, despite the rising popularity of Public Private Partnerships in the management and delivery of MSW services, the institutional setting, governance and regulatory structures and market linkages (for recyclables/compost) are at a nascent stage, making the successful implementation of PPPs a challenging task. This is further complicated by the presence of a large informal sector (mainly consisting of rag pickers) that pre-dominantly remains outside the PPP framework. Thus the evolution of the MSW sector in India and the potential role that PPPs could play, given the local institutional and market dynamics, demands closer attention. Strategic Framework A quick perusal of the various PPP practices in waste management in India display the presence of two broad contending approaches namely centralized (technology driven) and decentralized (community based) systems of waste management.11 At one end of the spectrum, private players are engaged for either a segment or the entire value chain of solid waste management for handling of bulk waste with little or no community participation, while at the other end there are cases where Self-Help Groups (SHGs) or Resident-Welfare Associations (RWAs) partner with ULBs to manage waste in their own localities with or without assistance from other private entities. The choice of a decentralized model vis--vis a centralized system of management depends on location (size, density), economic and sociopolitical-cultural aspects of cities/towns. The quantity of waste generated, availability of external funds, current financial and human resource capacity and the potential internal resource generation capacity of the ULBs differ as per city size. For instance, the per capita waste
A centralized waste management system involves management of bulk waste by one or two entities. The processing of waste is done at a centralized facility and involves application of modern technologies like pellatization, mechanical composting, etc. A decentralized waste management system envisages management of waste within the vicinity of waste generation i.e., a ward or zone and involves community participation in all segments of the MSW value chain namely, collection & transportation, processing and disposal of waste. We elaborate the concepts in detail later in chapter I.
11
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eXeCutiVe Summary
generation in large cities is greater than that produced in relatively smaller cities and town but the ULBs in the latter category are eligible for a greater percentage of central government assistance in terms of overall project cost. On the contrary, large ULBs conventionally have higher potential to generate tax and non-tax revenue to become financially self-sufficient to management waste in the longrun. Therefore, these factors should be considered by the ULBs to determine the waste management model for the city or the town. The operational model of the MSW Management project can be centralized or decentralized waste management system depending upon the profile of the locality in terms of composition of waste, availability of land for processing waste, market linkages, health risks and extent of informalization of the waste management system. Centralized PPP models are suitable for urban areas where significant economies of scale are possible and the composition of waste allows for greater extraction of value from the waste through technological solutions. Health hazards due to inefficient waste disposal and non-availability of land in close proximity of localities are other two important factors to be considered while choosing a centralized waste management system. Depending upon the maturity of the private sector to manage different segments of the MSW value chain, the ULBs can partner with waste management companies. Decentralized PPP models are appropriate if the organic composition of waste is high, land for composting is available at appropriate locations, market for compost is accessible, risk for poor self-governance is low and possibility of integrating informal health workers into the system is high. This allows PPPs at the unit level where micro-entrepreneurs can work with the ULBs to produce compost or other value added products from the waste and the ULBs either on its own or through a bigger private partner manages the collection of refuse and maintenance of landfill sites. With adequate planning and inclusive stakeholder consultation it is even possible for both the centralized and decentralized waste management systems to co-exist. Thus the need of the hour is to think out of the box and diligently explore suitable mechanisms to address the issue of poor municipal waste management in the country.
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PART I PUBLIC PRIVATE PARTNERSHIPS IN MUNICIPAL SOLID WASTE MANAGEMENT Potential and Strategies
Athena_SWM Report_Final.indd 59
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CHAPTER ONE
DEFINING MUNICIPAL SOLID WASTE
Municipal Solid Waste (MSW) in India includes commercial and residential wastes generated in municipal or notified areas in either solid or semi-solid form excluding industrial hazardous wastes but including treated bio-medical wastes.1 Management of MSW consists of seven important steps, namelysegregation and storage of waste at source, primary collection, street sweeping, secondary storage, transportation, treatment & recycling and finally disposal of waste. The scope of this report is confined to municipal waste and excludes other forms of wastes like e-wastes, untreated bio-medical wastes and industrial wastes. 1.1 MSWQUANTITY & CHARACTERISTICS
India generates over 1,15,000 metric tons of municipal waste per day. Fig. 1.1 displays the waste generated in Class I cities in India.2 It also shows the per capita waste generation in these cities. Class IA and IB alone account for over 40% of the total waste generated in the country.3 The per capita waste generation is highest in Class IA cities followed by Class IB and IC cities. Indias per capita waste generation is relatively low compared to other developed nations. An average Indian generates 0.3 to 0.6 kg of waste per day whereas an average American generates 2 kg of waste per day.4 In Hong Kong, the situation is even grimmer as the per capita waste generation is 5.07 kg per person per day.
1 Please refer to MSW (Management & Handling) Rules, Ministry of Environment & Forest, GOI (2000). 2 Cities with population over 5 million are classified as Class IA; cities with population between 1 and 5 million as Class IB; and cities with population between 0.1 and 1 million persons as Class IC. Source: High Powered Expert Committee Report, GOI (2011). 3 The waste generated by six megacities is almost equal to the waste generated by 228 Class IC cities. 4 Please refer to What a Waste: Solid Waste Management in Asia, World Bank (1999), for further details.
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P P P s I N M U N I C I P A L S O L I D WA S T E M A N A G E M E N T
Figure 1.1 Total and Per Capita Waste Generation

Waste Generation in 2011 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Class IA Class IB Class IC 38790 33618 38959 700 600 500 400 300 200 100 0 Class IA Class IB Class IC 425 304 Per Capita Waste Generation (Grams per day) 608
Source: Estimated from Status of Water Supply, Source: HPEC Report, GOI(2011) Sanitation and SWM in UrbanIndia, Statistical Volume III, SWM 1999, NIUA(2005).
Fig. 1.2 shows the per capita waste Studies have indicated that for generation in select developed and every Indian ` 1,000 increase in income developing countries of the world. the solid waste generation increases by One reason for the low level of waste one kilogram per month Visvanathan generation in India is that much of the et al., (2003) recyclable items are sold to the recycling units at the household level itself through a network of kabadiwalas.5 India has a good waste recycling system and the informal sector plays a significant role in it. For example, in Pune 22 % of the total waste generated in the city is recovered by the informal sector.6 The nature of the waste generated in Indian cities is also different from those of the industrialized, high income countries. Studies have found a direct negative relationship between a countrys income level and the quantity of bio-degradable waste in the total waste generated. Compared to countries in the high income group, waste generated in India has a higher share of bio-degradable and inert items. However, the composition of municipal waste is India has seen a marked change over the last two decades, as is evident from Fig. 1.3. The proportion of
Informal workers engaged in buying of waste from households and other commercial establishments e.g., hotels, shops, etc are colloquially referred to as kabadiwalas in India. 6 Please refer to The Economics of the Informal Sector in Solid Waste Management, CWG (2011), for further information on the role played by the informal sector in waste management in 6 cities across the world.
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C H A P T E R O N E : D E f I N I N g M u N I C I PA l S O l I D W A S T E
Figure 1.2 Per Capita Waste Generation (2011): A Few Select Countries
Per Capita Waste Generation - Global Scenario USA Netherlands Brazil Australia UK China Philippines India 0 Kg per capita 0.5 0.7 0.7 1 1.5 2 0.8 1.3 0.21 1.4 1.4 1.9
Source: Compiled from various sources
Figure 1.3 MSW Characteristics (1996 and2005)

MSW Characteristics (1996)
Metal 0.49% Glass 0.6% Others Rags 7% 0% Paper 4% Plastic 1%
MSW Characteristics (2005)

Metal 1% Glass 1% Others 4% Rags 4% Paper 8% Plastic 9%
Bio degradables 42%
Bio degradables 48%
Inerts 45%
Inerts 25%
Source: Based on data available in Improving Solid Waste Management in India, D. Zhu, et al.,(2008)
non-bio-degradable material, metals, glass and plastic has increased significantly. Inert items that comprised around 45% of the total wastes in 1996 reduced to 25% by 2005. Changing lifestyles, increased industrial and construction activity combined with increasing levels of income has resulted in the changing composition of waste over the years. 63
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1.2
MSW VALUE CHAIN
The MSW value chain conventionally consists of three broad aspects, namely, collection & transportation (C&T), processing and finally, disposal of wastes. A holistic approach to waste management includes efforts to reduce the quantity of waste generated at all points i.e., waste reduction at source to reduction at disposal. The C&T system includes door-to-door collection of segregated waste from households followed by transportation to waste processing plants in covered vehicles. The processing of waste involves the application of appropriate technology, depending upon the quantity and quality of wastes, so as to reduce the overall quantity of waste reaching the landfill sites and to derive value from the wastes to the extent possible.7 Lastly, the refuse from the processing plant is collected from the waste processing plants and disposed in scientifically engineered landfills. Every segment of MSW management entails cost and hence there is a need to manage all three segments of the MSW value chain in the most efficient manner. The cost nodes of the MSW chain are depicted in Fig. 1.4 provided below. In India, the state of MSW however deviates from the above prescribed process. In India, segregation and storage of MSW at source is lacking and the decomposable and non-decomposable wastes are often disposed off at common communal dustbin/disposal centre. The collection efficiencies are also seen to be poor, at around 70% in most Indian cities and continue to be predominantly manual in nature.8 Transfer stations are rarely used and the same vehicle that collects refuse form the individual communal bins is also responsible for taking it to the processing or the disposal site. Collection and transportation activities constitute approximately 8095% of the total budget of MSWM; hence, it forms a key component in determining the economics of the entire MSWM system. On Figure 1.4 MSW ValueChain
Waste Generation & Segregation Collection & Transportation
Processing
Disposal
Several technological alternatives have been available in recent times like incineration, pellatization, bio-methanation that allow conversion of waste in to useful products like electricity that have commercially saleable value. 8 A key trend in collection of MSW that is unique to low to middle income countries like India is the presence of a large informal sector that plays an active role in collection. The rag pickers work day and night to collect the recyclable materials from the streets, bins and disposal sites for their livelihood, thereby significantly reducing scope of recovering secondary materials form the waste.
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the contrary, disposal and treatment of waste is an underinvested area and open, uncontrolled and poorly managed landfills are a common feature across most Indian cities and town.9 1.3 INSTITUTIONAL FRAMEWORK FOR MSW MANAGEMENT
The overarching framework for management of MSW in the urban areas was created by the Ministry of Environment & Forest in 2000 with the enactment of MSW (Management & Handling) Rules, 2000 under the Environment Protection Act, 1986 that entrusted the ULBs with the responsibility of managing MSW. Box 1.1 summarizes the key features of the MSW rules. These rules, along with Box 1.1 Salient Features of MSW (Management & Handling) Rules,2000 Municipal Solid Waste (MSW) includes commercial and residential wastes generated in municipal or notified areas in either solid or semisolid form excluding industrial hazardous wastes but including treated bio-medical wastes. Prohibition on littering of MSW in cities, town, notified urban areas. Bio-Medical and Industrial waste not to be mixed with MSW. Responsibility of waste generators to avoid littering and ensure delivery of waste in accordance with the collection and segregation notified by municipal authorities Municipal Corporations shall undertake awareness campaigns for source segregation of MSW. Prohibition on manual handling of wastes. The storage facilities set up by municipal authorities shall be daily attended for clearing of wastes. Municipal authorities shall adopt suitable technology or combination of such technologies to make use of wastes so as to minimize burden on landfill. (Compositing, incineration, etc.) Land filling shall be restricted to non-biodegradable, inert waste and other waste that are not suitable either for recycling or for biological processing. The municipal authority shall undertake phased programme to ensure community participation in waste segregation.
A recent pilot study by Ministry of Urban Development to assess the performance of the ULBs relative to certain benchmarks in select cities and towns in the country showed that only 8% of the total MSW generated actually underwent scientific disposal.
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Figure 1.5 Institutional Framework for MSW Management

Ministry of Environment & Forest Ministry of Urban Development (CPHEEO)
(MSW Management & Handling Rules 2000)
(JNNURM Funds Service Standards Norms/Benchmarking 2008)
Central Pollution Control Board
Rules for scientific management of MSW
Formulates policy, prepares guidelines, sets benchmarks and provides funds
Monitors SPCBs and workings of ULBs
State Governments
(Urban Development Departments/State Pollution Control Boards Policy Directive, funding and monitoring
PPP
Regional Level SWM Facilities

(E.g. Gujarat, Tamil Nadu)
Multilateral Agencies
(Capacity Building and Funding)
Urban Local Bodies

(Service delivery through PPP or self)
PPP/CPP
Municipal Level SWM Facilities

(E.g. Hyderabad,Chennai)
Source: Athena Research
other legislations pertaining to plastic, bio-medical, hazardous and other wastes, aimed at instilling waste management practices that are safe and environmentally sound. Fig. 1.5 presents an overview of the institutional framework that governs MSW practice in the country. The Ministry of Urban Development (MoUD) issues policy guidelines from time to time and administers the Sub-Mission for Urban Infrastructure and Governance, which has MSW as one of its thrust areas. Pollution control boards at the central and state level monitor the compliance with service delivery benchmarks as set by MoUD. The MSW Rules have set responsibilities for ULBs, State governments and Central & State pollution control boards for different aspects of MSW management. While the rules make ULBs responsible for their implementation and for any infrastructure development relating to collection, storage, segregation, transportation, processing and disposal of municipal solid wastes, they entrust waste generators with the responsibility to avoid littering. The ULBs are required to organize awareness programs for segregation of wastes and promotion of recycling or reuse of segregated materials. The municipal authorities need to undertake a phased program to ensure community participation in waste segregation. For this purpose, regular meetings at quarterly intervals are arranged by the municipal authorities with representatives of local Resident Welfare Associations and Non-Governmental Organizations. In areas 66
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falling under the jurisdiction of development authorities e.g., Delhi Development Authority (DDA), Hyderabad Urban Development Authority (HUDA), it is the responsibility of such development authorities to identify landfill sites and hand them over to the concerned municipal authority for development, operation and maintenance. Elsewhere, this responsibility rests with the concerned municipal authority. The State Board or the Committee is mandated to monitor the compliance of the standards regarding ground water, ambient air, leachate quality and the compost quality including incineration standards.10 The responsibility of Central Pollution Control Board (CPCB) is to co-ordinate with the State Pollution Control Boards (SPCBs), and Committees with particular reference to implementation, review standards and guidelines and compile data. 1.4 MSW MANAGEMENTPARTNERSHIPS BY ULBS
Though the MSW Rules make the ULBs responsible for management of wastes, ULBs have partnered with private waste management companies, NGOs and RWAs for various segments of the MSW value chain due to various capacity constraints. In order to comply with the MSW Rules and overcome capacity constraints at the local level, some states have come up with centralized waste management systems at the city level or regional level. Centralized waste management systems at the city level are being practiced in Guwahati, Hyderabad and Chennai, among others. Regional level MSW management facilities have come up in Tamil Nadu and Gujarat.11 Various forms of engagement among the ULB, private sector and community have been observed at different places in the country. Exhibit 1.1 lists the various forms of partnerships undertaken by ULBs with other stakeholders for the management of MSW in India. Broadly, four kinds of engagement by ULBs can be observed in the management of MSW in India. Firstly, there are ULBs that manage the wastes on their own. Cities like Jabalpur, Bokaro and Tiruchirapalli, among others, fall into this category. It might be the case that these cities engage private contractors for some services like street sweeping but they collect, transport and dispose waste themselves. Secondly, there are cities like Hyderabad and Rajkot which have partnered with the private sector for processing of waste.
Incineration is a thermal combustion process that involves burning of organic substances contained in waste materials. 11 A Regional MSW Facility means a waste management facility or system of any kind (whether in relation to collection, transportation, treatment or disposal of MSW or a combination of any or all of them), which collects, manages or receives or disposes (as the case may be) MSW from more than one Authority. For further details, please refer to Municipal Solid Waste Management on a Regional BasisGuidance Note, MOUD, GOI (2011).
10
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In Rajkot, the collection and transportation of waste is managed by the local municipal corporation. In Hyderabad, the local authority initially entered into concession agreements with three private sector companies for only processing of waste. Lately, a separate contract was awarded to a private concessionaire for collection & transportation of waste for the entire city and processing of the remaining waste. Thirdly, municipal corporations of Chennai, Namakkal and Trivandrum, among others, have engaged SHGs and NGOs for (decentralized) management of waste. There are also cases such as the Guwahati Municipal Corporation, where ULB partners with both the private sector and the community of informal waste workers to design and implement an integrated (centralized) solid waste management model. Lastly, in some cities, the local community has come forward to manage the waste in their own areas or nearby vicinities. In such cases, the ULBs give permission to RWAs, SHGs or NGOs to undertake waste management activities. In other cases, the ULBs actively supports community participation in management of wastes by providing financial support to the community based on the area served or quantity of waste managed. For instance, the Advanced Locality Management scheme has been launched by Brihan Mumbai Municipal Corporation. Under the scheme, members of the locality participating in the scheme are provided subsidies and technical help to construct composting facilities. Exhibit 1.1 Forms of Partnership by ULBs forMSWM
ULB + Private Sector Player + Community
ULB (on their own)
ULB + Private Sector Player
ULB + Community
Bokaro, Trichy, Munger, Patna
Hyderabad, Rajkot, Chennai (1995 onwards), Bengaluru, Ahmedabad
Chennai (19891995) Namakkal Trivandrum
Guwahati
Source: Compiled from various documents including CDPs, SWM Tool Kit (MOUD, GOI), case studiesetc.
1.4.1
Centralized and Decentralized Waste Management Approaches
Municipal waste can be managed through a centralized approach, a decentralized approach or a combination of the two. Waste management services under each 68
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approach in turn can be delivered by the ULBs themselves or in association with the private sector or the local community. In India, both centralized and decentralized systems are in practice in different cities/towns. These two approaches have been briefly discussed below. a. Centralized Approach The centralized approach to waste management, also termed as Integrated Solid Waste Management, is a technology-driven waste management system for handling bulk wastes at a central processing facility. With respect to the MSW value chain, in a centralized waste management system, the implementing agency (either the ULB or a private entity) collects wastes from household or community bins and transports it to a processing facility. Thereafter, composting techniques and/ or waste to energy technologies like incineration, pellatization12, Refuse Derived Fuel (RDF), plasma gasification, bio-methanation are used to derive value from the wastes. These waste to energy technologies are more common in developed countries and have been applied in a few waste management projects in India. An Integrated Solid Waste Management System (ISWM) envisages provisioning of all aspects of waste management i.e., collection, transportation, processing and disposal of waste by one or two large entities. Hyderabad and Guwahati are two such cities where an ISWM system is in place. Fig. 1.6 gives a graphical representation of the ISWM project of Guwahati. Application of state-of-the-art technologies, reaping economies of scale and ensuring commercial viability of projects are the main reasons for bundling up of all segments of the waste value chain. Moreover, coordination between the ULB and the private entity is relatively better in the ISWM framework when compared to a scenario where multiple entities are engaged in different segments of the waste management process. b. Decentralized Approach The decentralized method of managing a citys waste involves management of municipal waste by various small waste management centers within the locality. In technical parlance, such centers are called Integrated Resource Recovery Centers (IRRC) which can be either profit-making or notfor-profit organizations engaged in collecting, transporting and processing around 2 to 20 metric tons of waste from the surrounding locality. The microentrepreneurs owning for-profit IRRCs generally engage informal workers for
Pelletization is the process of segregating incoming waste into high and low calorific value materials and ripping them up separately to nearly homogenous sizes. The different heaps of shredded waste are later mixed together in appropriate proportions and then solidified to produce Refuse Derived Fuels (RDF). The RDF is used to generate electricity.
12
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Figure 1.6 Stakeholder Map of Integrated SWM Project at Guwahati

Guwahati Municipal Corporation
Facilitates formation of GWMS
Concession Agreement (BOOT, 20 years) Land and other regulatory support Tipping Fees Form GWMS
RWA SHGs CBOs Other Groups GWMS
JnNURM
Financing
Guwahati Waste Mangement Company Ltd. Compost Plant RDF plant Power Plant
Ramky Enviro Engineers Limited
Supervision of waste management activity Dispute resolution
Services of C&T of Waste Sale of compost and power
User charges and electricity tariff and payment for compost
Public/Waste generators
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Figure 1.7 Community-Based For-Profit Decentralized SWM Systems
Households
Households
Collection of waste by former informal waste workers using cycle-carts Transportation to RRCs Segregation of wastes
Paper
Community
Resource Recovery Centre
Glass
Plastic
Resource Recovery Centre
Private
Municipal Corporation
Compost production and enriching it with NPK. Collection charges from households. Sale of compost to farmers. Sale of recyclables to recycling units Refuse collected by municipal corporation and dumped into landfills
Public
Recycling centre
collection and transportation of wastes through hand-held carts or other small vehicles. Composting is undertaken to convert organic waste into manure whereas recyclables like metal, glass, plastics etc are either sold to the recycling industry or recycled by the organization itself. The refuse is collected by the ULBs and transported to the sanitary landfill sites. One such example is Waste Concerna social business enterprise in Bangladesh. Fig. 1.7 provides a graphical representation of the decentralized system of the pilot project. The system is based on door-to-door waste collection and provides training to households in segregation of wastes. Resource Recovery Centers (RRC) are set up, each serving approximately 1,000 households and having a treatment capacity of two to three tons of waste per day. The RRCs are profit-making enterprises that employ informal health workers for waste collection and processing services. Each RRC provides daily door-to door collection services using cycle-carts operated by a team of two informal waste workers in uniforms and with safety equipment like hand gloves, boots and masks. The collected wastes are transported to the RRC where it is manually segregated and organic waste is composted using the aerated box method. Sieved compost is enriched with nitrogen, phosphorous and potassium to make organic manure. The organic waste comprises around 80% of the total waste. The recyclables, which form about 15%, are sold to recycling
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units while the refuse constituting 5% is collected by the municipal corporation every two or three weeks and dumped in landfills. There are also Indian examples of successful decentralized waste management systems which manage wastes in a manner that is environmentally safe and economically viable. Chennai, Bengaluru and Saharanpur are few cities which have experimented with the decentralized systems in the country. Chennai had a decentralized waste collection and transportation system as early as 1989 where EXNORA International a non-governmental organization (NGO), set up small waste management units in different areas of the cities managed by the community. EXNORA International roped in the informal waste workers for primary collection and transportation of waste from households to the waste bins provided in street corners by the Corporation of Chennai (CoC) The community contributed a nominal amount towards the service rendered which along with revenue from sale of recyclables covered the operational expenditure (salary of the workers and other administrative expenses) of the project. The CoC supported the initiative by transporting the refuse from the street bins to the dump sites. Another novel initiative is observed in Saharanpur City located in north-western Uttar Pradesh where municipal solid waste is being managed by a joint initiative of a large corporate houseITC Ltd, an NGOMuskan Jyoti Samiti, the local municipal corporation and the district administration in one area of the city. The Box 1.2 Waste Concerns Integrated Resource Recovery Centre
Waste Collection: 2 Metric Tonnes per day Human Resource Requirement: 6 workers, 2 van drivers, 4 waste collectors and 1 plant manager Compost Production: 500 Kg (25 % of the total waste collected) Compost Price: 2.55 Tk* per Kg (Tk 78 per kg after enrichment) Total Fixed Costs: Tk 5,08,200 O&M Costs: Tk 2,09,000 User Charges levied: 1015 Tk per month per household Land Used: 0.0022 Sq. Km Note: The financial figures are at 2002 price level Source: Community Based Decentralized Composting: Experience of Waste Concern in Dhaka, Urban Management Innovation. * Tk denotes Taka (Currency of Bangladesh)
NGO is engaged in the door-to-door collection, transportation and processing of waste. It has set up a small composting unit in the locality for converting organic waste into manure. The operational expenditure of the initiative is covered by sale of recyclables, manure and collection of user charges from the waste generators. 72
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Recently, a ward in Bengaluru has initiated the process to undertake decentralized solid waste management by utilizing the JNNURMs Community Participation Fund (CDF). Vijayanagara Nagarikara Vedike (VNV) the implementing agency of the project has been working in association with the Health Department of Bruhat Bengalore Mahanagara Palike (BBMP) on and the local community since the project planning and conceptualization phase.13 The scope of the work includes road sweeping, collection, segregation, transportation and disposal (through bio-mechanical composting) of the waste. The BBMP would be responsible for transportation of the waste and would provide technical and financial support. It would also assist in conflict resolution and operational problems, if any along with involvement in awareness initiatives. The responsibility of the citizens includes setting up and management of the compost unit. The VNVs role would be primarily initiating community awareness programmes, project identification & report preparation, organization of training
Vijayanagara Nagarikara Vedike is a Federation of the Resident Welfare Association and other institutions engaged in citizen welfare activities in different wards of Vijayanagara, Bengaluru.
13
Exhibit 1.2 Centralized & Decentralized Waste Management Systems at a Glance

Centralized Waste Management System Pros Suitable for high income countries/ cities Reduces manual handling of waste Waste can be used for producing compost and energy Decentralized Waste Management System Promotes source segregation Effective monitoring by community Allows integrations of informal waste workers Applicable in cities with strong social factors Savings in transport cost and landfill requirements. Does not address the issue of manual handling of waste. Requires space for each resource recovery centre in vicinity of households. Generation of electricity not feasible
Cons
Not suitable for waste with high organic waste content It is not cost effective Does not allow integration of informal waste workers
Source: Athena Research; Compiled from various sources
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programmes for persons from the community for O&M of the composting units, marketing of compost and disposal of waste, among others. Box 1.2 provides a snapshot of the key features of a small decentralized waste management facility practiced by Waste Concern in Dhaka. Salient Features The integrated and the decentralized waste management systems have their own advantages and disadvantages and cannot be uniformly applied to ULBs of all sizes and locations. Both the waste management mechanismscentralized and decentralizedwhen deployed in circumstances suited to the particular mechanism, can result in efficient solid waste management. Neither has been shown to be superior to the other on all parameters in all conditions, and hence, the question that needs to be answered is under which conditions should a centralized model of waste management be adopted, and when to adopt the decentralized model. An attempt has been made in Exhibit 1.2 to list the salient features of both the approaches so as to indicate the appropriateness of each. The choice of a particular approach depends on several factors like financial and human resource capacity of the concerned ULB, socio-economic-cultural profile of city/town, status of service delivery, quantity and quality of waste generated, availability of land, among others. In the next chapter, we discuss some key parameters that should be considered while choosing a particular approach to waste management.
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CHAPTER TWO
CURRENT STATE AND GAPS
2.1
EXISTING PERFORMANCE STANDARDS
Proper management of waste has been a critical aspect in urban areas, especially in mega cities which are major centers of waste generation. Irregular collection or non-collection, transportation in open vehicles, and environmentally unsafe methods of processing & disposal of waste are common features of a large number of urban areas across the country. While steps for improving service delivery were initiated as early as 1963 with the Zakaria Committee setting service norms and standards in urban services, poor implementation of the committees recommendations, owing to the presence of weak enforcement mechanisms has led to the poor management and delivery of MSW services in Indian cities. The public and the government were jolted into recognizing the deteriorating quality of waste management services by the Surat Plague disaster in 1994. After the Surat disaster, Clean India campaigns highlighting the pitiable conditions of hygiene and waste management in cities and towns were made by social activists in 1994 and 1995, covering 30 cities and 60 towns. Subsequently, a Public Interest Litigation (PIL) was filed in the Supreme Court of India, Almitra H. Patel Vs. Union of India (1996), seeking adoption of hygienic waste management practices by the ULBs. The Supreme Court of India formed an Expert Committee in 1999 to provide recommendations for improving waste management practices in Class I cities. Subsequently, the Ministry of Environment & Forest introduced the MSW (Management & Handling) Rules in 2000, incorporating key recommendations of the Supreme Court appointed Expert Committee. The MSW rules contained several remarkable features, e.g., door-to-door collection, segregation of waste at source and scientific disposal of waste, among others. Further, the Supreme Court of India set 2003 as the target year for compliance with the rules set by the ULBs. Prior to the announcement of MSW (M&H) Rules, 2000 there were hardly any standards to measure the quality of MSW management services provided by the local bodies.
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Exhibit 2.1 MSWM Service Level Benchmarks and Average ULB Performance
S/N 1 2 3 4 5 6 7 8 Performance Indicator Complaint Redressal Collection Efficiency Household Coverage MSW Recovery User Charges Collection Efficiency MSW Segregation Scientific Disposal Cost Recovery Service Level Benchmark (in percent) 80 100 100 100 90 100 100 100 Current Average Performance (in percent) 89.1 75.3 47.7 31.73 31.4 19.5 8.0 17.3
Source: Service Level Benchmarking Data book: Improving Service Outcomes 200809, Ministry of Urban Development, Government ofIndia.
Legend Target met Target missed by 0-25 % Target missed by 26-50 % Target missed by 51-75 % Target missed by over 75%
In the absence of any law regarding the management of municipal solid waste, the ULBs were not compelled to provide regular door to door collection of waste or for its scientific disposal. Another important landmark in the MSW space was the setting up of Service Benchmarks in Urban Services by MOUD in 2008. Exhibit 2.1 lists the various benchmarks to be achieved by the ULBs. 2.1.1 Performance of ULBsMSW Management
A glance at the existing situation of service delivery standards across the ULBs points to the poor performance of almost all cities and towns in India. Despite several policy interventions e.g., announcement of MSW (Management & Handling) Rules, setting up of service benchmarks, provision of central and state government grants through JnNURM under UIG/UIDSSMT etc, the outcomes have been largely unsatisfactory barring a few cities. 76
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C H A P T E R T W O : C u R R E N T S TAT E A N D g A P S
The MOUD undertook a pilot study in 2009 to assess the performance of 28 select ULBs representing different tiers of cities across different states. The study found that none of the ULBs performed at par with the service level benchmarks.14 The exhibit below summarizes the performance of the surveyed ULBs and highlights the poor service delivery in terms of C&T, poor segregation efficiency and unscientific disposal of wastes. Classifying the performance of the ULBs according to the city size (Class IA, IB and IC) shows that performance on parameters such as waste segregation and scientific disposal of municipal waste is extremely poor irrespective of the city size. Cost recovery is relatively better in Class IB cities like Indore, Surat and Ahmedabad. Scientific disposal of waste is absent in Class IB and IC cities and it is practiced only in 2 of the Class IA cities sampled. Household coverage is around 50% in all the three categories. Fig. 2.1 provides a comparative analysis of the sample of Class IA, IB and Class IC cities on all the eight parameters. The performance of the remaining urban cities which are not covered in the sample is even more dismal. The report by the High Powered Expert Committee
Figure 2.1 Status of MSW ManagementClass IA, IB & IC Cities

In Percent 100 80 80 60 40 20 0 HH Coverage Collection MSW Efficiency Segregation Class IA Class IB Class IC MSW Recovery Scientific Disposal Cost User Charges Complaint Recovery Collection Redressal Efficiency 100 100 100 100 100 90 80
Benchmark
Source: Based on data available in Urban Finance, Vol. 13(1), NIUA(2010)
The 28 cities/towns included in the pilot study cover 3 Class IA, 6 Class IB and 14 Class IC cities as per the new classification of cities mentioned in the HPEC Report, MOUD, GOI (2011). The remaining 5 cities belong to Class II/III/IV+ cities/towns.
14
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Figure 2.2 Backlogs of Service Level Benchmarks

In Percent
100 80 60 40 20 0 Class IA Class IB
C&T
100 88
94
100
93
100
93
100
100 100 75
100 100
65 48 41 41
13
Class IC
Processing
Class II
Scientific Disposal
Class III
Class IV+
Source: Based on data available in HPEC Report, MOUD, GOI(2011)
(HPEC) on urban infrastructure15 states that 100% Class III and IV+ cities have a significant backlog in C&T; between 88% and 93% of the Class I and Class II cities have backlogs in processing of waste while 100% of all Indian cities and towns have backlogs in terms of scientific disposal.16 Fig. 2.2 displays the service level backlogs of the ULBs in terms of three broad aspects of the MSW value chainCollection & Transportation, Processing and Scientific Disposal. 2.2 FACTORS CONTRIBUTING TO POOR SERVICE DELIVERY
ULBs lack of commitment, poor financial health, untrained or inadequately trained work force and lack of equipment are the main reasons for the incomplete coverage and unscientific processing & disposal of waste in Indian cities and towns. However, with an increasing urban population, and a changing socioeconomic demographic profile, there is growing pressure on the ULBs to deliver quality services to its citizens. This requires increasing the capacity of the ULBs for better management of MSW in their localities. Different segments of the MSW value chain are beset by different set of problems that render management of MSW ineffective, inadequate and inefficient. Inadequate collaboration by the ULBs, with all the stakeholders, namely, households, rag-pickers, non-governmental organizations, private waste management companies, households, environmentalists and local leaders, in devising possible solutions to the waste menace of the respective localities is an important factor that hinders the application of a concerted effort for MSW
Please see, HPEC Report, GOI (2011) for further details. Service Backlog refers to services that should have been provided by the ULBs but were not and therefore need to be provided now.
15 16
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Box 2.1 Solid Waste Management in Berhampur (Odisha) Solid waste management service in Berhampur, a Class I Town in Odisha is poor relative to the desired levels. A pilot study on the status of SWM service in 28 cities and towns found that the household coverage and collection efficiency of waste in Berhampur was 2.6% and 81.2%, respectively against benchmark levels of 100 percent for each service. Lack of human resource and equipment capacity in the Berhampur Municipal Corporation (BMC) is possibly one of the main reasons for the poor performance in these two aspects of service delivery. BMC has a total sanctioned strength of 840 staff of which 253 positions are lying vacant. Further, the Corporation is burdened with the payment of loans and gratuity to its retired staff. Waste is disposed in open dumping grounds as well as open channels thereby creating chokage and stagnation problems.a Door to door collection is absent and waste collection is not practiced on a daily basis. BMC is substantially dependent on government funds and grants (around 44%) and receipts from rates and taxes form about only 6% of the total receipts. The city does not levy any user charge for MSW service.
Sources: Town Level Background Paper on Berhampur Town (Odisha) for The Urban India Reforms Facility, KIIT(2011).
management. Lack of awareness about the importance of good SWM practices especially about waste segregation and the absence of any clear mandate that fixes the responsibility of waste segregation on waste generators result in mixing of all kinds of wastes by people. Further, most ULBs depend on central and state government grants for funds that are often inadequate, as the bulk of funds are absorbed by administrative expenses. Inadequate financial resources from the ULBs internal sources, inadequate and untrained staff, obsolete or insufficient equipment and lack of sufficient motivation to provide quality and timely services to people make the delivery of reliable and affordable waste management services all the more complex. The resource gap for the Operations and Maintenance (O&M) of municipal services alone was estimated to be around ` 32,143 crore for the period 200510.17 In this section we describe the various factors affecting performance across the value chain of solid waste management.
Please refer to Norms and Standards of Municipal Basic Services in India, M. P. Mathur et al. NIUA (2007).
17
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Box 2.2 Solid Waste Management in Nashik (Maharashtra) The Report card of the Nashik Municipal Corporation (NMC) in terms of the service level benchmarks is better relative to other ULBs. Household coverage and collection efficiency of NMC are 86.9 and 87 percent respectively while the extent of MSW segregation and recovery were found to be 34.5 percent and 100 percent respectively in the pilot study by Ministry of Urban Development in 2009. The network of Ghanta Gadis, as the garbage collection tractors are called colloquially, in the area have resulted in significant improvement in the level of service post MSW rules enforcement. The city has 124 tipper trucks each manned with one driver and 2 garbage collectors. Though the practice of source segregation is not widely practiced, the garbage collectors in the ghanta gadis segregate the non-biodegradable waste. NMC has constructed a 300 TPD compost plant and also disposes refuse in sanitary landfill sites. Around ` 52.3 crore has been allocated for provisioning of MSW services in the city.
Sources: City CDP of Nashik Municipal Corporation under JnNURM, NMC (2010). Nashik city Development Plan: Appraisal Report, JnNURM.
2.2.1
Factors contributing to Poor Waste Segregation System
Lack of public awareness about the need for waste segregation Creating awareness about the importance of proper waste management is an area that has not received adequate attention from policy makers. The principle of 3RsReduce, Reuse and Recycle is rarely practiced at the individual household or commercial establishment level. Citizens are not aware of the merits of waste segregation and scientific disposal of wastes. Even when citizens know that waste should be segregated into bio-degradable and non-biodegradable components, they do not practice it as they are not informed of the social and economic repercussions associated with the mixing of organic and in-organic waste with hazardous biomedical and electronic waste. Information, Education and Communication (IEC) campaigns highlighting the criticality of MSW management have not been undertaken at the required scale by ULBs. Lack of accountability for waste segregation The MSW (Management & Handling) Rules, 2000 does not fix the responsibility of waste segregation on the waste generators. However, the Committee on National Sustainable Habitat Standards for Municipal Solid Waste Management has recommended fixing the responsibility on premise occupiers for temporary storage of segregated waste. The Committee has also recommended penalizing municipal corporations for non-compliance with MSW Rules. Adopting a Carrot 80
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and Stick approach can ensure that the waste generator segregates waste. Providing rebate on property tax or other taxes collected by ULBs to incentivize segregation of wastes while levying penalties or non-collection of waste from individuals/establishments that do not supply segregated waste can be practiced by the ULBs. These features are likely to be incorporated in the amendment to the MSW Rules, 2000 that is under contemplation by the central government in consultation with state governments and ULBs. 2.2.2 Factors contributing to Poor Collection & Transportation (C&T) System
Unplanned and variable city features A large number of cities and towns in India have developed in an unplanned way. The width of roads and lanes vary significantly within and among cities. Therefore, C&T systems require meticulous planning to ensure successful execution. The different urban profiles of cities and towns call for different systems for C&T. However, most of the ULBs practice a uniform C&T system for an entire city/ town, as a result of which inaccessible and marginal areas are not covered. Inadequate equipment and inappropriate technology Inadequate vehicles and equipments at the disposal of ULBs, primarily due to lack of financial resources, is often cited as a reason for poor service delivery. Faulty designs for waste C&T system such as inappropriate size and placement of garbage bins, transfer stations, etc. has aggravated the problem of overflowing waste and insufficient removal of waste from sites. The waste characteristic in India is different from that of industrial countries as it contains a high proportion of bio-degradable wastes that increase waste density. Hence, vehicles that operate with low-density waste in industrial countries are not suitable or reliable for Indian conditions. The vehicles for transportation of waste should be adapted to suit Indian conditions pertaining to waste density, lane width, etc. Inefficient and untrained staff Inefficiency, rather than inadequacy, of the existing staff results in poor coverage of MSW management services. For instance, Delhi has five health workers per 1,000 persons, more than double the prescribed CPHEEO norm of 2 health workers per 1,000 persons, but its household collection efficiency is only 4.2%.18
18
See, Urban Finance, Vol. 13(1), NIUA (2010) for further details.
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There is a need to increase the efficiency of the health workers in order to improve the collection system of the ULBs. Non-integration of informal workers Informal workers e.g., rag-pickers, waste collecting communities, etc. play a vital role in the collection, transportation & disposal of waste and compensate, to some extent, the inadequacy of the services provided by ULBs. Failure to integrate these workers in the MSW management mainstream contributes to poor service delivery. The waste pickers often rummage waste bins and cause waste to scatter around the bins. Items like plastic, metals and glass collected by waste pickers reduces the potential value of waste and also makes production of energy from waste unfeasible as plastic is an important ingredient of refusederived fuel used for generating electricity. These factors play a decisive role if a ULB decides to set up an integrated waste management plant for extracting value from waste as key waste elements like plastic and metals are siphoned by the informal waste workers. 2.2.3 Factors contributing to Poor Processing & Disposal (P&D) System
Insufficient fund allocation to processing and disposal Open dumping of waste is the easiest way to dispose waste. Before the MSW (Management & Handling) Rules, 2000 were in force, ULBs were under no pressure to adopt scientific disposal practices. However, despite the introduction of the MSW rules, the practice of open dumping is still rampant in the country, with only a handful of ULBs having sanitary landfill facilities in place. The problems encountered in the C&T segment of MSW management are reflected in the P&D segment as well. Collection of un-segregated waste from source makes extraction of value costly or economically unfeasible in most cases. The Supreme Court Committee on Municipal solid waste in 1999 noted that around 7075% of the total expenditure on waste is spent on street sweeping; 2025% on collection and only 05% on disposal of wastes by the ULBs. Unproven technologies Controversies in the scientific and environmental arena for some waste management technologies e.g., incineration, plasma gasification, have made ULBs apprehensive about going ahead with such technologies.19 Some of the
Please refer to Garbology: Difference Engine: Talking Trash, The Economist, 27th April, 2012 for further details.
19
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ULBs, for instance, the Municipal Corporation of Delhi experimented with scientific methods to process and dispose waste but encountered problems due to various reasons. Please refer to Box 2.3 for an illustration. Further, wastes to energy/compost plants require the availability of a minimum waste quantity of specified composition and nature for the smooth operation of the plants, which is usually not available. Box 2.3 Waste to Energy PlantMunicipal Corporation ofDelhi The Municipal Corporation of Delhi (MCD) established a 3.75 MW wasteto-energy (wte) plant with assistance from Government of Denmark in 1987 to address the twin problems of waste disposal and electricity shortage faced by the city. The capacity of the plant was 300 TPD of solid waste and was set up at a cost of ` 25 crore by Volund Miljotecknik A/S of Denmark that also supplied the incineration technology. The plant started operation on a pilot basis but was shut down three years later due to the poor quality of unscreened or unsegregated incoming waste as the plant was design for screened waste. Subsequently a screening plant was set up with a capacity of 100 TPD but still the waste was not adequate to operate the plant.
Source: Failure of Timarpur, Case Study, NSWAI(2010).20
Based on information available at http://www.nswai.com/images/case_studies/4.pdf; accessed on 21st January, 2012.

20
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CHAPTER THREE
PRIVATE SECTOR PARTICIPATION IN SWM
In recent times, private sector participation has become an important mechanism to improve provisioning of infrastructure services worldwide. In India, several public private partnerships have been undertaken in commercial infrastructure sectors at the central, state and even local levels for overcoming capacity constraints in government bodies and for leveraging private finance and achieving efficiency. 3.1 NEED FOR PRIVATE SECTOR PARTICIPATION
Indias annual waste generation is projected to increase to approximately 260 MT by 2047 from the present 42 MT.21 Fig. 3.1 displays the anticipated waste quantities for Class I cities for the next two decades. There is an imminent need to address the service backlog (Fig. 2.2) as waste generation in India will increase manifold in the coming years with increasing population, industrial activity, income levels and urbanization. Class IA, IB and IC Cities will continue to account for the bulk of the waste generated in the country. Therefore, waste management and handling capacity in these cities must be enhanced. The land required for disposing waste is also set to increase in response to the increase in waste generation. Fig. 3.2 shows that the land requirement for landfills has increased by 75% in a span of just 3 years from 2007 to 2010 and is further estimated to increase by 285% by 2030 if prudent waste management practices are not adopted at the earliest. While there is scope for reducing the land required for landfills by adopting suitable waste processing technologies like composting, pellatization, and
Please refer to Successful Innovations in SWM Systems: Examples from Five Local Bodies in Tamil Nadu, GOTN & UNICEF (2010) for further details.
21
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Figure 3.1 MSW Generation: Past, Current & Future(MTD)

120,000 100,000 80,000 60,000 40,000 20,000 0 Class IA
2001 Class IB Class IC
2011
2021
2031
Figure 3.2 Future Land Requirement for Landfill inIndia

Sq. Km 160 140 120 100 80 60 40 20 0 2007 2010 Land Required for Landfill 2030 22.374 39.154
151.025
Source: Estimation of Municipal Solid Waste Generation and Landfill area in Asian Developing Countries, Khajuria et al., Journal of Environmental Biology(2010).
bio-methanation, application of technologies other than composting requires stringent implementation and monitoring mechanisms and the choice of such techniques should be made keeping economic and environmental costs, if any, in consideration. 86
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C H A P T E R T H R E E : P R I V A T E S E C T O R PA R T I C I PA T I O N I N S W M
The urban local bodies in India are not able to manage the increasing quantity of waste generated in urban cities even though they spend a substantial chunk of their budget on waste management. A United Nations Development Program (UNDP) survey, which covered 151 mayors of cities from around the world in 1997 found that insufficient solid waste disposal is the second most serious problems that city dwellers face after unemployment. Private sector initiatives and community participation have resulted in improved waste management services in several developed and developing countries and presents India n ULBs with an alternative to expensive or inefficient public delivery of MSW services. The rationale for bringing in private sector participation in this sector is primarily to leverage private sector efficiency, expertise and technology rather than finance, as several government schemes are in place for providing funds to ULBs, although with certain conditions. If the private sector provides higher standards of waste management service at the same cost or provides equivalent service at a lower cost compared to the local administration, then private sector participation should be considered. The private sector has access to a wide range of technological alternatives that can be used for the processing of waste. Asnani (2005), mentions that ULBs in India spend somewhere around 1050% of their total expenditure on waste management services.22 Hence the issue is not always the paucity of funds, but a lack of a professional approach to deliver services efficiently and in a cost-effective and reliable manner. Fig. 3.3 shows the total Figure 3.3 Combined Budgetary TransactionsCentre & State (` Crores)
In ` Crores 90,000 75,000 60,000 45,000 30,000 10,000 0 2001 Urban Development 2005 2010 2011 3,816 24,360 7,532 33,772 32,392 35,451 82,213
76,300
Medical & Public Health & Water & Sanitation
Source: Based on Data available in Indian Public Finance Statistics, DEA, GOI(2011) In Jabalpur, SWM is the single largest expenditure head in the municipal fund accounting for over 60% of the revenue expenditure. See http://www.jmcjabalpur.org/city_development_plan_section_6. jsp, for further details.
22
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Exhibit 3.1 Pre and Post Private Sector Participation in SWM in a few Cities/Towns
City/Town Anantapur Rajendra Nagar Qutubullapur Nellore Jamnagar Sriganganagar Jabalpur Kapra Kamptee Manmad Virar Year 1997 1997 1997 1998 1987 1994 1998 1999 1999 1999 1999 Cost Before PSP ` 000 11500 20 2000 23843 8000 700 1164 4640 25 300 4500 Cost After PSP ` 000 14500 85 4200 27812 2200 350 770 2908 18 147 3500 Value Chain Sweeping Sweeping & Collection Sweeping Sweeping Primary Collection Sweeping Sweeping Sweeping Commercial Transportation Sweeping & Collection
Source: Compiled from Status of Water Supply, Sanitation and Solid Waste Management in Urban India, Statistical Volume III, SWM 1999, NIUA(2005).
expenditure made by the government on the provision of Medical & Public Health and Water Supply & Sanitation and Urban Development services from 2001 to 2011. Expenditure on waste management services is included partly under both the accounts. Even though total expenditure on public health and urban development increased temporally, the service levels remained at dismal levels. There are instances where private sector participation has brought in cost reduction in MSW service delivery. Exhibit 3.1 compares the solid waste management sector before and after private sector participation. Due to nonavailability of data on the pre and post-PPP experience of all ULBs indulging in PPPs, a comparative analysis of only 11 cities is presented here even though cities like Delhi, Hyderabad and Chennai among others, had some form of private sector participation earlier. In India, significant cost reduction were observed in the case of Jamnagar and Sriganganagar after they sought private sector participation whereas Anantapur and Nellore witnessed an increase in cost of provisioning MSW services after they contracted sweeping services to private contractors. However due to the lack of any information on service levels provided to citizens of the aforementioned ULBs, it is difficult to comment on the success or failure of involving the private sector in MSW service delivery. With the laying down of performance standards for MSW service delivery, it is now possible to gauge the extent of improvement in efficiency and cost-effectiveness 88
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of MSW management consequent to private sector involvement in various segments of the MSW value chain. Such an environment has facilitated a spurt in long-term partnerships with the private sector for initiating door-to-door collection, setting up of waste processing facilities and scientifically engineered landfills. The number of projects with private sector participation has been increasing over the years and the country is well-poised to engage with the private sector partnerships to deliver MSW services. 3.2 POTENTIAL FOR PRIVATE SECTOR PARTICIPATION
At present, a handful of cities have ventured into public-private participation in an attempt to overhaul their waste management systems. The partnerships range from engagements for collection & transportation, processing & disposal of waste and for construction and/or management of sanitary landfills. Some ULBs, depending upon their need, have partnered only for C&T segments, some for processing and disposal, and a few only for the disposal of waste. The concept of Integrated Solid Waste Management, being relatively new in the country, has been adopted only by a few cities. The concern for efficient and safe disposal of waste has been growing in recent times as citizens are more aware of the need for and the importance of good waste management systems. The ULBs are under tremendous pressure to adopt good waste management practices and PPPs are seen as a possible option given that several ULBs lack the capacity and technical expertise to manage the growing waste quantities in their areas. The government has attempted to address the lack of funds at the disposal of ULBs by launching the UIG and UIDSSMT schemes under the JnNURM. These schemes provide grants to the ULBs so as to aid their efforts to improve and augment the provisioning of civic amenities. However, the ULBs availing the grant under the schemes are required to undertake a set of reforms within a specified period. For instance, municipal corporations (nagar nigams) are required to reform rent control acts, rationalize stamp duty, migrate to double entry accrual-based accounting system and achieve 100 per cent cost recovery in solid waste and water supply services. Appendix I lists the 17 key reform parameters to be undertaken by ULBs and summarizes the achievement until 2010. These reformatory measures are expected to create a conducive environment for improved delivery of MSW services and enhance the scope for Public Private Partnerships. 3.2.1 Potential in terms of number of ULBs
India has over 5,000 cities and towns classified broadly as urban areas. The number of metropolitan cities with population of over 1 million increased from 37 in 2001 to 50 in 2011 and is expected to increase to 87 by 2031. With 89
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increasing urbanization and correspondingly high levels of waste quantity that would be generated, the potential for PPPs is tremendous. A quick perusal of the performance of states across select reform parameter show that Andhra Pradesh and Maharashtra (having undertaken 16 reform measures) lead the group, while Gujarat and West Bengal have completed 14 reformatory measures. Karnataka, Kerala and Tamil Nadu have undertaken 12 reformatory measures each whereas states like Jharkhand, Arunachal Pradesh and Uttrakhand have undertaken only three reforms each.23 Fig. 3.4 depicts the number of long-term projects undertaken by the ULBs in a few states. Karnataka, Rajasthan and Tamil Nadu lead in terms of the number of long-term PPP projects undertaken by their ULBs. The type of PPP includes BOT (toll), BOT (annuity) as well as DBFOT.31 PPP projects worth around ` 2,600 crore are at different stages of implementation.24 Among the major states, Tamil Nadu and Karnataka have partnered with the private sector for four and seven long term projects, respectively. The effect of sound SWM practices is apparent from these states as they are among the leading states in terms of urbanization. Maharashtra and Gujarat have only one long-term project each but are states with great potential for PPPs in the MSW management sector and also display a good track record in PPPs in the commercial infrastructure sector. Figure 3.4 SWM Projects at State Level undertaken as Public Private Partnerships
Karnataka Rajasthan Tamil Nadu Uttrakhand Delhi Andhra Pradesh West Bengal Maharashtra Gujarat Chandigarh Assam
No. of Projects 0
7 5 4 3 3 3 2 1 1 1 1 2 4 6 8
Source: Compiled from Status of PPP Projects in India, PPP India Database, DEA,(2011) Please refer to Appendix I for details. The list is not exhaustive as PPP India database on solid waste management does not provide information on O&M contracts though several PPPs in O&M are underway in this sector.
23 24
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3.2.2
Potential Investment in MSW Management Services
A recent study pegged the total capital expenditure required by Indian cities over the next 20 years at $12 trillion-roughly $134 per capita per annum.25 The annual per capita capital expenditure on solid waste management services is stated to be $15. With a population of over 1.2 billion people, the total capital expenditure even at $15 per capita annually translates into a huge investment requirement. The High Powered Expert Committee (HPEC) on the infrastructure sector calls for increasing investment in urban infrastructure from 0.7% of the GDP in 201112 to 1.1% of the GDP by 2031. In addition, the 13th Finance Commission has already recommended the release of ` 23,111 crore to ULBs for the period 201015. The HPEC has recommended expanding the JnNURM in the future and increasing the reach of the mission to all cities and towns of the country. The mission would be re-christened the New Improved JnNURM (NIJnNURM) and it recommends investing 0.25% of the GDP annually on urban infrastructure. One of the recommendations of the HPEC with reference to financing of urban infrastructure is the provision for the creation of a special window for projects that would be financed or executed via PPP route or by leveraging private sources of funding. Fig. 3.5 provides a glance at the quantum of investment required in creation of solid waste management infrastructure in the Indian states. It can be seen that the southern and western states of India would require relatively larger investment compared to states in the central and north-western region due to high levels of urbanization. West Bengal and Maharashtra require substantial investment primarily due to high population levels as well as population density. Of the three segments of the MSW management value chain, treatment of waste would require most of the investment. There is a potential for leveraging private sector participation to enhance efficiency in the entire waste management system. With a growing emphasis on recovering O&M expenditure through their own means, ULBs are in the process of levying user charges on the waste generators. Several such examples exist, including Trivandrum and Guwahati. Such an endeavor would reduce the dependency of ULBs on external funds and grant, make ULBs financially self-sufficient and enhance sustainability of MSW projects. Several ULBs have utilized funds available through JnNURM for setting up solid waste management projects. Fig. 3.6 shows the total value of SWM projects underway through JnNURM. Here, it can be seen that the share of the central government and state/ULB is more or less equal. However, central share is higher for individual projects in cities that are classified as Class II and below.
Please see, MGI: Indias urban awakening: Building inclusive cities, sustaining economic growth, (2010).
25
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Figure 3.5 Investment Requirement in SWM in India-2031 (` Crores)26

North
27369 1018 1882 1501 0 674 1246 994 5000 10000 15000 20000
East and NE
15956
10000
20000
30000
West
34105 1274 2355 1878
South
21489 939 1738
10000
20000
30000 0
1386 10000 20000
PPP Type / Value Chain Disposal Treatment C&T Opex
Investment in Urban Water Projects in Cities IA & IB for 2012 32( Crores) <5000 5000 - 10000 > 10000
Figure 3.6 Sharing of Project Cost: JnNURM Funded SWM Projects

250
Figures in ` Thousand Crores
2060
200 150
1039 1021
100 50 0
Total Project Cost Central Share State + ULB
Source: Status of Implementation of JnNURM Projects, JnNURM(2012).
The research is based on per capita investment requirement projection made by the HPEC (2011) and covers only the Class IA & IB cities.
26
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Fig. 3.7 shows the total investment made in the solid waste management sector at the state levels. No regional concentration of SWM projects can be observed from Fig.3.7. Maharashtra, Tamil Nadu and Uttar Pradesh lead the list with high level of investments. States like Rajasthan, Assam and Madhya Pradesh are high potential states as large sections of the population still not covered by proper MSW management systems. AP and Karnataka, which are among the leading states in PPPs in commercial infrastructure, also have huge potential for such partnerships in the SWM sector as these states are not only progressive but are also undergoing high rates of urbanization. Fig. 3.8 and Fig. 3.9 show the expected growth and the breakup, value chain wise, of the MSW management services market. Buoyed by active private sector participation, the sector is expected to grow on average at a CAGR of around 22.4% for the period 200813.27 Further, the collection and transportation segment of the value chain has the highest potential with a market share of 79% followed by recycling and processing & disposal. In an evolving PPP market like India, initial experiments in collection & transportation segments can pave the way for integrated MSW management services as the market matures with time. Figure 3.7 State-wise Investments underway through JnNURM
Maharashtra UP Gujarat Kerala Punjab Uttarkhand Bihar Assam HP Arunachal Pradesh Total Project Cost 0 (` Crores) 50 100 150 200 250 300 350 400
Source: Status of Implementation of JnNURM Projects, JnNURM(2012).
27
Source: Frost and Sullivan (2008).
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Figure 3.8 MSW Management Services Market: Revenue Forecast(200809)

25 20 15 10 5 0 2008 2009 2010 2011 2012 2013 7 8.5 13.5 11 20 16
Source: Frost & Sullivan(2009)
In ` Hundred Crores
Figure 3.9 MSW Management Services MarketRevenue Breakup Value ChainWise
Recycling 15%
Treatment & Disposal 6%
Collection & Transportation 79%
Source: Frost & Sullivan(2009)
3.3
STRATEGIES FOR PRIVATE SECTOR PARTICIPATION
In this section, the process of selecting a suitable solid waste management model has been described. 3.3.1 Selection of the Appropriate Solid Waste Management Model
Selection of the appropriate operating and financial model is an essential first step to improving solid waste management services in a city. This, however, 94
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does not receive adequate attention in many cases. In this section, we discuss the parameters that should be considered while deciding the financial and operational models for a solid waste management system. Next, based on the parameters, we describe which financial structure, and which operational model, would be best suited for a given city. The choice of an appropriate waste management strategy would involve the evaluation of the following basic parameters: The overall quantity of waste generation, ULBs internal resource generation potential, financial health of ULBs and the availability of funds from higher tiers of the government influence the selection of the financial model of the waste management system. The choice of a centralized or decentralized waste management system is constrained by the availability of vacant land, composition of waste, market linkage for resources produced from waste, if any, health risk and the extent to which informal workers are engaged in the collection of waste. We elaborate each of these aspects briefly in the following pages. 3.3.2 Financial Model
The selection of the appropriate source of funds to meet capital and operational expenditure associated with the setting up of a solid waste management system depends on the following factors: Waste Quantity The quantity of waste generation and the characteristics of waste generated in a city or town is an important factor for adopting a particular system to manage the wastes. A city with large quantities of waste generation requires a robust collection and transportation system with an adequate fleet of high capacity transportation vehicles. Thus, a centralized approach might be more appropriate Exhibit 3.2 Major Determinants of Financial and Operational Model ofMSWM
Determinants of Financial Model (Capital and Operational Expenditure/ Income) i. ii. iii. iv. Quantity of waste generated Central and State funds availability Internal resource generation by ithe urban local bodies Financial and Human Resource Capacity Determinants of Operational Model (Centralized or Decentralized Waste Management System) i. ii. iii. iv. v. Availability of land Composition of waste Market linkages Extent of Informal Workers engaged in Collection of Waste Health risk
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Exhibit 3.3 Daily Waste Generation in Class I Cities inIndia

City Greater Bengaluru Greater Kolkata Chennai Delhi Greater Mumbai Greater Hyderabad Daily Waste Quantity City 2011 (TPD) 3,344 11,520 6,118 11,040 11,124 4,923 Jaipur Ahmedabad Bhopal Visakhapatnam Imphal Kozhikode Daily Waste Quantity 2011 (TPD) 1,362 2,518 877 1,194 72 429
Source: Sustainable Waste Management in India, Annepu(2011).
Exhibit 3.4 Waste Generation in Cities in India

S/N 1. 2. City/Town Category Population > 1 million Population < 1 million; and cities in North Eastern and J&K Per Capita Waste Generation High Low
in these cases. Class IA cities in India currently generate 2,400 MT to 7,000 MT of waste daily and it is expected to increase to 3,7009,000 MT daily by 2031. The waste generation in Class IB and IC cities is relatively lower than that of the Class IA cities as observed in Exhibit 3.3 provided below. The per capita waste generation varies within urban areas depending upon the degree of urbanization, commercial and industrial activity and per capita income. Exhibit 3.4 below classifies the cities and towns based on the magnitude of per capita waste generation. Availability of Central and State Funds In order to help the ULBs cope with the huge challenge of building the required infrastructure for a rapidly urbanizing population, the government is providing them grants under JnNURM. These grants are conditional upon the ULBs reforming certain aspects of their operational structure. Exhibit 3.5 provides the extent of government grants that can be availed by the ULBs depending upon their category. JnNURM is providing the ULBs with grants ranging from 50% to 100% of the project cost depending upon the city category. 96
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Exhibit 3.5 Availability of Central and State Grants

S/N 1. 2. City/Town Category Population > 1 million Population < 1 million Centre Grant 35 % - 50 % 80 % - 90 % State Grant 15 % - 20% 10 % ULB/Parastatal Share/ Loan from Financial Institutions* 50 % Up to 10 %
*Source: Modified Guidelines, (Sub-Mission for Urban Infrastructure and Governance), JNNURM, GOI (2006).
Financial health of the ULBs The availability of funds for the ULBs is a major factor that determines the standard of service delivery provided to the citizens. Engaging one or two private entities for a centralized system would involve substantial capital outlay (in absolute terms) on equipment and other infrastructure and require the balancesheet of the ULBs to be sound. Payment of tipping fee to the concessionaire for collection and transportation of waste or incurring the said cost on their own if the private sector has been engaged only for treatment of wastes forms a significant portion of the revenue expenditure of the ULBs. On the contrary, the decentralized approaches to waste management in India have worked primarily on their own with little support from the ULBs. Provision of vacant/unused premises and authorization for MSW services to RWA or community for processing of waste have been two major forms of support provided by the ULBs. However, in certain cases, for example in Mumbai, the ULB provides monetary compensation to the community for management of wastes based on certain parameters. A financially rich urban local body is better positioned to explore various alternatives that can be exercised for improving the current waste management service in the city or town. It has more degrees of freedom to use the available resource to build its own capacity in terms of skilled human resource, better equipment, state-of-the-art technology, and use of ICT in monitoring of waste management activity. Alternatively, it may leverage managerial and technical efficiency of experienced private waste management companies and devote itself to the task of monitoring the delivery of the service. It can practice centralized or decentralized waste management considering the quantity, quality of waste generation and other factors as necessary. A poorly equipped ULB is mostly dependent on government grants for improving the management of waste and has to abide by the conditions, if any, associated with the utilization of grants. Hence, it has fewer avenues for exercising different alternatives vis--vis rich ULBs.
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Internal Resource Generation Capacity of Urban Local Bodies Most of the ULBs in India find themselves in a financial equilibrium trap which is the result of the interaction of several financial and non-financial forces. This is illustrated in Figure 3.10. The poor service standards often result in low use of municipal services. The non-payment of taxes and user charges by the public makes a significant dent on the revenue collection of the ULBs, which in turn restrains the ULB from making new investments in infrastructure creation for enhancement of service delivery. At present, the adverse financial position of the ULBs is mainly because of non-collection of taxes e.g., property tax, and also due to the presence of suboptimal tax collection mechanisms. Once the ULBs reform their accounting and tax structure, their internal resource generation capacity will ensure their selfsustenance. Selection of the Financial Model The first two parameters, namely, quantity of waste generated and availability of central and state funds for solid waste management, are largely dependent on the size of the city. Therefore, the other two parameters, ULBs internal resource Figure 3.10 Financial Equilibrium Trap ofULBs
Non-payment of taxes
II
Low Use of Service
Poor Willingness to Pay
Inappropriate Standards
I
Institutional Deficiency
Low levels of Services
Equilibrium Trap of ULBs
Low Tax Collection
III
Insufficient Finance
Low Revenue Levels
Non-Tranparency Inadequate Systems of Financing
Inadequate Finance from Higher Governments
IV
Source: Analysis of Finances of Urban Local Bodies in India: A Cross-sectional Study, Nallathiga(2009).
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generation capacity and its financial health, determine the appropriate source of funds for capital and operational expenditure. For large cities, with a population greater than a million inhabitants, the quantity of waste generated is generally high and the central and state grants cover only up to 50% of the cost of the project. For such large cities, if the financial health of the ULB is good, then all the capital expenditure can be met through the ULBs financial resources. In case of poor financial health, some portion of the capital expenditure might need to be financed by the private sector. Cost recovery of operating expenses would depend on the paying capacity of the users, as well as the ULBs ability to monitor generation, bill accurately and collect dues. If both the paying capacity of the users and the ULBs collection efficiency are high, full cost recovery through user charges should be attempted. In case either of the two is low or weak, partial cost recovery must be attempted, with the shortfall being financed through government grants or external grants. A model of cross-subsidization, e.g., where water is supplied to industry that pays higher rates than domestic consumers, can also be implemented. These options are summarized in Exhibit 3.6. For smaller cities, with a population less than one million, there is relatively lower waste generation, both in per capita terms as well as in absolute terms. Additionally, the central and state grant allocations for provisioning of solid waste management systems are relatively high. In such a scenario, most of the capital expenditure can be met entirely from the central and state grants, while Exhibit 3.4 Strategy for Large cities (Population > 1 million)
Good Financial Health of ULBs CapEx: Central/ state grants + ULB OpEx: Full cost recovery through user charges CapEx: Central/ state grants + ULB OpEx: ULB with partial cost recovery user charges Poor Financial Health of ULBs CapEx: Central/ state grants + ULB + Private sector OpEx: Full cost recovery through user charges CapEx: Central/ state grants + ULB + Private sector OpEx: ULB with partial cost recovery through user charges
High internal resource generation capacity
Low internal resource generation capacity
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Exhibit 3.7 Strategy for Small Cities (Population < 1 million)

High internal resource generation capacity Low internal resource generation capacity Good financial health of ULB CapEx: Central/state grants + ULB OpEx: Full cost recovery through user charges CapEx: Central/state grants + ULB OpEx: ULB with partial cost recovery through user charges Poor financial health of ULB CapEx: Central/state grants OpEx: Full cost recovery through user charges CapEx: Central/state grants OpEx: ULB with partial cost recovery through user charges
operational expenses can be recovered from users of high paying capacity in order to meet the gap between grants and requirements. These options are summarized in Exhibit 3.7. 3.3.3 Operational Model
Selection of a centralized or decentralized model of solid waste management is dependent on the following factors, as discussed below. i. Availability of Land With such an enormous quantity of waste being generated on a daily basis, a centralized or regional facility may be helpful since land for setting up multiple waste processing plants may not be available, particularly in cities like Mumbai, where land is not only scarce but also has a very high opportunity cost. Smaller cities and towns may be better positioned to have decentralized waste management systems since the quantity of waste generation is relatively low and the availability of land is not as problematic as it is in large cities. It may also be possible to transport waste in smaller capacity vehicles like hand-driven carts or tricycles. There is a paucity of space for decentralized waste management systems at multiple locations in large cities. If Waste Concerns decentralized model is taken as a benchmark, then in order to manage the entire waste generated in the megacities, waste processing plants of 1,000 sq. m each would be required at 1,500 to 3,000 locations.28 However, the difference between the land requirement
28
Waste Concern 2 MT plant requires 1,000 sq. m of land for setting up the waste management centre.
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Exhibit 3.8 Availability of Land in Indian Cities

S/N 1. 2. City/Town Category Class I Cities Other Small Cities and Towns Land Availability Low High
Exhibit 3.9 Composition of Waste inIndia

Region Metros Other Cities East India North India South India West India Overall Urban India Compostables (In Percent) 50.89 51.91 50.41 52.38 53.41 50.41 51.3 Recyclables (in Percent) 16.28 19.23 21.44 16.78 17.02 21.44 17.48 Inert (In percent) 32.82 28.86 28.15 30.85 29.57 28.15 31.21 Calorific Value (Kcal/Kg) 1523 2084 2341 1623 1827 2341 1751
Source: Sustainable waste Management in India, Annepu(2011).
for centralized and decentralized waste management plants is not significant. For instance, the integrated solid waste management project at Guwahati has been allotted 1,60,536 sq. m of land for processing 300 MT of waste. If the same quantity of waste were to be processed by setting up 150 facilities with a 2 MT capacity, 1,50,000 sq. m of land would be required. However the Not in My Backyard Syndrome may hinder the provision of so many locations for waste management systems. A city may explore the decentralized system on a pilot basis to assess the response of the citizens to such systems. ii. Waste Composition The proportion of bio-degradable waste is high in the overall quantity of waste that is generated in Indian cities and towns. The proportion of compostables ranges between 50% and 57% in Indian cities and towns. Exhibit 3.9 displays the average waste composition region-wise. Composting is therefore a good alternative for treatment of wastes. Refer Box 3.1 below. Both centralized and decentralized systems can be applied to produce compost. Further, the calorific value of wastes in India lies between 1,523 Kcal/kg to 2,341 Kcal/kg, which is higher than the minimum calorific value required for deriving energy from wastes. 101
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Box 3.1 Indias Experience with Composting In India, composting has been practiced since ancient times to turn agricultural wastes into organic manure. During 197580, ten mechanical compost plants were set at various parts of the country with the twin objectives of producing manure for agricultural use and reducing the quantity of waste reaching the dumpsites. Central Public Health Engineering & Environmental Organization (CPHEEO) has stated that MSW in urban centers in India has a favorable Carbon-Nitrogen (C/N) ratio of around 30 and is conformable to composting. However, it cautioned that composting should not be seen as a commercial venture but should be considered as a processing method and the sale price should be fixed accordingly. The MSW Rules 2000 also sees composting as the preferred method to process municipal wastes. The Planning Commission in the Tenth Five Year Plan stated that traditional technologies like recycling of organic waste have been found to be useful and relevant. However, since the compost plants operate at a constant rate, fluctuations in provision of waste inputs to the plant, makes the project vulnerable. The commercial viability of the project is threatened further as demand for compost is seasonal.
Source: Composting Chapter 14, accessed from localbodies.up.nic.in
iii. LinkagesBackward & Forward Value in waste is the most important reason for private sector participation in this sector. Waste is often said to be a misplaced resource. Application of traditional as well as innovative technologies has made production of several goods from waste possible. Electricity, manure, bricks, bio-methanation and other recycled products from plastic, metals, etc can be produced through the application of suitable technologies. The proceeds from their sale determine the commercial viability of the waste management projects. However, the lack of backward and forward linkages in the form of availability of the right quality and quantity of waste and a market for the goods produced from waste have restrained scaling up of waste management projects. It is therefore important to understand the market for each output produced and choose the right output mix for mitigating the revenue risks in future. Waste-toenergy projects are not fit for decentralized systems due to feasibility issues. iv. Extent of Informal Workers engaged in Collection of Waste The City Development Plans (CDPs) prepared by the ULBs should also include an assessment of the valorization of waste by informal workers engaged in the collection of recyclables. This would help in estimating the actual quantity of 102
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waste generated in the city/town and the extent of recycling activity supported by the informal health workers. It may not be feasible for ULBs in cities with a large number of workers engaged in rag-picking. v. Health Risk Decentralized waste processing plants situated in local areas may pose health risks if the facility is not built and operated according to pre-defined standards. The risk would be high if the waste processing facility is unattended or if the waste treatment is not scientific. In case of accidents or in the event of a natural calamity, the danger of leakage of leachate or other harmful liquids is a serious concern due to the proximity of residents to the waste processing facilities. Selection of the Operating Model Selection of the right operating model is driven by cost implications. While the area of land required per ton of waste disposal does not vary significantly between centralized and decentralized models, the availability of such land for decentralized systems in large, dense cities is likely to be low. Even if land is available, its cost is likely to be prohibitive within large cities. Thus, if the cost of land, including the opportunity cost, is included in the capital expenditure required for the decentralized model, it is likely to be higher than the capital expenditure required for centralized systems, especially due to the economies of scale that are possible in the latter. The willingness of the community to actively participate in the management of waste in their surroundings is also an important factor that influences the choice of the operational model. The operational expenditure in decentralized systems is generally low due to the use of non-motorized vehicles like hand-held carts or tri-cycles employing informal workers for C&T of wastes. Use of high density waste transportation vehicles to cover greater distance between the waste processing facility and the collection centers involve higher operational expenditure. Exhibit 3.10 summarizes the typical cost differences for the two systems, though the actual tradeoffs can only be assessed on a project-to-project basis, with detailed data. The selection of a suitable operation model is thus driven by a number of factors, briefly summarized below in exhibit 3.10. 3.4 PUBLIC-PRIVATE PARTNERSHIP MODELS: ISSUES AND LESSONS
This section presents a few case studies of PPPs in the MSW sector and attempts to capture the key issues faced by stakeholders. The case studies prepared include Solid Waste Management Projects in Tirupur, Kanpur, Hyderabad and Timarpur. 103
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Exhibit 3.10 Centralized vs. Decentralized Solid Waste Management Systems

Type Decentralized Suitable when:
Land sites for composting are available Large number of informal workers in existing waste management system (rag-pickers) High degree of organic content in waste Risk of poor self-governance is low Markets for compost are accessible Possible to manage health risks adequately Significant economies of scale are possible Health hazard of inefficient disposal is high Composition of waste allows high value extraction through use of technology, for e.g., waste-to-energy plants Land is not available close to the community for decentralized model
Centralized
A. The Tirupur Solid Waste Management Introduction During 1990s, the Tirupur Municipal Corporation (TMC) started facing difficulties in managing the municipal waste generated in the area due to the increasing quantity of solid waste generation. The total waste produced by the town can be broadly categorized into three types: bio-degradable, nonbiodegradable and recyclable. The Tamil Nadu Urban Development Fund (TNUDF) suggested that TMC should develop a composting plant on a PPP basis to treat the biodegradable waste. In 1999, IVR Infrastructures and Projects Ltd. was selected through a competitive bidding process to finance, construct and operate the plant on a Build-Own-Operate-Transfer (BOOT) mode for a period of 20 years. A specially designed windrow compost yard having a 50 day life cycle piles was set up on a seven acre land.29 This land was taken on lease by the private concessionaire from the TMC at ` 1.75 lakh per annum. The concessionaire imported a plant worth ` 55 crore. The entire project cost was borne by the concessionaire. As per the concession agreement TMC was supposed to provide 100 MT of mixed waste per day to the private concessionaire, of which at least 40 MTD would be bio-degradable waste. The concessionaire would pay ` 3.5 per ton of waste sold to it. If the municipality defaults in providing the concessionaire
Windrow composting refers to the conversion of municipal waste into a stable mass by aerobic decomposition. Please refer to Composting Chapter 14 accessed at urbanindia.nic.in/publicinfo/ swm/chap14.pdf.
29
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Box 3.2 Level of Citizens/Community Participation Participation by the citizens and the community is another important aspect that should be considered while deliberating on the operational model. A community which is adequately informed and aware not only helps in proper segregation of waste at source but also in reduction of waste at source. Several examples of active citizens and community participation are in practice in different cities. For instance, RWAs in Chennai with the help of Exnora, an NGO, initiated waste management services in their localities as early as 1990s. The decentralized system is applicable for both for-profit and notfor profit organizations but requires a high degree of commitment from the community in waste management as their participation is crucial for all segments of the MSW management. The MSW Rules 2000 does not stipulate management of waste by the citizens themselves. In some cities citizens and informal waste workers have come forward to manage municipal wastes in their localities. For instance, RWA manage wastes in some areas in Mumbai with support of the Greater Mumbai Municipal Corporation (GMMC). In Pune, the Pune Municipal Corporation (PMC) is financially supporting Solid Waste Collection and Handling (SWaCH), a co-operative formed by waste pickers in 2007. The organization provides door-to-door garbage collection services across the city. PMC committed to support the operations of the co-operative for five years since inception. PMC provides management and equipment support and bears infrastructure and some welfare costs during the start-up phase whereas the co-operative in this incubation period explores revenue sources and becomes a selfsustainable entity by the end of the period. However, the sustenance of community based systems can be endangered with a change in commitment of the local administration consequent of a change in government. Further, once the concerned ULB starts levying and collecting conservancy charges on waste generators, it is unlikely that all users of the community waste management services would be willing to pay the user charges/conservancy charges twice. Hence, it is crucial to take note of the institutional framework governing the waste sector before adopting a particular approach.
the waste, it would compensate the concessionaire by paying it ` 5.20 per ton of waste not supplied. This meant that the demand risk was completely borne by the TMC. It was responsible for getting the required quantity of a given type of waste, thereby ensuring the sustainability of the project. The waste supplied after 105
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Figure 3.11 Structure of the PPP model in Tirupur

Tirupur Municipal Corporation
1) Provision of land or lease 2) Provision of waste 3) payment of ` 5.20 per tonne of waste in case of default
Payments of ` 3.5 per tonne of waste supplied
Compost
Buyers of Compost
Payments
IVR Infrastructures projects Ltd.
Monitoring
Peace Committee
composting it into fertilizer would be sold to the farmers. This was the source of revenue for the concessionaire. A model briefing the flow of funds and the respective responsibilities taken by the various stakeholders involved is shown in the figure above. Issues faced and lessons learnt Formation of peace committee The construction of the plant was completed in 2000. The concessionaire faced problems from the villagers who refused to allow its operation by threatening the workers at the plant. The concessionaire had to seek help from the municipality, which engaged a local NGO to convince the villagers about the importance of the plant and its use for waste management. A Peace Committee comprising of the village elders was formed to monitor the plant and ensure that there was no foul odor in nearby areas due to the processing of waste. Change in Compliance (Implementation of MSW Rules, 2000) While the compost plant was being designed and constructed, the Ministry of Environment and Forests, Government of India released the Municipal Solid Waste (Managing & Handling) Rules in September 2000. The Urban Local Bodies (ULBs) are responsible for the implementation of the rules, for infrastructure development for collection, storage, processing and disposal and operating the solid waste management system. The ULB may contract out its role of provision of infrastructure and operation to a service provider. The state pollution control board would be in charge of monitoring compliance to the rules. Accordingly, 106
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Tamil Nadu Pollution Control Board (TNPCB), set up in 1982 was given the role for ensuring compliance with MSW Rules 2000. TNPCB had to be consented for the following purposes. First was the suitability of the land for establishing a processing facility or a sanitary landfill. Second, allow operation only if the facility met the existing standards of pollution control. After the construction of the processing plant was completed in Tirupur, the private concessionaire approached TNPCB to get its consent for operations. TNPCB refused to give its consent because the processing plant did not comply with the MSW Rules. In particular, the solid waste would be sent for processing into the composting plant without segregation. MSW Rules mandated that the segregation of waste should be taken place at the source of generation and suitable technology should be available to recycle each kind of waste. Both, TNUDF and the private concessionaire pleaded TNPCB to excuse this project from following the MSW Rules as the concession agreement was signed before the rules came into place. TNPCB refused and instead asked the ULB to ensure segregation of waste at the source and only supply bio-degradable waste to the concessionaire. It further insisted that the concession agreement should be re-written to include the provision of at least 40 MTD of biodegradable waste by the TMC, since this was the amount of waste to be treated in the compost yard of the total 100 MT of waste supplied. The objective of this measure was to reduce the quantity of municipal waste brought to the landfill site, and thereby reduce the high capital cost involved in developing a landfill site. This meant that the TMC could no longer supply 100 MT of mixed waste to the concessionaire. The concessionaire refused to accept this demand and asked for 100 MTD of biodegradable waste as mentioned in the original agreement. This issue was solved after the TMC conducted a number of campaigns to create awareness about the segregation of the waste. This also allowed the rag-pickers to continue earning their livelihood by collecting un-segregated waste, segregating recyclables and selling them. Current Status At present, the population of Tirupur (including floating population) generates 450 MT of waste per day. Of this, 100 MT is bio-degradable waste, 340 MT is non-bio-degradable and 10 MT is recyclable. TMC supplies 40 MT of biodegradable waste to the private concessionaire, which will be increased by initiating privatization of collection and transportation of wastes in the town, aided by awareness campaigns.
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B. The Kanpur Solid Waste Management The need for a PPP in solid waste management of Kanpur The waste generated by the residential households and commercial establishments in Kanpur largely consists of organic waste, followed by waste from construction. The Kanpur City Development Plan prepared under the JnNURM mentions that bio-degradable waste is 56% of the total municipal waste. Prior to the engagement of a private player, the municipal corporation was responsible for collection of the waste and its disposal. There was no mechanism for segregation of waste and there was no waste processing plant. Considering the waste management scenario in the city, Kanpur decided to adopt a PPP framework to manage its MSW. Two concessionaires were selected for managing MSW in Kanpur. A private developer (Concessionaire 1, henceforth) was responsible for collection and transportation of waste. Another private developer, A2Z Pvt. Ltd. (Concessionaire 2, henceforth) was selected for processing and disposal of waste. Processing and Disposal of Waste In June 2008, a concession agreement was signed between KMC and Concessionaire 2 for processing municipal waste in Kanpur on a BOT basis with a concession period of 30 years. This project of ` 65 crore received a capital grant from JnNURM. The operations expenditure was to be met by the private operator by levying tipping fees. At this time, Concessionaire 1 was already selected which was responsible for collection of waste from the households and commercial estates and transport it to the processing plant; operated by Concessionaire 2. The waste transported to the processing unit (around 1,500 tons a day) would be segregated and converted into refuse-derived fuel (RDF), compost or bricks. The value chain describing the activities undertaken by A2Z Private Limited is shown below. Collection and Transportation of Waste Concessionaire 1 responsible for collection and transportation was incentivized only by the tipping fee paid to it by the KMC, based on the quantity of the waste collected. Hence, the concessionaire 1 understood its responsibility as moving garbage to the processing plant rather than providing raw material to concessionaire 2, which would be used to process to generate revenue. After the commencement of operations of the processing plant by Concessionaire 2, it was realized that the waste transported by Concessionaire 1 to the unit did not hold enough calorific value to be converted into RDF, compost or bricks. This increased the financial risk of Concessionaire 2 as it was not 108
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being able to generate revenue from selling the processed products to cover its operations and maintenance costs. Considering this situation, KMC terminated the contract of collection and transportation of waste with Concessionaire 1. Later, it entered into another contract with A2Z Private Limited (Concessionaire 3, henceforth) to undertake the responsibility of collection and transportation of waste on a BOT basis for a period of 30 years. The value chain that summarizes the role of A2Z Private Limited is given below. Reverse Integrated Solid Waste Management A2Z Private Limited is now responsible for both the aspects of MSW management; collection and transportation and processing and disposal. This process of first being responsible only for processing and disposal and later for collection and transportation as well is called the Reverse Integrated Solid Waste Management Project. The stakeholder model of Integrated MSW in Kanpur is shown below. The project has made provisions for penalties incurred by the concessionaire and the municipal corporation in case of default for not transporting the stipulated quantity of waste to the processing facility as per the agreement. Concessionaire 1 also collects user charges from the waste generators on behalf of the municipal corporation. Efficiency in collection of user charges is based on a given percentage of the total amount of user charges billable on a monthly basis (1st Year 30%, 2nd Year 40%, 3rd Year 50%). If the Concessionaire 1 defaults, the tipping fee paid by the ULB is reduced by the amount of the shortfall. Further, if Concessionaire 1 collects more user fees than required, the extra amount collected in that particular month is added to the tipping fee paid. If this takes place on a cumulative basis, then an incentive is given to the concessionaire (which is calculated on an annual basis).30 Lessons Having separate concessionaires for collection and transportation and processing and disposal may not be a sustainable project Prior to the Reverse Integrated Solid Waste Management project, the collection and transportation concessionaire did not realize the economic value of the waste it was collecting and transporting it to the concessionaire who had to recycle/ process it. The concession agreement for collection and transportation of waste provides an incentive to the private developer only in the form of a tipping fee paid based on the quantity of waste collected. This issue made it challenging for the concessionaire responsible for processing and disposal to mitigate its
30
The incentive is 20% of the total amount collected reduced by the amount to be collected.
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Figure 3.12 Value Chain for Processing and Disposal ofWaste
Segregation
Weighing the compactor containing municipal solid waste via an electronic system to ensure 1500 TPD is received The waste is transferred to 3 sorting machines, each with a capacity of 500 TPD to segregate it into. Particles of less than 75 mm Particles greater than 75 mm Stones, sand and bricks
Weighing Waste
Particles of length less than 75 mm is converted to manure or vermi - compost. The rest are converted to RDF using 3 machines, each with a capacity of 30 tonnes per hour. Stone and sand is converted into bricks.The plant produces 2000 bricks per day
Processing
Figure 3.13 Value Chain for Collection and Transportation ofWaste

Transportation of waste
Primary collection - door to door waste. Secondary collection-street sweeping and collection from accumulated wastes from road side dustbins and commercial establishments Transportation of waste to the processing facility. The minimum incoming waste should be 80% of 1500 TPD. This waste does not include biomedical, hazardous or radioactive waste. If it does, then the concessionaire insures the segregation before transportation
Collection of waste
operational and financial risk, as converting waste into revenue generating products. Hence, when the MSW management is decentralized with private sector participation for each segment of value chain, then the model may not be sustainable unless the tipping fee paid to the concessionaire responsible for collection and transportation is based on both the quantity and quality of waste.
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Figure 3.14 Stakeholder Model of a Reverse Integrated Solid Waste Management Project
Buyers of Processed Products:
a. Manure b. Bricks c. RDF Payments Processed Products Payments for providing waste 120% of the amount
Urban Local Body
User Free
Waste Generators/ Consumers

Municipal Solid Waste (1500TPD)
Tipping Fee 50% of the Fee
Processing & Disposal Concessionaire
80% of 1500 TPD(monthly)
Collection & Transportation Concessionaire
Flow of Funds Flow of Waste/ Processed Waste Flow of funds in case of default by the collection and transportation concessionaire
KMC resolved this issue by using a PPP model whereby all segments of the value chain of solid waste management are handled by a single entity. Involvement of community The issue of rag-pickers making a living out of the waste was solved by the private developer training them in collecting waste and retaining them. Before the KMC decided to handover MSW management in Kanpur to private developers, the collection and disposal of waste was carried out by rag-pickers. The ragpickers would generate income for their livelihood by the sales of recyclable waste that they collect. This was an issue in Kanpur, as contracting out collection of waste to a private developer meant taking away the rag-pickers source of income. A2Z Private Ltd., instead of hiring new workers for their project, chose to retain the rag pickers. The ragpickers were trained for using various tools of collecting waste and were paid a monthly income for doing the job. C. The Hyderabad Integrated Solid Waste Management The need for PPP in Integrated Solid Waste Management of Hyderabad The Greater Hyderabad Municipal Corporation (GHMC) in 2007 estimated that the city would generate nearly 3,800 tons of waste per day. Before 2007, the 111
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storage of waste at the source of generation and its segregation was limited to a few parts of the city. This was usually done when a huge heap of waste was accumulated at some location or when there were complaints from the public demanding its clearance. Only about 1015% of the households disposed it in the nearby community points. There were no means of quantifying the efficiency and monitoring of the garbage clearance mechanism. However, GHMC had already privatized large proportions of the solid waste management in the city 75% of the total area of the city was privatized for street sweeping and collection & transportation in the form of service contracts. Also, the corporation had already entered into two MoUs with private concessionaires for conversion of waste to energy. Each concessionaire was provided with 700 metric tons of waste, thereby privatizing as well as treating only 37% of the total waste generated. In order to meet the compliance rates of MSW (Management & Handling) Rules, 2000 and to implement the Clean Hyderabad 200607 Program; the GHMC decided to adopt an integrated solid waste management system under the PPP mode. Structure of the PPP Model The Infrastructure Corporation of Andhra Pradesh (INCAP) provided the consultancy services for project structuring, bid processing, financial analysis and selection of the concessionaire for the Hyderabad Integrated Solid Waste Management Project (ISWM). The entire time line of the bidding process has been shown in Fig. 3.15. 22 EoIs were received, of which six were shortlisted. Two different concessionaires submitted financial bids of ` 1,431 and ` 1,680 Exhibit 3.10 Increasing Scope of PPPs in Hyderabad
2008 onwards Integrated Solid Waste Management of 3,800 TPD generated by the city 75 % of the work contracted out. Another 700 TPD supplied to RDF Projects Ltd. for WtE 60 % of the work contracted out. 700 TPD supplied to Selco for WtE 27 areas covering 40,000 population Road Sweeping Collection & Transportation Processing O&M of Transfer Stations
200006 Year 199799 199697
Increasing Scope of PPPs Waste Disposal
Aspects of Solid Waste Management Source: Athena Research
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Figure 3.15 Timeline ISWM in Hyderabad

June: Issue of Request for Qualification September: Announcement of shortlisted bidders November: Receipt of Bids
2008
July: Receipt of EoI October: Issue of Request for Proposals
2009
Concession Agreement signed
Figure 3.16 Stakeholder Map of MSW Management in Hyderabad

Infrastructure Corporation of Andhra Pradesh Greater Hyderabad Municipal Corportation
Consulting Services Tipping Fees Concession Agreement (BOT, 25 years)
Central Government (35% of the project cost)
Financing
Ramky Enviro Engineers Limited

Tariffs
Monitoring
Environment protection Training & Research Institute
State Government (15% of the project Cost)
Prices
Services of collection & Transportation of waste
RDF
Waste Generators
Flow of Funds Flow of Resources / Services
Buyers of RDF
per ton of waste. Since the lowest tipping fee was the bid criteria, Ramky Enviro Engineers Limited (REEL) whose bid was ` 1,431 per ton of waste was awarded the project. The Greater Hyderabad Municipal Corporation (GHMC) and REEL entered into an agreement for integrated solid waste management in Hyderabad in February 2009. The project was to be carried out on a DBFOT basis for 30 years. The scope of the project included: Door to door collection of waste Collection of waste from storage points 113
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Transportation of waste to a transfer station Construction, operations and maintenance of transfer station Secondary transportation of waste from the transfer station to a processing facility Construction, operation and maintenance of the processing facility Disposal of waste by means of scientific landfill Construction, operations and maintenance of the landfill Capping of existing dump sites The total project cost was ` 434.91 crore and was eligible for a grant from the State Government and the Central Government under the JnNURM scheme, with a share of 15% and 35% of the total project cost, respectively. In the event of being unable to obtain the grant, GHMC was responsible for making a provision of grant equivalent to 50% of the total project cost, thereby covering the share of Government of India and Government of Andhra Pradesh. The arrangements for the remaining 50% of the project investments were to be made by the private concessionaire itself. The other obligations of GHMC include the provision of road connectivity to the transfer stations, the treatment & disposal facilities, and the handover of all existing infrastructure such as dustbins, landfills, vehicles, etc. to the concessionaire. The GHMC was also responsible for provision of power connections to the transfer stations and treatment and disposal sites. However, the arrangements of the distribution network, usage charges, water supply and power back up facilities were to be made by the concessionaire. A brief stake holder model describing the flow of funds and other resources in this project is given below. Figure 3.17 Sharing of Solid Waste in Hyderabad
Ramky (1700 MT)
Waste Generators
Collection & Transportion Concessionaire
Greater Hyderabad Municipal Corporation
Venkateshw ara (700 MT)
Treatment & Disposal / Waste to Energy Concessionaires
Selco (700 MT)
RDF Power Generation Limited (700 MT)
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The project allowed the collection and transportation of garbage by the private developer on a trial basis, starting with the east and the west zone of the city. After reviewing the performance in six months, the developer may be asked to carry out the activities for the municipal solid waste generated by the twin cities (Hyderabad and Secunderabad), which would be approximately 4,000 metric tons. According to the agreement, REEL had to commence the collection and transportation facilities within six months of being awarded the project and establish the processing facilities in two years. Despite the agreement being awarded in 2008, the project implementation was kept in abeyance for over a year due to objections raised by the municipal workers. The municipal workers argued that once the private developer would take the responsibility of collection and transportation of waste, their role would be restricted to sweeping of roads. However, after consultations with the labour union leaders and the municipal of administration and urban development, a memo was signed and the project was commenced. REEL paid ` 3 crore as project development fee and submitted bank guarantee of ` 18 crore towards the performance guarantee. GHMC appointed Environment Protection Training & Research Institute (EPTRI) as the independent consultant for the project to monitor the performance of the firm for 25 years, plus another 15 years of monitoring the landfills after closure. The concession agreement stated that of the 3,800 metric tons of waste collected by REEL, 700 MT would be given to each of the firmsSELCO and RDF Power Generation Limited for processing, and the remaining amount would go to back to REEL. Lessons Financing support by the state A financing issue was faced during the project implementation phase. Government of India refused to contribute its share of 35% of the project cost, amounting to ` 152 crore by claiming that the state had already exhausted its investments of seven years under the JnNURM. To resolve this problem, the state government agreed to bail out GHMC by bearing that part of the project cost which was to be provided by the GOI. Commitment by the government In July 2009, there was a strike by the GHMC employee unions arguing that the private concessionaire would limit their role in Hyderabad MSW Management for works such as street sweeping and not for the actual collection and transportation of waste. However, the Municipal Administration and Urban Development (MA&UD) released a memo to begin pre-construction works after having 115
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Figure 3.18 Stakeholder Mapping of Timarpur-Okhla Integrated Waste Management Project

o io e r i ero o e h olo e elo e D o i o e ree e e e or e e o
Delhi Power o o er i l
New Delhi Municipal Corporation
er
l o e
olle e er
Di o i re e l e le
io e r e o Pro e
ew e
Municipal Corporation of Delhi
Delhi Jal Board
hr Pr e h e h olo De elo e Pro o io o r
r o PP o h i i e e hro er i i ho e i Power or e r or ower e er e ol
re i
le
ri i
r i er ili er e e P r h er e le ri i e o ri i
o o
ehol er i l
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consultations with the heads of the labour union. It is essential for the government to intervene when such obstructions by the municipal employees cause delays in project development. Role of independent engineer It was during the initial stages of the collection and transportation of the waste, when the Environment Protection Training & Research Institute (EPTRI) sent a letter to the GHMC commissioner saying that the collection, transportation, treatment and disposal of the waste should be taken up simultaneously as per the agreement. It also said that the payment of the tipping fee should only come into effect when the treatment and disposal facility is constructed and is under operation. In this regard, REELs argument was that the Tipping Fee of ` 1,431 per ton, to be paid by the GHMC is for three components40% of it for collection & transportation, 20% for transfer to processing stations (dumping yards) and the remaining 40% for treatment and disposal of waste. Hence, until operations of treatment of waste begin, REEL should be paid only 60% of the tipping fee. This indicates the importance of the role of an independent engineer, to monitor the implementation of the project as per the concession agreement. Lack of clarity in the concession agreements of the municipal corporation with multiple private players for MSW management Initially, of the 3,800 metric tons collected by REEL and given to the GHMC, about 2,400 MT would be given back for power generation. Despite the fact that the concession agreement stated that GHMC would not enter into any agreement with other power generating companies, GHMC did enter into an agreement with Venkateshwara Power Ltd. to supply 700 MT of waste. REEL objected to this agreement, but the MA&UD argued that the agreement with Venkateshwara Power Ltd. was signed before the one with REEL for ISWM project. Recently, RDF Power Generation Ltd. demanded 200 MT extra from the GHMC. GHMC could not refuse to supply since it had to pay the remaining ` 5.45 crore for 26% of the equity share in its agreement with RDF Power Generation Limited. Currently, RDF Power Generation Limited is supplied 900 MT which it uses for power generation, further sold to Tata Power Trading Company for ` 3.6 per unit. The rest of the power generation companies are supplied 700 MT each and the rest of the waste collected is supplied to REEL for its power plant set up at Jawaharnagar. Thus, the lack of clarity amongst various concessions of the GHMC with other waste processing private developers, lead to the reduction of waste available to REEL for processing from 2400 MT to 1500 MT. This would increase the revenue risk of REEL.
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D. The Timarpur-Okhla Solid Waste Management Project Introduction This project was initiated in 2007 when Municipal Corporation of Delhi (MCD) and the New Delhi Municipal Corporation (NDMC) decided to implement a 16 MW Waste to Energy Project on BOOT basis by setting up an integrated municipal waste processing facility at Okhla and Timarpur in New Delhi.31 The project was an outcome of the continued difficulties faced by the ULBs of Delhi in disposing/treating solid waste. Around 2050 tons of waste (one-third of the total municipal waste generated in Delhi) was targeted to be processed to generate over 16 MW of green electricity. The project cost was estimated at ` 175 crore (later escalated to ` 200 crore32) with a construction period of two years.33 The project attracted 30 private players initially of which six submitted their bids. Four bidders qualified on technical parameters and finally Jindal Urban Infrastructure Limited was selected based on the lowest tariff for electricity generated from the project. The company had quoted ` 2.49 per kwh for the first year and a leveled tariff of ` 2.83 per kwh. Some Notable Features: The project is the first and largest integrated waste management project ever being set up in the country, aiming for a sustainable solution (Zero Waste Concept) taking MSW through an environmentally friendly process to generate clean and renewable energy from MSW. The project is CDM is registered with United Nations Framework Convention on Climate Change (UNFCCC) for earning carbon credits. The plant is expected to annually lead to emission reductions of 266,066 metric tonnes of carbon dioxide equivalent per annum.34 The project achieved financial closure within 4 months from award of Letter of Intent (LOI). The project demonstrated high level of preparedness as technical studies, statutory approvals, regulatory approvals, contractual framework, project
MCD and NDMC are two separate ULBs in Delhi with separate jurisdictional areas. This escalation was primarily due to increase in capacity of power plant from 16 MW to 20 MW. 33 Please refer to Timarpur-Okhla Solid Wate Manangement Project document retrieved at http:// ilfswasteexchange.com/html/TOWMCPL.pdf and Honble CM of Delhi Smt. Sheila Dikshit lays the foundation stone for the Jindal Ecopolis Timarpur-Okhla Municipal Solid Waste Management Project retrieved at http://www.towmcl.com/Pressrelease_Details.aspx?MKey=18&NKey=8, for different in project cost. 34 See, Okhla waste plant to power BSES, retrieved at http://www.thehindu.com/news/cities/Delhi/ article83310.ece, for further details.
31 32
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appraisals, etc. and tying up all linkages, was undertaken before the bidding process was initiated. The project did not require grants from the government for meeting its capital or operational expenditure. Lessons Project Preparedness This project demonstrated high degree of preparedness from the government as during the pre-bid phase the government undertook detailed technical studies, evaluation of financial and risk elements and obtained the required regulatory clearances. The Special Purpose Vehicle (The Timarpur Okhla Waste Management Company Ltd.) was incorporated before the government proceeded with the bidding process. Lack of Coordination The bidding process stretched over three years primarily due to delay in obtaining No-Objection Certificate (NOC) from different government departments for the project. Provision for a single window clearance can help in addressing the issues posed by different stakeholders in the government. Choice of Technology The project allowed the private sector consortium the flexibility to choose the technology for processing of waste. The consortium found RDF appropriate given the high organic composition of the citys waste. The choice of the technology was made after assessing it at alternative locations. Running pilots before applying a technology at a larger level could entails significant resource savings Stakeholder Consultation The project is located in close proximity of human settlements. This resulted in protests by different stakeholders, including residents and NGOs. The government conducted public hearings in association with different stakeholders to address the concerns of the residents. It is important that the location of MSW processing sites be chosen after proper planning and far away from human settlements. In case of severe location constraints, a well designed Information, Education and Communication (IEC) system is a must to get stakeholder buy-in.
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CHAPTER fOuR
CONCLUSION AND FUTURE MEASURES
Management of solid waste has been a major challenge for the local governments. Lack of concerted effort to create awareness about good waste management practice and failure of the ULBs to provide this important municipal service to the public are primarily responsible for development of a poor waste management system in the country. The severity of the issue has increased due to rapid urbanization coupled with rising income levels that could increase the problem of waste management manifold in the near future. By creating the required infrastructure for environmentally sustainable and cost-effective collection & transportation system, recycling, processing & scientific disposal, it is possible to reduce the quantity of refuse reaching landfills and also extract value from the waste. With India undertaking adequate measures to address the financial constrains of the ULBs through JnNURM and 13th Finance Commission grants it is important that the ULBs build capacity to appropriately allocate the funds and manage waste in an environmentally sound and cost-effective manner. This would Adequate planning and adopting waste management solutions that suits the socio-economic and geographical profile of the urban areas is particularly important. Lack of data is a major constraint towards this end. The government and other stakeholders need to come together to address the data gap in terms of waste quantity, composition among other aspects that would allow for informed decision making. The private sector has been assisting the ULBs to improve the management of waste in some segments of the MSW management. In some instances private sector participation has been able to enhance cost efficiency of delivery of the MSW management services. There is a need to take the public private partnerships to the next phase where such partnerships are based on a mature rationale. The emphasis of PPPs should be to leverage the private sector efficiency so as to ameliorate the ways in which waste is managed by the ULBs.
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The next stage of this project will involve developing recommendations for the stakeholders based on the extensive research undertaken during this exercise. To support the ULBs in their solid waste management strategies, capacity building exercises on the choice of financial and operational model would be conducted in a few select ULBs in the states of Tamil Nadu, Karnataka, Andhra Pradesh and Madhya Pradesh.
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APPENDIX I
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Exhibit I.1 Performance of State with respect to JnNURM Reforms

S/N 1 JnNURM Reforms 74th CAA (Transfer of 12 Schedule Functions) 74th CAA (Constitution of DPC) 74th CAA (Constitution of MPC) Transfer of City Planning Function Transfer of Water Supply & Sanitation Reform in Rent Control Stamp Duty Rationalization to 5 Per Cent Repeal of ULCRA Enactment of Community Participation Law Enactment of Public Disclosure Law E-Governance Set UP Migration to Double Entry Accrual-based Accounting Number of Cities with Coverage of Properties > 85 Per Cent Number of Cities with Property Tax Collection >90 Per Cent 100 Per Cent of O&M Cost Recovery in Water Supply 100 Per Cent Cost Recovery in Solid Waste Internal Earmarking of Funds for Services to Urban Poor Number of PPP Projects Number of Reform Measures AP ARP ASM BR CG DL GOA GJ HRN HP J&K JRD
2 3 4 5 6 7 8 9 10 11
12
13
14
15
16
17
3 16 3
1 7 8 8
3 2 3
1 14 6 7 1 1
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MPR MZM MP MAHA NL ODA PNB PDY RS SKM
KNK KL TN TRP UK UP WB
1 5 2 10 16 4 10 6 2
5 9 2
7 12 12
4 12 11
3 3 12
2 14
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REFERENCES
Annepu, R. K. (2012). Sustainable Solid Waste Management in India. Master of Science Thesis in Earth Resource Engineering, Earth Engineering Centre, Columbia University, (2012). Accessed from http://www.seas.columbia.edu/earth/ wtert/sofos/Sustainable%20Solid%20Waste%20Management%20in%20India_ Final.pdf Enayetullah, I., and A.H. Md M. Sinha (2002). Community Based Decentralized Composting: Experience of Waste Concern in Dhaka. Urban Management Innovation, Case Study #3. All India Institute of Local Self Government, New Delhi. Esakku, S., Swaminathan, A., Karthikeyan, O.P., Kurian, J., and K. Palanivelu (2007). Municipal Solid Waste Management in Chennai City, India. Eleventh International Waste Management and Landfill Symposium, S. Margherita di Pula, Cagliari, Italy; 1 5 October 2007. CISA, Environmental Sanitary Engineering Centre, Italy. ICRA Management Consulting Services Limited (2011).Toolkit for Public Private Partnership Frameworks in Municipal Solid Waste Management, Volume I Overview and Process. Ministry of Urban Development, Government of India. ICRA Management Consulting Services Limited (2011). Toolkit for Public Private Partnership Frameworks in Municipal Solid Waste Management, Volume IICase Studies of PPP Projects. Government of India. ICRA Management Consulting Services Limited (2011). Toolkit for Public Private Partnership Frameworks in Municipal Solid Waste Management, Volume IIIModel PPP Templates and Documents. Ministry of Urban Development,Government of India. ICRA Management Consulting Services Limited (2011).Toolkit for Public Private Partnership Frameworks in Municipal Solid Waste Management,
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REfERENCES
Volume IV, Baseline Status of MSWM in Select Satellite Towns. Ministry of Urban Development,Government of India. Jain, G.V., Mahadevia, D., and C. N. Ray (2005). Urban Governance for Sanitary Waste Management Services in Jabalpur. Working Paper No.26, School of Planning, CEPT, Ahmedabad. Kanpur Municipal Corporation (2010). Concession Agreement for the Collection and Transportation of MSW for Kanpur Municipal Corporation. Accessed from http://kmc.up.nic.in/PDF_Files/others/A2Z%20Agreement%20Copy.pdf Khajuria, A., Yamatoto, Y., and T. Morioka (2010). Estimation of municipal Solid Waste Generation and Landfill Area in Asian Developing Country. Journal of Environmental Biology, 31(5), pp. 649654. Kumar, S., Bhattacharyya, J.K, Vaidya, A.N., Chakraborty, T., Devotta, S., and A.B. Akolkar (2009). Asessment of Status of Municipal Solid Waste Management in Metro Cities, State Capitals, Class I Cities, and Class II Towns in India: An Insight. Waste Management, 29, pp. 883895. Mahalingam, A. (2010). Urban PPP Case Studies: Tamil Nadu. TNUDF, Government of Tamil Nadu. Mohan, D (2002). Peoples Right to Safety. Health and Human Rights, 6 (2), pp.161167. Ministry of Environment & Forests (2000). Municipal Solid Waste Management (Management & Handling) Rules, 2000. Government of India. Ministry of Environment & Forests (2011). Report of the Committee set up to frame National Sustainable Habitat Standards for the Municipal Solid Waste Management. Government of India. Ministry of Urban Development (2006). Modified JnNURM GuidelinesUIG. Government of India. Ministry of Urban Development (2006). Guidelines for Preparation of Detailed Project Reports and Selection of Technologies for Processing and Disposal of Municipal Solid Waste Using 12th Finance Commission Grants. Government of India. Ministry of Urban Development (2006). Report of the Working Group on Urban Development (excluding Urban Transport), Urban Water Supply and Sanitation (including Low Cost Sanitation, Sewerage & Solid Waste Management) and Urban Environment for the Eleventh Five Year Plan (20072012). Government of India. Ministry of Urban Development (2008). Handbook on Service Level Benchmarking. Government of India. 128
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REfERENCES
Ministry of Urban Development (2010). Improving Service Outcomes 200809: Service Level Benchmarking Databook. Government of India. Ministry of Urban Development(2011). Municipal Solid Waste Management on a Regional Basis-Guidance Note. Government of India. Ministry of Urban Development (2011). Report on Indian Urban Infrastructure and Services. High Powered Expert Committee. Government of India. National Institute of Urban Affairs (2010). Benchmark for Efficient Services. Quarterly Newsletter, 13(1). Accessed from http://www.niua.org/Publications/ newsletter/UF_ENG_JAN-MAR10.pdf Rathi, S. (2007). Optimization Model for Integrated Municipal Solid Waste Management in Mumbai. Environment and Development Economics, 12, pp. 105121. Sarkar, Papiya (2003). Solid Waste Management In DelhiA Social Vulnerability Study. In Martin J. Bunch, V. Madha Suresh and T. Vasantha Kumaran, eds., Proceedings of the Third International Conference on Environment and Health, Chennai, India, 1517 December, 2003. Chennai: Department of Geography, University of Madras and Faculty of Environmental Studies, York University. Pages 451464. The World Bank (1999). What a Waste: Solid Waste Management in Asia. Urban Development Sector Unit, East Asia and Pacific Region, World Bank Group, Washington DC. UNICEF (2010). Successful Innovations in Solid Waste Management Systems: examples from Five Local Bodies in Tamil Nadu. Government of Tamil Nadu, India. Urban Management Centre (NA). Integrated Waste Processing Plant on PPP (Build Operate Own) Process: Rajkot Municipal Corporation. Accessed from http://www.pas.org.in/Portal/document/ResourcesFiles/GoodPracticeDocs/ Integrated%20Waste%20Processing%20Plant.pdf USEPA (2010). Municipal Solid Waste Generation, Recycling and Disposal in the United States: Facts and Figures for 2010. Environment Protection Agency, US government. Vishwanath, C., and J. Trankler (2003). Municipal Solid Waste Management in Asia: A Comparative Analysis. Environmental Engineering & Management, Asian Institute of Technology.
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INDEX
24*7 3R access to water accountability adequacy of sewage treatment capacity apparent losses Asian Development Bank (ADB) Assam awareness campaigns Bangladesh basic services basic services to urban poor (BSUP) bengaluru berhampur bidding biomedical bio-methanation bokaro boot bot annuity bot toll Bruhat Bengaluru Mahanagara Palike build-operate-transfer bulk water supply byrraju foundation CAGR capacity building capex capital expenditure capital expenditure capital works central funds central public health environment and engineering organization
centralized centralized waste management approach characteristics of waste Chennai city class type city size Class IA Class IB Class IC Class II Class III Class IV+ collection collection and transportation collection efficiency collection efficiency collection efficiency of sewage network commercial commercial infrastructure sectors commercial viability community participation community participation compost concession agreement connections conserve constitutional amendment act (caa) continuity of water supply contract Corporation of Chennai cost recovery coverage coverage of sewage network services coverage of toilets
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INDEX
coverage of water supply connections CPHEEO cross-subsidization debt service reserve fund decentralized decentralized waste management approach Delhi developed countries differentiated tariffs disposal double accrual accounting systems draft National Water Policy, 2012 drainage drinking water economic good efficiency in collection of water supply related charges efficiency of water supply electronic waste eleventh plan empanelment of consultants engineering-procurement-construction environment environment protection act, 1986 equipments Exnora feasibility financial model financial structure financial sustainability financial sustainability fixed costs forecasts forms of waste fund allocation funding future investment requirements future land requirements gaps ghanta gadis Government of India Government of Madhya Pradesh (GoMP) Government of Tamil Nadu (GoTN) gram vikas samity grants-in-aid gross domestic product (GDP)
Guwahati hand pumps hazardous high powered expert committee report household coverage households Housing and Urban Development Corporation (HUDCO) human resource capacity Hyderabad implementation issues India industrial industries infrastructure infrastructure board Infrastructure Leasing & Financial Services (IL&FS) institutional framework integrated resource recovery centers integrated solid waste management integrated state water plan internal rate of return internal resource generation capacity International Bank for Reconstruction And Development (IBRD) investment outlay IRRC issues ISWM Jabalpur Japan International Corporation Agency (JICA)World Bank (WB) Jawaharlal Nehru Urban Renewal Mission (JNNURM) Kanpur Kanpur Municipal Corporation Khandwa Municipal Coproation (KMC) lessons litres per capita per day (lpcd) low-income countries Maharashtra Maharashtra Water Resources Regulatory Authority management contracts mandatory reforms
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INDEX
market linkages mature rationale medical and public health and water and sanitation memorandum of understanding (MOU) metering metering of water connections metropolitan level specialist agency micro-entrepreneurs millennium development goals million litres per day (MLD) ministry of environment and forests Ministry of Urban Development model concession agreements (MCAs) monitoring monopoly profits MSW (management & handling) rules, 2000 multilateral agencies Munger municipal solid waste (MSW) Muskan Jyoti Samiti nagar nigams Namakkal Nashik National Sample Survey Organization National Water Policy network pipes New Tirupur Area Development Corporation Limited (NTADCL) NGOs non revenue water non-governmental organizations non-profit organization non-tax revenue O&M expenditure operational model operations and maintenance operations and maintenance expenditure operations and management opex optional reforms parameters parastatal agencies Patna pellatization
per capita investments (PCI) per capita supply of water per capita waste generation performance based payments performance efficiency bonus phased project physical losses plastic policy framework potential revenue pricing primary collection priority investments priority investments (PI) private sector participation private sector participation (PSP) processing processing and disposal project procurement pro-poor policy public health engineering department (PHED) public private partnerships public procurement public-private-community partnership (PPCP) quality of waste quality of water quality of water supplied quantity of waste Rajasthan Rajkot Ramky Enviro Engineers Limited RDF recycle redressal of customer complaints refused derived fuel regulation rehabilitation rehabilitation and resettlement replacements residential welfare associations residentials reuse revenue structure Saharanpur
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INDEX
salient features sanitary landfill sanitary landfills scarce schemes service delivery service level benchmarks sewage network sewage network sewage treatment sewage treatment sewerage social infrastructure sectors solid waste management sources of drinking water sources of financing sources of water sourcing, treatment and transmission special purpose vehicle (SPV) specialist municipal undertaking stakeholders state funds status storage strategic framework sub-schemes suitable technology Sujala sweeping Tamil Nadu Tamil Nadu Corporation of Infrastructure Development (TACID) Tamil Nadu Water Infrastructure Company (TWIC) tap water target technical tenth plan Tiruchirapalli Tirupur Tirupur Exports Association (TEA) Tirupur Municipality
Tirupur Water Supply transfer station transparency transportation tube wells ULBs unaccounted for water (UFW) unbilled authorized consumption universal access urban areas urban development Urban Infrastructure and Development Scheme for Small & Medium Towns (UIDSSMT) urban infrastructure and governance (UIG) urban local bodies urban population urban water sector user charges Uttar Pradesh Water Management and Regulatory Commission Uttarakhand value chain value for money vehicles viability gap funding (VGF) village community village panchayat volumetric tariff waste generation waste pickers waste segregation waste to energy plant waste water treatment water and sanitation program (WSP) water framework law Water Health Centre Water Policy, 1987 Water Policy, 2002 water tariffs West Bengal
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PART I PUBLIC PRIVATE PARTNERSHIPS IN URBAN WATER SUPPLY Potential and Strategies
Athena_Water Report_Final.indd 1
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Chapter One
EVOLUTION OF URBAN WATER SUPPLY SECTOR
1.1
URBAN WATER SUPPLY SECTOR IN INDIA
Indias record of providing access to safe and reliable drinking water to its citizens has been very poor, even when compared with other developing countries. No major Indian city has a 24 hour water supply, and a sample of 28 cities averaged just 3.3 hours of water supply per day.1 Other quality metrics accessibility, affordability, cost recovery, extent of metering, extent of non-revenue water all underperform vis--vis the set standards by a considerable degree. The reasons for such chronic underperformance are complex and deep-rooted. Without attempting to list the reasons exhaustively or solve them comprehensively, this report focuses on the potential of one particular mechanism the Public Private Partnership to solve some of the problems associated with the delivery of reliable and affordable urban water supply. The report begins by tracing the evolution of the institutional and policy framework governing urban water supply and then goes on to present a description of the trends in Public Private Partnerships (PPPs) undertaken over the years. In Section 2, the current status of urban water supply and sewerage in is presented through an assessment of Service Level Benchmarks (SLBs). We provide an analytical description of a few pressing problems that have the potential to be addressed through the PPP mechanism. In Section 3, we briefly describe the funding requirement for improvements in urban infrastructure and the different sources of funds, highlighting the deficit that would need to be addressed, in part through private sector financing. In Section 4, we present a framework for successful PPPs developed through our research and describe individual features that have specific relevance to the urban water supply and sewerage sector. We present three case studies in the Appendix and have drawn on them extensively to provide evidence for our arguments.
Please refer to Service Level Benchmark MOUD, GOI (2010) for further details
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P U B L I C P R I VAT E P A R T N E R S H I P S I N U R B A N WAT E R S E C T O R
1.2
INSTITUTIONAL FRAMEWORK
Water is constitutionally a state subject, listed under Entry 17 in the State List, but with the provision for the center to intervene in case of management of interstate rivers under Entry 56 of the Union List. Yet the understanding of water and its related issues has evolved considerably since the drafting of the constitution. While water, in the constitution, originally referred to the management of rivers and irrigation, it is now more broadly understood to include all water bodies, aquifers, ground water, urban and rural water supply, sewerage, sanitation, etc. As such, currently in India, the central government is responsible for laying down the policy framework and for funding and monitoring schemes related to the provision and management of water resources. The implementation of the water policy through programs and schemes identified by the central government, such as development of water infrastructure, operating, maintaining and regulating the water supply system and setting and collecting water tariffs, is carried out by the state governments and by parastatal agencies such as the Urban Local Bodies (ULBs). A brief outline of the role of the state and the central governments across different functions of the urban water sector is given in the table below. Role of the Center Apart from laying down the policy framework, the central government provides funds for financing urban infrastructure development through various schemes and programs. The Jawaharlal Nehru National Urban Renewal Mission (JnNURM) is a central government sponsored urban modernization program with an allocation of over Rs. 1,00,000 crore spread over a period of seven years for 700 cities and towns. The JnNURM was introduced in 2005-06 and aims to provide grants-in-aid to urban local bodies to increase the access of urban infrastructure to the people and the quality of the services delivered, with a special focus on the improvement of the livelihoods of the urban poor. Under the mission, 50% of the funds were to come from the Central Government and the other 50% was to be shared between the beneficiary states and the ULBs.2 However, in subsequent years the Central Government increased its share by over Rs. 16,000 crore to avoid any shortage of funds. Major sub-components of JnNURM are described in the following exhibit. A disaggregation of the project cost based on the share of the central, state and the ULB shows that the share of the Central Government across the four sub
It is to be noted that the Central Government Funds under the JnNURM are released under the head of Additional Central Assistance (ACA). Please see DMU UIG/UIDSSMT (2011), JnNURM, MOUD for further details.
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Exhibit 1.1 Institutional Framework of Urban Water Sector

State Government Department of Water Resources (State Government) State Level Water Regulatory Authorities (E.g., Maharashtra Water Resources Regulatory Authority & Uttar Pradesh Water Management and Regulatory Commission) Statutory Bodies of the State Government, such as the Infrastructure Development Corporations. E.g., Tamil Nadu Urban Finance & Infrastructure Development Corporation Urban Local Bodies Not Applicable
Features
Central Government
Policy & Regulation
Ministry of Water Resources, Central Public Health Environmental & Engineering Organization (CPHEEO), Ministry of Urban Development, Government of India
Funding
Jawaharlal Nehru National Urban Renewal Mission (JnNURM) & Urban Infrastructure Development Scheme in Small & Medium Towns (UIDSSMT); Schemes under the Ministry of Urban Development, Government of India
Metropolitan Level Specialist Agency/ Specialist Municipal Undertaking Metropolitan Level Specialist Agency Specialist Municipal Undertaking
Capital Works
Not Applicable
Public Health Engineering Department / Public Works Department (State Government)
Operations & Maintenance
Not Applicable
State Level Specialist Agencies/ Metropolitan Level Specialist Agencies
Source: Various Government websites & Athena Research
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Exhibit 1.2 Components of JnNURM

Components of JnNURM Urban Infrastructure & Governance (UIG) Basic Services to the Urban Poor (BSUP) Urban Infrastructure and Development Scheme for Small & Medium Towns (UIDSSMT) Integrated Housing and Slum Development Programme (HSDP) Approved Project Cost* In ` crores 60,704 Scope of the Sub-Scheme Urban Infrastructure Projects relating to Water Supply, Sewerage, Solid Waste Management and Roads in 65 Mission cities. Housing and Slum Development Projects in 65 Mission Cities. Urban Infrastructure Projects relating to Water Supply, Sewerage, Solid Waste Management and Roads in cities and towns excluded in the 65 Mission Cities Housing and Integrated Slum Development in non-mission cities and towns.
13,498.61
28,983.65
10,997.35
* The figures shown are as on 2011. Source: DMU Report UIG, UIDSSMT, BSUP and HSDP, JnNURM, MOUD, (2011)
schemes varies between 46% (UIG) and 81% (UIDSSMT). The state governments share ranges from 10% (UIDSSMT) to 32% (BSUP) while that of the ULBs lies between 9% (UIDSSMT) and 37% (UIG). On average, the share of the Central Government, state government and the ULBs in the entire four sub schemes/ components is 53%, 21% and 26%, respectively. The UIDSSMT scheme under the JnNURM was introduced for those cities that were not covered under the UIG scheme. Allocations under the UIDSSMT scheme are shown in the figure below. Other than the JnNURM, external support agencies have also contributed funds for project development and capacity building in this sector. In the last decade (2001-10), World Bank fundedfor one project worth USD 48 Million, Japan International Corporation Agency funded nine projects worth USD 2,195 Million and Asian Development Bank (ADB) funded six projects worth USD 1,307 Million. The ADB has also been working with the state and the central governments to fund the development of PPP toolkits and guidebooks and to conduct capacity building workshops for ULB/State Government officials involved in drafting PPP contracts. A revision of the JnNURM, called as JnNURM Phase II is under formulation, and is expected to take over the Phase I from the beginning of the financial year of 2013 and would expand its scope to cover all the urban regions of the country.
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C h a p t e r o n e : e v o l u t i o n o f u r b a n Wat e r S u p p l y S e C t o r
Figure 1.1 UIG Funds Allocation

Water Supply
6,000 5,000
4,500 4,000 3,500
Sewerage
` Lakhs
` Lakhs
IA Central IB State IC ULB III
4,000 3,000 2,000 1,000 0
3,000 2,500 2,000 1,500 1,000 500 0 IA IB IC III
Central
State
ULB
Source: JnNURM Status of Implementation of Projects (December, 2011)
Figure 1.2 UIDSSMT Funds Allocation

2,000 1,500 1,000 500 0 North South Water Supply East Sewerage West
Source: State/town/sector-wise release status of projects under UIDSSMT, as on 31st August, 2010, MOUD
Role of the States The role of the states in governing water supply has also changed over the years. The 74th Constitutional Amendment Act (CAA), enacted in 1992, required the state governments to empower the Urban Local Bodies (ULBs) with such powers and authority as may be necessary to enable them to function as institutions of
7
` Lakhs
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self-governance.3 The JnNURM stipulates certain mandatory reforms on the ULBs as core municipal functions that includes water supply, drainage and sewerage and solid waste management. It requires the ULBs to own the political accountability and to share the technical, financial and administrative responsibility with others as appropriate.
Exhibit 1.3 Sample Institutional Structure of a State (Tamil Nadu)
State Government (Government of Tamil Nadu)
State Level Specialist Agency (Tamil Nadu Water Supply & Drainage Board)
Metropolitan Level Specialist Agency (Chennai Metro Water Supply & Sewerage Board)
Specialist Municipal Undertaking (Urban Local Body for each of the cities) Source: Athena Research
Specialist Municipal Undertaking (Urban Local Body for each of the cities)
Specialist Municipal Undertaking (Urban Local Body for each of the cities)
Box 1.1 Regulatory Institutions Only two states have a state level regulatory body for water management. Responsibilities are listed below Maharashtra Water Resources Regulatory Authority Determine, regulate and enforce the distribution of bulk water supply to various categories of use (agriculture, industries, power, drinking and sanitation) Establish water tariffs at a level which enables self-sustainable management of service delivery Review and clear water projects which meet the requirements of Integrated State Water Plan (ISWP, which implies efficient use of both ground and surface water) Uttar Pradesh Water Management and Regulatory Commission The commission will be responsible for the regulation of water resources, optimally allocating it for different purposes and for fixing water rates.
Retrieved from http://jnnurm.nic.in/wp-content/uploads/2011/01/Mandatory_Primer_1-2Implementation_CAA_Planning.pdf

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1.3
POLICY FRAMEWORK
Over the last two decades, the concept of water supply and management has acquired greater meaning, as reflected in the various National Water Policies that have been formulated till date (Refer Exhibit. 1.4). The first National Water Policy, formulated in 1987, had little emphasis or no mention of aspects such as interstate water distribution, pricing of water and private sector participation. The National Water Policy that was subsequently revised in 2002, retained the earlier emphasis on drinking water, modernization, quality and efficient use, with added emphasis on interstate water distribution and began recognizing the need for private sector participation and pricing mechanisms. A new Draft National Water Policy, 2012 is currently available for comments and suggestions from stakeholders and citizens. Though not without its critics, it has viewed water, over and above the minimum quantity required for sustenance of human life, as a scarce economic good that needs to be conserved, managed and priced to ensure efficient usage.
Exhibit 1.4 Broadening Scope of National Water Policy
Features
Focus on Drinking Water Maintenance & Modernization Interstate Water Distribution Water Framework Law Pricing & Regulation Private Sector Participation Efficient Use & Quality
National Water Policy 1987

Strong Emphasis Strong Emphasis No Emphasis No Emphasis Weak Emphasis No Emphasis Strong Emphasis
National Water Policy 2002

Strong Emphasis Strong Emphasis Strong Emphasis No Emphasis Weak Emphasis Weak Emphasis Strong Emphasis
Draft National Water Policy 2012

Strong Emphasis Strong Emphasis Strong Emphasis Strong Emphasis Strong Emphasis Strong Emphasis Strong Emphasis
Other notable additions in the draft National Water Policy, 2012 are: Water Framework Law A need for a national legal framework to lay down the general principles that could lead to the framing of suitable water laws, regulations and policies at the state level.
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Regulatory Authority Each state should have a water regulatory authority to fix and regulate water tariffs, monitor the operations, review performance and suggest policy changes. Water Charges Water charges should aim to recover at least the operation and maintenance cost of the water supply network. Cross subsidies through differential pricing should be incorporated into the water charges where necessary after considering the views of the beneficiaries. Further, the newly envisaged pricing system encourages the integration of the urban water supply system and sewerage system i.e., the water bills are directed to include sewage treatment charges. Public Private Partnerships (PPPs) Appropriate use of PPP models by transferring water related services to a private developer and/or the community should be encouraged. Shift in the Policy Framework to promote greater Private Sector Participation With the policy framework gradually allowing private sector participation, the urban water sector has witnessed a gradual shift from public procurement to private sector participation in different forms. The private sector has been involved in all parts of the value chain by either financing projects, undertaking capital works or by operating the water supply and sewerage networks in cities and towns. In India, private sector participation in the urban water sector started with Engineering Procurement Construction (EPC) and service contracts. With an increasing number of PPPs in the commercial infrastructure sectors such as roads and ports, a similar approach was adopted in the urban water sector. PPPs in this sector began with long term Build Operate Transfer (BOT) projects, where in many cases the private sector was expected to finance more than 50% of the project cost. However, due to poor commercial viability of such projects, the focus shifted to management contracts where funds were provided by the government and the private sector brought in its expertise, along with the on-going EPC and service contracts. 1.4 WATER SUPPLY VALUE CHAIN The value chain of urban water supply is broadly composed of three segments (i) Sourcing, treatment and transmission, (ii) Distribution and (iii) Waste Water treatment.
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Exhibit 1.5 Value Chain of Urban Water Supply

Sourcing, Treatment & Transmission Sourcing of Water from Natural Resources: Surface or Ground Water Treatment of water to potable Standards Transmission of water includes supply to the service areas Distribution & Operations Distribution & Storage of Water Operations include-Metering of the connections, collection of the user charges, customer complaints Waster Water Treatment Waste Water/ Sewage Network, Collection, Treatment, Reuse & Recycle. Operations include collection of sewage charges, redressing customer complaints
Each of the steps in the value chain have seen differing levels of private sector participation as will be discussed in the next section. 1.5 CHRONICLE OF PUBLIC PRIVATE PARTNERSHIPS IN URBAN WATER SUPPLY
To understand the evolution of different forms of public private partnerships both, in terms of the segments of the value chain, as well as the role played by the private sector we map out all the 18 PPP projects that have been undertaken in the urban water sector and have witnessed some degree of progress in implementation. This excludes projects that failed or were abandoned at an early stage of the project planning phase. PPPs in the 1990s In the 1990s, several PPP projects were planned based on long-term concession agreements that focused on bulk water supply. All projects initiated in this period were based on BOT/ Build-Own-Operate-Transfer (BOOT) models and were primarily funded by private sources. Efforts were made to implement such projects in Pune, Bangalore and Goa. However, over a period of time, most of these projects were abandoned for various reasons such as lack of commitment from the government, commercial non-viability and objections from the local community. Of the five PPP projects planned, only one could be successfully awarded. This was the Tirupur Industrial Water Supply project in 2000 with a project cost of ` 1,023 crore. The Tirupur PPP was meant to supply water to over 1000 textile units and 1.6 million households. In order to be commercially viable, a cross-subsidization
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In 1990s
Tirupur Water Supply
Tirupur Water Supply Alandur Waste Water Project
Exhibit 1.6 Evolution of Private Sector Participation in the Urban Water Sector
BOOT Projects 2000-05

Chennai Desalination Plant
Sonia Vihar Treatment Plant
Visakhapatnam Industrial Water Supply
Karnataka Urban Water Supply Improvement Project
Water Supply in Chandrapur Dewas Industrial Water Supply
BOT Projects 2006 onwards Management Contracts Year
Water Supply in Salt lake (West Bengal) Pilot Zone in Nagpur Water Supply in Latur Industrial Water Supply in Haldia Water Supply in Mysore Bulk Water Supply in Naya Raipur Water Supply in Madurai
Sewage Treatment & Reuse in Surat, Ahmedabad & Rajkot
Water Supply in Khandwa Water Supply in Shivpuri
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Sewerage Network & Treatment/ Re-use
Disribution, metering and storage
Sourcing, treatment and transmission
Desalination of water
Value Chain
Source: Public Private Partnerships India Database, Department of Economic Affairs, Ministry of Finance, Government of India and Athena Research
scheme charging higher user charges to industries and lower charges for households was embedded in the business model. In spite of being well planned, the Tirupur PPP project faced losses owing to the complex interplay of a number of factors such as reduced demand for water from textile industries after the recession and the shutting down of several dyeing units (which consumed a lot of water) due to environmental legislation. Factors leading to the Tirupur PPP have been further elaborated in the case studies given in Appendix I. PPPs under the Tenth Five Year Plan In the early 2000s, the primary form of PPPs proposed and implemented were management contracts for the rehabilitation of existing water distribution systems and/or their operations & maintenance (O&M). Another important trend observed in this period was the change in financing mechanisms from private financing to financial assistance from Central/State governments or multilateral agencies, thereby reducing the cost of PPP projects. During this period, emphasis was laid on increasing private sector participation for efficient delivery of services and introducing technological innovations, rather than for financing projects. Several attempts were made in Maharashtra and Karnataka to initiate PPP projects in the water sector, but the first management contract awarded during the Tenth Five Year Plan was the World Bank assisted Karnataka Urban Water Sector Improvement Project (KUWASIP). The success of this project, has led to the implementation of a number of such management contracts in the country. Details of the KUWASIP case study can be found in Appendix I.
Box 1.2 24 x 7 Water Supply is Possible The continuity of water supply is abysmally poor in most cities. To prove that 24x7 water supply is possible in the Indian context, a pilot project, KUWASIP, was funded by World Bank covering 10 % of the populations in three cities in Karnataka Hubli Dharwad, Gulbarga and Belgaum. The results have been impressive. Key achievements are as follows: 24x7 water supply in every household in the coverage area High water pressure 100 % metering High Collection efficiency High Cost recovery Further details of this case study are given in Appendix I.
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Figure 1.3 Investment Outlay and Source of Financing Urban Infrastructure in the 11th Plan4
140 120 ` Thousand Crores 100 80 60 35 40 20 0 Institutional Financing Central Sector Outlay State Sector Outlay Total Expenditure 10 10 Assistance from external support agencies 4 FDI and Private Sector 129 70
Source: Mid-Term Appraisal of the 11th Five Year Plan, Planning Commission, GoI, (2011)
PPPs under the Eleventh Five Year Plan The success of PPPs in the water and sewerage sector increased during the Eleventh Five Year Plan and subsequently, a number of contracts were awarded to the private sector in the following years. PPPs during this period were adopted across the value chain of water and sewerage, including bulk water supply to both, domestic and industrial consumers, improvement of the distribution systems and Operations and Management/Maintenance (O&M) of the entire water supply system. Both, BOT and management contracts were awarded. In keeping with the trends observed during the Tenth Five Year Plan period, financing was undertaken mainly by the government or by multilateral agencies. In the Eleventh Five Year Plan, the government estimated an expenditure of ` 53,666 crore and ` 53,168 crore respectively for urban water supply and sewerage. The main sources of funding for this sector during the Plan were the Central government (54 %) and the State government (27 %), with only 3.27 % of the investment coming from the private sector.
Here, the urban infrastructure includes only solid waste management, water supply and sewerage and storm water drainage.
4
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Chapter tWo
CURRENT STATE OF THE URBAN WATER SECTOR
2.1
SERVICE LEVEL BENCHMARKS
Until recently, while there existed plenty of anecdotal evidence regarding the poor performance of ULBs in providing urban water supply, there were no clear benchmarks set by the government against which this performance could be rigorously assessed on a regular basis. This critical necessity for any service quality improvement plan the establishment of Service Level Benchmarks (SLBs) was undertaken by the Ministry of Urban Development (MoUD) in 2009. SLBs on a number of performance parameters for water supply, sewerage, solid waste management and storm water drainage were developed and baseline data was collected from a sample of 28 cities, spread across 14 states and different city sizes. As can be seen from the Exhibit 2.1, the performance of ULBs on most parameters have indeed been poor. In particular, there have been deficiencies in the continuity of water supply and the extent of metering and extent of non-revenue water, with a shortfall of more than 50% from the target on both parameters. In exhibit 2.1, the performance of the sample cities across key service level benchmarks has been presented. 2.2 SOURCES OF DRINKING WATER
The number of urban households grew at a compounded annual growth rate (CAGR) of 3.92% between 2001 and 2011. The recently released National Sample Survey Organisation (NSSO), 2011 data on household amenities shows that in order to meet the requirement of the additional households over the last decade, the provision of drinking water via different sources increased at a CAGR of 4.2 % for tap water, 1.69 % for well water, 3.62 % from hand pumps and tube wells and 4.9 % from other sources.5 Even though the number of access points for tap water has
Other sources of water include spring water, river/canal, ponds, lakes, private tanks and bottled water.
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Exhibit 2.1 Service Level Benchmarks and Average Performance ofULBs

S/N Performance Indicator Service Level Benchmark 80%% 135 litres/ capita-day 90% 100% 100% 100% 100% 20% 24 hours per day 80% 100% 100% 100% 100% 90% 100% 100% 20% Current Average Performance 80.4% 126.4 litres/ capita-day 78.8% 66.6% 67.2% 67.2% 49.8% 44.1% 3.3 hours per day 83.1% 91.3% 87.9% 75.7% 76.5% 76.5% 65.9% 52.6% 14.8%
Water Supply 1 2 3 4 5 6 7 8 9 Efficiency in Redressal of Customer Complaints Per Capita Supply of Water Efficiency in Collection of Water Supply Related Charges Coverage of Water Supply Connections Quality of Water Supplied Cost-Recovery in Water Supply Services Extent of Metering of Water Connections Extent of Non Revenue Water Continuity of Water Supply
Sewerage 1 2 3 4 5 6 7 8 9 Efficiency in redressal of complaints Quality of Sewage Treatment Coverage of Toilets Collection Efficiency of Sewage Network Adequacy of Sewage Treatment Capacity Efficiency in Collection of Sewage Related Charges Extent of Cost Recovery in Sewage Management Coverage of Sewage Network Services Extent of Reuse and Recycling of Sewage
Source: Service Level Benchmarking Data book: Improving Service Outcomes 200809, Ministry of Urban Development, Government ofIndia
Legend Target met Target missed by 1-10 % Target missed by 11-25 % Target missed by 26-50 % Target missed by over 50 %
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C h a p t e r t W o : C u r r e n t S tat e o f t h e u r b a n Wat e r S e C t o r
exhibited a higher growth rate than the rate of growth of urban households, only 60-70% of the households in the urban areas have access to tap water. This implies that while the number of urban households has been growing at 3.9% per annum, on average the provision of drinking water grew by 3.6% per annum,6 resulting in a growing deficit in the provision of urban drinking water supply. The figure below shows the percentage of households with access to drinking water through different sources for the years 2001 and 2011.
Figure 2.1 Sources of Drinking Water for Indias Urban Households
Source: Main Source of Drinking Water 2001-11, Census of India 2011
Disaggregating the overall national picture into individual states, we see a wide variation in the mix of different drinking water sources across states. Refer Fig. 2.2. A quick perusal of the urban drinking water scenario reveals the following trends: In 2001, in states such as Odisha, Kerala, Jharkhand, Assam, Nagaland and Bihar, less than 50% of the urban households had access to drinking water through taps. This continued to be the case ten years later, in 2011. The percentage of households with access to drinking water through taps in states of Uttarakhand, Uttar Pradesh, Madhya Pradesh, Bihar, Assam and Jharkhand has fallen. Instead, the percentage of households with access to drinking water through tube wells and hand pumps has increased. For example, in Bihar, in 2001, 26.4% of the households used tap water, which fell to 20% in 2011. On the contrary, the number of households drawing water from hand pumps and tube wells increased from 64.9% in 2001 to 74.7% in 2011.
6
Source: NSSO Data (2011) MOSPI, GOI.
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States such as Mizoram, Karnataka, Goa and Tamil Nadu have shown significant progress in the provision of urban infrastructure for drinking water. The number of households with access to tap water in these states has increased from 44.2%, 78.4%, 81% and 65.4% in 2001 to 74.4%, 80.4%, 90.2% and 80.3% respectively in 2011. The recently released NSSO data on household amenities for 2011 further shows that only 62% and 1.7% of the urban households have access to treated tap water and covered wells respectively for drinking purposes. 2.3 NON-REVENUE WATER (NRW)
On an average, the extent of Non-Revenue Water (NRW) in India is 44.1%. This is much higher than the NRW of 15% in developed countries and the 20% that is set
Figure 2.2 Sources of Drinking Water in India (2011)
North Zone (%)
Other sources of water Handpumps/ Tubewells Well Water Tap Water
0 50 2.44 1.56 27.29 28.73 0.69 1.54 69.53 68.12 100
Access to Water
East Zone (%)

0 20 40 2.76 2.98 42.12 35.83 8.86 13.07 46.22 48.15 60
South Zone (%) West Zone (%)

0 20 1.9 1.85 13.43 11.42 2.85 4.42 81.82 82.29 40 60 80 100

0
2.78 2.88 10.72 16.27 11.76 13.16 74.72 67.67

20 40 60 80
2001 2011
Urban Population with Acess to Tap Water in 2011 (%) Below 40 40-60 60-80 Above 80
Source: Main Source of Drinking Water 2001-11, Census of India 2011.
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C h a p t e r t W o : C u r r e n t S tat e o f t h e u r b a n Wat e r S e C t o r
as the SLB for Indian cities by the MoUD. Only four of the 28 cities under study reported less than 20% NRW. Cities such as Shimla and PimpriChinchwad have an NRW of 23.7% and 24.3% respectively, which is close to the SLB set but higher than the NRW of developed countries. Non Revenue Water comprises of three components:
1. physical losses
These include leakages in the water supply infrastructure such as the distribution and transmission pipelines, storage reservoirs, overhead tanks and taps.
2. Commercial/apparent losses
These are caused due to the inefficient monitoring of the flow of water. Commercial losses include inefficient metering, data errors and theft. The physical and commercial losses together are called Unaccounted ForWater (UFW) losses.
3. unbilled authorized Consumption
The service providers usually supply free water to the beneficiaries who cannot afford to pay. The sources of water for these people are tube wells and hand pumps. The water supplied through these sources is authorised consumption but is unbilled, and hence contributes to non revenue water.
Figure 2.3 Non Revenue Water Supply in a Typical Urban City in India
Source: Athena Research based on data available in HPEC Report (2011)
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Exhibit 2.2 Potential Annual Revenue Lost due to Non-Revenue Water

Supplied Population (Million) Developed Eurasia (CIS) Developing 744.8 178 837.2 Water Consumption (lpcd) 300 500 250 Non Revenue Water (%) 15 30 35 Total Potential Revenue lost (USD Billions per year) 5.30 3.50 5.80
Source: Kingdom; Bill, Roland Liemberger and Phillippe Marin, The Challenge of Reducing Non Revenue Water (NRW) in Developing Countries, How the Private Sector Can Help: A Look at Performance Based Service Contracting, World Bank, (2008). lpcd: Litres per capita daily
The main reason for high NRW in Indian cities is the inadequate number and poor quality of pipelines for transmission and distribution and the low number of metered connections. Reduction in NRW is important to ensure the recovery of capital and O&M costs incurred in providing water supply and sewerage services. The exhibit provided below compares the extent of NRW across different types of countries and also depicts the total potential revenue that is lost due to NRW.
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Chapter three
FUTURE POTENTIAL FOR PPPS IN URBAN WATER
3.1
FUTURE INVESTMENT REQUIREMENTS
The High Powered Expert Committee (HPEC) estimates pertaining to the total investment requirement for water supply and sewerage for the next 20 years are ` 8.7 lakh crore and ` 4.8 lakh crore, respectively. Figure 3.1 and 3.2 show the breakup of the total investment requirements into capital expenditures and operating expenditures. For urban water supply, approximately 37% of the total investment required is for capital expenditure while the remaining 63% is required for operation and maintenance. For sewerage systems, about half the total investment is used for capital expenditure and the other half for operation and maintenance.
Figure 3.1 Investment Requirements in the Urban Water Sector (In ` Crores)
1,000 867 546
` Thousands
800 600 400 200

Total Investment Requirement Total Capital Expenditure
321
148 119 26 29
Capital Expenditure for Industrial Demand
0
Total O&M Expenditure
Capital Expenditure for Unmet Demand
Capital expenditure for Additional Demand
Source: HPEC Report, GoI(2011)
Capital Expenditure for Replacement
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Figure 3.2 Total Investments Required for Sewage Systems

600 ` Thousands 400 243 200 108 99 35 Total O&M Expenditure Total Capital Expenditure Capital Expenditure for Additional Demand Capital Expenditure for Replacement
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480
237
Total Investment Requirement
City-wise Investment Requirements The above mentioned investment requirements for reforming urban water supply and sewerage utilities are further broken down into per capita investment requirements for each of the city class types. The HPEC has provided these estimates based on certain assumptions. The assumptions that were made to estimate the investment requirements in water are: On an average, 80% of the distribution network pipes are to be replaced for delivering continuous water supply for all city size classes. For cities with population of 500000, industrial water production is assumed to account for about 20% of the total water production and demand is assumed to grow at 7% per annum. Storage requirement is assumed to be 45 lpcd (equivalent to one-third of the daily water demand). Cost of connection and metering per household is assumed to be ` 2500. Fore estimation of replacement cost, the service life of assets is assumed to be 30 years. The assumptions for estimates of investment requirements in sewerage network and sewage treatment re: Underground sewerage network for all city size classes and 100% collection and treatment of waste water. Sewage generated is assumed at 80% of the per capita water consumption, and 5% sewage generation is assumed for infiltration from ground water (113 lpcd). O&M cost treatment is up to secondary treatment.
22
Capital Expenditure for Unmet Demand
C h a p t e r t h r e e : f u t u r e p o t e n t i a l f o r p p p S i n u r b a n Wat e r
There is no excess treatment capacity in the existing sewerage treatment plants. For the estimation of replacement costs, the service life of the assets is assumed to be 30 years. Fig. 3.3 gives the per capita investment (PCI) required for capital works for different components of the Urban Water Sector value chain for different classes of cities.
Figure 3.3 Per Capita Investment Required for Different City Classes (In `)
Sourcing of water, treatment & transmission
1,500 1,450 1,400
1,404 1,487 1,482
Distribution, extensions (24*7 Standards)

5,000 4,500 4,000 3,500 3,600 4,520 4,619 4,619
1,350 1,300 1,250
1,357 1,282
3,000
2,914
1,282
2,500 2,000 2,030 Class IA Class IB Class IC Class II Class III Class IV+
Class IA Class IB Class IC Class II Class III Class IV+
Distribution (24*7 Replacements)

8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Class IA Class IB Class IC Class II Class III Class IV+ 1,831 3,855 2,679 3,200 6,755 6,755 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0
Sewerage network & treatment

6,648 5,316 3,841 3,360 3,411 5,649
Class IA Class IB Class IC Class II
Class III Class IV+
Source: HPEC on Indian Urban Infrastructure and Service, GoI(2011)
Water sources for class IA, IB and IC cities, especially in southern India are located far away from the city, hence the per capita investment for sourcing of water, treatment and transmission purposes for these cities tends to be higher than that of cities in other classes. The per capita investment for distribution networks and sewerage systems in metropolitan cities is lower than that in small cities and towns due to high population density.7
Assuming that certain cities would need to rehabilitate their existing systems, whereas the rest would have to build the complete infrastructure from a scratch.
7
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Class IA and Class IB cities (35 cities) will account for 43% of the total urban population by 2032 and require 53% of this total investment for water supply and sewerage systems. The remaining investment is for the rest of the 4,343 cities.8 The map below depicts the investment requirements in Class IA and Class IB cities in India. Maharashtra requires 22% of the total investment for its class IA and IB cities, followed by West Bengal and Delhi with 13% and 11%, respectively.
Figure 3.4 Investment Requirement in Class IA and IB Cities
Class IA Cities Class IB Cities
Investment in Urban Water Projects in Cities IA & IB for 2012-32 ( ` Crores)

< 30000 30000 - 60000 60000 - 90000 > 90000
Source: HPEC Report, GoI, (2011)
3.2
SOURCES OF FINANCING
The total expenditure on urban infrastructure, covering all the sectors namely, water supply and sewerage system, solid waste management, roads and
The re-classification of the cities has been done on the basis of the population size in the following manner: Class IA : > 5 million; Class IB: 1 5 million; Class IC: 100000 1 million ; Class II: 50000 100000; Class III: 20000 50000 ; Class IV+: < 20000
8
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C h a p t e r t h r e e : f u t u r e p o t e n t i a l f o r p p p S i n u r b a n Wat e r
transportation, storm water drains and street lighting, as a percentage of GDP, is estimated to increase from 1.59% in 2011 to 2.16% in 2032. The figure below gives the different sources of financing this expenditure as a percentage of GDP.
Figure 3.5 Sources of Financing
2.1
1.6
1.1
0.6
0.1
Total Expenditure Exclusive Taxes RevenueShared Taxes Non-Tax Revenue Transfers from Grants in aid Transfers from Grants in aid from Gol State Finance from State Central Commission Government Finance Commission JnNURM/ NUnNURM
0.4
2011-12
2021-22
2031-32
Deficit
A large amount of this expenditure needs to be financed through the urban local bodies own revenue sources that include exclusive taxes (property taxes, entertainment and advertisement taxes), shared taxes and revenue generated from its operations. Currently, this forms about 0.5% of the GDP, but needs to increase to 1.47% of the GDP by 2032. According to the HPEC Report, the on-going JnNURM scheme needs to be further extended for another twenty years and funds from this scheme should rise from 0.1% of the GDP in 2011 to 0.25% of GDP by 2032. The rest of the expenditure should be financed through nontax revenue (in the form of user charges) and the deficit would require new financing options such as support from external agencies, institutional financing and PPPs with private sector financing.
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Chapter four
STRATEGIC FRAMEWORK FOR SUCCESSFUL PPPS IN URBAN WATER SECTOR
PPPs in social infrastructure sectors such as water supply, sewerage, solid waste management, health and education have been practiced in India since the 1990s. Different methods/models were adopted and the country has witnessed few successful models and a number of unsuccessful ones. Unlike PPPs in the commercial infrastructure sectors, it has been very difficult to upscale PPPs in the social infrastructure sectors. The lack of sufficient understanding regarding peoples affordability and willingness to pay coupled by the general perception that it is the governments responsibility to provide public amenities like water supply and waste management free of cost has made the service less amenable for private sector participation. Thus the replication of PPP models and processes that worked in the commercial infrastructure sectors like Roads and power, in the delivery of urban water supply led to their failure. Further unlike the commercial sectors, the government did not initially provide viability gap funding to private concessionaires and instead funding was provided through schemes such as the Augmented Urban Water Supply Scheme (AUWSS), which were limited in nature. In this section, we present a framework for successful PPP implementation and highlight areas that need special focus due to the critical nature of the water supply and sewerage system. Exhibit 4.1 shows the role that needs to be performed by each stake holder involved in a PPP, the sharing of risks and the flow of funds between them. The government must make a strategic plan and identify various implementation modes (either via traditional public procurement or private sector participation) for the reforms in urban water supply and sewerage sector. As for private sector participation, a mature rationale for its suitability is necessary. The role of consultants in assisting the government for setting optimal tariff structures, avoiding undue monopoly profits to the private operator and thereby designing a sustainable financial model that allows social inclusion and environmental safeguards should be considered. Each of these factors is elaborated in this section by covering the issues and lessons from various practices in urban water supply and sewerage sector.
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Exhibit 4.1 Strategic Framework for Successful PPP Implementation

Project Impact Social Inclusion Universal access to basic amenities Civil society/local Community Identifying needs Setting service standards Planning and budgeting (in case of ULB projects)
Govt./Public Sector
Consultant
Technical Competence Objectivity Alignment of Incentives
Mature Rationale Strong Commitment Clarity of role Technical competence consensus building
VGF
Capital Subsidy
Negative Grant
Tax
Users Inputs on tariffs Responsible usage
Financiers Availability of longterm debt finance

Long term Private Developer Private Developer debt Technical competence Focus on efficiency Social commitment Innovation Consensus building Tariff Affected community Adequate compensation for land / loss of livelihood
Risk sharing Flow of funds
Sustainability Land / deforestation Water Air pollution Climate change Biodiversity
Source: Public Private Partnerships: Lessons from Experiences Athena Infonomics, April 2012 ,
4.1
ROLE OF PUBLIC SECTOR
Rationale & Planning Given the critical nature of the service drinking water supply and sewerage systems where the cost of delays and project failure are extremely high, it is important to evaluate the suitability of the PPP model before implementing the project. This should be done by identifying the objectives of the project and by comparing it with other ways of providing the service e.g., public procurement. In other words, the value for money indicator for a PPP project must be measured and established. One needs to examine the rationale for having a PPP along with an assessment of the execution capability of the private sector and the monitoring capacity of the public agency. Experiences of PPP projects in the water sector show that the reason for opting to provide water utilities under a PPP mode was initially
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Chapter four: StrategiC frameWork for SuCCeSSful pppS
inadequate government funds, capacity and capability to execute such projects. Examples include projects such as the Tirupur Water Supply, Krishna Bulk Raw Water Supply, Cauvery Water Supply and Water Supply in Pune, although not all of these projects were actually implemented. The government realised that to meet the requirements of the citizens, the water supply system needs to be improved. However, the municipal corporations had neither the financial capacity (due to poor management of the services accompanied by a lack of application of tariffs) nor the operational efficiency (output in terms of their staffing levels and technical expertise) to provide these services. Hence PPPs were selected to meet these financial and efficiency constraints. Commitment Strong political commitment towards the project is essential to avoid any delay in the approval of the project, release of central or state funds, land acquisition and providing clearances to the private sector. Furthermore, the role of the government, which varies from one type of PPP model to another, should be clearly identified and executed. The bid process should be transparent and appropriately structured so as to ensure the selection of the most competent private player. Procedural Frameworks The government is responsible for providing procedural frameworks related to the PPPs in this sector. These include providing toolkits, procedures for bidding and awarding contracts, modelling concession agreements (MCA), methods for monitoring and evaluating the projects. These frameworks for the urban water sector are still under formulation with support from multilateral agencies. They are an important component of PPP projects since they act as guiding tools and build more confidence among the stakeholders while executing the projects. Regulatory Authority Pricing of water remains a sensitive and contentious issue. However, usage of water over and above a minimum quantity essential for human sustenance should be treated as a scarce economic good and priced appropriately to ensure its conservation and proper management. Such an approach can be pursued by establishing a water tariff regulating authority at the state level. Nodal Agencies Although there is a national level PPP nodal agency, not all states have their respective state PPP cells. Five states have their PPP cells. These include, Andhra Pradesh, Haryana, Maharashtra, Karnataka and Rajasthan. Some of the states
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have their own infrastructure board, such as Andhra Pradesh, Gujarat, Haryana, Maharashtra, Karnataka and Rajasthan. Only 16 states, including Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Gujarat, Haryana, Maharashtra, Madhya Pradesh, Goa, Punjab, Karnataka, Rajasthan, Tamil Nadu, Uttarakhand and Uttar Pradesh have their respective State PPP Policy. Of these, Gujarat is the only state which has a sector wise empanelment of consultants. The establishment of a state PPP cell is necessary specifically for sectors such as water, which is a state subject. The state PPP cell should take the responsibility of identifying the priority areas in the sector, conceptualise projects, undertake feasibility and technical studies and implement, regulate and monitor the projects. 4.2 ROLE OF PRIVATE SECTOR
Private Developers and Contractors It is important to build a highly competitive environment that facilitates the selection of the right private player with the best technical and financial expertise to execute projects without time or cost overruns. The emphasis should be on the efficiency and quality of the service provided with a strong social commitment that allows inclusivity. It must be ensured that the profit-making incentive does not lead to a monopoly over the asset by the private player. The developer should be capable of bringing new innovations and technology for effective service delivery which may not be brought in if the project is undertaken through public procurement. It is also necessary that the rehabilitation and resettlement of the local community affected due to the development of an infrastructure project be undertaken along with the government. Consultants Technical consultants assist the government in carrying out feasibility studies and estimating the socio-economic costs and benefits of projects and most importantly, in contract structuring. The consultants are required to align the incentives of all stakeholders involved and factor in social inclusion and environmental sustainability in the project plans. They must guide the government/private sector and therefore improve the latters capability to successfully implement a PPP project. Past experiences of PPP projects in the urban water sector indicate rigid contract structuring. However, there are a few projects in which flexible components were incorporated in the contracts to restructure certain parameters. For example, the Tirupur Water Supply Project was designed in a manner that allowed for financial restructuring i.e., conversion of debt into equity. Incorporating such flexibility in the contract structures and lenders agreements may help to reduce the chances of project termination, thereby reducing re-bidding costs, allowing uninterrupted services to customers and enhancing the long-term sustainability of the models.
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4.3
COMMUNITY PARTICIPATION
Engagement of the community in the provision of essential services like water has been considered a critical element to ensure the availability of these services to different sections of society, and to efficiently cater to their needs and grievances. Different forms of community involvement have been considered at various stages of the water and sewerage value chain, namely to provide financial support, manage the utilities, or monitor operations. We describe three aspects of community participation that can enhance the efficiency of a project. Transparency The public or private partner responsible for asset creation and provision of water supply and sewerage facility must engage the local community in the decision making process. Public communication and consultation allows for an exchange of dialogue between the representatives of the community and the utility provider. Such an interaction also allows the public to share their views on a project or a programme that is to be implemented. As for the service providing agency, it allows them to share the details of the project so as to avoid any problems during the implementation phase. In brief, it allows transparent, mutual negotiation of the project outcomes, helps overcome information asymmetries and creates awareness among the stake holders. Accountability Greater community participation can improve the accountability of the public and private sector officials responsible for delivering water supply and sewerage services. For example, the Byrraju Foundation implements its Sujala water treatment plants in various parts of Andhra Pradesh. The stake holder model of the project that showcases the active role played by the village community is presented below. The most important aspect of the project is the formation of Gram Vikas Samity a small member team of the village community that is involved in monitoring the project. The management of the project by the community facilitates immediate redressal of grievances or any problems in service delivery. Participation in Project Execution Community participation in project execution may range from the identification of the need for service delivery to the actual operations and maintenance of the service delivery by the community. In the case of basic services, such as health, education and water supply, participation of the community may increase the efficiency of service delivery as the communitys needs and recurrent grievances are recognised. Box 4.1 gives an example where the private developer consults the
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Exhibit 4.2 Stakeholder Map of Byrraju Foundation Model of Drinking Water Supply
Government Free Land Subsidized power for plant Permission to draw water Subsidy (30% of capital cost) for selfhelp groups Schools,Health Centers, Aged People, Panchayat Office Free water Water Treatment Plant Initial cost of the plant Technical guidance Water Testing Byrraju Foundation Training to plant operator
Plant O&M
Operators Locals to operate the plant Village Community
Water Monitoring User charge (as low as 20 paise/litre) Gram Vikas Samity Members
village community (Village Panchayat) before setting up its water treatment centre (Water Health Centre) and also encourages them to participate in the execution of the entire water supply system.9
Box 4.1 Water Health Centers10 Water Health International, founded in 1996 in USA supplies safe (meeting WHO and ISO15550 standards) and affordable drinking water to the under-served community via a decentralized innovative business model. It began its operations in India in 2005 through its subsidiary named Water Health India Pvt. Ltd. Since then it has established 175 Water Health Centers (WHCs) across different villages of Andhra Pradesh and is currently setting up its WHCs in states such as Gujarat, Karnataka, Maharashtra, Tamil Nadu and parts of North-Eastern India.
Village Panchayats refer to a system of governance prevalent in rural India since ancient times. The 73rd Constitutional Amendment Act, 1992 conferred constitutional status to Panchayats. It is the third tier of government below the state government. 10 Source: Athena Research
9
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The WHCs are developed on a Public-Private-Community Partnership (PPCP) basis: usually a Memorandum of Understanding (MoU) is signed by the Village Panchayat (VP) and the company. The selection of the villages is based on parameters such as location, existing infrastructure, availability of natural resources, size of the population and village income levels. The VP is responsible for providing the company with the land, power and water sources for setting up the plant. All the support is usually provided free of cost by the VP while in some cases the concessionaire pays for the power charges. The plant, with a capacity for treating 21,000 liters per day, is built in approximately 22-40 days, once the company gets the VPs approval. The quality of the water at each water health centre is tested every month over twenty parameters in the laboratories of the organization. The organization works with Non Government Organisations (NGOs) that use various techniques of social marketing to capture the market and convinces the villagers about the quality of water supplied to them. Initially, user fees were levied based on income categories. However, due to difficulties in managing price discrimination, this was changed to a system of standard fees for the entire population of a village. However, the user fees vary across different villages and districts. The variation depends on the technology and the degree of contamination of the water. This is a PPCP Project on a BOT basis, usually with a concession period of 10 to 15 years. The private developer trains and hires members of the village community to operate the WHCs and to sell the water to various houses that are situated in remote areas.
4.4
RISK ALLOCATION
It is important to ensure that the risks associated with the PPP are properly defined and appropriately allocated among the stakeholders. Measures to mitigate risk must also be provided. Risks are critical to PPP projects as they indicate the probability of occurrence of events that may cause changes in the socio-economic, political and natural environment faced by projects.11 Allocation of risks is important to increase efficiency, reduce project related costs and achieve improved value for money. The risks should be allocated to those stakeholders who are best suited to handle them. In case the party, to whom the risk was allocated, fails to handle it, the other stake holders involved in the project may make attempts to mitigate those risks in a manner that the community is not affected due to interrupted services. 4.5 FINANCIAL SUSTAINABILITY
financing Capital expenditure
Most successful PPP projects in the urban water sector have had more than 50% of theircapital expenditure financed by the government or by multilateral agencies.
Please see, Risk A critical focus of PPP Design, PPP Toolkit for Improving PPP Decision Making Processes, Public Private Partnerships in India, Ministry of Finance, Government of India as retrieved from http://toolkit.pppinindia.com/
11
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Evidence from past experiences suggests that the economic viability of the project would suffer if the private sector were to finance the capital expenditure of the project. This is because building the infrastructure for supplying water is capitalintensive and recovering this cost from user charges would make water supply services unaffordable to the poor. Examples of successful PPP models show that public financing boosts the confidence of the private sector to enter into PPP projects in the urban water sector. Government funding through schemes under the JnNURM along with reasonable tariff structures creates a win-win situation for the project stakeholders. The Karnataka Urban Water Supply Improvement Project (KUWASIP) was funded jointly by the World Bank and the Government. Its success led to a similar financing pattern being followed by other projects, namely the water supply in Latur, Khandwa and Mysore. Details of the project are provided in the case studies in the Appendix. Financing Operations & Maintenance Expenditure Given that the capital expenditure of the PPP projects in the urban water sector will be largely funded by the government or by multilateral agencies, the viability of the project depends on its ability to recover its operations and maintenance costs. Broadly, there are two ways in which the O&M costs can be recovered. A. Revenue through User Charges The private operator/implementing government agency levies water tariffs on the users. The revenue generated from the collection of tariffs will be used to recover the O&M costs. The revenue can be shared with the private operator in either of the two forms discussed below: First, in a BOT (Toll) project, the revenue risk can be borne by the private sector partner and the private partner collects user charges during the concession period after which the ULB takes over the user charges collection function. Such a mechanism is under operation in the Tirupur Water Supply Project Secondly, in a BOT (Annuity) project, the private operator can be made responsible for collection of user charges but only receives a certain predetermined percentage of the revenue collected based on its collection efficiency. Khandwa Municipal Water Supply project is an example of such a revenue model. B. Revenue through Performance Based Payments The performance based method of compensating the private partner may or may not involve levy of user charges. Here, the revenue to the private operator for executing water supply and/or the sewerage system is based on its performance
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in meeting the set service standards. The payment is made by utilizing grants available under government schemes or from multilateral agencies. Hence, the revenue risk of the private player is linked to its performance. Such a mechanism ensures enhanced performance by the private sector partner and discourages monopoly profits and provides quality services to the customers. The Karnataka Urban Water and Sanitation Improvement Project is an example of this type of a revenue model.
Box 4.2 Pricing of Water Pricing of water is an extremely contentious issue in the Indian context. The opposition is primarily ideological in nature and fails to appreciate the reality of water scarcity across the world and the impending need to conserve and manage this scarce resource. Pricing of water and/or private sector participation in its delivery are seen as tantamount to privatisation of water per se. Yet, a pricing structure that allows everyone 24*7 access to an acceptable minimum quantity of water for basic sustenance, and that charges users consuming above the set minimum level so as to recover at least the O&M costs of providing the water supply services can be an important step towards conserving water as well as providing quality service. Water tariff systems such as flat tariffs or tariffs as a percentage of property taxes do not incentivise users to regulate their water consumption. Tariff structures such as volumetric tariffs or differentiated tariffs based on income levels of the consumers are more socially acceptable and environmentally conscious. Volumetric or differentiated tariff structures take account of both, social inclusion and affordability issues, and ensure that a minimum quantity of water is within the reach of all classes of people, irrespective of the ability and willingness to pay. The cost of administering different types of water tariff varies from category to category. For example, a flat water tariff is easier to collect and govern than a volumetric tariff which requires an efficient meter system.
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Chapter five
CONCLUSION
Much work needs to be done to revamp the crumbling urban infrastructure in the country and provide universal access to basic services such as water and sanitation. PPPs in the urban water sector, if undertaken in a well-planned manner, and for the right reasons, is one viable approach for solving some of the chronic problems faced by the sector. This report highlights some of the necessary steps that must be undertaken for a successful PPP. PPPs, as has been emphasized in this report, are not appropriate for every situation and should not be implemented indiscriminately. In many cases, it may be more appropriate to undertake public works through EPC contracts. Selection of the appropriate model of private sector participation either through EPC and management contracts or through BOT Toll/Annuity models is an important step in the project identification phase, but one that often does not receive the necessary attention. A detailed process of arriving at the appropriate model of private sector participation that includes exhaustive assessment of existing physical infrastructure, current performance on service delivery benchmarks, and the technical, operational and financial capability of the ULBs, needs to be developed. The selection of the appropriate private sector participation model maximizes the potential performance of the developed system. Realizing this potential, however, requires a strong focus on execution from all the stakeholders. It is particularly important to undertake intensive capacity building of urban local bodies and implement reforms that make them accountable and responsible for achieving service level benchmarks in water supply and sewerage. A programmatic approach that integrates planning for urban water supply and sewerage at the state level, which is further broken into targets and objectives for cities that are stratified according to their size, is the overarching approach of implementing change. Full achievement of the service level benchmarks should
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occur in a phased manner, where intermediate targets are set, based on a number of parameters, such as the state of existing physical infrastructure, the technical and operational capacity of the ULBs and the private sector, availability of finance, etc. The next phases of our research will develop an approach to identify the appropriate private sector participation model and develop guidelines for phasewise implementation for PPPs at the urban local body level.
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APPENDIX I CASE STUDIES
1. THE TIRUPUR WATER SUPPLY PROJECT Background Tirupur, a town in Tamil Nadu is at the centre of Indias cotton knitwear industries with the textile units contributing to nearly 90% of the countrys exports. Water is an intensively used raw material in this industry. It was in the early 1990s that the industrial units in Tirupur started facing water shortages. The industrial units in Tirupur had no access to piped water due to the lack of infrastructural facilities. Moreover, the other sources of water, such as ground water and surface water, were heavily polluted due to discharge of toxic effluents without treatment into the River Noyyal by the dying and bleaching units which operate in the area. This rendered the ground water unfit for use. Lack of access to water was slowing down the growth of the industries and increasing the cost of production as the industries had to rely largely on private water tankers who charged a high price for water supply. In order to protect the industries from making losses, the Tirupur Exports Association (TEA), a body which constituted primarily of knitwear exporters, approached the Government of Tamil Nadu (GoTN) to make provision for the supply of industrial water to the textile industrial clusters. Heeding to the request of TEA, the GoTN in 199394, mandated the Tamil Nadu Corporation of Infrastructure Development (TACID) to design and develop the Tirupur Area Development Project (TADP) with the objective of developing the water supply and sewerage system for extracting water to meet the industrial demands. TACID approached IL&FS to assist in the implementation of the project. The project cost estimated by IL&FS was ` 500 crore.12 However, the government did not have adequate financial
The total project cost of $ 100 million has been converted into Indian rupee terms with the following exchange rate one USD = ` 50.
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Appendix i CAse studies
resources to implement such a large project. Hence, it was decided to implement the project on a PPP basis, making this the first PPP project in India in the water sector. In August 1994, the GoTN signed a MoU with the TEA and IL&FS to form a public limited company called the New Tirupur Area Development Company Limited (NTADCL). However there was an initial lag of five years in the implementation of the project due to a change in the government. Political instability and frequent change in the government is a potential threat to such large-scale projects. The project was further delayed as NTADCL only achieved financial closure in 2000 with a debt-equity ratio of 1.5:1. Meanwhile, the textile industrialists had to meet their industrial water requirements by buying water from farmers of the villages in the district. A concession agreement was signed between the GoTN, Tirupur Municipality (Contracting Authority) and NTADCL (Concessionaire) with a project cost of ` 1,023 crore, to be developed on a BOOT basis with a concession period of 30 years. The construction for the project finally started in 2002 and the operations began in 2005. A brief timeline of the project is given on the next page:
Exhibit 1a Timeline of the Tirupur Water Supply Project
TACID was given the responsibility of developing TADP MoU was signed between GoI,GoTN, TEA and IL&FS Concession Agreement signed between GoTN,TMC and NTADCL
Operation began
1993
1994
1995
2000
2002
2005
TACID approached IL&FS for assistance
NTADCL was incorporated as a public limited company
Construction started
Structure of the Project:

a. Stakeholder model
The key stakeholders in the project were IL&FS (the private entity), NTADCL, Tamil Nadu Water Infrastructure Company (TWIC) and TEA. The exhibit below depicts the stakeholder model which identifies the role of each stakeholder and the transfer of resources from one entity to another. The role of IL&FS was primarily to provide transactions and financial advisory and undertake the documentation for the same. It was also responsible for the management and execution of the project.
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Exhibit 1b Stakeholder Model/Organogram of Tirupur Water Supply Project

GoTN & TMC Concession Agreement Lenders Debt NTADCL Equity Promoters GoTN IL&Fs TEA and others
Formation Special Purpose Vehicle EPC Contractors Hindustan Construction Company Larsen & Toubro O&M Contractor
Developer A consortium of Mahindra, United Utilities and Wilbur Smiths Associates (USA)
Independent Engineer
A JVC of United Utilities (UK) Pell Frischman and Mahindra & Mahindra
Tirupur Water Supply Project Supply of Water to Beneficiaries Industrial Units Residents Water Tariffs TMC
NTADCL, a Special Purpose Vehicle (SPV) established by TWIC, was made responsible for the development and implementation of the project. Unlike the traditional SPVs which consisted only of private organizations, this SPV was a joint shareholding between the public and the private sector. The first task of the SPV was to make the project commercially viable and to achieve this objective, a tariff structure13 was established which allowed for the collection of user charge by the concessionaire from the beneficiaries. Contractors for the project were selected through a pre-qualification process and submission of technical and financial bids. Around 40 Indian and International contractors had participated. The Construction and Operations and Management contracts were signed in 2002.
b. financial Structure
NTADCL was responsible for raising finances for the project. However it had encountered various barriers in the process. The primary issue facing the project
13
Please refer to the revenue model discussed later.
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was the reluctance on the part of the financial institutions to provide credit for the project. Concerns were expressed as there was no precedent for PPP in the water sector and this was the first project of its kind in India. Also, there was less clarity regarding the relevant risks shared by the different stakeholder. The project achieved financial closure in 2000. The various sources of financing have been given in the table below.
Exhibit 1c Sources of Financing
Sources of Financing Equity Tamil Nadu water Investment company (TWIC) a. IL&FS b. GoTN c. TEA Others Debt Subordinate (IDBI) Total Amount ( ` Crores) 322.7 57 48 10 217.7 613.8 86.5 1023
Source: Dwivedi, G., Public Private Partnerships & Lessons from Tiruppur Water Supply and Sewerage Project, ManthanAdhyayan Kendra, 2008.
C. revenue Structure
The water supply plant had a total capacity of 185 Million Litres per Day (MLD), of which 125 MLD was to be supplied to the textile industries, 25 MLD to Tirupur residents and 35 MLD to the nearby villages. The prices for the same were fixed at ` 45, ` 5 and ` 3 per kiloliter respectively, which allowed for a cross-subsidization mechanism. The industries were charged a price which was decided by the Price Review Committee constituted under the project. The prices for domestic users and other users were based on recommendations made by the Tamil Nadu Water & Drainage Board. The concession agreement also had provisions for price escalations that covered annual inflation.
D. alternative revenue loss mitigation measures
Certain innovative measures were mentioned in the concession agreement to mitigate risks. These were as follows:
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Water Shortage Period Fund (WSPF)
This fund covered an amount of ` 75 crore that was meant to mitigate the risk of the concessionaire during water shortages arising from the reduced flow of water or degradation of water quality. This would allow the concessionaire to continue generating revenues irrespective of the quantity and quality of water drawn from the river.
Debt Service Reserve Fund (DSRF)
A fund of ` 50 crore was created to ensure timely debt servicing during its operations.
Status of the Project since Inception
It was only in 2005 that NTADCL was able to provide continuous supply of water to all consumers, both domestic and industrial. However the project faced a series of unexpected events which negatively affected the profitability and commercial viability of the project. One of the main setbacks to the project was the decline in the industrial demand for water. There were several reasons for this. Firstly, the global recession lead to a fall in the demand for Indian textile exports. Secondly, new technologies in the textile industry reduced the water intensity of production. Thirdly, Tirupur had adequate rainfall, which allowed the industrialists to extract ground water at a cheaper cost. Moreover, the mitigation efforts were insufficient to make up for the revenue loss with the DSRF getting completely exhausted in the period. The low industrial demand was accelerated due the court order in January 2011 which resulted in the closing of several industrial units for causing pollution by discharging used water into the nearby rivers without any treatment. The Pollution Control Board has since then taken strict measures and only allows units that will comply with the policy of zero liquid discharge into the rivers to commence operations. Majority of the units, as a consequence, have outsourced their dying operations. Lessons
Delays in project due to change in government
This project was proposed by the existing government in 1993. However an election and change in the government in 1996 resulted in poor political will for implementing the project. This delayed the project by a period of four years until financial closure was achieved in 2000. Thus sustenance of political will for implementation of such long term projects is central to the successful implementation of PPPs.
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projections of demand for water were not changed
The initial water demand projections were made in 1994 by the textile industries without engaging any consultant. By the time the NTADCL developed the project and started operations, the economic environment of the industry had changed. There should have been inbuilt mechanism which would allow for re-forecasting of demand to capture such changes.
lack of support from the industrial units
The project was developed specifically to cater to the demands of industrial units. However, during its operational phase, the town received adequate rainfall, which allowed the industrial units to extract more ground water instead of buying water from the project. Also, increased pollution of the rivers by the industry hindered the operation of the project and increased the revenue losses.
provision of special rights to the foreign investor
One of the foreign equity investors had a share of 27.05%, which was the largest amongst the investments made, following TWIC. The investor was given special rights that made it necessary to seek prior approval in order to restructure the financial model. The investor disagreed with a number of amendments suggested.
immediate measures taken
To reduce the revenue risk associated with the private developer and to ensure smooth flow of funds, TWIC (financier) approached the Supreme Court with an immediate request to allow 10% of the textile units to operate. TWIC had taken on the responsibility of ensuring that these units complied with the Tamil Nadu Pollution Control Board directive of zero effluent discharge. This allowed NTADCL to breakeven. Measures currently under Consideration
restructuring of the revenue model
The capacity of the water supply plant at present is 250 MLD, which can be upgraded to cover additional users through a minor investment of ` 50 crore. NTADCL is considering exploiting this additional capacity to supply a minimum of 100 MLD to the TMC. However, this will take another 3-4 years as the TMC needs to build the necessary infrastructure for storage facilities and distribution systems, including a number of overhead tanks. Water will be supplied to the residents of the village at the weighted average tariff (approximately ` 25-27 per kiloliter) as against ` 3 per kiloliter proposed in the initial revenue model. An additional 85
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MLD will be supplied to industrial units and other commercial centers beyond Tirupur.
Corporate Debt restructure package:
Under this measure, the conversion of some portions of the debt into equity is being considered. The banks would convert 15% of the debt to equity. The government is planning to give interim debt and extra equity, which will be used by the NTADCL to repay a portion of the debt and for operations and maintenance. IL&FS may also convert its subordinate debt into equity. 2. THE KARNATAKA URBAN WATER SUPPLY IMPROVEMENT PROJECT Background The Urban Drinking Water and Sanitation Policy, 2002 of the Government of Karnataka (GoK) articulated the need for augmenting the bulk water supply, initiating reforms in distribution networks, volumetric pricing and gradual private sector participation in the delivery of water supply in the state. Until 2003, the Karnataka Urban Water Supply and Drainage Board (KUWSDB) was responsible for sourcing bulk water and supplying it to the distribution points in the cities. The distribution of water to the urban households was operated and managed by the respective ULBs. Over the years, the ULBs have performed poorly due to the lack of funding to maintain the distribution network and to ensure continuous water supply. In order to implement the policy and to test the possibility of 24*7 continuous water supply, the GoK launched the Karnataka Urban Water Supply Improvement Project (KUWASIP) in 2005 with assistance from the International Bank for Reconstruction and Development (IBRD), a component of the World Bank. The two bodies collaborated to jointly finance the project and leverage the expertise of the World Bank in project delivery and social intermediation to meet the project objectives.
Structure of KUWASIP the project consists of two components:
i) Rehabilitation of the distribution network in the demonstration zones of the selected cities and operations of the same: This was to be done on a PPP basis (performance based management contract) ii) Priority Investments (PI) for enhancing bulk system capacities and increasing their efficiency by reducing transmission losses: This was to be done on an EPC basis with the nodal agency being KWSDB.
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The total project cost was ` 237 crore, funded by the World Bank and the Government of Karnataka. A detailed structure of the allocation of investments is given in Exhibit 2a below.
Exhibit 2a Financial Structure of KUWASIP
Sources of Funds International Bank for Reconstruction and Development Government of Karnataka Total Use of Funds Technical Assistance 11.75 Amount ( ` Crore) 182 55 237
Physical Investments 1) Rehabilitation for Distribution Network in Demonstration Zones 42 Phase II 22.6 Phase III 154.5 2) Priority Investments Project Implementation Support Total 8.15 237
Source: The Karnataka Urban Water Sector Improvement Project, Water and Sanitation Program, Field Note, (2010).
This case study will focus on the first component of the project, which was implemented on a PPP mode.
Operations and Maintenance of the Distribution Network
A technical consultant was appointed to undertake a feasibility study to identify the cities, their respective demonstration zones and estimate the project cost. The three cities that were identified were Belgaum, Gulbarga and Hubli-Dharwad. A certain number of wards from each of these cities were selected as demonstration zones, such that 2.2 lakh people (approximately 10% of the population from each city) were covered. The concession agreement was signed in 2005 between a private developer and five government bodies: three ULBs, Karnataka Urban Water Supply and Drainage Board (KUWSDB) and Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC). The project was to be developed in three phases for a period of three years and six months. The role of the private developer in each of these phases is shown in Exhibit 2b below.
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Exhibit 2b Phases of the Management Contract
Rehablitation of the Distribution system (58 Weeks)

Determine the number of potential consumers and their willingness to pay tariffs Assess the existing network of pipelines and submit the hydraulic designer Provide an investment plan Continuous pressured supply to every connection 100% metering with issuance of monthly bills Reduce losses to 20 litres/ connection/ day/ meter pressure Response to queries within 24 hours and redress them with 7days
Construct a new pipe network meeting the performance indicators Install bulk and consumer metering system Establish 24*7 customer service stations
Investment Plan (21 weeks)
Operations & Maintenance (104)
In the first phase, an assessment of the existing network of pipelines was undertaken. Several technical challenges were faced by the private developer in identifying the leakages as a detailed underground network map was unavailable. Further, it was discovered that the pipes could not withstand high pressure and were also placed at shallow depths which could result in damage to the pipes due to vehicular traffic. Thus, a complete replacement of the distribution network was proposed. The amount of investment proposed by the concessionaire was ` 26 crore, which was much lower than what was estimated by the technical consultants (` 42 crore) which was subsequently approved by the government. In the second phase, the private developer appointed three sub-contractors who would be responsible for each component of the O&M operations: pipeline renewal, installation of meters and consumer connections, and issuance of bills and collection of tariffs. Even though this phase was to be completed in 58 weeks, it got deferred by another 16 weeks due to a delay in the approval of the sub-contractors by the nodal agencies. A technical auditor was appointed by the government to assess the key performance indicators to be met by the private developer. This task was undertaken
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during the last six weeks of phase 2. The indicators proposed by the auditor included: 24*7 continuous water supply to 90% of the demonstration zone. 90% metering coverage and issuance of bills Reduction in water losses to 30 liters/connection/day/meter pressure 90% of the customer services stations to be operational The private developer completed this phase successfully and started with phase three (operations of the distribution network) in April 2008.
Stakeholder Model
Throughout the project period, the ownership of the assets was with the ULBs. The responsibility of operations and management was to be transferred to the ULB at the end of the concession period. The private developer was not entrusted with the responsibility for tariff setting. KUIDFC was responsible for monitoring the developer and coordinating between various stakeholders. A detailed stakeholder model for the project is given below.
Exhibit 2c Stake holder model of KUWASIP

Financiers 1) world bank 2) Government of karnataka Project cost- Karnataka urban Assistance in Project ` 70 Crores Infrastructure Implementation Development Finance Corporation Debt Repayment 1) Sourcing Raw Water 2) Treatment of water 3) Supply of water till the Distribution Points Karnataka Urban water Sewerage & Distribution Board
Technical Consultant
Urban Local Body Water Tariffs
Private Developer 1) Rehabilitation Distribution Networks 2) Operation & Management of Distribution Networks 3) Installation of Bulk Water Meters 4) Setting up Computerized Billing System 5) Tariff Collection
Monitoring the Performance Technical Auditor
Users
Karnataka Urban Water Sector Improvement Project
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A certain amount of remuneration was provided to the private developer to carry out the functions in each of the phases. In order to incentivize the private developer to avoid cost overruns and time delays, be efficient in use of capital and resources and meet the key performance indicators, the scope of the project provided bonuses based on the specific requirements that were met. The details of the remuneration and the bonuses are given in Exhibit 2d below.
Exhibit 2d Remunerations and Bonuses Allocated to the Private Developer
Remuneration Fixed remuneration 60% of the total remuneration which is paid in quarterly installments throughout the project period Performance remuneration 40% of the total remuneration which is paid in quarterly installments during the operations and management phase, only if the key performance indicators are met Retention money 10% of the total remuneration which is paid on successful completion of the project
Bonuses Capital efficiency during rehabilitation phase For savings 25% of the total capital expenditure, bonus equals 3.75% of the total remuneration For savings > 25% of the total capital expenditure, bonus equals 10% of the total remuneration Capital efficiency during O&M phase For savings 25% of the total O&M expenditure, bonus equals 15% of the total remuneration For savings > 25% of the total O&M expenditure, bonus equals 40% of the total remuneration Performance efficiency during O&M phase For reduction in real losses between 15 & 20%, bonus equals 20% of the total remuneration For reduction in real losses > 20%, bonus equals 30% of the total remuneration Percent increase in billed volume to the base volume of bulk water supplies is 25% , bonus equals 12% of the total remuneration > 25%, bonus equals 30% of the total remuneration
Source: The Karnataka Urban Water Sector Improvement Project, Water and Sanitation Program, Field Note, (2010).
The private developer utilized less than 25% of the funds allocated for the capital and operations expenditure thereby earning a capital efficiency bonus of 3.75% and 15% of the total remuneration. In addition, it also met all the performance targets that were set by the implementing agencies and the technical consultant, thereby earning a performance efficiency bonus as well.
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Key Lessons
Preproject assessment should be carried out by the implementing agencies
The private developer faced difficulties while designing the detailed project report, as the quality of information available about the distribution network was poor. All the three ULBs and KWSDB did not have any records of the underground pipeline system and the number of connections. These studies should be carried out by the implementing agencies before the project is awarded as it brings more clarity in the scope of the project.
Co-operation by the Government
There should be sustained co-operation amongst the various levels of government and also with the private developer. This can shorten several delays in the project. Some of the delays faced by the developers in the project include getting approval from the implementing agencies for the selected sub-contractors, non-availability of bulk water from the KWSDB to the distribution points during the demonstration phase and delay in release of payments to the private developer by the implementing agencies.
Formation of Social Intermediation and Communications Strategy Cell (SICS)
The SICS was formed under the KUIDFC comprising the representatives from each of the government bodies and NGOs. A budget of ` 2 crore was allocated for the activities to be undertaken by them. These included customer surveys to assess the need for continuous water supply and the willingness to pay volumetric tariffs, and raising awareness about water usage and hygiene factors.
Approach of a phased project
A major factor contributing to the success of the project was the approach adopted for its implementation. It allowed for the flow of funds in installments, specifically focusing on the performance of the developer. The approach called for phased implementation of the project in a selected demonstration zone which helped to reduce the risk burden on the private developer. Phased implementation also allowed for formulation of realistic expectations regarding the performance, cost and delivery. Additionally, it helped to prove to all the stakeholders that continuous water supply with the collection of volumetric tariffs was possible.
Implementation of pro-poor policy
The project took the needs and constraints of the urban poor into account. The urban poor were identified as those residing in houses with less than 600 square feet of built-up area. These people were given a waiver of initial deposit for getting a connection and were charged concessional rates for a life-long supply of 8,000
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liters per household per month. Also, some water was supplied free of charge through public kiosks, cisterns and bore wells fitted into hand pumps for the most vulnerable sections of the society. Current Status After completing the project in 2010, the operations and maintenance of the water distribution system in the demonstration zones of the selected cities of Karnataka was retendered. The financial bid parameter was decided based on the cost charged by the private developer for operating the water distribution system. This cost was,once again, divided into a fixed component and a variable component based on the performance of the developer. The project was awarded to the same private developer who had earlier implemented the project. Currently, the government is structuring the project for expanding the rehabilitation of the water network system in other cities. 3. THE KHANDWA WATER SUPPLY PROJECT Background The Khandwa Municipal Corporation (KMC) had estimated the citys population to be 2, 25,373 in 2004. The water required to meet the demand of the population was estimated to be 29 million liters per day (MLD) based on the standard assumption of providing each individual with 135 liters per day, as formulated by CPHEEO. However, the KMC had the capacity to supply only 17.20 MLD from its three main sources of water namely, Bhagwant Sagar Reservoir (Sukta Dam), Nagchun Dam and ground water, with each of them contributing 10.5 MLD, 1.2 MLD and 5.4 MLD, respectively. Around 60% of the water supplied to the towns was drawn from the Sukta Dam. Despite the KMCs claim that 80% of the town had access to water supply, it was discovered that large residential colonies comprising of 15 wards did not have piped water supply and were dependent largely on private water tankers to meet their needs. Since 2004, various efforts have been undertaken by the KMC to meet the deficit of 11.8 MLD of water. First, the KMC tried to increase the quantity of water drawn from the Sukta Dam. This required replacing the open drain with a pipeline from the reservoir to the treatment plant and an additional installation of a 28-inch pipeline from the treatment plant to the augmentation centre. Housing and Urban Development Corporation (HUDCO) was approached for credit and were willing to provide a loan of ` 13 crore. However, the Government of Madhya Pradesh (GoMP) refused to provide a counter-guarantee and hence the project was abandoned. A second effort was made in 2006 to draw more water from the main canal of the Indira Sagar Dam and use Nagchun tank as the reservoir for distribution. The
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cost estimated for this project was ` 34.35 crore and it was to be funded through the Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT). However, the Narmada Development Authority informed the KMC that the canal cannot be operated in the summer as it becomes dry. The KMC subsequently hired private consultants M/s. Mehta and Associates to identify a new source of water and design a water supply project for the town of Khandwa. In April 2007, ChhotiTawa River was identified as a new water source. The estimated project cost for designing the water supply was ` 103 crore, of which ` 3 crore was allocated as consultancy costs and ` 93 crore was to be funded through UIDSSMT. The project was proposed to be undertaken on a PPP mode. Structure of the Model The project was to be implemented on a BOT basis with a concession period of 25 years. M/s. Mehta and Associates was responsible for designing the project, estimating the cost, providing transaction advisory and other advisory services. The project was to be implemented in two phases. Firstly, the construction of the pumping facilities, treatment plant, overhead tanks and the distribution system was to be completed over a period of two years. The remaining 23 years were allocated to the operation and maintenance of the project. Exhibit 3a provides a detailed scope of the project. It is evident, from exhibit 3a, that the operational risk lay with the concessionaire, who was responsible for the construction and operation of the entire value chain.
Exhibit 3a Value Chain of the Project
Intake facilities on the bank of Chhoti Tawa river. Facilies to pump 45 mld water till the treatment plant. Electrical substation to ensure uninterrupted power supply for the development of the Project.
Treatment of water
Treatment plant with a capacity of 45 mld Clear water pumping plant along with sump and pumps to discharge clear water of 44 mld Rehabilitaion of the existing distribution system Providing and laying 51400 meter long clear water pumping from treatment plant to over head tanks (OHTs)
Water Intake
Distribution of water
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Due to delays in preparing the Detailed Project Report, the project cost inflated to ` 115.32 crore. In 2009, a Concession Agreement was signed between KMC and Vishwa Infrastructures to implement the project. The bid criterion for the selection of the concessionaire was the lowest capital cost estimated and the lowest tariff charged from the water users. Revenue Structure The total project cost was ` 115.32 crore. The capital expenditure of ` 93.25 crore was to be financed by a government subsidy through the UIDSSMT. This is a grant that ULBs receive from the State and the Central Government for their willingness to implement Municipal Reforms under the UIDSSMT. The subsidy was to be deposited in installments by the state nodal agency into the account of the private concessionaire for executing the project. The rest of the project cost was to be financed by the concessionaire itself. An upfront equity of ` 5.51 crore was made by the private developer. The remaining amount (` 16.55) was financed through debt. So the share of GoI and GoMP together in the project was 81% and the share of the private concessionaire was 19%. The KMC did not have any funds of its own to invest. The various sources of financing and its utilization have been given in the exhibit below. The cost of operations and management/maintenance was to be financed through the revenue generated from the collection of tariffs. The concessionaire
Exhibit 3b Financial Structure of the PPP Model
Sources of Funds Urban Infrastructure Development Scheme for Small & Medium Towns (UIDSSMT) Debt Private Equity Total Use of Funds Project Preparation and Consultancy Services Capital Costs Total 3.45 111.87 115.32 Amount ( ` Crores) 93.25 16.5525 5.5175 115.32
Source: Dwivedi, G., Public Private Partnerships & Lessons from Tiruppur Water Supply and Sewerage Project, ManthanAdhyayan Kendra, 2008 and Athena Research.
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was responsible for establishing a volumetric metering system and collecting water tariffs, which then had to be transferred to the KMCs escrow account. The private developer was paid by the KMC based on collection efficiency. The stakeholder model of the project has been provided below.
Exhibit 3c Stakeholder Model
Consultancy Services Government Khandwa Municpal Corporation Mehta & Associates
Payments Payme Grant via Urban t Infrastructure frastructure Development Scheme ent for small and Medium nd Towns Concession Agreement Water Tariffs
Project Development &Operation Water supply in Khandwa Equity
Vishwa Infra
Water Supply
Users1) Residents 2) commercial Estates 3) Industries
Debt
Flow of Funds Lenders Flow of Resources / Services
The estimated Internal Rate of Return (IRR) for the project was 12%. This was based on the bid price of the treated water per kilolitre that would be charged by the company to cover its O&M costs over the concession period, the construction costs incurred by it and the interest payments on debt. This excludes the share of GoI and the GoMP made under the provision of the UIDSSMT. The supply of water was to be undertaken in two phases. The first phase allowed supply of only 17 MLD of water for the first four years of the O&M component of the project. This would be increased to 30 MLD from the fifth year, once all connections to the domestic households, commercial institutes and industries are released. The concessionaire had estimated distribution losses of 15% (approximately 5 MLD of water). Therefore, in the second phase, the target for water supply was 34.74 MLD. The O&M costs proposed by the private developer for the first phase was ` 7.62 crore per annum, i.e. ` 63.75 lakh per month. The concession agreement included
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a provision for cost escalation at 10% per annum. To meet these costs, the water tariff proposed by the concessionaire was ` 11.95 per kilolitre of water supplied and there was a provision that allowed this to be increased by 10% every third year; i.e. after every two years.14. A similar revenue structure covering operations and maintenance costs and generating profits is expected to be implemented in the second phase. Lessons
Government grants attract private participation
The financial structure of the project plays an important role in attracting the developer. A grant given by the State and Central Government via the UIDSSMT scheme covered around 80% of the total project cost which reduced the financial risk borne by the private concessionaire.
Governance and regulatory issues
According to the private developer, the project will be successful as there is a strong commitment by all the stakeholders and the government has been showing keen interest, ensuring a mobilization of political will. Minor delays however were faced in acquiring land and releasing funds.
Willingness to pay water tariffs by the community
The revenue structure was designed while the project was still in its implementation phase. However, this structure is yet to be finalized by the project implementers. The question that needs to be addressed is the ability of the concessionaire to recover the costs. This is because nearly 40% of the population in Khandwa lives in the slum areas and the average cost recovery of expenses by the KMC during 2005 to 2008 was only 32.48%.15
Raising Awareness
Awareness projects were conducted by the concessionaire in association with local NGOs. The focus of the campaign was to create awareness in schools and hospitals about the quality of water and the availability of 24x7 water. The primary objective
Based on this, the concessionaire, during the first phase of the water supply, could barely break even with an estimated revenue of ` 7.70 crore 15 For further details refer to Dwivedi, Guarav and Rehmat, Private Water Supply Augmentation Project for Khandwa Town in MP under UIDSSMT: A Case Study of the Impacts of the Project, ManthanAdhyayan Kendra. (2011).
14
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of such campaigns was to get public acceptance and avoid conflict or any other related hurdles at a later stage. Current Status The project was commissioned to be completed in March 2012. This deadline was not met due to a delay in setting up electro mechanical systems for the project and commissioning the distribution network. After construction, the supply of water will be undertaken in a phased manner in select wards as demonstration. This will be gradually expanded to the rest of the town and complete operation of the water supply system will commence. The revenue structure of the project has not been finalized yet, despite the submission of the water tariff by the concessionaire during the bidding process. There are ongoing discussions between the developer and the government on making annual payments to the concessionaire in proportion to the revenue collection by the KMC.
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REFERENCES
Browne and Mohan Management Consultancy (2010). PPP Models for Water Supply: an Evaluation. Browne and Mohan, India. Census of India (2011).Main Source of Drinking Water 2001-11.Ministry of Home Affairs, Government of India, New Delhi. Department of Economic Affair (2010). Risk A critical focus of PPP Design. PPP Toolkit for Improving PPP Decision Making Processes, Public Private Partnerships in India. Accessed from http://toolkit.pppinindia.com/ Dwivedi, Guarav (2008). Public Private Partnerships and Lessons from Tirupur Water Supply and Sewerage Project.ManthanAdhyayan Kendra, Badwani. Dwivedi, Guarav (2011). Private Water Supply Augmentation Project for Khandwa Town in MP under UIDSSMT: A Case Study of the Impacts of the Project. ManthanAdhyayan Kendra, Badwani. Infrastructure Leasing and Financial Services (2005). Tirupur Water Supply ProjectInnovation Report.The Indian Innovation Awards 2005, IL&FS. IL&FS Water Limited (2011). Presentation to Working Group on Urban and Industrial Water Supply and Sanitation for the Twelfth Five Year Plan (201217). Accessed from http://urbanindia.nic.in/programme/uwss/uiww/PPT_6th_Meeting/PPT_IL_FS_Water. pdf Kingdom, Bill, Roland Liemberger and Phillippe Marin (2006). The Challenge of Reducing Non Revenue Water (NRW) in Developing Countries. The Water Supply and Sanitation Sector Board Discussion Paper Series, 8.The World Bank Group, Washington DC. Madhav, Roopa (2008). Tirupur Water Supply and Sanitation Project: An Impediment to Sustainable Water Management. International Environmental Law Research Centre Working Paper, 1.Swiss National Science Foundation, Geneva, Switzerland. Mahalingam, Ashwin., Ganesh A Devkar, and Satyanarayana N Kalidindi (2011). A Comparative Assessment of Public Private Partnership (PPP) Coordination Agencies
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referenCeS
in India: What Works & What Doesnt. Public Works Management and Policy, 20(10),pp. 1-32. Sage Publication, India. Ministry of Environment & Forest (2009). State of Environment Report India. Government of India, New Delhi. Ministry of Urban Development (2005). JnNURM Brochure. Government of India, New Delhi. Ministry of Urban Development (2006).Modified JnNURM Guidelines UIG. Government of India, New Delhi Ministry of Urban Development (2010). Service Level Benchmarking Databook: Improving Service Outcomes 2008 09. Ministry of Urban Development, Government of India, New Delhi. Ministry of Urban Development (2011). Jawaharlal Nehru National Urban Renewal Mission Monitoring Format: Fund Allocation and Release (UIG) Summary statement Report. Ministry of Urban Development (2011). Jawaharlal Nehru National Urban Renewal Mission Monitoring Fund Allocation and Utilization (BSUP/ IHSDP): Summary statement Report. Ministry of Urban Development (2011). Jawaharlal Nehru National Urban Renewal Mission Monitoring Format: Fund Allocation and Utilization (UIG/ UIDSSMT) Summary statement Report. Ministry of Urban Development (2011). Report on Indian Urban Infrastructure and Services. High Powered Expert Committee Report, Government of India, New Delhi. The World Bank (2008).How the Private Sector Can Help: A Look at Performance Based Service Contracting. The World Bank Group, Washington DC. The World Bank (2010). The Karnataka Urban Water Sector Improvement Project, Water and Sanitation Program, Field Note.
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Public Private Partnerships In Urban Water Supply And Municipal Solid Waste Management Potential and Strategies

Authors Arslan Aziz Ankit K Chatri Saloni K Shah

Typeset by DSM Soft (P) Ltd., Chennai Printed at

ix x xv xvii xix xxiii

Chapter 2 2.1 2.2 2.3

Service Level Benchmarks Sources of Drinking Water Non-Revenue Water

Chapter 3 3.1 3.2

Future Potential for PPPs in Urban Water

Chapter 4 4.1 4.2 4.3 4.4 4.5

3.1 3.2 3.3 3.4

85 89 94 103 121 123 127 131

Chapter 4 Appendix II References Index

Figure 3.4: Investment Requirement in Class IA and IB Cities

Exhibit 3.5: Availability of Central and State Grants

Exhibit 3.8: Availability of Land in Indian Cities

110 111 113 113 114 116

S. Narayan IAS (Retd.)

DEFINING MUNICIPAL SOLID WASTE

Figure 1.1 Total and Per Capita Waste Generation

Source: Compiled from various sources

Figure 1.3 MSW Characteristics (1996 and2005)

MSW Characteristics (2005)

Bio degradables 42%

Bio degradables 48%

MSW VALUE CHAIN

Figure 1.5 Institutional Framework for MSW Management

(MSW Management & Handling Rules 2000)

(JNNURM Funds Service Standards Norms/Benchmarking 2008)

Central Pollution Control Board

Rules for scientific management of MSW

Formulates policy, prepares guidelines, sets benchmarks and provides funds

Monitors SPCBs and workings of ULBs

Regional Level SWM Facilities

Urban Local Bodies

Municipal Level SWM Facilities

Source: Athena Research

ULB (on their own)

ULB + Private Sector Player

Bokaro, Trichy, Munger, Patna

Hyderabad, Rajkot, Chennai (1995 onwards), Bengaluru, Ahmedabad

Chennai (19891995) Namakkal Trivandrum

Centralized and Decentralized Waste Management Approaches

Figure 1.6 Stakeholder Map of Integrated SWM Project at Guwahati

RWA SHGs CBOs Other Groups GWMS

Ramky Enviro Engineers Limited

Supervision of waste management activity Dispute resolution

Services of C&T of Waste Sale of compost and power

User charges and electricity tariff and payment for compost

Source: Athena Research

Figure 1.7 Community-Based For-Profit Decentralized SWM Systems

Resource Recovery Centre

Resource Recovery Centre

Source: Athena Research

Exhibit 1.2 Centralized & Decentralized Waste Management Systems at a Glance

Source: Athena Research; Compiled from various sources

CURRENT STATE AND GAPS

EXISTING PERFORMANCE STANDARDS

Figure 2.1 Status of MSW ManagementClass IA, IB & IC Cities

Source: Based on data available in Urban Finance, Vol. 13(1), NIUA(2010)

Figure 2.2 Backlogs of Service Level Benchmarks

Source: Based on data available in HPEC Report, MOUD, GOI(2011)

Factors contributing to Poor Waste Segregation System

Based on information available at http://www.nswai.com/images/case_studies/4.pdf; accessed on 21st January, 2012.