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					  Sustainable water
management strategy in
        India
 Case Study of Mysore Water
        Distribution
          Oct 13, 2011
                 by
        G S Basu, Jusco, India
Agenda



    I.    India Urban Water Scenario

    II.   JUSCO Mysore Experience

    III. Future of Sustainable Water Management in India




                                                           2
Demand for water in India is expected to rise
dramatically in the next few decades

Drivers of water usage increase                                                                            Water Demand in India; 2010 - 2050
                                                                                                           Cubic KM or Trilion Liters
                          Population increase from 1.2 Billion in 2010 to
   Population              1.6 Billion in 2030 will directly increase demand                                                                                           1180
                           for water
                                                                                                                                                 1.3%


                          Increased urbanization from 30% to 50% will
 Urbanization                                                                                                                                     843
                           create demand aggregation at select points in
                           India, sometimes away from high water                                                                                                        863
                                                                                                                              710
                           availability areas
                                                                                                                                                  650
   Per Capita             Indian GDP is expected to grow causing per
     Income                capita income to rise from $468 to $ 17366 by                                  Agricultrue
    Increase               2050. Increased per capita will result in lifestyle                                                592
                                                                                                            Domestic
                           changes, requiring more per capita water. For
                                                                                                            Industrial                                                  119
                           e.g. water consumption in US is 582
                           litres/person / day compared to India’s ~90                                          Power                             66                     87
                                                                                                                            46                  71                         75
                                                                                                               Others          39 13
                          India’s industrialization increase will increase                                                 20                  21 35                  37
 Industrializati
      on                   demand for water – especially increase in power,                                                  2010                2025                  2050
                           steel and other heavy industries
                                                                                                          Per Capita
                                                                                                          Availability1,2         1,730             1,401               1,200


1: As per international norms, if per capita water availability is less than 1700 m 3 per year, country is water stressed and if the per capita availability is less
than 1000 m3, the country is water scarce
2: Using theoretical available water as a base for calculations
Source: Ministry of Water Resources, National Hydrology Institute, Roorkee , 'The Himalayan Challenge: Water Security in Emerging Asia, Strategic Fore
                                                                                                                                                                                3
 Resulting in a potentially significant demand
 supply gap in the near future

Water Supply and Demand in India; 2010 - 2050                                  River Basins in India, with water shortage, 2030
Cubic KM or Trilion Liters                                                     Percentage
                                                            Demand
1,000                                                       Current
                                                            Supply
  950

  900

  850                                12% gap by 2025

  800
                                                              +12%
  750
                                  Current useful
  700                             water supply


    0
    2010 2012 2014 2016 2018 2020 2022 2024 2026

     Expected issue by 2015


   2: EFR – Eastern Flowing Rivers; WFR – Western Flowing Rivers (non major rivers)
  Source: Ministry of Water Resources, National Hydrology Institute
                                                                                                                                  4
While India faces water shortage in near future, it
already is facing significant issues in Urban areas

Urban Water Requirement / Availability , 2007       Water Supply in a day on average, 2000              Indian Population in Urban Areas, 2006 - 2025
Million Litres per Day                              Hours                                               Millions
          82,450                                              19

                                           -31%                                                            Tier 1 > 4 M
                                                                                                                                           544
                                  56,750                                                                   Tier 2 1-4 M
                                                                                                  -15
                                                                                                           Tier 3 < 1 M
                                                                                                                                           146
                                                                                       4
                                                                                                                                                        +67%

                                                                                                                   325                      93
                                                         Supply Hours             Supply Hours
       Requirement                Supply
                                                +           Asia1                    India                          89

                                                                                                                    50
Sewage and Waste Water Generation in Treatment, 2005
Million Litres per Day                                                                                                                     305

          26,254                                            15,438                                                 186

                                                                                                 -40%
                                           -73%                                      9,263
                                                                                                                  2006                     2025

                                  7,044



       Generated
                   Domestic
                                 Treated                  Generated
                                                                     Industrial
                                                                                    Treated
                                                                                                                               ?
1: 50 Asian cities benchmarked by ADB
Source: Ministry of Urban Development, United Nations handbook of benchmarks, Central Pollution Control Board, Asian Development Bank
                                                                                                                                                          5
Several municipal water bodies have poor operational
and financial health

Municipal Leakage and Metered Connections, 2010                                  Average Meter Connection per Employee, 2003
Percentage, Millions                                                             Count

                                City             City    Leakage
                                               Size in     (%)   Connections
                                                India            Metered (%)
                                               (Rank)
  ~45% of Municipal
   water supply is              Nashik           21         60              80
   leaked - does not            Delhi             2         53              56
   generate revenue
                                Nagpur           13         52              40
  Connections not              Hyderabad         6         50              na
   metered in ~40%
   cases                        Bangalore         3         45              96
                                Kolkata           4         35              10
                                Rajkot           25         23              na
                                Chennai           5         17              na
                                Mumbai            1         13              75



Operating Ratio, 2007
                                                                                                           Operating Ratio is defined as
                                                                                                            O&M Costs / Revenue
                                                                                                           Operating Ratio more than 1.0
                                                                                                            indicates utility is not able to
                                                                                                            recover even O&M costs
                                                                                                           Ideally a utility should have a
                                                                                                            operating ratio less than 1.0
                                                                                                            to cover for capital
                                                                                                            expenditures
                                                                                                           Most Indian utilities are
                                                                                                            performing poorly
Source: Urban Water India, report by McKenzie-Ray, Asian Development Bank
                                                                                                                                           6
This has led to increased realization for Private
Participation in Water Management
                                 Milestone for Private Participation in Water in India
     Timeline


        2002                    New Water Policy launched calling for Private Sector Participation - PSP

        2004                    Guidelines defined for private participation in Urban Water and Sanitation
                                projects on a PPP mode

        2005                    Provision for Financial bridge for viability gap for private companies

                                PPP in Urban water supply linked to schemes like JNNURM

        2006                    Formation of India Infrastructure Finance Corporation Limited for
                                providing 20% funding to infrastructure projects

        2008                    Increased projects involving private companies in Urban water and
                                Sanitation


     Private companies can participate in Urban Water Management in areas of
                Water Treatment; Distribution; Waste Management
Source: Ministry of Water Resources, National Hydrology Institute
                                                                                                             7
Private participation is expected to help in the following
areas


          Access to funds for capital improvement


          Access to latest technology and tools including MIS


          More efficient operations


          Better consumer complaint handling systems


          Experience of urban water management in other geographies


          Knowledge and skill transfer to municipal body staff




                                                                      8
Agenda



    I.    India Urban Water Scenario

    II.   JUSCO Mysore Experience

    III. Future of Sustainable Water Management in India




                                                           9
JUSCO – A Comprehensive Urban Infrastructure
Service Provider
A TATA Enterprise
India’s only private sector integrated civic service provider
                                                                  Services:
                                                  Purpose
                                                                   Water & Waste Water
                                                                    Management

                                                                   Power Distribution and
                                                                    Infrastructure

                                                                   Solid Waste Management

                                                                   Construction Services

                                                                   Integrated Maintenance

                                                                   Environment Management



                                                                Jamshedpur
                                                                A town built on a
                                                                promise
                                                                                             10
JUSCO has been recognized for excellence in Urban
civic services




     National Urban Water Award for Consumer       Total Productive Maintenance (TPM) Excellence
                 Satisfaction, 2009                          Award held at Kyoto, 2008




  JUSCO received Global Water Intelligence Award    Asian Water Management Excellence Award
                in London, 2008                                      2008
                                                                                                   11
Mysore – A Heritage city in South India



                             Mysore City Facts

                            • Area: 128.42 km2
                            • Population: 1,000,000
                            • Location: 12°18′N 76°39′E
                            • Climate: Temp: Min – 38.5°C, Max – 9.6°C
                            • Elevation: 763 metres (203 ft.)                  Mysore Palace


                             Mysore History

                            • Named after Demon Mahishasura
                            •“Kannada” is the native language of Mysore
                            •One of the princely states at time of independence
                            •Strong Arts Heritage(“Cultural Capital of Karnataka”)
                                                                                     Mahishasura

       Karnataka
                             Mysore Economic Profile
    Mysore
                            • Tourism Hot spot within Karnataka
                            •Second Largest Software exporter in Karnataka
                            • Significant handicrafts industry
                            •Sandalwood carving, Bronze work,
                                                                                Jayalakshmi Vilas




                                                                                               12
 Mysore Water Distribution Background

                                        Cauvery River
 Mysore Water Distribution
 Background

 Source of water Cauvery river
  fairly dependable

 Current water production 214
  MLD which means availability
  of 234 lpcd.

 Civic Services administered
  by a Municipal Corporation
  (MCC)

 City Council has a Mayor and
  Deputy Mayor; 65 elected
  Corporators each representing
  a Revenue Ward.

 Core municipal area of 65
  wards: about 84 sq km. City
  expanding and MUDA
  responsible for planning &
  development; Master plan
  covers 150 sq km.                               Mysore City
                                                  Corporation (MCC)
 Karnataka Urban Water
  Supply and Drainage Board
  (KUWSDB) is the main body                    Mysore Urban Development
  responsible for water supply                 Authority (MUDA Boundary)
                                                                           13
Mysore Water Distribution was facing
significant issues…

Background for Mysore Distribution          Issues for Consumers                  Issues for KUWSDB
                                                                            +
                                           Water available for 3-5              Inspite of a good water
 Bulk water production assets have
                                            hours per day in West                 source (cauvery river)
  outlived age
                                            Zone and every alternate              being close, there is
   KUWSDB is implementing a bulk
                                            day in East Zone                      additional cost borne for
     augmenting arrangement
                                                                                  borewells and tankers to
                                           Water availability at erratic         meet customer demand
 Distribution system in the city dates
                                            hours – middle of night,
  back more than 100 years
                                            very early morning etc.              NRW in excess of 40%
 18 Boosting stations provided to
                                           Inadequate water                     Poor collections from
  provide pressurized water
                                            pressure, requiring people            consumers
                                            to install booster pump on
 Around 20,000 unauthorized
                                            water lines                          Low tarriff levels – many
  connections over a base of 126,000
                                                                                  consumers billed on
                                           Water contamination due               volumetric consumption
 ~ 80% meters not functional
                                            to old / rusted pipes                 because of non functional
                                                                                  meters
 Tap pressure ~ 3-5 m, as opposed to
  7 m, as per norms in India




                                                                                                          14
Mysore Water Distribution was facing
significant issues (Contd)




  Waiting for turn to fill water at community tap




                                                    Collecting water at odd hours in the morning

        Old man collecting water at dawn
                                                                                                   15
Mysore Water Distribution was facing
significant issues (Contd)




     Too little pressure for consumers…   …While leakage and wastage at other parts


                                                                                      16
Mysore Civic bodies envisaged a program to solve
water issues through private participation

         Name of Project……………        24X7 Water Supply performance based
                                       management contract in Mysore city.
         Job Description……………        Conversion of intermittent to 24/7 continuous
                                       water supply system for 120,000 connections

         Client………………………             Mysore City Corporation (MCC) & Karnataka
                                       Water Supply & Drainage Board (KUWSDB)

         Project Aim…………………          To enable a profitable Urban Local Body
                                       (ULB); Reduce losses and improve consumer
                                       experience by providing 24x7 water

         Contract Start Date………      28/01/2009

         Completion Time…………         72 months

         Value………………………              Rs. 1,620 Million (~USD 36 Million)

         Funding arrangement         JNNURM:State Govt:MCC – 80:10:10


                                                                                   17
Responsibility for entire water cycle to be shared
between public and private parties

        Urban Water Supply Cycle

                                                                                      Waste Water
           Abstraction /
                                   Transmission              Distribution            Collection and
            Treatment
                                                                                       Treatment



Party      KUWSDB/MCC              KUWSDB/MCC                Contractor                  KUWSDB/MCC




          Around 240 MLD           Bulk water to WTP      170,000                 Responsible for
Notes                                                        connections of           waste water
           water bulk supply         and Treated water
           from Cauvery river        to Master Balance       which 120,000            collection and
           tapped at 3 different     Reservoir (MBR)         authorized               treatment before
           areas                     under scope of          connections              release to Cauvery
          4 Water Treatment         KUWSDB                 1700 KM of piping        waters
           Plants (WTP) under       6 MBRs to balance       network
           management by             water supply having    Consumer
           KUWSDB                    capacity of 126 ML      complaint handling
                                                            Metering and Billing
                                                            Revenue collection
                                                             improvement

                                                                                                      18
Mysore Project to be executed in three
phases

                                                                               Phase 3:
                                                                              Management
                                                Phase 2:
                                              Rehabilitation
             Phase 1:
            Preparatory                                                        • Operation,
                                                                                 maintenance
                                         •   Operation, maintain and improve     and
                                                                                 improvement of     India’s largest PPP
                                             facilities and provision of water
                                                                                 services to         project covering a
                                             services
                                                                                                     population of 1 Million
                                         •   Implementation of Final Investment achieve the
                                                                                 respective
• Study and documentation existing           Plan involving procurement,
                                                                                 Performance        Rehabilitation of ~
    water infrastructure & service           construction (new network, valves,
                                                                                 Targets as laid     1700 KMs of pipeline,
•   Prepare O&M plan                         meters, customer connections,
                                                                                                     pump stations,
•   Topographical and customer               creation of DMA etc), commissioning down.
                                                                                                     electrical and allied
    survey for mapping the network and   •   Implementing Integrated
                                                                                                     work
    water infrastructure details & for       Management Information System
                                                                                                    Improved billing and
    compilation of customer database         (IMIS) incorporating Customer
                                                                                                     collection
•   Hydraulic network modeling &             Complaint Management, Billing &
                                                                                                    Establishment of 24x7
    design for rehabilitating the            Collection Process and Network
                                                                                                     customer complaint
    intermittent Supply network to           Management Modules
                                                                                                     centre
    Continuous Water Supply


               1 year                                3 Years                            2 Years

                                                                                                                       19
Salient Features of the Contract…


 Revenue and Risk Sharing                   Performance Gurantees

  Tarriff fixed by Municipal body,        Contractor revenue linked to several performance
   Operator to bill consumers and pass      parameters
   the revenue to the municipal body       30% of O&M revenue and 50% of Management fees (~ xx of
                                            total fees) tied to meeting performance targets
  Risk sharing between Urban Local
   Body (ULB) and Contractor              Performance Parameter     Target               Weightage
       Investment risk with ULB /
         Government (source of funds)     Number of connections     Progressive             30%
       Tarriff risk with ULB             with 24x7
       Design and Construction risk      Revenue Improvement       % improvement over      30%
         with Contractor                                            baseline revenue
       Performance risk with
         Contractor                       Revenue Water in 24x7     85%                     10%
       Operation risk with Contractor    area
       Collection risk with Contractor   Complaint Resolution      98%                     15%

  Performance based management           Leakage Levels            25%                     5%
   contract
                                          Quality Compliance        100%                    5%

                                          Pressure Compliance       95%                     5%


                                                                                                 20
JUSCO Approach for Project Execution

                                  2a      Rehabilitation of
                                          existing network



                                         Work break down packages for execution
                                         Prioritizing the works for execution
                                         Implementation of Rehab plan
                                         Service level targets delivered in stages
                                         Manage Issues Relating to Change in supply
     Development of Capital
1                                         pattern to 24X7
       Improvement Plan


                                          Operations and
     Asset Mapping               2b      Maintenance of existing
     Measuring bulk inputs and           network
      outputs
     Base lining of losses,
      existing service levels           Customer centre with SLGs defined
     Establishment of DMAs,            Standardization of O&M practices
      Water Balance                     Active leakage management
     Hydraulic Modeling &              Meter Management
      Investment Plan                   Incentive based billing and revenue collection
                                        Integration of mapping, billing, customer care &
                                         network management
                                        Safety Management
                                        Total Productive Maintenance (TPM) Practices
                                                                                            21
Project close to mid point in duration, with good progress

                                                                     Connections, 2009 – 2014
                                                                     Units




Contract Agreement –
28 Nov 2008
      Project Start
      Jan 2009
                         Start of 6 monthly
                         Performance Milestones
                                 First Performance Target –
                                 10k 24x7 connections

                                                          We are here
                                                                Next 6 monthly milestone of 70k
                                                                24x7 connections




  Jan                 Jan              Jan                    Jan               Jan               Jan            Jan
  2009                2010             2011                   2012              2013              2014           2015

12 months                     36 months Operation & Rehabilitation                       24 months Maintenance
Preparatory Phase             Phase                                                      Phase
And significant improvement in consumer
satisfaction                     Top factors in consumer satisfaction score*
                                                                                  Water Quality
                                                                                  Percent               91
                                                                                              65              +40%

Consumer satisfaction score, 2009 – 2010                                                                             95
Percent
                                              90                                             2009      2010

              79                                                   +14%           Water Availability
                                                                                  Percent               94
                                                                                              77              +22%
                                                                                                                     76



                                                                                             2009      2010

                                                                                  Customer Service
                                                                                  Percent
                                                                                              62
                                                                                                        52    -16%   68




                                                                                             2009      2010
            2009                           2010
                                                                                  Metering
                                                                                                        95
                                                                                  Percent     80              +19%
                                                                                                                     60

  x       Importance to customers

*Out of 8 factors including others such as Collection, Billing, Safety Measures
and Behavior of staff                                                                        2009      2010          23
Agenda



    I.    India Urban Water Scenario

    II.   JUSCO Mysore Experience

    III. Future of Sustainable Water Management in India




                                                           24
India has one of the lowest water tariff and tariff
hike is a very sensitive issue
                                    Price to customers, 2009
 Common public perspective          USD per 1000 Litres
 to water in India
                                    Germany                            1.52
  With abundant rainfall and         United
   extensive river systems,                                     1.11           Common
                                    Kingdom                                     psyche about
   India has historically been a
   water rich country                 Turkey                    1.06            water as a
                                                                                “free resource
                                      United
  Water has been considered                             0.52
                                      States                                   There is a lack
   “God’s gift” leading to water
   not seen as critical or finite     Mexico            0.42                    of political will
   resource that needs to be                                                    to consider
   managed                             South                                    increase in
                                                       0.34
                                       Africa                                   water tariff
  Need to have a national              Chile          0.34
   regulatory authority to                                                     Indian
   regulate water                      China      0.20                          Municipalities
   consumption, as for other                                                    rarely recover
   natural assets such as air                                                   their costs of
                                    Indonesia    0.13
   spectrum, is not easily                                                      operations given
   conceived                                                                    low tariff rates
                                        India   0.08


                                                                                                25
 Indian Utilities face several challenges


         Challenges                         Possible Solutions


       1 Low water tariff resulting in       All connections to be metered
                                             Move from flat tariff to consumption based telescopic tariff
         poor recovery on investments
                                              structure to reflect economic status of the connection and the
                                              usage, including subsidy tariff for “Lifeline supply” and facilitating
                                              demand management
                                             Improved tariff and collections to improve funds availability
       2 Crumbling Infrastructure and        Possible corporatization for revenue and cost management
         limited funds for capital
         maintenance or improvement          Support from State and Centre such as JNNURM*
                                             Efficient use of assets with periodic good maintenance practices
                                             Adoption of technologies and management practices
       3 High operational costs and not      Meticulous benchmarking of good practices and processes
         satisfactory staff productivity     Ring fencing of accounting system
                                             Structured skill enhancement programme for ULB staffs


       4 High level of Network losses       Track and report NRW for every urban ward
                                            Active Leakage Management
                                            Physical audits to address illegal connection

                                            Consumer focus through 24x7 complaint handling and prompt
       5 Weak focus on customer
                                             response
                                            Capture consumer data for decision making and providing
* Jawaharlal Nehru Urban Renewal Mission
                                             analytical support for solving issues
                                            KPI for customer service level guarantee                             26
 JUSCO has implemented a comprehensive urban
 water management in Jamshedpur with significant
 results
                                                       Results (2005)
                      Parameter             Unit       Baseline         Results (2010)

                      Population
                                        % of Total        67%               85%
                      Covered

                      Metered
                                                           ~0               30%
                      Connections       % of Total
JUSCO was
formed as a
corporate             NRW               %                 36%               9.5%
urban utilities
service
provider for          Service
Jamshedpur            Guarantee         % of Total        77%               99%
town in 2004.         Compliance

                      Failures in
                      Water Systems     No per Month       44                1.1


                      Operating Ratio   O&M Cost /        1.07               0.82
                                        Revenue
                      Staff/1000        Nos               > 8.0              4.03
                      connections
   Source: CRISIL
   * JUSCO Projects                                                                      27
Private sector participation in urban water
management is becoming popular after initial
reservations                                Graph Indicative




   Overall momentum
    for PPP in Water
              Sector



                    Mid 90s              Early 2000               Mid Decade                  2010                    2015

                          High Interest by     Very little interest    High Government        Renewed interest
    Interest               Foreign Players      Ineffective push         focus                   by International
                          New Concept for       from the                Domestic Interest       Cos.
                           Indian Companies      Government                                      Increased
                                                                                                  involvement by
                                                                                                  Domestic Cos.
                          First initiatives    Few projects            High level of          Many ongoing
     Activity             Poor results and     Onset of                 Public and NGO          projects
                           lack of momentum      pessimism on             opposition             Commercial
                          Many projects         Water PPP               High profile            Success being
                           grounded                                       projects grounded       closely monitored

                                                                                                 Latur
                          Pune                 Sonia Vihar WTP         Mumbai Kurla
                                                                                                 Madurai
  Key Projects            Hyderabad                                      East
                                                                                                 Chennai
                          Goa                                           DJB Pilot
                                                                                                 Salt Lake*
                          Bangalore                                     Bangalore DMA
                                                                                                 Mysore*
                                                                         Sangli
 Source: CRISIL
                                                                                                 Haldia*
 * JUSCO Projects                                                                                                            28
 Several companies are entering the PPP infrastructure
 space in India
 In the 12th Five year plan, investment in Infrastructure is expected around $1 Trillion, with
 50% PPP participation

   India Infrastructure - PPP share, 2002 – 2017
   USD Billions

           PPP                                                             1,000
           Investment


                                                                            500


                                                   514


                                                   329
                            250
                                                                            500
                            188
                                                   185
                             63
                            10th                 11th                       12th
                                               Five year plans


Source: PPP India; Ministry of Finance
                                                                                                 29
Private Sector Expectations from Government
for Water Utilities Market Development


What Government    Develop regulations that assure certainity of future cash flows to the
should do to        extent possible
promote PPP        Provide political commitment for PPP as warter is not perceived as a
                    simple commodity by either the consumers or the Government
                   Align economic interest of all parties
                   Accept that profit from water business is OK
                   Define PPP projects on a holistic basis
                   Encourage plurality of approach and establish a framework that
                    accepts failures



What Government    Offer a project without detailed project due diligence including
should NOT do to    adequate stake holder engagement
promote PPP        Change goalposts after contract is signed or re-negotiate
                    arrangements if there is no sufficient genuine justifications beyond
                    control of the parties to sustain operation
                   Consider a PPP investment as an asset and not a business
                   Superimpose public processes on private initiatives
                   Split a large projects into smaller parts and bid out, limiting economic
                    returns
Source: ILFS
                                                                                               30
Thank You




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