Arun Lakhani

Chairman and Managing Director, Vishvaraj Infrastructure Limited

“It is very important that sewage be treated as a water source and not just as waste.”

In a recent interview with Indian Infrastructure, Vishvaraj Infrastructure Limited’s chairman and managing director, Arun Lakhani, spoke about the potential of wastewater recycle and reuse in India, key initiatives undertaken in this area by the company, experience with 24×7 water supply projects, key challenges and future plans. Excerpts…

What is the potential of wastewater recycle and reuse in India? What is the significance of such projects in view of India’s looming water crisis?

India generates over 38,000 million litres per day (mld) of sewage. Most of the sewage is discharged directly into waterbodies without any treatment. This untreated sewage can be used as a potential source of water supply by industries and thermal power stations. There is scope for 20,000 mld of sewage to be utilised by industries and another 8,000 mld by thermal power plants. Even if about half of the industry and thermal power station requirement is met by treated wastewater, about 18,000 mld of freshwater will be available for domestic use which can satisfy the needs of at least 180 million people (12 per cent of our population). It is, thus, very important that sewage be treated as a water source and not just as waste.

The sheer quantity of wastewater that we are generating is very important. For example, if 1,000 mld of water is supplied to a town, then 80 per cent of it comes out as wastewater. At present, most towns do not have a proper sewerage network and even if 600 mld is captured, then 500 mld usable water is available, which is a very significant quantity. Swapping this 500 mld of treated wastewater for industrial use releases 500 mld of freshwater (currently used by industry and commercial establishments). This curtails the exploitation of freshwater for non-potable uses. Unless we start using this treated water for commercial and industrial use, we will not be able to sustain and secure freshwater for our future needs.

What are some of the key initiatives undertaken by your company in this regard?

Currently, Vishvaraj Infrastructure is developing a 200 mld wastewater treatment plant in Nagpur. It is a 100 per cent privately funded project. The project is being undertaken for the Nagpur Municipal Corporation (NMC) and involves the construction and operation and maintenance (O&M) of the plant for a 30-year period. The 200 mld water generated will be sold to thermal power plants nearby and their freshwater allocation will be used by the town for drinking purposes. The revenue from treated wastewater sale will ensure that the plant capex and opex for NMC is recovered, thus converting it into a profit centre from an  existing cost centre. The freshwater availability of 200 mld will be able to feed almost 1.5 million additional people.

The company has won a Swiss Challenge bid from the Rajasthan government for a 125 mld sewage treatment and reuse proposal for Jaipur. The project scope includes rehabilitating the existing 125 mld facility. Moreover, tertiary treatment will be added along with delivery pipelines to different industrial areas in the city. The treated wastewater will be sold to the Rajasthan government at pre-decided rates.

Besides, many other such projects are expected to come up in the future. A number of state governments have formulated policies restricting the use of freshwater by thermal power plants.

Is there a regulatory framework in place for wastewater recycle and reuse in India?

At present, we do not have any regulatory framework for recycle and reuse. However, the central government’s recent announcement about using treated wastewater for thermal power stations within a 50 km radius of the recycling facility is very encouraging. A few states such as Maharashtra and Rajasthan have come up with a policy in this regard which clearly encourages water reuse.

What are the key features of the 200 mld sewage treatment project in Nagpur, in terms of scope of work, project cost, treatment technology, type of public-private partnership format and concession period?

The scope of work of the project includes the augmentation of a 100 mld sewage treatment plant (STP) to 200 mld along with construction of pumping stations and laying of pipelines. It is being implemented on a design-build-finance-operate-transfer basis with 100 per cent investment from our subsidiary, Vishvaraj Environment Private Limited. As per the agreement between Vishvaraj and NMC, the former has the right to sell the secondary or tertiary treated wastewater to any non-potable user.

The total cost of the project for the first phase up to a secondary treatment level is estimated at Rs 2.62 billion. The recovery of the investment by the operator is by way of annuity payment by NMC post the construction period of two years. The annuity towards capital and O&M investment will be paid by NMC over a period of 30 years.

What is the current revenue sharing mechanism for the project?

There is an annuity support structure for the project. As mentioned earlier, Vishvaraj has the right to sell the treated wastewater to any non-potable user. As per the contract agreement, Vishvaraj and NMC will share the revenue from the sale of treated wastewater on the basis of a predetermined revenue sharing formula. NMC will recover its entire capex and O&M cost payout if the operator manages to sell 200 mld of the treated wastewater.

What are the key targets and timelines of the project? What has been the progress so far? How viable is the project in terms of cost, quality, sustainability, etc.?

The construction of the plant is advancing well. We are already ahead of the timeline stipulated by NMC. Though the construction period specified is two years, we will finish the construction in the next 15-18 months.

It is a viable and sustainable model. Annuity-based projects are relatively less risky and if the wastewater is sold, a share of revenue is also received. Besides, NMC has a good track record and credit rating so we are assured of the annuity payment.

Who are the key buyers of the treated wastewater? What is the cost/tariff per unit?

The treated wastewater will be used by the NTPC thermal power plant at Mauda, Nagpur. The secondary treated wastewater from the facility will be used directly for ash handling and cooling tower requirements. The tariff agreement is yet to be signed. The distance from the plant will decide the cost of the pipeline as well as the pumping cost and thus determine tariff per unit.

What are the key challenges in project implementation? What are the lessons that can be learnt? How can other cities replicate this model?

The delay in obtaining approval was the only hurdle we faced. The earlier government took almost one and a half years to clear the project. Owing to this delay, the cost of the project has escalated by around 10 per cent.

This model has the potential of being replicated in every city, as every city in India has similar problems such as untreated sewage, lack of capital to create treatment infrastructure, water shortage, need of water for industrial use, etc. This unique yet simple model can solve most of these issues and create water security for towns for decades to come.

What has been the progress on the Nagpur 24×7 water supply project? What has been the response from the citizens?

In the last three-four years, we have managed to achieve equitable water distribution. Over 500 km of water pipelines and 100,000 service connections have been replaced. Water quality has improved considerably because of the regular cleaning and monitoring of reservoirs.

The response of citizens has been quite encouraging. The volume of water billed has increased significantly. Vishvaraj has conducted a number of open forums and debates to spread awareness about the benefits of the project. We have conducted a “My City, My Water” campaign to educate school children about the benefits of clean water. This has had a far reaching impact as these students go home and educate their parents as well.

We have also selected Jal Mitras (who are basically respectable and prominent personalities) in every locality for creating social impact and facilitating communication between people and the private sector.

We also have a social welfare team to create awareness among people in the area before the work begins, during the work and after the work is completed. They interact with citizens on a daily basis through mohalla meetings and door-to-door campaigning.

What are the expectations from the government and urban local bodies (ULBs)?

Today, sewage is the last thing on any ULB’s list of priorities and is often neglected as ULBs do not have a taxation system which will give them funds to implement such programmes. The government should follow integrated urban water management which should have both drinking water and sewage treatment components, with an effort to reuse the treated wastewater for sustainable water management. These projects should automatically include sewerage networks and reuse facilities. ULBs should set up such projects and take the onus of communicating the benefits and hardships faced during project implementation to citizens.

What are the future plans of the company?

Vishvaraj is currently undertaking 24×7 water supply projects in five towns in Karnataka. These are by way of management contracts where funding is being provided by the state government and we have been given the responsibility to replace pipelines, construct reservoirs and other infrastructure facilities and undertake O&M for five-seven years. The company has also recently secured a 24×7 water supply project in the Pimpri Chinchwad Municipal Corporation. Besides, we shall be bidding for a couple of projects in Kolkata and Delhi.

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