Trends and Outlook

Expansion of water supply and metro rail systems accorded high priority

Urbanisation is taking place at a rapid pace in India. During the 2001-11 dec-ade, urban population increased by about 32 per cent, whereas the country’s total population recorded an increase of about 18 per cent. With migration into cities from rural and semi-rural areas and the continuing expansion of city limits, the challenge of delivering basic services in Indian cities is growing.

The provision of basic services  has not kept pace with urbanisation and cities are visibly deficient in the quality of services rendered to existing populations. The coverage of water supply and sanitation networks continues to remain low, with widespread regional disparities. The water supply and sewerage infrastructure in most cities is characterised by obsolete and faulty pipeline networks, high non-revenue water supply, insufficient treatment capacity, etc. Further, most cities in the country do not have even a basic public transport system. The existing transport services like buses and metro rail are not only overcrowded and inconvenient, but have limited coverage.

The situation is slowly changing with renewed interest from the government and the private sector. The government has announced ambitious programmes to make the sector more attractive to the private sector for investment and participation in the creation of new infrastructure. There have been some notable developments in terms of infrastructure creation, approval of new projects, uptake of new initiatives to deploy advanced IT solutions, etc.

Indian Infrastructure presents a snapshot of the recent trends and sector outlook…

Key trends

  • Rising urban populations have increased the demand for water and sewage management. According to the Central Pollution Control Board, total water supply in Class I (population of 100,000 and above) and Class II (population between 50,000 and 100,000) cities was estimated at 77,200 million litres per day (mld) in 2015. Increasing populations have also led to an increase in sewage generation. Municipal sewage generation was estimated at 61,755 mld in 2015. Treatment capacity has not kept pace with increasing generation and India has the capacity to treat only about 37 per cent (22,963 mld) of the total sewage generated.
  • Infrastructure facilities, though improving, are significantly below acceptable standards. With respect to water supply, the coverage of urban households with piped networks stands at 70 per cent (2011 census). However, there exists significant variation in the proportion of households with access to piped drinking water services in urban areas. The national average for water supply connections is 52 per cent. Likewise, for sewerage, the total network coverage stands at 12 per cent and there is a near absence of sewage treatment facilities.
  • However, recently there have been some visible improvements in terms of both infrastructure creation and service delivery in the water supply and sanitation segments. Over 1,355 mld of additional treatment capacity has been created in the past year under various projects and schemes – 945 mld for water treatment and 410 mld for sewage treatment. Besides, projects involving a combined treatment capacity of 2,200 mld have been approved. About 85 per cent of this capacity will be for sewage treatment.
  • The sector is also receiving increased interest from the government. The central government has earmarked fresh allocations for the three ambitious programmes – the Swachh Bharat Mission (SBM), Smart Cities Mission and Atal Mission for Rejuvenation and Urban Transformation (AMRUT) – with the objective of expanding water supply and sewerage networks in urban areas.  Under the AMRUT scheme, the central government has sanctioned about Rs 44 billion during the two-year period 2015-17 (till June 2016). A total of 33 cities have been shortlisted for development under the Smart Cities Mission and have an investment requirement of Rs 807.89 billion. Further, the SBM, which was launched in October 2014, made some headway. During October 2014-June 2016, close to 50 per cent of the targets set for the five-year period October 2014-October 2019 for individual and community toilet construction have already been met.
  •  The concept of 24×7 water supply has also garnered significant interest in the country. In the past, successful pilots have been implemented in Nagpur, Delhi, Malkapur, Amravati, Hubli-Dharwad, Belgaum and Gulbarga. These projects have provided important lessons with respect to the operation and management of existing infrastructure, use of IT in improving service delivery, expanding the customer base and improving revenue collection. Based on the success of the city-wide 24×7 water supply project in Nagpur, several cities in Karnataka and Himachal Pradesh are planning to take up similar projects.
  • While there has been considerable activity in the water supply and sanitation segments, progress in the two principal modes of urban transportation in India – bus- and rail-based systems  – has been lacking. Despite several initiatives, including improving city bus services, procuring modern buses, using the latest technology for fare collection and promoting integrated transport, the urban bus segment has very few successful projects to showcase. After missing several deadlines, the Amritsar and Pune bus rapid transit (BRT) projects were operationalised in early 2016. Other BRT projects have not made much headway.
  • On the other hand, the urban rail-based segment saw a number of significant developments in the past year or so. At present, metro projects are operational in Delhi, Bengaluru, Kolkata, Gurgaon, Jaipur, Chennai and Mumbai. During the year, metro rail systems in Delhi and Bengaluru operationalised new stretches. Besides, at least 590 km of network length received either central or state approval.
  • With regard to private sector participation (PSP), there have not been many positive developments. Though the scope of PSP has expanded and evolved over the years, there has been rising resistance from the private sector to invest in urban infrastructure projects, particularly due to lack of stable revenue streams and payment guarantees. In the water supply segment, several attempts have been made to leverage the technical expertise of the private sector through public-private partnership (PPP) projects. The experience of the private sector has been a mixed one with both failures and successes. Some of the successful PPP projects such as the Nagpur 24×7 water supply project and the development and management of water supply and sewerage systems at Sector V, Salt Lake City, have provided key lessons to draw from. On the other hand, in the urban transport segment, private participation has been limited due to high construction costs and long gestation and payback periods.
  • The customer base of urban local bodies (ULBs) is expanding at a rapid pace. The government, particularly at the local level, is undertaking several initiatives to improve customer satisfaction. At the national level, initiatives like the MyGov online platform and Digital India have driven water utilities to adopt and employ advanced technology solutions. Most utilities have either implemented or are considering implementing applications such as customer relationship management, geographic information system, automated meter reading, supervisory control and data acquisition, etc.

Sector outlook

  • Growth in the urban population is expected to continue, and its share is set to increase to over 40 per cent of the total population by 2031 (600 million). India Infrastructure Research estimates that the water demand is expected to increase to 84,920 mld by 2017-18 and sewage generation to 67,930 mld. Similarly, higher urban populations will require an increase in the availability and efficiency of public transport systems.
  • Given the current urban infrastructure backlog, the investment requirements for the sector are huge. As per the High Powered Expert Committee Report on Urban Infrastructure and Services, at 2009-10 prices, long-term investment requirements (till 2031) for the sector are estimated at about Rs 25 trillion. The bulk of these investments are expected to come in the form of budgetary and plan allocations of the central and state governments through various programmes and schemes. Multilateral agencies will also play a crucial role in funding urban infrastructure projects.
  • Union Budget 2016-17 raised the central plan outlay for the Ministry of Urban Development to Rs 166.05 billion (budget estimates) as against Rs 131.95 billion (revised estimates) in 2015-16. Of the total, the share of gross budgetary support will be Rs 140.38 billion (85 per cent) and internal and external budgetary resources will stand at Rs 25.66 billion (15 per cent).
  • The budget also made specific allocations for the Smart Cities Mission, SBM and AMRUT. For the SBM, Rs 90 billion has been allocated, while about Rs 72.96 billion has been set aside for AMRUT and the Smart Cities Mission. Meanwhile, a major programme for the sustainable management of ground-water resources has been launched with an estimated investment of Rs 60 billion.
  • Net, net, the urban infrastructure sector has a positive outlook and offers huge opportunities for all stakeholders. A number of new water supply and sanitation projects are expected to be approved in the next one-two years under the three centrally sponsored programmes. Further, metro construction activities will be undertaken in a big way across the country. The government will continue to play a key role in driving sector growth by way of approving new programmes and schemes. The success of these projects, however, will depend on project structuring, political support, updated database of current infrastructure facilities, tariffs and revenue streams and the financial health of ULBs. Unless these are taken care of, progress in the urban infrastructure sector will continue to be hindered.

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