The city of Nagpur in Maharashtra has been witnessing rapid economic development due to its renewed role as the industrial and investment hub of the state. The city’s population and urbanisation level have also grown rapidly due to rising migrant inflows. As a result, resource availability, especially that of water, has come under increasing stress. One of the foremost concerns in Nagpur today is the unrestricted use of potable water for various non-potable purposes.
To combat these issues, wastewater reuse facilities are being developed in the city. At present, a wastewater treatment project, which involves the reuse of 200 million litres per day (mld) of treated sewage, is under execution in Nagpur. The project aims to supply the treated sewage to nearby thermal power plants (TPPs) for non-potable use. This would make additional potable water, previously used by the power plants, available for meeting the city’s drinking water requirements. It is estimated that this fresh water could serve at least an additional 1.5 million people.
Once completed, Nagpur’s experience is likely to provide valuable insights, lessons and best practices to other cities looking to explore the treated wastewater segment. Further, this would also help civic agencies meet the growing water requirements for domestic, industrial and commercial purposes.
Background and project scope
At present, the city of Nagpur generates about 525 million litres of sewage per day. In 2014, the Nagpur Municipal Corporation (NMC) awarded Vishvaraj Infrastructure Limited (VIL) the contract for expanding the capacity of the Bhandewadi sewage treatment plant (STP) from 100 mld to 200 mld. The project scope also involves the construction of two 75 mld pumping stations at Pioli and Pohra and the laying of a 17 km rising main pipeline for conveying sewage from the two pumping stations to the STP. Construction work on the plant began in November 2015.
The project is being implemented on a design-build-finance-operate-transfer basis. As per the concession agreement, the concession period of the project is 32 years, which comprises two years for construction and a 30-year period for operation and maintenance (O&M). During the initial two years of construction, VIL will also operate and maintain the existing 100 mld plant.
Further, O&M activities at the STP will be carried out through a supervisory control and data acquisition (SCADA) system. Along with chambers and treatment units, flow regulation and valves of the plant will also be controlled through SCADA. Therefore, the plant will require minimal manual intervention.
Use of treated sewage and other by products
As per the arrangement between VIL and NMC, the former has the right to sell the secondary or tertiary treated wastewater to any non-potable user. VIL is planning to sell the treated sewage from the STP to TPPs in the Nagpur area. These plants require low-end industrial standard water for ash handling and cooling towers. Treated sewage can thus act as a good substitute for freshwater for these requirements.
At present, VIL is in advanced stages of discussions with NTPC Limited for selling the majority of the treated sewage generated by the STP. The treated sewage will be used by NTPC’s TPP at Mouda in Nagpur. A tariff rate of about Rs 10 to Rs 25 per cubic metre of treated sewage is being considered by the two parties.
Further, VIL is also planning to reuse the biogas and sludge generated as by-products during the treatment process. The biogas can further be converted into compressed natural gas (CNG). In fact, VIL is in talks with Swedish company SCANIA AB, which is planning to use the CNG to ply green buses in Nagpur. Moreover, VIL is also exploring the possibility of generating power from the biogas, which will be used for operating the sewage treatment facility. There are also plans to sell the sludge generated by the STP as a bio-fertiliser. These initiatives will require a huge upfront investment for the setting up of a biogas purification or methanation plant and a captive power plant, and for the procurement of high pressure gas storage cylinders.
Project finance and revenues
The total capital investment required for undertaking various construction works is estimated at Rs 2.62 billion. As per the public-private partnership arrangement, 100 per cent of the capital investment will be provided by the private operator, VIL.
The key sources of revenue for the private operator will be annuity payments made by NMC and revenues from the sale of treated wastewater, biogas and sludge. Post the two-year construction period, VIL will receive annuity payments from NMC. This fixed annuity will be paid over a span of 30 years and will cover both the capital and O&M expenses incurred by the developer.
Revenues generated from the sale of treated sewage will be shared with NMC in the form of a royalty payment. The royalty will be calculated based on a predecided revenue-sharing formula. Therefore, not only will the sale of treated sewage bring in revenues for the private concessionaire, but the royalty will also allow NMC to recover the cost it will incur towards making annuity payments. However, the additional investment required to treat the sewage and supply it to the identified buyer will have to be mobilised by the operator.
According to a cost-benefit analysis undertaken by VIL, if it is able to sell 100 mld of the treated sewage, the revenue shared with NMC will allow the civic agency to recover its entire annuity costs towards the plant’s O&M activities. With the sale of 200 mld of treated sewage, NMC will recover not only the O&M annuity, but also the capital annuity payments made to VIL.
Progress so far
In terms of physical progress, almost 42 per cent of the project work stands completed as of September 2016. Civil work on the STP is 90 per cent complete and purchase orders for about 70 per cent of the electromechanical works have been placed. Further, approximately 28 per cent of the pipeline laying work has been completed. The entire project is expected to be commissioned by October 2017.
The recent growth in the number of projects in the recycle-reuse segment indicates that the central government is focused on improving services in the sewerage sector. Nagpur is one of the few cities in the country that is undertaking initiatives to reuse its wastewater. NMC’s strong commitment to and support of the development of reuse facilities has been key to attracting private investment in the sector.
Today, most cities face similar issues of untreated sewage and the unrestricted use of potable water by industries. However, the funds required to set up such treatment facilities have to be mobilised through private sources, given the poor financial health of urban local bodies (ULBs). In this backdrop, the Nagpur STP model can be easily replicated by other ULBs in the country. A similar model can be adopted to meet the twin goals of ensuring sustainable water supply to industrial and domestic consumers as well as conserving surface waterbodies.