Trends and Outlook

Increased private participation and technology penetration to drive growth

Rapid urbanisation has led to a massive rise in demand for services such as water supply and waste management. Improving quality of civic services has thus become a key focus area today for urban local bodies (ULBs). The current water demand-supply gap is large and freshwater resources are depleting rapidly. Thus, vast investments are required to address these needs.

The government, over the past few years, has stimulated the process of reviving the water supply and waste management segments through the launch of a number of centrally sponsored programmes. There has been a surge in activity in terms of the launch of big-ticket programmes and schemes, transformation of age-old technologies and an increase in project uptake.

Despite this, many issues remain unaddressed and some segments have seen little action. There still exist challenges of inadequate ULB capacity, low private interest and investment, irrational user charges, shortage of skilled manpower, time and cost overruns, and absence of stable revenue streams. Unless these are taken care of, progress in the water and waste sector will continue to be impeded.

A snapshot of the notable trends over the past year and the outlook for the water and waste sector…

Rapidly increasing urban population, dwindling freshwater resources, widening sewage generation and treatment gap, and huge waste generation

  • The demand for water from different consumer segments has been increasing steadily. With the fixed supply of water resources, demand will far exceed availability before 2050. Per capita water availability will continue to decline with the growing population, increasing demand and dwindling freshwater resources.
  • Wastewater generation too is increasing rapidly, and in the absence of adequate infrastructure for collection and treatment, the already depleting freshwater reserves are being polluted.
  • According to India Infrastructure Research, total water supply in Class I and Class II cities was estimated at 103,000 million litres per day (mld) in 2018, as compared to 62,300 mld in 2014, an increase of over 13 per cent. Increased water consumption has also led to an increase in sewage generation, which increased from 49,800 mld in 2014 to 82,400 mld in 2018. During the same period, sewage treatment capacity increased from 23,270 mld to 26,070 mld. The widening gap between sewage generation and treatment is indicative of the lower-than-required investment in treatment infrastructure.
  • With regard to solid waste, as per the Ministry of Housing and Urban Affairs’ latest estimates (2019), the country’s urban areas generate about 52.97 million tonnes of solid waste per annum. A little over 50 per cent of the total waste generated is scientifically processed. Waste management practices in most cities are characterised by the absence of door-to-door collection and segregation of waste, inadequate transportation infrastructure, unscientific disposal and inadequate treatment capacity.

However, over the course of the past few years, the sector has witnessed some important trends and developments. Decentralised or modular sewage treatment facilities are being set up. Recycling and reuse of wastewater is gaining acceptance. Advanced treatment technologies are being deployed. Highly sophisticated tools and equipment are being used for automation and control. Energy generation from sewage is receiving greater focus. ULB capability in segregating, recycling and reusing waste is being strengthened. The emphasis on scientific disposal has increased. ULBs are also recognising and practising 3R (reduce-reuse-recycle) or 4R (reduce-reuse-recycle-replace) concepts.

Significant support from the government for infrastructure creation and capacity building

  • In the past four-five years, the government has introduced a number of programmes and schemes to improve the country’s water supply and sewerage infrastructure. Schemes such as the Smart Cities Mission (SCM), the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), the Namami Gange programme and the Swachh Bharat Mission were launched to help scale up infrastructure capacities. An estimated investment requirement of over Rs 3 trillion has been envisaged for the four ongoing schemes for the next three to four years.
  • There have been visible improvements in waste supply and waste management at the city level, in terms of projects undertaken, capacity added and technology deployed and best practices adopted. There have also been some improvements in the financial and operational capabilities of ULBs.

Private sector needs to play a bigger role in infrastructure creation and technology adoption

  • Given the limited resources with government agencies, the private sector has an important role to play in the water supply and sewerage sector. Therefore, private sector participation is being encouraged in areas such as providing 24×7 water supply; setting up sewage treatment plants, waste-to-energy (WtE) plants and recycling facilities; and undertaking integrated solid waste management. In the past few years, a number of projects have been implemented on a public-private partnership (PPP) basis.
  •  Undoubtedly, the private sector has been successful in improving service delivery and reducing operations and maintenance (O&M) costs. ULBs are testing new business models to maintain the profitability and viability of water and waste projects. A new PPP format, the hybrid annuity model, which is a mix of the engineering, procurement and construction and build-operate-transfer models, is also being experimented with in the sewerage sector. ULBs are entering into long-term O&M contracts (15-20 years) for operating and maintaining water and wastewater treatment facilities. Also, private sector funding is being extensively used for financing WtE projects.

Making cities smart, deploying IT for better service delivery and customer satisfaction

  • The pace of technology adoption in the management of water supply and waste services has improved. ULBs are providing online civic services, and deploying advanced treatment technologies for water and waste treatment and automation and control tools for operating and monitoring treatment facilities.
  • Applications such as those for enterprise resource planning, smart metering, revenue management, customer relationship management, etc., are being deployed to automate business processes. Also, advanced solutions such as supervisory control and data acquisition systems, geographic information systems, satellite surveillance and remote sensors are being deployed for monitoring collection, distribution and treatment systems.
  • Bigger ULBs in Mumbai, Ahmedabad, Surat, Pune, Delhi, Bengaluru and Chennai have successfully automated their business processes and introduced online systems to improve customer experience. Tier II and Tier III cities too have started taking initiatives to reduce water losses.

Renewed focus on capacity building, recycling and reuse, rationalising user charges and NRW

  • The government is taking a number of steps to improve the operational and financial performance of ULBs. The government has been incentivising and encouraging local bodies to become self-sufficient and to mobilise resources through instruments such as municipal bonds. Six cities – Pune, Greater Hyderabad, Bhopal, Amaravati, Ahmedabad, and Indore – have issued municipal bonds to fund infrastructure development. Further, as part of the reform process under AMRUT and the SCM, a number of ULBs are shifting to computerised accounting systems and e-service delivery platforms.
  • Industries are also becoming receptive to the idea of deploying advanced technologies to treat effluents, as well as recycling and reusing them for industrial purposes and greenbelt development. Further, ULBs have begun to take steps towards improving their billing and collection processes. District metered areas are being established to manage water distribution networks. Pipeline repair/replacement works are being carried out to plug leakages and replace obsolete pipes. Besides, detailed mapping of assets and underground utilities, and the deployment of leakage control technologies are key steps being taken to contain losses resulting from increasing levels of non-revenue water (NRW).

Outlook and new opportunities: Strengthening capacity at the local level for project execution and O&M

  • Rapid urbanisation and steady economic growth are increasing the demand for water, thereby increasing the sewage generated. The demand for water in Class I and Class II cities is expected to increase to 182,725 mld by 2025. At this rate of growth, sewage generation is expected to increase to over 146,185 mld by 2025. Cities with a million-plus pouplation will account for the bulk of the water supply and hence sewage generation (estimated at over 50 per cent).
  •  Given the existing service backlog, delivering acceptable levels of service will require a multi-pronged effort. ULBs need to build financial and operational capacity. Strict regulations have to be introduced to restrict excessive groundwater extraction, and encourage recycling and reuse of wastewater and rainwater harvesting. The private sector must also play a part by investing in projects for bridging the gap between sewage generation and treatment capacity, encouraging judicious use of freshwater resources by adopting advanced technologies and processes, and creating profitable markets for wastewater by-products. An equally important role has to be played by the governments at the central and state levels. There is a need for formulating coherent policies that enable ULBs and encourage private sector partcipation (PSP). The government also needs to create a pool of bankable projects to be implemented on a PPP basis.
  • That said, the outlook for the water supply and waste sector is positive and offers significant opportunities for various industry stakeholders. The government’s strong commitment and support to the development of efficient water supply and waste management infrastructure is expected to attract greater PSP. Growing urbanisation and greater emphasis on achieving 100 per cent water supply and sewerage coverage will be the two biggest drivers in the sector.

Over the next three to five years, investment in the sector will be directed towards improving water use efficiency and encouraging waste recycling and reuse. The next big challenge for utilities will be to deploy more advanced technologies and systems for enhancing customer participation. They must communicate proactively with customers to serve them better, by developing multiple communication channels, through the internet, SMSs, mobile devices, etc. This will lay the foundation for future growth and improvement in service provisioning.

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