Rising urbanisation, increasing investments and the growing adoption of advanced project delivery models are driving the growth of the water sector. As projects become larger and more operationally intensive, the sector is witnessing a parallel evolution in contracting structures, risk allocation mechanisms and long-term performance accountability. Detailed project reports (DPRs) continue to form the foundation for project planning and execution. Meanwhile, the implementation experience across major programmes has highlighted the need for greater flexibility, stronger institutional coordination and more balanced contractual frameworks. Along these lines, the growing integration of financing, construction and long-term operations and maintenance (O&M) is changing the approach to project execution and financial sustainability. At a recent India Infrastructure conference, industry leaders discussed strategies to address challenges across different contracting stages through evolving contracting structures, hybrid annuity models (HAMs), cost considerations, funding mechanisms, scope and risk allocation, among other aspects. Key takeaways from the discussion…
Design and execution stages
DPR preparation forms part of a broader contractual and tendering framework, with reports prepared for specific delivery models such as engineering, procurement and construction (EPC), design, build and operate or HAM models. DPRs are developed based on the defined scope of work, investigations and project objectives at that stage. Once completed, the project proceeds to tendering, often under internationally accepted contractual frameworks such as International Federation of Consulting Engineers (FIDIC). Under the framework, bidders are provided adequate time to review documents, conduct their own assessments and raise technical or contractual queries before bid submission.
DPRs continue to serve as the primary baseline for pricing, design and project execution. However, given the scale and complexity of many projects, DPR-level assessments may not always capture all operational and site-specific conditions in complete detail. While contractors typically undertake additional investigations and incorporate associated risks during the bidding stage, challenges can still emerge during execution over contractual interpretation, risk allocation and accountability. Such issues often contribute to delays, disputes and prolonged arbitration processes. Clarity in risk-sharing is therefore, essential for reducing disputes and improving project execution in the sector.
Transforming contracting structures
Contracting structures in India’s water sector are steadily evolving in line with changing project delivery models, financing mechanisms and long-term operational requirements. While existing frameworks provide mechanisms for managing scope variations and claims, there is growing emphasis on creating more balanced structures particularly under HAM and other public-private partnership (PPP) models.
Further, internationally funded water projects increasingly combine construction with long-term O&M responsibilities. While financing for the construction phase is generally well established, ensuring long-term O&M payment security remains a key challenge, particularly in urban water projects with low user tariffs and limited municipal revenues. Consequently, HAM and other projects under PPP models often require developers to manage long-term financial and operational commitments over extended concession periods. Besides, project experience across several cities has highlighted the importance of close coordination between state governments, urban authorities and implementing agencies to support timely payments and long-term operational sustainability. Stronger payment security mechanisms, clearer contractual safeguards and stable policy support are increasingly seen as essential for sustaining investor confidence and improving project viability.
Evolving HAM models
HAM is increasingly emerging as an important framework for attracting investment and strengthening long-term operational accountability in India’s water sector. At the same time, HAM and other PPP-based projects introduce greater financial sensitivity to execution delays, as developers must manage construction schedules, debt obligations and long-term operational responsibilities. Delays related to land acquisition, statutory clearances or approvals can significantly increase financial pressure due to the continuing cost of capital and extended project timelines.
In response, project developers have adopted more proactive coordination mechanisms to support smoother execution. Large wastewater projects have seen dedicated teams working closely on land-related processes, statutory approvals and right-of-way clearances, particularly for extensive pipeline networks requiring coordination across multiple jurisdictions and local authorities. Moreover, close engagement with implementing agencies has become key for reducing procedural delays and maintaining the project progress.
Several projects are also demonstrating evolving wastewater reuse and revenue-generation models, where treated wastewater from tertiary treatment facilities is supplied for industrial applications.
Cost and tendering aspects
Contractual and commercial complexities continue to influence project execution across India’s water sector. Industry experience indicates that existing procurement structures, risk allocation mechanisms and implementation timelines often create operational and financial challenges for project developers and contractors.
Tender pricing in many projects is typically linked to estimates prepared through DPR, requiring bidders to align proposals within predefined cost structures. This is likely to create constraints where additional technical assessments indicate the need for higher design provisions, operational safeguards or contingency measures. As a result, project developers often face the challenge of balancing technical requirements with commercial competitiveness and bid eligibility.
To address these issues, industry participants have emphasised the need for more balanced contract structures, clearer risk allocation and wider adoption of standardised contractual frameworks. Internationally funded projects supported by organisations such as the World Bank, the Asian Development Bank and the Japan International Cooperation Agency are often viewed as following more standardised contracting approaches aligned with internationally accepted frameworks such as FIDIC. Greater consistency in such practices is expected to improve transparency, reduce disputes and support more efficient project execution across the sector.
Underlying challenges
The sector is gradually evolving towards more adaptive and performance-oriented project execution models. However, contractors continue to encounter challenges in accurately assessing the variability of influent characteristics in sewage treatment projects. In many cases, actual wastewater quality and load conditions during operations differ from projected parameters, especially where industrial effluents mix with the municipal sewage. This has increased the need for greater operational flexibility and design adaptability in treatment systems.
Additionally, implementation experiences across EPC, HAM and PPP projects have also highlighted the importance of collaborative approaches in addressing operational deviations and discharge compliance requirements. In line with this, authorities are increasingly adopting more responsive mechanisms across several water related programmes. These are likely to support smoother execution when actual site conditions differ from initial assumptions.
Meanwhile, the sector is witnessing growing recognition of the need for greater standardisation in tendering practices, qualification criteria and contractual structures across states and implementing agencies. Technology-neutral and performance-based approaches are increasingly gaining traction as key for improving competition, efficiency and long-term project outcomes.
Besides, funding structures, project scope and risk allocation are emerging as critical considerations in the implementation of HAM and other PPP-based water projects in India. Timely clearances, balanced contractual frameworks and institutional coordination are being viewed as essential for ensuring financial viability and attracting long-term private investment. This is aligning to the point that unlike in conventional EPC contracts, delays in HAM projects can have far greater financial implications, as project developers must continue servicing debt during the construction period. Meanwhile, the sector is gradually shifting towards greater innovation and lifecycle-focused planning. Although procurement systems have traditionally remained highly cost driven, there is an increasing emphasis on improving the long-term operational efficiency, sustainability and value creation.
Paving the way ahead
Going forward, the continued expansion of India’s water sector will depend on stronger institutional coordination, balanced project structuring and more responsive implementation frameworks. Large-scale programmes such as the Atal Mission for Rejuvenation and Urban Transformation, Swachh Bharat Mission and Jal Jeevan Mission have significantly expanded investments and accelerated project development across the country’s water and wastewater sector. Alongside, the water project implementation experience has highlighted the need for stronger institutional capacity, more balanced project planning and greater standardisation in contractual and approval frameworks. In large design-build projects, especially water or wastewater treatment facilities and distribution networks, DPR preparation and timely approvals remain critical to execution progress.
The sector is nevertheless gradually evolving towards more responsive and solution-oriented implementation approaches, particularly in programmes focused on wastewater management and river rejuvenation. Besides, growing activity in seawater desalination, brackish water desalination, wastewater recycling and reuse is reflecting the gradual strengthening of technical capabilities and water market maturity across the sector.
