PPP in Water Sector : Nagpur E Experience i

YEAR 2012

Water sector Challenges

Availability of adequate quantum of water and at economical cost to meet future f demand. Water Losses and UFW Equitable distribution (Alternate day / 20 hrs/day) Accountability (inefficient system) y ) Water to Slums ( Water network coverage and inadequacy of network Water supply management during summer peak demand Old and inefficient assets Delay in capacity augmentation to meet the demand from Limited water sources. Capital availability Low L water t tariff t iff and d Poor P billing billi mechanism. h i Lack of professional approach.

24/7
YEAR 2007

Intermittent Supply

Aseem Gupta IAS, Commissioner, Nagpur

NAGPUR WATER SUPPLY

Year Populati on Water Supply i mld in ld 16.50 45.00 80.00 125.00 lpcd ate Rate 114 149 124 103 Sources

Vicious circle and strategy gy

Inadequate maintenance of existing assets Lack of operational expertise High UFW Strain on Water R Resources Tariffs not rational Unsatisfied demand Poor cost recovery AUGMENTATION
Strain on water resources Additional capital expenditure

1921 1941 1961 1981

145000 302000 644000 1217000

Ambaz ari + Gorewada Ambazari + Gorewada + Kanhan Ambasari + Gorewada + 1st Aug. Kanhan Ambaz ari (discarded ), Gorewada + 3 Times Aug. to Kanhan Gorewada + Kanhan + Pench -I + Pench -II Gorewada + Kanhan + Pench -I + Pench -II + P Pench h -III III

STRATEGY
REINFORCING THE WATER SUPPLY CYCLE THROUGH EFFECTIVE REFORMS IN WATER SECTOR WITH PPP

2001 2004

2150000 2350000

370 00 370.00 470.00

172 200

If Singapore supply 24x7 water supply at 165 lpcd why N Nagpur struggled l d to supply l daily d il 2 hrs h water supply l in i all ll areas

MISMATCH BETWEEN INCREASING NEEDS & DECREASING RESOURCES BWSSB-NOV '96

FUNDING BURDEN ON STATE

FUNDING CONSTRAINTS THROUGH COMMERCIAL SOURCES

Private Participation in Water Sector :Exist in NMC

All new assets created since 1999 is managed though service contract. Existing assets also managed thru service contract for Pumping station/ WTP O&M / Valve operations/ Billing distribution/ Annual maintenance contract for Zonal level Disadvantages
It is only a labor contract replacing retired employees. No link with performance No accountability towards consumer Short term Contracts break up in small parts with no feasibility for private investment

Public Private Partnership in Water Sector

Project Finalized Under JnNurm
Pench-I WTP Improvement & Up gradation (Rs 6.42 Crore)
70% grant in aid, 30% by private operator 5 Years O & M by operator

Water reuse For Power Plant (Rs 130 Crore)

70% grant in aid, 30% by Mahagenco 30% O & M by Mahagenco & pay to NMC the raw sewage charges @ Rs3.0 3.50 per 1000 Ltr for 110 MLD. Annual revenue to NMC Rs 15 crore from sewage

24/7 24/ W Water Supply S l (R (Rs 20 C Crore) )

5 years O & M with performance based targets to reduce UFW and improvement in service level to customers in a pilot zone of 1.25 lakhs population.

Advantage :
Reduced number of NMC employees p y as of now 80% % of assets managed g by y private contractors Short term annual contract can be replaced by better contract Non performing contactor can be replaced by better one Reduced R d d O & M cost t Over the period of time capacity building of local contactors in O & M Prepared the ground for larger involvement of Private participation without affecting g the NMC employees. p y Hence, , less resistance for PPP.

Improvement to Kanhan Water Supply (Rs 65 Crore)

70% grant in aid, 30% by private operator 15 Years O & M by operator

Upcoming p g Projects j for Private Participation p

Water production and distribution management of Nagpur City as a whole.
2.5 million population, 585 mld of water supply, 2.0 lakhs connection

Water reuse for 200 mld of raw sewage for power, industrial and other non potable uses.

NMC approach for Private Participation

P f Performance based b d long l t term contract t t Private Participation in capital cost from Operator Technology gy by y operator p for lower life cycle y cost New assets to generate income rather than increase financial burden on NMC or at least reduce financial burden on NMC Better service to consumer and urban poor Asset ownership with NMC JNNURM funding for better viability of project and reduced cost of capital. it l No NMC employee for operating the New assets for Augmentation to water supply projects

Kanhan WTP Up gradation :PPP model

WTP
Existing Plant capacity : 120 mld Age : 70 years

Objective
Upgrade to 240 mld Rehabilitation /Replacement of equipments Improvement of energy efficiency (Saving of 20% in energy cost) Reduction in water losses and operating cost per mld

Model for private participation

70% grant from JNNURM Balance from Operators investment Technology for up gradation by operator Plant O & M for minimum 15 y years for repayment p y of operators p investment. Monthly payment (Fixed Charges + variable charges) +/- Performance linked Bonus/Penalty Reduction in water cost/mld to NMC by 10% with commitment for 15 years.

Bid : Model for Kanhan WTP

Li Limited it d private i t players l willing illi t to i invest ti in th the water sector Many M EPC contractor t t available il bl PPP Objective :Better quality ,reliability and economical i l supply l of f water t Bid Option : EPC or Equity (NMC share) Bid evaluation
Capital Cost + PV for O & M cost for 10 years+ PV for energy cost t for f 10 years+ PV for f capital it l cost t recovery against capital investment by private operator
9 Discount rate for O&M and energy : 7% 9 Discount rate for capital cost recovery : 14%

Bid : M Model d lf for K Kanhan h WTP

Guaranteed Saving in water cost/cum by 7% for 15 years. y Performance guarantee for water quality, quantity and energy consumption consumption. Repayment for capital participation in 15 years. Water augmentation by 120 mld without any burden of capital cost on NMC.

Bid : Model for Kanhan WTP

Five bidder shown interest : Jindal Water with GDC, Dagramont, Veolia, Driplex & Pratibha Three Bids received from Jindal, Dagramont & Veolia Dagramont and Veolia were qualified in Technical Proposal Dagramont Opted for EPC and Veolia for Equity Participation. Participation Evaluated bid of Veolia was lowest.

24x7 Pilot Project j : PAYMENT AND

PERFORMANCE
Payment P t terms t are as follows f ll
Technical Services (lump sum) 50% fi fixed di in equal li installment t ll ti in 74 months. th 50 % based on milestone achievement. Rehabilitation Work (As per measurement) As per measurement of actual quantity executed. Bonus / Penalty ( % over & above lump sum) Increase in billed quantum Reduction in UFW Reduction in consumer complaint Cost benefit target g

24x7 Pilot Project : Objectives

Pench-I WTP Up gradation :PPP model

WTP
rated capacity : 113 mld Actual Operating capacity before rehabilitation : 90 mld Age : 25 years

UN-INTERRUPTED WATER SUPPLY at desired pressure. pressure 100 % Meterisation including NMC properties. Optimise the UFW (Real + Apparent Losses) < 15% Efficient billing mechanism. pp y to meet the water demand of Urban Sufficient supply poor (Slums). Reduction in consumer complaint and redresser within 48 h hrs. Improved Satisfaction for stakeholders. Implementation of successful experience in other parts of the city.

Objective
Upgrade to 136 mld Rehabilitation /Replacement of equipments for additional 10 years of service Improvement of energy efficiency (Saving of 30% in energy cost)

Model for private participation

70% grant from JNNURM Balance from Operators investment Technology for upgradation by operator Plant O & M for minimum 5 years for repayment of operators investment. Monthly payment (Fixed Charges + variable charges) +/- Performance linked Bonus/Penalty

North Zone STP : PPP Model

Existing E i ti Central C t l Zone Z STP
100 mld operates at 70 mld NMC repay the loan on capital cost taken for construction construction. NMC to spend 4 5 crore/ annum for O & M

Water Tariff for Conservation and Sustainability

Water Tariff for full cost recovery for sustainable water business. business Average Tariff increase from Rs 7/Cum to Rs 14/Cum Subsidized Tariff to Urban poor and low domestic consumption 55 lpcd (appx 8 units/family/month @ Rs 7/unit) Tariff at cost for domestic consumption up to 135 lpcd (appx.20 units/family/month @ Rs 10 / unit) Premium Tariff for domestic consumption beyond 135 lpcd and non domestic usage.(@ Rs 15 to 30 per unit and beyond for commercial usage) Indexation with raw water and energy charges. charges It enable to pass additional cost (70% of operating expenses) directly to consumer as surcharge. per y year. Powers to Commissioner to increase base rate 5% p Tariffs are sufficient to replace the old assets and repay the loan for Jnnurm Projects g will be better with operational p efficiency y and reduction in Earning Non Revenue Water.

Proposed p PPP Model for North Zone STP

70% grant from JNNURM Balance investment from Mahagenco (Power generation company) ) Plant will be operated by Mahagenco for 30 years. Mahagenco will pay 15 Crore /year for 30 year to NMC for raw sewage of 110 mld Mahagenco will use treated sewage for power plant (2 800 MW) (2x800 Agreement between NMC and Mahagenco is finalised.

Proposed NMC approach for Private Participation for entire cit city
Rationalization of Tariff for full cost recovery and subsidy to urban poor. g and sense of ownership p for PPP Political willingness proposal Performance based contract for 25 years. Private Participation in capital cost from Operator Better service to consumer and emphasis on urban poor sse ownership o e s p with NMC C Asset JNNURM funding for better viability of project and reduced cost of capital. All operational ti l risk i k with ith O Operator t Inbuilt incentive for performance

Proposed Institutional Setup

Direct management by NMC Through granting ti a Concessive C i S Service i O&M Contract to a private Operator SPV limited to Raw water operation during repayment of ADB loan

NMC managing the whole development process

NMC
Exclusiv ve right of use N NMC assets Raw Water Supply Agreement

Type of Contract with private Operator

xRehabilitate-Finance-Operate-Maintain Contract of NMCs Water treatment and distribution pipe works. xNMC to retain ownership of fixed assets xNMC granting exclusive operational responsibility for public assets maintenance and service delivery to private SPC. xNMC represented by the Commissioner. Under the provisions of the NMC Act, xNMC to grant the exclusive rights and obligations of distributing potable water to eligible customers within NMC territorial jurisdiction through municipal water supply facilities. xSPC to provide for delivering piped drinking water supply services to eligible customers in NMC service area according to applicable regulation and in compliance with specific service levels targets, over a determined period. xThe SPC to operate, maintain, repair, refurbish, and decommission and/or replace worned-out granted facilities at its own risks and peril. xPrivate operator to implement and co-finance first 5-year 350 crores Rs investment programme while JNNURM provides for 70% funding with grants (Up to 245 crores) x25 years. years xExtension possible according to the provisions of the PPP Agreement, subject to approval from General Body.

ADB/FI/Other Bulk Agreement funding Water SPV

Borrowing

Contracting Authority Scope of Contract

Excedent of Op peration

Lease/O&M Agreement

Private Operator
Duration and possible extension

Flow of Funds For O & M and Repayment of Loans

Repayment

Service Area

Bulk Water SPV

ADB/FI/ Other

Loan

x NMC limits: SPC is required to connect any new customer within an agreed period of time, whenever the connection plot is located within a Service Perimeter which is defined in reference to a distance from granted distribution pipe works. xSPC may be requested to sell bulk water to townships beyond NMC limits: On NMC request and for a special rate of service (bulk to communal meter outside the Service Area) xThe SPC is granted the excusive right of using identified municipal assets and to provide water supply services within the boundaries of NMC administrative limits. xSPC must comply with all Indian laws, regulations, orders d and d directives di ti th t may affect that ff t the th realization li ti of f Granted Services. x Penalties to be applied to the operator in the event of breach of its obligations. x Performance bond in favour of NMC to cover the performance failures with respect to the operator obligations x Power of attorney to be given to SPC to act against illegal connections and disconnect bad payers.

Other Revenues

NMC

Escrow

Exclusivity

Governing Law
Fees

Operator

Escrow

Mechanisms for enforcement

Tariff collection by Operator

Service

Consumer

Resolving disputes

x Procedures & time table shall be strictly regulated under applicable Indian Law by the lease agreement. x To Establish mechanisms of arbitration. xCourt of Law will be next step (Mumbai) x3-slab O&M fee would be applicable according to service level oStandard service level to metered connections meeting Contract service performance targets oSocial service level to connections in slum areas for delivery of 70 lpcd for a fixed monthly rate oBulk B lk supply l t to t townships hi outside t id th the b boundary d of f NMC. xSpecial arrangement to be set up during transition period until Full JNNURM investment programmes are completed: oservice performance targets would not be required in specific zones oPurchase agreement to be established between the operator and NMC for the supply of treated water t from f active ti DBFO projects j t at t a preferential f ti l price. Full O&M cost recovery targeted by 2014.

Remuneration of the SPC

RW Asset SPV

NMC

Asset SPV

S ppl sec Supply secured red through 7-day raw water storage facility

Transition Period

PPP Transaction Structure

Private Operator

Water Sector SPV for NMC

NMC retains Sector Management powers Asset SPV created on a permanent basis to develop and provide municipal water infrastructure required for the Services Private operator is appointed on a long term basis to use the infrastructure provided by the SPV to deliver water services under a full-city 25-year O&M Concessive Contract T Temporary SPV created d to absorb b b ADB L Loan

THANK YOU