Sumouleendra Ghosh, Partner and Global Infrastructure Water Sector Lead, KPMG in India, with inputs from Sharmi Palit, Consultant, KPMG in India
Earlier this year, India, with an estimated population of 1.42 billion, surpassed China to become the most populated country in the world (Press Release, UN DESA, April 24, 2023). The staggering number has several implications for the country’s socio-economic development, one of which pertains to the availability of water for varied purposes. This is hardly surprising, given the looming water crisis that threatens to transform into a major hurdle in the nation’s path to success. India is one of the most water-stressed countries in the world – with only 4 per cent of the world’s water resources serving 18 per cent of the global population (India Brief, World Bank, February 14, 2023). Other factors contributing to the water woes include indiscriminate withdrawal and contamination of groundwater, the absence of integrated water resource management, a lack of incentives for optimising wastewater reuse, the inability to impose even a basic tariff on the majority of users, and inadequate capacities to treat and reuse wastewater. In the past few years, the water sector has witnessed a gradual change, taking centre stage in government priorities and focus areas. Several new programmes have been launched including the Jal Jeevan Mission, the Swachh Bharat Mission (SBM), the AMRUT, the Atal Bhujal Yojana and the Namami Gange Mission, among others. This has been complemented by focused budgetary allocations, particularly for the creation of sewage and sanitation-related infrastructure. Within the water sector, wastewater has emerged as one of the burning issues. Broadly, wastewater can be classified into three categories based on the source of generation – domestic, industrial and agricultural runoff.
In 2021, the CPCB reported a 50 per cent increase in treatment capacity in the country from the 2014 level. Despite this achievement, the stark reality of the wastewater landscape indicates that in urban areas, where sewage generation reaches 72,368 mld, there is an installed treatment capacity of 31,841 mld and an operational capacity of 26,869 mld. Of this, only 12,200 mld of treatment capacity complies with the prescribed norms of the State Pollution Control Boards and Pollution Control Committees (National Inventory of STPs, CPCB, 2021). The widening gap further increases the water stress, with cities struggling to access adequate quantities of water to fulfil their various needs. This also contributes to a major pollution hazard with a significant portion of untreated wastewater being discharged into the environment, particularly open land and water bodies, as well as aquifers through natural recharge (National Inventory of STPs, CPCB, 2021). Urban wastewater management in India is plagued by a lack of adequate capacity of STPs and poor capacity utilisation of existing STPs. The major underlying factors that resulted in this situation include the insufficient financial and institutional capacity of ULBs, the lack of appropriate regulatory measures and the absence of economic water pricing
In recent years, a strong push from the centre, coupled with complementary efforts from the state, district and city-level authorities, has led to focused efforts towards water management. Consequently, the concept of integrated water management and circular economy has received policy impetus. In 2022, a National Framework for Safe Reuse of Treated Wastewater (NMCG, 2022) was released with the vision to promote the widespread and safe reuse of treated used water in India. This will reduce the pressure on scarce freshwater resources, environmental pollution and public health risks. The adoption of a sustainable circular economy approach will provide socio-economic benefits. With a guideline for the formulation of state reuse policies, the framework promotes the development of appropriate market and economic models for the reuse of treated wastewater. Another major development in the sector is the enforcement of stringent regulations by regulators such as the CPCB and the NGT. The NGT Order of 2019 introduced more stringent norms for wastewater discharge, putting significant pressure on cities to adopt immediate measures to improve wastewater management. However, insufficient capacities and resources pose major obstacles in ensuring a timely response to the regulatory measures. The wide gap in wastewater infrastructure, as well as the non-compliance with prescribed norms in the existing facilities, warrants increased investment, which further complicates the problem. Nevertheless, the government has taken several initiatives to improve the situation. Under Namami Gange, several STPs are currently under construction, alongside interception and diversion networks, in several cities on the banks of the Ganga river and its tributaries. With the introduction of the hybrid annuity model-based public-private partnership (HAM PPP) model and one city one operator model, Namami Gange has created significant impact on the wastewater sector and received a significant interest from private sector investors, technology providers and infrastructure developers. The key features of the measures adopted by Namami Gange include the following:
- An innovative HAM PPP model with a long contract tenure (construction period plus 15 years of O&M)
- One City One Operator model wherein one private sector player takes over existing STPs and retrofits them while constructing new STPs
- Performance-linked payment, with the capex paid over 15 years along with O&M payment subject to adherence to performance standards
- Selection based on life cycle cost and not purely on asset acquisition cost
- Encouraging involvement of private sector- developers, EPC players and financiers, and creating a conducive environment for all stakeholders
- Allowing private sector innovation through a technology-neutral, output-linked bid structure
- Transparent bid process through reputed transaction advisors-resulting in good participation and competitive price discovery
- Central-state partnership throughout project lifecycle, including project planning, project structuring, transaction and bid process and implementation
- High degree of payment securitisation through the central government in terms of advance deposit of two construction milestones during construction phase and two years of capex annuities, O&M payments and power charges during implementation phase
Apart from Namami Gange, concerted efforts are being made under other schemes. One of the key components under AMRUT 2.0 has been the enhancement of sewage infrastructure in cities. As of March 2023, 3.34 million new sewer connections and 2,795 mld of STP treatment capacity have been proposed under the scheme (Release ID: 1911162, Press Information Bureau, March 27, 2023). Under SBM-Urban, approximately 6.3 million household toilets have been constructed with onsite treatment facilities or connection to the nearest sewer network. There is a strong emphasis on ““safe sustainable sanitation for all by ensuring that no untreated wastewater is discharged in the open environment” (SBM Urban Dashboard, 2023) as embedded in the vision of this programme.
The way forward
Considering the challenges ahead and tasks at hand, stakeholders should place a stronger emphasis on the following measures:
- The creation of institutions and a regulatory framework at the river basin level as well as at the state level for incorporating state-level integrated water resource planning. This would include measures to assess available water at various sources, plan quantity of water to be used from each source, and develop principles for the allocation of water resources among competing sectors and users.
- The creation of a city-level sewerage master plan and a phase-wise plan for the development of sewerage networks and STPs. This should involve the integration of the existing septage system with the proposed sewage network including the development of co-treatment facilities.
- Enhanced private sector involvement, from project conceptualisation and development to project financing through innovative PPP models. In this regard, lessons can be learnt from the Namami Gange model as well as from initiatives of a north Indian state, which has recently rolled out tenders under the One City One Operator model in various big cities of the state for sewerage infrastructure creation, operations and maintenance.
- Necessary steps to ensure that the detailed project reports of new STPs incorporate a reuse component. At the project planning stage, all potential avenues for wastewater reuse should be explored, along with a market assessment to indicate the quantity of water that can be sold to end consumers (with or without tertiary treatment), price per unit of water to be sold and estimated revenue generation. Wherever possible, the concerned ULB should also identify specific consumers of treated wastewater and sign an MoU or minimum offtake agreement before the project is finalised and tendered out to private sector bidders.
- Promotion of the reuse of wastewater by ULBs for non-potable uses including urban forestry, road washing and cleaning, commercial uses and mandatory uses for industrial activities, in cities with functioning STPs. Although these are already being implemented in many cities to some extent, this should be scaled up as soon as possible.
- The adoption of an approach where cities set targets for institutional consumers for mandatory reuse of wastewater, coupled with economic incentives through appropriate pricing of wastewater (at a discount on the tariff for freshwater supply).
- The adoption of innovative market-based cap and trade models in bigger cities through the active intervention of water regulatory authorities or other appropriate government bodies.
- Finally, the adoption of technology to monitor performance of existing and newly created sewage infrastructure and their impact on the environment. This should be done both at the state and city levels, resulting in the availability of accurate real-time data being captured with minimal human intervention and presented in centralised dashboards for further analysis. Also, data collated and collated at the state and city levels should be analysed using modern data analytics tools, resulting in informed policy responses and corrective actions.
These steps would require close collaboration between different tiers of governance, strong political will and stakeholder involvement at every level. Capacity building, sensitisation and public consultation would be required at every stage of implementation.