The Latur water supply project is replicable across India.
The Latur water supply project is replicable across India
Hydro-Comp is an international information technology and consulting group of companies specialising in integrated management systems and related consulting services for the utility industry. Its consulting services range from network optimisation to non-revenue water reduction, and its management systems and outsourcing services include billing, customer services, asset management and work order and maintenance. Ashok Natarajan, MD, Hydro Comp Enterprises spoke to SHRIKANT RAO in an exclusive interview in Mumbai
Your Latur water supply project is being hailed as an outstanding model. How you can extend that to the rest of the country? Latur with a population of
4 lakh is a model that can be controlled whereas in the case of cities like Mumbai where there are several agencies at play it would be impossible to replicate..
Models like Latur are required to be revived now in other cities. Latur did not have a source of funding so it relied on a company and they have run it through a very competitive bid. There were Tatas along with us, there was Jindal and there were 8 firms in the initial fray technically. The consortium of Subhash Projects and Hydro-Comp got selected based on certain technical parameters and the financial proposal. The same thing could be extended to other cities. All that other cities need to do is A- they don't need to have crores and crores of rupees because today the source of funding is also limited A- is to do the actual optimisation, call in these experts. We would like to work with the utilities, the standing committees and the political people to really make it effective. Because some thing that is very important is what is called the water regularisation plant and then the structuring of the contract has to be so perfect that it is a win-win situation for everybody A- the citizens, the stake holders, the municipalities as well as the company itself because we are getting our returns on the money that we bring in after a number of years. For example in Madurai, we are now investing in the first three months on the complete preparation of the water audit, network assets going underground, understanding the system, preparing the complete hydraulic model or demand model. 25,000 individual consumers have been interviewed and then we prepare what is called the detail project report which we are going to take to the Government of India. We will also be investing some money. We expect a large dose of money to come in to the Government of India because at a very nominal cost we will be able to deliver excellent service to the citizens. This model is replicable across India and as you know JNNURM is primarily for large construction, capital projects. We don't come under the purview. But we want to do good operational excellence, good processes, good customer care centers, build in software tools like integrated management system which is efficient and the participant should be with the utility itself. These people should be part of our process. These people have to invest some amount of money as they are part of the process. What we require is some amount of viability gap funding of Rs 4 or 5 lakh in India for the smaller towns, because JNNURM is only for towns above 10 lakh. The impact on the urban sector will be far higher than what it has been in the last five years in principal cities.
Would it be fair to say that the Latur model is replicable in the smaller cities because they are more manageable?
Very much so, provided the political climate, the corporators and the citizen members understand and be in the entire process right from the beginning. Bringing out tenders attract a fair share of contro-versy A- we too had that in Latur. So that's why we brought the urban local body into a tripartite agreement along with Maharashtra Jeevan Pradhikaran, the nodal government company. So this model is replicable. Fortunately in Maharashtra it is a little advanced because there are some tariff policies in place. For example MJP has already been charging per KL of water Asome rates in all the 25 waterworks they handle but that type of thing is not available to the rest of the country. First of all people are desisting because there are hell of a lot of losses due to wastage of water. That's the biggest loss, people just throw water. During Diwali time in Latur city the water level capacity shot up from 45 mld to 55 mld. 55 million litre were
lost. We need to rightly strategise this business and bring in good inputs, in
terms of technical, commercial as well as people participation.
What are the obstacles you face?
The obstacles are in terms of people not wanting to have meters and volumetric measurements because they don't want to pay for the cost of water. There have to be service charges for service connections A- like we have to take deposits for laying new pipelines for slum areas. We have invested around Rs 18 to 20 crore in Latur A- the project will happen over a two year period, it took off in June last year. As far as Latur is concerned we are not telling the people to pay everything upfront. We are recovering them in fixed EMIs.
What is the status of the Latur project?
The first part of it we have done and now we are in a takeover mode. We have to take it over from the local urban body and together with Maharashtra Jeevan Pradhi-karan and Latur Municipal Corporation we have to run it. We will create a SPV called Latur Water Management Company.
Can you talk about the Madurai project?
Madurai is the second biggest city in Tamil Nadu. It's a BB Plus rated city as per the CRISIL rating. Here the unique model of operator consultant was followed. There were three major companies which came and bid for this job. For doing all the stuff that we are doing in Latur involves a lot of money. We have to do a network analysis, set up systems, understand the underground systems and require a commercial understanding of the whole thing. We need to have a big team in place. You have to spend a year to study the city as no ready data is available for any city in India. So we are being paid a technical fee and we are putting all this money up-front from our side as the investment. We are doing the water audit, network survey, we are conducting for the first time a GIS based consumer survey and we have interviewed about 25,000 citizens in this particular project in Madurai A- individual households with a 25 page questionnaire asking about the quality of life, their expectations, per capita income, whether they have suffered from any water borne diseases and what they feel they like the city to be. We have put everything as a detailed project report. With PPP being initiated in a big way by the Government of India so we are investing some money. We are also asking the ULB, in this case the Madurai Municipal Corporation to invest some money and then we are approaching the Government of India, the JNNURM to give us the major part of our funding. And we will be able to optimise the network with very low cost and people will see the benefits of this.
How much subtraction do you expect from the usual cost?
We can guarantee at any place 20-25 per cent savings straight away by using our systems or methodologies. As I told you in Latur just by decommissioning two sources we brought down the electricity cost. It was Rs 1.58 crore, now it is around Rs 70-80 lakh. It is significant. They are not able to pay for that. Once we take over we will implement a lot of better improvements to the whole system.
Is your company involved in other cities apart from Latur and Madurai?
We are actually bidding actively in all the other cities. Our collaborator and principal partner Subhash Projects has taken up Bhiwandi as well. We are in the DPR stage. Other cities are just catching on. This concept has not caught on so quickly in India. Thousands of crores have been invested in terms of infrastructure in terms of building treatment plants, putting pipes and things like that but nobody went for a city O&M optimisation - this has got big win with small money. In Gujarat and Maharashtra we are quite bullish. Maharashtra is one of the few states which has passed legislations for non revenue water reductions. The authorities there have also said they would like to invest each of the ULBs on metering. The govern-ment is making a fund available for water loss management so any ULB can actually avail of certain funds to improve the system. The southern states are doing quite well - they are going on a different route, it is mostly EPC and they are trying ignore O&M contract. In the north progress has been seen in cities like Chandigarh.
Do you think there is a lot of empathy in terms of PPP in India?
Not much, actually the government is pursuing this, but still the understanding of the PPP models is important. Because the stake holders are finally the corporators and other people in smaller bodies,
they have to be evolved, they have to be educated, capacity building and institut-ional strengthening has to be done. As far as contracts are concerned they have to learn to adhere to them. Exit routes are available now but you lose your name, your credibility and investments. You can only go into litigation which is not good.
How has the reaction from the private sector been?
So far very few companies have really come forward. One of the good companies has been Subhash Projects and Marketing and L&T. Only these type of companies have taken initiatives in doing work
in PPP mode whether it is water or
What is the future of PPP?
I think there is future growth for PPP because none of the urban bodies are healthy enough to invest even some money. So they need to bring in good players, have good by laws passed, have good structuring of contracts, hire some good consultants who can do a proper structuring of tenders and then invite the private sector. But they should also have a nodal company like say MJP in Maharashtra, in the case of Gujarat, an organisation like GWSSV. I mean the nodal agency should be a part of it so that risk is mitigated on the other side also. So if say the private sector does not find it remunerative and there are problems then there should be someone to stand in and take over so that the project doesn't collapse. Similarly for us, we want lot of risk mitigation management to be done and we want actually a very clear bridge capital. We want viability gap funding because all the technical work nobody does, it takes six-seven months. We spent crores of rupees in Latur understanding it. These are all intangible things which people don't see. For this we need some funding as a kind of soft loan.
Tell us about the projects Hydro-Comp is doing elsewhere around the world?
We are doing four large cities in Eastern Europe under a KFW fundingA- Serbia and the new restructured Europe countries. We are working along with Berlin Wasser, a big operator which supplies the best quality of water and handles seven or eight cities in Germany A- we are joint consortium partners. They are diversified and take us along with them. Also we are doing a lot of projects in Africa, Tanzania, Lesotho now plus we have also done a lot of work for Swaziland under the World Bank. We have done a complete non revenue water contract and improved the system loss from 45 per cent to about 18 per cent. So primarily we do a lot of work in Africa.
Briefly, what is required to give PPPs a push in India?
In order to give PPP a big push there is a requirement of basic initial viability gap funding. Certain funds should be made available either to the operator, the selected party or the ULB itself to spend on it. It takes months to do the life cycle assessment. So there should some fund available to spend on major repairs, that is what we are insisting at Latur. We need good water regulation, by laws and then reforms in terms of meters because with metering only you can achieve water management 24 x 7 and achieve reduction in losses. Every city loses on an average as much as 50 per cent! We are proud to say that we can offer in these areas a real differentiation. We do a financial model and show them and at the end of the tenure of ten years or fifteen years when we hand over they will realise how profitable they could be if they maintain the systems as prescribed. So what we want is a sort of support from the government in these areas. They should be able to come wherever we come with some investment. For instance if we are willing to invest about 10 per cent, the government should come forward to contribute 60 -70 per cent because the ULBs are not in a position to invest. There is a lot of interest shown by ADB and Japanese banks, it will take some time to develop these projects but we are quite active.
Can your experience be applied to huge cities like Mumbai?
In big cities like Mumbai the problems are multifarious A- you can't apply the same techniques. Secondly it is a wrong concept to have privatisation everywhere. Without the utility people being stakeholders, without them being part of the whole process, nothing can happen. The most important people are those who are on field, the valveman for instance who know where the valves are located. In Latur, for example, there are 576 valves which have all gone underground. Nobody knows, those people have all retired and the bosses sitting in the office will not know. That is why to get the network asset register done it took us three months time and we had to spend a lot of money, effort and resources to get it done and then put it in a systematic way into a system of GIS. In order to do all this government should provide funding because only then will the ULBs become self sustainable after some time. They should encourage Indian entrepreneurs to collaborate with people from outside. What is now happening is that they are putting some very tall pre-qualifications. In order to take part in a place like Mumbai my company will probably not qualify based on the parameters. But we can do a decent job. We have a team, have hands on experience in the Indian environment. Mumbai handles 4000 mld of water per day so you can imagine that the size of the operation will be quite big. So the govern-ment would have to encourage Indian companies to participate with good technol-ogy companies and they should not put barriers to entry for people in this sector.
Hydrocomp is headquartered in Nicosia, Cyprus and maintains additional regional offices in Egypt, South Africa, Botswana and India as well as country offices where main contracts are carried out, along with a strategic partnership network stretching across Europe, Africa, the Middle East and Asia. Recently the group formed a new company in India, called Hydro-Comp (India) to directly address the local market. The company has already secured two projects, the one, in association with local partners, being a 10-year concession contract for the city of Latur in Maharashtra and the other in Madurai, Tamil Nadu.
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