Surat Wastewater Recycling Project through PPP Approach SACOSAN IV – Group Discussion on Urban Sanitation Dr. Anand Chiplunkar 07 April, 2011

Background  Joint initiative of ADB, GoG and SMC  Ministry of Urban Development, Government of India (MoUD) sought ADB assistance for developing PPPs in water supply / wastewater reuse  GoG positive response to participate in this initiative  Surat waste-water reuse project developed as part of this initiative  Largest (40 MLD) project in waste water recycling through PPP approach in India till date  First such PPP project to be bid out by a Municipal Corporation

Surat City Settings  Textile, Diamond cutting/polishing clusters  City water source is upstream dam not river Ground water has high total dissolved solids  Proximity of STP and industrial estate

Need for the Project  Water shortage as an impending threat by 2015  Dependence on River Tapi  Significant unmet industrial water demand  Pandesara demand ~100 MLD (~ 13% of SMC demand)  SMC supply only 55 MLD; rest by tanker/other sources  Bamroli STP within 5 km from Pandesara Industrial Estate  100 MLD capacity Sewage Treatment Plant  Pandesara Industries keen interest in water security  Early stage interactions confirmed strong support Recycling the Secondary Treated Water from Bamroli and supplying to Pandesara Industrial Estate therefore was a logical win-win project

Rationale for PPP  PPP will bring in required investment of Rs. 800 million  Will release SMC capital for other socially relevant and non- remunerative projects  Opportunity cost of capital (at 12%) translates to nearly Rs. 100 million annually  PPP will help insulate SMC and GoG from technology and operating risks  Doing project on EPC will lead to SMC bearing technology and O&M accountability  PPP facilitates outcome-based monitoring and payments  Private operator responsible to meet quality and quantity targets  Stringent roll-out and performance obligations PPP thus emerged the best approach for implementing this project

Project Scope 1.Operation and Maintenance of existing Bamroli STP. 2.Construction, O&M of new Tertiary Treatment plant. 3.Construction, O&M of new Transmission networks. 4.Rehabilitation, O&M of existing sumps at Pandesara 5.Rehabilitation, O&M of existing distribution network 6.Construction, O&M of new potable water network

Project structure

Bid process  Transparent engagement with private sector through the process  Two Pre-Bid meetings in June and July 2009; over 20 operators participated  Participation from reputed Indian and international Operators  Triveni Engineering: Rs /KL (Declared as Preferred Bidder)  Others Bids: Rs /KL, Rs /KL, Rs /KL  Two of the unsuccessful bidders sent written appreciation on project development and bid process transparency Good project structuring and transparent bid process led to a highly competitive bidding and efficient price discovery

Bid process - timelines IdentificationPreparationApproval Dec 07April 08Nov 08Mar 09 Bid Process Apr 11 Preferred Bidder Identified Presentation to SMC Standing Committee Nov 09 Bid process initiated SMC approval pending Feasibility evaluation started Political decision making has been a challenge in the award

Project is a win-win for SMC, Pandesara and GoG  SMC gets to augment water availability at NO Additional Cost  55 MLD-60 MLD supplied by SMC will continue to provide revenues  40 MLD from Tertiary treatment with flexibility to expand to 80 MLD  New Tertiary Treatment Plant and Potable Water Network assets  Pandesara gets greater water security at competitive tariffs  Tariff (Rs /KL) less than Rs. 25 / KL that is proposed by SMC and compares well with current tariff of Rs. 16 / KL  GoG could create wider impact through the replication potential of this project  Provides a replicable model to realise water security and climate change goals  Consistent with GoG’s PPP vision and intent to usher in Private investment in Infrastructure

Replication Potential in Urban Sanitation  Sewage / waste-water recycling in water stress areas has business potential  Focus on sewage treatment plant - industry cluster combinations  Attract private sector investments through public private partnership (PPP) projects  Balance risk appetite of international and national players without comprising project quality and performance obligations technical expertise / capabilities of international operators investment risk appetite of local private sector operators

Thank You For further information contact: Dr. Anand Chiplunkar