India Water Markets and Opportunities A Perspective
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Agenda
• Context - CH2M HILL
• India Water Market Potential And Drivers
• India Water Market Opportunities
• India Water Market Prognosis
• Private And Public Partnership Drivers And Progress
• Suggested Improvements
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CH2M HILL
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CH2M HILL
•FORTUNE 500 company (Rank
456, 2009)
Staff Strength
Revenue
5
CH2M HILL – Leading Mega Programs
MASDAR Green City Abu Dhabi Nuclear Civil
Program
London Tideway Tunnels
US Forces Korea Base Location
DTSS/Changi WRP
Puerto Rico Infrastructure
SewerFix
Panama Canal Expansion Program
London 2012 Olympics
UK Crossrail ProjectMumbai Airport, India
Interceptor Sewer, Delhi
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CH2M HILL India – Multi Disciplinary Team
• Our India corporate office is located in Gurgaon• More than 150 multidisciplinary staff with Sewerage, Program Management, Mechanical, Electrical, Instrumentation, Urban Planning, Financial, Institutional strengthening, GIS
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INDIA WATER MARKET POTENTIAL AND DRIVERS
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INDIA TO REAP BENEFITS OF DEMOGRAPHIC DIVIDEND
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INDIAN WILL BE THE 3RD LARGEST ECONOMY IN THE WORLD BY 2050
2,061
3,148
3,603
3,782
5,870
6,074
6,673
27,803
35,165
44,453
Italy
France
Germany
UK
Russia
Brazil
J apan
India
US
China
759
787
804
1,119
1,122
1,720
2,132
2,213
2,225
2,829
4,617
12,457
India
Brazil
South Korea
Spain
Canada
Italy
France
UK
China
Germany
J apan
USA
Real GDP in 2006 (Figures in US$ Bn.) Estimated Real GDP in 2050 (Figures in US$ Bn.)
India is the only economy th
at will c
ontinue
progressing at g
rowth rates s
ignificantly above
5% between 2005-50
Source: Dreaming With BRICs: The Path to 2050;
Global Economics; Paper No: 99; Goldman Sachs
The Recent World Bank Projection of 8% GDP growth for India in 2010, overtaking China’s projected growth of 7.7%.
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WHOLE OF ASIA – WATER STRESS/ SCARE AREA BY 2020 – DRIVER
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INDIA WATER MARKET OPPORTUNITIES
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• Annual market in India is up to $6 to $ 8B, growing at 15 to 20%.• Population growth, migration from rural to urban areas, tightening
regulations and aging infrastructure • Increasing demand for improvements in the level of services, realisation at
all level that lack of infrastructure to stifle India growth story • Energy-Water-Environment-Sustainability nexus and optimisation• Increasing demand for River clean-up, stream, and water bodies restoration• Funding through local sources (JUNRUM), PE funds, IFI agencies (JBIC,
WB, ADB, USAID etc.) • Increasing PPP opportunities in Water Sector
KEY MARKET TRENDS/OBSERVATIONS- OPPORTUNITIES
GWI Apr 09TOI Jun 2008
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WATER SECTOR OPPORTUNITIES
• Water Resources – Dams/ Storage/ Catchment protection • Ground water - Rain water harvesting/ ASR/ Ground Water
Contamination • Conveyance, Canal, Tunnels, Pipelines• Unaccountability for Water “UFW” or NRW, Under Value/ pricing of
water, wastages • Sewer Conveyance, liquid and solid treatment, Sewer / Wastewater
treatment Rehabilitation • Inadequate distribution of water resources (infrastructure, irrigation)• Operations & Maintenance of the water and sewerage infrastructure
Opportunities exist across whole supply chain space… study, consulting, design, EPC/ DB, Equipment Vendors, PPP projects
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INDIA WATER MARKET PROGNOSIS
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• Water business is local and at differing stages of evolution across India
• Major clients … third layer of Govt agencies ( local ULBs).. Limited Institutional capacity
• Local market characterised by the “tentative” behaviour by municipal / government agencies with different degree of bureaucracy
• “Uncertainty is Certain” • Cut –throat local competition • Majority of Clients prefer price to value• Water is recognised as a one of the national risks along
with energy
Water Market Prognosis
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LOCAL ULBs CHARACTERISTICS AND THE VICIOUS CIRCLE
• Low institutional Capacity, insufficient Financial and Managerial Resources
• Inadequate Coverage and Low Service Level, Poor O&M
• Low Tariff and High Non Revenue Component, Poor cost recovery
• Unsustainable Resources Management practices
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PRIVATE AND PUBLIC PARTNERSHIP DRIVERS AND PROGRESS
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Need for PPP
• Financial gap…. Lack of Management Accountability
• Low Service levels v/s demand for better services
• Increasing affordability at least in Metro cities
• Skill and Strength Gap ( Engineering, Accounting/ Financial, Management)
• Unwillingness to adopt new technology by ULBs
• Competition among states to provide better services in a shorter time
• Increasing willingness on part of Government
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PPP PROGRESS So Far….
New Initiatives Good International Interest
Not so good results
Mid 90s
Early 2000
Mid 2000
Current
FutureMomentum SubsidedStart of Pessimism
New effort to Prepare PPP project sStakeholder oppositionsHigh Profile Projects derailed
Some Success Some projects delayed/ Shelved
Many initiatives Commercial results awaitedPPP at inflexion point
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SUGGESTED IMPROVEMENTS
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SUGGESTED IMPROVEMENTS
• General – Enhance and make transparency on project more visible
– Poor performance track record – too many bad examples of pre bid and post bid implementations – focus good projects and what went right
• Project Preparation – Conduct Financial viability and Funding support
– Realistic estimate of schedule and cost
– Political Alignment
– Get professional support if appropriate in-house support is not available
– Aim and plan for high quality
– Plan based on the real time and contextual data
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Selection Based on QFB System
Engineering
Construction
Start Up andCommissioning
Project Life Cycle Timeline
Pro
ject
Ris
k P
rofil
e
Procurement
5 to 10%of Project Budget
40 to 50%of Project Budget
35 to 50%of Project Budget
+/-5%of Project Budget
Co
st S
avi
ng
Op
po
rtu
nity
Planning
Cost Saving Opportunity
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SUGGESTED IMPROVEMENTS
• Procurement – Do not invite bid if the project is not ready – Quality and fee based selection– Adhering to the planned Schedule and time line – Transparency in the procurements process – Structured process, TOR clarity, quality of documentation, communication,
response times, dead lines etc – Realistic expectations and appropriate risk allocation (accepted and
understood international standards)
• Delivery – Timely availability of data – Timely approval / decision and payments – Early involvements of Stakeholders – Establishment of Project Management Unit or project Manager in client
organisation
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THANK YOU