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Mitali Nikore and Mahak Mittal, “Arresting India’s Water Crisis: The Economic Case for Wastewater Use,” ORF Issue Brief No. 453, March 2021, Observer Research Foundation.
This year’s World Water Day, being marked on 22 March, is a sombre occasion. After all, 600 million people in India currently face acute water shortages, and almost 200,000 lose their lives from lack of access to safe water.[1] More than 12 percent of the country’s population (or approximately 163 million) are already living the “Day Zero” scenario,[a] with no access to clean water within or near their homes.[2] The COVID-19 pandemic has exacerbated the water crisis by increasing the demand for domestic water by 20-25 percent, as hygiene awareness has grown and households are practicing handwashing more regularly.[3]
The future scenario gives no hope, as water demand is projected to exceed supply by 50 percent by 2030 (See Figure 1). Agriculture would be the worst hit, followed by industries that are heavily dependent on water, such as food processing, beverages, textiles, metals, chemical, paper and leather. The water shortage could result in a six-percent loss in GDP by 2050.[4], [5],[6]
Figure 1: Water demand and supply scenario by 2030 in India
Note: The demand for water in India is expected to grow at a 2.8% Compounded Annual Growth Rate (CAGR) from 2010 to 2030, facing a supply gap of 50% by 2030.
Water shortage brings with it other consequences, among them, worsening already existing rural-urban and gender-based inequalities. To begin with, water scarcity in India impacts women more severely than men. Indian women spend some 150 million days collecting water annually, losing an estimated INR 10 billion (US$133 million) in incomes.[8] Moreover, water supply systems are unevenly distributed: 52 percent of households in urban areas have tap access, against a much lower 18 percent of rural households.[9]
Among India’s fundamental problems is the lack of freshwater resources. While the country is home to 18 percent of the world’s total population, it accounts for only 4 percent of global freshwater resources.[10] Freshwater sources fulfil 85 percent of India’s water demand (See Figures 2 and 3), and it remains the world’s largest consumer of groundwater, consuming 124 percent more groundwater than China or the US.[11]
Figure 2: Water use across sectors in India
At the same time, a potential source of water – wastewater, is highly underutilised. If India reuses 80 percent of its untreated wastewater from 110 of its most populous cities, 75 percent of projected industrial water demand can be met by 2025.[13] Sludge from treated wastewater can irrigate from one to three million hectares of land annually, while providing nutrients to crops and reducing fertiliser dependence by 40 percent.[14] Moreover, the use of treated wastewater for non-potable industrial and agriculture purposes frees up freshwater for drinking water consumption.[15] India generates approximately 62,000 million litres per day (MLD) of domestic sewage in urban centres. There are 920 sewage treatment plants (STPs) operated primarily by municipal corporations, with a treatment capacity of close to 23,000 MLD, i.e., merely 37 percent of generation. Only 33 percent of India’s urban wastewater is actually treated, and an even smaller portion is reused.[16],[17] These figures are low when viewed against those of comparable countries. For instance, BRICS nations Brazil and South Africa treat 45-55 percent of their wastewater (See Figure 4).
Figure 4: Wastewater treatment and reuse (% of wastewater generated)
The Central Pollution Control Board (CPCB) estimates that sewage generation will increase to over 120,000 MLD by 2051. Moreover, approximately 13,500 MLD of industrial wastewater is generated by manufacturing clusters, 60 percent of which is treated at the country’s 193 common effluent treatment plants (CETPs).[19],[20] The gaps in treatment capacity are amplified at local levels, as STPs are concentrated in larger cities and CETPs are unevenly distributed across states.[21]
Recognising this challenge, the Indian government shifted its focus to solid waste, sludge and greywater management under the Swachh Bharat Mission 2.0 (SBM 2.0), the second phase of the central government’s country-wide campaign to eliminate open defecation and improve solid waste management. Following a sustained focus on achieving open defecation-free (ODF) status, the Ministry of Housing and Urban Affairs (MoHUA) developed detailed criteria for cities to achieve ODF+, ODF++ and Water+ statuses in May 2020.[22] As per this definition, cities must satisfy three criteria to be declared Water+ (the highest rating):
Despite these new targets, the budget allocation for SBM Urban has remained flat between 2020-21 and 2021-22, at INR 23 billion.[23],[24] Thus, as state governments and city-level agencies pursue Water+ status, two questions arise: How will municipal bodies and city authorities mobilise the additional financing required to bridge wastewater treatment capacity gaps? And how will they ensure the operational efficiency and maintenance of these facilities? This brief argues that partnerships with the private sector will be key.
Modern wastewater treatment plants (WTPs) are capital-intensive and require the use of innovative technology, such as sensors, Internet of Things (IoT) devices and Artificial Intelligence (AI)-based trackers. The high upfront capital requirements in machinery and equipment, combined with unpredictable revenue streams, make this a high-risk sector, deterring private sector investment.
Global experience suggests that countries which have transformed wastewater treatment into a business opportunity succeeded by leveraging the public private partnership (PPP) model. In this scenario, governments provide financial support to WTPs, lowering investment risk, and private sector firms accord technical expertise alongside capital investment. This allows PPPs to be more cost-efficient than purely government-run projects. Furthermore, it allows for scale: a larger number of WTPs can be established through PPPs given the fiscal constraints of government-led investment. Israel and Singapore are two leading international examples in this regard. Both countries have leveraged advanced technology, enacted clear regulations, and built strong institutional capacity in the wastewater sector. The following paragraphs describe their experience and outline the lessons that can be learned by India.
Israel has historically faced severe water scarcity, primarily due to its geography and location. More than half the country is occupied by desert land, and it experiences a semi-arid climate; prolonged periods of drought are common. However, it is now a global leader in the sector of recycled water utilisation and recycles 87 percent of collected wastewater. Treated water met one-third of national demand in 2015, effectively reducing groundwater dependency and improving drought resistance.[25]
Success factors:
Singapore is a water-scarce country heavily dependent on Malaysia for water imports. In 2003, they first began reusing treated wastewater to produce NEWater, i.e., ultra-clean, high-grade reclaimed water.[28] Currently, NEWater meets 40 percent of Singapore’s total water demand. By 2030, they aim to meet 50 percent of this demand.[29]
Success factors
Estimates from the World Bank show that globally, there were 1,025 PPP projects between 2007 to 2020 in the sector, covering integrated municipal solid waste, water treatment, and disposal, with an investment of US$81.6 billion.[33] Of these, only 65 PPPs were from India, involving US$2.8 billion investment or a mere 3.4 percent of global expenditure.[34] Various challenges inhibit India’s private sector from establishing wastewater PPPs:[35]
In spite of this, there are WTPs established on the PPP model successfully operating in India. Notable examples include the Hindustan Zinc STP in Udaipur, Rajasthan, and the Thane Belapur CETP in Maharashtra.
In 2012, Hindustan Zinc Limited (HZL) established a PPP with the Udaipur Municipal Corporation (UMC) and the Rajasthan Urban Improvement Trust to build Udaipur’s first STP. The aim is to treat 100 percent of Udaipur’s domestic sewage by 2022.[37]
Success factors
Common effluent treatment plants (CETPs) offer common facilities for Micro, Small and Medium Enterprises (MSMEs) that cannot otherwise afford water treatment.[39] The first CETP in the Trans Thane Creek (TTC) industrial area was established in 1997 with a capacity of 12 MLD, at a cost of INR 45 million (US$0.6 million). It was upgraded by 15 MLD in 2006 for INR 80 million (US$1.06 million). The plant serves 572 small-scale and 91 medium/large-scale members of the Thane-Belapur Industrial Association (TBIA), and 2,582 non-member users.[40] This model is now being replicated across Maharashtra.
Success factors
As demonstrated in the examples above, a strong anchor, be it a firm or industry association, is essential to drive project implementation. Government support with capital costs is essential for the MSME sector, while large industries can bear these expenses. The government must set clear regulations around user charges, water quality and treatment processes to help private investors estimate total costs, identify revenue streams and establish long-term financial sustainability.
The water and wastewater treatment market in India is a US$4-billion industry, growing at 10-12 percent annually (pre-COVID-19).[44] In a post-pandemic economy, central and state governments must work in partnership to create markets for treated water.
Avoiding a day-zero scenario in major Indian cities requires urgent and dedicated effort, not only from governments and municipal agencies, but also from the private sector and the citizens. The experience of the COVID-19 pandemic has lifted the veil on the frailties of current economic pathways, which now need to be set on a more environmentally sustainable foundation.
Wastewater recycling offers a solution that could benefit all parties involved. With the public sector providing a clear regulatory framework, tariff regime and risk mitigation instruments, PPPs can be leveraged to create CETP and STP infrastructure, and bridge financing gaps. A market for treated water can be established to maximise the circular use of scarce freshwater. Under a differentiated tariff regime, the cost of water as an input for select consumer categories such as agricultural or industrial users can be reduced, and freshwater conservation can be encouraged. SBM 2.0 offers the perfect opportunity to implement these initiatives and achieve the goal of 100% Water+ cities.
Mitali Nikore is an experienced infrastructure and industrial development economist, and founder of Nikore Associates, a youth-led policy design and economics think tank.
Mahak Mittal is a Research Advisor at Nikore Associates.
(Research assistance was provided by Shalini Rajput, Darshana Nair, Mohanish Bajaj, and Chandni Ganesh.)
[a] Day Zero is defined as the point in time when a region runs out of water.
[b] A municipal bond is a debt security issued by an Urban Local Body (ULB), Special Purpose Vehicle (SPV) or State level Parastatal, to finance capital expenditures such as the construction of highways, bridges or schools or any other project of public utility such as water saving project, energy saving project, etc. See: The Institute of Chartered Accountants India, Municipal Bonds for Financing Urban Infrastructure in India: An Overview, The Institute of Chartered Accountants India, 2018, https://cpfga.icai.org/wp-content/uploads/2019/06/municipal-bond.pdf
[c] Impact bonds are outcomes-based contracts. They use private funding from investors to cover the upfront capital required for a provider to set up and deliver a service. The service is designed to achieve measurable outcomes specified by the commissioner. The investor is repaid only if these outcomes are achieved. See: University of Oxford Government Outcomes Lab, “Impact bonds,” University of Oxford Government Outcomes Lab Website, https://golab.bsg.ox.ac.uk/the-basics/impact-bonds/
[d] A ring-fence is a virtual barrier that segregates a portion of an individual’s or company’s financial assets from the rest. See: Investopedia, “Ring-Fence,” Investopedia Website, https://www.investopedia.com/terms/r/ringfence.asp
[e] A guarantee is a promise by a guarantor to a beneficiary (or beneficiaries) that, in the event of a specified default by an obligor, the guarantor will pay the beneficiary a specified amount. Although similar to insurance, a guarantee does not entitle the issuer to review a claim before it is paid; rather, the payment is triggered by specified events. See: United Nations Development Programme (UNDP), “Public guarantees,” United Nations Development Programme Website, https://www.sdfinance.undp.org/content/sdfinance/en/home/solutions/public-guarantees.html
[1] NITI Aayog, Government of India, Composite Water Management Index: A Tool for Water Management, India, 2018, https://niti.gov.in/writereaddata/files/document_publication/2018-05-18-Water-Index-Report_vS8-compressed.pdf
[2] “Composite Water Management Index: A Tool for Water Management, 2018”
[3] Suresh Kumar Rohilla, “COVID-19 outbreak: More hand washing can increase India’s water woes,” DownToEarth, March 20, 2020, https://www.downtoearth.org.in/blog/water/covid-19-outbreak-more-hand-washing-can-increase-india-s-water-woes-69900
[4] NITI Aayog, Government of India, Composite Water Management Index, India, 2019, https://niti.gov.in/sites/default/files/2019-08/CWMI-2.0-latest.pdf
[5] The 2030 Water Resources Group (2030 WRG), Charting Our Water Future, 2009, McKinsey & Company, https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/sustainability/pdfs/charting%20our%20water%20future/charting_our_water_future_full_report_.ashx
[6] “Composite Water Management Index: A Tool for Water Management, 2018”
[7] The 2030 Water Resources Group (2030 WRG), Charting Our Water Future, 2009, McKinsey & Company, https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/sustainability/pdfs/charting%20our%20water%20future/charting_our_water_future_full_report_.ashx
[8] Research Foundation for Science, National Commission for Women, Government of India, Women and Water, India, 2005, http://ncwapps.nic.in/pdfReports/WomenandWater.pdf
[9] World Health Organisation and United Nations Children’s Fund, Joint Monitoring Programme for Water Supply, Sanitation and Hygiene: Estimates on the use of water, sanitation, and hygiene in India, India, WHO and UNICEF, 2019, https://washdata.org/data/country/IND/household/download
[10] Dipankar Ghoshal, “Helping India Overcome Its Water Woes,” World Bank Group, December 9, 2019, https://www.worldbank.org/en/news/feature/2019/12/09/solving-water-management-crisis-india
[11] United Nations Educational Scientific and Cultural Organisation (UNESCO), The United Nations World Water Development Report 4: Managing Water under Uncertainty and Risk, UNESCO, 2012, https://unesdoc.unesco.org/ark:/48223/pf0000215492
[12] Food and Agriculture Organisation of the United Nations (FOA), Clean Water and Sanitation: Progress on Water-use Efficiency 2018, United Nations Water, 2018, http://www.unwater.org/app/uploads/2018/10/SDG6_Indicator_Report_641-progress-on-water-use-efficiency-2018.pdf
[13] World Bank Water and Sanitation Program (WSP) and International Water Management Institute (IWMI), Recycling and Reuse of Treated Wastewater in Urban India: A Proposed Advisory and Guidance Document, Sri Lanka, 2016, http://www.iwmi.cgiar.org/Publications/wle/rrr/resource_recovery_and_reuse-series_8.pdf
[14] World Bank Water and Sanitation Program (WSP) and International Water Management Institute (IWMI), Recycling and Reuse of Treated Wastewater in Urban India: A Proposed Advisory and Guidance Document, Sri Lanka, 2016, http://www.iwmi.cgiar.org/Publications/wle/rrr/resource_recovery_and_reuse-series_8.pdf
[15] World Bank Water and Sanitation Program (WSP) and International Water Management Institute (IWMI), Recycling and Reuse of Treated Wastewater in Urban India: A Proposed Advisory and Guidance Document, Sri Lanka, 2016, http://www.iwmi.cgiar.org/Publications/wle/rrr/resource_recovery_and_reuse-series_8.pdf
[16] ENVIS Centre on Hygiene, Sanitation, Sewage Treatment Systems and Technology, ” National status of waste water generation & treatment,” International Institute of Health and Hygiene, New Delhi, http://www.sulabhenvis.nic.in/Database/STST_wastewater_2090.aspx
[17] Shashank Singh, Hidden Risks and Untapped Opportunities: Water and the Indian Banking Sector, India, World Wildlife Fund for Nature (WWF) India, 2019, http://www.indiaenvironmentportal.org.in/files/file/hidden_risks_and_untapped_opportunities.pdf
[18] Food and Agriculture Organisation of the United Nations (FAO), AQUASTAT Main Database, 2016, http://www.fao.org/aquastat/statistics/query/index.html
[19] “Hidden Risks and Untapped Opportunities: Water and the Indian Banking Sector, 2019”
[20] Ministry of Environment, Forest and Climate Change, Government of India, Common Effluent Treatment Plants, Winter Session, Lok Sabha 2016, India, 2016, http://www.indiaenvironmentportal.org.in/files/file/Common%20Effluent%20Treatment%20Plants.pdf
[21] “Hidden Risks and Untapped Opportunities: Water and the Indian Banking Sector, 2019”
[22] Ministry of Housing and Urban Affairs, Government of India, Water Plus Protocol and Toolkit, India, Government of India, https://www.sbmurban.org/water-plus#:~:text=Water%20Plus%20Protocol%20and%20Toolkit,-Home%20/%20Water%20Plus&text=A%20city%20can%20be%20declared,treated%20wastewater%20to%20the%20environment
[23] Ministry of Finance, Government of India, Union Budget 2020-2021, India, 2020, https://www.indiabudget.gov.in/budget2020-21/doc/eb/sbe57.pdf
[24] Ministry of Finance, Government of India, Union Budget 2021-2022
[25] Philippe Marin, Shimon Tal, Joshua Yeres and Klas Ringskog, Water management in Israel: Key Innovations and Lessons Learned for Water-Scarce Countries, Washington D.C., World Bank Group, 2017, https://openknowledge.worldbank.org/bitstream/handle/10986/28097/119309-WP-PUBLIC-56p-WcmpeProof.pdf?sequence=1&isAllowed=y
[26] Christine Bismuth, Bernd Hansjürgens and Ira Yaari, “Technologies, Incentives and Cost Recovery: Is There an Israeli Role Model?”, in Society – Water – Technology ed. R. Hüttl, Bens O., Bismuth C., Hoechstetter S (Springer, 2016), https://doi.org/10.1007/978-3-319-18971-0_16
[27] Mirjana Stankovic, Ali Hasanbeigi, and Nikola Neftenov, Use of 4IR Technologies in Water and Sanitation in Latin America and the Caribbean, Inter-American Development Bank, 2020, https://publications.iadb.org/publications/english/document/Use-of-4IR-Technologies-in-Water-and-Sanitation-in-Latin-America-and-the-Caribbean.pdf
[28] PUB Singapore’s National Water Agency, “NEWAter,” PUB Singapore’s National Water Agency Website, https://www.pub.gov.sg/watersupply/fournationaltaps/newater
[29] Singapore National Water Agency, Our Water, Our Future, Singapore, PUB Singapore, 2018, https://www.pub.gov.sg/Documents/PUBOurWaterOurFuture.pdf
[30] PUB Singapore’s National Water Agency, “NEWAter,” PUB Singapore’s National Water Agency Website, https://www.pub.gov.sg/watersupply/fournationaltaps/newater
[31] Pawan K. Sacheva, “Water Management & the Singapore Story” (Webinar Presentation, Avendus Capital, Singapore Sustainability Models Webinar, October 31, 2020).
[32] FICCI Water Mission and The 2030 Water Resources Group (WRG), Urban Wastewater Public-Private Partnerships, FICCI, 2016, https://www.2030wrg.org/wp-content/uploads/2016/04/FICCI-Water-Mission-2030-WRG-White-Paper-Urban-Waste-Water-PPPs-V6Rev1-With-Pix.pdf
[33] World Bank Organisation, “Sector Snapshots: Water and Sewerage 1919-2020,” World Bank Organisation, https://ppi.worldbank.org/en/snapshots/sector/water-and-sewerage
[34] The World Bank, ”Private Participation in Infrastructure – Water and Sewerage,” The World Bank, https://ppi.worldbank.org/en/snapshots/sector/water-and-sewerage
[35] “Urban Wastewater Public-Private Partnerships, 2016”
[36] World Bank, Inclusive Business Models for Wastewater Treatment, World Bank Group, 2017, https://www.innovationpolicyplatform.org/www.innovationpolicyplatform.org/system/files/5%20Wastewater%20Treatment_Apr6_0/index.pdf
[37] India Sanitation Coalition, Sewage Treatment Plant – Hindustan Zinc Limited, India, India Sanitation Coalition, 2014, http://www.indiasanitationcoalition.org/resources/Case-Study-Hindustan-Zinc.pdf
[38] “Sewage Treatment Plant – Hindustan Zinc Limited, 2014”
[39] Central Pollution Control Board (CPCB), Ministry of Environment and Forests, Government of India, Global good practices in industrial wastewater treatment and disposal/reuse, with special reference to common effluent treatment plants, India, 2011, https://smartnet.niua.org/sites/default/files/resources/Report_CETP_GGP.pdf
[40] Common Effluent Treatment Plant (CETP) Thane-Belapur Association, “CETP October 2020 Brochure,” CETP Thane-Belapur Association, https://cetpttc.org/documents/CEPT-BROCHURE
[41] Common Effluent Treatment Plant (CETP) Thane-Belapur Association, Trans Thane Creek Industrial Area, India, CETP Thane-Belapur Association, 2020, https://cetpttc.org/documents/CETP PRESENTATION.PPT
[42] Maharashtra Pollution Control Board (MPCB), “Thane Belapur CETP – A Success Story,” MPCB, October 2020, https://www.mpcb.gov.in/waste-management/common-effluent-treatment-plant/sucess_story/thane-belapur
[43] Common Effluent Treatment Plant (CETP) Thane-Belapur Association, “CETP October 2020 Brochure,” CETP Thane-Belapur Association, https://cetpttc.org/documents/CEPT-BROCHURE
[44] Shashank Singh, Hidden Risks and Untapped Opportunities: Water and the Indian Banking Sector, India, World Wide Fund for Nature (WWF) India, 2019, http://www.indiaenvironmentportal.org.in/files/file/hidden_risks_and_untapped_opportunities.pdf
[45] EY and ASSOCHAM, ‘Think Blue’ Effective Water Management: Integrating Innovation and Technology, India, EY and ASSOCHAM India, 2019, http://www.spml.co.in/Download/Reports/Think-Blue-Effective-Water-Management-June-2019-EY-Assocham-Report.pdf
[46] NITI Aayog, Government of India, Composite Water Management Index, India, 2019, https://niti.gov.in/sites/default/files/2019-08/CWMI-2.0-latest.pdf
[47] G. Cornish, B. Bosworth, C. Perry, and J. Burke, Water Charging in Irrigated Agriculture, Rome, Food and Agriculture Organisation of the United Nations (FAO), 2004, http://www.fao.org/3/y5690e/y5690e0b.htm
[48] M. Singh, V. Upadhyay, and Atul Mittal, Urban water tariff structure and cost recovery opportunities in India, India, Water Science & Technology, 2005, https://www.researchgate.net/publication/7298993_Urban_water_tariff_structure_and_cost_recovery_opportunities_in_India
[49] Global Infrastructure Hub, Global Infrastructure Outlook: India Investment Forecasts, Global Infrastructure Hub, 2015, https://outlook.gihub.org/countries/India
[50] NITI Aayog, Government of India, Bidding Documents for Public Private Partnership in Integrated Solid Waste Management and Integrated Liquid Waste Management, India, Government of India, 2020, http://niti.gov.in/sites/default/files/2020-09/Bidding-Documents-for-PPP-in-Integrated-Solid-Waste-Management-and-Integrated-Liquid-Waste-Management.pdf
[51] Ministry of Ports, Shipping and Waterways, Government of India, https://pib.gov.in/Pressreleaseshare.aspx?PRID=1523352, 2018
[52] Laura F. Zarza, “Smart Water Technology, the Future is Here,” Smart Water Magazine, January 15, 2019, https://smartwatermagazine.com/news/smart-water-magazine/smart-water-technology-future-here
[53] “Smart Water Management Technology and IoT,” Digiteum, October 24, 2019, https://www.digiteum.com/smart-water-management-iot/
[54] Suresh Rohilla Kumar, Pradeep Kumar, Mahreen Matto and Chhavi Sharda, Mainstreaming energy efficiency in urban water and wastewater management in the wake of climate change, India, Centre for Science and Environment, 2017, https://cdn.cseindia.org/attachments/0.73120800_1505297784_Policy-Paper-Mainstreaming-Energy-Efficiency-in-Urban-Water.pdf
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Mitali Nikore is an experienced infrastructure and industrial development economist and founder of Nikore Associates a youth-led policy design and economics think tank
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