The recent water crisis in parched Chennai caught everyone’s attention. Several parts of Maharashtra, Karnataka, Madhya Pradesh, among other states, also faced severe drought this year. The availability of water clearly is becoming a big issue in India and there lies an opportunity to invest heavily to address the crisis that repeats in some or the other state every year.
India accounts for around 18 per cent of the world’s population, but only four per cent of global water resources. As many as 600 million people face extreme water stress and almost 82 per cent of rural households lack piped water access.
In the Budget earlier this month, Rs 10,000 crore was allocated to the National Rural Drinking Water Mission. It aims to provide potable water to every rural household by 2024.
The allocations towards department of water resources, river development and Ganga rejuvenation were also increased this year, signalling the Narendra Modi-led NDA government’s intent to address the water crisis.
These various government schemes such as river linking, Namami Gange (national mission for clean ganga), piped water supply and PMKSY (Pradhan Mantri Krishi Sinchayee Yojana) would require a capital expenditure of as much as $270 billion over the next five years to 15 years, estimates Bank of America Merrill Lynch.
If the government is to accomplish its target to provide piped water supply to every rural household by 2024, for instance, then it will require an investment of $94 billion. The river linking project will also require a huge investment if the government is to link rivers across the country. BofA Merrill Lynch estimates a capex of as much as $168 billion over the next 15 years for river linking.
River linking was first envisaged three decades ago, as a way to address to the problem of droughts in some regions and floods in others. But, its been controversial, with experts warning of immense damage to the ecology, if implemented. Currently only two projects—the Ken-Betwa river linking project in MP and UP and the Polavaram project in Andhra Pradesh—have made some progress.
Over the past five years, water-related infrastructure investments have risen at a 15 per cent compounded rate, touching $21 billion in the year ended March 2019. However, much of the funds were put in by states, said Shah. The central government is making some investments of its own, in projects like Namami Gange. Cleaning the Ganga will require $3 billion to be spent over five years, much of it to be used towards setting up sewage treatment plants. Elsewhere, the PMKSY will need another $4.5 billion over five years.
“Historically, the Central government’s capex spends on water have been muted. However, the centre has driven schemes like Saubhagya (project to provide electricity to all households) and Swachh Bharat in co-ordination with the states and could repeat the same in case of flagship water schemes,” Shah said.
With ground water heavily exploited, other resources like rain water harvesting, desalination of sea water could be among the solutions to improve water availability. In a typical water supply project, capex incurred is on pumps, pipes, water treatment plants and the civil construction.
This could open up huge opportunities for private companies. Much of this will be towards engineering, procurement and construction (EPC) projects.
However, just like the government back in the late 1990s came out with the build-operate-transfer (BOT) route for private companies to come ahead and pickup some of the huge investments needed to develop roads and highways, the government could explore similar models for private companies to also play a big role in some of the huge water related infrastructure projects in the future, said Shah.