2. Sustainable water management strategy with spotlight on Indian Water Conservation experience Case Study of Mysore Water Distribution Oct 13, 2011 by G S Basu, Jusco, India

3. Agenda I.India Urban Water Scenario II.JUSCO Mysore Experience III.Future of Sustainable Water Management in India 3

4. Demand for water in India is expected to rise dramatically in the next few decades Source: Ministry of Water Resources, National Hydrology Institute, Roorkee, 'The Himalayan Challenge: Water Security in Emerging Asia, Strategic Fore 1: As per international norms, if per capita water availability is less than 1700 m 3 per year, country is water stressed and if the per capita availability is less than 1000 m3, the country is water scarce 2: Using theoretical available water as a base for calculations Drivers of water usage increase Population  Population increase from 1.2 Billion in 2010 to 1.6 Billion in 2030 will directly increase demand for water Urbanization  Increased urbanization from 30% to 50% will create demand aggregation at select points in India, sometimes away from high water availability areas Per Capita Income Increase  Indian GDP is expected to grow causing per capita income to rise from $468 to $ 17366 by 2050. Increased per capita will result in lifestyle changes, requiring more per capita water. For e.g. water consumption in US is 582 litres/person / day compared to India’s ~90 Industrializati on  India’s industrialization increase will increase demand for water – especially increase in power, steel and other heavy industries 4 Per Capita Availability 1,2 1,7301,4011,200 Water Demand in India; 2010 - 2050 Cubic KM or Trilion Liters

5. Resulting in a potentially significant demand supply gap in the near future Source: Ministry of Water Resources, National Hydrology Institute 750 850 0 1,000 950 900 800 700 +12% Current useful water supply Expected issue by 2015 Water Supply and Demand in India; 2010 - 2050 Cubic KM or Trilion Liters River Basins in India, with water shortage, 2030 Percentage Demand Current SupplyCurrent SupplyCurrent SupplyCurrent Supply 12% gap by 2025 5 2: EFR – Eastern Flowing Rivers; WFR – Western Flowing Rivers (non major rivers)

6. Source: Ministry of Urban Development, United Nations handbook of benchmarks, Central Pollution Control Board, Asian Development Bank 1: 50 Asian cities benchmarked by ADB 6 While India faces water shortage in near future, it already is facing significant issues in Urban areas Urban Water Requirement / Availability, 2007 Million Litres per Day Water Supply in a day on average, 2000 Hours Sewage and Waste Water Generation in Treatment, 2005 Million Litres per Day DomesticIndustrial + Indian Population in Urban Areas, 2006 - 2025 Millions ?

7. India has one of the lowest water tariff and tariff hike is a very sensitive issue  With abundant rainfall and extensive river systems, India has historically been a water rich country  Water has been considered “God’s gift” leading to water not seen as critical or finite resource that needs to be managed  Need to have a national regulatory authority to regulate water consumption, as for other natural assets such as air spectrum, is not easily conceived Germany United KingdomUnited KingdomUnited KingdomUnited Kingdom Turkey Indonesia United StatesUnited StatesUnited StatesUnited States China India Mexico Chile South AfricaSouth AfricaSouth AfricaSouth Africa Common public perspective to water in India Price to customers, 2009 USD per 1000 Litres  Common psyche about water as a “free resource  There is a lack of political will to consider increase in water tariff  Indian Municipalities rarely recover their costs of operations given low tariff rates 7

8. Several municipal water bodies have poor operational and financial health Source: Urban Water India, report by McKenzie-Ray, Asian Development Bank  ~45% of Municipal water supply is leaked - does not generate revenue  Connections not metered in ~40% cases CityCity Size in India (Rank) Leakage (%) Connections Metered (%) Nashik216080 Delhi25356 Nagpur135240 Hyderabad650na Bangalore34596 Kolkata43510 Rajkot2523na Chennai517na Mumbai11375 Municipal Leakage and Metered Connections, 2010 Percentage, Millions 8 Average Meter Connection per Employee, 2003 Count Operating Ratio, 2007  Operating Ratio is defined as O&M Costs / Revenue  Operating Ratio more than 1.0 indicates utility is not able to recover even O&M costs  Ideally a utility should have a operating ratio less than 1.0 to cover for capital expenditures  Most Indian utilities are performing poorly

9. Private participation is expected to help in the following areas 9 More efficient operations and improved operating ratio Access to funds for capital improvement Access to latest technology and tools including MIS Experience of urban water management in other geographies Knowledge and skill transfer to municipal body staff Better consumer complaint handling systems

10. Agenda I.India Urban Water Scenario II.JUSCO Mysore Experience III.Future of Sustainable Water Management in India 10

11. A TATA Enterprise India’s only private sector integrated civic service provider Services:  Water & Waste Water Management  Power Distribution and Infrastructure  Solid Waste Management  Construction Services  Integrated Maintenance  Environment Management Jamshedpur A town built on a promise JUSCO – A Comprehensive Urban Infrastructure Service Provider Purpose 11

12. National Urban Water Award for Consumer Satisfaction, 2009 Total Productive Maintenance (TPM) Excellence Award held at Kyoto, 2008 JUSCO received Global Water Intelligence Award in London, 2008 Asian Water Management Excellence Award 2008 JUSCO has been recognized for excellence in Urban civic services 12

13. Mysore – A Heritage city in South India Karnataka Mysore 13 Mysore City Facts Area: 128.42 km 2 Population: 1,000,000 Location: 12°18′N 76°39′E Elevation: 763 metres (203 ft.) Demon Mahishasura supposedly k killed in this town One of the princely states at time of independence Strong Arts Heritage “Cultural Capital of Karnataka ” Mysore History Mahishasura Mysore Palace Mysore Economic Profile Jayalakshmi Vilas Tourism Hot spot within Karnataka Large Software exporter Significant handicrafts industry Sandalwood carving, Bronze work,

14.  Source of water Cauvery river fairly dependable  Civic Services administered by a Municipal Corporation (MCC)  City Council has a Mayor and Deputy Mayor; 65 elected Corporators each representing a Revenue Ward.  Core municipal area about 84 sq km. City expanding and MUDA responsible for planning & development; Master plan area: 150 sq km.  Karnataka Urban Water Supply and Drainage Board (KUWSDB) is responsible for water supply Mysore Water Distribution Background Mysore Urban Development Authority (MUDA Boundary) Mysore City Corporation (MCC) Cauvery River Mysore Water Distribution Background 14

15.  Water available for 3-5 hours per day in West Zone and every alternate day in East Zone  Water availability at erratic hours – middle of night, very early morning etc.  Inadequate water pressure, requiring people to install booster pump on water lines  Water contamination due to old / rusted pipes Issues for Consumers Mysore Water Distribution facing significant issues…  Bulk water production assets have outlived age  KUWSDB is implementing a bulk augmenting arrangement  Distribution system in the city dates back more than 100 years  18 Boosting stations provided to provide pressurized water  Around 20,000 unauthorized connections over a base of 126,000  ~ 80% meters not functional  Tap pressure ~ 3-5 m, as opposed to 7 m, as per norms in India Background for Mysore Distribution 15 Issues for KUWSDB/MCC  Inspite of a good water source (Cauvery river) being close, there is additional cost borne for bore wells and tankers to meet customer demand  NRW in excess of 40%  Poor collections from consumers  Low tariff levels – many consumers billed on avg consumption because of non functional meters +

16. Mysore Civic bodies envisaged a program to solve water issues through private participation  Name of Project……………  Job Description……………  Client………………………  Project Aim…………………  Contract Start Date………  Completion Time…………  Value………………………  Funding arrangement  24X7 Water Supply performance based management contract in Mysore city.  Conversion of intermittent to 24/7 continuous water supply system for 130,000 connections  Mysore City Corporation (MCC) & Karnataka Water Supply & Drainage Board (KUWSDB)  To enable a profitable Urban Local Body (ULB); Reduce losses and improve consumer experience by providing 24x7 water  28/01/2009  72 months  Rs. 1,620 Million (~USD 36 Million)  JNNURM:State Govt:MCC – 80:10:10 16

17. Abstraction / Treatment TransmissionDistribution Waste Water Collection and Treatment Party Notes KUWSDB/MCC Contractor (Jusco)  Around 240 MLD water bulk supply from Cauvery river tapped at 3 different areas  4 Water Treatment Plants (WTP) under management by KUWSDB  Bulk water to WTP and Treated water to Master Balance Reservoir (MBR) under scope of KUWSDB  6 MBRs to balance water supply having capacity of 126 ML  170,000 connections of which 120,000 authorized connections  1700 KM of piping network  Consumer complaint handling  Metering and Billing  Revenue collection improvement Responsibility for entire water cycle to be shared between public and private parties Urban Water Supply Cycle  Responsible for waste water collection and treatment before release to Cauvery waters KUWSDB/MCC 17

18. Mysore Project to be executed in three phases Phase 1: Preparatory Phase 2: Rehabilitation Phase 3: Management Study existing water infrastructure & service Prepare O&M plan Topographical and customer survey for for compilation of customer database Hydraulic network modeling & design for rehabilitating the intermittent Supply network to Continuous Water Supply Operation, maintain and improve facilities and provision of water services Implementation of Final Investment Plan involving procurement, construction (new network, valves, meters, customer connections, creation of DMA etc), commissioning Implementing Integrated Management Information System (IMIS) Operation, and maintenance phase 1 year3 Years2 Years 18  India’s largest PPP project covering a population of 1 Million  Rehabilitation of ~ 1700 KMs of pipeline, pump stations, electrical and allied work

19. Salient Features of the Contract…  Tarriff fixed by Municipal body, Operator to bill consumers and pass the revenue to the municipal body  Risk sharing between Urban Local Body (ULB) and Contractor  Investment risk with ULB / Government (source of funds)  Tarriff risk with ULB  Design and Construction risk with Contractor  Performance risk with Contractor  Operation risk with Contractor  Collection risk with Contractor  Performance based management contract Revenue and Risk Sharing Performance Gurantees  Contractor revenue linked to several performance parameters Performance Parameter Target Number of connections with 24x7 Progressive Revenue Improvement% improvement over baseline revenue Revenue Water in 24x7 area 85% Complaint Resolution98% Leakage Levels25% Quality Compliance100% Pressure Compliance95% 19 +

20. JUSCO Approach for Project Execution Development of Capital Improvement Plan  Asset Mapping  Measuring bulk inputs and outputs  Base lining of losses, existing service levels  Establishment of DMAs, Water Balance  Hydraulic Modeling & Investment Plan  Customer centre with SLGs defined  Standardization of O&M practices  Active leakage management  Meter Management  Incentive based billing and revenue collection  Integration of mapping, billing, customer care & network management  Safety Management  Total Productive Maintenance (TPM) Practices 1 Rehabilitation of existing network Operations and Maintenance of existing network  Work break down packages for execution  Prioritizing the works for execution  Implementation of Rehab plan  Service level targets delivered in stages  Manage Issues Relating to Change in supply pattern to 24X7 2a 2b 20

21. Jan 2009 Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Contract Agreement – 28 Nov 2008 Project Start Jan 2009 Project Start Jan 2009 First Performance Target – 10k 24x7 connections We are here Next 6 monthly milestone of 70k 24x7 connections 12 months Preparatory Phase 24 months Maintenance Phase 24 months Maintenance Phase 36 months Operation & Rehabilitation Phase Start of 6 monthly Performance Milestones Connections, 2009 – 2014 Units Project close to mid point in duration

22. +14% 20102009 +40% 20102009 2010 +22% 2009 +19% 20092010 Water Quality Percent Water Availability Percent Metering Percent Consumer satisfaction score, 2009 – 2010 Percent Top factors in consumer satisfaction score* *Out of 8 factors including others such as Collection, Billing, Safety Measures and Behavior of staff 95 76 60 x Importance to customers Already improvement in consumer satisfaction noticed Independent study by AC Nielsen India 22

23. Agenda I.India Urban Water Scenario II.JUSCO Mysore Experience III.Future of Sustainable Water Management in India 23

24. Indian Utilities face several challenges (1/2) 24 Challenges Possible way forward thru PPP approach * Jawaharlal Nehru Urban Renewal Mission Weak focus on customer  Improve service delivery thru introducing robust operation Management processes  Consumer focus through 24x7 complaint handling and prompt response  Capture consumer data for decision making and providing analytical support for solving issues thru IT enablement  KPI for customer service level guarantee 1 Low water tariff resulting in poor recovery on investments  All connections to be metered backed up by efficient meter management process  Move from flat tariff to consumption based telescopic tariff structure to reflect economic status of the consumer and the usage, including subsidy tariff for “Lifeline supply” and facilitating demand management  Cross subsidy between domestic and industrial/commercial connections in tariff structure 2

25. Indian Utilities face several challenges (2/2) 25 High operational costs and not satisfactory staff productivity  Adoption of technologies and good management practices  Meticulous benchmarking of good practices and processes  Ring fencing of accounting system  Structured skill enhancement programme for ULB staffs 3 High level of Transmission & Distribution losses  Track and report NRW for every urban ward  Active Leakage Management  Physical audits to address illegal connection 4 Challenges Possible way forward thru PPP approach * Jawaharlal Nehru Urban Renewal Mission Crumbling Infrastructure and limited funds for capital maintenance or service improvement  Improved revenue collections to improve funds availability backed up by efficient IT enabled consumer billing process  Possible corporatization for revenue and cost management thru proper ERP module  Support from State and Centre such as JNNURM*  Support thru soft loan from multilateral agencies  Last mile connection cost to be borne by consumers to reduce investment  Additional revenue thru NRW reduction and tariff restructuring to repay loan and recover O&M cost  Efficient use of assets with periodic good maintenance practices  Efficient and innovative hydraulic modeling of network to reduce capital investment 5

26. How Private participation can help ULBs (1/2) – example JUSCO’s experience in Jamshedpur 26 ParameterUnit Results (2005) Baseline Population Covered Metered Connections NRW Service Guarantee Compliance Failures in Water Systems Operating Ratio % of Total % No per Month O&M Cost / Revenue 67% ~0 36% 77% 44 1.07 JUSCO was formed as a corporate urban utilities service provider for Jamshedpur town in 2004. Staff/1000 connections Nos > 8.0 Results (2010) 85% 30% 9.5% 99% 1.1 0.82 4.03

27. How Private participation can help ULBs (2/2) – example JUSCO’s experience in Haldia 27 ParameterUnit Results (2008) Baseline Water Production Water Sale NRW Service Guarantee Compliance Critical equipment availability MGD % % of Total % 19.7 15.2 25% NA 85 JUSCO took over Haldia city water supply as BOT cum Concession agreement with Haldia Development Authority (HDA) from Nov 2008. Results (2010) 27 23.6 9.7% 99% 94

28. Mid DecadeEarly 2000Mid 90s20102015 Interest Activity Key Projects Overall momentum for PPP in Water Sector  High Interest by Foreign Players  New Concept for Indian Companies  First initiatives  Poor results and lack of momentum  Many projects grounded  Very little interest  Ineffective push from the Government  Few projects  Onset of pessimism on Water PPP  High Government focus  Domestic Interest  High level of Public and NGO opposition  High profile projects grounded  Renewed interest by International Cos.  Increased involvement by Domestic Cos.  Many ongoing projects  Commercial Success being closely monitored  Pune  Hyderabad  Goa  Bangalore  Sonia Vihar WTP  Mumbai Kurla East  DJB Pilot  Bangalore DMA  Sangli  Latur  Madurai  Chennai  Nagpur  Salt Lake*  Mysore*  Haldia* Source: CRISIL Private sector participation in urban water management is becoming popular after initial reservations 28 Graph Indicative * JUSCO Projects

29.  Develop regulations that assure certainty of future cash flows to the extent possible  Provide political commitment for PPP as water is not perceived as a simple commodity by either the consumers or the Government  Align economic interest of all parties  Accept that profit from water business is OK  Define PPP projects on a holistic basis  Encourage plurality of approach and establish a framework that accepts failures  Offer a project with detailed project due diligence including adequate stake holder engagement Source: ILFS Private Sector Expectations from Government for Water Utilities Market Development 29

30. 30 Thank You