Water sector in India: Overview and focus areas for the future
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1 Water sector in India: Overview and focus areas for the future PanIIT Conclave 2010 kpmg.com/in
2 1 India, home to 16 percent of the world s population, has only 2.5 percent of the worlds land area and 4 percent of the world s water resources at its disposal. Precipitation in the form of rain and snowfall provide over 4,000 trillion liters of fresh water to India 1. Most of this freshwater returns to the seas and ocean via the many large rivers flowing across the subcontinent. A portion of this water is absorbed by the soil and is stored in underground aquifers. A much smaller percentage is stored in inland water bodies both natural (lakes and ponds) and man-made (tanks and reservoirs). Of the 1,869 trillion liters of water reserves, only an estimated 1,122 trillion liters can be exploited due to topographic constraints and distribution effects 2. The demand for water has been increasing at a high pace in the past few decades. The current consumption in the country is approximately 581 trillion liters with irrigation requirements accounting for a staggering 89 percent followed by domestic use at 7 percent and industrial use at 4 percent 3. Critical Issues in India Burgeoning demand for water Demand in the country is projected to very soon overtake the availability of water. In some regions of the country, it has already happened. Graph 1 shows the likely trend of growth in demand. The rapid increase in population, urbanization and industrialization has led to a significant increase in water requirement. In the next decade the demand in water is expected to grow by 20 percent, fueled primarily by the industrial requirements which are projected to double from 23.2 trillion liters at present to 47 trillion liters. Domestic demand is expected to grow by 40 percent from 41 to 55 trillion liters while irrigation will require only 14 percent more ten years hence, 592 trillion liters up from 517 trillion liters currently 4. billion cubic meter Graph 1: Demand vs. supply curve in India E 2025E 2050E Water Supply Water De ma nd Source: Standing Sub-committee of Ministry of Water Resources, Development Alternatives, KPMG Analysis 1 Technology Mission Plan Document Union Ministry of Science & Technology 2 Ministry of Water Resources, Development Alternatives 3 NCIWRD, Report of the Working Group on Water Resources for the XIth Five Year Plan, KPMG Analysis 4 NCIWRD, Ministry of Water Resources, KPMG Analysis
3 2 The per capita availability of water has significantly come down and is likely to come down further with the growing population and demand. As per the Ministry of Water Resources per capita water availability in 2025 and 2050 is estimated to come down by almost 36 percent and 60 percent respectively of the 2001 levels. Graph 2: Per capita water availability in India 2000 Actual Fo recast Percapita water availabilit y (cub ic meters) Popu lation (Millio n) Source: KPMG Analysis of data from Census of India, Ministry of Water Resources, Development Alternatives
4 3 On an absolute basis, countries are defined water stressed when annual water supplies drop below 1,700 m3/ person; and water scarce below 1,000 m3/person. A country is defined as suffering high relative water stress if demand is greater than 40 percent of the renewable water supply 5. India has been constantly fairing low on the twin measures of water deficiency absolute standard as well as the relative standard. Over the coming years the demand situation is projected to become worse. Life for the average city dweller in India would become a lot tougher. Water supply for the average citizen could drop from an average of 105 liters to only 65 liters a day with a large section of the population having no access to potable water at all. Regional disparities There is a regional disparity in availability of water across the country due to uneven rainfall. Most Indian cities, including Chennai and Mumbai, depend on rainfall for their yearly water supply. Chennai has been suffering from water shortage for decades. The requirement for the city and the adjacent areas is around 1,470 million liters per day, which includes commercial and industrial demand. But the city gets a daily supply of only 600 million liters per day from sources such as lakes and reservoirs, which are dependent on the erratic monsoon. The city has recently inaugurated a desalination plant, adding 100 million liters of reclaimed water to the city s drinking supply daily. Groundwater depletion and contamination Irrational use has led to higher groundwater consumption than recharge. Groundwater levels have reduced drastically in the last 60 years. Of all the 5723 blocks assessed across India by the Central Ground Water Authority, 839 have been found to be over-exploited, 226 are classified as critical, while 550 are under the semicritical tag. Thus, around about 29 percent of India s ground water blocks are considered to be in need of very careful and judicious use henceforth 7. Inefficiencies in usage and supply Irrigation water usage across the country is inefficient. As per figures released by the Union Government in 1999, India had an irrigation efficiency of ~36 percent in and projected that efficiency would have to increase to 60 percent by 2050 to bring a balance in the demand and supply of water. A model of water demand and supply for 118 countries accounting for 93 percent of the world s population developed by the International Water Management Institute (IWMI), shows that a 50 percent increase in demand of water by 2025 can be met by increasing the effectiveness of irrigation 8. Domestic and industrial usage of water is also inefficient and one of the key reasons for this is the lack of economic pricing of water. Governments have largely desisted from pricing water at its real cost. The unrealistically low prices tend to encourage overuse and wastage. Unaccounted-for water (UFW) is high due to several reasons including old water systems and poor maintenance, illegal connections, leakage, and lack of proper mapping of distribution system. Average unaccounted for water in India is pegged at almost 32 percent 9. The Confederation of Indian Industry (CII) estimates that the typical Indian municipal water utility has the potential to improve water pumping system efficiency by 25 per cent thereby increasing efficiency of supply 10. Water accounting provides support to sustainable and economic water markets. To this end, the creation of a robust water accounting framework is integral to successful implementation of a water policy. 5 Samuel T. L. Larsen. Lack of Freshwater Throughout the World 6 Chennai Water Desalination Limited: 7 Central Ground Water Authority 8 International Water Management Institute (IWMI) Data Book of Water Utilities in India 10 Alliance to Save Energy, USA. Municipal Water and Energy Efficiency Projects in India
5 4 Large investment requirement Investment in urban water supply and sanitation has increased during the first decade of the 21st century, driven by increased central government grants made available under Jawaharlal Nehru National Urban Renewal Mission and funding from development agencies such as ADB, World Bank and JICA 11. The 11 th Five-year plan ( ) foresees investments of INR 127,025 crore (USD 28.6 billion) for urban water supply and sanitation, including urban drainage and solid waste management. However, overall investment required in the sector is estimated to be INR 620,000 crore (USD 129 billion). India currently spends about 6 percent of its GDP on infrastructure, less than several countries in Asia, and nearly half of the 11 percent invested by China. While private sector interest in the sector has increased, critical barriers such as poorly written contracting documentation, large timelines to project award and suboptimal risk sharing exist. 11 ADB: World Bank: go.worldbank. org/e9ro7f96w0; JICA:
6 5
7 6 Key Imperatives for various stakeholders in the water sector The reliability, financial sustainability and affordability of water supply and wastewater treatment services need urgent improvement. It is important that key steps are taken by various stakeholders to improve the situation Key imperatives for the central government: To modify the National Water Policy to emphasize re-use of treated wastewater and reduction in groundwater usage. This is especially relevant for sectors like agriculture that consume over 80 percent of fresh water supplies. Expand funding for water source development, sewerage networks and sewerage treatment plants under schemes like JNNURM Increase technical assistance grants for capacity building of Urban Local Bodies to manage Public Private Partnership Projects Increase technical assistance grants for ULBs to set up sewage treatment facilities Increase technical assistance grants to ULBs for loss reduction, sewage treatment and recycling and groundwater recharge projects. Key imperatives for state governments: Define roles and responsibilities of each entity in the sector Create regulatory institutions to oversee the management of water resources and pricing of bulk water Initiate reforms of Urban Local Bodies to diversify revenue sources, improve creditworthiness, facilitate operational autonomy, improve technical capabilities Improve information sharing of state-wide water resources among agencies responsible for planning regional development Support ULBs in developing robust water supply and wastewater treatment project structures to attract private investment. Key imperatives for urban local bodies: Upgrade planning capacity within local bodies by increasing number of planners, environmental engineers Initiate gradual increase in water tariffs to ensure optimum utilization of water resources Develop plans for expanding sewage collection networks and building sewage treatment plants Explore alternative technologies for sewage treatment like Soil Biotechnology based systems and Reed-based systems Lobby to increase water and sewerage tariffs to pay for capacity expansions. Reorganize subsidy system to ensure subsidies reach the poor via targeted, area-based subsidies instead of general subsidies Cut non revenue water by fixing leaks, monitoring water supply quantity and quality. Key Imperatives for technology companies: Engage with government agencies to create policy frameworks that support growth of water reuse, wastewater treatment and standards Invest in research and development for technologies (through investments in pilot projects) and commercial models suited to the Indian cities, towns and rural areas Run awareness campaigns targeted at households to monitor water quality, conserve water and provide education on managing household waste to lower costs of treatment (e.g.: Free distribution of water testing kits, separation of organic and inorganic wastes, use of a dual flush system) Engage with the construction industry on designing projects for wastewater re-use. Key imperatives for agricultural users: Main contribution is to invest in water-use efficiency enhancing technologies such as drip irrigation Organized farmers federations could initiate industrial wastewater re-use projects in areas with industrial activity and declining water availability. Similar initiatives could be taken up by farmers groups in city outskirts. Key imperatives for industrial users: While several industries have initiated zero-discharge projects in their factories/plants, many others continue to discharge effluents without treatment. Self-monitoring and regulation must become the norm for industries that aspire to grow as environmental sustainability and corporate social responsibility are key pillars of differentiation among global firms Industry Associations like CII and ASSOCHAM must facilitate dissemination of best practices in water and wastewater management.
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