`Achieving Sustainability - India`s Needed Water

Report
Amrita and Deakin Universities
International Conference on Sustainable
Development and Governance
“Achieving Sustainability –
India’s Needed Water
Reforms and Restructures”
Dr Michael Porter
Research Professor of Public Policy
Alfred Deakin Research Institute, Australia
Coimbatore, Tamil Nadu, India
12th – 14th December, 2012
The Water Crisis can Spoil
an Indian Century
 The National Commission on Water and the World Bank have agreed: water balances
in India are precarious, unsustainable.
 By 2050 demands will exceed all available sources of supply; pockets of catastrophe.
 Unless desalination becomes economic and affordable thanks to general economic
development. Energy costs say this can be only a part of the story in selected areas.
 Over 15 percent of all aquifers are in critical condition, a number which will grow to
60 percent in the next 25 years unless there is change.
 About 15 percent of India’s food is being produced using non-renewable, ‘mined’,
groundwater.
 The social and economic consequences of continued ‘muddling through’ are huge.
 It’s not just physical capital; It’s the structure of rules, laws and incentives
So …..The challenge in water in India is …
Turning Dead Water Capital into Live Capital
World Bank-GOI Assessment: 2005
“India faces a turbulent water future. The current water development and management system
is not sustainable: unless dramatic changes are made—and made soon—in the way in which
government manages water, India will have neither the cash to maintain and build new
infrastructure, nor the water required for the economy and for people.”
INDIA’S WATER ECONOMY - BRACING FOR A TURBULENT FUTURE
Prof John Briscoe, Harvard, (then Head of Water, World Bank) and Dr R.P.S. Malik, University of Delhi (Editors),
drawing on papers by:
The evolution of national policies and programs (Mr. A.D. Mohile, former Chair, Central Water Commission)
• The evolution of water development and management, (Mr. A Sekhar, Adviser, Planning Commission)
• The evolution and performance of World Bank work on water in India (Dr. R.P.S. Malik, University of Delhi)
• Water and growth (Professor Ramesh Bhatia, Institute of Economic Growth, University of Delhi),
• Water and poverty (Dr. R.P.S. Malik, University of Delhi)
• Water and environmental sustainability (Mr. George Varughese, Development Alternatives)
• Water and energy (Professor Ramesh Bhatia, Institute of Economic Growth, University of Delhi)
• Pricing and financing (Professor Sebastian Morris, Indian Institute of Management Ahmedabad)
• Water rights and entitlements (Dr. Maria Saleth, International Water Management Institute, Colombo)
• Accountable institutions (Dr. Tushaar Shah, International Institute of Water Management, Anand)
• Moving to scale (Dr. Nirmal Mohanty, Infrastructure Finance Development Corporation)
• The political economy of change (Professor V.S. Vyas, Institute of Development Studies, Jaipur)
So: What Does a 2012 Stocktake Reveal?
The Constraints of Nature

India has a highly seasonal rainfall,





50 percent of precipitation in just 15 days
90 percent of river flows in just 4 months
The storage, treatment and asset maintenance needs…are huge
But while water is affected by nature, the absence of structures for managing scarcity kills reform
In organizational structures, incentives, trading so that water gets to the most highly valued uses
Create a critical need for market tools,
institutions, incentives and accountability






Defined entitlements and rights to sell, vesting current rights
Pollution, discharges and losses need to be charged for
Trading both water and entitlements, where Australia has leading expertise
Need to invest in new allocation structures, trading and technologies
Expertise, training and education support for a dynamic growth industry
To treat water with the respect a really scarce and vital essential service
deserves
Sectoral GDP and water withdrawal
Population data
Population (million)
India:
Key Water
Investment
and
Coverage
Data
Urban
population
Rural
population
Total
population
2008
349.5
(29.5%)
835.1
(70.5%)
Growth rate
2016 2005-10 2010-15
426.0
2.5%
2.4%
(32.3%)
0.8%
893.8
1.1%
(67.7%)
1,184.6
1,319.8
1.5%
Agriculture 86.5%
Market drivers
Scarcity
Nominal GOP
$1,206.7 billion
$1,019
GOP at PPP
$3,297.8 billion
$2,784
Water resources and scarcity data
Total renewable water resources: 1,880.0 km 3/yr
Total annual water withdrawal: 645.9 km 3/yr
Per capita renewable reources 2008: 1,587 m 3jy r
Per capita renewable reources 2016: 1,425 m 3/yr
Population facing scarcity 2008: 466,204,000
Finance
Demographics
Priority for wastewater
Water utility data
Global Water
Intelligence
2012
Manufacturing
16.3%
1.3%
GDP data
GOP in 2008
Total GOP
GOP per capita
Industry 5.5%
Total utility water market, 2010
Total utility water supply: 26,500.00 million m 3jyr
Water service coverage: 80.0%
Water population served: 939.0 million
Water network length: 508,000-580,500
Metering penetration: n;a
Non-revenue water: 18.0%
Average water tariff: $0.08jm3
Wastewater utility data
Total wastewater capacity: 2,966.40 million m 3jyr
Wastewater service coverage: 15.0%
Wastewater population served: 176.6 million
Wastewater network length: 161,300 km
Collected wastewater receiving
secondary treatment or better: 24.0%
Average wastewater tariff: $0.01jm 3
Municipal water
capex $1,568.1m
Municipal wastewater
opex $174.9m
Anticipated CAGR 2010-2016: +8.8%
During this period the total market value will increase from
$3,901.2 millionjyr to $6,460.6 million/yr.
Sectoral GDP and water withdrawal
Population data
Industry 25.7%
Population (million) Growth rate
2008
574.8
(43.1%)
2016
699.7
(50.1%)
2005-10
2.7%
2010-15
2.4%
759.1
(56.9%)
697.5
(49.9%)
-1.0%
-1.1%
1,333.9
1,397.2
0.6%
0.5%
Urban
population
Rural
population
Total
population
China:
Key Water
Investment
and
Coverage
Data
Global Water
Intelligence
2012
Agriculture 12.5%
Manufacturing
33.5%
Industry 47.5%
Agriculture 67.7%
Market drivers
GDP data
Scarcity
GOP in 2008
Nominal GOP
GOP at PPP
Total GOP
GOP per capita
$4,327.4 billion
$3,244
$7,926.5 billion
$5,942
infrastructure
Water resources and scarcity data
Total renewable water resources: 2,830.0 km 3jyr
Total annual water withdrawal: 630.4 km 3/yr
Per capita renewable reources 2008: 2,122 m 3jyr
Per capita renewable reources 2016: 2,026 m 3/yr
Population facing scarcity 2008: 391,025,000
Demographics
Priority for wastewater
Water utility data
Total utility water supply: 97,090.00 million m 3/yr
Water service coverage: 94.7%
Water population served: 355.0 million
Water network length: 480,084 km
Metering penetration: n/a
Non-revenue water: 36.0%
Average water tariff: $0.27 jm 3
Total utility water market, 2010
Municipal water
apex $7,783.0m
Municipal wastewater
capex $14,066.7m
Municipal
wastewater
opex
$3,130.8m
Wastewater utility data
Total wastewater capacity: 15,915.42 million m 3/yr
Wastewater service coverage: n/a
Wastewater population served: n;a
Wastewater network length: 315,200 km
Collected wastewater receiving
secondary treatment or better: 62.2%
Average wastewater tariff: $0.12/m 3
Municipal water
capex $17,087.5m
Anticipated CAGR 2010-2016: +8.6%
During this period the total market value will increase from
Population data
Urban
population
Rural
population
Total
population
Sectoral GDP and water withdrawal
Population (million) Growth rate
2008
2016 2005-10 2010-15
18.6
20.4
1.2%
1.1%
(88.7%) (90.1%)
2.4
2.2
-0.6%
-0.6%
(11.3%)
(9.9%)
20.9
$1,013.5 billion
23.9 km³/yr
22.6
1.0%
Agriculture 3.1%
Industry 10.0%
Domestic
14.7%
Manufacturing
Services
69.0%
Total water
11.0%
Nominal GDP
$1,013.5 billion
withdrawal
23.9 km³/yr
Scarcity
1.0%
Agriculture 75.3%
Deterioration of
infrastructure
Australia:
Key Water
Investment and
Coverage
Data
Global Water
Intelligence
2012
Governance
Market drivers
GDP data
GDP in 2008
Total GDP
GDP per capita
Industry
28.0%
Nominal GDP
$1,013.5 billion
$48,420
GDP at PPP
$799.1 billion
$38,176
Scarcity
5
4
Deterioration of
infrastructure
Demographics
3
2
Governance
Finance
1
Water resources and scarcity data
Total renewable water resources: 492.0 km³/yr
Total annual water withdrawal: 23.9 km³/yr
Per capita renewable reources 2008: 23,506 m³/yr
Per capita renewable reources 2016: 21,759 m³/yr
Population facing scarcity 2008: 7,259,000
Priority for wastewater
Finance
Demographics
Priority for wastewater
Water utility data
Total utility water supply: 2,034.00 million m³/yr
Water service coverage: 97.0%
Water population served: 20.8 million
Water network length: 136,845 km
Metering penetration: 95.0%
Non-revenue water: 18.0%
Average water tariff: $1.80/m³
Wastewater utility data
Total wastewater capacity: 1,982.00 million m³/yr
Wastewater service coverage: 94.0%
Wastewater population served: 19.3 million
Wastewater network length: 117,606 km
Collected wastewater receiving
secondary treatment or better: 100.0%
Average wastewater tariff: $1.73/m³
Total utility water market, 2010
Municipal wastewater
capex $1,760.9m
Municipal water
capex $3,518.3m
Municipal water
opex $4,199.5m
$13,202.8m
Total market value
(2010)
Municipal wastewater
opex $3,724.1m
Anticipated CAGR 2010-2016: +1.6%
During this period the total market value will increase from
India Water Expenditures
Utility water expenditure
Utility wastewater expenditure
2,500 -----------------
500 -------------------
2,000
400 - ------:71"'-.....
c
1,500
E
-=----_-_-_-_-_-_-_-_-_-_-_-
-----
c
300
-------------------,-""!:......
E
1,000
o --------------2010
2012
2014
o ------------------
2016
2012
2010
2014
•Water resources
• Network rehabilitation capex
•Operating expenditure
• Network expansion capex
• Treatment plants capex
•Other wastewater
2016
Water market data ($ million)
Municipal water
Water resources
Network expansion capex
Network rehabiliation capex
Treatment plants capex
Total water capex
Municipal water opex
Municipal wastewater
Network expansion capex
Network rehabilitation capex
Treatment plants capex
Other wastewater
Total wastewater capex
Municipal wastewater opex
Total municipal market
2010
2011
2012
2013
2014
2015
2016
1,040.5
226.1
188.4
113.0
1,568.1
1,574.5
625.4
475.6
396.4
237.8
1,735.2
1,629.6
657.9
529.1
440.9
264.5
1,892.4
1,686.6
842.5
528.3
440.3
264.2
2,075.3
1,785.3
992.6
591.6
493.0
295.8
2,373.0
1,894.9
1,028.3
691.7
576.4
345.8
2,642.1
2,011.1
1,181.6
755.2
629.3
377.6
2,943.7
2,134.2
2010
2011
2012
2013
2014
2015
2016
122.6
335.4
92.9
32.8
583.7
174.9
141.4
371.3
107.9
40.3
660.8
181.1
166.7
404.8
133.0
45.1
749.5
187.4
198.0
359.5
210.3
49.2
817.0
216.2
233.7
356.2
247.1
53.6
890.5
248.7
274.1
349.4
288.7
58.4
970.7
284.7
309.3
361.9
314.7
72.2
1,058.0
324.6
3,901.2
4,206.7
4,516.0
4,893.8
5,407.1
5,908.6
6,460.6
Water Assets – Much Dead Capital?
An Unsustainable Situation that is getting
worse with economic development
 Many Indian water assets are what de Soto* calls “dead capital”
 Incentives to maintain dams, pipes, connections are not generally
vested in “owners”. So assets degrade. Customers denied.
 Need for legal ownership of all assets in groups, communities or
companies. Without secure water, other investments at risk.
 Need scope to buy and sell those water and infrastructure
entitlements and have incentives to maintain and enhance.
 Make water investible.
 If assets well vested and exchangeable, then they can secure
other investment loans – becoming live capital!
* Hernando de Soto: The Mystery of Capital: Why Capitalism Works in the West
and Fails Everywhere Else, 2000
A personal story, from Madurai, 1960s
• In the 1960s I travelled in Tamil Nadu and India as part of
an Australian student group – at this point with a clinic
• I took a not unusual photo at a lake where water sharing
was going on out of Madurai, featuring:
• Washing, clothes and personal
• Discharge of waste water
• Animals drinking
• Collection of drinking water
• Life expectancy was around 27
• One solution is simple rights for water purposes, fees and
bans on particular uses. Easier said than enforced. But
necessary and at the core of reports and recommendations.
The “Must Do’s” from the Reviews
 Stimulating competition in and for the market for irrigation,
water, and sanitation services;
 Empowering users by vesting clear, enforceable water
entitlements; genuine water rights, and tradable
 Ending the culture of secrecy - transparency the rule;
 Introducing incentive-based, participatory regulation of
services and water resources;
 Putting the sector on a sound financial footing;
 Investing heavily in the development of a new generation of
multi-disciplinary water resource professionals;
 Making local people the first beneficiaries of water projects
Institutional Reforms the Key
• India needs a re-invigorated set of public water institutions,
• New private and locally controlled & profitable water businesses
• Instruments for efficient allocation are required;
 vested water entitlements, and discharge fees (wastewater…)
 contracts between providers and users,
 pricing incentives which govern the use of water;
 stimulating competition in and for the market
 for irrigation, water, discharges and sanitation services;
• Empowering users by giving them clear, enforceable water
entitlements;
• Ending the culture of secrecy and making transparency the rule;
• Introducing incentive-based, participatory regulation of services
and water resources;
From Tube Wells to Renewable
Power and Nuclear Desalination
The tube well, and “green revolution” transformed agriculture
20 million wells, 50% of irrigated agriculture; helped the poor
Evidence now points to economic instruments - water is scarce
The urban middle class make do with irregular, unpredictable,
and often polluted public water services.
They have developed coping strategies which include
investments in household storage, but no real price signals
Purchasing of bottled water for drinking, installation of
household water purification – but wholesale market missing
Desalination – reverse osmosis
• Makes for an infinite supply of potable water at a
price – with pumping and filtering costs
• Water becomes like capital – can borrow as much as
you like at your risk price
• For coastal areas that are economically efficient,
desalination is sound water insurance, enables firms
to plan on water security. But need sound economy.
• Climate independent water supply lowers capital and
risks for business – future not really climate affected
• The question is the price, and that embodies energy
costs of pumping (heavy) sea water through reverse
osmosis membranes – separating saline and solids
from clean water
Conclusion – Sustainability requires changes
 The water market is fundamental to all else – a risk centre
 Water suffers varying scarcity, but the Indian sector barely
applies the (economic) structures for managing scarcity
 Australia suffers too: but has pioneered structures that
vest water entitlements, allow auctions and trading, and
treat water as if it is scarce; which it surely is!
 So what we need to do is create the arrangements well
described in the World Bank volume in 2005
 Written in part by some of India’s leading economists and
water experts: and recognised as a world class study
 And apply those recommendations or else the other
economic breakthoughs and the smarter Indian economy
will flounder on the failures of the water sector
About the speaker
 Michael Porter holds a PhD from Stanford University and BEc Hons from University
of Adelaide
 He is Research Professor of Public Policy at Alfred Deakin Research Institute, Deakin
University, Victoria, Australia.
 He has previously taught at Stanford, Yale, ANU and Monash Universities
 His projects in India have been funded by the World Bank, ADB, Macquarie Bank and
AusAID and included a water and public works project in Hyderabad, AP; a Housing
and Decentralisation project led from Delhi. Other water, energy, electricity trading
and other infrastructure projects for the World Bank, ADB, ASEAN, and AusAID have
been in Indonesia, China, Vietnam, Fiji, Philippines, Thailand, Burma and Samoa
 Michael has also worked for the International Monetary Fund, Research Department;
Washington DC; The Reserve Bank of Australia, The Department of Prime Minister
and Cabinet, Canberra; ; Macquarie Bank,The Federal Reserve Board, Washington
DC,

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