PPP in waste water management - A Look at China

Every individual, community, city and nation grows till a tipping point after which it needs to evolve and adapt to its environment in order to sustain itself and prosper. With a population of 1.2 billion people and counting, it is safe to say that India has long reached its tipping point.

At this juncture, any government, right winged or left, would find itself stressed and lacking resources to provide stable and well built infrastructure such as roads, health care, electricity, water and waste management. Even with 2013-2014 witnessing a gross tax collection of ₹13.64 trillion (US$210 billion) and not including regulatory fees collected, our nation struggles to create adequate systems. One must take into consideration that the Government needs to provide for several facilities and infrastructure in one amongst many others such as scientific research, agriculture, military defence etc. However, the need of the hour cannot be ignored. It is imperative that citizens have access to basic necessities such clean drinking water in order to ensure good health, prevention of diseases and an acceptable standard of living across various strata of society.. In light of these challenges a partnership between the Public Sector and the Private Sector is often a highly sought after solution. A model which allows governments to execute ambitious projects with the assistance of privately owned, better managed and streamlined corporations while overseeing and regulating the projects, PPP (Public-Private Partnerships) seems like a great way ahead. Yet, over the last two decades several individuals and organisations seem to have developed the opinion that PPPs cause more losses and damage. Perhaps we should look at our neighbour, the People's Republic of China with the eye of a student and with the intention to benchmark our own PPPs.

With 600 million people residing in 655 cities (as per 2008 reports), China is experiencing rapid urbanisation. If the country were to follow current trends, just the urban population itself is projected to pass the 1 billion mark in 2030. This roughly breaks down to 8 mega-cities with over 10 million human beings in each of them.

Accelerated growth has come at its own cost. Social, economic and ecological issues have become a pressing matter for the Chinese government. Sustainability models which were once ignored are now being revisited and studied in order to tackle the obstacles expected in the coming decades.

So what exactly is China doing?

Sector by sector, China is developing Public Private Partnerships. Wastewater Treatment is at the forefront of their priority list because of it's direct impact on the life of Chinese citizens. With growing air pollution also becoming a major concern, the government wants to ensure they resolve the issue of waste water management as soon as possible. PPP are being considered for several reasons such as to reduce the inefficiencies of state run activities and to take advantage of additional financing brought in by private investors. Their model includes:

• Methods to ensure that groups of every economic class receive drinking water

• Increase in accountability and improvement in the governance of managing authorities

• Allowance for a higher level of public participation

• Systems which encourage local bodies to take on the tasks and responsibilities of water management.

It has not been an easy or short path. China began to sow the seeds for PPP back in the 1990s by deregulating the water sector. This allowed private and foreign investors to contribute towards the water supply and waste water management infrastructure.

China has explored several models ranging from complete privatisation of projects to foreign investors holding majority stakes in joint ventures

There are currently an estimated 400 water supply and wastewater PPP projects in the PRC and most of them run on a Build-Operate-Transfer model, allowing for several private players to form partnerships. Treatment of waste water from Shanghai, The Huangpu River and Yangtze River provide surface water sources for urban areas, the population of which exceeds 17 millions.

The Shanghai ZhuyuanYoulian No. 1 wastewater treatment project (ZY1WWTP) is the first mega-ton wastewater treatment plant (WWTP) in Shanghai, which has the capacity of treating 1.7 million m3/day. The JV benefitted from private capital investment, bank loans and was also assisted by the indirect subsidisation provided by the local government. bank loans.. It is worthy of note that in return the JV had to provide an online monitoring system and allow third-party quality checks. This is a great example of how important government involvement and vigilance is.

Under these conditions, the plant serves 23.5 million residents and carries out a minimum treatment of 1.4 million m3 /day.

The service fee that was attached to the PPP is almost 40% below the government's own projected cost.

The Chinese government has been successful in transferring the financial burden of the project from the public to the private sector by aligning the performance of the JV to a variable service fee.

Mr. Arun Lakhani, a leading expert and advisor on PPPs and the MD of Vishvaraj Infrastructure Limited is a great believer in a strong and long lasting relationship being formed between the public and private sector. "Our national highways and expressways now competing with international standards and getting international recognition, stand testament to the fact that Public-Private-Partnerships are a successful model when executed with equal accountability, efficiency and honesty", said Mr. Lakhani.

There is much to be learned from our neighbours across the border and it would be wise of India to pay heed to the rising need for PPPs in major public sectors. With appropriate regulation, monitoring and political will the Indian government can give the Indian Infrastructure scenario the boost it needs to support our growing nation and compete with other first world countries.