India Suffers from Water Security Problem
With the second largest population in the world and a growing economy, India is a big water consumer. However, as a result of limited water availability and poor infrastructure, India faces a number of challenges. The Water Security Index, created by the Asian Development Bank (ADB), gives India an overall score of 1.6 which is low compared to other Asian countries. Among the five components of the index India gets the lowest scores for household water security, urban water security, and environmental water security. This indicates that India suffers from serious water problems including: (1) poor ability to satisfy household water and sanitation needs, and poor ability to meet hygiene requirements for public health in all communities; (2) insufficient urban water-related services, such as water supply, wastewater treatment, and drainage; and (3) river basins that are in poor health.
The Gap between Wastewater Generation and Treatment Capacity
In the past decade, wastewater generation in India increased from 26,254 MLD (million litres per day) in 2003-04 to 47,459 MLD in 2011-12, with a compound annual growth rate (CAGR) of 7.69%. Although the quantity of wastewater treated increased with a CAGR of 10.85%, the level of wastewater treatment is still much lower than the generation level. In 2011-12, as little as 33.8% of wastewater discharged was treated. A government report, Urban and Industrial Water Supply and Sanitation for the Twelfth Five-Year Plan (2012-2017), identified that flawed planning for sewage treatment was a major cause of wastewater problems. The report summarized the major issues as follows:
- Cities worry about clean water supply but not the wastewater this will generate
- India lacks national accounts for the excreta it generates and the excreta it treats
- The challenge of sewage collection and treatment has not received adequate attention
- No Indian city is confident enough to claim to have a complete sewage system, which can keep up with sanitation and pollution challenges
- The capital intensity of the current waste system results a situation where cities can only provide for a few and not for all. Smaller cities cannot even afford a sewage drainage system, let alone a sewage treatment system
- Some sewage plants do not function because of high recurring costs (such as electricity and chemicals) or do not have sewage to treat as a result of poor pipeline systems that convey sewage to the plants
Investment Opportunities in Indian Wastewater Sector
Industrial segment accounts for more than half of the wastewater market
As a consequence of the huge gap between wastewater generation and treatment, wastewater treatment has become a lucrative market. Some large global and domestic players such as Degremont, Doshi Ion, Driplex, Ion Exchange India, Thermax, VA tech Wahag and Veolia Water, have already engaged in the India water and wastewater treatment market. According to Avalon Global Research, participants of the water treatment market (including input water and wastewater treatment) in India can be classified into three types, namely, large players (capital investment greater than USD1 million), medium players (capital investment between USD0.22 – 1 million), and small players (capital investment less than USD0.22). Fewer than 20 large players occupied 30% of the market share, while 600 small players shared only 20%. The remaining 50% of market share is occupied by 200-250 medium players. The value of the wastewater treatment segment of the market is around USD1.2 billion and accounts for 60% of the total value of the water treatment market in India. The wastewater treatment market can be further divided into residential, commercial, industrial, and municipal usage, which account for 3%, 9%, 55% and 33% of the market respectively.
Drivers for sector growth
A US government agency, Export.gov, estimated that the value of the India wastewater treatment market will reach USD3.25billion by 2030. In accordance with this projection, Censere has identified several possible drivers for the growth.
- Poor infrastructure and low wastewater treatment capacity is one of the major water problems in India. In some cities and towns, such as cities in Karnataka, Gujarat and Andhra Pradesh, wastewater treatment facilities have the capacity to handle less than 12% of wastewater discharged. The high proportion of untreated discharged water will cause hygiene problems and constrain economic growth. The Indian Government is unlikely to ignore this problem and improvement of wastewater treatment systems has already been included the Jawaharlal Nehru National Urban Renewal Mission (JNNURM).
- Following the economic development and urbanization of India, growth in power generation, refining, and manufacturing is inevitable. Following these industries many opportunities will be created for providers of wastewater treatment equipment and services. In 2010, the urbanization level of India was 30.9% and the United Nations projects that this will increase to 32.8% by 2015 and then 37.2% by 2025.
- UNICEF predicted that water availability per capita in India will decrease in the next 40 years. In 2011, per capita average annual availability was 1,545 cubic meter/year, but it is projected that this will decrease to 1,340 cubic meter/year by 2025 and 1,140 cubic meter/year by 2050. Stress of water limitation will drive India towards reusing and recycling wastewater.