Piped water, unlimited

Piped water, unlimited

A desalination plant coupled with a new business model boosts Chennai's water supply.

Today, R. Sathyalaksmi is friends with her neighbours again. A resident of Minjur in north Chennai, she and her neighbours had been forced by circumstances into frequent spats over the past few years. Tensions, after all, do run high when you have to queue up at an unearthly hour with the family collection of plastic pots for the water tanker.

Minjur once had plenty of groundwater, but the water table was depleted by excessive use to feed the needs of a growing city, and sea water had contaminated the sub-soil water. "Lack of sleep and excessive physical work reflected on my health," says the 35-year-old mother of two. "Things look a lot better now," she says, referring to the extra supplies from a desalination plant commissioned recently. Piped water supply to her area is a reality again. So is the bonhomie among residents.

A tidal wave of business

  • India's municipal water supply market is worth Rs 887 crore today
  • The market is growing at 10 per cent a year in real terms and 21 per cent in value terms
  • Waste water recycling could be a Rs 6,018 crore business by 2015
  • To meet the water needs of the entire population, projects adding up to Rs 10,926 crore are to be awarded over the next six years
  • Seawater desalination for industrial use could increase from a Rs 330 crore business today to Rs 821 crore in 2015
Residents in most parts of Chennai live in constant fear of a monsoon failure - the rains recharge the reservoirs and groundwater. The United Nations Development Programme mandates a minimum of 150 litres of water per person per day. So, Chennai, with its population of 10 million, needs 1,500 million litres per day. Add to that the industrial need, and the city's total water requirement is 2,000 mld.

However, the Chennai Metro Water Supply and Sewerage Board, popularly known as Metro Water, manages to supply an average of 1,000 mld. People bridge the gap by getting their own bore wells dug. With no perennial river nearby, Chennai has always depended on rainwater stored in reservoirs and tanks. In the 1970s, when its population was 1.75 million (1961 Census), the city had close to 35 lakes and tanks. Over the past four decades, urbanisation has eaten up many of these reservoirs and tanks. The population has increased to about 10 million today, but the government has built just two water supply projects. The 230-km pipeline from Veeranam Lake in Tamil Nadu brings in 180 mld and the Krishna Water Scheme around 500 mld, depending on what the neighbouring Andhra Pradesh releases from the Krishna river.

In July 2003, Tamil Nadu passed a law that made it mandatory for every house to install a rainwater harvesting system. Things were better for the next few years, with the state getting some good rains. But everything still depended on the monsoon. The state was aware of the potential of seawater but desalination was an expensive option, especially since Chennai's citizens do not have to pay for their water supply. Banks were reluctant to fund any desalination project.

That was until the identification of a unique business model by IVRCL Assets and Holdings, which then went ahead and implemented it with the help of technology from Befesa of Spain, through a joint venture, Chennai Water Desalination Ltd. Its 100 mld desalination project at Minjur, set up at a cost of Rs 600 crore, had the backing of Metro Water. IVRCL accepted certain facts: desalinated water is expensive, the process is power-intensive and bankers would seek greater levels of comfort and stringent guarantees for financial closure.


In April 2007, the National Institute of Ocean Technology had tested a barge-mounted desalination plant with a capacity of 1 million litres a day. Positioned 40km off the Chennai coast, the plant had used low-temperature thermal desalination. It was dismantled after a brief but successful run and the institute now wants buyers for this technology.
So IVRCL and Metro Water entered into an agreement that had a high comfort level for bankers and also lowered the cost per litre. A take-orpay agreement bound Metro Water to pay the maintenance and water charges of Rs 52 per kilolitre even if it does not take the water from the desalination plant. The state guaranteed a letter of credit. The project's financials are now backed by a Rs 30-crore escrow account for upfront payment with a topping facility for two times that amount, and priority access to Metro Water's receivables. A force majeure clause was also included to ensure that the project does not fall prey to political upheavals.

Keeping in mind the interest charges, operation and maintenance costs, IVRCL will operate and maintain the project for 25 years before transferring the assets to the state. It hopes to generate surpluses after nine years. The long period under the build-operate-own-transfer or BOOT model ensures that Metro Water pays only 5.2 paise per litre, or Rs 16 crore a month.

This includes the cost of power and replacing the membrane in the filters. "With these checks and balances, we have access to reserves necessary for working capital to run the plant for 7-8 months even in the worst scenario,'' says S. Ramachandran, Managing Director of IVRCL Assets & Holdings, and Director of Chennai Water Desalination.

Without this kind of commitment from the government, it would have been difficult for a private party to commission a plant of this scale, he explains. Ramachandran says Maharashtra, Gujarat and Andhra Pradesh have shown interest in the business model.

The Tamil Nadu government is pushing for more desalination plants. VA Tech Wabag, which provides water treatment and supply solutions, is setting up a 100 mld plant.

Experts such as Poornima Jalihal of the National Institute of Ocean Technology are against large-scale desalination. "They are highly power intensive and there exists the danger of ecological imbalance if the dense saline waste is thrown into the sea continuously at a particular spot," she warns.

Some suggest a balanced approach. In Chennai 400-500 mld of water is discharged into the Buckingham Canal after secondary treatment. Rajiv Mittal, MD and CEO of VA Tech Wabag, says this water can be used after proper treatment.

"Eighty per cent of sewage water can be recovered, and the cost of putting up a tertiary treatment plant is about half that of a desalination plant," he says. In Singapore, Mittal says, water recovered from sewage accounts for 15 per cent of the main supply.

"Conservation and recycling may be cost-effective solutions no doubt, but for Chennai residents the Minjur project is like an unexpected downpour on a sunny afternoon," says Mittal.