Fifth meeting of the Urban Think Tank on financing options for water and sanitation

Fifth Meeting of the Urban Think Tank "Financing Options for Water and Sanitation" 9th June 1998, New Delhi UNDP - World Bank Water and Sanitation Program FOREWORD by Mr J P Murty,IR Joint Secretary Ministry of Urban Affairs & Employment The key to financing the massive investment required in urban infra- structure, particularly in the water and sanitation sector, is to develop , linkages between financial agen- . f cies, technical organizations work- - ing in the sector and municipal decision makers. This information note designed by - * the Urban Think Tank, will provide * you with pointers towards this goal and help you in your quest to finance vital urban services. We at the Ministry of Urban Affairs & Employment feel that the note is a useful source of information. You may, therefore, like to get associated with the Think Tank. You may like to contact the Think Tank or the agencies listed directly. D FID ~~Department for Internvtional D FID Development  The Urban Think Tank Key Financing Institutions: A Profile The Regional Water and Sanitation Ministry of Urban Affairs and Employment (MUA&E) Group-South Asia (RWSG-SA) of the Minisufry an Aairs and Emlyent a &e) UNDP-World Bank Water and Sani- Water suppiy and sanitation is a state subject and the Department.of Urban tation Program has been hosting Development of the Ministry of Urban Affairs and Employment (MUA&E) assists regular meetings of the Urban Think the stpte governments in their programmes by way of formulating broad policy Tank since December 1994. framework, providing legislative support, providing central assistance through centrally sponsored schemes, providing technical guidance, organising training The Urban Think Tank brings together workshops, sponsoring research and development projects and processing practitioners working in the various assistance from bilateral and multilateral international institutions for state areas of provision of water supply government projects. and sanitation for an informal discus- sion on a wide range of issues. The Ministry runs the following centrally sponsored schemes for urban water and The Fifth Urban Think Tank was sanitation organised in Delhi on the 9th of June. Low Cost Sanitation for Scavengers It was the first in the series of Urban It finances conversion of existing dry latrines into low cost water seal pour-flush Think Tanks to directly focus on latrines and construction of new sanitary units where none exist, to prevent open Municipal Managers and is a collabo- defecation. The scheme is operated by providing subsidy from the MUA&E and rative effort of the RWSG-SA and the loans from the Housing and Urban Development Corporation (HUDCO) in a Department for International Develop- synchronized manner so that the conversion/construction of low cost sanitation ment (DFID). units and liberation of scavengers is done on a whole town basis. It is now customary for the Urban Think Tank to produce an information Accelerated Urban Water Supply Programme note such as this for dissemination to This scheme is funded by the central and the state governments in the ratio municipalities all over India. of 50:50 to provide safe and adequate water supply facilities to the entire The Fifth Urban Think Tank focused population of towns having population less than 20,000 in the country. on "Financing Options for Water and Public Health Engineering Training Sanitation", and the output of the Development of trained manpower is one of the thrust areas of the Ministry. Think Tank is this information note The Central Public Health Environmental Engineering Organisation (CPHEEO) which was produced by the partici- organises various training courses through academic institutes and field depart- pants. The intention of this information . ........ anotse is tntorovi brf ts information ments. Grants are provided to recognised engineering colleges and training no to domesti agies whmic institutions for conducting post-graduate, short-term and refresher courses. On those domestic agencies which municipalities can approach to fi- Source: Ministry of Urban Affairs and Employment, Annual Report 1996-97 nance provision of water supply and sanitation services. . - - - . . E. . The Urban Think Tank is a participa- * State Urban Finance Corporations tory forum and we will appreciate receiving your comments and sugges- * Water Supply and Sewerage Boards tions on topics that you feel are a Development Authorities important for managers of urban local bodies such as yourselves. * State functional agencies for Housing and Urban Development Please write back to us, particularly if * New Town Development Agencies you wish to participate in the Think Tank. * National Capitol Region Planning Board The Think Tank has been kindly * Municipal Corporations/Councils invited to Nagpur by the Nagpur Divisional Commisioner, and the a Improvement Trusts Sixth Think Tank will be held on . Private Companies/Agencies etc. September 17, 1998 in Nagpur.  Pune Water Supply Housing and Urban Development Corporation (HUDCO) and Sewerage Project In order to supplement the efforts of the government for urban development, Pune has planned a major water including the improvement of services, the Government of India decided to supply and sewerage project through entrust the task of urban infrastructure financing to the Housing and Urban private sector participation, based on Development Corporation (HUDCO). HUDCO has a separate Urban the city's finances and investment Infrastructure Finance Wing to process loan proposals from public and capacity. The estimated costs are private agencies, including Municipal Corporations/Councils. The schemes about USD 200 million. The bidders eligible for HUDCO financing include water supply, sewerage, drainage and are required to carry out all construc- solid waste management, especially in small and medium towns with a tion, arrange for the finance, operate population of less than 10 lakhs. The objectives of the Urban Infrastructure and maintain part of the constructed Wing in HUDCO are: facilities, undertake billing and collec- tion and studies for leak detection. a) to increase the supply of capital available to local authorities to finance urban The process of preparation required infrastructure projects; technical, financial, legal and admin- b) to help cities of all sizes, especially small and medium towns, to provide istrative guidance. These are provided adequate urban services by providing long term finance for urban projects; by FIRE, Kirloskars, Nishith Des Asso- c) to help in the channeling and monitoring of funds in a systematic manner ciates, IL&FS, HUDCO, ICICI and CARE. for development activities through State/Regional/City level agencies and It required clearances from the State private companies; Departments of Urban Development, Finance, Planning, Water, Revenue d) to offer technical assistance in project preparation, installation of viable low- and Irrigation and the Empowered cost infrastructure and in the adequate pricing of services; Committee for the privatization of in- e) to offer consultancy services for formulation of infrastructure projects; and frastructure. Locally clearances were f) to encourage development of new towns. obtained from the Standing Commit- tee, and the Municipal Corporation. Water and sanitation schemes come under the category of Urban Infrastructure The primary issues exercising the local Schemes for which financing is structured as shown below: elected representatives were the extent to which tariff rates of water needed revwkisio theiffrineatison withr nelectri Category Repayment Extent of Finance Net Rate of revision, their indexation with electric- Period (l) Interest (%l ity rates and the residual ability of the civic body to undertake other projects. water Supply, sewerage, Upto 10 yeSrsa 70 15 The representatives were apprehensive Danagem,S , ~~~~~~~~~~Management, of the political fallouts of any steep Integrated Water Supply tariff revision without commensurate service improv,and the daners Low Cost Sanitation Upto 7 years EWS LIG MIG HIG 10 imrveet g ( upto Plinth) 50 60 75 75 of privatization of water. These were sufficiently answered in discussions, Low Cost Sanitation Upto 15 years EWS LIG MIG HIG 10 articles by informed citizens in the (Superstructure) 95 85 75 60 newspapers and seminars arranged * Note: Repayment of 15 years can be considered in exceptional cases on payment by the Institute of Engineers and NGOs. A constanttdialogueiwasrmaintained of 1% higher rate of interest. (EWS = Economically Weaker Sections, LIG, MIG, betw nt advisers, the biddr, ,te HIG =Low, Middle and High Income Groups respectively) between the adgvisers, the bddccers, the Municipal Corporation and the Gov- For more information, contact: ernment on all aspects of the contract, Arvind Malhotra and their suggestions, wherever fea- Executive Director, Infrastructure sible, were incorporated. HUDcO Bhawan Confributed by: Mr. Ramanath Jha, India Habitat Centre, Lodi Road Metropolitan Commissioner, New Delhi 110 003 Mumbai Metropolitan Region Tel: 011 46A 7792 1464 8194 Fax: 011 462 0019 Former Municipal Commissioner, Pune  ... Participants Programmes and other activities being carried out by HSMI which may be of interest in the context of financing of water and sanitation services are : urban German Dev. Coop. GTZ Coordination Office infrastructure planning and management for municipalities; urban infrastructure C/o Nagpur Municipal Corpn, Mahanagar project formulation, appraisal and financing; improving municipal services - Palika Marg, Civil Lines Nagpur 440 010 focus on low cost infrastructure; solid waste management and low cost Ph.: 0712 524002 * Fax: 0 712 524002 E-mail: gtznag@nagpur.vsnl.net.in santation; public pnvate partnerskips for provision of urban services; legal issues in financing of housing and urban infrastructure projects; community InfrMstrucure Finance Advisor participation in shelter and urban infrastructure; environmental impact Indo-US, Financial Institutions Reform & assessment; financial management of urban local bodies; resource mobilization Expansion Community Consulting International E-3/4, Vasant Vihar New Delhi 110 057 of urban local bodies; leadership and management for local elected Ph.: 011 6143551/6149836 representatives from the south asian region; and international training Fax: 011 6141420/6144480 programme on urban development management. E-mail : fired@giasde0l.vsnl.net.in For further informotion, contact: PROGRAM Dr. Kulwant Singh, Executive Director * Mr. A.K. Sengupta, Program Officer HSMI, HUDCO House, Lodi Road, New Delhi 110 003 UNDP-World Bank Water & Sanitation Program Tel: 011 469 1834 * Fax: 011 464 1292 PB No. 416, 55 Lodi Estate, New Delhi 110 003 E-mail: ku1vants@nda.vsni.netin Ph.: 011 4690488/89 * Fax: 011 4628250 E-mail: aksengupta@worldbank.org * Ms. Barbara Evans, Regional Urban Specialist National Institute of Urban Affairs (NIUA) UNDP-World Bank Water & Sanitation Program National Institute of Urban Affairs (NIUA) is a premier institute for research, PB No. 416, 55 Lodi Estate, New Delhi 110 003 Ph.: 011 4690488/89 * Fax: 011 4628250 training and information dissemination in urban development and management. E-moil: bevansl@worldbank.org Established in 1 976 as an autonomous body under the Societies Registration Act, * Dr Charles Pendley, Sector Planner the Institute enjoys the support and commitment of the Ministry of Urban Affairs UNDP-World Bank Water & Sanitation Program and Employment, Government of India, State Governments, urban and regional PB No. 416, 55 Lodi Estate, New Delhi 110 003 Ph.: 011 4690488/89 * Fax: 011 4628250 development authorities and other agencies concerned with urban issues. E-mail: cpendley@worldbank.org The thrust areas of NIUA's research are: urbanization and urban policy, urban * Ms. Fiona Fanthome, Consultant planning and development, infrastructure and services, poverty, environment, UNDP-World Bank Water & Sanitation Program transport, shelter, municipal finance, the informal sector and urban governance. PB No. 416, 55 Lodi Estate, New Delhi 110003 Ph.: 011 4690488/89 - Fox: 011 4628250 The research on urban infrastructure and services has focused on financing of E-mail: rwsgdelhi@worldbank.org urban infrastructure, accessing capital markets, pricing and cost recovery in * Mr. M. Nakao, Urban Specialist municipal services, public private partnerships, and private sector investment in UNDP-World Bank Water & Sanitation Program urban infrastructure and services. Research on municipal finance covers the status, PB No. 416, 55 Lodi Estate, New Delhi 110 003 Ph.: 011 4690488/89 * Fax: 011 4628250 structure and trends in municipal finance, local financial resource mobilization, E-mail: mnakao@woddbank.org municipal budgeting and accounting, municipal taxation and its administration, * Mr. Parameswaran Iyer, India Country Team municipal governance, 74th Constitution Amendment Act and its implications for Leader, UNDP-World Bank Water & Sanitation municipal governance, and state-local government fiscal relations. Program, PB No. 416, 55 Lodi Estate N. Delhi -3 Ph.: 011 4690488/89 . Fax: 011 4628250 The main aim of NIUA's training activities, conducted under the FIRE-D project E-mail: piyer@worldbank.org and Urban Basic Services Programme, has been capacity building of municipal * Ms. Rekha Dayal, Regional Program Adviser bodies and infrastructure agencies. Under the FIRE-D project, training is being UNDP-World Bank Water & Sanitation Program imparted to top and middle level functionaries of these agencies on: municipal PB No. 416, 55 Lodi Estate, New Delhi 10 003 Ph.: 011 4690488/89 * Fax: 011 4628250 finance and accounting, management of urban environment, management of E-mail: rdayal4@worldbank.org services, financing of infrastructure, resource mobilization, privatization, pricing and cost recovery of services, valuation and assessment of property tax, and For all correspondence on the Think Tank includingprjcfomltnfruba ifasutre change of address/corrections, comments and suggestions, please write to: For more information, contact: The Urban Think Tank Dr. Pushpa Pathak C/o UNDP-World Bank Water and Sanitation Program, RWSG-SA National Institute of Urban Affairs 55 Lodi Estate, New Delhi - 110003 I Floor, Core-4B, India Habitat Centre, Lodi Road, New Delhi - 1 10 003 Phone: 011 469 0488,4690489 Tel: 011 464 3284, 461 7543 * Fax: 011 461 7513 Fax: 011 462 8250 Email: hpauil@WORLDBANK.ORG Email: niua@niua.emet.in  Participants Infrastructure Leasing and Financial Services (IL&FS) Fifth Urban Think Tank IL&FS has taken up the challenging task of developing infrastructure MUNICIPAL MANAGERS projects on a commercial basis. IL&FS envisages that the participation of the MUNIIPA MANAprivate sector in delivering a safe and reliable water supply to domestic *Mr. M.L. Yadoav, Commissioner consumers and industry could be commercially viable. Moreover, it is felt that Bharatpur Municipal Council, Bharatpur Ph.: 05644 222493 * Fax: 05644 23355 private sector participation will reduce, if not completely remove, the existing Res: 05644 23459 systemic and operational inefficiencies, which currently prevail in the water * Mr. Mohonlal Gupta, Mayor Jaipur supply and sanitation sector in the country. The objectives of IL&FS for the water Municipal Corporation, Jaipur 342 001 sector are: Rajasthan Ph.:0141 519424/519426 Fax: 0141 519424 (a) to provide much needed investment and meet the Government's goal to * Mr. Parthosarthy Mitra, Commissioner rehabilitate and expand the water supply and sewerage systems; Municipal Corpn Shimla, Town Hall (b) to facilitate additional funds flow into the water sector through international Shimia, Himachal,Pradesh 171 001 Ph.: 0177 212899- Fax: 0177 256576 and national capital markets; and * Mr. Rajiv Agorwal, Municipal Commissioner (c) to build capacity and commercialise water utilities, to meet the needs of the Pune Municipal Corporation, Pune Ph.: 0212 324285 * Fax: 0212 324099 customers and improve the internal cash generation capability of the sector. E-mail: rjmco@giaspn0l .vsnl.net.in IL&FS can participate in the water sector by * Mr. Ramanath Jha, Municipal Commissioner Mumbai Metropolitan Regional (a) entering into a Build-Operate-Own-Transfer (BOOT) contract to finance, Development Authority, Mumbai design, build, own and operate assets for a fixed period; transferring the Ph.: 022 6426076/6429751 assets back to the Government at the end of that period; Fax: 022 6512788 * Mr. J.S. Saharia, Municipal Commissioner (b) entering into or facilitating service or management contracts with State Nagpur Governments, Municipal Authorities and State Water Supply Boards; and Ph.: 0712 532464/532057 Fax: 0712 539584 (c) appointing contractors through an international bidding process for . Mr. Sanjay Agarwal, District Magistrate, construction, operation and maintenance of water pumping stations, Meerut treatments, and maintenance of reservoirs. Ph.: 0121 642232/640166/544133 Fax: 0121 647200 In the provision of water supply and sanitation services the perceptible risks of * Mr. Sudhir Bhafia, Executive Engineer, private sector involvement for both the government as well as the private sector Public Health Department, are quite high. Therefore, IL&FS has adopted an approach which requires 43-1B/4, Hukam Singh Road, Amritsar I143 001 Ph.: 0H1m83 271769 both the public sector and the private sector to participate on an equal footing. * Mr. Vijay Bonsal, President Hence, IL&FS uses the option of private-public partnership. Under this Municipal Council, Bharatpur format IL&FS has been incorporating special purpose vehicles in the form of Ph.: 05644 23079 * Fax: 05644 23355 limited companies, with, joint ownership between government and private Res: 05644 23355 sector partners. The role of the special purpose vehicle is to enter into a OTHER AGENCIES concession agreement with the government to: * Ms. Alison Barrett, Head uPo (i) act as the BOOT contractor with full responsibility for financing investment, Department for International Development design, construction, operation and maintenance; and jDFID) India B-2 Anand Niketon, New Delhi 110 021 (ii) transfer assets back to the Government at the end of the agreement period. Ph.: 011 6114225 * Fax: 011 6882954 E-mail: A-Barrett@dfid.gtnet.gov.uk IL&FSs first initiative to bring about private sector participation in the water . Mr. Atul Prokash, Vice President - Operations and wastewater sector was the Tirupur Area Development Programme (TADP). Infrastructure Development Finance Co. Limited To implement the TADP, IL&FS incorporated a limited company named as C/o HDFC Ltd., B-6/3 Safdarjung Enclave the New Tirupur Area Development Corporation Ltd. (NTADCL) in joint DDA Commercial Centre, New Delhi 110 029 association with the Ministry of Commerce (Government of India), the Ph.: 011 6103146/6103147 ami ation for Indstri Ifrastruce Develoment Limitedaan the Fax: 011 6109446 Tamil Nadu Coporation for Industrial Infrastructure Development Limited and the * Mr. Brian Baxendole, Head WESG, Department Tirupur Exporter's Association. NTADCL will be responsible for successful for International Development (DFID) India implementation of the TADP program on a commercial basis (BOOT format). B-2 Anand Niketan, New Delhi 110 021 The IL&FS has also undertaken the role of merchant banker to the project and Ph.: 01 1 6876379/6875973 Fax: 011 688295 7 shall be responsible for raising the requisite resources. The IL&FS is also currently E-mail: B-Baxendale@dfid.gtnet.gov.uk implementing a water supply program in Dewas, Madhya Pradesh along  ... Participants similar public-private partnership line as well as the Vishakapainam Industrial Water Supply Project. Mr. Chethn Vaidya, Urban Management Adviser, Indo-US FIRE Project, For more information, contact: Community Consulting International E-3/4 Vasant Vihar, New Delhi Mahesh Babu Ph.: 011 6149836/6144480 Head, Project Finance Fax: 011 6141420 Infrastructure Strategic Businees Unit * Dr. Chris Athayde, Program Manager East Court, Zone IV, 4th Floor Department for International Development India Habitat Centre, Lodi Road, New Delhi 110 003 (DFID) India B-2Anand Niketan, NewDelhiI 10021 Tel: 011 463 6637/41 /42 * Fax: 011 4636651 Ph.: 011 6871647 v Fax: 011 6871655 * Dr. Dinesh Mehth, Regional Adviser South Asia e * * P Urban Management Program for Asia & Pacific Key Non-FAnancing Institutions: A Profile UNDP/UNCHS . - = . ) ' ff=; : - -;- 5 j Ph.: 011 891178 * Fax: 011 6141420 Financial Institutions Reform and Expansion (FIRE) Project * Mr. H Oita, Chief Representative The Indo-US Financial Institutions Reform and Expansion (FIRE) project is funded dverseaslEoonromicCoamteSreet New Delhi 110021 by the U.S. Agency for International Development (USAID). One of the Ph.: 011 3714362 - Fax: 011 3715066 components of the FIRE project (FIRE-D) is to support the Government of India * Ms Kathryn Tovey, M.Phil Student in strengthening and expanding the debt market by financing affordable urban Cambrige University Wolfson College services on a full-cost recovery basis through sponsoring of municipal councils Pha: +44 1223 762385 and authorities. This Debt Market/Infrastructure component (FIRE-D) falls under E-mail: ksst23@cam.ac.uk the auspices of the Union Ministry of Urban Affairs and Employment with USAID * Mr Keith Word, Economist, GHK International support to the National Institute of Urban Affairs (NIUA), HUDCO and St James Hall, Moore Park Rood Infrastructure Leasing and Financial Services (IL&FS), as well as to selected local London 5W6 2JW, UK Ph.: +44 171 7368212J+W 171 7360784 entities. HUDCO and the IL&FS, acting as financial intermediaries, make loans * Dr. Kulwant Singh, Executive Director HSMI, to selected municipal corporations, state boards and authorities and private Hudco House, Ispat Bhawan, New Delhill 0003 enterprises which have formed partnerships with municipal entities. Eligible Ph.: 011 4691834* Fax: 011 4641292 projects include water supply, sanitation, solid waste management and * Mr. M.P. Singh, Chief Project Officer integrated area development schemes. The NIUA acts as the advocate for policy Overseas Economic Cooperahon Fund of Japan 2nd floor, Parliament Street, New Delhi 110021 change and the coordinator for delivery of technical assistance and training Ph.: 011 3714362/3717090 directed at the development of local government capacity. Fax: 011 3715066 E-mail: mp.singh@oecf.go.jp For more information, contact: * Dr. Meera Mehta, Urban Finance Adviser Tom Chaipman IFIRE Project) Indo-US, Financial Institutions Reform & Expansion Project Manager Community Consulting International The FIRE(D) Project Office E-3/4, Vasant Vihar, New Delhi 110 057 E-3/4, Vasont Vihar, New Delhi Ph.:011 6143551 *Fax:0116141420 Tel: 0116143551/6149836 * Fax: 011 6144480 * Mr. Mihir Bhatt, Director, Foundation for Public Interest, 25, Vasundhara Colony, Gulbai Tekra Ahmedabad 380006 Gujarat Human Settlement Management Institute (HSMI) Ph.: 0 79 6568421 * Fax: 079 6420056 Dr. PRS. Rona, Director Corporate Planning Human Settlement Management Institute (HSMI) is involved in providing Housing & Urban Dev Corpn Limited HUDCO training to professionals and functionaries of Urban Local Bodies, Urban Bhawan, lHC, Lodi Estate, New Delhi 110003 Development Authorities, Local and State Level Agencies dealing with water Ph.: 011 4616732/461 7696 supply/sanitation, housing, slum improvement, NGOs and CBOs operating in the field of urban infrastructure and housing. *Mr. Paneer Salvam, Environment Officer The World Bank, 70 Lodi Estate The HSMI provides Delhi based class-room training, as well as on-the-job New Delhi 11 0003 Ph.: 011 4619491 *Fax: 011 4619393 training. Five decentralized training centers transfer HSMI courses to the * Dr. Pushpa Pothak, Associate Professor regional context for wider dissemination. These training centers are located National Institute of Urban Affairs at UP Academy of Administration, Nainital; Administrative Training Institute, India Habitat Centre, Core 4 B, 1st floor Mysore, Karnataka; HCM Rajasthan Institute of Public Administration, Jaipur; PhLd 01e N D17517/4617513 Professional Development Centre, Pune, Maharashtra; and Kerala Institute of Fax: 011 4617513 * E-mail: niua@niua.ernet.in Local Administration, Thissur, Kerala.