After the successful privatisation of solid waste management in Chennai, cities like Bangalore and Ahmedabad are looking to emulate the same with similar public private partnerships (PPP) for their urban infrastructure. City corporations are waking up to the benefits of PPPs. Advising these cities is the infrastructure advisory of KPMG.
Onyx, part of Vivendi group, was awarded a seven-year concession to manage Chennai’s solid waste just over two years ago. The company has made an investment of Rs 40 crore, and is responsible for collecting approximately 600 tonne of waste a day. The current concession covers only a third of the city. The rate paid is Rs 600 per tonne.
It has clearly been a win-win situation for all concerned. The city is looking cleaner than before. The government is saving at least 20 per cent of the costs it was incurring when managing the disposal itself. The staff is better trained and dressed, and more efficient vehicles are being used. All work is usually carried out at night, thus minimising traffic disturbances.
KPMG’s head of infrastructure advisory Amrit Pandurangi told FE that these good practices are already being adopted by the government staff in the rest of the city who believe that if Onyx can do it, so can they. When it came to recruiting staff, the long standing monopoly of a certain community was broken as no caste based differentiation was made. Onyx is now preparing a similar proposal for Ahmedabad city. The Supreme Court has also told the Delhi government to study the Chennai model and try an implement a similar one. Hyderabad too has given concessions to private players, but only a couple of streets to each. This means smaller players, requiring a highly involved supervision and coordination.
Likewise, Bangalore is working closely with Vivendi and an another French company Ondeo to manage the city’s water distribution. Each company would be given a population area of one million to service, and be responsible for operations, maintenance and replacement of all dysfunctional assets including distribution pipes. The initial contract period would be for five years, renewed for a much longer period subsequently based on performance. Investment for the two companies would be Rs 200 crore each.
Besides expected to improve services to consumers, economic efficiencies would come about if the companies can cut down losses and theft, currently as high as 24 per cent. If collections from users go up, and better pipes and pumps cut energy consumption, it would effectively boost the balance sheet.
Mr Pandurangi feels PPPs should take off in India because governments neither have the funds required to invest in infrastructure, nor can they guarantee quality and efficiencies of services. PPP may take costs up, but they bring with them quality and reliability most wanted by customers.
But would higher costs, say for higher water charges, find acceptance? Surveys amongst people staying in Chennai’s slums say they are anyway paying more than twice the corporation rates for water, as the same is unreliable and they have to buy from private tankers. These people are willing to pay higher for the service, and any views contrary to this are more like myths according to Mr Pandurangi. Similarly farmers can be expected to pay more for electricity and vehicle owners for toll provided they get quality.
But he adds a word of caution: “Some cities in Uttar Pradesh have tried to replicate the Chennai model by drawing up similar contracts without expert advice. But PPP requires a deep study of local conditions and issues, and a good understanding between all stakeholders to ensure cooperation of all to survive political and economic hurdles. Otherwise, PPP could well be the buzzword over the coming years.”
