Water Scarcity in India – Needs Infrastructure Investments Worth Billions of Dollars

As per Niti Aayog – Composite Water Management Index June 2018 Report – “India is suffering from the worst water crisis in its history and millions of lives and livelihoods are under threat. Currently, 600 million Indians face high to extreme water stress and about two lakh people die every year due to inadequate access to safe water. 

The water scarcity in India is only going to get worse. By 2030, India’s water demand is projected to be twice the available supply, implying severe water scarcity for hundreds of millions of people and an eventual ~6% loss in the GDP of India.” 

The report also mentioned “Highlighting the growing national crisis—54% of India’s groundwater wells are declining, and 21 major cities (including New Delhi, Bengaluru, Chennai and Hyderabad) are expected to run out of groundwater as soon as 2020, affecting ~100 million people.” Is the situation really that critical? Let’s find out.

Current Water Situation in India:

Large part of India has started feeling water stress. Exponential growth in water demand is taking place due to rise in population, fast-paced urbanisation and evolving lifestyle. More than 17% of the world’s population resides in India, but the country has only 4% of the world’s renewable water resources. 

In fact 2/3rd of the global population lives with severe water scarcity for a month every year and most of this population resides in India and China. The annual per capita availability of water is spiralling downwards continuously from 5,177 cubic meters in 1951 to 1,720 cubic meters in 2019. 

India receive ~4000 BCM of water (via rains) every year and water bearing capacity in all the reservoirs (including other small ponds) in India is less than 300 BCM and as far as aquifers recharge is concerned that is somewhere around 400 BCM which means we cannot even save 1⁄3rd of total water that we receive. 

Indian government is planning to store and recharge as much as they can. Further followed by proper rainwater management – Judicious use of water, rain water harvesting & recharge of ground water, reuse of water and afforestation – India can become water secure country. Government intends to do all these together. 

Niti Aayog says 21 major cities are expected to run out of groundwater. However, the water ministry says the situation is not worse, it’s not good either. As, amongst these 21 cities, 16 cities have dual sources of water supply and rest four out of five are from punjab which can be shifted to alternative source of surface water.

What is the government doing about the water crisis in India?

Post elections the government of India have clearly indicated their priorities on building the water infrastructure in India. Few of those steps / undertaken projects are as below: 

1] Merging of all water related ministries into one “Jal Shakti Ministry” headed by Shri Gajendra Singh Shikhawat:

After the NDA government came back into power, in May’19, the erstwhile ministries of water resources and drinking water and sanitation have been merged in the ministry of Jal Shakti in May’19 itself. 

As a result, all the water related departments – surface water, ground water, river rejuvenation, irrigation etc. and departments looking at the use of water have come under a single ministry, which could significantly ease the implementation of large programmes by easing the process and timelines of sharing data / resources within the government.

2] Launch of Jal Shakti Abhiyaan

The Indian Government has initiated the Jal Shakti Abhiyan to stimulate rainwater harvesting and water conservation efforts in 255 water stressed districts of the country. The Jal Shakti Abhiyaan campaign would run from 1 July 19 to 15 September 19 in states receiving rainfall during the south-west monsoon, while States receiving rainfall in the retreating or north-east monsoon would be covered from 1 October 19 to 30 November 19. 

Overall, 313 blocks with critical groundwater levels would be covered, along with 1,186 blocks with over-exploited groundwater and 94 blocks with low groundwater availability.

In Jal Shakti Abhiyaan campaign, teams of officers from the central government of India will visit and work with district administration in 1592 water stressed blocks in 256 districts, to ensure five important water conservation interventions. These will be (a) Judicious use of water (b) rain water harvesting & recharge of ground water (c) reuse of water and (d) intensive afforestation

3] Declaration of providing tapped water supply to every household by 2024 also known as “Nal se Jal” or “Har Ghar Jal by 2024”

The ministry of drinking water and sanitation had targeted to provide potable water to 50% of rural households and 35% households to get piped connection water by 2017. However, as of 2017, the project had under-performed significantly and only 18%/17% of households potable water / piped water connection. 

While the average cover of rural piped water connection across India is 18%, there is a wide variation across states. States such as Gujarat (78.5% coverage), Haryana (53.5%), Punjab (52.8%) have coverage above 50% levels, while the North and East Indian states such as Uttar Pradesh, Bihar, West Bengal have coverage of sub-5%, for example (exhibit below).

Household with Piped Water Connection

However, now the Indian government’s focus has shifted to provide piped water supply to every household by 2024. Therefore in terms of the sheer volume of work, major efforts have to be based in these East and Central Indian states and only top 5 states would account for 55% of the targeted households to be provided tap drinking water connection.

No such large scale projects have been undertaken. However, similar state level projects have yielded in good demand for Distribution Pipes, Pumps & valves, Water Treatment and EPCs & Civil work. As per JM Financial breakup cost for a typical piped drinking water project – Pipes & Fittings (40%), EPC – Civil Work (25%), Water Treatment (25%) and Pumps and Valves (10%). 

4] Interlinkage of Rivers

The Indian rivers interlinkage aims to effectively manage water resources in India by linking Indian rivers by a network of reservoirs and canals and so reduce persistent floods in some parts and water shortages in other parts of India. 

India receives about 4,000 cubic kilometers of rain annually, or about 1 million gallons of fresh water per person every year. However, the precipitation pattern in India varies dramatically across distance and over calendar months. 

Much of the precipitation in India, about 85%, is received during the summer months through monsoons in the Himalayan catchments of the Ganges-Brahmaputra-Meghna (GBM) basin. The northeastern region of the country receives heavy precipitation, in comparison with the northwestern, western and southern parts. 

The uncertainty of start date of monsoons, sometimes marked by prolonged dry spells and fluctuations in seasonal and annual rainfall is a serious problem for the country. The nation sees cycles of drought and flood years, with large parts of west and south experiencing more deficits and large variations, resulting in immense hardship particularly the poorest farmers and rural populations. 

Lack of irrigation water regionally leads to crop failures and farmer suicides. Despite abundant rains during July–September, some regions in other seasons see shortages of drinking water. Some years, the problem temporarily becomes too much rainfall, and weeks of havoc from floods. This excess-scarcity regional disparity and flood-drought cycles have created the need for water resources management. Rivers interlinking is one proposal to address that need.

The National perspective plan envisions about 150 million acre feet (MAF) (185 billion cubic metres) of water storage along with building inter-links. These storages and the interlinks will add nearly 170 million acre feet of water for beneficial uses in India, enabling irrigation over an additional area of 35 million hectares, generation of 40,000 MW capacity hydro power, flood control and other benefits.

The National Water Development Agency has identified 30 links (16 under the Peninsular Component and 14 under the Himalayan Component) for preparation of feasibility reports. The Indian government has identified four priority links for the preparation of detailed project reports (DPR) under the Peninsular Component: the Ken-Betwa link project (UP and M.P.), the Damanganga-Pinjal link project (Maharashtra and Gujarat), the Par-Tapi-Narmada link project (Maharashtra and Gujarat) and the Godavari-Cauvery link project (AP and TN). Ministry data show that DPRs are ready for the first three projects, while FRs are ready for 13 links. 

Development of such infrastructure in India will lead to increase in demand of larger steel pipes and cement.

5] Namami Gange Project

A total of 221 projects have been taken up under Namami Gange project at a cost of ~Rs 22,200 crores. Out of 221 projects, 60 projects are completed and balance are at various  stages of implementation. 

A total of 97 towns have been identified along the main river Ganga, which are approximately generating 3,800 MLD of sewage, while the sewage treatment capacity is only 1,650 MLD (43% of the demand). In Phase 1, 95 sewage projects are being implemented across 61 towns (out of 97). 

This is projected to create 1,950 MLD capacity (cost of Rs.15,000 Cr). 952 grossly polluting industries have been identified on river Ganga and water treatment agencies are working with them on zero liquid discharge monitored through CPCB server. 764 industries have already been connected to CPCB server and letters have been issued to remaining for installation and connectivity to CPCB server.

Water Infrastructure Projects Focus on Large Cities of Ganga River

The focus of the Namami Gange Project would be on 10 major towns – Haridwar, Kanpur, Pryag Raj (earlier Allahabad), Varanasi, Farrukhabad, Patna, Bhagalpur, Kolkata, Howrah & Bally, which contribute 64% of the total sewage discharge. In addition, the Indian government is working on 10 projects on Ganga tributaries, such as Yamuna, Ramganga, Saryu and Kosi. These projects are for creating 1400 MLD sewage treatment capacity at a cost of Rs.3,100 Cr.

In the next phase, which is under proposed stage, the Indian government is planning to work on towns along major tributaries of Ganga, a preliminary study is in process to identify the sewage treatment infrastructure in these areas.

Expenditure on these water infrastructure projects in India:

As per published report by Bank of America Merrill Lynch – The following four projects could cost Indian government around $270 billion over the next 5 to 15 years period. Of these, the major expenditure is expected to allocated to interlinking of river at $168 billion followed by piped water supply at $94 billion. 

JM financials sees Rs 5.6 – 6.3 lakh crore ($81-91 billion) being spent on piped water supply project alone between 2019-20 to 2024-25, almost doubling budget spends on water and sanitation.

Capex Projection on Indias Water Projects in 5 to 15 Years

Also recently, PM Narendra Modi ji announced to spend Rs 3.5 lakh crore in the next 5 years under the newly formed Jal Jeevan Mission, which aims to provide piped water (‘Har Ghar Jal’) to all rural households by 2024.

Who could Really benefit from these  water infrastructure projects in India:

1] Infrastructure & Water Treatment Companies 

The water led infrastructure push will open lots of orders for Infrastructure companies. Projects like Interlinkage of Rivers will lead to building of many new dams and canals leading to healthy order flows for infrastructure companies in India. 

Namami Gange is opening lots of new orders for water treatment companies like VA Tech Wabag & ION  Exchange.

2] Pipe & Pump Companies

With the announcement of “Har Ghar Jal by 2024” will drive demand for distribution pipes like GI, HDPE and PVC pipes benefiting companies like Astral Poly, Supreme Industries, Surya Roshni. 

Whereas projects like interlinking of river will boost demand for large steel pipes like MS / HSAW pipes benefiting companies like Jindal Saw & Welspun Corp. DI pipes could be used in both the projects benefiting TATA Metaliks and Srikalahasthi pipes. 

Pump makers will also gain as water will be required to be drawn from bore well, open wells, storage facilities. Among the companies that would benefit include Shakti Pumps (India) Ltd., V-Guard Industries Ltd. and Crompton Greaves Ltd. 

3] Cement Companies

Many dams will be built for interlinking of rivers leading to huge demand for cement companies. Under project “Har Ghar Jal” cement companies with presence majorly in central and eastern parts of India are expected to benefit the most as major work is expected to be done there.

How optimistic are managements of companies that will benefit from these water infrastructure projects in India?

1] Supreme Industries:

Current announcement by the central government of India of piped water for all till 2024, will boost requirement of plastic pipes system in large volume which is good for the company’s business. Other drainage and sewage related projects are also gathering momentum and will lead to pipe demand. 

Nal se Jal (same as above project) will give a boost to the piping sector. Supreme manufactures HDPE pipes which are also used (other than iron / steel pipes) in similar (Nal se Jal) ongoing project which supreme provides to contractors. Company is also increasing its capacity for HDPE pipe. The margins for HDPE pipes, comparatively are lower but there is good demand for the product. 

2] Astral Poly:

Astral will play a big role in the scheme “Nal se Jal” for water distribution. Company has few products which would help them participate in this scheme. Additionally, Astral has been looking to develop new products which could help in such infrastructure projects in India. 

Astral is also adding new capacity to participate in the scheme. Astral is also working with US companies (formed a JV with a US company first to trade and then set up product lines) for a product related to water conservation (To reuse and recharge water in ground). Management has water conservation and “Nal se Jal” scheme products on their priority. Management sees great future in these segments.

3] Tata Metaliks:

Prime Minister of India has announced its intention related to water supply for all households, we believe this should give lots of boost to the ductile pipe division and it will drive further growth, mainly for current players. 

Additionally, management believes improving water infrastructure is key for India and Government of India cannot afford not investing in water infrastructure. The DI pipes industry was growing at 8% to 9% for the last five years and management believes the further growth should be around 9% to 12% on a conservative basis. However, it could go up to 12% to 15%.

We may also see lots of players coming in as the DI pipes sector looks very attractive. Recently, Vedanta acquired Electro Steel Corporation from NCLT, they manufacture Integrated Steel & DI pipes. 

4] Srikalahasthi Pipes:

Interlinking of Rivers (ILR) project is government of India’s proposal to link 37 rivers through 30 links, dozens of large dams and thousands of miles of canals, making it the largest water project in the world. 

Once the project is set in motion, there will be an unprecedented demand not only for DI pipes and fitting, but also services for design, implementation, project management, and maintenance.

5] Welspun Corp.:

Currently, 600 million Indians face high to extreme water stress due to inadequate access to safe water. If this continues, it is estimated that by the year 2030, 40% of India’s population may not have access to drinking water, eventually resulting into about 6% loss in the GDP of India. 

In order to combat this degrading situation, India will have a cumulative investment requirement from 2016 to 2040 of USD 373 billion in water infrastructure. India is set to embark on an ambitious exercise to link over 70 of its rivers. Central government’s ambitious Rs 5.5 lakh crore River Inter-link plan is a large-scale civil engineering project that aims to link rivers.

6] Jindal Saw:

Water segment is looking very promising. Indian Government’s announcement of “Nal se Jal” would give rise to lot of demand in the water sector. 

India is such a diversified geographical country that some regions are facing drought situation and there’s flood situation in some regions. However, if we could manage aggregate rainfall across region, we might be able to cater all of the water demand across the country and therefore what India is looking at is Integrated water distribution and management system.

That start at top – Interlinking of water bodies (rivers, dams), this (main level) can be done through HSAW pipes (Jindal saw is capable of manufacturing 4 + meters diameter). Within city limits generally DI pipes are used (Generally manufacture up to 1000 mm, Jindal saw manufacture up to 1200 mm). For last mile connections (colonies, houses) HDPE pipes are used (up to 200mm, however below 100mm only HDPEs are available). 

Jindal saw is the only company in India which is present in all three segments.

7] VA Tech Wabag:

The economic benefits of access to clean drinking water and basic sanitisation would amount to more than USD 43 billion a year or and economic gain each year of around 5.2% of GDP of India with a benefit cost ratio of 3.2 and a payback period of 7 years.

In less than a decade, there could be transformative boost to the Indian economy just by helping its citizens access to clean drinking water and sanitation. The Water Ministry in India has also brought some initiative to bring all departments working on water under one roof. 

Providing access to clean drinking water and sanitation is around six times bigger than the ambition of bringing electricity to every part of India. To fulfil the electricity dream, power had to be taken to a little more than 20 million households, whereas nearly 141 million households lack piped water. But as challenging as it sounds, it is fundamental pillar to India’s USD 5 trillion dream.

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