Public-Private Partnership Stories Clean Ganges (Varanasi & Haridwar) PPP Over three-quarters of the sewage generated in the towns and cities along the river Ganges in India flows untreated into the 2,525-km long river, which is a water source for 400 million people, or about 40% of India’s population. Recognizing the need to rejuvenate the river Ganges, the Government of India (GoI) approved the “Namami Gange” (“Clean Ganges”) program in 2015. The National Mission for Clean Ganga (NMCG), managed by the Ministry of Water Resources, River Development and Ganga Rejuvenation, looked to develop modern sewage treatment plants (STPs) through Public-Private Partnerships (PPP) to reduce the pollution flowing into this sacred river. IFC supported the NMCG in Uttar Pradesh Jal Nigam and Uttarakhand Pey Jal Nigam to design and tender PPPs to find the right private sector partners to sewage treatment plants and rehabilitate the associated infrastructure in cities of Varanasi (Uttar Pradesh) and Haridwar (Uttarakhand). After a competitive bidding process, development of a 50 Million Liters Per Day (MLD) STP in This series provides an overview of public-private partnership stories Varanasi was awarded to a consortium led by Indian infrastructure company – Essel Infra Projects in various infrastructure sectors, Ltd., and two STPs in Haridwar with total capacity of 82 MLD were awarded to HNB Engineers where IFC was the lead advisor. Private Ltd. On October 11, 2017, tripartite agreements were signed by NMCG, state water authorities, and the winning bidders for setting up STPs under India’s hybrid -annuity PPP model, IFC marking the first time this model has been used for wastewater treatment projects in India. Public-Private Partnerships 2121 Pennsylvania Ave. NW Washington D.C. 20433 IFC’s advisory work was undertaken with financial support from DevCo, a multi -donor ifc.org/ppp facility, funded by the UK’s Department for International Development (DFID), the Austrian Development Agency, the Dutch Ministry of Foreign Affairs, the Swedish International Development Agency, and IFC. BACKGROUND TRANSACTION STRUCTURE India’s holy river Ganges is a water source for 400 million people, A transaction structure for constructing, operating, and which accounts for approximately 40% of India’s population. maintaining STPs for 15 years at Varanasi and Haridwar was Over three-quarters of the sewage generated in the towns and developed, with assets to be transferred back to the state water cities of India’s crowded northern plains flows untreated into the authorities at the end of the concession term. As per the hybrid 2,525-km (1,570-mile) river Ganges. The river, which stretches annuity model, 40% of the capital cost would be paid to the from the Himalayas to the Bay of Bengal, is also a destination for private developers on the completion of construction while the waste produced by hundreds of factories. This presents serious remaining 60% of the cost will be paid over the life of the project health and environmental risks for the people of India. Moreover, as annuities along with operation and maintenance (O&M) the use of untreated or partially treated wastewater for irrigation expenses. The annuity and O&M payments will be linked to the is widespread among farmers and is responsible for a variety of performance of the STP, which will ensure continued health and food safety issues. performance throughout the life of the PPP due to greater accountability. Previous attempts to clean the river under the Ganga Action Plan (GAP) launched in 1985 largely focused on creating sewerage NMCG will be responsible for all payments under the project, and infrastructure assets that state governments or urban local bodiesthe state water authorities will be responsible for reviewing and (ULBs) operated and maintained. This approach, was primarily monitoring the works undertaken by the private developer during driven with a focus on constructing assets, but failed to construction and O&M during the tenure of the agreement. This adequately invest in their operation and maintenance. This transaction structure has huge potential for India and has approach has not led to an improvement in the quality of water of significantly increased investor confidence in the Clean Ganges river Ganges. program and in NMCG as a partner. NMCG is now developing hybrid annuity projects in 10 more cities using the model The GoI looked to change this by leveraging the expertise of the documents developed by IFC. private sector to construct, operate, and maintain treatment facilities in major cities along the river. In January 2016, GoI BIDDING approved a “hybrid annuity PPP model” for the creation and A single stage bid process was adopted and the tender had more maintenance of sewage treatment assets under the Clean Ganges than 35 companies express interest and participate in the pre-bid program. The NMCG intends to establish the hybrid annuity PPP consultations. Six bids were received for Haridwar and eight for model as sustainable model for developing wastewater treatment Varanasi. This is significantly higher than the 1-3 bids NMCG plants and sought IFC expertise to structure and tender the first typically receives for its DBOT projects. Essel Infra Projects Ltd. PPPs. won the bid for the Varanasi project with a bid of $24 million and HNB Engineers Private Ltd. was awarded the Haridwar project IFC’S ROLE with a bid of $27 million. The construction period for these As lead transaction advisor to NMCG and state water authorities projects is around 2 years and the operation and maintenance of Uttar Pradesh and Uttarakhand, IFC helped design the first of period 15 years. its kind hybrid annuity structure with a view to balance public and market risks and created a competitive bidding process. EXPECTED POST-TENDER RESULTS IFC’s role included technical, legal, and analytical support including: • The project is expected to improve drinking and industrial water supply, reduce the stress on • Conducting a detailed technical analysis for determining groundwater, and make safe water available for waste quality depending upon seasonal fluctuation and evaluation of various technology options for its treatment. irrigating agricultural crops. • Assessing financial feasibility under different PPP • First successful hybrid annuity PPP in sewage contractual options. treatment in India. • Reviewing social, legal, and commercial issues related to the project to identify impediments and/or constraints that could • The framework for this hybrid annuity PPP will affect private sector participation under different contractual influence the design of future PPPs in the states schemes and financial arrangements, and to design a risk along the river basin and in India. allocation framework. • Leading discussions with potential investors to gauge commercial viability of the project, investor interest, and enable optimal project structuring. • Managing the bid process, including preparation of bid documents and evaluation of bids.