The International Finance Corporation (IFC) has helped structure India’s first hybrid-annuity PPP for sewage treatment.
India’s National Mission for Clean Ganga, and the state governments of Uttarakhand and Uttar Pradesh, signed the first two agreements with private sector companies to construct sewage treatment plants in Haridwar and Varanasi.
Under this model, the government will pay 40% of the project cost linked to construction milestones and the remaining 60% will be paid over a 15 year period as annuities to the private companies involved in the project along with operation and maintenance expenses. This process is expected to be a viable way for the concessionaire.
National Mission for Clean Ganga director general U.P. Singh said: “These projects are the country’s first two hybrid annuity projects for the development of sewage infrastructure. They will ensure that untreated sewage from these cities does not flow into the Ganga, giving a boost to our flagship Namami Gange program.
“With IFC’s help in designing the hybrid-annuity structure and well-balanced bid documents, the projects will increase private sector’s participation in this important initiative.”
HNB Engineers had won the contract for constructing the project in Haridwar. As per the contract the company will construct, operate, and maintain a sewage treatment plants with an aggregate capacity of 82 million liters per day (MLD).
In Varanasi, a consortium of led by Essel Infra Projects will develop a 50 MLD sewage treatment plant. Construction period for both the projects is 2 years and the operation and maintenance period 15 years.
It is estimated that over three-quarters of sewage produced in the towns and cities flow untreated into the 2,525-km long Ganga River, which is a water source for more than 400 million or 43% of India’s population.
Around 3036 MLD of sewage is produced from 118 towns in 11 states and only half of it is treated. If the project implementation is successful, it can help millions by improving water quality in the Ganga basin.
IFC South Asia director, Mengistu Alemayehu said: “Hybrid annuities are widely used globally to make payments for large-scale infrastructure projects. Adopting these in the sewage sector for flagship Namami Gange program for the first time will help deepen private sector engagement in this vital space.
“In partnership with the state and central government, we are introducing a bankable model that can be used to roll out similar PPP projects in more than 100 cities in the Ganges basin.”