29 Jul 11 Charting through India’s waste waters
Recently, I read an interesting quote-”Third world war will take place over water.” I was really surprised to read it as I always thought that the next war could be over fuel or uranium. But soon after that, when I was working on one of my projects, I studied the concepts of water management, treatment, recovery and recycle, and the consequences if they are not adopted. And what surprised me even more was the immense and untapped market potential it has in India. Commercial water treatment in India currently stands at a whopping USD 2.2bn and is growing at 10-12% for the last 5 years.
Current state and opportunities for Water and Waste Water treatment in India
The economy is growing steadily at 7-8% and water consumption for commercial purposes is also seeing an upward trend. According to Government estimates, total requirement for industrial water in 2025 will grow four-fold to 120 billion cubic metres (bcm), from the current 30 bcm. As water usage increases, water treatment will also take the front seat. Government is making an effort to build infrastructure for water treatment as it owns more than 50% of the total water treatment establishments in India. To name a few initiatives, the Government has allowed 100% FDI in the infrastructure sector, including water treatment systems. It has also sanctioned 463 projects requiring an investment of USD 11bn, mostly for basic urban services like water supply, sewerage and storm-water drainage and its treatment. The Government also plans to add 1,742 million liters per day (MLD) of sewage treatment capacity in the next two years. All this looks like a great opportunity for companies that are into water treatment services.
Furthermore, even today, 85% of all Indian cities do not have any water/sewage treatment facility. The market potential in terms of value is more than 3 times the current market size of water treatment/sewage treatment plants(WTPs/STPs). The total capacity gap between the waste water generation and its treatment is as high as ~80%.
The point-of-consumption market, which involves localized treatment of water by setting up distribution channels, is USD 220mn, and is growing at over 20% year-on-year, driven by urbanization. Industries in the country require normal to ultra-purified water and this segment has business to the tune of USD 450mn and is growing at 15% annually. The possibilities are immense for domestic and foreign water treatment companies given the huge addressable market. Following is the list of industries, where water treatment infrastructure is poor, which these companies can target:
Challenges for Water treatment companies in India
However rosy the picture looks, there are various challenges that these companies might face while operating in India. The importance of water treatment is yet to catch up here. Most Indian companies have installed WTPs/ETPs not because they understand its importance, but just because it has been made mandatory by the Government. This ignorance on their part is majorly responsible for the poor state of water/effluent treatment in India. They need to realize that water treatment can actually affect the profitability of their business in the long run. As much as 90% of the treated water can be recovered and reused by industries, which will save them procurement cost of water and taxes paid to the Government. In India, not many, in fact most, of these industries are not willing to commit to capital investment where they will not garner any immediate benefit. On the other hand, when we look at supply side, water treatment companies here face business development issues as most of these water treatment projects are allotted through tenders. Often, one needs to have ‘’great’’ political or Government connections to win these tenders because of the prevalent redtapism. It is really challenging for a new entrant to win these contracts, which amount to almost 50% of the industry volume.
But these problems are not as big as the opportunities which lie ahead. There are a few players like Thermax, Dow Chemicals and Ion Exchange, who have been running turnkey projects and provide end to end services from pre-treatment of water to waste water recycling. There is huge opportunity for foreign players as 100% FDI is allowed by the Indian Government in this sector. Apart from setting up their business operations in India, additional opportunities exist in providing consulting and design services to the Indian water industry. Growing public concern, media pressure and renewed legislature have opened up the avenues of growth in this industry, which means it is the right time for water treatment companies to enter the Indian waters!