In an interview with Anil Mathew, Sasidhar Chidanamarri, Programme Manager – Environment and Building Technologies, South Asia and Middle East, Frost & Sullivan deliberates at length on the strides India is making in water treatment equipment front. Edited Excerpts:
How established is Indian water treatment equipment industry? What is the current market size of this sector and at what rate is it growing?
The Indian water treatment market is highly fragmented with over 200 equipment manufacturers supplying varied type of plants. Of this, only a couple of them are national players, while all others are localised suppliers enjoying up to 60% of the wallet share. In spite of so many suppliers, this market is yet to mature (because they are mostly from the unorganised sector) using the latest technologies and project management skills.
Our research indicates that the market size of the Indian water and wastewater treatment equipment was about Rs. 52,000 million (or, Rs. 5,200 crore) in 2010. It is expected to grow at a compound annual growth rate (CAGR) of 12% in the next three years.
What are the factors driving the growth of water treatment equipment industry?
Industrialisation, urbanisation and government impetus are the driving factors of this market. Currently, industrial segment dominates the overall market with a share of approximately 50%. Investment-driven growth in the industry segments such as power, pharmaceutical, biotechnology, food processing and refining has resulted in stupendous growth of both process water treatment as well as effluent treatment systems, with an up-trend in recycle and reuse equipment. Rapid urbanisation, growth of sub-metros and new nodes of economic activity are also driving demand for water and waste water treatment equipment and services.
Besides, scarcity of fresh water and the highly polluted state of surface water resources have necessitated the increased usage of treatment equipment. As the economy is growing, the urban local bodies or municipal corporations have been able to open their purse strings, to set up sewage treatment plants and drinking water treatment plants, to make our cities livable and competitive. For a case in point, Chennai has selected a technology provider and operator for its second desalination plant. Even Mumbai is planning to come up with a desalination plant, to meet the drinking water requirements of its population, which is expected to touch 6,300 million litres per day, (MLD) by 2021. In the coming years, share of the municipal segment in the overall market is expected to gradually increase, due to the impetus received from programmes such as national urban renewal mission and other programs sponsored by the state, central governments and international aid agencies.
Do Indian firms have capabilities in designing technologies for larger scale water treatment plants? If not, how important is it for them to develop such skills?
Technologies for water and waste water treatment have been traditionally sourced from overseas, due to high cost of technology development. It continues to be so even today. However, Indian companies have been very capable in adopting these technologies to Indian conditions and making them a success here. Thus, while the heart of the technology comes from abroad, there are enough resources and capabilities here, to design, manufacture, assemble and execute large water treatment projects.
With an increase in the number of suppliers, there is a pressure on the price levels of these systems and project costs. Therefore, using local sourcing of components to make it affordable to the price-sensitive Indian customers has become a must. The large domestic water firms are endowed with strong project management and execution capabilities and are technologically on par with overseas firms, when it comes to conventional treatment techniques. However, overseas firms have the upper hand when it comes to niche technologies like desalination, membrane bio reactors (MBR), bio-solids (sludge) management and sludge-to-energy. Also, in the bidding process, references, past experience in providing solutions to a similar industry, technology and balance sheets are a ‘must-haves’. Hence, Indian and overseas companies form a project specific alliance to meet the specifications in the tender.
It is very important for the Indian companies to invest in R&D aimed at new technologies or modify existing technologies, to suit the Indian market. The growing awareness about the pollution, coupled with the changing attitude of Indian industries to reduce their total water footprint, is transforming the market. Customers are seeking one-stop-shop for all their water needs, starting from installation of water and effluent treatment systems, to operations and management, to ensure effective water usage. In this context, it is vital for the Indian companies to offer ‘total’ or ‘holistic’ water management solutions.
Is there a huge demand for indigenously manufactured water treatment equipment? If not, why do companies prefer imported equipment to domestically made ones?
Domestic water firms are quite adept at manufacturing conventional treatment techniques such as demineralisation, media filtration and activated sludge technologies. The market is now seeing increased adoption of technically complex methods like UF pre-treatment, polishing of treated sewage to use it as process water, membrane systems, MBR and sequential batch reactors (SBRs) and moving bed bioreactors (MBBR). These systems are currently being offered by overseas players such as GE Water, Veolia Water Solutions, EIMCO and Siemens Water, with whom most of the Indian companies collaborate as and when a project comes up. Some of these overseas technology suppliers do not get into civil part of the project and merely act as technology suppliers to the Indian companies.
Are Indian equipment manufacturers competent enough to meet the competition from the foreign players? If not, which are the areas they have to focus to develop the much needed expertise?
There is no gainsaying that Indian manufacturers are equally competent to face the competition head on. Large Indian water companies are now executing large scale projects such as sea water and brackish water desalination, polishing to treated sewage for reuse as process water for large industries as well as indentified BOOT (build, own, operate, transfer) based projects in the municipal segment, as a business strategy for growth. It is going to be more of “co-optation,” where Indian and foreign companies compete as well as cooperate.
Mega trends are expected to create a paradigm shift in the market:
Energy and resource recovery from reverse osmosis desalination plants
Solar powered desalination
Wastewater recycling and reuse
Sludge to energy
Energy efficient zero liquid discharge systems
Public private partnerships (PPPs) in large municipal projects
Management of assets/utilities.
Has the government taken enough steps to grow this industry? If not, what do you think that the Govt. should do to push the growth of water treatment equipment industry?
Yes, the government has pursued adequate steps to prop up this industry. 100% Foreign Direct Investment is allowed under Automatic Approval. There exists exemption on all items of machinery, including instruments, apparatus and appliances, auxiliary equipment and their components parts required for setting up of water supply plants, including a plant for desalination, demineralisation or purification of water to make water fit for agricultural or industrial use. Excise duty has also been exempted on pipes used for taking water from water treatment plant, including its reservoir, to the first storage point.
In this decade, the recently framed National Water Mission seeks to ensure that a considerable share of urban water requirements is met through recycling of wastewater. Another area highlighted in this mission is the promotion of cost effective desalination technologies and encouragement of public private partnerships (PPP). If the strategies enshrined in this mission have to be successful, central government should dole out funds to the states, besides providing technical support. Since recycle technologies like zero liquid discharge (ZLD) are expensive, central government can envisage a common treatment system akin to the currently used common effluent treatment plants (CETPs). More importantly, state pollution control agencies have to conduct regular audits to ensure the efficiency of treatment plants and penalise industries that are not complying with the regulations. Presently, the agencies are under-staffed and do not have the expertise to carry out the rigorous checks and balances or put in place bankable public private partnerships (PPPs) projects.
Would you please brief us about the trends and innovations happening in the water treatment equipment front? How far Indian companies have succeeded in embracing these trends and innovations?
The way market is panning out there is a great deal of promise in the following segments. There is ample scope for services such as operations and maintenance (O&M). The existing contracts are mostly in the form of annual maintenance contracts. However, going forward, operations and maintenance for the tenure of 3-5 years will gain prominence, as more and more end users outsource the operations and maintenance of water and effluent treatment plants, to focus on their core competencies.
Municipal desalination can turn out to be the silver bullet in coastal cities teeming with growing population but low on fresh water sources. The current installed capacity is about 560 MLD and is expected to clock double digit growth rates, with appropriate action plan by local and state governments.
To sum up, as we tread along, the opportunities manifest as the clamour for sustainable growth reaches a higher decibel.