Andhra Pradesh Priorities: Urban Infrastructure - ILSF

1. Urban Infrastructure
Parijat Dey, IL&FS Academy of Applied Development
O Rajesh Babu, Andhra Pradesh Urban Infrastructure Asset Management Ltd.
Andhra Pradesh Priorities conference, Vijayawada June 19

3. Source: City Lights, NASA
“All through organized history, if you wanted prosperity, you had to have cities. Cities are places that attract new people
with new ideas”
– Jane Jacobs, author of “Cities and the Wealth of Nations”

4. Urban Infrastructure Gap
Source: Service Level Benchmarking, Water and Sanitation Program 2010, GoI; McKinsey 2011
• By 2030 urban areas are expected to
house 40% of India’s population and
contribute to 75% of GDP
• Estimated investment requirement on
infrastructure from 2012-31: INR 39.2
Lakh Cr (Source: HPEC)
• Key sector includes
• Water supply
• Sewerage
• Solid Waste Management
• Urban transportation
Service Level Gap in Urban Infrastructure

5. About: Vijayawada
• District: Krishna
• Area: 61.8 sq.km
• Elevation - 125 m
• City Population: 1,034,358 (2011 Census)
• Population density: 23,700 per sq. km
• No. of House Holds: ~2.75 Lakhs
• Average Literacy (%): 81.24 % (2011 Census)
• Wards: 59 wards with 3 circles
• Length of ULB Roads (in Kms): 1,250

6. Rationale
• 2nd largest city of the newly formed Andhra Pradesh state
• Increase in economic activity due to construction of the new capital Amaravati
• The local economy is expected to reach $17 bn by 2025, a six fold increase over 2010 level
• Business and agricultural capital of the state
• Key Industries: software, tourism, education, real estate and industries
Growing
Economic
Importance
• State Government Vision: Transform Andhra Pradesh into a "bustling" state and place it among the top
three states in the country by 2022
• By addressing the urban infrastructure service delivery gap, transform Vijayawada, a part of AP
capital region, as a world-class smart city
• Showcase state’s capability to investors
Why we need
the
interventions

7. 1st analyzed solution
Provision for piped water supply

8. Piped Water Supply
• India has 4% share of world’s water resources
• 80% of surface water is polluted; Losing of US$6 bn annually due to water-
borne diseases
• 64% urban Indians are connected and daily water supply is 1-6 hours
India
Andhra Pradesh
• Over 90% urban area in AP does not meet the requirement of 135 litres per
day per head recommendation
• In 24 ULBs (out of 110 ULBs) water is supplied twice in a day
Vijayawada
• 61% of total households are connected (1.2 Lac connections)
• 93% of residential connections are unmetered
• Water Supply Frequency: (2 to 4 hrs.) twice daily
• Shortcomings in the service delivery owing to deficiency in the water
distribution network (46% Non-revenue water)

9. Provision of Piped Water Supply
• 24 X 7 water supply distribution to 100% household in Vijayawada
• 80% replacement of existing distribution network pipes
• Intervention will start in 2019
• Project life: 25 years

10. List of Costs
• Capex Water Production
• Capex 24x7 Distribution Extension
• Capex Replacement/ Upgradation
• Opex
• Social cost of disruption due to
construction (First Year)
Item (INR Bn) at 5%
Discount Rate
Capex for production 3.4
Capex for distribution extension network 3.8
Capex for distribution replacement 2.1
Opex 40.8
Social cost of disruption 4.9
Total 54.8
Key Data Sources
• High Powered Expert Committee (HPEC) on Indian Urban Infrastructure
• National Research Council Canada

11. List of Benefits
Item (INR Bn) at 5%
Discount Rate
Water revenue 103.5
Salvage value of the asset 2.2
Consumer surplus 51.6
Cost of water through alternate source 17.5
Avoided Disability Adjusted Life Year 8.1
Total 183.0
Water Revenue:
Salvage value
Avoided cost of water through
alternate source: Assumed 50% of the
bore wells in AP offer unimproved
water
Consumer Surplus
Value of Disability Adjusted Life Year
saved
Key Data Sources
• VMC Municipality Tariff for water supply
• Global Burden of Disease database relevant to Andhra Pradesh
• Meta Analysis on impact of drinking water and sanitation on diarrheal diseases
• Meta Analysis on willingness to pay for improved water access

12. Total Benefits and Benefit-Cost Ratio
Intervention Discount Rate Benefit (Rs bn) Cost (Rs bn) BCR
Provision for piped water supply
3% ₹ 249 ₹ 69 3.6
5% ₹ 183 ₹ 55 3.3
8% ₹ 121 ₹ 41 2.9

13. 2nd analyzed solution
Provision for Sewerage for All Households

14. Sewerage
• Wastewater generated per day: 40 bn liters, expected to double in 15 years
• Coverage of sewerage systems and STPs in Urban areas: 2%
• Untreated Sewage flow into rivers, lakes and ponds: Approx. 80%
India
Andhra Pradesh
• Sewerage treatment capacity of about 10%
• 18.1% of Andhra Pradesh urban population is connected to Piped Sewerage
networks (Under Ground Drainage)
• 8 cities have existing partial underground drainage facility
Vijayawada
• 36% of the households have access to sewerage connections
• 35% of the sewage generated by the city is treated
• Total treatment capacity of 120 MLD

15. Provision of Sewerage for All Households
• Underground sewerage system with complete coverage
• 100 percent collection and treatment of waste water
• Intervention will start in 2019
• Project life: 25 years

16. List of Costs
Item (INR Bn) at 5%
Discount Rate
Capex for treatment 0.9
Capex for network - last mile connection 1.1
Capex for network - Incremental population 2.0
Capex for distribution replacement 2.4
Opex 24.8
Social cost of disruption due to construction 2.7
Total 33.9
• Capex for Network
• Capex for Treatment
• Opex
• Social Cost of disruption due to
construction (First Year)
Key Data Sources
• High Powered Expert Committee (HPEC) on Indian Urban Infrastructure
• National Research Council Canada

17. List of Benefits
Item (INR Bn) at 5%
Discount Rate
Sewerage revenue 7.1
Salvage value of the asset after project life 1.7
Avoided River/ canal cleaning cost 0.1
Avoided Disability Adjusted Life Year (DALY) 29.5
Total 38.3
Sewerage Revenue
Salvage value
Avoided River/ canal cleaning cost
Value of Disability Adjusted Life Year
saved
Key Data Sources
• VMC Municipality Tariff for sewerage
• Global Burden of Disease database relevant to Andhra Pradesh
• Meta Analysis on impact of drinking water and sanitation on diarrheal diseases
• Centre for Science and Environment

18. Total Benefits and Benefit-Cost Ratio
Intervention Discount Rate Benefit (Rs bn) Cost (Rs bn) BCR
Provision for Sewage and wastewater
treatment
3% ₹ 60 ₹ 43 1.4
5% ₹ 38 ₹ 34 1.1
8% ₹ 22 ₹ 25 0.9

19. 3rd analyzed solution
Provision for Improved Solid Waste Management

20. Solid Waste Management
• Solid waste collection: 83%
• Waste processed/ treatment: Less than 30%
• Three-fourths of the municipal budget on SWM goes into C&T
India
Andhra Pradesh
• 92% of households in Andhra Pradesh was covered under door to door
collection in 2016
• Source segregation covered 8% of households in the States
• Spend less than 10% of budget on SWM on processing and disposal activities
Vijayawada
• VMC claims 100% collection efficiency; however, waste processing and
treatment is almost non-existent
• In the past, VMC had taken several initiatives for waste processing but none of
them are presently functional
• Segregation of waste at household level is low

21. Provision of Improved SWM
• 100 percent door-to door collection of waste
• 100 percent processing and treatment of waste
• Intervention will start in 2019
• Project life: 25 years

22. List of Costs
Item (INR Bn) at 5%
Discount Rate
Capex for collection and transport 0.2
Capex for treatment 0.4
Capex for disposal 0.2
Opex 12.6
Total 13.4
• Capex C&T
• Capex Treatment
• Capex Disposal
• Opex
Key Data Sources
• High Powered Expert Committee (HPEC) on Indian Urban Infrastructure

23. List of Benefits
Item (INR Bn) at 5%
Discount Rate
Revenue from sale of compost and RDF 1.5
Salvage value 0.1
Land value savings due to intervention 5.0
Avoided landfill closure cost 2.1
Willingness to pay for improved SWM 19.6
Total 28.2
Revenue
• Compost price INR 2,500 per ton
• RDF price INR 300 per ton
• Landfill closure cost
• Rs. 15 million per ha (average life of a
landfill is 25 years)
• Willingness to pay for SWM
Key Data Sources
• Dumpsite Rehabilitation Manual: Centre for Environmental Studies
• Solid Waste Management in Indian Cities, Status and emerging Practices, Darshini Mahadevia, Jeanne M. Wolfe
• PIB

24. Total Benefits and Benefit-Cost Ratio
Intervention Discount Rate Benefit (Rs bn) Cost (Rs bn) BCR
Provision for Solid waste management
3% ₹ 40 ₹ 17 2.3
5% ₹ 28 ₹ 13 2.1
8% ₹ 18 ₹ 9 1.9

25. Summary of Analysis
Intervention Discount Rate Benefit (₹ bn) Cost (₹ bn) BCR
Provision for piped water supply 5% ₹ 183 ₹ 55 3.3
Provision for Sewage and
wastewater treatment
5% ₹ 38 ₹ 34 1.1
Provision for Solid waste
management
5% ₹ 28 ₹ 13 2.1

26. Sensitivity Analysis: Water Supply
Scenarios NPV net
benefits at 5
percent
BCR at 5
percent
Benefits
Relative Risk of Piped water (0.77) (Base Case)
(RR of basic piped water over unimproved sources on diarrhoea)
128.2 3.3
Relative Risk of Piped water (0.21)
(RR high quality piped water over unimproved sources on diarrhoea)
182.4 4.3
Cost
Social cost increase by 50 percent 125.8 3.2
Social cost decrease by 50 percent 130.7 3.5

27. Sensitivity Analysis: Sewerage
Scenarios NPV at 5
percent
BCR at 5
percent
Benefits
Relative Risk of Sewerage (0.72) (Base Case)
(Improved over unimproved sanitation on diarrhoea)
4.4 1.1
Relative Risk of Sewerage (0.59)
(Improved over unimproved sanitation on diarrhoea)
20.5 1.6
Relative Risk of Sewerage (0.88)
(Improved over unimproved sanitation on diarrhoea)
-13.2 0.6

28. Sensitivity Analysis: SWM
Scenarios NPV at 5
percent
BCR at 5
percent
Benefits
WTP for improved SWM (Average of the study result) (Base case) 14.9 2.1
WTP for improved SWM (Max of the study result) 27.6 3.1
WTP for improved SWM (Min of the study result) 2.7 1.2