SECTOR ANALYSIS

Date April 2011

India: Opportunities and challenges of the Indian Our ref. AJ
water industry
Prepared by Trade Council India, New Delhi

Abstract:

The Indian Water Industry is today on the crossroads. In a

developing country with huge requirements for water recycling and
purification of drinking water, there is a huge scope for growth.
The total Indian water market is estimated to be about USD 12
billion. While the government sector contributes about 50% of
this, the private industrial sector provides the remaining business.
The overall market is growing at 15-20% every year.

Thus, the market for water treatment in India is also seeing

immense expansion. This market is growing at about 15-20%
annually, like the overall water industry, with certain segments, like
the industrial and drinking water segments, seeing even higher
growths.
Table of Contents
Introduction: Opportunities and challenges of the Indian water industry ................. 3
Drinking water industry ...................................................................................................... 4
Water/Waste Water Treatment industry: ........................................................................ 4
Danish-Indian demo project.............................................................................................. 6
Contact: ................................................................................................................................. 7

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Introduction: Opportunities and challenges of the
Indian water industry

The Indian water industry possesses a great array of opportunities for the members
of Danish Water industry. This brief will summarize these opportunities as well as
the challenges, posed by the nature of the Indian Water market.

India faces a desperate situation of water shortage. Its fragile and finite water
resources are depleting while the demands for water from various sectors of the
economy are rapidly rising. In recent years, the industrial and domestic sectors
have realized this disparity in the supply and demand. The per capita availability of
water in India has been reduced from 5277 cubic metres in 1995 to 1970 cubic
meters now. This is projected to reduce further to about 1000-1700 cubic meters
by 2025, making India a water stressed nation. At the same time, demand for water
continues to grow and will grow 40% from 750 bcm to 1050 bcm by 2025. 90% of
the total wastewater in India continues to be discharged without any treatment.
About 1.3 billion litres of raw sewage and 250 million litres of industrial effluent is
added to the Ganges river every day.

With the New Economic Policy launched in 1991, the government tried to
encourage market-based approaches and privatization of urban water. The
National Water Policy drafted last year looks at water as an economic good and
looks at numerous macro and micro initiatives in this regard. Therefore, if you are
in the Indian water industry, you are in the right place at the right time.

India has devoted substantial resources to the water supply and sanitation sector,
significantly increasing its commitment since 1980 with the launch of the
International Drinking Water Supply and Sanitation Decade. Today, drinking water
investments constitute about 3% of the national budget. Due to these steps, today
85% of the urban and 75% of the rural population has access to public water
supplies. 48% of the urban population and 36% of the rural population has access
to sanitation services. But clearly, there is a lot of scope and opportunity to do
more, which in turn means high market opportunities for private companies
wanting to enter the Indian water industry.

The Indian Water Industry is today on the crossroads. In a developing country

with huge requirements for water recycling and purification of drinking water,
there is a huge scope for growth. The total Indian water market is estimated to be
about USD 12 billion. While the government sector contributes about 50% of this,
the private industrial sector provides the remaining business. The overall market is
growing at 15-20% every year.

Thus, the market for water treatment in India is also seeing immense expansion.
This market is growing at about 15-20% annually, like the overall water industry,
with certain segments, like the industrial and drinking water segments, seeing even
higher growths. The key drivers for this industrial growth are:

 Increased awareness about drinking water quality and health

 Decreasing water quality and users having to go for ground water

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  Environmental pressures on wastewater discharge from govt. pollution
control boards
 Reducing availability of water, forcing users to go for reuse & recycling of
water
 General Industrial and Economic Growth particularly in chemical,
pharmaceutical, power plants, food and textile industry

Drinking water industry

Safe drinking water is linked closely to the well-being of human life. In India, the
primary sources of drinking water, that include surface water and groundwater, are
contaminated by different physical impurities, agricultural and industrial wastes and
underground chemicals and minerals. Water borne diseases are widespread,
especially among the low income classes of the society. It is a cause of growing
concern that many Indians do not have access to safe drinking water. Thus, the
regular testing of water quality and using an appropriate water purification system
depending upon the quality of water is essential for good health.
 Opportunities: These trends pose great opportunities for companies working
within the area of potable water filtration, as well as companies working in
the bottled water industry. Recent industry figures from India indicate that
sales of bottled water grew from $189 million (USD) in 2003 to $599
million in 2008 – a growth rate of 216 percent. With this figure projected to
double in the next five years India is being seen as one of the fastest
growing bottled water markets in the world. The growth of the Indian
market is being attributed to people having more disposable income
coupled with poor public water infrastructure. Concerning the competition
on the market, Parle's Bisleri that virtually monopolised the bottled water
market earlier is now competing with Nestle, Coca Cola, PepsiCo,
Manikchand, UB and Britannia. According to a national-level study, there
are close to 200 bottled water brands in India. Nearly 80 per cent of these
are local brands. However, the premium bottled water market in India has
brands like Evian, San Pelligrino and Perrier.

 Challenges: The drinking water industry in India is very cost competitive,

which can limit Danish companies using expensive technologies.
Furthermore, the bureaucracy in India puts a big hindrance on the ease of
doing business in India, which is why there is often a need for the Danish
Embassy to be present at every step of the process of Danish companies
entering the Indian market.

Water/Waste Water Treatment industry:

While India is relatively rich in water resources, untreated domestic sewage,
industrial effluents and runoffs from chemical intensive agricultural farms are the
main contributors to widespread pollution of surface and groundwater sources.
Untreated domestic wastewater is a major source of pollution and wastewater
treatment facilities often do not function properly or are closed due to improper

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design and poor operation and maintenance. Reliable information on the Indian
water market is scarce, but it is estimated the total market is worth more than US$1
billion, divided about one-third for water provisioning, one-third for municipal
water treatment and one-third for industrial water treatment. While almost half of
India’s urban population (46 per cent) has access to sanitation services, less than 12
percent of rural residents have similar access. India lacks sewage systems and
wastewater management plants sufficient to meet the needs of its growing urban
population. In many cities the sewer systems are in very bad condition and need
extensive maintenance or replacement. There is a growing trend towards public
private partnerships for water and wastewater treatment plants and distribution
systems. Water scarcity has led many industries to adopt water-recycling systems
especially in the food, textile, pharmaceutical, chemical and power industries. Zero
discharge systems and wastewater recycling are becoming increasingly popular in
India.
 Opportunities: Opportunities exist for Danish companies to provide
technical consultancy services through the contractual and/or joint venture
route. Government spending is minimal compared to the total estimated
requirement of almost US$5 billion for water/wastewater treatment
facilities. To bridge this gap the Indian government allows 100 per cent
Foreign Direct Investment for municipal water and wastewater treatment
projects. Furthermore, the water treatment market is moving from
chemical treatment and demineralisation technologies to greater use of
membrane technology, which is a great opportunity for companies working
with this technology. Additionally, the Special Economic Zone scheme
offers incentives such as duty free imports and tax exemptions. But these
zones require environment impact assessments, wherefore companies
working with environmental initiatives are well poised to offer their
services in this area.

 Challenges: The Indian water treatment equipment industry is reasonably

well established and very cost-competitive. This leads to high competition
in this sector. Furthermore, locally fabricated equipment is about 30 per
cent cheaper than imported equivalents, which can be a possible challenge
for foreign companies. However, Indian firms have limited capabilities in
designing technologies for larger scale water treatment plants, which opens
up opportunities for Danish companies. However, like in the Indian
drinking water sector, bureaucracy can greatly limit the ease of doing
business in India.

In 2003, the Indian Government announced the mother of all projects -

interlinking of major river networks all over the country, thereby connecting the
water-deficit and the water-abundant areas. This project poses yet a possible big
opportunity for Danish companies. The project valued at over USD 100 billion is
one of the largest in the world. This has a great possibility of kick starting the
economy, and brings a huge set of requirements for equipments and construction.
Danish companies could in turn help fulfil these requirements.

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Danish-Indian demo project
Currently, the Trade Council in India is working on a Danish-Indian demo project,
with the waste water treatment sector, which focuses on energy efficiency, process
optimization and reuse of water. The project is a partnership between various
actors: The Trade Council, Danish Water Forum, Danish Environmental
Protection Agency (DEPA) and six Danish companies.

The project took point of departure in the apparent needs of Indian wastewater
treatment plants in terms of renovation and upgrading, which pointed towards the
establishing of a demonstration site for Danish know-how and technology at an
existing waste water treatment plant. Due to an increasing population and the
demand for establishing new wastewater treatment plants it was obvious to assess
if existing plants can be upgraded and serve their purpose with a lower energy
consumption and a higher efficiency within existing constructions and boundaries.
This approach will also enable a much faster expansion of the capacity, going
hand-in-hand with energy savings. Optimization of the treatment processes may
also lead to a much better discharge water quality, enabling reuse of the water for
other purposes, e.g. industrial or agricultural use. Another aspect of the project is
associated with the abatement of climate changes, aiming at reducing the use of
fossil fuel and thereby helping in keeping the global warming at bay.

Since February 2009 the Danish participating companies have formed a

partnership with the aim to explore the possibilities for establishing such a
demonstration site. The Danish Ministry of Environment has provided funds for
facilitation of the Danish partnership since the partnership activities are considered
part of the contribution to implementation of the Indian-Danish frame work
agreement on environment.

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Contact:
Trade Council in India
Embassy of Denmark
11, Aurangzeb Road
New Delhi-110011

Anshul Jain, Commercial Officer

B&C, Infrastructure & Defence
ansjai@um.dk
M: +91-98100-28527

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