Country: India |
Sector: Solid Waste Management |
Name of Project: Berhampur Solid Waste Management Project |
Contracting agency: Berhampur Municipal Corporation |
Agency type: Sub-national, local body |
Contract term: 20 years |
Construction period: 12 months |
Bid Parameter: Technical evaluation and the lowest level of grant required (with a cap of 25% of total project cost) |
Total cost of project: $10.3 million |
Total Population served: 400000 |
Per unit cost: NA |
Basic specifications: Standards based on legislation and rules |
Stage of project: The contract was signed in August 2013. The waste processing facility is under construction; operations are expected to begin in August 2014 |
Time taken for processing project from concept to contract execution: 24 months |
Local or foreign investor: Local investor, UPL Environmental Engineers Limited |
Applicable legislation: Municipal Solid Waste Management and Handling Act and Rules, Odisha PPP Policy |
Approving authority: Government of Odisha |
Is the approval process the same as for other projects: Approval Process followed was as required by the Odisha PPP policy i.e., approvals were sought at the local body, Department (Housing & Urban Development) and Empowered Committee on Infrastructure level |
Role of Private Party: The private party will be responsible for collection, transportation, segregation, recycling, treatment and scientific disposal of waste, construction, operation and maintenance of composting facility and closing of existing dump site. |
Role of Public Authority: Setting performance standards, monitoring and verification of performance and contract management |
Financing: Support from DevCo, Ministry of Foreign Affairs, Netherland; debt and equity financing by investor |
Payment Mechanism: Payments made by the Berhampur Municipal Corporation based on output |
Tariff: Berhampur Municipal Corporation is not levying user charges |
Comparison to existing rates: NA |
Government Support: Monthly payments made to the private party; construction grant and concessional loan from Odisha Urban Infrastructure Development Fund (OUIDF), which is financed by KfW |
Other advantages : Annual GHG emissions savings of 16000 tons |
Contingent liabilities created: Fiscal commitments and contingent liabilities are created for the municipal corporation as a result of (a) monthly payments during contract term, (b) provision for termination clauses; comfort letter may present contingent liabilities to the state government as well. |
Risks: project non-viability, payment risk, technology risk, performance risk |
Level of risk: Moderate |
Key risk mitigating features: Construction grant to mitigate lack of viability; 3-month reserves maintained in escrow account and automatic release of funds monthly to cover payment risk as also a letter of comfort from the Housing and Urban Development Department; detailed performance targets against indicators to cover performance risk; |
Factors affecting decisions on the size of project or population serviced by the project: Viability was an issue here, but as the project serves the entire municipal area and is not a joint project, there was no scope for increasing the size of the project; however, in the case of Cuttack and Bhubaneswar municipalities, they have developed a joint solid waste management project to ensure project viability |
Lessons learned: • Standardizing documents could help scale up the projects; two other projects are being developed and implemented on similar lines now; • Waste treatment technologies are limited and it is especially difficult to understand at local level which technology will work or not work; • Solid waste projects with waste treatment facilities require large upfront investments but revenues are low; • There is less precedence for these projects and these are less known by lenders; there is less appetite for lending to such projects; • Since the Municipal Corporation pays, the payment risk was high due to lower credit profile ; this had to be supported by escrow mechanisms as well as comfort letter from the state government; • Lenders do not have appraisal skills for such projects; upstream work is required on how to appraise such projects for financing; • Infrastructure development funding facilities and partial risk facilities may need to be created to improve financing flows to such projects; • There are capacity issues at local body level both in the public sector as well as the local investors/ providers/ financiers |