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New Delhi: Europe’s top water management companies are seeking to expand in India as farmers, industry and urban residents compete for increasingly scant supplies.

Veolia Environnement SA, Europe’s biggest water company, aims to sell more treatment plants to Indian energy and mining businesses. The next largest, Suez Environnement Co., is considering purchases of local operators as part of a push for 10-fold growth in the Asian country over five years.

“Markets like India will become more important for companies like us," Veolia Water India’s chief executive officer (CEO) Patrick Rousseau said in an interview in New Delhi. “We’ve focused on municipal contracts in India. Now we’re looking at industry. We’re talking to companies."

Almost 600 million Indians are at risk of supply disruption as surface and groundwater levels drop, imperilling Prime Minister Narendra Modi’s development agenda and signalling the nation’s $1.4 billion market for wastewater recycling is set to grow. Paris-based Veolia and Suez are targeting overseas expansion as thrifty French mayors squeeze margins on municipal contracts at home.

Patchy metering, theft and below-cost supplies are stoking overexploitation. Rousseau said people wouldn’t be able to afford water if utilities were charging the full cost incurred.

Growth potential?

For now, India’s economy is a small part of the companies’ global water businesses. Veolia’s Indian revenues of €50 million ($55 million) compare with global sales of about €24 billion in 2014. Suez’s $100 million from India contrasts with overall revenue of €14 billion last year.

Yet the small market size shows the potential for growth, according to G.V. Giri, an IIFL Capital Ltd analyst in Mumbai. Modi’s push to curb pollution in the river Ganges also boosts the outlook for Veolia, India’s VA Tech Wabag Ltd and Singapore’s Hyflux Ltd, Giri said.

“More corporates will be forced to spend on water self-sufficiency," he said. “With government announcements about shutting polluting industries along the Ganges, we’ll see more industrial demand for water recycling in the coming decade."

VA Tech Wabag has surged 325% since a low in August 2013, exceeding the 68% advance in India’s S&P BSE 500 index. Veolia is up 19% in 2015 and Suez has climbed 10%, compared with the STOXX Europe 600’s 16% rise.

Untreated waste

Focusing on industry involves “high-value" technology with better profit margins, Veolia’s Rousseau said in the 17 March interview. The company currently has municipal treatment plants in India’s Karnataka, Maharashtra and Delhi states.

Suez plans to bid for large sewage and desalination facilities in Mumbai, Chennai and other cities, the CEO of its local unit, Shyam Bhan, said in New Delhi in March.

India only has the capacity to treat about a third of the wastewater it generates, data from consultancy TechSci Research shows. Its market for wastewater treatment plants will reach $2.1 billion next year from $1.4 billion in 2013, TechSci said.

Scaling up the industry faces a perennial Indian problem: money. Modi set aside 4,200 crore for water resources in the year ending March 2016, down from about 13,100 crore in the previous fiscal year.

Other obstacles are the pace of municipal contracts, which slowed last year during the general election Modi won, and the lack of water regulators that enforce standards.

Modi’s agenda includes reviving a 30-year-old plan to link Himalayan and peninsular rivers to channel water to deficient basins. He also wants to curb toxic discharges into the Ganges.

The World Resources Institute estimates more than half of India faces high water stress, and Rousseau sees an expanding local opportunity for water management technology.

“It’ll take time, but I’m confident," he said. “More and more Indians are now traveling and they realize that things in India are not acceptable, as simple as that." Bloomberg

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