Housed
in a bungalow on the Santhome High Road, Chennai, the
New Tirupur Area Development Company's (NTADC) office
will pass off as some non-descript residence. It certainly
does not look like a corporate office of a company implementing
a Rs.1,150-crore project.
"This is the way we work," laughs Mr. M. Raman,
managing director. Mr Raman earned the sobriquet of ‘Ford
Raman’ for the passion he displayed in bringing the
global auto major Ford Motor to Chennai. Probably once
his latest project goes on stream, he will be known as
Tirupur Water Raman!
At a time when six private water-supply initiatives found
their ‘watery grave’ owing to unviability, the
Tirupur water project is nearing financial closure and
the project work is expected to start soon. "Perseverance
ultimately pays," is all that Mr. Raman can say.
For the uninitiated, Tirupur, a small town near Coimbatore
in the southern state of Tamil Nadu, is the country's
largest cotton knitwear centre, accounting for 90 per
cent of the country's exports in this sector. But the
town suffers from some major handicaps. The domestic water
supply is limited to a few hours and that too on alternate
days, industries do not have access to piped water supply,
waste water collection and treatment facilities are non-existent
and road and communication network is sub-standard.
In order to alleviate the suffering, the authorities prepared
a comprehensive plan to address the infrastructure-related
problems. And the project was called the Tirupur Area
Development Programme. But lack of budgetary support prompted
the local authorities to invite private players and opt
for a commercial format to implement the master plan.
This led to the formation of NTADC - a joint venture between
Mahindra & Mahindra, Infrastructure Leasing and Financial
Services, United Utilities, Bechtel, Government of India,
Government of Tamil Nadu and the Tirupur Exporters Association
- to take care of the water supply project on Build-Own-Operate-Transfer
(BOOT) basis. NTADC is the concessionaire for 30 years.
"The scope of work includes, bulk water supply to
Tirupur municipality, industries and wayside villages,"
says Mr Raman. Besides this, NTADC will also be responsible
for improving the distribution network within the municipal
area and provision of sewerage collection treatment and
disposal and low-cost sanitation facility within Tirupur.
The company will draw 185 million litres per day (mld)
of water from the river Cauvery to be supplied to industries
in the Tirupur Local Planning Area (TLPA), Tirupur municipality
(industrial and domestic) and wayside villages.
While the industries will be charged Rs.45 per kilo-litre
(KL), the households in Tirupur and wayside village houses
will pay Rs.5 and Rs.3.5 KL.
Patience and perseverance are the two qualities needed
for implementing a project of this magnitude, opines Mr
Raman. The reasons are many. But the main reason is the
finance availability.
"Funds are scarce for water supply projects. And
what ever is available, is at a high cost. Lenders perceive
such projects as highly risky one," Mr Raman remarks.
His project has a debt component of Rs. 674 crore and
some of the loans have been contracted at 16 per cent
rate.
Apart from the stiff interest rates, the two other components
of the loan, viz. loan tenor and conditions, are more
stringent. "Projects like ours need 30-year-debt
whereas in India, funds are generally available for only
15 years," laments Mr Raman.
The loan is backed up by security in the form of assignment
of project agreements and step in rights, charge on the
assets, receivables and residual insurance proceeds. The
lenders also insist on some percentage of reserve to be
provided out of receivables (0.33 per cent in case of
NTADC).
This security is also in the form of a revolving security
deposit and an irrevocable letter of credit equivalent
to one-month’s receivable, besides creation of a
special account for receivables from the Tirupur municipality.
In order to secure receivables from industrial units,
a revolving security deposit equivalent to three months
receivables has been insisted.
While long-term debt funds are difficult to get, there
is lack of appetite for equity investors to put in their
funds in a water project due to its long gestation period
and other conditions, Mr Raman adds. Incidentally, NTADC
has raised Rs.300 crore in equity capital as against a
projected figure of Rs.400 crore. "We will go for
a public issue at appropriate stage", says Mr Raman.
In conclusion, he says, "Commercialisation of the
water sector is a recent phenomenon in India. We have
passed successfully through various stages of project
development. And this experience will set the benchmarks
for commercial development of water sector in India."
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