An Innovative Financing Model for Sewerage Infrastructure Using Technology

The digital twin of the Ganga has been sanctioned under the Centre of Excellence at IIT (Delhi) to assist data-driven decision-making in the National Mission for Clean Ganga and other Government agencies.

Hydrological modelling, assessment of groundwater stress, identification of hotspots, scenario analysis, and monitoring of basin water resources are at the core of this project, which helps in ensuring objectivity and transparency in the decision-making process. The use of artificial intelligence, mathematical simulations, and planning tools has been envisaged in the project concept.

Hybrid annuity-based Public-Private Partnership (PPP) projects under the National Mission for Clean Ganga (NMCG) introduce an innovative financing approach for sewerage infrastructure. The key objective is to link payments to the actual performance of sewage treatment plants (STPs).

Traditionally, there was a concern that during the Operation and Maintenance (O&M) phase, private operators paid less attention to proper O&M because monthly payments were relatively small compared to the larger payments received during the construction phase. This sometimes resulted in non-compliances and poor operational responsiveness.

To address this issue, a new financing model has been developed in which a significant portion of the construction payment is deferred and released during the O&M phase as an annuity, based on the satisfactory performance of the STP.

Under this model, the government pays only 40% of the capital cost during the construction period. The remaining 60% of the capital cost, along with interest, is paid to the concessionaire as annuity over a 15-year O&M period. This structure ensures that both the government and the private sector share financial risks.

The concessionaire’s performance is assessed against specific Key Performance Indicators defined in the concession agreement, and annuity payments are released only when performance standards are met.

These projects do not involve any user charges or tariff collection. The entire project cost is borne by the Government and provided to the State Government as a central grant-in-aid.

NMCG has sanctioned a project for interception and diversion (I&D) and STP for pollution abatement of the river Mahananda in Siliguri Municipal Town, West Bengal, at an estimated cost of Rs 361.86 crores under the hybrid annuity PPP mode.