Alandur Sewerage Scheme

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In March of 2000, Alandur Municipality (AM) awarded a BOT contract for two sewage treatment plants (STPs) to First STP Private Limited on a 14 year basis following a competitive 2 stage bidding process, one comprising the technical proposal and the other comprising the financial proposal. The two STPs had a capacity of 12 million liters per day (mld) each, for a total capacity of 24 mld. The STPs were part of the Alandur Sewerage Project (ASP), which was to build the area’s first sewerage system to provide low cost sanitation to the then 130,000 residents of Alandur. First STP Private Limited was a special purpose vehicle (SPV) created by IVRCL Infrastructures & Projects Ltd. of India and Va Tech Wabag of Austria. IVRCL was the majority shareholder with 95% stake in the SPV. The construction, operation and maintenance of the planned sewerage system including sewer lines, pump houses, and pumping plants was to be carried out by the entirely by municipality. However, First STP was to build, operate and maintain the STPs during the contract period of 14 years and hand over the STP to the municipality at the end of the contract period. The work of the project was to be carried out in two phases. In the first phase (initial two and half years period), the first 12 mld capacity STP was to be completed and commissioned. The other STP was to be built in the next phase. As per the agreement, the municipality was to pay First STP a fixed rate for every cubic meter of sewage treated with a guarantee to cover the company’s minimum fixed operating cost and capital investment. The tariff structure allowed full user charge recovery based on cross subsidies for the poor from commercial and industrial users on a 1:3:5 ratio, namely Rs 150 (US$ 3.12) per month for households, Rs 450 (US$ 9.54) for commercial users and Rs 750 (US$ 15.89) for industrial users, with an annual increase of 6% subject to agreed-upon ceilings. ASP achieved financial closure in November 2001. The total cost of the two STPs was Rs 100 million (US$2.1 million), financed by an ICICI term loan of Rs 30 million. The first plant cost Rs 60 million and was commissioned in September of 2002 while the second plant was expected to cost Rs 40 million and be commissioned by 2005. None None