Water – Wastewater treatment funding: Opportunities and challenges

Explore the challenges and opportunities in India's water and wastewater treatment sector. Learn how government initiatives and private sector contributions are shaping the future of water management.
Water and wastewater treatment, opportunities and challenges
Water and wastewater treatment, opportunities and challenges(Image Source: Wikimedia Commons)
Updated on
4 min read

India, a water starved country

Numerous studies have shown that the drinking water situation in India is far from ideal. According to UNICEF, about two-thirds of India’s 718 districts are afflicted with extreme water depletion. One of the biggest challenges is the fast rate of groundwater depletion in India, a country known as the world’s highest user of this source due to the proliferation of borewell drilling over the past few decades. This adds to the pressure as India has 18 percent of the world’s population, but only 4 percent of the world’s water resources. To make matters worse, more than half of India’s rivers are polluted. As per recent government statistics, 62.5 percent of wastewater in urban India either remains untreated or is partially treated. In this context, it is evident that the opportunities in the water and wastewater management industry are tremendously high.

The opportunity

According to a 2022 Frost & Sullivan report, the Indian water and wastewater treatment market will likely reach $2.08 billion by 2025 from $1.31 billion in 2020, registering growth at a compound annual growth rate (CAGR) of 9.7 percent. The report also ranked India as the 6th largest market for environmental technologies in the world, with subsector rankings of second for water/wastewater management.  Furthermore, owing to fast growth and urbanisation, our demand for water is projected to be twice as much as the available supply by next decade.

The Government of India, through its schemes like the Atal Mission for Rejuvenation and Urban Transformation, Jal Jeevan Mission, Community Drinking Water Schemes, and National Mission for Clean Ganga, etc. has contributed to the growth of the Indian water and wastewater treatment market. 

The private sector is also contributing to the rising demand for advanced wastewater treatment solutions. Industries like power, food and beverage, chemicals, pharmaceuticals, refineries, and textiles are required to treat wastewater before discharge. They are increasingly seeking alternatives to traditional chemical treatments and demineralisation plants, such as reverse osmosis membranes, for more effective wastewater management.

States have also imposed stringent process water regulations on industries, while some industries have established desalination plants to comply. Power plants, cement factories, iron and steel units, oil refineries, distilleries, and fertiliser plants are increasingly adopting the principles of reuse, recycling, and zero liquid discharge to optimise water usage and reduce their environmental impact.

According to a World Bank report, there is a significant financing gap between the required investments and the current capital flowing into critical areas .The UN estimates that achieving the Sustainable Development Goals (SDGs) will require an additional USD $2.5 trillion annually in developing countries alone.

Currently, funding for these sectors is primarily driven by the public sector. Large-scale projects are supported by the Indian Government, followed by commercial finance and multilateral agencies. Bilateral funding agencies and corporate finance contribute next, while foreign and domestic philanthropic organisations account for only a small portion of the funding. The Banking, financial services and insurance (BFSI) sector has a crucial role in bridging this gap and driving sustainable growth.

The challenges

The most glaring challenge is the sheer unavailability of funds at competitive rates. Non-Banking Financial Companies (NBFCs) can get FDIs and International partners to participate, but due to challenges in the Indian markets, especially in the water and wastewater treatment segment, this isn’t always easy.

To begin with, there is a lack of tested and financially profitable business models for water sanitation and water treatment. This has led to low participation and investment from private entities. Consequently, the government currently supplies 90 percent of funding for water-related activities.

Another big problem is the unavailability of methods/techniques for measurement of impact. It is natural that impact investors want to understand the outcomes of their investments in water and water treatment plants, but there are simply no standard methodologies for measuring and reporting the impacts of adaptation interventions. Therefore, it becomes difficult to get these funds or motivate investors to invest again. 

To attract impact funds, there is utter confusion with respect to impact areas. There is no guidance, standards, or even time given for testing interventions. The fast-changing climate discourse and, with that, the evolving climate jargon in India is creating confusion around concepts like environmental, social and governance concerns, net zero, carbon neutral, resilience and vulnerability, etc. In other words, most impact investors do not have an updated understanding of the Indian context of the problem or the intervention required.

Where NBFCS come into play and the need of the hour

NBFCs can be a catalyst of change in the water and water treatment segment by providing timely and adequate funds. Providing a viable resource of funds to NBFCs willing to invest in this sector is the need of the hour. Support from Public sector banks, an understanding of the Indian context in the industry, and transparency on the impact of projects carried out by impact investors can bring about a real change of pace to the entire water and wastewater management industry.

Ms. Irem Sayeed is the Chief Credit Officer at UGRO Capital.

All views expressed in this article are that of the author and may not reflect the views of the India Water Portal.

Related Stories

No stories found.
India Water Portal
www.indiawaterportal.org