Dewas water supply project to be recast

The Madhya Pradesh government is planning to restructure India's first water supply project dedicated to industrial units at Dewas.

The project will allow a private player to lift water from an intake well on the Narmada-Kshipra river link nearby. State government sources said the project would be re-auctioned through the Swiss Challenge method, allowing the existing supplier a first right of refusal, after a Cabinet nod.

Welspun Projects is operating the project but does not have sufficient water supply. "The project will be restructured soon once the Cabinet okays it," a highly placed source in the Madhya Pradesh government told Business Standard.

The project was conceived by the government in 2005 and took shape in 2007, when the Dewas Industries Association, Madhya Pradesh State Industrial Development Corporation and MSK Projects signed a tripartite agreement. MSK Projects was allowed to lift water from Nemawar, a village 125 km away, and distribute it to local industries at Rs 26.50 a kilolitre.

"The agreement was for supply of 12 million litres of water a day against the planned capacity of 23 million litres. However MSK Projects could not meet the demand," said Ashok Khandelia, president of Dewas Industries Association. Later, the project was handed over to Welspun Projects but it, too, could not supply the required water. "Against an estimated demand of 15 million litres per day, the supply is about three million litres," said Khandelia.

Dewas is home to units of Tata Leathers, Sun Pharmaceuticals, Eicher, Silver Coin, John Deere, Cummins and Kirloskar, apart from a large number of smaller drug, soybean and engineering companies.

With restructuring, the project cost will go up to Rs 118 crore because the new bidder will have to pay Rs 49.14 crore principal to funding agency IDFC and estimated interest of Rs 12.01 crore. The rate, frozen due to insufficient water supply, will be indexed to inflation and power costs. "We are ready to pay, provided the supplier ensures sufficient water," Khandelia said.

A restructured project will feed Dewas' industry till 2037, as planned.

Originally proposed for 60 million litres per day, the project was curtailed to 23 million litres and its term was increased from 15 years to 30 years.