Govt reneges on PPP with L&T, to take over VIWSCo

The Andhra Pradesh government has decided to take over the joint venture Vizag Industrial Water Supply Company (VIWSCo) from Larsen & Toubro Limited (L&T), heralding a major reversal of the first-ever policy on PPP (public-private participation) model on water supply management.

L&T, which had also executed another water supply project worth about Rs 500 crore, has 51 per cent equity in VIWSCo with the Vizag Municipal Corporation (VMC) and the Andhra Pradesh Industrial Infrastructure Corporation(APIIC) holding the rest.

VIWSCo was formed to execute a water supply project as well as manage it for a period of over 32 years.

In a recent meeting, chief minister Y S Rajasekhara Reddy instructed the officials to take necessary steps to entrust the management of VIWSCo, formed with an equity of Rs 25 crore, to VMC in place of L&T, sources close to the development told Business Standard.

According to sources, VMC will now buy out the entire L&T's equity by paying back Rs 13.5 crore invested by it.

The agreement with L&T for managing the water supply scheme came under the government's scanner immediately after the Congress took over the reigns of the state with local Congress leaders, led by the ministers of that area vehemently opposing the idea of L&T running the scheme.

When in Opposition, these leaders had argued that the people of Visakhapatnam would have to shell out heavily to meet their drinking water needs if a private company had control over the water supply scheme.

Designed to supply 264 MLD of water from Godavari river to the Visakhapatnam Steel Plant, Simhadri Power project (NTPC) besides the municipal corporation, Vizag Pharmacity and the Andhra Pradesh Special Economic Zone, the project was completed last year with the loan contribution of Rs 240 crore by Rashtriya Ispat Nigam Limited (RINL), Rs 50 crore from NTPC and Rs 60 crore from the municipal corporation. The remaining money was mobilised through banks. The project was also executed by L&T.

As per the agreement entered by these public sector entities and the state government agencies, the special purpose vehicle (SPV) would supply water to them and adjust the bills against the loans.

With VMC at the helm of affairs of the water supply company, the recovery cost may run into rough weather, let alone its professional management, observers felt.

Intriguingly, an entirely different excuse for the decision to show the door to L&T from VIWSCo is being given by the Congress from the one it made when it was in the Opposition.

According to state government officials, the political leadership is now of the view that there is no point in entrusting the management rights with L&T for the next 30 years as the scheme would be redundant within a 4-5 year period.

According to them, a new canal with much larger capacity has been planned to meet the water requirements of Vizag area under the proposed Polavar irrigation project, which is expected to dwarf the present industrial water supply scheme.

But, a deep division of opinion among the officials is said to have come to the fore on this crucial decision.