The Indian environmental market, including consulting, design and engineering, equipment, products, operations and maintenance, air pollution, chemicals, etc., is pegged at about र 200 billion. The water and wastewater treatment market is worth about र50 billion, while the waste management services market encompassing municipal, biomedical, hazardous and electronic waste is estimated to be about र10 billion. The water and wastewater market in India is in a growth phase, while, on the other hand, the waste management services market is in its nascent stage. The waste management segment holds tremendous potential in the short and long term, owing to strong regulatory action and awareness about waste management.
The air pollution equipment market is valued at about र 20 billion and this market is in the growth stage in line with the industrial development and phase-in of strict emission control regulations. On the whole, the environmental market has the potential to experience about 15-20% growth in the next five years.
The ongoing economic crisis has caused considerable slowdown in the industrial activity, which has affected the market to some extent. According to the Center for Monitoring the Indian Economy (CMIE), 23% of industrial investments worth around र1400 billion have been shelved or deferred due to liquidity crunch. Hence, in the near term, industrial and commercial segments may not offer the requisite support to the environmental market as these segments have been impacted by financial crunch. Nevertheless, the municipal segment and the related infrastructure projects backed by central and state governments can be expected to continue to drive the market in these recessionary times. The potential this market offers has led to the mushrooming of several small-scale players offering both equipment and feasibility & engineering assessment services. Long term alliances are being forged by overseas firms such as Veolia and GE with the domestic counterparts as a part of their aggressive strategy to garner a niche in the Indian market. The market, especially water and wastewater, displays mixed characteristics of being price sensitive and value focused. Small and medium market players cater to the price sensitive asset owners or end-user segments. However, with the introduction of stringent regulations and growing awareness about environmental concerns, end users are seeking value products that function efficiently, consuming less energy. And, they are not reluctant to pay more to lower the operational costs of their systems.
Paradigm Shift in Conducting Business
Pressure from the media and NGOs is forcing industries and municipalities to treat and recycle wastewater and develop engineered landfills for solid waste disposal. Central and state PCBs are gearing up for strict enforcement of effluent discharge standards. The principal constraints to the development of the water supply and sanitation sector such as funding limitations, inadequate cost recovery and inadequate operation and maintenance are being addressed to improve infrastructure. The success of PPP as envisaged in JNNURM in some municipalities with regards to water and wastewater and solid waste management is likely to be replicated in other cities and towns. The PPP mode, through Built-Own-Operate (BOT) basis is being offered as a solution to overcome funding constraints as Governments are coming to terms that active industry participation is a must due to massive flow of money and technology required in this business. On the other hand, water management firms, which are financially not strong enough to fulfill the participation under BOT mode, are being funded by domestic and overseas private equity and venture capital agencies. Venture Capitalist / Private Equity firms are keen on seizing investment opportunities in the environmental sector with focus on renewable energy and energy-efficient projects such as methane utilisation, biomass projects, and methane capture and utilisation projects. IDFC PE has invested about र350 million in Doshion Limited, a leading Indian wastewater management company. IL&FS and Sabre Abraaj infused about र2500 million in Ramky Enviro so that the latter can undertake environmental projects in waste management and wastewater treatment solutions across India. The reasons for investments are not hard to understand. The Indian Government has embarked on the gargantuan task of sprucing the urban infrastructure such as wastewater treatment and solid waste management, with active participation from the private sector. All these are the telltale signs of developments expected to happen in the Indian market.
The difficult and complex task of striking a balance between economic growth and environment has just begun. And, global as well as local investors are chasing the opportunities emanating out of India’s proclivity for energy security, environmental protection, and economic growth.
From the Report by: Sasidhar Chidanamarri, Industry Analyst – Environment and Building Technologies, South Asia and Middle East, Frost & Sullivan
