Encouraging Private Sector Participation (PSP) for sustainable and scalable desludging service delivery in urban India – Financial modelling for city cases from India

4 Poster Track: Applied Research » 5 Financial aspects in FSM

Speaker: Anindita Mukherjee

Summary – for publication in conference brochure:


With India’s increasing dependence on On-site Sanitation Systems (OSS), fostering the value chain for the collection and conveyance of faecal sludge in the FSM ecosystem has become both a market and policy priority. Although these services fall under the public purview, their provision is dominated by the private sector – often under an unregulated and unstandardised paradigm – owing to gaps in public service delivery.  Through a financial modelling exercise based on a robust evidence-base around the collection and conveyance businesses across eight cities, this study finds that private actors engaged in these businesses are marginally profitable, vulnerable to government action and weather high operational risks.


Introduction, methods, results and discussion:

With the launch of the Swachh Bharat Mission-Urban (SBM-U) in 2014, approximately 6 million individual toilets were built in urban India over a period of 5 years. However, owing to the high costs associated with the provision of underground sewerage systems, India has experienced an increasing dependence on On-site Sanitation Systems (OSS). While the Urban Local Bodies (ULBs) are traditionally responsible for providing Faecal Sludge Management (FSM) services, there remains a major disparity in the demand and supply of service provision by the ULBs, which is further exacerbated by the bourgeoning size of the urban population and the consequent increase in the need for FSM services.

In this milieu, many Indian cities are witnessing participation from small-scale private entrepreneurs who are addressing the increasing demand for FSM services, especially in the collection and conveyance segment, albeit informally in most cases. Diverse markets have proliferated across India, which cannot be encompassed in national policies which recommend standardised solutions for desludging services. Further, local governments lack a systematic understanding of gaps in their unique sanitation ecosystems, and the specific synergies that private partnerships can achieve. The situation is further complicated with recent programs advocating for a one-size-fits-all approach.

This study provides an understanding of the prevalent and emerging practices related to PSP in collection and conveyance of faecal sludge, and to strengthen the evidence-base for sustainable and scalable service delivery models. It’s also an attempt to contribute towards an enabling environment for private entrepreneurs, which will require localised policies and programmes, pertaining to specific requirements of the city/state, as determined by the ULBs.

Based on an evidence-base from eight Indian cities, this study undertook a financial modelling exercise to evaluate the profitability of privately operated collection and conveyance businesses in FSM. Further, the modelling exercise was also used to analyse the impact of exogenous shocks such as varying the degrees of economic and environmental regulations, imposing cross-subsidisation mechanisms and market competition, and varying the distance from the designated dumping/treatment facility. The financial models were then used to outline best practices vis-à-vis economic, planning and management decisions undertaken by the ULBs, in tandem with private entrepreneurs.

There are different models and methods of engagement of the private sector with the ULBs. The financial analysis indicated that as the collection and conveyance of faecal sludge becomes increasingly centralised and state-driven, per-trip profits and market turnover decrease steeply, crowding out or stifling private sector entry. Accordingly, markets which are driven by competitive prices and governed by regulatory guidelines, rather than economic regulations (such as price ceilings, plying time restrictions, etc), incur higher returns. Instances of monopoly practices such as ULB paid scheduled desludging or ULB contracting of private operators are also perceived to negatively impact business profitability, thereby disincentivising private entrepreneurs. Further, the predominant demand generators in thriving markets may be influenced by the city size – dependency of markets in larger cities is skewed towards ‘bulk’ customers (including apartment complexes, hotels, etc), as opposed to individual customers driving the markets in smaller cities.

Conclusions and implications:

The business models of PSP in collection and conveyance of faecal sludge have emerged in response to the local environment and thus vary considerably across the eight locations studied. Overall, it may be inferred that an over-regulation of the sector is likely to negatively impact the operations and profitability of private operators. The local/city government, thus, should aim at ensuring that the larger sector goals are achieved, i.e., all urban households with individual toilets connected to septic tanks and other OSS systems have access to safe emptying/desludging services and faecal sludge collected is safely transported and treated prior to its disposal in the environment in order to ensure there is no environmental pollution.

As the FSM market evolves and the indispensable role of the private sector in service delivery emerges at the forefront, it will be crucial to identify mechanisms that not only ensure perpetual revenue-generating opportunities for private operators, but also reduce their business risks while upholding sustainable environmental outcomes. Towards this end, a pragmatic approach by the ULBs would entail the creation of an enabling business environment for private operators, which ensures market-determined outcomes under the formal ambit and minimises environment and public health hazard.

Relevant references:

Census of India
2011. ‘Houses
Household Amenities and Latrines – Availability and Type of Latrine Facility 2001-2011.
& Mukherjee
A. (2019). Unearthed - Facts of Onsite Sanitation in Urban India. New Delhi: Centre for Policy Research. doi:10.13140/RG.2.2.29637.60643
& Chhabra
S. S. (2019). Bridging the Gap: Opportunities for Private Sector Participation in Faecal Sludge and Septage Management. New Delhi: Centre for Policy Research. doi:10.13140/RG.2.2.22926.72006
National statistical Office. (2019). NSS 76th Round: Drinking Water
Hygiene and Housing in India
July 2018 – December 2018. Ministry of Statistics and Programme Implementation.
SBM-U Dashboard. http://swachhbharaturban.gov.in/dashboard/

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