My guest today is Rajiv Mittal who is the chairman and managing director at VA Tech Wabag, one of the leading companies in water and waste water treatment segment. Mr. Mittal, thank you very much for joining us on Deep Dive. Sir, it's a unusual sector. It's not the normal infrastructure, but one of the most essential one for any economy because water recycling circular economy is what now everyone is moving towards. Give us a sense of where we stand today and kind of opportunity that you see.
Thank you Sajith for having me on your show and hello to all your viewers. I think you introduced water sector. I think in future I'm sure we will all introduce water sector as the most promising sector, as the most essential sector because water has never been so important in past two decades as it is today. So, the importance of water in the present circumstances has seen a tremendous improvement. Whether it is for human consumption, whether it is for industrial, whether it is to maintain the environment, or we as one of the resources required for industrial growth and sustainability. Plus the recent war in Gulf area has given a lot of importance to water. It's not only to meet the present demand, but also to have a spare or a buffer capacity in case of emergency. So, that makes water very, very important.
Plus, you can see this is definitely a priority sector driven by the climate change, urbanization, industrialization. This is all making a big difference to the water sector. And that is what water is today. If you see, there is almost next 5 to 7 years, if you see the growth story of Wabag, it is all going to depend on the demand which we can even see and identify today. Almost 75 billion dollars we see in the conventional water sector, which we need to invest in next 5 to 7 years. And then if you see the split between the EPC and O&M, almost 20% will be invested in operation maintenance, which is one of the verticals of Wabag, and that we will continue to do. Plus, there's an industrial growth, and we have to ensure that industry gets a viable, reliable, and affordable water supply to maintain their growth, and maintain their production without any disruption. So, the economic growth of each country will be dependent on availability of water for this GDP growth. So, I think this is not only in India, but if you see Middle East, Southeast Asia, Wabag is present in most of developing economies, or you call it emerging economies, the situation is same. Whether it's Asia, Africa, Middle East, we see same trend. So, I must say opportunities are immense. We are very bullish about it and Wabag as a company is well positioned to take advantage of this. Maybe a wastewater treatment plant or surface water treatment plant or a desalination plant or for that matter even a reuse of used water plant. So, I see the importance of water and everybody will talk about water with lot of respect and lot of concern and we will see lot of investment going into water in next one decade.
Uh you know, it's no longer a municipal story. It's about how you're going to have a circular economy with respect to water given the fact uh like for India, you know, fresh water is just 4% of the total availability and we cater to nearly 16% of the global population in that sense. Uh how do you look at the entire this circular economy and where is the value creation that comes in in that economy?
I think circular economy is no longer a choice, Sajid. Today, it's a must. Everybody is talking about circular economy, sustainability, clean and green environment. In this situation, no longer we can continue to just extracting water from our surface water, from our ground water, or keep discharging our used or waste water from industries and from domestic users to nallahs and surface water and polluting them, which is what we have done over the ages. Today, there's realization that we have to not only protect the environment, but we also have to conserve this precious resource called water. So, naturally, when you talk about circular economy or you talk about net zero water or water positive net zero power, this is all coming from the idea of circular economy or reducing the greenhouse gases. And that's exactly where Wabag is positioned and working on it.
Today, if you see what is happening, Wabag is into a field where we said and this we said 20 years back, Sanjeev, that we have to focus on converting waste to wealth as you given your introduction. Water was not valued. People didn't talk about it. Didn't know about this sector and the potential of this sector. But today, everybody's talking about it because to no longer it's just a waste you can discharge. There's a huge huge implication if you discharge a waste and NGT comes to know, you can be paying fines in terms of hundreds and few hundred crores of rupees. So, the implications are huge. So, what is the option? Option is to treat the waste to meet the discharge standard. When you're treating the waste to meet the discharge standard, why don't you add additional step of tertiary treatment and reuse that water. By reusing, what are you doing? You are increasing the viability of your plant or industry what you have. You are getting a sustainable water resource, additional water which was not available to you. And this gives you reliability in your operation. You don't have to shut down your plant during the summer months when the local municipal authority says, 'No, we are short of water and we are going to give it to the industry. We are not going to give it to the industry, we'll give it to the domestic users.' There's always going to be more pressure on domestic users requirement rather than on industry requirement. And we have seen in the past lot of industries have gone into red because for few months they had to shut the plant because of this. Now, if you reuse water, this problem is gone. Because what are you reusing? A reusing a resource or a raw material which is called used water. They have no drought. They are available 365 days, 24 by 365 days. And if that is available, your industry will get a reliable, affordable, and sustainable water resources. That's number one.
Number two, you are not discharging the waste water to the environment. So, you are protecting the environment. And also from economic reason, no pollution control board or NGT can come and put a fine on you. And third, this is going to improve your GDP. If industry is assured of reliable water at affordable price, just imagine how the industrial growth will take place. So, this point of view, we are very clear. Circular economy is a must. It's no longer a choice.
There are water opportunities which are emerging, not just treatment of water, but going into, you know, ultra pure water. You have compressed biogas now which has started. You have started a unit on that as well, if I'm not wrong. Industries like solar PV and data centers and green hydrogen are also required abundant quantity of water. How can you give us a sense of the value creation that happens at these levels and the value add that is required?
Absolutely, Sanjit. Very good question and very relevant for being future ready. See, Wabag, as you know, is a technology company. We have more than 125 patents and trademarks, which we use only for our captive purposes, and we have been very successful in that. And we continue to invest in R&D so that we are up-to-date with the required technologies for the future market aspect point of view. Now, these sectors which you named a few, PV solar cells was not a market few years back. Recently, India decided and gave license to make PV cells, and the moment you make PV cells, you need ultra pure water. The moment you go to semiconductor, because this was a big damage to all the countries who were dependent on China during COVID, some of the supply of these chips was disrupted. And the whole operation of those industries which were dependent on these chips got disrupted. So, I think almost all countries, not only the developing countries, but the developed countries also decided to put their own capacities, and that is what has shifted in last 5 years. You see lot of investment going in in manufacturing of semiconductor and obviously they need lot of water and this water is ultra pure water and that is where we as a technology company come in to produce ultra pure water and take this orders.
The third thing you can talk about AI data centers. This is also emerging industry. And when we look at all these data centers, they also gulp water because of air conditioning requirement. They need a lot of water. This time may not be a ultra pure water. They definitely need a clean water but in the large quantity. That is a new area we see if it is happening. Of course, another area which is emerging very fast is our green hydrogen. Today economically may not be viable but as the scale goes up, this also product will be economically viable and we need a good quality may not be ultra pure but at least a demineralized water where the salt quantities are substantially reduced for hydrogen production.
Last you talked about CBG. There cannot be an appropriate time as it is today to develop your own resources and as our honorable Prime Minister says, be atmanirbhar. Don't only depend on this gas which is for cooking or for automobile fuel for importing this fuel and we know what happened. Now, even our LPG at home is short supply. And lot of sites are suffering because there's not enough gas available. Now, if we start converting our organic residues, whether it is from sewage, waste water, even our cow dung, even our agriculture residues, which is polluting our capital air every year during the winter months. All that can be put through gasification plant, generate biogas, clean it, and have it available for fuel as domestic cooking fuel or for automobile fuel. And that is what government of India has come up with a scheme called Satat scheme or Gobar Dhan. This is all about creating wealth again from Gobar Seth, from industrial residues, from agriculture waste. And that is what is very attractive. Government is encouraging industries to put more of these CBG plants so that India's dependence on importation of gas at least reduces if not eliminated.
The kind of investments which are coming in it's runs into billions of dollars and these investments are also now backed by sovereign funds. You have multilateral agencies like a World Bank or an ADB doing it and in over and above that government schemes are there. Government is also spending billions of dollars there. How do you look at these investments and the kind of backing now which is coming back into this water economy.
