By Vrishti Beniwal and Archana Chaudhary
Bloomberg
On a steamy May morning in Ballari, a former British military outpost in southern India, the handful of workers still employed at Bachal Lal Varma’s jeans-washing factory sit on the dusty street outside with nothing to do.
Though their shift began more than an hour ago, they can’t start work until a water tanker shows up. A well that normally supplies Varma’s business is almost parched, making it necessary for him to spend $74 (5,000 rupees) a day-more than three times his daily profit-to buy water and stay open.
“I will try to continue as long as I have the courage,” Varma said. As he waits for monsoon rains to replenish groundwater, he holds out hope that Karnataka’s state government will soon provide a direct water supply to his factory.
The distress among Ballari’s small garment-makers signals a long-term threat the government’s plans to turn India into the world’s next big manufacturing powerhouse. Competition for water is only set to grow in the next few decades, increasing costs and risks for companies looking to heed Modi’s call to “Make in India.”
India has nearly a sixth of the world’s population but gets only 4 percent of the Earth’s fresh water. Already more than half the nation’s economy faces water stress. By 2030, demand is expected to outstrip supply by about 50 percent, according to the Water Resources Group.
The dearth of water may deter companies from setting up production facilities in India, says Anette Andersson, a Stockholm-based f fund manager at SEB Investment Management AB who manages $366 million in assets.
“If nothing else, the risk premium has to be higher,” she said.
Last year, the government for the first time required all companies that use groundwater to obtain permission. The Environment minister said India would aim to reduce industrial water usage by half in five years with technology to reuse, recover and recycle water.
Yet, it’s hard to see anything changing: Water costs next to nothing and enforcement is weak.
“Because you get it for almost free, you tend to misuse it,” said Damandeep Singh, director at CDP India, which says it holds the world’s largest database of corporate-related water information using disclosures from companies such as Coca-Cola, Ford and Nestle. “Appropriate pricing of water is possibly the best way to ensure it is used judiciously.”
And water is cheap mainly for political reasons: Politicians don’t want to irk either voters or businesses who contribute to election campaigns.
While individual factories have taken initiatives to save water, little is happening on the ground, said Shekhar Chandra, deputy director of the Federation of Indian Chambers of Commerce and Industry, which calls itself the nation’s largest business group. Part of the reason, he said, is “a huge gap as compared to international standards.”
“There’s a lot of scope for improvement and the industry is already working on that,” he said. “From a regulatory side, things have not been tied in to an extent that all industries come on board.”
But during shortages, factories are often the first to get hit. Industry accounts for only 8 percent of water use, but authorities would rather cut its use than reduce the more than 80 percent that goes to irrigation and domestic purposes.
One of the worst droughts in decades this year prompted Maharashtra state to cut water supply to industry by as much as 50 percent. Mangalore Refinery & Petrochemicals shut a crude unit in southern India, and NTPC closed down a thermal plant in the eastern part of the country.
While all companies are now required to get approval for water use, local pollution control boards usually only take action against them if villagers complain. In a high-profile case in 2014, Coca-Cola scrapped plans for a $24 million factory due to permit delays after farmers protested.
Coca-Cola has a sustainability page on its India website to show its efforts on water replenishment, reduction and recycling. Kamlesh Kumar Sharma, a Coca-Cola spokesman, declined to comment further. Representatives of Ford and Nestle didn’t respond to emails seeking comment.
Hindustan Unilever, India’s largest consumer-goods maker and a unit of Unilever, started a foundation in 2010 to promote water conservation. It has helped conserve 200 billion liters of water so far, according to the company.
“Given the magnitude of the problem, the emphasis must be on sustainable and scalable solutions,” Hindustan Unilever said in an emailed response to questions.
In Ballari, which sits between Goa and Chennai in India’s south, villagers once stitched uniforms for soldiers of the colonial British Indian Army. Some 3,000 textile companies now employ about a fifth of the district’s workforce, mainly to make low-cost jeans that are exported to the U.S., Middle East, Australia and Europe.
Varma and other business owners are banking on a new pipeline under construction that will bring more water from a river 10 miles away, eliminating the need to pay for private water tankers.
Even so, the shortages are another reason that the sons and daughters of garment makers in Ballari want to leave the industry, said Hare Ram, a father of three who owns Sony Jeans Washers & Readymade Garments, one of the city’s oldest units.
“I’m not able to scale up my business because of lack of resources,” Ram said. “How can you make in India if there is no water?”
— Bloomberg
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