Water PPPs: are they here to stay?

Part 1: Urban water sector

On June 20, 2011, in New Delhi, the Union minister for Urban Development, Kamal Nath, answering questions at the Reuters Global Real Estate and Infrastructure Summit, said that “the Indian government must lift the lid on privatisation in public utilities, passing the costs on to consumers”. He said, “in our water and waste disposal, we should target at least 50 percent of funds from the private sector”. Only a week before, on 15 June, the Empowered Committee of the Delhi government endorsed a proposal by the Delhi Jal Board to enter into a public private partnership arrangement for the management and distribution of water for Malviya Nagar and Vasant Vihar zones .  The Indian honeymoon with private water operators is well on its way. (See box: The Indian PPP story)

In March 2011, Anne Le Strat, the deputy mayor of the city of Paris announced an 8% cut in water prices effective July 1, 2011 to  mark the first anniversary of the return to public management of the city’s water. Beginning January 1, 2010 the municipal corporation of Paris put an end to the 25-year long management of the city’s water and sewage systems by the subsidiaries of Veolia and Suez. For the first time in over 150 years, the management of Paris’ water became the responsibility of the city municipal corporation.

In Uruguay, water and wastewater services have been renationalized after years of partial privatisation. A civil society campaign led to a national vote in which the public demanded that access to water and sewage services be recognised as a basic human right. The wording has been written into the Uruguayan Constitution, with the additional provision that the services be provided through state-owned entities.

Around the world, governments are pulling out of punitive contracts with water multinationals and getting back to the job of supplying affordable water to people. The Remunicipalisation Tracker of the Water Justice Project says that 40 municipalities and urban communities in France alone, the homeland of water privatization, have remunicipalised water services over the last ten years, resulting in cheaper tariffs and improved services. In Paris, the Eau de Paris, the publicly owned entity has announced that it will supply water at 1 euro per kilo litre and will maintain this price till 2015.

Ratcheting up of capital costs: The raison d’etre for PPP

The Eleventh Plan for the water and sanitation sector was 1.44 lakh crore which is an increase of 122% over planned outlay for the Tenth Plan of Rs. 0.65 lakh crore. The Report on Indian Urban Infrastructure and Services by the HPEC estimates investment requirements for the water supply, sewerage, and storm water drainage and solid waste management sectors as 8.04 lakh crore . This is about 462% more than the Eleventh Plan outlay. In addition, the Committee has separately estimated another Rs. 10.92 lakh crore for operation & maintenance for the same period. Therefore, PPPs are seen to help in  “leveraging scarce budgetary resources of the government”. However, a recent brochure produced by the JNNURM cell of the Ministry of Urban Development, says that of a sample of 6 water sector PPP projects analysed, only 29% share of capital contribution was leveraged through PPP .

What and where It is difficult to get an idea of exactly how many PPP projects are on in the water sector. The central agency coordinating PPP projects in the country, the PPP Cell in the Department of Economic Affairs has a database of PPP projects. This database is vague and incomplete. For instance, well known projects such as the Sonia Vihar Plant, the Hubli-Dharwar project, and the Nagpur project are not listed in the database. Manthan has compiled a database of about 64 projects. The map at right gives you a selection of water PPP projects in India. It does not include those in the pipeline

Water as an economic good: Will it work?
The key argument for the PPPs in the water sector is that water is an economic good The paradigm of private companies managing water supply is tied to the concept of providing water for profits. This concept has been rejected abroad as well. In 1999, the United Kingdom introduced the Water Industry Act, under which from July 1 1999, water companies cannot disconnect water supplies citing unpaid bills or use devices that would limit the quantity of water supplied.

Civil society groups argue that Right to water has been recognised as a fundamental right by the United Nations and therefore it is the sovereign duty of governments to ensure that every human being is assured of access to adequate and safe water. This is an important reason why PPPs in the water sector have not really taken off. In many of the high profile projects such as in Delhi, Mumbai, Bangalore, people’s protests have firmly nailed the door on water privatisation projects.

Locked behind a wall of silence
One of the enduring complaints by civil society across the spectrum of PPP projects has been the lack of transparency. Details on the costs, the risks to the operator, to the ULB, performance targets, penalties, tariffs, coverage etc are not made available to the public. In the case of the Tiruppur PPP, a clause in the agreement states that neither party shall divulge any information related to the operations, contracts, commercial or financial arrangements of the project or the contents of the agreement, except under conditions of confidentiality. When civil society representatives asked for information on the project, the New Tirupur Area Development Corporation Ltd. (NTADCL) refused to provide information. The RTI petition filed by the citizens is still pending in court.

What of the future?
The PPP experience in India’s water sector has not followed the same pattern as in other countries. A strong and informed civil society has stepped in to prevent runaway privatization.

Nonetheless, the government proactive measures to push the PPP concept, it is clear that PPPs are here to stay. Today, it is more or less accepted that the private sector will be involved in O&M and distribution. While there are many new projects in the pipeline, it is too soon to determine whether PPPs are a viable player in the water sector.

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