A watered-down scheme

The new urban water supply scheme in Madhya Pradesh that encourages private sector participation is replete with lacunae, according to an NGO that studied the scheme.
Source:India Water Portal
Source:India Water Portal

In November 2011, the government of Madhya Pradesh sanctioned Rs 493 crore to 37 Urban Local Bodies (ULB) for drinking water supply projects under the Chief Minister’s Urban Drinking Water Supply Scheme (CMUWSS) along the lines of the Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT). The objective of CMUWSS was to encourage private sector participation in drinking water through Public Private Partnership (PPP) and to provide drinking water to the people as per the drinking norms of the Central Public Health and Environmental Engineering Organisation (CPHEOO).

Going by the CMUWSS scheme, the state government would provide 30 percent subsidy to urban bodies with a population of 50000 and 20 percent for those with less than 50000 people for drinking water projects. A budgetary provision of Rs 157 crore 25 lakh has been made during the current fiscal for this scheme. In the first phase, schemes worth Rs 132 crore are being started in 37 cities. 

A study on the sustainability of the scheme as well as UIDSSMT drinking water projects in Kukshi, Shahdole and Dahi were conducted by Manthan Adhyayan Kendra, an NGO based in Badwani. We have the details of the concerns raised by the NGO regarding the scheme. Here’s the lowdown:

Inadequate assessment of resources

A Detailed Project Report or DPR is one of the primary documents in which the evaluation of resources for project implementation is carried out.The Manthan team found that the DPRs of Kukshi, Shahdole and Dahi districts have not accessed the drinking water resources properly and are replete with factual errors. For example, the DPR of Kukshi says that 3.30 million litres per day (MLD) of water is not enough for 28,331 Kukshi residents. But if 3.3 MLD water is provided to them on a daily basis, it amounts to 116 litres per person per day, which is sufficient for every resident in Kukshi. In Shahdole's DPR, different figures are mentioned on various pages for the same resource. In Dahi's DPR, there is neither a specific mention about the implementation of CMUWSS nor any clarity about which scheme the drinking water project was sanctioned under and no basis has been provided for the water availability assessment.

Expensive scheme

As per the terms and conditions of the CMUWSS, the Urban Local Body or the ULB, after a project is implemented, has to adopt the full cost recovery approach but it is not often feasible in small towns. For example, in five years from 2008-2013, the Kukshi ULB has spent an average of Rs 1 crore on CMUWSS and recovered Rs 20,60,000 as water tax (22 percent of total expenses). But as per the conditions of the CMUWSS, to recover the full cost of the project, the Kukshi ULB has to raise the water tax to more than five times the average water tax recovered. Similar are the conditions of recovery in Shahdole and Dahi.

Sceptical tendering processes

For the implementation of PPP, the ULBs have to issue tenders for the detailed work. The bid is awarded to the interested private company based on the rate and technical capacity. During the tendering process, companies like Vastu Shilpi Project Ltd, Siddharth Technical Project Ltd. and Soni and Associates Private Companies expressed their interest in the project. But, the local administration did not check the technical documents and the technical capacity of the companies properly. The project was awarded to Vastu Shilpi Project Ltd in Kukshi and Dahi. Secondly, there was no competition among the private enterprises and it was found that there was a huge difference in the project cost of the same project quoted by these companies. Vastu Shilpi also bagged the water supply contract in Badwani and Pipariya. There is no clarity on the criteria for awarding the contracts.

Decision-making process

When the decision of accepting the government proposal of CMUWSS was taken in Kukshi, there was no elected council that represents the people to take a collective decision but the sub-divisional magistrate went ahead and took the oath anyway. Even after the constitution of the elected council, the members of the council did not even comment on the decision.

As per the terms and condition of the CMUWSS, it is mandatory for the ULB with more than one lakh population to accept PPP and to provide the financial contribution to the project. In case a ULB has less than one lakh population and if it lies within the radius of 20 km of the ULB which has more than one lakh population, then the scheme would be implemented in the group. 

After handing over the water supply contract to the private company, the ULBs have to apply the following terms and conditions:

  • Within one year of the implementation of the scheme, every water connection in the ULB's jurisdiction should be metred.
  • The ULB has to bear the cost of the loan taken for the scheme and the operation and maintenance cost.
  • To recover the cost of operation and maintenance, the ULB has to impose a tax on sewage and solid waste management.
  • For financial assistance, the ULB has to follow the rules and regulations of the government strictly without which the fund flow would be stopped.
  • If the income received by the ULB by water supply is less than the operation and maintenance cost, then the loss incurred by the ULB can be recovered through other sources.

Disadvantages of PPPs

As per the report on Public Private Partnerships published by Manthan Adhyayan Kendra in 2010, the following are the problems of PPPs in the water sector:

1.Transparency and accountability

One of the most significant problems that the PPP projects create is their impact on the democratic structure and the control of the society. Such projects demand and get secrecy on grounds of their commercial aspects and due to the nature of their for-profit operations. For example, when the projects such as Nagpur water supply project and Tirupur water supply project were implemented, the people around the zone were not aware of even the basic details of the project, leave alone the issue of consultations during the project planning phase.

During the negotiations for the project, there are rarely any consultations with the residents. Post project finalisation also, citizens face trouble accessing information about it. These barriers deny the common people directly impacted by the projects the access to critical information including the decision-making process. The World Bank in 2006 reported that despite the fact that there were nearly 90 PPPs in India under construction and operation, there was no publicly accessible database providing even the most straightforward information about them.

2.Impact on decision-making

The decision-making structures of PPP projects involve bureaucratic agencies and private corporations. Such structures ignore the need for public consultation and consent during the project development and implementation stages. This disregard for public consent often leads to protests and resistance from user groups which in turn cause an increase in the project gestation period and cost overruns. 

3.Access to information

The access to information for PPP projects have always been a task for the people. Thanks to the Right to Information Act (RTI) 2005 that enabled common man to seek information for public development projects. But, even after the implementation of RTI, the information regarding PPP projects are not disclosed by the private companies suo motu. There are many examples in India that show that people have been denied critical information from private companies about the implementation of public projects.

For example, Manthan Adhyayan Kendra had asked the New Tiruppur Area Development Corporation Limited (NTADCL) about the details of Tiruppur water supply project (a PPP project), but even after repeated reminders, the information about the project was not revealed. Finally, Manthan filed an appeal with the Tamil Nadu State Information Commission (TNSCI) asking for the information. The TNSCI ordered the NTADCL to provide all the project-related information to Manthan but instead of complying with the order, NTADCL moved the high court to stay the TNSCI order. (Read more about the project here)

4.Equality and social justice

It is also observed that PPPs lead to inequalities in society by increasing the salaries and perks of PPP consultants, officials and lawyers of the private companies. This often translates to lower salaries and benefits to public sector employees, sometimes even leading to retrenchment of lower grade public sector employees, who are then hired by private corporations at lower salaries without benefits. 

The implementation of CMUWSS have not so far brought any positive results in the delivery of water services in Madhya Pradesh and there is a need to understand that privatisation is not the solution to address the water problems in the state and for improving water services, strengthening municipal bodies is the need of the hour.