History of Water Privatisation in India

Failure of the public sector to provide water to all or to regulate its use that has formed the basis for those who argue that like other resources, water too must be more efficiently utilised.

National Water Policy 2002

Private sector participation should be encouraged in planning, development and management of water resources projects may help in introducing innovative ideas, generating financial resources and introducing corporate management and improving service efficiency and accountability to users.

Where the debate actually gets polarized is whether bringing in efficiency also means bringing in the private sector? Supporters of privatisation argue private companies are better placed to increase efficiency. Critics say private companies will raise tariffs making water unaffordable.

History of Jusco

Jamshedpur Utilities and Services Company (Jusco) is a wholly-owned subsidiary of Tata Steel, the flagship company of the Tata group, formed in 2003. It is the Tata vehicle in the emerging water sector in the country having the experience of managing water service in Jamshedpur city for over nine decades. According to the JUSCO website (juscoltd.com), JUSCO has been managing the water supply of Jamshedpur for the last 102 years. In addition to Jamshedpur and Mysore, it has water supply operations in Bhopal, Gwalior, Calcutta, Haldia, Muzaffurpur and Chennai. Mysore project is the third consecutive prestigious water project it has won (in 2008) — the other two are both build and operate (BOT) projects in Salt Lake Sector-V, Kolkata and the industrial city of Haldia. These three projects coupled with Jamshedpur have enhanced Jusco's credentials as the largest water supply developer and operator in the country. According to the website jipm.or.jp of the Japan Institute of Plant Maintenance, a public corporation under Japan's Ministry of Economics, Trade & Industry, JIPM gave out Total Productive Maintenance Excellence awards in 2008 to fifty companies all over the world and JUSCO was one of the awardees. According to the website globalwaterawards.com, JUSCO was one of just 4 nominees for the 2008 Water Company of the Year global award.

Problems with existing Vani Vilas Water Works in Mysore: (Source: http://www.mygrapa.blogspot.com/)

Mysore city water supply is suffering from many serious problems. A significant portion of customers do not have meters. Most of the meters are not working properly. There is plenty of leakage all over the city. As a result of these factors, only a small fraction of the water pumped into the city gets billed. Many customers do not pay their water bills. So MCC is collecting only a fraction of the amount due to it. Due to lack of revenue, maintenance of the system is not possible. In many localities, water is supplied once in few days. When it is supplied, the pressure is low. Quality of water supplied is also poor. So poor that one can not help wondering why we are not having epidemics every day! No one knows where all the underground pipes and valves are. As a result, in many cases, one can not even localize the problem. These problems are getting worse with time. After spending Rs. 130 crores of ADB loan to provide 24x7 water supply, we are pumping twice the water into Mysore, but the water problem is increasing. Neither MCC nor the Water Board seem to have the technical expertise required to run the water supply system efficiently. MCC does not have the determination to collect its dues in the face of political pressure. Without outside intervention, the situation will soon become irreparable. It is in need of emergency treatment. The only way out seems to seek the help of competent and experienced professionals. But such help does not come cheap.

JUSCO Mysore Proposal

JUSCO has bagged a six-year performance-based water management contract for Mysore city. On December 2, 2008 at Mysore, Jusco entered into the tripartite contract agreement with Mysore City Corporation (MCC) and Karnataka Urban Water Supply and Drainage Board (KUWSDB). This is the largest water supply project being executed through public private partnership (PPP) model in India. All similar water supply projects undertaken till date have been pilot projects targeting part of the city (population of less than one lakh), whereas this is the first city-wide project which will serve a population of more than a million. The project will enable equitable distribution of Cauvery water treated at Hongalli and Melapur treatment plants to the consumers through a network of about 1,200km from 28 small and large reservoirs, gradually increasing the hours of supply to 24 hours a day with service level guarantees commensurate with national and international benchmarks as stipulated in the contract agreement. KUWSDB and MCC had bid out this project in March earlier this year. Jusco has won this Rs152 crore project against stiff national and international competition from Larsen and Toubro, Jain Irrigation Projects and the joint venture of Ranhill Utilities Berhad, Mayasia and SPML. The project will utilise the already sanctioned JNNURM funds (80 per cent of the project cost) for improving the water supply infrastructure in Mysore city. The balance funding would be provided equally by the state government of Karnataka and MCC. The project will be completed in three phases spread over six years. The first phase of twelve months will involve complete hydraulic remodeling of the present system and preparation of capital investment plan. In the second phase of three years, Jusco will rehabilitate the distribution network to reduce water losses and gradually increase various service standards. The third and final phase of two years will involve providing 24x7 water supply in the entire city ensuring sustainability of achieved service standards. Under the agreement, JUSCO will manage and maintain the supply system for six years for which it will be paid Rs 16.2 crore annually. The agreement will benefit the MCC as well the citizens as it will regularise the present water supply with day-long supply, increase the MCC revenue, regularise unauthorised and non-metered connections which number around 1.3 lakh and improve mobilisation of water charges with JUSCO issuing computerised bills every month. It will install 1.3 lakh meters to monitor all the non-metered connections in the city, he said. According to Ayub Khan, the mayor, there would be no increase in the water rates and the present staff would continue. The MCC itself would make payment of salaries to the water supply staff. JUSCO will only supervise the personnel. MCC is spending Rs. 30 crore for maintenance of water supply in the city while its revenue is only Rs 18 crore, with the monthly collection of water charges standing at Rs 1.5 crore. Of this amount, 10 per cent was paid to the KUWS&DB. As JUSCO will be paid Rs. 16.2 crore annually for maintenance, it will result in considerable savings for the MCC. The 50% reduction in operating costs can be achieved as a result of acting on unauthorised connection, acting on non-revenue water and reducing leakages. In 2005, the central government launched the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to upgrade the infrastructure of various cities in India. Under this programme, cities can submit infrastructure improvement projects to the central government. For cities such as Mysore, if the project is approved, the central government meets 80% of the cost and the state government meets another 10%. Therefore, by spending only 10% of the cost, cities can carry out projects which would normally be beyond their financial reach. The contract that MCC has signed with JUSCO to improve the water supply infrastructure in Mysore is one such JNNURM Project. Is JUSCO privatisation of Mysore water Supply? Will JUSCO make unlimited profits from the contract? For the designated work done by JUSCO during the 6-year duration of the contract, it will get a fixed compensation of Rs.162 crores. Other than the bonuses it will get for reaching performance targets earlier, it will not get any other money. Privatization normally means the opportunity to make as much profit as the company can. Such an opportunity seems to be absent in the contract. JUSCO is being pitched as a partner in modernizing the water supply than privatizing it. MCC prepared a Rs. 230 crore project to improve the water supply infrastructure in Mysore and submitted it to the central government. The central government trimmed it to Rs. 195 crores before approving it. Two tenders were floated for the works. The first one was to build major overhead tanks all over Mysore and supply them with water from the water treatment plants through large underground pipes. Nagarjuna Construction Company won this tender for Rs. 77 crores. The second tender was for creating an Integrated Management Information System for the water supply, doing all the work required to make the present intermittent non-pressurized water supply system into a continuous pressurized 24x7 water supply system and maintaining the system for 6 years. 12 companies participated in the tender process: Subhash Projects & Marketing, JUSCO, JVRCL Infrastructure & Projects, Tata Consultancy Services, Veolia Water of France, Jain Irrigation Systems, Infrastructure Leasing & Financial Services, Jindal Water Infrastructure, Vishwa Infrastructure & Services, Larsen & Toubro, Nagarjuna Construction Company and Ranhill Water Services of Malaysia. JUSCO won the tender with the lowest bid of Rs. 162 crores. Ranhill Water Services made the second lowest bid of Rs. 256 crores and Larsen & Toubro had the third lowest bid at Rs. 305 crores. It was curious that two companies of the Tata group, TCS and JUSCO competed with each other in the bidding. It was also curious that Veolia and JUSCO which are running a joint operation in India since 2004 bid separately. The variation in the bid amounts was another surprising factor. JUSCO's bid was only Rs. 162 crores, while Jain Irrigations Systems' bid was Rs. 882 crores! JUSCO quoted Rs. 40 crores for management while Larsen & Toubro quoted only Rs. 16 crores (L&T lost out because it quoted an excessive amount on materials). The water supply system is being modernised at an estimated cost of Rs 194 crore. Split into three phases, two phases of the project are already in progress. JUSCO has won the tender for the third phase costing Rs. 102 crore, according to Mysore Mayor Ayub Khan. He has denied the recent criticism leveled at some quarters that the water supply system is being privatised by handing it over to JUSCO and the water rates will go up. He has made it clear that the Mysore City Corporation (MCC) and the elected council will continue to have the say as the powers are with it. "The contract with JUSCO is only to remodel, manage and maintain the drinking water supply system in the city and the criticism of it being privatised is totally baseless,"he asserted. On April 26th 2009, workers deployed on maintenance of water supply system in Mysore City Corporation warned of going on an indefinite strike if their services are transferred to JUSCO without proper conditions and terms. V.N. Halakatti, President of the Union's Central Committee, expressed strong opposition to the one-sided JUSCO dea. Getting into the clutches of JUSCO, without official notification about appropriate service conditions, without correcting the injustice to sufferers due to the service deficiencies, without promotions, without implementing the principle of employment on compassionate grounds and without regularising the services of temporary employees, was a conspiracy, he charged. Demanding the award of only civil works to JUSCO and avoiding the responsibility for managing the water supply system, he urged for issue of official orders based on bipartite agreement relating to terms and conditions of services and benefits hitherto. JUSCO project is now facing opposition from corporators too. This comes after the MCC took the members to Jamshedpur to familiarise them about JUSCO's management of water services at the steel city in Jharkhand. Corporators are not satisfied with water management at Jamshedpur. In planned areas, water is supplied 24x7 and the bill is a minimum of Rs 200 a month. At slums, borewell water is supplied through public taps. In case water connection is required by the slum dwellers, they need to pay Rs 10,000. There is no government control over handling of the facilities at Jamshedpur including water and electricity. Corporators are terming JUSCO as privatization of the public utilities, and that JUSCO does not have social concern since it has not extended the UGD connection of slums and does not supply water to them. This comes after protests at the MCC recently when prominent citizens voiced their opposition to the deal according to which the JUSCO will take over the management and handle it for six years. The Tata company is scheduled to get the management by April-end, which has been opposed.

Will the water tax rise steeply after the contract?

According to the contract, JUSCO has no role in fixing the water rates. It is the jurisdiction of MCC. The water tax will increase only if MCC decides to increase it. But JUSCO has been given the job of making sure that every customer location is fitted with a correctly working meter. If you were paying less water tax because of a defective meter or some other reason, then your tax will increase.

Will public taps be closed after the contract?

This decision belongs to MCC.

Is Privatisation the only solution?

The answer is not either private or public, the answer is really combination of both. But the understanding of inefficiencies can start only with the payment of right price of water. People will never be able to pay the right price for water and sewage because it's too costly; we have to change the technology both for supply of water and sewage management. Water supply and sewage management should be tightly linked and should be managed by one single body. Private companies cannot do different things. They may have to do the same things differently. The question is of distribution, in plugging leakages. The non-revenue water in Indian cities is 50-60 per cent. Reducing those leakages would increase water supply by that much. Bangalore charges Rs.5 / kiloliter while the actual cost incurred is around Rs.35. In Mumbai it is even worse - Rs.2 / kiloliter. Indian cities bring water from further and further away. The longer the distance the water has to travel the more the leakages. Private companies would heavily focus on reducing leakage and pilferage, and implementing a strong system for service payment fee collection. These coupled with right technology can bring down the costs of operation. This would make public service more efficient and profitable and can in turn eliminate/reduce the dependency on private companies. ----------------------------------------------- References and Further reading: http://www.business-standard.com/india/storypage.php?autono=342839 http://www.tata.com/article.aspx?artid=HIdzqEAcS/Y= http://www.starofmysore.com/searchinfo.asp?search1=20393&search2=newsheadlines http://timesofindia.indiatimes.com/articleshow/4156515.cms Complete 700 page document on JUSCO agreement - http://jnnurm.mysorecity.gov.in/news/01/16/2009/dpr http://www.mygrapa.blogspot.com/ Discussion on Praja.in - http://praja.in/tags/jusco ---------------- Note: Sharada Prasad works for India Water Portal Team at Arghyam. The views expressed in this post are of the author and need not reflect those of the organization he works for.