Privatisation

The word privatisation is derived from the latin word “privatus”. Privatisation of water services means transfer of ownership, property or the business of water services from the government to the private sector. This includes services such as operation and maintenance of water services, bill collection, metering, revenue collection, etc.

Water: Commons or a commodity?

Water is a basic need of life and even the United Nations (UN) has recognized this need as a human right. The UN World Water Report of 2006 notes that "there is enough water for everyone" and "water insufficiency is often due to mismanagement, corruption, lack of appropriate institutions, bureaucratic inertia and a shortage of investment in both human capacity and physical infrastructure". 

However, the process whereby all resources not limited to water are transformed from a public good to a tradable commodity is due to economic processes at work. Fears over water scarcity and the need to manage water efficiently by giving it an economic value is the starting point from where privatization is pushed. Critics of public supply of water insisted on the state’s inability to operate efficiently and created a case for a shift towards market-based water governance. However, “when private companies try to make large profits through high water prices, it denies the poor the inalienable right to the most necessary substance for life”, says Vandana Shiva, noted environmentalist.

Yet worldwide, there is a rush to privatize water services.

Myths of privatization

There are several myths associated with the concept of privatisation, the most popular being:

  • Privatisation saves money.
  • Private company does a better job than those in the public sector.
  • Privatisation will lead to lower prices and better standards of service.
  • Turning the public utilities into private companies results in a dramatic improvement in their performance and efficiency.
  • Privatization needs to be accompanied by minimal regulation.
  • Privatization allows governmental entities to better anticipate and control budgetary costs.
  • Privatization allows governmental entities more administrative flexibility.
  • The public still maintains control over a privatized asset or service and the government retains the ultimate ability to make related public policy decisions. 
  • If anything goes wrong, the government can easily fire the contractor or adjust the contract.
  • Companies are chosen for privatization contracts on the merits, not based on political or financial connections.

(Sources: Exposing the myths of privatization, Privatization myths debunked)

Background of water privatization: International experience 

The water privatisation wave started in the early 1990s in Latin America and then it spread to other developing countries across the globe. The rapid thrust in water privatization in developing countries was due to increased involvement of the World Bank and International Monetary Fund (IMF) in pushing structural reforms with governments to facilitate private sector growth. Lending terms were imposed on developing nations through stipulations in trade agreements and loan conditions to impose water privatization. The water sector was sought to be opened through the World Trade Organisation (WTO) and General Agreement on Trade in Services (GATS) that are a set of rules governing international trade.

Divesting the water sector of social obligations

The provision of the resource was increasingly vested in the hands of a few multinationals mostly European and American, with the top two multinationals controlling about 75% of the water industry. The sector is a natural monopoly owing to the high levels of investments and extensive distribution networks required. These big multinationals were able to exert strong pressure on national governments to privatize water provisioning. An attempt was made to recover the full price of water provisioning, and cross-subsidies were removed to ensure free market trade. Although pro-privatization proponents claim that it has a great record of accomplishment of success with regards to increase in efficiency, quality, reliability and affordability of services to the people, in reality, privatisation programs are structured in a manner where the risks are passed on to the public and no major investments are made by the private company without a ‘take or pay’ clause.

Impact of privatisation

Across the globe people resisted privatisation of water services due to its serious impact on the poor. "In Australia, in 1998, the water in Sydney, was contaminated with high levels of giardia and cryptosporidium shortly after its water was overtaken by Suez Lyonnaise des Eaux…  In Britain, Water and sewage bills increased 67 percent between 1989 and 1995. The rate at which people's services were disconnected rose by 177 percent… Water rates in England increased by 450 percent while company profits soared by 692 percent. CEO salaries for the private corporations behind the water supply increased by an astonishing 708 percent. As one can expect with such high price fixing, service disconnection increased by 50 percent. Meanwhile, the British Medical Association condemned water privatization for its health effects because dysentery increased six-fold. After privatization, water fees in France rose by 150 percent while the water quality declined.” (Water is life)

The anti privatization protest has started gaining popularity after the water privatisation conflict in Cochabamba, Bolivia in 2000. The model of privatisation advocated by the World Bank has started failing in many countries like Buenos Aires, Tucuman (Argentina), Dar es Salaam (Tanzania), Grenoble (France), Metro Manila (Philippines), Nkonkobe (South Africa), Atlanta (USA),etc. In South Africa, this has led to thousands of disconnections (from water supply) for those who cannot pay. Commentators fear that this has affected the health of the nation’s people and decreased social equality further. (Water, Private Limited, Manthan Adhyayan Kendra)

The case of Cochabamba and El Alto in Bolivia

Cochabamba, the city of the now famous ‘water wars’ in Bolivia is the most well known example of the conflict over privatization of its municipal water supply utility (to Bechtel, a US based Corporation) at the behest of the World Bank. Many people were forced to literally choose between food and water leading to a peoples uprising in 2003 to oppose the concession.

In El Alto, Suez got several concessions including an assured rate of return and soft loans but yet, hiked connection charges steeply. The monthly water bill rose to $20 in a city where the minimum wage is less than $100 a month the moment Aguas del Illimani (AISA), a subsidiary of Suez, a water giant took over the water services. The government was forced to revoke its water privatization legislation soon after people protested.

Elements of the water privatisation process

The process of privatisation of water services entails:

  • Unbundling (separation of source, ‘transmission’ and ‘distribution’)
  • Independent regulator to free the sector from ‘political interference’, to set tariffs and decide other issues
  • Steeply increasing tariffs, de-politicisation of tariffs
  • Full cost recovery
  • Elimination of subsidies
  • Cutting off supplies for non-payment
  • Dismantling public/ community supplies like public taps, stand posts
  • Retrenchment
  • Privatisation and Public-Private Partnerships
  • Allocation of water to highest value use through market mechanism
  • Water entitlements being introduced for ensuring markets of tradable water rights
  • New laws to enshrine and ensure all this

(Source: Water, Private Limited, Manthan Adhyayan Kendra)

Modes of privatisation

Privatisation of Water Supply and Sanitation (WSS) can be several levels and can be of various types. It may involve components from the dam, canal system, water treatment plant, water distribution system, billing system, collection/ treatment/ disposal of wastewater and sewage.

  • Service Contracts: These are short-term contracts for providing particular services like meter reading and bill preparation.
  • Lease/Management Contract: The ownership of the water facility remains with the municipal authority and the company is appointed by it to manage the facility or the facility is leased out to the company. The municipal authority does new investments and expansion while the company has to manage the day-to-day operations.
  • Build Own Operate Transfer (BOOT) Contracts: The company builds a part of the infrastructure (treatment plant, filtration plant etc) and runs it under a long-term contract, with a purchase agreement that has ‘take-or-pay’ guarantee clauses. 
  • Concessions: These are long term contracts wherein the private company takes full responsibility of the system, provides services and is responsible for expansion, new investments, recovery of bills etc.
  • Divestures: In this case, the Government either fully or partially divests its equity in a utility that is then bought off by a private company.

Water privatisation in India

Water privatization in India started in the late 1990s. The government with the technical assistance of International Financial Institutions like the World Bank and the Asian Development Bank developed water policies and various laws to facilitate private sector participation in the water sector. The entire paradigm of the water sector is seeing modifications manifesting in changes in water policies, laws and institutions. Manthan Adhyayan Kendra describes the happenings in the water sector as "not merely privatisation, but more accurately corporatisation or corporate globalisation (since most of the companies involved are foreign multinationals)".

“The Borai Industrial Estate Build Own Transfer (BOT) Water Supply project on the Sheonath river in Chhattisgarh, the proposed private sector management contracts for several zones in Delhi, proposed privatisation of water services in Bangalore under Greater Bangalore Water Supply and Sewerage Project (GBWASP), the Maheshwar Hydro Power Project on Narmada in Madhya Pradesh, the Coca Cola factory in Plachimada, Kerala exploiting public groundwater to manufacture soft drinks – all are examples of the rapidly growing privatisation of water services and resources in India. As these examples show, privatisation in the water sector involves all elements – hydropower, industrial and domestic water supply, and even irrigation.” (Water, Private Limited, Manthan Adhyayan Kendra)

India has witnessed the violation of standards of operation by private companies who indulge in price fixing and amplify prices after they take over. It is the poor who face disconnections and are often forced to drink contaminated water, consequently.

The Sheonath river project in Chhattisgarh was one of the initial water privatisation projects in India. Thousands of people protested against the government;s decision to hand over 23 kms of the river to private companies and the banning of the locals from using the river water. In this case, privatisation was not limited to the water service but extended to the river itself.

In the last two decades, there has been a massive increase in private sector participation projects in the water sector in various cities across India. Most of the major private sector players like Suez, Vivendi, Thames Water and Bechtel are present in India. The state wise list of private sector participation projects is available on Manthan’s web site, an organization involved in the public scrutiny of water privatization projects.

To know more about the myths and the reality related to the privatisation of water services in New Delhi please see the report titled: Privatisation of water services in New Delhi : Myth and reality - Report by Water Privatisation - Commercialization Resistance Committee.

Aid agencies like Department for International Development (DFID), AusAID and USAID are pushing for privatisation of projects initiatives. The centrally sponsored Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has through Municipal Reforms Projects in states made it mandatory for municipal corporations to undertake mandatory urban reforms, including possible privatisation of water, in order to be eligible for central funds. The irrigation sector too is seeing greater involvement of the private sector in canal operations and comprehensive privatisation of select schemes often in the name of Participatory Irrigation Management (PIM). Concepts like tradable water entitlements and tradable pollution permits are likely to lead to the cornering of water resources by those who have the purchasing power or who can buy the right to pollute.

Manthan's website has a database of water supply, sanitation and hydropower projects involving privatisation in India.

The way out

Because private sector focuses on profit it is important that Government’s restructure Water Utilities to reverse the infrastructural decay and improve their performance. There is a need to have greater engagement with the public and make Water Utilities accountable and capable of delivering water services.

References

  1. Green Left Weekly
  2. Exposing the myths of privatization
  3. Privatization Myths Debunked
  4. Running Dry: the humanitarian impact of the global water crisis
  5. Water Privatization Case Study: Cochabamba, Bolivia
  6. Shiva, Vandana. 2002. Water Wars: Privatization, Pollution, and Profit. South End Press. 158 pgs.
  7. Water: Private, Limited, Issues in Privatisation, Corporatization and Commercialization of Water Sector in India, Gaurav Dwivedi, Rehmat and Shripad Dharmadhikary, Manthan Adhyayan Kendra, Badwani, 2007

 

 

 

 

  • At a workshop on Water Ethics leading up to the Water Future Conference in Bangalore in September 2019, the idea of, and the need for an ethical framework for water management and legislation was discussed. In a country as diverse and complex as India, ethics play an important role in how we view wa...
    priyadposted 15 hours 31 min agoread more
  • While most parts of the country are facing a water crisis, here’s a case from the arid state of Rajasthan, where decentralized initiatives are solving water issues. Dungarpur in southern Rajasthan has exemplified how community participation with local level planning processes are working towards i...
    Anonymous (not verified)posted 2 weeks 3 days agoread more
  • A Future Earth Conference Opening new frontiers in water system diagnostics and innovative solutions to mitigate the 21st-century global water crisis The Sustainable Water Future Programme (Water Future) of Future Earth is organizing its first international conference in partnership with Divecha C...
    priyadposted 2 months 6 days agoread more
  • Nirmala Sitharaman, Finance Minister alluded to gaon, garib and kisan as the centre of all policies of this government, while announcing a clutch of schemes aimed at the rural and urban poor. Her budget speech last week reiterated the government's commitment to ensuring piped water supply to al...
    Amita Bhaduriposted 2 months 2 weeks agoread more
  • Water scarcity has a history … and that history is nothing less than the history of government. – Alatout, 2008. Attempts to privatize water may have increased globally in the recent past, but in more general terms, governments largely control water as in India, where water is a state subject....
    Anonymous (not verified)posted 3 months 16 hours agoread more
  • INTRODUCTION On 30th May, the new government took oath to serve the nation. The celebrations on that scorching summer evening at Rashtrapati Bhavan echoed hollow with more than 500 million people vulnerable to severe drought in the country. India is currently going through an extended dry spell wit...
    priyadposted 3 months 2 weeks agoread more
  • Surya Ganga, a film directed by Valli Bindana takes an all embracing view of the energy sector, especially the social and environmental consequences of big energy projects in India. The film was released in India recently. The story begins with an inquisitive six-year-old girl along with her mother ...
    Amita Bhaduriposted 3 months 2 weeks agoread more
  • India has, over the last 50 years, spent approximately $50 billion on developing water resources and another estimated $7.5 billion on drinking water, with little to show for the money (Devraj 2002). Apart from big dams and irrigation systems, the government has encouraged the digging of millions of...
    Amita Bhaduriposted 5 months 1 week agoread more
  • "Darjeeling today has a thriving water business, with a fleet of 105 trucks plying three or four trips a day from April to June, carrying 5500 to 6500 litres of water on each run" Source: Lama and Rai (2016)  'Chokho Pani: An Interface Between Regional And Environment In Darjeeling'. Himalay...
    aarti kelkar kh...posted 5 months 2 weeks agoread more
  • Compiled by Pankaj Kumar S., Resource Person; additional research provided by Ramya Gopalan, Research Associate 5 July 2006 Original Query: Sharadbala Joshi, Water, Engineering and Development Centre (WEDC),Loughborough University, UK Posted: 16 June 2006 I have primarily been involved with urban...
    aarti kelkar kh...posted 6 months 18 hours agoread more
  • People of Ramra, a village in the Kairana block of Shamli district of Uttar Pradesh have warm recollections of river Katha that joins the Yamuna below Ramra. Mustaquim Mallah, a 30-year old river conservationist recalls how his grandfather held many pleasant childhood memories of the river. "My grea...
    Amita Bhaduriposted 7 months 4 weeks agoread more
  • Launched in 2015, Project Raahat, an initiative by students of a management institute, Shaheed Sukhdev College of Business Studies (SSCBS), Delhi University has been working on eradicating open defecation and providing safe sanitation in urban slums of India. They do this through innovations in...
    Amita Bhaduriposted 8 months 15 hours agoread more
  • While India has experienced dynamic growth over the past few years, enormous challenges remain in the water supply and sanitation sector. As a part of the Nation’s vision various national initiatives are currently underway to improve the levels of cleanliness through solid and liquid waste managem...
    priyadposted 8 months 1 week agoread more
  • Put aside Rs 500 crore for lake clean-up: NGT to Karnataka government Taking note of the authorities' neglect of pollution in Bellandur and Varthur lakes, the National Green Tribunal has ordered the Karnataka government to put aside Rs 500 crore towards the cleaning up of these lakes. The tribunal ...
    swatiposted 9 months 2 weeks agoread more
  • We have just a year to go for Swachh Bharat Mission’s (SBM) deadline of making India open-defecation free (ODF). In the last four years, the government has built 86.08 million toilets (as on September 26, 2018) throughout the country as a part of this flagship programme on providing safe sani...
    Amita Bhaduriposted 11 months 4 weeks agoread more
  • Recently, Delhi saw an urban Chipko movement of sorts with the people coming out in large numbers with a single agenda—save the last of the trees left in the city. In the famous Chipko movement of 1973, local communities in Tehri Garhwal, Uttarakhand emblematically embraced trees to demand an end ...
    Amita Bhaduriposted 1 year 1 month agoread more
  • Estimates suggest that about 10 million Indians are affected by fluorosis, a sickness associated with the consumption of increased concentrations of fluoride, mostly through water. Bones get weakened due to excessive accumulation of fluoride in them which results in increased hip and wrist fractures...
    Amita Bhaduriposted 1 year 1 month agoread more
  • Pramod Kumar Singh, the caretaker of a community toilet complex in northwest Delhi’s Sultanpuri area is proud about its upkeep. The complex, built by the Delhi Urban Shelter Improvement Board (DUSIB) and inaugurated in 2016, is well maintained with beautiful landscaping, posters and wall art. Pra...
    Amita Bhaduriposted 1 year 1 month agoread more
  • Entering its second year, the Graduate Program of Water Science and Policy 2018 at Shiv Nadar University envisages a multi-disciplinary classroom, engagement and content delivered by some of the best minds globally – experts on water who have worked on ground realities, made policies and initiated...
    priyadposted 1 year 4 months agoread more
  • Alternative Futures: India Unshackled is a new book that dares to imagine what India could be. Published by Authors Upfront, 35 author-activists, researchers and thinkers have drawn upon their experiences to write on alternative political, ecological, economic and sociocultural scenarios that w...
    chicuposted 1 year 4 months agoread more

Pages

A workshop in Bangalore explored water ethics and how it can be applied to water management.

At a workshop on Water Ethics leading up to the Water Future Conference in Bangalore in September 2019, the idea of, and the need for an ethical framework for water management and legislation was discussed. In a country as diverse and complex as India, ethics play an important role in how we view water, and thus manage it.

Topics

Sub-Categories

Regions

People come together to dig community ponds in Dungarpur, to fight water scarcity.

While most parts of the country are facing a water crisis, here’s a case from the arid state of Rajasthan, where decentralized initiatives are solving water issues. Dungarpur in southern Rajasthan has exemplified how community participation with local level planning processes are working towards improving rainwater harvesting and recharge of groundwater.

Topics

Sub-Categories

Regions

A Future Earth Conference

Opening new frontiers in water system diagnostics and innovative solutions to mitigate the 21st-century global water crisis

September 24, 2019 9:00AM - September 27, 2019 6:00PM
August 31, 2019 12:00PM

Topics

Sub-Categories

Regions

But have the crucial schemes received more money than last year? We talk to some experts in the water sector to find out.

Nirmala Sitharaman, Finance Minister alluded to gaon, garib and kisan as the centre of all policies of this government, while announcing a clutch of schemes aimed at the rural and urban poor. Her budget speech last week reiterated the government's commitment to ensuring piped water supply to all households in India.

Topics

Sub-Categories

Regions

An analysis of the new Nal se Jal scheme, promising drinking water to every household in India by 2024.

Water scarcity has a history … and that history is nothing less than the history of government. – Alatout, 2008.

Attempts to privatize water may have increased globally in the recent past, but in more general terms, governments largely control water as in India, where water is a state subject. After all, water is the only life-giving non-substitutable good; hence, controlling water means controlling life, and controlling society at large.

Topics

Sub-Categories

Regions

An analysis of the effectiveness of the Composite Water Management Index as a policy-making tool

INTRODUCTION

Topics

Sub-Categories

Regions

The film Surya Ganga makes a case for a shift in India’s energy policy towards renewable sources.

Surya Ganga, a film directed by Valli Bindana takes an all embracing view of the energy sector, especially the social and environmental consequences of big energy projects in India. The film was released in India recently. The story begins with an inquisitive six-year-old girl along with her mother and uncle setting out on a journey across the length and breadth of India to seek answers to the adverse impacts of dams on the river Ganga.

Topics

Sub-Categories

Regions

Private provision of water services is most successful where the operation and maintenance contracts are offered by the local water users.

India has, over the last 50 years, spent approximately $50 billion on developing water resources and another estimated $7.5 billion on drinking water, with little to show for the money (Devraj 2002). Apart from big dams and irrigation systems, the government has encouraged the digging of millions of tube wells and borewells energised by electric and diesel-driven pumps that now provide half of the country’s irrigation. Still, around 120 million people in India do not have access to safe drinking water, and about 21 percent of all communicable disease in this country are water related.

Topics

Sub-Categories

Regions

Better governance and equitable as well as sustainable use of water resources are essential to solving the deepening water crisis in Darjeeling.

"Darjeeling today has a thriving water business, with a fleet of 105 trucks plying three or four trips a day from April to June, carrying 5500 to 6500 litres of water on each run"

Source: Lama and Rai (2016)  'Chokho Pani: An Interface Between Regional And Environment In Darjeeling'. Himalaya, The Journal Of The Association For Nepal And Himalayan Studies, 36(2), 90-98

Topics

Sub-Categories

Regions

Compiled by Pankaj Kumar S., Resource Person; additional research provided by Ramya Gopalan, Research Associate 5 July 2006

Original Query: Sharadbala Joshi, Water, Engineering and Development Centre (WEDC),Loughborough University, UK

Posted: 16 June 2006

Topics

Sub-Categories

Regions

Pages

Subscribe to RSS - Privatisation