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Hell bent on water privatization in Delhi

D. Raghunandan

6th September, 2012

It seems the Sheila Dixit government of Delhi, backed by powerful elements in the UPA-II central government, will let nothing stand in the way of water privatization in the capital. Several earlier attempts going back many years to fully or partially privatize distribution of water, especially the big loan application to the World Bank in 2005, were foiled by vigilant community organizations, public interest groups, trade unions and political parties especially the Left. This time the Delhi government is all set to push through privatization of the water utility.

A pilot project for privatized distribution of water in Malaviya Nagar, Vasant Vihar and Mehrauli areas of South Delhi has been approved by the Delhi Jal Board (DJB) and the Planning Commission is soon to be launched. The Malaviya Nagar area is being handed over to a consortiumof SPML Infra and French MNC Suez Degremont, one of the worlds largest water corporations which is already running the Sonia Vihar water treatment plant in Delhi and other water projects in India. A combine of SPML Infra, Tahal Consulting Engineers and, shockingly, Israels largest water company Hagihon Jerusalem Water and Wastewater Works (about which more later), have been awarded the Mehrauli and Vasant Vihar areas.

As before, the public is being seduced with the claim of 24x7 supply of water in these pilot areas and a promise to extend the scheme to other areas later.

The case against water privatization has been repeatedly made and remains valid. Despite these arguments being vindicated by bad experience with privatization in other countries as well as in the nascent attempts in India, the Delhi government is determined to subject citizens of Delhi to profiteering by corporate monopolies. Citizens of Delhi, and those of other parts of the country who will later be subject to water privatization based on claims of success in the capital, should understand fully what is in store for them.

Privatization or sub-contract? The term water privatization is of course short-hand for privatization of water utilities. In coming days and months, we will no doubt hear loud protestations from DJB and Delhi and central government spokespersons, that there is no privatization of water in Delhi. It will be asserted, as in 2005, that this is merely a limited contract for management of water distribution given to some reputed private parties after a tendering process, and that ownership of all water sources, treatment and distribution assets, will remain with the government, and that citizens in these pilot areas will surely benefit from 24x7 water supply brought about by more efficient management. All these are barely half-truths together amounting to fooling the public.

The pilot projects in Delhi are said to involve management contracts for water distribution, related repair and maintenance for 10-12 year periods. Fees and other costs are said to be around Rs.730 crores. This is one of several forms of privatization resorted to worldwide. Fully privately owned water utilities are very rare, probably serving not more than 25 million people out of the total around 1 billion people worldwide estimated to be served by private water utilities which are mostly publicly owned but privately run. Most common are concessions of 20-30 years where the entire system covering storage, treatment and distribution of water is handed over to the company which makes necessary investments and earns revenues. Medium-term leases are another popular form, and management contracts are perhaps the least adopted.

But whatever the nuances, the common feature is that, although formal ownership continues to nominally vest with public entities, all these public-private partnerships are undoubtedly different forms of privatization, with public bodies ceding varying degrees of control over quantity, quality, coverage and pricing to corporate bodies. Since the private party is in the business for profit, water in such privatized utilities is always viewed, valued and managed in terms of its price. Whatever the specific form of involvement of private players, water moves from being a common good to a commodity, with all that this implies.

Water (and other common resources) as an economic good is slowly but surely becoming an integral part of public policy under UPA-II and indeed under the neo-liberal economic framework which have shaped the policies of both UPA and NDA governments at the Centre, and those of governments in many States. The recently released Draft National Water Policy explicitly calls for water to be treated as an economic good, and the earlier NDA government too had issued a Water Policy advocating private sector participation in the water sector. Such reforms in the water sector and other public services are also central to the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) which makes such privatization of public utilities a condition for grants and soft loans from the centre, much like the World Bank, IMF, ADB and many other multilateral and bilateral agencies especially including USAID which helped formulate and push it. Privatization of electricity distribution has now become institutionalized and it is clear that water is heading that way, education and health having already been significantly reformed.

Experience elsewhere What makes water unique is not only that it is essential for life, part of the fundamental right to life according to the Supreme Court, but also that it is a finite resource. Water cannot be manufactured (not counting expensive and limited desalination) unlike electricity. It is hardly surprising therefore that privatization of water, as with other commons, has always constricted rights especially of the poor, restricted access, resulted in sharp rise in prices and gross inequity in distribution.

The notorious privatizations of Cochabamba, Colombia, and Dar es Salaam, Tanzania, hardly need to be recalled. The disastrous privatizations resulting in massive prices, prolonged street protests and police repression ultimately led to cancellation of the contracts, with Dutch MNC Bechtel Corporation in Colombia and with UKs Biwater in Tanzania, leaving these countries to bear heavy costs for many following years. The World Bank, which pushed for and structured these privatization, neither suffered nor seems to have learned any lessons as evidenced in Delhi and elsewhere in India.

Privatized municipal water supply systems in Europe and the US are often cited as success stories by champions of privatization. The most sweeping privatization was done in England under Margaret Thatcher, but Scotland resisted this ideological drive with no ill-effects. In contrast, in England prices went up by 50 percent and profits of the private concessionaires rose by a staggering 147 percent in the first few years!

In fact there is a strong trend of re-municipalization of water utilities in Europe and even in the US precisely because of the negative experiences with privatized utilities. The water utility in Paris was privatized in 1984 but was re-municipalized in 2010 by the new Socialist mayor in fulfillment of a major election plank. In Germany, most water utilities remain municipal, although the Berlin utility was partially privatized in the late 1990s. Regulation in Europe also tends to be done mostly by municipal or other public bodies. In Italy in July 2012, the Constitutional Court has pronounced privatization of water utilities and other public services to be unconstitutional, endorsing the results of a unique referendum held in 2011, and reversing decrees proclaimed and even legislation adopted under former conservative president Berlusconi and even the incumbent technocrat-president Carlo Monti.

Water utilities in the US are predominantly municipal. The largest privatization was undertaken in 1998 in the city of Atlanta where an operations contract was awarded to United Water, then a subsidiary of French MNC Suez. A story familiar to Delhi residents with the private electricity companies, played out with the private water utility in Atlanta: inflated expenditures, poor maintenance, low investment in infrastructure, repair expenses being passed off as capital expenditure, all accompanied by repeated demands for enhanced payments and rise in tariffs. Atlanta cancelled the contract in 2003 and has struggled to restore it to good condition at considerable additional cost.

Disaster awaits Delhi Given Delhis experience with private electricity discoms, Delhi airport and the private airport metro line, it is not difficult to foresee what will happen in water privatization. The whole structure is designed to facilitate higher tariffs and ever higher payments by the Delhi government, ie the citizens, while encouraging poor maintenance and infrastructure development. Above all, the claim of 24x7 water supply will be shown to be a hoax. If it is even partially achieved for a short time, it will be by fraudulent means and at the cost of citizens in other parts of the capital.

Delhi suffers from a serious water deficit. Total demand is estimated at about 3375 MLD (million litres daily) against which DJB supplies only around 2700 MLD after accounting for all losses during treatment and distribution, leaving a shortfall of about 675 MLD. This can only worsen with Delhis population expected to reach 20 million by 2020. Augmenting water availability is highly problematic, given that new Himalayan dams, besides the already controversy-shrouded Kushau and Renuka dams, are highly unlikely and given claims on river waters by upstream states. Groundwater extraction is well beyond limits, currently twice the recharge rate from rainfall, and potential is further dropping due to rampant construction including by State authorities over recharge areas such as the ridge and riverbed in gross violation of the Master Plan and various Supreme Court orders.

Inequitable distribution of water in Delhi is acknowledged even by published figures of DJB and Delhi Government. Two-thirds of the citys population gets only 5 percent of the water supplied. People in parts of Delhi, especially south, outer and north Delhi, get less than 40-50 LPD per person against the norm of 120 LPD while the rich and privileged in NDMC and Cantonment areas get a staggering 400-500 LPD per head. Around 1,600 unauthorised colonies and 1,100 JJ clusters and resettlement colonies do not get piped water. The argument by some well-meaning citizens groups that Delhis water problems can be solved by tackling the unequal distribution, and that Delhis water deficit is unreal and only results from leakages, distribution issues and poor management, is simply wrong and unfortunately strengthens the administrations position.

If water is actually supplied 24x7 to some pilot areas, the truth is that it can only be done by taking away water from some other area. And there is simply insufficient water to enable supply of water 24x7 to all of Delhi. 24x7 water supply in Delhi is a total myth.

Pro-contractor agreement In fact, the contracts for the pilot projects do not at all require the companies to supply water 24x7 to each household, but only at the entry point to the concerned District Metering Area (DMA). So if the company can show that some water is being supplied round the clock at the DMA entry point, it is completely free to divert as much water as it wants to high-consumption, high-paying users within that area by supplying low-paying consumers only a few hours each day. Even a tariff structure with lower charges for low-consumption households, while appearing to be a social equalizer, will actually mean that consumers at higher slabs will be supplied more water because that will mean more revenue and profits for the distribution company.

This model of privatization was drawn up in 2002 by the consulting MNC Price waterhouse Coopers (PwC), a favourite of various multilateral agencies. Frontline magazine reported several years ago, with documentary evidence, that the World Bank kept raising objections to appointments of consultants until PwC was selected for the Bank-supported DJB restructuring project! The current management contract too has been drawn up along the lines suggested by PwC and ensures minimum responsibility and maximum profits for the contractor, while all accountability continues to remain with the DJB and Delhi Government.

DJB has full responsibility for sourcing and treatment of raw water, and supply of water to each zone. So if DJB does not supply requisite quantity treated water, the private distribution companies would be absolved from their contractual obligation for 24x7 supply within the DMA. In the Sonia Vihar water treatment plant in Delhi operated by Suez-Degremont, the DJB has been unable to supply adequate quantity of raw water and is therefore paying through its nose for work that the plant is NOT doing, and the penalties it incurs for non-fulfillment of its obligations are mounting!

Reducing Non Revenue Water (NRW), that is un-metered water supplied or lost through leakages, is another major expectation from the private operator, and one fraught with dangerous consequences especially for Delhis poor. The Contractors are apparently required to reduce NRW from its current 60 percent levels to 23 percent in 5 years. However, NRW is not confined to leakages and theft as suggested, but significantly also includes water supplied to most JJ clusters and unauthorized colonies and to other community taps, hydrants or through tankers. Private distributors will obviously first cut off these water supplies to the poor, thus showing good progress in reducing NRW!

The end result is predictable and clear. Basic problems of inadequate water availability will remain unsolved. Neither the pilot privatization projects, nor their future extension to the whole city, have any solutions for augmenting water availability through conservation, demand management, flood-water storage, rainwater harvesting, groundwater recharge or any other means. Water will become more expensive, with no assurance of more regular supply. Inequalities in water supply between localities, and between high-paying and low-paying consumers, will become sharper. The poor all over the city, and low-income areas in particular, will be badly hit. The DJB and the Delhi government will wash their hands of all responsibility and, while now claiming that it is only handing over distribution and management, will later unashamedly pass the whole buck to the private distributors even while defending their performance, and the high tariffs and fees. At best, the Chief Minister may write a letter to the distribution company, as she occasionally does to the electricity discoms! Dj vu!

Finally, why an Israeli company operating in occupied territories with an apartheid-type system, where Palestinians are denied water rights by law, by procedure and by prices, should be selected for water distribution in Delhi is beyond comprehension. It is also ironic indeed that Hagihon Jerusalem Water, while being a fully autonomous corporation and Israels largest water company, is a public sector entity. If Delhi can contract out its water distribution to an Israeli municipal expert, can it not develop such capability in its own Delhi Jal Board?

Last Updated on Saturday, 06 April 2013 08:36