Privatisation Of Municipal Water Supply

People’s Democracy

Organ of the Communist Party of India (Marxist)


No. 14

April 04,

Of Municipal Water Supply


is an irony, indeed a tragedy, that on World Water Day (March 23, 2004), one
should be writing this article about efforts being made at the level of both the
centre and many states in India to privatise water, a basic human necessity
rightly considered as a public good but now being sought to be expropriated by
corporate interests using the instruments of imperialist globalisation. 

variety of moves have been quietly underway for some time now, under the active
prompting of the Word Bank, IMF, Asian Development Bank and other multilateral
agencies, for privatisation of water supply utilities in India, starting with
the major metropolitan cities and using these as leverage to open up the entire
water utilities sector in the country for exploitation by multinational
corporations. The latest endeavours in this regard are in the national capital
following on from the successful privatisation of electricity distribution in
Delhi. While the Congress government in Delhi denies that these are moves
towards privatisation and claims that these are only in the nature of
“sub-contracts”, the fact is that these contracts are only the first
steps in a carefully calibrated series of measures designed to achieve the
gradual privatisation of municipal water supply.


thin end of the wedge in Delhi is the contract given to Ondeo Degremont, a
subsidiary of the French multinational Suez Lyonnaise which is active in over
100 countries worldwide, to build and operate a water treatment facility and a
sewage treatment plant in the capital. The Delhi projects are among 20 more
similar projects in other major Indian cities funded by the World Bank or other
international agencies all working towards the same goal being actively pursued
not only in India but in numerous other countries all over the world.


of the major areas under discussion under the aegis of the World Trade
Organisation (WTO) is the General Agreement on Trade in Services (GATS) covering
sectors such as energy, telecommunications, education, tourism, transportation
and water. The GATS negotiations are still on-going and are a major bone of
contention especially between developing nations and the advanced capitalist
countries since their goal is to liberalise trade in services and open up the
sector to private companies especially MNCs. The discussions under GATS are not

completely new, however, but seek to systematise and put into a global treaty
framework a process which has already been underway for more than a decade in
different developing countries under pressure from the IMF and the World Bank
under its notorious Structural Adjustment Programmes (SAPs). Under the guise of
improving efficiency, reducing governmental deficits and attracting private
investments, many countries in Africa and Latin America, such as Kenya, Tunisia,
Colombia, Ecuador have been pressurised into privatising public services
especially, for the purposes of this article, water utilities and other
water-related services, often with disastrous consequences.


the above context, a closer look at what is taking place in India, using the
developments in Delhi as a case study, would be highly illuminating as to what
lies ahead for the Indian people and the nature of struggles they would have to
wage to retain their rights over water.




demand of water for Delhi is estimated at about 750 MGD (million gallons daily)
or 3375 MLD (million litres daily). As against this, the Delhi Jal Board (DJB)
supplies about 600 MGD (2700 MLD) of treated water which corresponds to around
1670 MGD raw water received by it. The raw water received comprises about 88 per
cent from surface water from the Yamuna and Ganga canals and about 12 per cent
from groundwater. Delhi thus faces a minimum shortfall of about 150 MGD (675 MLD)
to meet current demand not to mention the increased demand due to expansion of
the city and its population which is expected to go up from the present 13.5
million to 21 million by 2020. 

DJB loses about 30-40 per cent of treated water during distribution and is only
able to treat and supply about 60 per cent of the raw water it receives which
compares unfavourably with the 80-90 per cent international standard. It needs
emphasis that DJB has reached its maximum installed capacity for water treatment
which means that, even if it receives additional raw water to make up for
shortfall, it would not be able to treat it unless substantial additional
investment is made in increasing treatment capacity and efficiency.

are many medium and long-term projects being planned or in various stages of
implementation to cover the present and future anticipated deficit, such as
water from the Renuka, Keshau and Tehri dams. However, the major and only
short-term “solution” being offered to the people of Delhi is the
Sonia Vihar Plant being set up by the French MNC Ondeo Degremont under the aegis
of the Delhi Jal Board with a capacity to supply 140 MGD (635 MLD) of treated
water daily, the raw water to come from the Upper Ganga Canal of the Tehri Dam
project, tapped off near Muradnagar in UP. The Sonia Vihar Project was
initiated by the Delhi government pursuant to a Report prepared by Price
Waterhouse Coopers (PWC), the international consultants, on “reforming”
Delhi’s water supply as part of a World Bank sponsored programme and marks the
beginning of privatisation of DJB and Delhi’s water supply.

course, the Congress-run Delhi government has vehemently denied that there is
any move to privatise water utilities and claim that the Sonia Vihar Project is
being run by the French company only as a “sub-contractor” of the DJB.
The Delhi BJP leader Dr Harsh Vardhan has sharply attacked the Sheila Dikshit
government for clandestinely privatising DJB and handing over a national
resource to a multi-national. But the BJP-led central government’s minister of
state for water resources Bijoya Chakravarty indirectly defended the Project by
cleverly informing parliament that there is “no move to privatise the Ganga”,
a diversionary stand he was able to take due to a mis-directed campaign against
the privatisation policy by some activists seeking to evoke emotive sentiments
associated with the “holy Ganga” by claiming that the Sonia Vihar
project is somehow “polluting” the Ganga.



little is known or has been made public about the Project itself except its
broad contours, adding to the shroud of mystery surrounding the Project and
strongly suggesting that there is indeed something to hide. Degremont is to set
up, run and maintain the plant over a 10-year period in what is described in the
DJB website describes as a Build-Own-Operate (BOO) contract even though the
Delhi government and the DJB have repeatedly stated that they, and not Degremont,
own the facility. So build-operate-transfer (BOT) is perhaps a better
description of the contract, especially since the DJB has paid Rs 188 crore to
Degremont for setting up the plant. The Delhi government has also given
Degremont a counter-guarantee of assured returns (no one knows exactly how much)
for the contract period against treated water supplied from the plant along with
productivity incentives to the company (Degremont is believed to have assured a
90-95 per cent ratio of treated to raw water). The contract however, seems to
absolve the French MNC of any responsibility for the more difficult task of
distribution or of revenue collection which will remain the responsibility of
the DJB and the municipal authorities of the MCD, NDMC and Cantonment Board.

Delhi government appears to be following the World Bank-PWC suggested path of
step-by-step reforms that is to first lease out or sub-contract specific service
elements, then commercialise (that is gradually increase revenues to match costs
until the ultimate goal of “full cost recovery” is achieved) and corporatise
(bring the water utility on par with autonomous companies) along with
regulation, and finally divest or privatise in one form or another. The PWC
Report suggests that private sector participation in different ways and for
different functions be gradually built-in because, it is argued, this would
bring in better efficiency, accountability, technology and even fresh

Report explicitly recommends that the process and model followed in Delhi
earlier for Electricity be adopted for water also with the former finally ending
up having joint ventures of the Delhi government with corporate partners who
would also fully take over management functions for electricity distribution
while generation and transmission remained state-sector functions but gradually
being corporatised.

the Delhi government continues to deny any privatisation moves in the case of
water, the measures already initiated are strongly reminiscent of measures taken
towards privatisation of electricity distribution in the Capital. The Delhi
government and DJB first hinted at hiking water tariffs, which are considerably
lower in Delhi than in other Indian metros, but backed off for the moment in the
face of public resentment. It then decided to appoint a Regulatory Commission to
decide on tariffs, thus resorting to a well-known tactic to evade direct
responsibility for a tariff hike which the World Bank, the PWC Report and other
pro-privatisation forces are known to favour. Interestingly, the PWC Report
recommends that the Regulator for water not only looks at tariffs and similar
issues but also promotes private sector participation and, when this
is achieved, balances private and public interests — in other words,
first bring in corporates where there are none and then, in the name of
“balancing interests” ensure that corporates control the water utilities and
other services, preferably in an environment where all the hazards and risks of
distribution and revenue collection are borne by the state-sector along with a
“balanced” half of the equity as in the notorious electricity distribution
joint ventures!




this has indeed taken place in the electricity utilities in Delhi with none of
the supposed benefits of privatisation. Delhi is flooded with complaints of
faulty meters, over-billing and unresponsive customer service, all supposedly
“natural” ills of the state sector. Faults and break-downs continue unabated
and, if supply appears to be better, it is because the state-owned transmission
utility is buying more power than earlier which they could have done anyway,
even without the much-vaunted private distribution companies. Power losses and
theft are as high as before. To top it all, the much maligned subsidy the state
was earlier doling out for electricity, supposedly on account of its
inefficiency, has gone up at least three times except that now the Delhi
government pays this huge amount to the private distribution companies! And the
Delhi Electricity Regulatory Commission has been a silent and complicit
spectator. So much for private sector efficiency and accountability!

same scenario can be expected in the case of water too where the corporates, in
this case MNCs, are not even entering the distribution arena in the first
instance. In Delhi, where the DJB suffers from 30-40 per cent losses during
distribution, much of this owing to poor maintenance and repairs, DJB has
already for the past several years given this job to various private contractors
who, despite having been paid huge amounts, have made no difference to the
losses resulting in massive financial loss to the Delhi government. Clearly
privatisation has not worked in this aspect of water services here so why should
it be expected to work in others?

in other Indian cities has been no better either. All these cities continue to
face serious water shortages even while tariffs have gone through the roof.
Tariffs are many times higher than in Delhi with water-starved Chennai being
almost ten times higher! So successful has the World Bank guided corporatisation
of Chennai Water been that it is stated to have recovered 140 per cent of the
costs incurred! These experiences suggest that
main impact on the consumer is only likely to be higher tariffs while the main
benefit will go to the private, mostly MNC, corporates.



far we have spoken of privatisation of municipal water supply utilities and
related services. However, a number of other measures have contributed to a
virtual juggernaut rolling on towards privatisation of all water resources in
the country.

for instance, is the preserve of the state as it is a national resource like
minerals and the Central Groundwater Authority (CGWA) is mandated as the
custodian of all groundwater resources. However the government has allowed
groundwater to become the “property” of rich property owners and
others with the financial ability to invest in its extraction and distribution.
With no laws specifically laying down rights over groundwater, landowners have
come to assert de facto and increasingly de jure rights over
sub-surface water flowing beneath their land and exploiting it at will. In the
absence of proper water supply and effective regulation, groundwater is now the
source of an estimated four-fifths of domestic water supply in rural areas, and
around half that of urban and industrial areas, much of this being supplied by
rich landowners. 

demand for water in urban areas is prompting landowners to sell “their”
groundwater which is, in fact, a common resource. This is not only leading to
sharp drops in groundwater levels and unsustainable drawals far beyond the
capacity of the system to recharge, but also to growing rural-urban disparities
in groundwater utilisation. Farmers in many parts of the country are reported to
be abandoning agriculture in favour of better returns from groundwater! The
groundwater trade is estimated at close to Rs 3000 crore today. 

most glaring case which shows the fate awaiting us all is that of the Coca-Cola
plant in Plachchimada in Kerala where the MNC is pumping out millions of gallons
of water from the otherwise drought-prone area, and has even refused to
implement the state government’s order (itself obtained only after massive
public protests and litigations) to cease operations till monsoons are over,
arguing in Court that the MNC has an unfettered right over the
groundwater under its land! 

World Bank has long argued for privatisation of water and has supported water
businesses by landowners in Africa and Latin America. In India, while the
BJP-led NDA government and like-minded pro-liberalistaion, pro-globalisation
governments in different states deliberately look the other way or even actively
connive in the process, corporates are mining precious groundwater at throwaway
costs to supply all manner of industries including “purified” drinking water
and aerated beverages. A fact conspicuously missing from the BJP’s “India
Shining” ad campaign is “Bottled water sold in the past 50 years: Negligible
— Bottled water sold under BJP rule: over Rs 1000 crore per year”! How much
more privatised, or expensive, can water get?

bears note that the NDA government’s National Water Policy adopted in 2002
explicitly states: “Private sector participation should be encouraged in
planning, development and management of water resources projects for diverse
uses, wherever feasible. Private sector participation may help in introducing
innovative ideas, generating financial resources and introducing corporate
management and improving service efficiency and accountability to users.
Depending upon the specific situations, various combinations of private sector
participation in building, owning, operating, leasing and transferring of water
resources facilities, may be considered.”

is a precious national resource which should be under public control. But
selling out the nation’s wealth, infrastructure and its very natural resources
has become second nature for the BJP and its allies. And several other Parties
are not very far behind!