Privatisation Of Delhi Water Supply

People’s Democracy

Organ of the Communist Party of India (Marxist)


No. 41

October 09,

Of Delhi Water Supply




a mounting storm of public criticism against the Delhi government’s plans to
privatise water supply, coming on top of a wave of public protests against the
hugely negative impact of electricity privatisation, the Delhi Jal Board
announced withdrawal of its loan application to the World Bank for a project
under which the proposed restructuring of the water utility was to take place.
This is a significant victory for all those who had been campaigning against
these moves, including the CPI(M) and other Left parties which had only recently
written to the prime minister demanding withdrawal of the World Bank project. It
also sends a strong message to other metros and cities and is a blow to the
privatisation mania that seems to have gripped the ruling establishment and
sections of the elite classes.


World Bank has a long and inglorious record of advocating privatisation of
public utilities. In the water supply sector, Bank-funded projects run by
European and American multinationals are being implemented in country after
country in Africa, Latin America and Asia. In Tanzania, Colombia and the
Philippines, for example, the World Bank funded water supply projects have left
a trail of disaster, debt and impoverishment. The MNCs have imposed enormous
tariff hikes, denied water to the poor and others unable to bear these
hardships, diverted water to luxury resorts and golf courses and reaped
exorbitant profits. In the face of inevitable public protests, in some places at
the level of popular uprisings, the MNCs have fled these countries, leaving
behind stranded water utilities, governments with huge uncovered loans,
infructuous infrastructure costs and, adding insult to injury, have demanded and
often extracted compensation invoking contractual clauses imposed by the World
Bank. As a result, these discredited policies are now being rolled back all over
the world including in Europe where such privatisation began during the Thatcher


least for now, citizens of Delhi will be spared such tortures. However, this
relief may be short-lived. There are no indications that the temporary reprieve
for Delhi represents a retreat on the policy front. Further, Delhi’s water
woes still remain to be addressed. The government may have decided, at least for
the moment, to drop World Bank funding but the threat of a creeping
privatisation under various guises still looms over this metropolis and, other
cities in India. Residents of Delhi and other prime locations in India will have
to be extremely vigilant and guard against the many ways in which their right to
efficient equitable water supply may be challenged while the very nature of
water utilities as a public service based on sustainable utilisation of a public
good is sought to be undermined.


scenario in Delhi makes for an illuminating case study of all-India interest.




demand of water for Delhi is estimated at about 750 MGD (million gallons daily)
or 3375 MLD (million litres daily). Delhi receives around 1670 MGD of raw water
from different sources such as the Yamuna, Upper Ganga canal flowing in the
National Capital Region (NCR) and from groundwater. With losses during treatment
estimated at 30-40 per cent and losses during distribution estimated at a
further 30-40 per cent, the DJB supplies only about 600 MGD of treated water to
consumers. Delhi thus faces a minimum shortfall of about 150 MGD (675 MLD) to
meet current demand not to mention the increased future demand due to expansion
of the city with a population expected to go up from the present 13.5 million to
21 million by 2020.


in Delhi receive highly erratic and inadequate supply of water which is also of
very poor quality due to overworked and inefficient treatment plants and
contaminated groundwater. There is huge disparity in water distribution between
different parts of Delhi: against a planned minimum daily requirement of 160
LPCD (litres per capita per day), water supply ranges from a low 40 LPCD in
Mehrauli zone to 560 LPCD in the Cantonment area. Over 30 per cent of Delhi’s
population, not confined to slum clusters and unauthorised colonies alone,
receives no piped supply whatsoever. Several new middle-class residential areas
have recently come up with city authorities making no arrangements for water
supply. Given the failure of the Delhi government to ensure water supply, close
to a third of the city’s residents are thus forced to depend on so-called
“informal systems of water supply” meaning private contractors
supplying water drawn from borewells at high rates. All this is leading to
severe public resentment often spilling out into the streets.  


this overall background, Delhi government had embarked upon a programme of
privatisation of the Delhi Jal Board (DJB) in the utterly misplaced hope created
by the World Bank lobbyists that this will solve the water supply problem. In
fact, it would only have worsened it and caused irretrievable long-term damage
in social, economic and environmental terms, while triggering massive social


to privatise DJB, more or less along the lines of the privatisation of the
electricity utility and in keeping with neo-liberal “reforms”
advocated by the World Bank and other financial institutions dominated by the
USA, have been on the anvil for some time. The Delhi government under both BJP
and Congress has been among the more active proponents of privatisation of
public utilities, with actual implementation of these policies gaining momentum
during the Sheila Dixit regime.


fact, as we shall see below, even before formulating the privatisation project
as recommended by the international consultancy firm Price Waterhouse Coopers (PWC)
under the World Bank guidance, several measures towards this end had already
been taken in Delhi in terms of both piece-meal implementation and preparations
for a more comprehensive privatisation of DJB. Now World Bank type thinking has
clearly been internalised in various government circles even if the Bank is not
actually involved in specific projects.




Project prepared by the Delhi government and DJB is based on the assumptions
that current failures can be overcome by purely managerial measures, that only
privatisation in some form or other is the solution and that tariffs must rise,
gradually leading to “full cost recovery”.  PWC had cleverly recommended that, since total privatisation
in terms of handing over ownership would not be acceptable, the same goal should
be achieved through unbundling, giving management contracts for different
activities to private parties and, to the extent possible, by government raising
tariffs to desirable levels before the privatisation commences so as to protect
the private players from public resentment.


of the utility, in this case implying supply of raw water, treatment and bulk
distribution, and retail distribution each being handled by different parties,
has always been the precursor to privatisation as with electricity in Delhi and


years, DJB has appointed contractors to handle repairs and maintenance of
various parts of the supply system with no transparency as to contract terms or
award modalities, no accountability in terms of performance or deliverables, and
no positive impact on reducing pipeline losses.


a beginning towards unbundling and privatisation of the water utility, the Delhi
government had set up the Sonia Vihar water treatment plant with 145 MGD
capacity ostensibly to make up for Delhi’s water shortfall. The plant is to be
operated by the Ondeo Degremont, a subsidiary of the French multinational Suez
Lyonnaise with guaranteed high returns and huge backdoor profits in terms of a
plethora of “incentives” in terms of relaxed performance parameters,
lowered power charges and so on, while penalties for underperformance remain
unspecified and non-transparent. Payments have been for the construction work by
the Delhi government as per Degremont’s bloated specifications. Interestingly
there is cost escalation of over 300 per cent! Worst of all, the plant continues
to lie idle since the Delhi government has been unable to ensure supply of raw
water from UP and is running up penalties of over Rs 1 lakh per day as per the
terms of the contract.


Project envisaged that management contracts will be given to private parties
ostensibly with performance targets, incentives and penalties but with complete
lack of transparency. All capital expenses were to be incurred by DJB according
to requirements specified by the Contractors and Consultants appointed for the
purpose. Tariffs were to be set by a Regulator whose task, significantly, would
include “facilitating” privatisation and “ensuring remunerative
returns” to service providers, in other words there is a built-in bias
towards the private contractors. Importantly, as PWC had recommended, much of
the tariff rises have already taken place, having increased by 200-300 per cent
for most consumers in Delhi even before the privatisation Project. In similar
World Bank assisted projects in Chennai, Hyderabad, Bangalore and Mumbai,
tariffs range from Rs 5 to Rs 10 per klitre compared to Rs 3 for higher brackets
in Delhi now, raised from Rs 1 earlier. Metering and collection of revenues in
any case were also to be responsibilities of the DJB under the Project. Then DJB
has been assigned the “dirty” job while the contractors sit back and
collect fees and bonuses.


performance targets assigned to contractors are based on a presumption of
adequate raw water supply by DJB failing which, as is most likely in the given
scenario, the contractor is absolved of all performance obligations and targets,
as with the Sonia Vihar plant. In all the hue and cry over this white elephant,
no one has blamed the MNC while all have targeted the Delhi government. The
management contract system serves therefore only to absolve the private parties
of any responsibility, deflect criticism and to disguise the real privatising
nature of the process. Private contractors will control the utility and make
profits without any accountability while the DJB will be held responsible for




announcing retraction of the loan application to the World Bank and putting in
abeyance the privatisation Project submitted to it, DJB authorities have
simultaneously stated that they would implement many of the recommendations of
the PWC Report and also the Delhi government’s favourite so-called “24×7
Scheme” under which regular water supply would be provided in two Zones of
Delhi. While it has not been made clear whether or not some
“outsourcing” would be entailed in such exercises, the point is that
Schemes such as “24×7” are completely misplaced and will provide
absolutely the wrong lessons for subsequent Delhi-wide extension.


present constraints on water availability in Delhi, “24×7” supply to
some parts of the city can only mean diverting water from some other part of the
city. Obviously, some privileged zones would get round-the-clock supply at the
cost of poorer or politically less sensitive areas. The problem of inequitable
distribution of water will get exacerbated, with higher-income areas and bulk
consumers willing and able to pay higher tariffs, getting more water than
lower-income residential areas. Such a scheme will set a dangerous precedence
for the future. 


is also highly likely that, in the face of public protest at diversion of water
from other areas, and to overcome poor availability, withdrawal of groundwater
will be enhanced, with disastrous consequences for Delhi’s future. DJB has
already sought to transfer to itself powers of the Central Ground Water Board,
the custodian of sub-surface waters which are a public good, so that DJB can
indiscriminately withdrew groundwater. With privatisation in any guise private
contractors will in increasingly withdraw groundwater. Then pressure on
groundwater will only intensify with the DJB itself.


in groundwater in India has already reached a horrendous level of Rs 3000 crore
annually. Private tankers abound and farmers holding lands surrounding large
cities are giving up agriculture to take up extraction and sale of groundwater
which is not theirs just because the borewell is located on their lands. In
Chennai, private water tankers today are estimated to meet almost 10 per cent of
the city’s water requirements despite World Bank guided corporatisation of the
water utility. In fact, the World Bank, as a matter of policy, encourages such
private exploitation of groundwater. Many World Bank-financed projects in
Colombia, Paraguay and Senegal have supported small-scale water entrepreneurs.
The World Bank though supports private enterprise in groundwater extraction and
distribution it has argued that “suitable regulatory mechanisms” could
promote optimum use of water.




Delhi, the floor area ratio (FAR) of residential properties has been
progressively increased in league with the builder mafia leading to huge
increases to occupancy without any increase in water supply, straining the
already over-stretched water supply system to breaking point. New upper-income
residential colonies and water-guzzling commercial establishments such as
shopping malls, commercial complexes and private hospitals have been allowed to
come up in water-stressed areas. There have been no efforts towards demand
management or the many feasible measures to reduce water usage as have been
adopted in several countries.  


measures have been taken to augment groundwater through recharge provisions and
large-scale rainwater harvesting. However, construction activities in the Yamuna
riverbed, the ridge, flood plains, and neighbouring areas have been destroying
existing natural and manmade structures which could recharge groundwater. Given
Delhi’s dependence on river and canal waters from other states, the Central
Ground water Authority has proposed several measures to augment water supply
through sustainable utilization of groundwater from areas of natural recharge.


of the above issues figures even remotely in the now withdrawn DJB Project or in
the future official thinking which deals only with distribution of water. The
present thinking about improving water supply is concerned with superficial
tinkering with distribution management and tariff structures. It is essential
that in Delhi, and in other metros and cities, a comprehensive plan for
improving water supply is drawn up including such institutional restructuring as
may be necessary but with full participation of citizens and all relevant
planning and other statutory bodies such as CGWA.


is that unplanned and unsustainable water use, and its privatisation, continue
to remain on the neo-liberal agenda in India. The NDA’s National Water Policy,
which was also invoked by the DJB in support of its privatisation plan under the
Congress government of Delhi, 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.”


if this or that privatisation project such as that of DJB is withdrawn from the
overt clutches of the World Bank, this Damocles sword still dangles over our