Privatisation Of Municipal Water Supply

IT 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.

A 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.

The 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.

One 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 notcompletely 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.

In 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.


Total 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.

The 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.

There 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.

Of 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.


Unfortunately, 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.

The 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 capital.

The 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.

While 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!


All 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!

The 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?

Experience 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 the main impact on the consumer is only likely to be higher tariffs while the main benefit will go to the private, mostly MNC, corporates.


So 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.

Groundwater, 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.

Increasing 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.

The 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!

The 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?

It 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.”

Water 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!