Public Private Partnership in Water Sector

Introduction:
Even though 71 % of the earths surface is covered with water, which seems to be an abundance of water on this planet, only less than one half of one percent of earths water supports human life. In 1999, the vice-president of the World Bank said the wars of the next century will be about water. According to the WHO, more than one billion people do not have access to clean water and 2.5 billion people do not have adequate sewage and sanitation services. Over 20,000 people, mostly children, die daily due to water borne diseases like cholera and diarrhoea. These statistics clearly show the need for provision of clean drinking water and sanitation facilities.

Current Scenario:
Since 1990, many national and local governments in developing countries like South Africa, India and Latin American countries have made contracts with several private firms for construction, operation and maintenance of the water utilities under PPP mode. The private firms weaseled into these countries where they peddle privatization as a simple, cost saving solution. The most common assumption made was that the private sector would improve utilities by bringing in new capital, raising the level of staff expertise, and making operations more cost effective and efficient. According to a report on water privatization by World Bank more than 260 PPP contracts have been signed since 1990 to provide water services in more than forty developing countries. Between the years 1991 and 2000, the population of developing and transition countries, which depends on private firms for water

supply and sanitation grew from 6 million to 94 million [ ref: World Bank: PPP in Water]. Even though the water PPP projects are declining in developing countries due to people uprisings, the population dependent on private firms grew from 94 million to 160 million by 2007 because of rapid urbanisation in the first decade of millennium.

PPPs and its players:

A project will have 3 players, viz. government, private firm and public i.e. the user. The success of any PPP lies with these players and the satisfaction of their requirements. Firstly, the government needs a permanent solution to the problem. Secondly, the private firm expects profits. Finally, the user expects value for the money paid. When a road project is taken up under PPP, only a few people will be affected by its construction (land acquisition problems). Even if the toll charges are high on the road, the user has an alternative of choosing another route to the destination. Also, the regular users of the road consist of only a small percentage of the total traffic as compared with the project for providing water utilities, where some variables have to be emphasised. The local condition, willingness to pay should be given more importance. Here, same set of community has to bear with the provided water utilities for 20 30 years with no option of other alternative. So, implementation of the project would face a lot of resistance from local citizens. This can be clearly proven from the case studies of Cochabamba and Stockton which we have discussed in class. In both these case studies, a huge uprising by the people is observed. Opposition for privatization of water in Cochabamba, Bolivia made a mark in the

history of water PPPs. Observing all these case studies, a conclusion can be made that; water will go to the set of the people who can pay the most, not to the set of people who need it the most. The private firm will run into profits only if both the rich and the poor pay for the service. The discussion about the tariff has arrived because of the common notion of the people that the government has to provide these services, where they dont expect profits and therefore, the services provided would be cheaper. If a private firm provides these basic services, it expects profits, which increases the services cost. Supporting this I would like to quote a fact that a contract awarded to a company named Bechtel by the government of Bolivia got cancelled because of huge uprisings by the local people due to increase in the tariffs by 160%. Bechtel made $14 billion in profits for the year 2001 which is nearly double the Bolivias GDP and sued that government for $25 million in World Banks secretive International Court for Settlement of Investment Disputes based in Washington, D.C. [ref: Citizen guide to water privatization by Public Citizen an NGO from USA]. Other advantages can also be seen using the PPPs in water sector, viz. increase in the services, improvement in quality, and mainly, enhancement in efficiency. Many PPPs were able to reduce Non-Revenue Water (NRW) to 15% which is comparable to statistics of developed countries, increase bill collection ratio, and maintain labour productivity, measured as the number of staff per thousand connections. [Ref: citizen guide]

Solutions to the problems raised:

For the success of PPPs on water, incentivizing the user should be given the main priority. Tariffs have a huge impact directly on the user. The rich will anyway be in a

state to pay for the water utilities, so the poor should be more focused upon for reduction in the hike of tariffs. Government can either provide subsidies to the poor or the city dwellers should be charged based on the plinth area of the houses as in Alandur, Tamil Nadu. In the cases like Tirupur, the cost should be reduced for the poor and extra cost should be charged from the industries. Here the industries should be compromised by deducting taxes and offering land at cheaper rates to the industries. These projects will be beneficial if launched with National Poverty Reduction strategies by creating employment in the same project for the poor. This strategy not only helps in creating a psychologically positive impact on the PPP but also provides necessary skills and assets that will enable them to take full advantage of any expansion in employment potential. For some cases like Alandur, the main reason for the implementation of PPPs is because of the successful campaigning. In Stockton the anti PPP signature campaign took place more interactively than the support campaign. Ideology of the user on any PPP can be changed by effective campaigning like direct involvement of bureaucrats and elected heads as the mayor did in Alandur. I would like to finally conclude this by quoting Water promises to be to the 21st century what oil was to the 20th century: the precious commodity that determines the wealth of nations. - Fortune Magazine, May 2000