People's Democracy

 Privatisation Of Delhi Water Supply

Raghu

AMID 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.

The 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 era.

At 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.

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

DELHI WATER SCENARIO

Total 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.

Consumers 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.  

Against 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 unrest.

Plans 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.

In 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.

THE DJB PRIVATISATION PROJECT

The 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.

Unbundling 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 elsewhere.

For 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.

As 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.

The 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.

All 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 failures.

CREEPING PRIVATISATION

While 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 "24x7 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 "24x7" are completely misplaced and will provide absolutely the wrong lessons for subsequent Delhi-wide extension.

Given present constraints on water availability in Delhi, "24x7" 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. 

It 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.

Trade 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.

UNSUSTAINABLE USE OF GROUNDWATER

In 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.  

No 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.

None 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.

Problem 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."

Even 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 heads.