It has suddenly come to mean big bucks in India. With water resources in the country fast depleting and the government throwing up its hands, at least five global corporates are ready to tap the over $2,000 million market—they've already set up shops in several states and are confident of seeing their projects approved with the central government literally rolling the red carpet to welcome them.
To facilitate "private partnerships", the ministry of urban development last month released a set of guidelines to state governments for creating a "welcoming atmosphere" in the drinking water sector. The ostensible reason for the directive: "The traditional dependence on unreliable flows of public funds to finance piecemeal projects consistently fails to bridge the urban infrastructure gap. Private partnership is essential." In other words, the simple business of piping drinking water to urban homes will get a multi-national coating. Of course, the cost of privatisation will either have to be borne by the consumer or subsidised by the state.
Officials in the urban development ministry are already predicting what the future holds for millions of urban dwellers—they will have to pay at least ten times more for water. In fact, besides defining legal reforms to accommodate the private players and various contracts that public civic bodies can enter into, the guidelines are specific about a major rehaul in the tariff structure: "An independent economic regulator is to be created for de-politicising the setting of tariff."
Neither the guidelines nor the National Water Policy, 2002, which advocates more private involvement in the water sector, bother to factor-in the result of such corporatisation elsewhere in the world. As in Bolivia, where riots broke out in the city of Cochabamba after a 35 per cent increase in water bills, such experiments have been contentious almost everywhere. According to a study compiled by David Hall, director of the Public Services International Research Unit at the University of Greenwich, privatisation of water in the Philippines, Germany, Brazil, Nairobi and Argentina have led to a tremendous increase in water prices, triggering-off public outrage. "Making profits on people's most basic needs is the dream of many corporate executives. When they dream of water, let's hope their sleep remains troubled for some time," says Hall.
Nevertheless, Indian policy-makers justify privatisation as a necessary step for reforms in the water sector. "Everyone looks at it as a natural resource for which nobody should be asked to pay. The problem is that the water which reaches your house has to be first taken to the treatment plants, has to be treated and then piped to homes. All this costs money. Where is that going to come from?" asks A. Shekhar, advisor for water resources in the Planning Commission.
Shekhar argues the case for privatisation on the grounds that none of the urban municipal bodies have the resources to either augment their infrastructure to meet the growing demand for water or initiate steps to conserve the existing resources. Besides, he says, the National Water Policy, 2002 is clear about encouraging the private sector to participate in water management. "If individual civic bodies are dealing with these companies directly, they're not doing anything that has not been specified in the policy," he says.
Global players, however, are keenly watching developments in India and are slowly seeping into the sector. Sham J. Bhan, managing director of Degremont, a subsidiary of France's Suez, says his company has projects in six cities in India and does not rule out further expansion plans. "We are dealing in treatment of water exclusively. Future expansion will depend on the kind of trade environment the government creates," says Bhan.
Degremont has a project in Delhi too—the Sonia Vihar treatment plant is being developed by the company on a design, build and operate (DBO) contract for a fixed period of seven to ten years during which its profits are guaranteed by the government. "Right now, we are happy with a profit of Rs 10 crore per annum. Other companies may be content with managing and operating existing plants owned by individual civic bodies. But we don't want to dabble in that. We have very strict quality control and would like to maintain our image as quality service providers to our clients," says a senior manager with Degremont.
While private companies like Degremont have the government subsidising their profits, other international agencies are looking forward to the civic bodies reforming their tariff structure to pay back loans. Toru Nomura, chief representative of the Japan Bank for International Cooperation (JBIC), says the bank has already invested heavily in the water sector in India but the funding of each project depends on "some reform" promised by individual civic bodies. "Our borrower is mainly the central government, which, in turn, funds local projects. But we monitor each project in terms of its financial viability. That is, we will not fund a project unless the individual civic body shows some promise of financial reform," says Nomura. He believes that the tariff structure has to be reformed for improvement in quality and conservation of water. "I can't believe that in the city of Delhi people can't pay for their water. A rational tariff structure has to be devised that will also keep in mind the needs of the poor. The present state of things should not be allowed to continue," he adds.
There is only one problem in this analysis. It perceives water not as a fundamental right of the people, but as a commodity the government can no longer afford to make available to its people. This approach, according to Himanshu Thakker of the South Asia Network on Dams, Rivers and People (SANDRP), is fundamentally flawed. "Water is a natural resource and the government owns it only because it promises to make it available to people. On what basis has the government made water a commercial product? On what basis are the private companies selling bottled water to people? Who has allowed them to make profit out of this natural resource?" asks Thakker.
The answer to shrinking water resources and growing needs, according to Thakker, does not lie in privatisation but in community participation and transparency on the part of the distributing agencies. Conservation efforts in India have been pioneered not by the government but by community leaders like Anna Hazare and Rajender Singh. The irony, says Thakker, is that while the government claims that it does not have any money to make infrastructural improvements in the existing maintenance and distribution system, it's willing to subsidise the foreign companies' profits in the water sector.
"It is like privatising national assets and nationalising private losses. The country is being sold and nobody has the courage to speak out. Why would a multinational invest in water without expecting you to pay back several times the amount?" asks K. Ashok Rao, secretary general of the National Confederation of Officers' Associations of Central Public Sector Undertakings.
While the government is busy putting in place reforms to suit the private players, NGOs, community leaders and trade unions are currently bracing themselves for the inevitable. Water, they say, is all set to boil.