The Hindu : Improving urban water supply through partnership

Online edition of India's National Newspaper
Tuesday, Jan 21, 2003

Opinion

Opinion - News Analysis

Improving urban water supply through partnership

By Alfredo Pascual

There are few more contentious issues in India today than the involvement of the private sector in urban water supply and sanitation. For many, the very idea of private sector involvement in the supply of water and sanitation is anathema. They argue that water is not a tradable commodity but a social right and that any private sector involvement will lead to the privatisation of a natural resource.

What is clear, however, is that innovative solutions are required to improve drinking water and sanitation for India's 300 million urban residents. With cities, such as Bangalore, often limited to alternate days' water supply and many of the urban poor left out of the water supply chain altogether, it has become increasingly clear that many of the municipal water systems are failing to cope. And with the relentless increase in urban populations, water shortages will continue and can only get worse.

Within this context, the private sector does have a valid role to play — not as the owner of water resources but in providing the much-needed expertise, technology and financing for the delivery of efficient water services.

Take financing. Asia's water and sewerage networks desperately need money for investment to keep pace with their growing populations.

Current estimates are that $300 billions of investment is required in the next decade alone (Source: Lehman brothers' presentation to the World Panel on Financing Water Infrastructure on October 9, 2002) — too much for the public budget alone. Funding for a big part of this will have to come from the private sector.

Central to the success of private sector participation will be the development of an equitable tariff structure, with water being assigned an economic value and the urban poor paying less for safe, piped water than what they do through illegal and informal vendors. The increased revenue through the raising of tariffs will help the water service providers recover their operating costs and have enough to improve and expand the networks. Increased tariffs will also provide an incentive among the urban population to conserve water.

Today, private sector participation is beginning to emerge in India. In Tirupur, Tamil Nadu, for example, a State/municipal owned financial intermediary, together with an equity contribution from a private sector consortium, will lead to an investment of Rs. 10 billions ($200 millions) in the city's water infrastructure over the next six years with the private consortium assuming responsibility for the construction, operation and maintenance of the new facilities for the next 30 years. This is good news for the local population, which can expect a better service delivery.

The Bangalore Water Supply and Sanitation Board is also exploring private sector participation in water distribution to improve the quality of service to customers in two pilot areas serving a population of two millions.

Yet, participation from the private sector is only one part of what must be a united effort from all sections of society. With the continued focus on the entry of large foreign water operators, other key players are being ignored.

Governments, for example, will have to maintain major responsibility for providing an effective and efficient regulatory framework for the service providers. In no way does the involvement of the private sector imply an abrogation of this responsibility.

It is the government's responsibility to establish a framework of rules for setting tariffs and defining service standards, with an independent regulator to enforce the rules. A strong regulatory framework will provide the private sector with confidence that their investment is protected against arbitrary regulation, while giving the consumers comfort that their interests are being looked after. Proper regulation will insulate urban water supply from short-term political cycles and provide a longer term framework.

The role of community groups and users is also essential in urban water supply. As the de facto resource managers and protectors of water, communities are at the heart of effective water management and will often have an important interface with the private sector in terms of developing the services they want and are willing to pay for. Finally, there are the often-ignored independent small-scale providers from the private sector. Whether they are water truckers, neighbourhood distributors, or septic tank emptiers, they represent an enormous hidden economy and play a key role in delivering water and sanitation services. These providers fulfil an essential role in filling the gaps and it is important to formalise their role and provide a constructive environment in which they can operate.

Innovation in water policies is urgently needed to provide water and sanitation services to all, including the poor. There is an urgent need for governments, civil society and the private sector to work as partners to improve the management and conservation of water resources and achieve efficient delivery of water services. It is through such partnership that the ultimate goal of `Water for All' in India's cities can best be attained.

(The writer is Director, Infrastructure Finance Division, Private Sector Operations Department, Asian Development Bank, Manila. The views expressed herein are those of the writer, and do not necessarily represent those of ADB.)

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