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Privatisation of water

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A. VAIDYANATHAN

Appraisal of the rationale and performance of privatisation of water supply for domestic consumption

THE WATER BUSINESS - Corporations Vs People: Ann-Christin Sjolander Holland; Books for Change, 139, Richmond Road, Bangalore-560025. Rs. 450.This book deals with the contentious issue of privatisation of water supply for domestic use. The author has visited a large number of cities and towns in developing and developed countries to understand the circumstances that led to privatisation and expectations about the difference it would make to the coverage, quality and cost of water supply; and the extent to which these expectations have been realised. For this purpose, besides collecting information on the working of the systems and key indicators of their performance, she had extensive discussions with different segments of users, workers, officials, politicians and experts to ascertain the views and perceptions of different stakeholders. The picture that emerges is highly critical of both the rationale and performance of privatisation.

Rapid privatisation

The study shows that the recent rapid expansion of privatisation is the result of a conjuncture of several factors: the inability of public systems to improve efficiency and to mobilise resources needed for expansion and modernisation; ascendance of neo-liberal economic policy (favouring free markets, globalisation and cutting back the role of the government and the public sector) among influential segments of both the domestic elites and international organisations; vigorous lobbying by multinational water companies and their success in persuading international agencies and professional forums that privatisation of public systems is the solution to the latter's inefficiency; and inducements and pressures from international financing institutions by making loans conditional on privatisation.The population covered by privatised systems has grown from about 50 million in l990 to over 330 million currently. Most of them are in large and mega cities and controlled, directly or through subsidiaries, by large multinational companies (MNCs). What is striking is the dominance of two of the largest water companies - both based in France - in the business, and the fact that their operations cover cities spread across several continents. The critique of privatisation relates largely to the MNC controlled systems.

Critique

It highlights the widespread dissatisfaction among users over the poor quality of service of private companies, their failure to fulfil their commitments regarding expansion and improvements to systems to serve the poor, as well as huge and arbitrary increase in water rates. Workers unions are concerned about huge layoffs in the name of cutting costs and there are complaints from the public about corruption in award of contracts. Despite protests from users - which in many cases have been violent - privatised systems have been able to get away with gross violations of their commitments with impunity because of lacunae in the agreements and MNCs' influence over politicians and public officials. The agreements do not spell out sanctions against non-fulfilment or violation of commitments by the companies nor the mechanisms of enforcement. This is compounded by the absence or ineffectiveness of regulatory institutions to ensure that service quality, investment, costs, pricing and profits of water supply companies are subjected to transparent public scrutiny and consistent with well-recognised principles applicable to public utilities.The author finds some signs of MNCs reassessing the nature of role they would like to play in the light of their experience and the criticisms of their performance as well as changes in the perceptions of their critics about the areas and functions in which professional expertise from private firms could be used to advantage in improving public systems. She also refers briefly to the growing interest of efficient public systems in sharing their experience and helping others to perform better. One wishes that she had explored this aspect in some detail.

Public versus private

It also needs to be recognised that most of the deficiencies of performance of privatised systems and their underlying factors are not unique to them. They are characteristic of most public systems as well. In fact, the difficulties of and resistance to reform is even greater in countries like ours where public systems are entirely funded by the government and managed by government personnel without being subject to review by any independent regulatory authority. Moreover, public systems in urban and more so in rural areas do not cover the entire population. Typically, the proportion of poorer segments with access to public supply as well as the quantum of supply is much below average. A large part of the water requirements of the population (and particularly to poorer segments) is left to be met by unregulated exploitation of groundwater, stream and local ponds by individuals. These resources are everywhere under severe stress.The working of both public and private water supply systems is influenced by similar sets of factors and forces. Evidently they are not equally important and do not operate in the same manner or have the same effect on the performance of different systems. The author does refer to a few instances of efficient private management and also efficiently run public systems. While considerations of equity in access to such a basic need as water for domestic consumption argue strongly for public systems, efforts to reform these systems can greatly benefit from a systematic study of the factors accounting for variations in performance of different public as well as private systems.


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