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Are supply-side solutions to water access sufficient?

By Darryl D'Monte

While overall access to water supply infrastructure in cities is increasing, coverage remains uneven. But are dams and so-called "flexible water allocations", as advocated by the World Bank, the answer?

Judging by contemporary preoccupations, India seems to consist only of cities, and that too, populated solely by the well-to-do. Not surprisingly, that attitude has rubbed off on bureaucrats and experts.

Of course, the cities are big enough in themselves. In the 2001 census, the urban population stood at 210 million and is estimated to have risen to 290 million the following year. In 2002, cities constituted 28% of India's total population of 1.3 billion. Apart from the national capital territory of Delhi, the most urbanised states are Tamil Nadu (44%) and Maharashtra (42%).

Forgotten in the euphoria over economic growth is the fact that there were 41 million slum-dwellers in 2001, rising on an average by 3.5% over the next 15 years, to reach nearly 70 million by 2017. That is more than the entire population of every European country, with the exception of Germany.

The central government has recognised the vital importance of cities and their burgeoning contribution to the GDP. The Jawaharlal Nehru National Urban Renewal Mission seeks to fund the development of major centres, but policy prescriptions should not neglect the urban underbelly.

The ministry of urban development recently held a workshop, funded by the World Bank, on 'Bridging the Gap between Infrastructure and Service' in water supply and sanitation. Smita Misra from the Bank's Delhi office pointed out that while overall access to water supply infrastructure in cities is increasing -- nearly everyone has some source of potable water -- coverage is uneven. In Class I cities, Uttaranchal has the highest access, while Orissa registers only 55%. When it comes to piped water, Tamil Nadu is highest and Rajasthan is at the bottom of the pile. No city has 24x7 supply. The average Goan enjoys 341 litres per day over eight hours, the Mumbaikar 240 over five, and the Delhiite 223 over four hours. While these may sound very modest quantities, we should remember that the Parisian makes do with 150 litres per day, with an affluent standard of living.

The World Bank points out that there is "uncontrolled water abstraction and usage", which public utilities refer to as "unaccounted for water" and "non-revenue water", including leakages, illegal diversion of supply and free supply through standposts. The operation and maintenance cost is not recovered and public subsidies tend to benefit the better-off. The capital expenditure is not recovered and left to governments to shoulder. The design of projects "seldom takes into consideration household preferences and willingness to pay".

Both the urban rich and poor have what the Bank terms "coping costs" in addition to their water bills. These would include, for instance, extra supply by tankers, electricity charges on private pumps and the like by the rich, and hours spent in queues by the poor. Thus, the actual costs paid for water far exceed what city-dwellers actually pay as water bills. A Delhi survey in 2005 found that in authorised colonies, the affordable water bill was Rs 525 per household per month, while each only paid about Rs 125 as water charges. The comparative figures for the underserved, including jhuggi jhopris, were Rs 225 and Rs 50. The inference, obviously, is that people are already paying in cash or kind for poor service and, if this were improved, would be ready to bear the burden. However, it is important to remember that water, unlike electricity, is the most basic need, and therefore can't be priced beyond the reach of the poor.

The World Bank's approach has been put into practice in what is known as the Karnataka Urban Water Sector Improvement Project, which it has assisted. At the Delhi workshop, Chandramohan V, executive director (finance) of the Karnataka Industrial Development Finance Corporation (KIDFC), detailed how its French "strategic partner" Veolia has improved water delivery in three district towns -- Belgaum, Gulbarga and Hubli-Dharwad. Veolia was formerly known as Vivendi and is the largest private water company in the world. Chandramohan mentioned how urban local bodies typically had no idea of the condition of their water infrastructure, and metered connections were a small percentage. Between 40 and 70% of the water supply was either non-revenue water or unmetered.

Veolia, which is a Rs 60,000 crore global company with 1 lakh workers in 51 countries, conducted market surveys in these three towns and found that people -- including slum-dwellers -- were willing to pay. They didn't insist on free supply, provided the service was reliable. According to Didier Renard, the Bangalore-based technical director of Veolia: "There is a lack of understanding on the part of the government: there is an unwillingness to charge." The cost of water was Rs 10-20 per kilolitre, while only Rs 2-5 was recovered.

The World Bank loaned Rs 182 crore and the central government granted Rs 55 crore, while the state government provided the rest of the full cost of Rs 237 crore. Prior to the start of the project, studies were conducted on the overall water policies of Karnataka, the regulatory and legal framework, the scientific and rational framework for tariffs, and the strengthening of service delivery, including by the private sector. In the three towns covered under the initiative, there was "100% metering" and "volumetric pricing", leading to full cost recovery. K A Joseph from Veolia described it as a "commercially-oriented service".

According to Joseph, it proved that 24x7 supply was possible. Each connection cost between Rs 10,000 and Rs 12,000, a cost that could be amortised over 30 years to Rs 400 a year. With the KIDFC spending Rs 900 a year on operation and maintenance, this worked out to a total cost per year of Rs 1,300. Pricing water at Rs 6 per kilolitre to provide 135 kilolitres per connection per day, each urban local body had a revenue of Rs 2,900 per connection annually, which still left a substantial profit to repay debts and so on. The entire cost of the project could be recovered within 20-30 years.

At the workshop, Veolia was questioned about whether it paid for the groundwater, which it admitted it did not. A participant also asked why the company had not invested any funds: the investment was entirely by KIDFC while the company's contract only covered operation and maintenance. This could not be termed a public-private partnership in the fullest sense of the term. Its performance would only be monitored for two years, which was also not long enough.

In cities, generally, there are also problems with metering. Due to slum-dwellers being treated as illegal squatters, few local bodies would be prepared to extend water supply to them. Even if they are connected and fail to pay their bills, their water supply could be cut off, with the threat of epidemics like cholera, as was the experience in South Africa (which, incidentally, guarantees every family a free minimum of some 60 litres of water per household per day).

The privatisation of water supply is highly controversial, even if assets remain in the hands of public utilities but operation is handed over to private companies. The failure in Karnataka itself of the Greater Bangalore Water and Sanitation Project (GBWADP) speaks volumes. At the Delhi workshop, Ramesh Ramanathan from the NGO Janaagraha, which earlier cooperated in this project, cited how it had pulled out in February 2006 due to "lack of information on privatisation".

The objective was to provide water, underground drainage and sewage treatment in eight municipalities around the state capital, an area of 240 sq km, covering 1.3 million people. The project cost was originally $ 150 million, but it had escalated by up to a third. The cost was to be split between water and sanitation. As far as water was concerned, the Karnataka government was to provide 22% of the cost, the beneficiaries 35% and the municipalities 43%. According to Ramanathan, the project provided extensive and formal scope for public participation. However, trouble brewed when many of the project's champions were transferred. There were outstanding issues, such as poor policies, pricing, etc. A number of stakeholders had divergent agendas and there was "slow and painful progress".

This was compounded by the agitation at the time against the attempted privatisation of operations of the Delhi Jal Board, based on a consultancy report by PricewaterhouseCoopers. The aim was to hand over management of each of the 21 zones to multinational companies (MNCs). A management fee would be paid to each for running a zone, based on certain parameters. There would be bonuses for achieving targets, and penalties for not. Two zones in south Delhi were the first to be considered. Among the four companies being considered were, according to the Delhi NGO Parivartan and the Right to Water Campaign, Veolia, Suez, SAUR and Bechtel (the US company that was boycotted in India in the 1960s for offering to build a chain of fertiliser plants at a highly exaggerated cost). Parivartan documents how Veolia's contract in Tucuman, Argentina, in 1994 included a 95% increase in tariffs in the first year, forcing a boycott by consumers and the termination of the contract in 1998.

A fundamental problem with the World Bank's approach is that it relies on supply-side solutions while ignoring the inequitable distribution of water (and sewerage facilities). A comprehensive study in 2005 by the Delhi office of the international NGO WaterAid, titled 'Profiling 'Informal City' of Delhi' clearly highlights this vast disparity between the jhuggis and pucca colonies. Equity would demand cross-subsidies rather than only across-the-board metering. As a general principle, isn't it possible to reform existing municipalities to make them perform? In the US itself, most provision of water is in public hands, with excellent service. All developing countries lack the capacity to monitor private companies, as the ongoing controversies with Reliance on electricity supply in Delhi and Mumbai demonstrate. In Mumbai, citizens are questioning the initial "studies" being conducted for similar operations in a municipal ward in Andheri by a company called Castalia.

The Bank's reliance on supply-side solutions was manifest in the remarks at the workshop by senior water advisor David Grey. He contrasted the storage capacity of the US, which is 6,000 cubic metres per head, with India's paltry 1,700. He made out a strong case for improving the storage capacity in this country, considering that 90% of the monsoon rain fell in some 15 days, and all the rain in 40 days. He advocated dams -- which, in other contexts, the Bank euphemises as "hydropower" -- and held up as a model the Itaipu dam in northeast Brazil. Some municipalities in the vicinity earn 70% of their revenue -- in some cases $ 2,000 per capita -- from the benefits flowing from the dam. He believed that this poor region of Brazil was now competing for dams. However, environmentalists have long criticised Itaipu as an example of destruction of habitat and displacement of people, while most of the benefits have accrued to cities miles away from the location.

Even more controversially, Grey called for "flexible water allocations" under which small farmers could sell their entitlements to cities. He pointed out how less than 40% of India's GDP now emanated from irrigated agriculture, which uses something like 80% of the country's supply. "Allow trade of water into cities," he argued. "These entitlements show what you can do with what you have. It's a win-win situation, but it is blocked by implacable conservatism."

At a juncture when agriculture is getting a raw deal at the hands of the central and state governments, due to the liberalisation of this sector under the WTO and other reforms, this might prove to be the proverbial last straw. All reformers -- at home and abroad -- ought to be reminded that despite the country's high growth rates, six out of 10 Indians are still engaged in agriculture, which is in severe crisis. Farmers have been hit by high prices of inputs and falling prices of commodities on the international market (due to subsidies in industrial nations, among other factors). Their land is already being taken away for industrial and urban use -- without them being paid for it at market rates. Now "experts" are proposing that they sell their water as well?

InfoChange News & Features, February 2007