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River Inc

By Dr Sudhirendar Sharma

Following on Chhattisgarh's heels Kerala has been planning to give easy access to groundwater to private operators. And some 30 Indian cities are inviting bids for their municipal water supplies from a handful of multinational corporations specialising in water

How is it that water which is so useful that life is impossible without it, has such a low price, while diamonds, which are quite unnecessary, have such a high price? -- Adam Smith

As if in response to Adam Smith's question, Kailash Soni of Radius Water Ltd has been given a monopoly over the supply of water from a 23.6 km stretch of the river Sheonath in Chhattisgarh through a build-own-operate-transfer agreement with the state government. The government gets an assured income; industrial houses get an assured and reliable water supply; only the communities that have traditionally depended on the river waters for all their needs don't know where they stand. Close on Chhattisgarh's heels, Kerala plans to give easy access to private operators to exploit groundwater.

Already, some 30 cities in the states of Maharashtra, Karnataka, Andhra Pradesh and Rajasthan are inviting bids for their respective municipal water supplies from a handful of multinational corporations specialising in water. Tirupur town in Tamil Nadu and Hubli-Dharwad in Karnataka have moved closer to the privatisation of their water utilities. Delhi's water supply will soon be in the hands of Vivendi. The Ministry of Environment and Forests has estimated that $65 billion would be required in the water and wastewater sector over the next 10 years and has consequently urged the state governments to raise water tariffs every two years to become eligible for credit.

Since the 1992 Dublin Conference on the Environment, and the 2000 Hague World Water Forum, commodification and privatisation of the world's water has been presented as the only solution to universal access and environmental sustainability. World Bank officials argue that increased cost recovery and privatisation will actually expand access to clean water. They are not alone in arguing for privatisation. The multi-donor World Commission on Water for the 21st Century is convinced that 'if the poor have to survive they must buy water for their daily needs'.

Protagonists of privatisation contend that both the rural and urban poor are willing to pay higher fees in order to have a reliable supply of water. World Bank-sponsored studies indicate that the urban poor already pay five times the municipal rate for water in Abidjan, Cote d'Ivoire, 25 times more in Dhaka, Bangladesh, and 40 times more in Cairo, Egypt.

1.1 billion people, mostly in developing countries, lack access to adequate clean water. The global water industry, estimated to be worth US $7 trillion, is assured of profits for at least the next 25 years, during which time the number of people without access to potable water will move closer to an incredible 3 billion.

But privatisation critics say higher prices for water mean the poor have to use less or go without. In Ghana, for example, price increases have already forced many people to cut down water consumption drastically. Public health officials link such reduced access to increased health risks. In South Africa, enhanced water tariffs forced people in the Kwagulu-Natal region to consume polluted river water and the resultant cholera outbreak claimed some 32 lives in 1999. Cut off from municipal systems, the poor are forced to buy water from tankers and often get a diseased swill responsible for some 4 million deaths per year.

And how long can the poor sustain payments of increased tariffs? They might be paying so much that they can afford to buy cups of water to drink but not the 40 litres per day which is the minimum necessary to meet basic human needs.

Under a shrinking international aid environment, governments are finding it hard to raise the $31-35 billion that are needed annually to provide universal access to water. While recession, structural adjustment programmes and other problems have undermined the ability of local authorities the world over to provide their communities with safe and integrated public services, transnational companies have seized the initiative under a favourable donor environment. Leading water companies like Bechtel of the UK, Vivendi and Suez-Lyonnaise of France have made inroads into the developing world thanks to contracts won under international loans, in return for `tied aid' from their governments.

If the recent violent protests in Bolivia and the emerging opposition in Ghana are any indication, privatisation of water is being resented by civil society. Yet, there is no let-up as governments in developing countries succumb to donor pressure for facilitating privatisation of their water utilities.

This is not quite what the world had promised a decade ago at the historic Earth Summit in Rio de Janeiro. Northern governments have fallen short of their promise to contribute 0.7% of their gross national product (GNP) annually to bring the developing countries at par. According to OECD, official development assistance dipped to $53 billion in 2000, down from $69 billion in 1992. Far from being any closer to the 0.7% mark, actual aid spending as a share of GNP had slipped to a shocking 0.2% in 2000.

The World Bank and the International Monetary Fund (IMF) both pursue policies that open the floodgates for private investment in the water sector. With national co-financing of World Bank water projects already at its lowest -- 10% during the decade -- the Bank is demanding that governments 'slash spending, pull money out of circulation, and privatise public utilities'. The World Bank has been assertive in its campaign. Water privatisation is one of the many conditions that determine the extent of loans under the World Bank's Country Assistance Strategy. Paraguay is the latest victim of this revised strategy as the Bank suspended a $46 million loan for non-compliance with the stipulated conditions attached to the loan. However, for accepting its pre-condition to raise water tariffs by 95%, the World Bank approved a loan of $110 million to Ghana in July 2001. By doing so, the Bank has made its intentions clear -- ensure `full cost recovery', privatise public sector utilities…or else.

(Dr Sudhirendar Sharma is a water expert and columnist attached to the Delhi-based The Ecological Foundation. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.)

InfoChange News & Features, March 2003