See editorial in April 2003 downtoearth.org via Making India Green

LAST FORTNIGHT, I wrote about the different models of water privatization. Questions continue to haunt me, but let me try and work towards some resolution. Firstly, there is the issue of pricing of water for the relatively rich of the developing world. It is evident that urban and industrial sectors in the developing world do not even begin to pay for the water they use; indeed, they misuse it in their toilets and factories. Therefore municipalities are bankrupt and this, along with all other inefficiencies, makes them lousy service providers. The private sector is, in this circumstance, given a messianic role, because good credit rating can bring in financial investment, those 'billions' needed to provide safe water for all.

The question, then, is the kind of contract that is signed between the private entity -- interested in profits -- and the public entity incapable of raising profits. Clearly it will be unfair. The municipality or local government will either see the private sector as the instrument to recover money from subsidized consumers, or simply see it as a way to provide some efficiency even as the government continues to subsidize its consumers and also pay the private sector its pound of flesh.

I would call this most-favored model back door privatization. Delhi has contracted multinational Degremont to run its water treatment plant. The city municipality recovers less than four per cent of the cost of water it supplies. But it will have to pay Degremont full costs, if not more. It cannot raise water tariffs because electoral politics will not allow it. The same opposition politicians (it does not matter of which party, since opposition is a stance in itself) who will make a song and dance about the unfair terms of Degremont -- quite correctly -- will also not allow a single paisa to be increased on water tariffs. They will definitely not allow the metering of water to take place so that large users can be billed accordingly.

All this is done in the name of the poor in this strangely 'socialist' country of ours. So, last month the key opposition party in Kolkata went on strike against the attempt of the state Marxist government to install water meters in each household. This, when all politicians realize that it is the rich, or at least the relatively rich, that guzzle water and that it is they who are being subsidized. The poor get a few bucketfuls; studies show clearly they pay much more for the little they use.

It is the same with industry. They, too, pay a pittance for profligate extraction. Therefore clearly, more than the issue of privatization, it is the issue of payment for water by the rich and relatively rich that must be resolved first.

Secondly, there is the issue of 'ownership' of the resource itself. Under existing law the state has full jurisdiction and control over water. It gives itself these rights to manage in the interests of all. But this also means that it can transfer, at will, certain rights over the resource in the interests of a few. This certainly creates problems for the privatization option because, then, something much more fundamental than contractors-at-work is involved.

Thirdly, there is the key issue of: safe water for whom? The private sector has no answers for the poor in the developing world. They are not markets. They are scattered. They cannot pay. Therefore anyone who argues for private sector involvement in the name of the rural poor is, putting it bluntly, a fraud. But worse, governments also do not care. It is the resource of the poor that gets appropriated -- surface water extracted and returned as sewage, or groundwater piped out and away -- from their villages and neighborhoods, exclusively for cities and industries.

Given all this, I would like to step beyond the Bushism of a 'with-privatisation-or-against-it' argument. I would certainly not argue that the private sector can solve the water problems of the world. But I would also not argue to exclude it in playing a role in water services.

But a contractor private sector can only work within the terms society sets for it. It cannot own the resource. It certainly cannot be its custodian. It can only be contracted to deliver water and take back sewage. Sewage must be included in all water contracts because this is the real and dirty business of water.

The private sector can also be asked to set the price and recover dues. But setting the tariff must be fully transparent about the full costs of treating and delivering water and waste. Governments that subsidize its middle-class electorate must not hide behind socialist rhetoric. I expect that, once some measure of the real price is paid for water and waste, this dependence on the private sector will also magically disappear. The public utility sector could become more, or at least equally, efficient as the private company as its returns on equity -- profits -- can be fully reinvested in the system.

In the water management framework, the issue of 'ownership' needs resolution. This is important. Not only because the rights of the poor must be safeguarded in present and future agreements. But also because, as the state and the private sector will not and cannot provide water for poor urban and rural communities, the rights of these communities to control and manage their natural asset must be secured.

Therefore, to my mind the real issue is about the governance and regulatory framework to secure the rights and access of all to clean water. It is about the right to life of all.

Let us not lose sight of this. Not even for an instant.