Can Sheila Dikshit make a success of water supply outsourcing?

Spurred by the success of power distribution privatisation in Delhi (check this), the Sheila Dikshit government is looking seriously at privatisation of water distribution also. Now, whether it does good to the city or not, the political opposition has necessarily to oppose it, and it is in that context that the North Delhi Mayor Ms Meera Aggarwal (of the BJP) has stated, in her recent letter to Lieutenant Governor Tejinder Khanna, that 'water supply should be transferred back to the newly created three municipal bodies in the Capital in accordance with the 74th Constitutional Amendment, which talks about giving more powers to local bodies (for the full report in Zee News, click here)'.

She went on to add that

'it was on the assumption that MCD could not manage water supply properly, that it was taken over by Delhi Government in 1998. If privatisation had been the remedy, MCD could have done that itself'. She also added that 'if water distribution is privatised, then sewerage system would also go into private hands, as both complement each other; disposal of waste water system is part of the supply of the water and that cannot be separated; the result is that with the privatisation of water supply, sewerage would also go the private parties automatically. The irony is that in 1998, Delhi Jal Board was established through Delhi Water Board Act, vide which Water Distribution system and the sewerage system had been taken away from the MCD. Delhi Fire Service had already been taken away much before. In 2010, Slum and JJ Department was also taken away from the MCD'.

The letter also 'demanded that Delhi Fire Service and Slum and JJ Department be also re-transferred to the local bodies'.

Now, power supply had been crumbling in cities, and, through its privatisation exercise, the Sheila Dikshit government has more or less provided the solution to the problem, at least as far as cities are concerned. Admittedly, Delhi is not the first city to have privatised power supply; but, it is clearly the largest and most successful privatisation exercise undertaken in recent times. As such, it now provides a road map for other cities that may want to follow suit, the benefits of doing so being considerable (check the blog linked above).

Water supply privatisation however is a far trickier area. To begin with, the term 'privatisation' is not quite appropriate here, since there is a limit to the availability of the good, and, only what is made available to the service provider, can he undertake to supply. As such, the correct terminology applicable would be 'outsourcing'.

It is perhaps true that most water-supply upgradation schemes tried out in the past (not in India) had ended up in total privatisation, and, driven by the short-term profit maximising objective of the service providers, taking advantage of the 'natural monopoly' nature of the service, led to unfair cost escalations. But, the reasons for the municipalities not wanting to continue providing the service by themselves, in the first place, hadn't disappeared at all. Not quite appreciating this, some municipalities had apparently reverted to undertaking it themselves, and are now inevitably set to re-invent the wheel, after putting the citizens to a lot of hardships, in the process (for more on that, click here)

The only large scale upgradation and supply outsourcing contract attempted so far in the country has been in Mysore, involving JUSCO (Jamshedpur Utilities and Supplies Co Ltd), a TATA company. And, their impending withdrawal now, after more or less burning their fingers, has not helped the cause any. There was of course a powerful vested interest lobby working there day and night to sabotage the job (check here), quite like there was in Delhi also when the power distribution privatisation job was going on. But, whereas the TATA's and Reliance deployed all the resources at their commend to counter them in Delhi, the TATA's (JUSCO) approach, in the case of the Mysore Water supply contract, somehow seemed lackadaisical, even from the very beginning. The contract was essentially an upgradation and supply management one over a 6-yr period. Even if they found they were going be suffering losses, had they done a fairly professional job, they could have pulled out at the end of it all with their heads held high. Unfortunately however the impression going around is that they were 'kicked out', much to the glee of the vested interest lobbyists, who are of course the ones projecting it that way. Either way, TATA's have suffered a huge loss of face there.

Another mistake that JUSCO possibly made was in offering to provide for 24 X 7 supply. The major advantage of the 24 X 7 pressurised system apparently is that you can avoid the individual sumps and overhead tanks, since, even when regulated, there will be a definite pattern of flow. However, that kind of pre-supposes a perennial source of water, like in the case of the snow-melt fed rivers in Europe and the US. In South India, however, with our being largely dependent on some three months of rainfall between June and August, the drawal from the source (reservoirs) will have to be regulated, and even cut off, if the water levels drop below certain critical levels. As such, the idea of 24 X 7 supply seemed illogical, even to begin with. Even in Delhi, even though it may have snow-melt fed Yamuna flowing by, I doubt a 24 X 7 system will work, since the Yamuna is already terribly over-exploited.

All of the above do not detract from the fact that we need efficient water supply, as also sewerage management, fire services, slum rehabilitation/ management, etc, and going by the spirit of the 74th amendment, whoever is providing these services needs to be accountable to the urban local bodies (ULB's). That however does not mean that the ULB's should be running these themselves, since it is not just these services, but there are many more, and no ULB anywhere in the world can pool in the kind of capacity to manage all of them by itself. And, that's where outsourcing comes in, and for efficiency, you need professional private players, like the Delhi power supply privatisation job has very clearly shown. And, the ULB's have to learn to team up with the Delhi government to manage the jobs since the jurisdiction will very often extend beyond the ELB's limits.

From the no-nonsense way Madame Shiela Dikshit went about handling the power supply privatisation job, one feels confident that she can do a similar job of water supply outsourcing too. It is just as well, since water is too precious a resource to be left to ever-bungling ways of the government service providers.

Muralidhar Rao