Water Privatization 5

Topics: Water, Water resources, Drinking water Pages: 23 (8423 words) Published: February 14, 2009
Water privatization

Water privatization involves transferring of water control and/or water management services to private companies. The water management service may include collection, purification, distribution of water and waste water treatment in a community.

Traditionally this service has been provided by the local governmental infrastructure such as the municipality and local city council. The pro privatization lobby including water corporations, the World Bank and IMF has aggressively campaigned for water privatization on the grounds that, while water subsidies promote wasteful practices, commodification of water should allow market forces (supply and demand)to set the water tariff, which in turn will reduce water consumption and promote water conservation. Furthermore, it is argued that opening this sector to private providers will bring in badly needed capital for upgrading and development of infrastructure. There are several models of water privatization that are currently in vogue in different parts of the world (Citizens Network, 2003).Depending on the degree of privatization, these models can be broadly categorized into:

Service Contracts – In this model, public authority retains overall responsibility for the operation and maintenance of the system, and contracts out specific components. service contracts last 1-3 years and include services such as meter reading, billing and maintenance. While public ownership is maintained and community accountability structures remain in place, the transparency of operation can be limited. Contracts are often not openly negotiated and regulation and oversight is usually lacking.

(Design), Build, Operate, Own and Transfer or (D)BOOT- this model of privatization is usually used for system infrastructure development such as water treatment plans that require significant finance. The private operator is required to finance, construct, operate and maintain the facility for a specific period of time (usually more than 20 years). At the end of the term the infrastructure may turned over to the municipality or the contract is renewed. This model is more prevalent in developing countries. Examples of (D)BOOT include Tiruppur Project in Tamil Nadu India and Cochabamba experience in Bolivia.

Divestiture- in this model, the government or public authority awards full ownership and responsibility of the water system including the water source to a private operator under a regulatory regime. This is also done in the form of 10-20 year renewable contracts on the entire system. The government moves operation to private hands thus improving efficiency. Competition is limited through the process of bids on the divestiture. The private sector firm is than expected to take the risks and recoup investment/profits. This model cedes tremendous power over an essential resource to corporations. Examples of divestiture include the Rasmada scheme, under which a 22-year lease over a stretch of the Shivnath River in Chattisgarh was accorded to Radius Water, Inc.

Water privatization has been recommended by the Indian Government’s national water policy (National Water, 2002) to address the issue of water scarcity. In its article 13 titled, “Private sector participation” the policy says that “private sector participation should be encouraged in planning, development and management of water resources projects for diverse uses, wherever feasible”. This has placed water privatization at the forefront of developmental policies implemented by several state governments (Ghotge, 2002).while the policy is silent on the kinds of privatization models that will be adopted as can be seen from the case studies below, most of the privatization that has been done in India follows the (D)BOOT model. The national water policy also encourages interlinking of rivers to improve water availability in water scarce areas (interlinking, 2005).the proposed river linking scheme has water privatization at its heart...
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