The true cost of water

By Sunita Narain
Published: Tuesday 15 April 2003

Excessive heat and little light is how I would describe discussions on 'privatisation' of water. Protagonists say this is the magic bullet that will deliver safe water for all. Antagonists insist the private sector is interested only in profit, not in public good. Their claim that "Ganga is being sold to multinationals" evokes outrage.

So where does the truth -- if there is anything of the kind left -- lie?

Take the Ganga case. A French multinational, Degremont, has been awarded a contract by the Delhi Jal Board, a state-owned water authority, to treat raw water for supply to Delhi's residents. This water will come from the river Ganga. At tremendous cost: pipelines will be laid over long distances to meet the water guzzling city's needs. The cost of building the pipelines and transporting water remains with the state. But as a company will build and run the water treatment facility, it becomes a privatisation model. In this build-own-operate scheme, the state still sets tariffs, collects revenues and overall manages water services.

In the second model, the responsibility shifts to the private entity. The state plays, at best, a regulatory role. The problem arises when the 'entity' sets tariffs -- to pay for operating costs and to rake in profits -- for a service like water, in rich and not so rich cities of the developing world. For instance, in Metro-Manila, in Philippines, a successful privatisation venture has run into trouble. Water multinational Suez SA has run into local politics, which is blocking its moves to increase the rates that its local franchise could charge consumers. Water is a business and if not profitable, the company moves out. Even so, the state technically remains custodian of the resource.

In the third model, 'ownership' shifts to private enterprise. This is the river-leasing model, so much in the news lately. The Chhattisgarh government has entered into a contract with a private company to invest in a barrage on the Sheonath river and provide water to the local industrial estate. In this build-own-operate contract, activists allege that a 23-km stretch of the river has been leased to the company for 22 years. Contract details are unclear, but people's access to this stretch has been reportedly curtailed. This is not an entirely new approach. In other parts of the country, small stretches of rivers have been leased to specific industries as their water sources.

The fourth model is more unregulated. Here the water resource is free for all. An example is the use of groundwater by bottled water or beverage companies. Under the existing legal framework, companies can simply bore a hole in the ground, extract water and make profits. Nothing extraordinary, you could say. All industries, institutions, house-owners and farmers that consume groundwater are part of this 'private' army of users. Of course, the use of this free resource by a superbrat profitable company -- national or multinational -- cannot be equated with say, a sugarcane farmer, rich or poor.

Is 'privatisation', then, a solution or a disaster? Before this, let us understand why privatisation is happening at all. Is it only because the World Bank and water companies want to 'commodify' water and push water-services in our part of the world? These agencies clearly smell lucre. We have dirty and scarce water, incompetent and bankrupt municipal agencies and growing populations. Our desperate need for clean water provides a fantastic business opportunity and grist to their greed.

But I would argue that it is the rich and middle classes of developing countries that are actually responsible for the privatisation of water. I would, in fact, go so far as to argue that water scarcity and pollution are the outcome of the fact that water has for too long been considered a free good. A free good that benefits not the poor, but the relatively rich of the developing world.

For the poor, there is no free lunch. They pay -- through their labour or with cash -- for the meagre stinking water they get. In truth, they pay for it through worsening health. The relatively rich, in stark contrast, are grossly subsidised. Take Delhi. It costs the city public utility between Rs 9-10 per 1000 litres to treat and distribute water in the city. Its citizens pay 0.35 paise per 1000 litres -- less than 4 per cent of the cost. Bangalore citizens pay the most: Rs 5 for 1000 litres. But their water cost is Rs 40 for the same quantity, so they pay 12 per cent of the cost. Compare this to bottled water, where we pay Rs 10 for each litre for the clean water.

But this is only half the story. The main cost is not in providing clean water, but in taking back the flushed dirty water in the sewage systems and treating it before discharging it into rivers. We know that sewage and drainage costs can be as high as 5-6 times more than the cost of water supply. And with increasing chemical pollution, water treatment costs are only going to increase. Urban populations do not even think about this, let alone pay. Therefore, literally, they are subsidised to defecate in convenience. India treats less than 3 per cent of the sewage it generates. No wonder we have massive water pollution problems.

Let us be clear. Privatisation or no, the subsidised middle class of the developing world cannot and will not pay the true costs of water and sewage. Therefore, is the issue more about the re-appropriation of this natural monopoly by the poor, and not about privatisation per se? Is the private sector the devil? Or the state? Or both?

I will continue this discussion.

-- Sunita Narain

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