Inordinate delay

By Nidhi Jamwal
Published: Saturday 31 January 2009

Maharashtra needs Rs 870 crore (Credit: Shripad Dharmadhikary) An excuse to privatize irrigation project

STARTED in 1984, the yet to be completed Nira Deoghar irrigation project in Maharashtra has run into rough weather. A recent judgement by the three-member water regulatory authority has put on hold the privatization of the project in Bhor taluka, Pune district.

Aimed at irrigating 45,000 hectares the project when conceived was to cost Rs 62 crore. By 2007, the state government had spent over Rs 450 crore on the project, which remained incomplete. Another Rs 870 crore was required to finish the project, claimed fresh official estimates. What remained was 5 per cent of dam construction and 164 km of canals. A water distribution network also had to be put in place. With state coffers drying up, Maharashtra needed an investment of Rs 36,630 crore to complete its over 1,200 incomplete projects.The government decided to seek private participation through an advertisement issued in September by the Maharashtra Krishna Valley Development Corporation (mkvdc), a state body.

The recent judgement forced the corporation to withdraw its advertisement on December 17. But the regulatory authority's order is in conflict with a government resolution, which allows private sector participation in such projects (see box Who calls the shots).

Who calls the shots?
Regulatory authority or the government resolution? The authority wants the resolution revised
Government resolution in 2003 Maharashtra water resources regulation Act, 2005
Private developers can make changes in the quantum of water to be made available to users Authority can determine water entitlements
Private developers can increase water tariff Only authority can determine revisions
Permits recovery of capital cost through water tariff Operations, maintenance recovery only
Ignores participation of water users association in planning and construction stage Stresses on such participation
Source MWRRA/Case No 1 of 2008/1717, November 10, 2008 order of MWRRA
In Nira Deoghar the role of the private player was to complete the construction of the dam, build canals and put in place a water distribution network. In return, the private player would be in control of the dam and its water.

After the advertisement was published, Prayas, a non-profit in Pune, sought the intervention of the Maharashtra Water Resources Regulatory Authority. In its petition in January 2008 Prayas challenged the advertisement and claimed it was issued without involving the authority, mandatory under the Maharashtra Water Resources Regulatory Authority Act, 2005. It also asked for the involvement of interested parties like water user associations, farmers and non-profits, which mkvdc dismissed.

"There is little transparency in such projects and the government lacks clarity. There is confusion whether to empower the regulatory body or limit its role," said Sachin Warghade, research associate at Prayas. But he is happy as the response to the petition was positive.

The regulatory authority conducted a hearing and ordered mkvdc to withdraw the advertisement and not to re-advertise until the 2003 resolution was revised. mkvdc officials argued that their actions conformed to the existing law. "The eoi (expression of interest) advertisement should be considered as a short tender notice where only mkvdc is involved... eoi advertisement is supposed to be altered/modified... the final bid document will be free from all ambiguities," read the written report submitted to the authority.

The report added that since the project received administrative approval in 1984, it should not be considered a new project and kept out of the authority's purview. The authority countered the corporation's view and said there was need for a fresh economic review especially in the light of a new factor--the private developer, who would bear costs and secure benefits. This may impact the project, including water tariffs, the authority said.

The authority was correct in pointing out water tariffs may increase, said Warghade. "The company would like to recover the money it invests in the project and earn profits out of it. Increased tariff will directly impact farmers. Such a revenue model needs to be scrutinized before approval," he added.

Why privatization
The state government came up with a State Water Policy in 2003 where it sought the participation of the private sector to finish incomplete projects. The resolution laid down guidelines for private sector participation on a build-operate-transfer basis.

According to state records, as of March 2007, there were 1,246 incomplete projects.

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