ANALYZING THE IMPLICATIONS OF

WATER PRIVATIZATION: REORIENTING

THE MISPLACED DEBATE
Pankti Vora, Maneka Khanna & Arthad Kurlekar*
The recent public outcry against the Delhi Jal Board’s proposed public-
private partnership model has rekindled the contentious debate around wa-
ter privatization and its impact on the urban poor. Several grass root level
organisations and activists have coalesced to form the Water Privatization-
Commercialization Committee that is actively opposing the project under
the patronage of Retired Justice Rajinder Sachar. In this context, this pa-
per seeks to explore the implications of privatization in the financing and
management of water supply systems. While it concurs with much of the
criticism that has been raised against privatization, it argues that this fail-
ure of privatization is actually a reflection of the ‘governance crisis’ in the
Indian water sector. By undertaking a detailed examination of the reasons
for the inherent failure, it concludes that the focus of the current reforms
in the water sector must be directed at establishing a foundation of ‘good
governance’, which is imperative to set the stage for a successful process of
privatization in India. In this regard, it proposes certain basic, but signifi-
cant institutional reforms that must be factored into the urban water supply
structure to ensure efficiency of the operator, whether public or private.

I.  INTRODUCTION
The last few decades have witnessed a transformation in the ori-
entation of policy agendas, as state-led practices in public utility provision have
been met with increasing discredit, and an emphasis has been placed on pri-
vate sector involvement.1 As a part of this trend, privatization has become a
cornerstone of the broader reform agenda. In India, a gradual retraction of the
state and promotion of private player participation has been a facet of the neo-
liberal agenda that was triggered in the 1990’s. Public utilities such as electric-
ity boards, the power sector, water supply systems, and the heath care sector
have been subject to institutional transformation as a part of this ongoing trend
of privatization.

*
3rd, 3rd & 2nd year students respectively, The W.B. National University of Juridical Sciences,
Kolkata. We would like to express our sincere gratitude to Mr. Saurabh Bhattacharjee,
Assistant Professor, NUJS, for his valuable suggestions and guidance while writing this paper.
We are solely responsible for any shortcomings in this paper.
1
Karen Bakker, A Political Ecology of Water Privatization, 70 Studies In Political Economy 6
(2003).
148 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
The policy of privatization of water, though presently in its in-
fancy, is not entirely new to the Indian water sector. The National Water Policy,
2002, explicitly encouraged private-sector participation in the planning, devel-
opment and management of water resources, wherever feasible. It envisaged
private player involvement to introduce innovative ideas, generate financial
resources, introduce corporate management, and improve service efficiency
and accountability.2 A number of pilot projects were launched in an attempt to
engage private players in both the rural and urban water sectors. The case of
the Sheonath river, where the Chhattisgarh government handed over a stretch
of the river to a private company to manage water distribution, has been par-
ticularly significant, albeit much condemned.3 Apart from this, municipalities
of many cities have employed public-private partnerships, where the private
player is in charge of operation, management and distribution improvement.
Important projects include the Tirupur project (to build, operate and charge
for water supply); the Hubli-Dharwad project that aims at 24x7 water supply
for residents; the Khandwa project in Hyderabad and most recently, the Delhi
Jal Board (‘DJB’) public-private partnership model. Most recently, the Draft
National Water Policy, 2012 encourages the engagement of private companies
as service providers for water distribution.4

The focus of this paper is on investigating the impact of privatiza-

tion of urban water services, particularly with regard to the impoverished and
more vulnerable sections of society. Significant parts of the world are at the
brink of facing an urban water crisis, where with growing urbanization, large
sections of the urban poor are deprived of access to ‘adequate and safe’ drink-
ing water. While rural areas in India too have had some experiences of private
player involvement, the scope of this paper is limited to urban areas, as private
sector participation in India has had an urban bias.

This paper is divided into two parts. The first part explores the
implications of privatization of water supply in India, with particular reference
to access to the urban poor. It begins by laying down the primary arguments
that have been raised in favour of private sector involvement. Subsequently,
we build up a case against privatization and aim to prove its failure in improv-
ing access to the urban poor. On a detailed analysis of the underlying reasons
for such failure of privatization, we conclude that the problem does not lie in
privatization itself, but in the manner of its implementation in developing coun-
tries. Therefore, in the second part of this paper we argue that the failure of

2
Government of India, Ministry of Water Resources, National Water Policy, April 1, 2002,

available at http://wrmin.nic.in/writereaddata/linkimages/nwp20025617515534.pdf (Last vis-
ited on June 3, 2013).
3
Binayak Das & Ganesh Pangare, In Chhattisgarh a River becomes Private Property, 41(7)

PW 611 (2006).
E
4
Government of India Ministry of Water Resources, Draft National Water Policy, 2012, June

2012, available online at http://mowr.gov.in/writereaddata/linkimages/DraftNWP2012_
English9353289094.pdf (Last visited on June 5, 2013).

January - March, 2013

 IMPLICATIONS OF WATER PRIVATIZATION 149

privatization points to broader issues of governance of the Indian urban water
sector, and seek to propose certain institutional changes in this regard. Hence
we attempt to debunk the traditional opposition to privatization, but do not
endorse it as a mode of water management. We argue that it is the restructuring
of the governance mechanism that will ensure both sustainable and equitable
water supply, whether public or private.

II. LEGAL FRAMEWORK GOVERNING URBAN

 
DOMESTIC WATER SUPPLY IN INDIA
Water is placed in state list in Schedule VII of the Constitution
of India; thereby giving each state government the prerogative to establish its
own system of water supply.5 Due to the absence of a common body of govern-
ing principles, every state has distinct laws, leading to systems of water supply
across states lacking comprehensiveness and compatibility.6 Water policy is
also influenced by the central government through less formal mechanisms,
such as the formulation of National Water Policies and ‘Model Laws’. More
importantly, the Centre is able to significantly influence water policy in tar-
geted states by ensuring water supply systems envisaged in schemes such as
the Jawaharlal Nehru National Urban Renewal Mission (‘JNNURM’) are im-
plemented, by the provision of central funds for the same.7

Through the 73rd and 74th Constitutional Amendment Acts, the

ultimate responsibility of water supply has been devolved to the elected local
bodies, in keeping with the trend of decentralization in recent water sector re-
forms.8 While the states lay down the legislative framework for water supply,
the management of the system is carried out by the municipalities. Broadly
speaking, urban water supply across India works on a twofold mechanism: first,
urban dwellers having individual piped connections are provided water by a
networked water supply system, that is metered or charged by varying mecha-
nisms; and second, the municipalities set up community standposts or hand
pumps in different areas that are free and an open resource for the public.9
5
Constitution of India, 1950, Schedule VII, List-II, Entry 17.

6
K. J. Joy & Suhas Paranjape, Water Use: Legal and Institutional Framework in Wate and the

r
a in ndia 238 (2009).
L
ws
I
7
Philli ullet, Wate a Pove ty nd evelo ment- Wate Secto R efo m n ndia

p
C
r
L
w
r
A
D
p
r
r
r
s
I
I
54 (2009) (The Center provides 80% funding for schemes such as the JNNURM and the
UIDSSMT and hence secures implementation of them. The example of Khandwa Water
Project in Madhya Pradesh shows how implementation of the UIDSSMT was instrumental
in bringing privatization to the region); See also Manthan Adhyayan Kendra, A Case Study of
Khandwa Water Supply Augmentation Project, May 2011, available at http://www.manthan-
india.org/IMG/pdf/Khandwa_Case_Study_Part_I_Final_Version_May_2011.pdf (Last vis-
ited on November 23, 2012).
8
Priya Sangameswaran & Roopa Madhav, Institutional Reforms for Water in Wate a

r
L
w
fo the enty i t entu y 145 (Phillip Cullet, Alix Gualtieri, Roopa Madhav & Usha
r
T
w
F
rs
C
r
Ramanathan ed., 2010).
9
Cullet, supra note 7, 144.

January - March, 2013
150 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
In this current framework, since the ultimate management of the
system is in the hands of the local bodies, it is at this level that the private play-
ers get involved. However, the level and scale of private involvement differs, as
‘privatization’ encompasses a spectrum of contractual arrangements between
the government and the private sector depending on the legal and regulatory
framework and the degree of control with the state.

Private sector involvement ranges from service contracts- where

the local body merely contracts out certain functions to a private body- to full-
fledged divestiture, wherein the ownership is given to the private player.10 The
most common models of privatization are public-private partnerships (‘PPP’),
such as management or concession agreements.11 In such arrangements the pri-
vate party undertakes operation and maintenance of the water supply network,
and the assets are owned by the public entity, however, in each model, the level
of investment of the private player and risk undertaken vary.12 The Report of
the Working Group on Urban and Industrial Water Supply and Sanitation for
the 12th Plan that has been submitted to the Planning Commission (‘12th Plan
Report’) recommends employing technical and administrative proficiency for
projects dealing with improvement of distribution of water supply.13

PART A: IMPLICATIONS OF PRIVATIZATION OF

WATER SUPPLY

III. WHY PRIVATIZE?: THE CASE FOR URBAN

 
WATER PRIVATIZATION
For most of the 20th century, collective wisdom in public policy
affirmed water management to be a tool for the social legitimization of the
state.14 Water was considered a strategic resource having public health benefits

10
Jessica Budds & Gordon McGranahan, Are the Debates on Water Privatization Missing

the Point? Experiences from Africa, Asia and Latin America, 15(2) nvi onment and
E
r
banization 4 (2003).
U
r
11
Id.

12
See Amit Bhaduri & Arvind Kejriwal, Urban Water Supply: Reforming the Reformers, 40(53)

PW 5543 (2005) (The Tirupur Water Supply and Sewerage Project in Tamil Nadu is a full
E
concession agreement, while the proposed projects of Hubli Dharwad and DJB are manage-
ment contracts for rehabilitation of network for first few years, followed by operation and
management for 10-15 years. In concession agreements, the investment comes from the pri-
vate player; while in the case of management contracts, the private players get an annual fee
for undertaking the supply).
13
Steering Group on Water Sector, Planning Commission of India, Report of the Working Group

on Urban and Industrial Water Supply and Sanitation for the 12th Five Year Plan, November,
2011, available at http://planningcommission.nic.in/aboutus/committee/wrkgrp12/wr/wg_
indu_sani.pdf (Last visited on June 1, 2013).
14
Bakker, supra note 1, 6.

January - March, 2013
 IMPLICATIONS OF WATER PRIVATIZATION 151

and enormous impact on the environment. Hence, there was widespread con-
sensus regarding the suitability of the state to be in charge of water and sewer-
age provisions.15 However, closer to the end of the century, countries across the
globe started facing acute water crisis, and concerns were raised regarding the
efficiency of public utilities. This concept of state failure emphasizes the flawed
management by the state due to structural defects of the public sector system.
Critics of the public model argued that involvement of the private sector would
solve the many failures plaguing water and sanitation utilities and address the
urgency of the emerging water crisis.

Privatization of water services has been seen as a panacea for

the problems of government run supply systems, namely, inefficiency, corrup-
tion, lack of finance and infrastructure and tremendous wastage. Proponents
of privatization argue that it brings in the much needed finance and investment
for rehabilitating existing networks and extending infrastructure and services
to those who did not have access before.16 Private players are seen as more ef-
ficient and accountable to consumer needs, curing the problem of maladmin-
istration of municipal agencies.17 Most importantly, privatization strikes at the
primary problem of state-run networks, which is the under-pricing of water,
leading to wastage and excessive leakage by consumers. Hence privatization
allows for the transferring of costs to consumers, thereby reducing the losses
of the supply system. The underlying assumption is that the market is more ef-
ficient than the state at providing basic services.

It is crucial here to elaborate upon the rationale expressed by

International Financial Institutions (‘IFIs’) supporting private sector involve-
ment. Institutions such as the World Bank and International Monetary Fund
(‘IMF’) find favour in privatization as it introduces a new paradigm of market
pricing using a ‘full-cost recovery’ approach, which in turns promotes sustain-
able use.18 Such an approach is essential, according to these international fund-
ing agencies, to make consumers realize that water has a cost and its supply is
not unlimited.19 Privatization is hence a mechanism to facilitate end-consumer
conservation, leading to sustainability and economic efficiency of the resource.
15
Gordon McGranahan & Davis Satterthwaite, Governance and Getting the Private Sector to

Provide Better Water and Sanitation Services to the Urban Poor, 2006, available at http://
pubs.iied.org/pdfs/10528IIED.pdf (Last visited on February 3, 2013).
16
aude a lo & ony la ke, lue Gold: he i ht to Sto the o o ate heft of the

M
B
r
w
T
C
r
B
T
F
g
p
C
rp
r
T
Wo ld’ Wate 11 (2003).
r
s
r
17
Amitabh Kundu & Sandeep Thakur, Access to Drinking Water in Urban India: An Analysis of

Emerging Spatial Pattern in the Context of New System of Governance in ana in Wate
M
g
g
r
R e ou ce - Policie , n titution nd echnolo ie 150 (Ratna Reddy & S. Mahendra Dev
s
r
s
s
I
s
s
A
T
g
s
ed., 2006).
18
James Winpenny, Report of the World Panel on Financing Water Infrastructure, March 2003,

available at http://www.unwater.org/downloads/FinPanRep_MainRep.pdf (Last visited on
February 3, 2013).
19
Matthias Finger, The New Water Paradigm: The Privatization of Governance and

Instrumentalization by the State in he u ine of Global nvi onmental Gove nance 284
T
B
s
ss
E
r
r
(David Levy & Peter J Newell ed., 2005).

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IV. THE CASE AGAINST PRIVATIZATION:

 
IMPACT ON THE URBAN POOR

A. IMPACT ON LOW INCOME HOUSEHOLDS

As discussed earlier, the framework of water supply in urban
India is twofold- first, networked water supply through pipelines and second,
sources of free water like public standposts, etc. In this section, we aim to in-
vestigate the implications of privatized water supply on the urban population
linked to the piped network supply.

1. Tariff hikes

Privatization of water is invariably fraught with an increase in
tariffs and hence, an exorbitant burden is placed on the urban poor who are un-
able to cope with the increased price level. This lies at the heart of the debate on
the impact of privatization on the poor and has been the subject of considerable
debate in the past few decades. We assert that privatization of water utilities
will lead to increased cost, whether through a reworking of allocation prin-
ciples (from social equity to economic equity); change in infrastructure goals
(from security of supply to economic pricing) or through a similar redefinition
of the principles underlying water supply.

In order to assess the impact of privatization on the price of water,

it is important to comprehend the ideological direction and basic strategy un-
derlying the trend of privatization. The major justification behind involving pri-
vate-players is the need for improved efficiency and financial sustainability.20
IFIs such as the World Bank and Asian Development Bank, stress that water is
an increasingly scarce resource that requires a financially efficient allocation
mechanism that only the market can provide.21 Hence, privatization is firmly
grounded on principles of full-cost recovery or economic pricing22 as opposed
to most public network suppliers that often recover only partial costs of water
supply. Espousal of such principles of full-cost recovery shall inevitably lead
to an increase in consumer prices of water. The ‘water wars’ in Bolivia stand
as the most drastic example of price increases and consequent deprivation for
20
akke , P ivatizin Wate : Gove nance ailu e
a en nd he Wo ld’ ban Wate

K
r
B
r
r
g
r
r
F
r
A
T
r
s
U
r
r
72 (2010).
i i
C
r
s
s
21
This has been constantly reflected in policy documents regarding reforms of water supply

issued by the World Bank. See, e.g., Alexander McPhail, Alain R. Locussol & Chris Perry,
Achieving Financial Sustainability and Recovering Costs in Bank Financed Water Supply and
Sanitation and Irrigation Projects, June, 2012, available at water.worldbank.org/sites/water.
worldbank.org/files/publication/financial-sustainability-recovering-costs-water-projects_0.
pdf (Last visited on February 3, 2013).
22
These requirements mean that user fees paid by water consumers must cover all water system

costs, which usually include the costs of operation, maintenance and capital expenditure, and
sometimes the cost of servicing past utility company debt.

January - March, 2013

 IMPLICATIONS OF WATER PRIVATIZATION 153

large sections of the poor, with prices hiked to 200-300% within the first few
weeks of private operation.23

Further, an increase in price levels is unavoidable due to the profit

motive that is inherent in any private enterprise. In many cases private com-
panies get profits written into their contracts.24 Before investing in any project
for water supply, private companies will always ensure that their investment is
recouped with a satisfactory profit margin.25

Many promoters of privatization have raised arguments that in

certain models of privatization (particularly in most Indian examples ), the tar-
iff structure is controlled by the municipal bodies, wherein only certain specific
tasks of operation and management are contracted out to private companies.
Hence, the impact of privatization on prices is argued to be diluted. However,
we argue, that even in such models of privatization, an increase in tariff is una-
voidable. Firstly, in most of these cases, the government increases consumer
prices prior to privatization in order to attract the private sector and make the
investment appear more profitable.26 Water supply in developing countries is
not always considered a profitable enterprise; hence in order to lure investor
interest, governments deliberately hike tariffs, so as to minimize the risk for
the private player. This may be seen in the case of the DJB project.27 In this
public-private model, the domestic municipal board had the authority to es-
tablish tariff structures. However, just preceding privatization, consumers in
Delhi witnessed a 10% annual increase in prices.28 Also, experience suggests
23
Such price rise has been seen in almost all major privatization efforts in developing coun-

tries. In 1999 the Bolivian government granted a 40-year contract to Aguas de Tunar. Weeks
after the private company was fully operational, prices of water hiked to 200-300%. Further,
the World Bank stipulated no public subsidies must be given to ameliorate increase in wa-
ter tariffs. Water became completely unaffordable for large sections of the population, and
there were massive protests. The gravity of these incidents led to the infamous ‘water wars’.
While this may be seen as the most drastic form of price increase, it stands to tell the tale of
escalating prices as a corollary to privatization. See generally A. Nickson & C. Vargas, The
Limitations of Water Regulation: The Failure of the Cochabamba Concession in Bolivia, 21(1)
ulletin of atin me ican R e ea ch (2002).
B
L
A
r
s
r
24
Miloon Kothari, United Nations Special Rapporteur on Adequate Housing, Privatising

Human Rights: The Impact of Globalization on Adequate Housing, Water and Sanitation,
available at http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan010131.pdf
(Last visited on February 1, 2013).
25
Kate Bayliss, Privatization and Poverty: The Distributional Impact of Utility Privatization

(Centre on Regulation and Competition, Manchester University, Working Paper No. 16, 2002).
26
This was the case in the privatisation of water in Buenos Aires and was further emulated in the

Manila water privatisation. See Kate Bayliss, id.
27
Water Privatization and Commercialization Resistance Committee, Privatization of Water

Services: Myth and Reality, available at http://www.indiawaterportal.org/sites/indiawaterpor-
tal.org/files/privatization_of_water_services-myth_and_reality-wpcrc-2012.pdf (Last visited
on February 19, 2013).
28
See Sujith Koonan & Preeti Samat, Delhi Water Supply Reforms: Public-Private Partnerships

or Privatisation?, 47(17) PW (2012) (In this project, the municipal bodies lent assurance
E
to citizens that prices would not be hiked after the water sector reforms were undertaken.
However facts reveal a different picture- Since 2009 the water tariffs in concerned areas have

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154 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
that even if tariff setting is the prerogative of the public body in theory, con-
tracts are often structured such that other decisions that directly impinge on
the tariff-setting process are in hands of the private entity, and there is nominal
autonomy over the tariff setting process.29

This represents a base for subsidies that are strictly targeted at

the vulnerable sections, to ensure equity in water pricing.30 Water subsidies
and cross-subsidies31 are commonly incorporated into water tariff structures
in public utilities.32 However, the present forms of privatization see water as
an economic good and mandate full-cost pricing, according to which consum-
ers must pay for what they use.33 Advocates of privatization (particularly in-
ternational funding agencies) are averse to subsidies as they create imperfect
markets that lead to the distortion of water as an economic good.34 Private
companies do not favour cross-subsidies as they prefer not ‘overcharging’ their
‘best’ consumers.35 Hence, through the course of implementation, privatization
has been unable to internalize social equity principles.

2. Disconnections

With increasing water prices, large sections of the urban poor are
unable to cope with such price levels. The policy of privatization mandates that
water be provided only to those who are financially capable of paying for it. In
case of non-payment, private companies resort to large scale disconnections to
forestall any losses in their investment.36

been raised annually (a) Residential from Rs 5 to Rs 7.19 per m3, (b) Mixed from Rs 5 to Rs
14.32 per m3, (c) Commercial from Rs 34 to Rs 41.76 per m3, (d) Government institutions from
Rs 33 to Rs 41.76 per m3. The total increase is from Rs 19.17 to Rs 26.26 for 32,148 connec-
tions. The DJB revenue increase from 2009-10 to 2010-11 is from Rs 6.812 crore to Rs 13.632
crore. Clearly, prior efforts were made to make sure that the tariff structure is high enough to
bear the operator’s fee).
29
Sangameswaran & Madhav, supra note 8, 148.

30
Kundu & Thakur, supra note 17.

31
Cross-subsidies are essentially when users who have the capacity to pay are charged higher

prices and this allows the utility to subsidise those who cannot pay the full price. Hence, using
social equity principles, water is made accessible to economically weaker sections of society.
32
Budds & McGranahan, supra note 10.

33
Bakker, supra note 20, 36.

34
Gau av ivedi, P ublic-P ivate Pa tne hi in Wate Secto : Pa tne hi o

r
D
w
r
r
rs
ps
r
r
r
rs
ps
r
P ivati ation? 26 (2010).
r
s
35
Id.

36
For instance, in Guinea, privatization resulted in severance of a third of the total connec-

tions in urban areas as a result of nonpayment. See John Nellis, Privatization in Africa:
What has Happened? What is to be Done?, October 2005, available at http://policydialogue.
org/files/publications/PrivitizationAfrica_Nellis.pdf (Last visited on February 3, 2013). In
India, the Asian Development Bank imposed a water supply disconnection policy and in-
creased water tariffs in Rajasthan and Karnataka. See Asian Development Bank, Rajasthan
Urban Infrastructure Development Project No 29120, Report and Recommendation of the
President to the Board of Directors, 1998, available at http://www.adb.org/sites/default/files/
projdocs/1998/rrp-R18998c1.pdf (Last visited on July 5, 2013) & Asian Development Bank,

January - March, 2013

 IMPLICATIONS OF WATER PRIVATIZATION 155

Such disconnections are a significant violation of the right to wa-
ter, particularly in the context of the rights based approach to water. General
Comment 15 (‘GC-15’) of the International Covenant of Economic, Social and
Cultural Rights (‘ICESCR’), that envisages the normative content of the right
to water, vests in every individual the ‘right to be free from arbitrary discon-
nections’.37 Further, while mandating economic accessibility to water, GC-15
stipulates that “the charges associated with securing water must be affordable
for all, and must not compromise or threaten the realization of the Right.”38
Such an embodiment of the right is reaffirmed in another Report of the High
Commissioner on Human Rights39 that provides for procedural safeguards in
cases of disconnections.

We argue the policy of complete disconnections espoused by pri-

vate players in light of inability of the poor to pay, is a grave violation of the
right to water on two counts. First, by adopting principles of full-cost recovery
and prioritizing profits, privatization pre-empts water from being affordable for
all sections of society. Unaffordable pricing followed by subsequent disconnec-
tion impedes realization of the right to water. Second, disconnection of services
is often accompanied by the elimination of standposts leaving the poor with ab-
solutely no access and violating the minimum requirement that is indispensable
for survival. The content of the right to water obligates the state to provide bare
minimum of water to the poor.40 Several jurisdictions, including those that do
not define water as a human right such as France, Belgium and England, have
denounced disconnections that deprive people of the basic minimum supply of
water.41 In Belgium, users have a right to an uninterrupted minimal service of

Karnataka Urban Development and Coastal Environmental Project No 30303, Report and
Recommendation of the President to the Board of Directors, 1999, available at http://www.
adb.org/sites/default/files/projdocs/1999/rrp-R62744.pdf (Last visited on July 5, 2013).
37
United Nations Committee on Economic, Social and Cultural Rights [CESCR], General

Comment No. 15: The Right to Water, E/C.12/2002/11 (January 20, 2003), available at http://
www.unhchr.ch/tbs/doc.nsf/0/a5458d1d1bbd713fc1256cc400389e94/$FILE/G0340229.pdf
(Last visited on May 23, 2013).
38
Id.

39
United Nations High Commissioner for Human Rights [UNHCR], Report on the Scope

and Content of the Relevant Human Rights Obligations related to Equitable Access to Safe
Drinking Water and Sanitation under International Human Rights Instruments, U. N. Doc A/
HRC/6/3, G.A. Res. 64/ 291 (August 16, 2007).
40
See on en o an, Wate on a : R i ht and R e ulation in the an national

B
r
w
M
rg
r
T
p
g
s
g
T
r
s
Gove nance of ban Wate Se vice 160 (2011)(This obligation on the government is to
r
U
r
r
r
s
entitle all citizens to a basic minimum of water and adopt due process while resorting to
disconnections. This was upheld in South Africa where there is active socio-economic rights
litigation over the access to water. In the case of Residents of Bon Vista Mansions v. Southern
Metropolitan Local Council [(2002) 6 BCLR 625], the Court mandated fair and equitable
procedure during disconnections such as, reasonable notice of intent to disconnect, provision
of an opportunity to make representations, etc).
41
Cullet, supra note 7, 196(France deprecated disconnections on the ground that they would be

‘disproportionate measures that deprive users of an element that is essential to life’ in the
case of Monsieur Francois X and the Union Federale des Consommateurs d’Avignon v. Societe
Avidnonnaise des Eaux, Order No. 1492/95, May 12, 1995. In England and Wales, privatization

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156 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
water under all conditions, and there are procedural safeguards for disconnec-
tions, that may be resorted to only in cases of immediate danger or fraud.42 We
argue that such policies are imperative to prevent arbitrary disconnections by
private players and the resultant violations of the right to water.

3. Removal of Public Standposts

It has been argued for a number of years that certain municipal
laws in India already allow for disconnection of water services.43 While this
argument may hold water, proponents of this argument fail to realize that when
such disconnections would be carried out, people could rely on public stand-
posts provided by the municipality. However, with privatization, the problems
of disconnection are exacerbated in light of elimination of sources of free pub-
lic water.

One of the foremost strategies proposed by private players to im-

prove water sector infrastructure is removal of ‘public-standposts’ and similar
free public water utilities.44 Private players argue that municipalities are often
known to be slipshod in maintaining these standposts and there are numerous
environmental and health concerns that arise with such standposts.45 However,
one can trace such a policy stance to the profit motives of private companies.46
Private companies often regard such public sources of water as “loss-making
facilities” and hence push for their elimination. This is essentially a strategy to
exert pressure on all residents to adopt piped water supplies.

The impact of such elimination is complete deprivation of low

income households from access to water, constituting a violation of their right
to water as well as other human rights that are intricately related to the right to
water. The urban poor are faced with disconnections of their piped supply in
light of increasingly unaffordable tariff rates, and have no alternative sources
of water supply. We hence conclude that such unregulated privatization has
glaringly adverse consequences for low income households that previously re-
lied on the piped network supply.

resulted in large scale disconnections that were held unjustified and consequently the statutory
framework was amended to forbid disconnections to dwellings on inability to pay).
42
Philli ullet, supra note 7, 196 (This was upheld in the case of In Communaute Flamande,

p
C
Decretreglant le droit a la fournitureminimale d’electricite, de gaz at d’eau, December 20,
1996).
43
Cullet, supra note 7, 195.

44
For instance, The Kerala Urban Sustainable Development Project imposes on the State

Government to convert existing standposts either to individual metered housing connec-
tions or to metered standposts. See Asian Development Bank, Kerela Urban Infrastructure
Development Project No 32300, Report and Recommendation of the President to the Board
of Directors, 2005, available at http://www.adb.org/sites/default/files/projdocs/2005/32300-
IND-RRP.pdf (Last visited on July 5, 2013)
45
Koonan & Samat, supra note 28.

46
Id.

January - March, 2013
 IMPLICATIONS OF WATER PRIVATIZATION 157

B. IMPACT ON INFORMAL DWELLERS AND THE

HOMELESS

The legal status of informal settlements and slums is in most cases

dubious, with the government terming these settlements as ‘illegal encroach-
ments’ and not granting them formal land rights.47 The attitude of the Indian
Government has been particularly apathetic, by failing to regularize these set-
tlements and instead, subjecting them to arbitrary demolitions.48 This attitude
has allowed for the state to obviate its responsibility to provide network utilities
to this section of the urban population and render them persona non grata in of-
ficial records.49 Slum dwellers are unable to access public services and benefits
from subsidized public water supply, despite their willingness to pay. The lack
of official records and information about this segment of the population leads
to their exclusion from any water provision scheme.50 State officials are wary
of extending services so as to ensure no perverse incentives of slum growth are
created.51 In such a situation, the slum dwelling populations are forced to rely
on free standposts and informal water endors for their water supply, thereby
compromising the water quality and physical accessibility while incurring a
much higher cost.52

Although privatization is seen as necessary to extend services to

this population, experience suggests that the effect is to the contrary. Most pri-
vate sector schemes do not extend to these areas because of the unattractive
market conditions, and are not obliged to do so, due to their invisibilisation in
state records.53 Multinational companies have asserted their disinterest in ex-
tending services to the poor, as they are too poor to be profitable and pose too
47
Hulya Dagdeviren & Simon A. Robertson, Access to Water in the Slums of the Developing

World, 10 (Int’l Policy and Inclusive Growth, Working Paper Series, Paper No. 52, June 2009);
Usha Ramanathan, Illegality and the Urban Poor, 41(29) PW (2006).
E
48
Ramanathan, Id.

49
United Nations Expert Group Meeting on Population Distriburion, Urbanization, Internal

Migration and Development, Social and Environmental Aspects of Peri-Urban Growth in
Latin American Megacities, /P P/ G - R /2008/10 (December 19, 2007); Bakker, su-
UN
O
E
M
U
B
pra note 20, 111.
50
Dagdeviren & Robertson, supra note 47.

51
Water Utility Partnership, Better Water and Sanitation for the Urban Poor: Good Practice

from Sub-Saharan Africa, 2003, available at http://wwwwds.worldbank.org/servlet/ma
in?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&entit
yID=000333037_20080328022843 (Last visited on February 3, 2013).
52
Most water short areas in urban India depend on informal water vendors for their water supply,

who resell water obtained through municipally obtained water source or privately maintained
groundwater source, and consumers often end up paying more than 100 times the unit cost
than the piped supply. See Budds & McGranahan, supra note 10; David McKenzie & Isha Ray,
Urban Water Supply in India: Status, Reform Options and Possible Lessons, 11 Wate Policy
r
454 (2009).
53
Privatisation contracts in Dar Es Salam, Tanzania and Cote D’Ivore excluded an obligation to

supply in peri-urban slum settlements, while low income settlements in Cartegena, Columbia
and La Paz, Bolivia were deemed outside the city’s limits and thereby outside the contracts
purview ; See Water Aid Tanzania, Water Reforms and PSP in Dares Salam, 2003, available

January - March, 2013

158 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
great a financial risk.54 In cases where privatization schemes have been avail-
able to these inhabitants, the private contractors require that the existing water
connections, if any, be dismantled, to be replaced by new ones for metering and
billing purposes. However, the new connection charges for these unplanned
settlements are significantly higher, as they are in areas of low network densi-
ty.55 Since most connection charges are based on the principle of recovery of
capital costs, they become unaffordable for the poor settlements. Further, the
private concessionaires fail to cater to the specific issues posed by this market,
such as the low water pressure in these areas, the burden of connection fees and
transaction costs, pro-poor billing practices etc.56

The water project in Hubli-Dharwad demonstrates the exorbi-

tant costs imposed on the poor by proposed privatization schemes. Since the
new scheme was available to only those with legal connections, the poor were
forced to first pay charges to the municipality to regularize their connection,
followed by connection charges to the private service provider.57 Further, the
scheme demonstrated perverse discrimination against the poor, wherein previ-
ously legal connections were charged only Rs. 50 per month for cost recovery,
while newly regularized connections would have to undertake full cost recov-
ery charges.58

The exclusion of the slum dwellers is exacerbated by another con-

ditionality being imposed by way of privatization contracts and IFI funding;
the elimination and discouragement of public standposts.59 Official records
state that only 47% of the population has individual water connections, thereby
revealing that majority of the population relies on community and shared wa-
ter supply sources. Despite this, most privatization projects in India threaten
to eliminate public standposts, as discussed earlier. Even where protests have
ensured that standposts are not eliminated, they are metered and billed, with
consumption charges similar to those of individual connections.60

In the absence of any water supply provision, the poor settle-

ments are primarily dependent on informal vendors, who either resell wa-
ter from municipal sources or transport groundwater through tankers.61 The
discourse on privatization is largely silent on the role and regulation of these

at http://www.wateraid.org/documents/plugin_documents/waterreformsandpsptanz.pdf (Last
visited on February 3, 2013); Budds & McGranahan, supra note 10.
54
Id.

55
Connection fees vary depending on the distance from the network, see Bakker, supra note 20,

125.
56
Bakker, supra note 20, 128.

57
Priya Sangameswaran, Roopa Madhav & Clifton D’Rozario, 24/7 ‘Privatization’ and Water

Reform: Insights from Hubli-Dharwad, 47(14) PW 6 (2008).
E
58
Id.

59
Kundu & Thakur, supra note 17.

60
Sangameswaran, Madhav & D’Rozario, supra note 57.

61
McKenzie & Ray, supra note 52; Dagdeviren & Robertson, supra note 47.

January - March, 2013
 IMPLICATIONS OF WATER PRIVATIZATION 159

informal sources, which sometimes operate illegally.62 Informal vendors are
characterized by unregulated water quality and high and arbitrary pricing. The
general increase in tariff due to privatisation is borne indirectly by these slum
dwellers, as these tariffs are passed on by the vendor reseller.63

The problem of exclusion from water services to the poor is a more

complex problem of governance, entitlement and citizenship and social rights,
that privatization does not have the solutions to, and only serves to exacerbate.

V. INSTITUTIONAL FAILURE OF
 
PRIVATIZATION
In the above analysis we have elucidated the implications of pri-
vatization on access to the most marginalized section of society, the urban poor.
In addition to this, there are certain inherent reasons for the large scale failure
of privatization in developing countries across the world.

A. TRANSFER OF FINANCIAL RISK

The cornerstone of the arguments in favour of privatization is that
the involvement of private agencies will be instrumental in mobilizing finance
for cash-strapped governments, and will bring in the much-needed investment
for water sector reforms. Pro-privatization arguments assume the willingness
of the private companies to provide finances needed for extending and improv-
ing infrastructure and to undertake the risks of such investment. However, evi-
dence from privatization projects in India and globally proves that the risk of
investment continues to lie with the government.

The bulk of financing for the concessional agreements in public-

private partnership comes from public financing.64 Investment in water infra-
structure in developing countries is not an attractive proposition for a private
player due to the range of risks involved and the large capital requirement,
with recovery of costs taking up to several years.65 Private corporations are
thus undertaking more service/management contracts where there are faster
returns on capital and the responsibility of extending service remains with the
public body.66 Such low risk ventures allow the private companies to look over

62
McGranahan & Satterthwaite, supra note 15.

63
Australian Government (Water and Sanitation Program), Increasing Access: The Experience

of Small Scale Water Providers in Serving the Poor in Metro Manila, January, 2004 available
at http://www.wsp.org/sites/wsp.org/files/publications/eap_Inc_access.pdf (Last visited on
February 3, 2013).
64
Bakker, supra note 20, 36.

65
Bayliss, supra note 25.

66
In Guinea and Cote D’Ivore, billing services were outsourced to the private company while

maintenance of infrastructure remained with the government. See Bayliss, Id.

January - March, 2013

160 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
efficiency and performance, and arguments of private players extending the
service and infrastructure fail.

The water sector reforms of the DJB provide a case in point.67 The
Detailed Project Report of the model revealed the private sector involvement
in the financial arrangement was only 15%, whereas the Government directly
assumed 70% of the risk.68 Further, the financial arrangement of the privatiza-
tion project in Khandwa, Madhya Pradesh, reveals that the public financing of
the project was Rs 96 crore, with 80 % of the finance coming from the Central
Government and the State Government contributing another 10%. On the other
hand, the private company only undertook 10 % of the investment.69

In fact trends of privatization in India demonstrate that the gov-

ernment is not only assuming the risk of the project through investment, but also
safeguarding the private player from any potential risk to it. In long term con-
cession agreements, such as the Tirupur Water Supply and Sanitation Project in
Tamil Nadu, the government has kept large scale contingency funds, to avoid
the loss borne by the private contractor.70 The Government has used public re-
sources to make separate funds to cushion the private corporation from any risk
or exigency.71 The lack of investor interest in entering these agreements leads to
governments enticing the private corporations by offering them large conces-
sions and allowing tariff hikes,72 thereby transferring an additional monetary
burden of concessions and subsidies on the government.

B. BIASED CONTRACT NEGOTIATIONS

The basis of any private provision of water service is the contract
between the urban local body and the private corporation, which determines
the level of involvement and investment of the private player, the tariff struc-
ture, the extent of services etc. The negotiations for this main contract are in-
strumental as they define the direction of the restructuring exercise towards
privatization.73 In absence of an external regulatory authority, it is the contract
which regulates the performance of the contractor, by stipulating the sanctions
against the private player when designated targets are not met. However, the
67
Delhi Jal Board Privatization Model in Deep Trouble, ime of ndia August 17, 2012.

T
s
I
68
Koonan & Samat, supra note 28.

69
Steering Group on Water Sector, Planning Commission of India, supra note 13.

70
See Bhaduri & Kejriwal, supra note 12.

71
The Government of Tamil Nadu has provided the private company with Rs. 75 crore Water

Shortage Period Fund in case of any shortage of water resources during the agreement period,
along with a Rs. 50 crore Debt Service Reserve Fund to finance its debt in case of any revenue
loss.
72
Kate Bayliss, Privatisation and the World Bank: A Flawed Development Tool, 13 Global

ocu (2001), available at http://www.psiru.org/reports/2000-11-U-WB.doc (Last Visited on
F
s
February 1, 2013).
73
nited ation uman Settlement P o amme ( - ), Wate and Sanitation in

U
N
s
H
r
gr
UN
HABITAT
r
Wo ld ’ itie - ocal ction fo Global Goal 199 (2003).
r
s
C
s
L
A
r
s
January - March, 2013
 IMPLICATIONS OF WATER PRIVATIZATION 161

power disparity between multinational corporations (where most often the
private players are involved) and developing nations, with these corporations
often being backed by IFIs, creates an unequal bargaining power and affects
the negotiation process, leading to one-sided contracts.74 These corporations
are further protected from multilateral/bilateral trade and investment agree-
ments between countries, which provide for compensation to the companies in
case the government decides to terminate the agreement.75 Further, in order for
the urban poor to benefit from the reform projects, it is crucial their interests
stand at the forefront from the stage of contract negotiations itself.76 However,
either the efforts of the state to lure investors and represent the project as profit-
able or the overriding say of the dominant private company, leads to concerns
of the impoverished being disregarded.

In the case of failure of the companies to perform according to

the contract, the companies are able to renegotiate the contracts to lower their
performance target.77 Renegotiation has become the order of the day, with the
World Bank even writing a manual on how to renegotiate failed concession
agreements.78 Therefore, it is those developing countries that require an over-
haul of the supply system that do not have the bargaining power to negotiate a
successful contract, thereby leading to a skewed privatization model that brings
in none of the proposed benefits of privatization.

C. NATURE OF CONTRACTS: UNDERMINING

ACCOUNTABILITY
Water, by virtue of being a fundamental necessity, demands that
the process of its supply and management be defined with effective safeguards
and accountability mechanisms in larger public interest.79 However, experi-
ences of implementation of privatization in developing countries, and even pre-
liminary initiatives in India have demonstrated an acute dearth of liability on
the private companies and instances of lapses, corruption etc.80

74
Sangameswaran & Madhav, supra note 8, 149.

75
Aguasdel Tunari, the concessionaire in Cochabamba, Bolivia brought a proceeding against

Bolivia before the International Centre for Settlement of Investment Disputes (ICSID), and
invoked a bilateral investment treaty between the Netherlands and Bolivia as the basis for
jurisdiction in Aguasdel Tunari v. Republic of Bol., ICSID Case No.ARB/02/3.
76
McGranahan & Satterthwaite, supra note 15.

77
This has been seen in 2001 in Manila in Phillipines, when such renegotiation took place despite

the presence of the state regulatory authority. See generally Sarah Hale, Water Privatization in
the Phillipines: The Need to Implement the Human Right to Water, 15(3) Pac. R im . & Pol’y
L
J. 790 (2006).
78
ui Gau ch, G antin and R ene otiatin nf a t uctu e once ion : oin it R i ht

L
s
s
r
g
g
g
I
r
s
r
r
C
ss
s
D
g
g
(2004).
79
Craig Anthony Arnold, Privatization of Public Water Services: The States’ Role in Ensuring

Public Accountability, 32(3) Pe e dine .R. 564 (2012).
pp
r
L
80
Allegations of corruption in privatized water supplies have occurred in many regions of the

world. For example, the French multinationals Suez-Lyonnaise and Vivendi were convicted in

January - March, 2013

162 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
The deficit of transparency starts with the very process of grant-
ing of concession or consultancy contract to the private player. There is a sys-
tem of biases and maladministration that operates to grant only ‘favoured’
companies projects, especially when they are backed by international funding
institutions like the World Bank.81 Such contracts are usually concluded behind
closed doors,82 and information and details of the project are kept out of public
purview.83 Considerable controversy was floating around the DJB project, with
allegations of extensive manipulation in the granting of the consultancy con-
tract to Price Waterhouse Coopers (‘PWC’) in 2005.84 Documented evidence
has been reported to show how the World Bank kept raising objections and
altering selection criteria for appointments of consultants until PWC was se-
lected for the DJB restructuring project (supported by the World Bank itself).85
In addition to this, the secrecy predicament of such contracts is heightened as
private companies are exempt from Right to Information (‘RTI’) review, allow-
ing them to escape public scrutiny.

The nature of contracts and generality of obligation stipulated in

such contracts can be seen as one of the primary triggers for lapses in account-
ability. In most cases governments make long-term contracts with the private
company, with a weak system of checks and balances.86 Since the operation
and management of water supply is so complex and nuanced, the performance
parameters of the scheme are often left vague, while targets set are either bogus
or inconsequential.87 Such contracts give considerable leeway to the private
players to flout the targets and not be held liable for such.88
France of paying bribes to obtain water concessions. Similar instances have occurred in South
Africa, Bolivia where the private companies have been alleged to use fraudulent practices in
the operation and management of services. See Public Citizen, Water Privatization Fiascos:
Broken Promises and Social Turmoil, 2003, available at http://my.ewb.ca/site_media/static/at-
tachments/group_topics_grouptopic/22078/privatizationfiascos.pdf (Last visited on February
7, 2013). Even in the very recent case of the DJB, certain RTI petitions filed have revealed
anomalies in the budget approval for awarding the consultancy contract. Information obtained
through the RTI filings suggest that there was no approval by the planning division for the es-
timate of Rs 3.35 crore drawn up by the DJB for the contract. This has elicited severe criticism
regarding corruption in the process. See Koonan & Samat, supra note 28.
81
This shall be discussed in detailed in Part VI (Role of International Financial Institutions).

82
Kothari, supra note 24.

83
In fact, in Shri Navroz Mody v. Mumbai Port Trust, Appeal No. CIC/AT/A/2009/000964 dated

22-07-2008, the Court stated that contracts for privatization of water were cloaked in secrecy,
and called for accountability and transparency.
84
Avjeet Singh, Political Economy of Reforms: Learning from the Delhi Water Sector Experience,

available at http://siteresources.worldbank.org/EXTGOVACC/Resources/CaseStudyDelihi.
pdf (Last visited on February 2, 2013).
85
Aman Sethi, Private Water, Public Misery, ontline April 8, 2006.

F
r
86
Kothari, supra note 24.

87
See Bhaduri & Kejriwal, supra note 12.

88
An interesting example of this is the World Bank’s response to concerns about the DJB pri-

vatization project. The World Bank has stated that in case of major violations of project targets
and obligations, total penalty on a company for all violations put together would not exceed
30% of the management fee. Hence, even if an overt infringement is committed by the com-
pany, they stand to lose only a nominal fee. See Koonan & Samat, supra note 28.

January - March, 2013

 IMPLICATIONS OF WATER PRIVATIZATION 163

VI. ROLE OF INTERNATIONAL FINANCIAL

 
INSTITUTIONS
Through the course of the above arguments, we have seen an
overwhelming influence of international financial institutions, particularly the
World Bank and IMF, in the ongoing reforms of privatization in developing
countries. Most often privatization is a necessary pre-condition for the release
of aid funds and has been tied to eligibility conditions for debt relief by the
World Bank and IMF.89 Since developing countries are in acute need of aid
disbursement, they are almost forced to align themselves with the policies of
privatization.90 Instances show how such international IFIs have powerfully
shaped the national trajectories of water reforms in an array of countries.91
Therefore, the failure of privatization in many developing countries may not
solely lie in the hands of the domestic governments, and can be attributed to the
overriding powers of the International Financial Institutions.

The first objective is to understand the nature of the policies of

these agencies. The IFI’s paradigm of reforms has always had a strong neo-
liberal inclination. Their policies envisage water as an economic good that is
subject to market forces to ensure efficiency and most importantly, sustain-
ability of this resource.92 These policies have continually failed to internalize
the distributional aspects of water supply and the consideration of social and
equitable policies. In fact, even the recent ‘shift’ of focus by the World Bank
from ‘Structural Adjustment Program’ to ‘Poverty Reduction Strategies’ has
not really achieved much, as the emphasis on markets and efficiency has been
strong.93 The absence of equitable policies is exacerbated when such policies
are imposed upon developing countries where large sections of the population
are ridden with poverty. Hence, the most significant impact of the IFIs is the
trade-off of interests of the vulnerable and impoverished in light of achieving
‘financial sustainability’ of water.

Along with imposing privatization on borrowing states, IFIs are

also assuming a predominant role in determining the selection of the company,
consultants, independent regulators etc. To ensure efficiency, procurement and
selection of contracts must be done through open and transparent competition,

89
Bayliss, supra note 25.

90
Andres Olleta, Role of the World Bank in Water Law Reforms in Wate a fo the enty

r
L
w
r
T
w
i t entu y 84 (Phillip Cullet, Alix Gualtieri, Roopa Madhav & Usha Ramanathan ed.,
F
rs
C
r
2010).
91
See generally Bayliss, supra note 72.

92
See generally Bayliss & Cramer, Privatisation and the Post-Washington Consensus: Between

the Laboratory and the Real World in evelo ment Policy in the 21 t entu y: eyond he
D
p
s
C
r
B
T
Po t-Wa hin ton on en u (2001) (For a review of the evolution of the World Bank’s policy
s
s
g
C
s
s
s
position on privatization).
93
Bayliss, supra note 25.

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164 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
typically by bidding.94 However, the World Bank has often been accused of ma-
nipulating its upper hand by giving preference to large multinational players.95
Moreover, the World Bank is underwriting such giant corporations with public
money and governments are saddled with the responsibility of assuring returns
to shareholders.96

Further, at the negotiation stage, concerns are being raised as to

whether decision-making can remain open, equitable and inclusive.97 Engaging
international funding agencies and multinational corporations often creates an
‘information asymmetry’ between the private company and the local govern-
ment, where the former is far better informed.98 In such cases if the local body
is the regulator, this information asymmetry further reduces accountability and
transparency.

Another crucial point is the transnational legal setting that seri-

ously undermines a nation’s regulatory framework.99 Bilateral investment trea-
ties, which provide for disputes to be submitted to arbitration, view any form
of national regulation and supervision as potentially expropriatory and often
exclude larger public interest issues.100 The cases of Bolivia and Argentina
demonstrate the pervasive political influence of the International Centre for the
Settlement of Investment Disputes (allied to the World Bank) on the water sec-
tor reforms and policies in these countries. This seriously undermines the role
of the domestic regulator which is crucial to the privatization process.

PART B: REORIENTING THE MISPLACED

‘PUBLIC VERSUS PRIVATE’ DEBATE

VII. THE MISPLACED DEBATE: IS THE

 
PROBLEM REALLY PRIVATIZATION?
In the above arguments, we have aimed to explicate the controver-
sial debate against private sector involvement in urban water sector. We have
established that implementing privatization in the current scenario in India
shall only lead to further exclusion of the urban poor from water services. At

94
James Winpenny, supra note 18.

95
Barlow & Clarke, supra note 16.

96
For instance, as a condition imposed by the World Bank, Chile had to guarantee a profit

margin of 33% to Suez Lyonnaise des Eaux regardless of the profitability of the system. See
Jennifer Naegelle, What Is Wrong With Full-Fledged Water Privatization?, 6 J. . & Soc.
L
hallen e 110 (2004).
C
g
s
97
McGranahan & Satterthwaite, supra note 15.

98
nited ation uman Settlement P o amme ( - ), supra note 73, 201.

U
N
s
H
r
gr
UN
HABITAT
99
Morgan, supra note 40.

100
Id.

January - March, 2013
 IMPLICATIONS OF WATER PRIVATIZATION 165

the same time, continuation of the public distribution system will increase ex-
isting problems and inequities. Hence, we argue that the current focus on water
privatization actually presents an artificial choice between public and private
operators and diverts attention from more foundational questions regarding ur-
ban water governance.101 Primary problems of tariff hike and disconnections,
exclusions of certain sections of society and biased privatization arrangements
alluded to above, are not problems inherent to privatization, but in the manner
it has taken shape in developing countries. The diminished control of the state,
the domination of private companies and international funding agencies are
issues rooted in the deeper malaise of the state not recognising its obligation
to ensure universal access to water. Therefore, one of the primary solutions
lies in pinning an enforceable obligation on the state to ensure it discharges its
responsibility, whether it performs as the distributor or the supervisor of pri-
vate companies. Similarly, problems of tariff hike, disconnections and nature
of contracts may be tackled by allowing the private player to work in a strong
regulatory framework of the state, such that economic policies do not hamper
distributional equity.

Hence, solutions to problems of urban water supply do not lie in a

simple switch to either public or private distribution, but in reformation of the
institutional principles of water supply, as prescribed in the subsequent section.
We contend that most of the elemental obstacles in improving water supply
relate to more fundamental concerns of governance of urban water utilities.

Let us first elucidate the concept of ‘governance’ and delineate

the fundamental principles that characterize this concept. Water governance re-
fers to the “range of political, social, economic and administrative systems that
are in place to develop and manage water resources, and the delivery of water
services, at different levels of society”.102 The United Nations Economic and
Social Commission for Asia and the Pacific defines ‘governance’ in terms of
decision-making processes and processes for implementing such decisions.103
It enumerates eight crucial requirements which form the foundation of ‘good
governance’, namely: it must be participatory, to include all actors and stake-
holders; it must be consensus oriented; accountable; efficient; transparent, to
ensure fairness and to instil faith in the system of governance; responsive; and
equitable.104

101
McGranahan & Satterthwaite, supra note 15.

102
Global Water Partnership Technical Committee, Peter Rogers & Alan Halls, Effective Water

Governance, 2003, available at http://www.tnmckc.org/upload/document/bdp/2/2.7/GWP/
TEC-7.pdf (Last visited on February 5, 2013).
103
United Nations Economic and Social Commission for Asia and the Pacific [UN ESCAP],

What is Good Governance?, available at http://www.unescap.org/pdd/prs/ProjectActivities/
Ongoing/gg/governance.asp (Last visited on May 18, 2013).
104
Id.

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166 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
Since the concept of ‘good governance’ finds application in vari-
ous contexts, it is important here to specifically delineate the contours of good
governance in the water sector. Governance of water encompasses a wide gamut
of processes by which stakeholders articulate their interests; their input is ab-
sorbed, decisions are taken and implemented, and decision-makers are held
accountable in the management of water resources and water services.105 Good
governance thus in relation to water would mean, equitable access of water to
all, inclusion of excluded areas by implementing affordable costs for usage, and
ability to participate in the decisions of water distribution, budgeting etc. It also
means transparent procedures with minimum bureaucratic hurdles, maximum
efficiency and minimum wastage of resources. A recent paper commissioned
by the Global Water Partnership identified that the approach to water govern-
ance must be open and transparent as opposed to clouded with bureaucracy;
inclusive and communicative in place of being exclusive and expert-driven;
coherent and integrative in preference to sector-specific; and equitable and ethi-
cal as opposed to biased in favour of the elite majority.106 It is thus evident that
problems of accountability, centralized decision making and exclusion of the
poor, as explained in previous sections, stem from the governance approach
rather than private/public operation of the water utility. Therefore, in the sub-
sequent sections, we suggest reforms for the restructuring of water utilities to
make them more democratic, accountable and transparent.

The problem of inequitable access to water points to another ma-

jor aspect of governance failure; the marginalisation and rejection of the poor
sections of the population by the state, by deeming them ‘illegal occupants’.
Dwellings in slums or on pavements and other public spaces are deemed illegal
by the state, thereby condemning this large population to a status of illegitimate
citizenship. Such marginalisation demonstrates why concerns of the poor have
never dominated mainstream debates on water supply provision, thereby allow-
ing for their needs to be side-lined and ignored. Karen Bakker explains that the
exclusion of the poor is systemic, fuelled by misplaced notions of development
and modernization that have been inherited over the years. Post-colonial states
have inherited the development patterns of the colonial regime wherein full
citizen and social rights were accorded only to the upper sections of society.107
Since full recognition of citizenship rights is limited to the elite, public ser-
vices such as water, education, electricity, regarded as the “material emblems

105
This definition is adapted from that of the Institute on Governance, a non-profit organiza-

tion founded in 1990 to promote effective governance. For more information, see Institute on
Governance, available at http://www.iog.ca/ (Last visited on February 28, 2013)
106
The Global Water Partnership, available at http://www.gwpforum.org/gwp/library/

Governance.pdf (Last visited on February 28, 2013).
107
Bakker gives the example of Jakarta, Indonesia to show how the colonial policy of excluding

the ‘natives’ from the piped supply network extended into the post colonial periods. The city
of Jakarta remained divided in the post colonial period, with the poorer sections of popula-
tion not receiving the benefits of urbanization and modernization; See Bakker, supra note 20,
115-117.

January - March, 2013

 IMPLICATIONS OF WATER PRIVATIZATION 167

of citizenship” are provided only to these upper sections of the population.
Infrastructure based systems such as water supply have the exclusion of the
poor and the slums literally hardwired into the network, with piped networks
not extending to those sections of the city.108 It has been argued that there exists
a systemic bias against the poor, irrespective of whether the operator of water
service has been public or private.109 Governments are incentivised to under-
take more visible infrastructural projects catered to elite sections of society,
with investment-heavy ‘invisible’ water piped networks receiving low priori-
ty.110 Such an ‘elite capture’ of resources and public provisions has been evident
in the literature on housing and settlement rights of the urban poor in India.111
In such a situation, the private provision of water services does not prove to be
a solution, but only serves to aggravate this process of exclusion. The solution
therefore seems to be in extending the full range of entitlements and social
and citizenship rights to these excluded populations, possibly through a rights
based approach, as discussed later in the paper.

The importance of governance reforms have been recognised

in the 12th Plan Report which emphasizes that without addressing the funda-
mental governance impediments plaguing the Indian water sector, any amount
of technological changes, influx of investment; or infrastructural innovations
shall only have limited usefulness. 112 It has identified a threefold problem in the
Indian governance model- lack of participation of water users at various levels;
lack of transparency and the imperative need for institutionalized accountabil-
ity. While we will deal with each of these reforms in a nuanced manner later,
we emphasize that an efficient and well governed utility is at the core of the
reform process, and the management of the utility, whether public or private,
is secondary.

VIII. SETTING THE STAGE FOR

 
PRIVATIZATION: WHAT INDIA MUST KEEP IN
MIND
We argue that the success of privatization is hinged on a foun-
dational restructuring of water governance and a re-haul of the underpinning
institutional principles. While it would be beyond our expertise to suggest an
adept governance model for India’s water sector, we lay down the foundational
principles that India must institutionalize in order to reform the water sector
and facilitate successful privatization.

108
Id., 28.

109
Id., 47.

110
Id., 47, 117.

111
Ramanathan, supra note 47.

112
Steering Group on Water Sector, Planning Commission of India, supra note 13.

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168 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
A. ADOPTING A RIGHTS BASED APPROACH TO WATER

It is accepted that the concept of privatization is not inherently
contradictory to accepting a human right to water. In fact, we argue that a
well-defined and enforceable paradigm of entitlements to water is an essential
pre-condition to privatization in India.

1. Understanding the Domestic Rubric of the Right to Water

In order to assess the ramifications of privatization in India, it is
crucial to comprehend the domestic rubric of the right to water.113 A plethora of
constitutional and legal provisions govern the availability, control and distribu-
tion of water.114 However, a human right to water is not explicitly guaranteed
under any statutory or constitutional provision. An activist interpretation of the
right to life under Article 21 of the Constitution has been extended to recognize
a fundamental right to water.115 While the initial catena of cases pronounced
such a right only in pollution and environment-related cases, the later trajectory
of cases116 have addressed the more fundamental concerns of access to resource
and the right to safe and adequate drinking water. These cases have recognized
an obligation on the state to provide safe drinking water to all.117

With regard to the nature of water as a resource, the Supreme

Court in M.C. Mehta v. Kamal Nath118 held that water is a community source
which is to be held by the state in public trust, by recognizing the state’s duty
to respect the principle of inter-generational equity. Hence the state is a trustee
of water resources, and must ensure equity in distribution of water utilities.
Apart from this, the Directive Principles of State Policy in Article 37 of the
Constitution envisage the principle of equal access to material resources of the
country.

113
Videh Upadhyay, Water Rights and the ‘New’ Water Laws in India- Emerging Issues and

Concerns in a Rights Based Perspective in ndia nf a t uctu e R e o t, 2011- Wate : Policy
I
I
r
s
r
r
p
r
r
and Pe fo mance fo Su tainable evelo ment 56-57 (2012).
r
r
r
s
D
p
114
S. Murlidhar, The Right to Water- An Overview of the Indian Legal Regime in he uman

T
H
R i ht to Wate (Eibe Riedel & Peter Rothen ed., 2006).
g
r
115
Jayna Kothari, The Right to Water: A Constitutional Perspective, available at: http://www.

ielrc.org/activities/workshop_0612/content/d0607.pdf (Last Visited, February 2, 2013).
116
Upadhyay, supra note 113 (These include Wasim Ahmed Khan v. Govt. of Andhra Pradesh,

(2002) 5 ALT 526 (DB); Mukesh Sharma v. Allahabad Nagar Nigam, 2000 All LJ 3077;
Diwan Singh v. SDM, 2001 All LJ 273; S.K. Garg v. State of Uttar Pradesh, 1999 All LJ
332; Gautam Uzir v. Gauhati Municipal Corpn., (1999) 3 GLT 110; Vishala Kochi Kudivella
Samrakshana Samithi v. State of Kerala, (2006) 1 KLT 919).
117
Roopa Madhav, Context for Water Sector and Water Law Reforms in India in Wate a

r
L
w
fo the enty i t entu y 120 (Phillip Cullet, Alix Gualtieri, Roopa Madhav & Usha
r
T
w
F
rs
C
r
Ramanathan ed., 2010).
118
(2002) 3 SCC 653: AIR 2002 SC 1515.

January - March, 2013
 IMPLICATIONS OF WATER PRIVATIZATION 169

Notwithstanding the constitutional provisions and fundamental
right to water, water supply is considered a ‘local’ responsibility.119 A Model
Municipal Law, passed by the Ministry of Urban Development in 2003, deline-
ates the functions and responsibilities of municipalities with respect to pro-
vision and supply of water.120 Since it would not be feasible to examine the
separate laws of each state, we aim to expound the nature of obligations of
municipalities as under the Model Law that has largely been relied on by the
states. § 47(1)(a)(i) of this Law obligates the municipality to “provide on its
own or arrange to provide through any agency…water supply for domestic, in-
dustrial and commercial purposes”. While this Section makes water supply an
obligatory function of the municipality, one sees that subsequent sections make
the fulfilment of this obligation contingent on various other factors.121 The duty
of ensuring sufficiency of water is circumscribed to those measures that are
“reasonable at a practical cost”. Further the responsibility of the municipality
to supply water to places that do not have networked supply is limited to only
“as far as is possible” by the Municipality. Further, § 171(2) vests all discretion
of deciding whether measures are practicable or of a reasonable cost with the
Municipality itself. We argue that this is a marked dilution in the obligations
assumed by the municipality. In most states, drinking water is regarded as a
contractual rather than statutory right.122

Hence despite the existence of a developed body of case law that

recognizes the right to water and State laws that delineate the duty of munici-
palities with respect to water supply, the content of the right is inadequate and
has not been adequately elaborated upon.123

Further, a major drawback of water law in India is that there

is no legislated standard to define ‘clean’ water, unlike most of the world.124
Although the Bureau of Indian Standards (‘BIS’) prescribes standards to as-
sess the suitability of water for drinking purpose,125 this benchmark is merely

119
By the 73rd and 74th Amendment, the governance of water supply has devolved to the elected

local bodies, in keeping with the trend of decentralization. Thus the responsibility of urban
water supply lies with the municipalities established under different state legislations.
120
Ministry of Urban Development and Poverty Alleviation, Model Municipal Laws, October

2003, available at http://urbanindia.nic.in/legislations/li_by_min/Model_Municipal_Law/in-
dexmml.html (Last visited on February 2, 2013).
121
Joy & Paranjape, supra note 6.

122
Phillip Cullet & Roopa Madhav, Water Law Reforms in India: Trends and Prospects in Wate

r
nd he a n ndia 528 (2009).
A
T
L
ws
I
I
123
ullet, supra note 7, 52.

C
124
For instance, in the United States potable water quality is legislated and enforced under the

Safe Drinking Water Act. Also, a developing country like South Africa has well-defined na-
tional standards for drinking water and the state has a duty to test potable water on a monthly
basis to ensure adherence to the prescribed standards. Steering Group on Water Sector,
Planning Commission of India, supra note 13.
125
For the current standard see Bureau of Indian Standards, Drinking Water Specification (Second

Revision of IS 105000, December 24, 2009, available at http://bis.org.in/sf/fad/FAD25(2047)
C.pdf (Last visited on February 2, 2013).

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170 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
recommendatory and not legally enforceable.126The deficiency of a precise and
elaborate right to water creates major apprehensions regarding the implications
of privatization, as we will argue hereinafter.

2. International Context of The Right to Water

The human right to water has been recognized by various in-
ternational instruments127 and agencies, as well as by different national
governments.128The most elaborate embodiment of this right is General
Comment 15 of the ICESCR, which lays down the normative content of the right
encompassing both procedural and substantive components.129 The substantive
components include: availability, accessibility, quality stipulations whereas the
procedural framework guarantees the right to information concerning water
issues, due process in case of disconnections, the right to participate, provision
for effective remedies, etc.130 It imposes a ‘constant and continuous duty’ on
states to move towards full realization of the right to water, while also imposing
the minimum core of the right for immediate realization.

In addition to international rights instruments, many coun-

tries have embodied the right to water in their constitutions or legislations.131
Noteworthy in this regard is South Africa, which not only has an explicit right
to water written into its Constitution, but also has statutorily recognized con-
tours of this right. In the aftermath of the cholera epidemic that was due to
privatization in many cities, South Africa recognized the importance of a rights
based approach. In 2000, the state announced a ‘lifeline of free water for all’
set at 25 litres per person per day and provided at 6,000 litres per household
per month, regardless of income.132 This policy is now strictly enforced despite
practical obstacles and vehement resistance from IFIs.133

126
Steering Group on Water Sector, Planning Commission of India, supra note 13.

127
For instance, the human right to water has been explicitly recognized under the Convention

on the Rights of the Child, G. A. Res. 34/180, Art. 24, U.N. Doc. A/RES/44/25 (November 20,
1989) and the Convention on the Elimination of All Forms of Discrimination against Women,
G.A. Res. 34/180, U.N. Doc. A/34/46 (1979). The U.N. General Assembly has also confirmed
the existence of the human right to water, see G. A. Res. 54/175, ¶ 12, U.N. Doc A/RES/54/175
(December 17, 1999).
128
ullet, supra note 7, 51 (§27(1)(b), Constitution of South Africa explicitly guarantees the

C
right to access to adequate water. Also, in Uruguay, the right to access to potable water and
access to sanitation is a fundamental right since 2004).
129
Alix Gowlland Gualtieri, International Human Rights Aspects of Water Law Reforms in

Wate a fo the enty i t entu y 246 (Phillip Cullet, Alix Gualtieri, Roopa Madhav
r
L
w
r
T
w
F
rs
C
r
& Usha Ramanathan ed., 2010).
130
Violeta Petrova, At the Frontiers of the Rush for Blue Gold: Water Privatization and the

Human Right to Water, 31(2) ook. J. nt’l . 15 (2005-2006).
B
r
I
L
131
See Hale, supra note 77 (42 Countries have codified the human right to water in their legisla-

tive or constitutional framework, examples being South Africa, France, Uruguay, Namibia to
name a few).
132
Budds & McGranahan, supra note 10.

133
Water Aid Tanzania, supra note 53.

January - March, 2013
 IMPLICATIONS OF WATER PRIVATIZATION 171

3. The Need of a Rights Based Approach for Privatization

A right to water is instrumental in making water a legal entitle-
ment, rather than a commodity and service, thereby giving each citizen a range
of legal tools to secure their rights.134 Such a scheme of entitlements empow-
ers the poor and disadvantaged against exploitation and exclusion, as well as
provides for socially inclusive policy formulation.135 It is important to note that
private provision is not in itself inconsistent with the right to water.136 In fact,
it is argued that a rights based approach to water provides the perfect policy
platform for private water services, which may achieve the benefits of private
involvement, while ensuring larger public benefit.137 Having a definite right to
water with explicit recognition of duty bearers is instrumental in ensuring that
the state does not obviate its responsibility, whether it performs as the service
provider or as the regulator, in case of private sector involvement.138

Although the exact contours of the right to water are not fixed,
the right does not mandate the state to provide free water for all.139 The
Constitutional Court of South Africa has specified that the right to water does
not require the state to provide water for all on demand, but it ensures that the
state takes reasonable legislative and other measures to ensure achievement of
the right, within available resources.140 Many see this aspect of progressive re-
alization emphasized on by the Constitutional Court as a limitation of the rights
based approach.141 However, we argue that the experience of South Africa sug-
gests the constitutional recognition of the right has been crucial in formulation
of national water policies for universal access. 142 The case of Namibia suggests
that having a strong legislative framework such as the Namibian Water Act,
134
World Health Organisation, The Right to Water, March 2004, available at http://www.who.int/

watersanitationhealthl/rtwrev.pdf (Last visited on February 2, 2013).
135
Id.

136
This is evident in Points 27 and 49 of GC-15 where the private provision has been accepted,

provided water remains affordable. See akke , supra note 20, 150; Henri Smets, Economics
B
r
of Water Service and the Right to Water in e h Wate nd nte national conomic a
F
r
s
r
A
I
r
E
L
w
173 (Edith Brown Weiss, Laurence Boisson & Nathalie Bernasconi-Osterwalder ed., 2005).
137
Hale, supra note 77, 4.

138
Petrova, supra note 130.

139
Luis Marin, Ricardo Sandoval, Fanny Tagle, Eva Sanchez & Victor Martinez, Water as a

Human Right and Asian Economic Resource: An Example from Mexico in Wate thic 117
r
E
s
(Roman Llamas, Luis Martinez-Cortina & Aditi Mukherji ed., 2009).
140
This case arose from the challenge of the citizens to two policies of water services. The first,

installation of prepaid water meters and second, the limit of 25 kilolitres per household per
month under the free water policy. The Constitutional Court upheld both these policies saying
that the state had the duty of progressive realization with available resources in Lindiwe
Mazibuko v. City of Johannesburg,s Case CCT 39/09 [2009] ZACC 28.
141
o an, supra note 40, 163 (It is argued that the right to water has given no substantive en-

M
rg
titlements to the people but has merely required the government to undertake a ‘reasonable
regulatory approach’).
142
After the outbreak of cholera in 2000 due to large scale disconnections of water supplies, the

government enacted Free Basic Water Policy as part of the Water Services Act, providing
6000 litres per month to poor households. See Hale, supra note 77, 4.

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172 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
1956 which specifies the role and responsibilities of the state in the provision
of water services, as well as guidelines for private operators, provides a strong
legal and regulatory framework for the provision of water services, whether it
is by the state or by private players.143

We recognize that the rights based approach has many limitations

as it gives no clear solutions to questions of ecological rights and sustainability
and complicates the gamut of already existing water rights.144 However, we
argue for the right to water, not as a solution, but as a strategy that will be
instrumental in the formulation of a robust legal framework with a rights and
entitlements based approach.

B. PRO- POOR WATER GOVERNANCE: RECOGNIZING

‘ILLEGAL’ DWELLERS AND GRANTING LAND
RIGHTS
As discussed above, the exclusion of the urban poor from the wa-
ter supply system stems from the state attributing the status of illegality and
ineligibility to these informal dwellers.145 These inhabitants are termed ‘en-
croachers’ and trespassers on public land, with no legally recognizable prop-
erty rights over the land they occupy.146 Lack of a secure tenure and property
rights puts the residents in a permanent state of insecurity and impermanence,
subject to arbitrary demolitions by the State.147 More significantly for this pa-
per, it denies them access to water and other basic amenities, which require
official land registration.148 They are therefore forced to spend large parts of
their income on more expensive, informal sources of water, leading to a vicious
cycle of poverty.149

The absence of official land rights points to a broader systemic

denial of basic citizenship rights for the poor, wherein they are not granted the
right to vote or a ration card and therefore, are unable to exert influence on the
political and governance system.150 This compounds the problem wherein the
exclusion created by the insecure land tenure further reinforces exclusion from
the political and urban system. This attitude of the state reflects the perception

143
Olleta, supra note 90, 31.

144
Bakker, supra note 20, 149.

145
Usha Ramanathan, Demolition Drive, 40(27) PW (2005).

E
146
Ramanathan, supra note 47.

147
Diana Mitlin, A Fund to Secure Land for Shelter: Supporting Strategies of the Organized

Poor, 15(1) nvi onment & banization 181 (2003).
E
r
U
r
148
Bakker, supra note 20, 124.

149
Mitlin, supra note 147.

150
Mitlin, supra note 147; Alternate Law Forum, Mumbai to Shanghai without Slums, available

at http://www.altlawforum.org/node/193 (Last visited on February 28, 2013).

January - March, 2013

 IMPLICATIONS OF WATER PRIVATIZATION 173

of these residents as rural migrants that may not be given the full range of urban
citizenship rights.151

The legal system has furthered this marginalization, with various

archaic laws providing for arbitrary slum demolitions with no provision for
effective resettlement.152 The attitude of the judiciary has been inconsistent,
with a majority of judgments reflecting the elitist notions of citizenship inter-
nalized by the state.153 However, in the landmark case of Olga Tellis v. Bombay
Municipal Corpn. (‘Olga Tellis case’), 154 the Supreme Court recognized the
importance of settlements of the pavement and slum dwellers under the right to
livelihood, read under Article 21 of the Constitution. Consequently it prohib-
ited arbitrary demolitions of their housing, requiring any demolition to follow a
reasonable and just procedure in light of the negative mandate of Article 21.155
This was reaffirmed in Ahmedabad Municipal Corpn. v. Nawab Khan Gulab
Khan,156 where the Court gave additional protection to the slum dwellers by
emphasising that they could not be treated as migrants, due to the constitutional
protection of free movement under Article 19(e) of the Constitution. Despite
these Supreme Court affirmations, most of the jurisprudence on slum evictions
and the right to land for the poor demonstrates a callous disregard for this sec-
tion of society. A host of Delhi and Bombay High Court judgments have termed
the poor ‘trespassers and encroachers’157 and have prioritized ‘cleaning up of
the city’158 over the right to life and livelihood of the residents. By declaring
the provision of resettlement as a ‘burden on the public exchequer’,159 they have
discounted the obligation of the state to provide secure housing for all.160 The
judgment of the Supreme Court in Almitra H. Patel v. Union of India161 best
reflects this attitude, wherein the Court likened the provision of land rights to a
slum dweller to rewarding a pickpocketer.

151
Darshini Mahadevia, Rutul Joshi & Rutool Sharma, Approaches to the Lands for the Urban

Poor, India (Centre for Urban Equity, Working Paper No. 2, 2009).
152
See, e.g., Slum Areas (Improvement and Clearance) Act, 1956; The Slum Areas (Improvement,

Clearance and Redevelopment) Act, 1971; The Maharashtra Vacant Lands (Prohibition of
Unauthorised Structures and Summary Eviction) Act, 1975.
153
See Ramanathan, supra note 47.

154
(1985) 3 SCC 545: AIR 1986 SC 180.

155
Id.

156
(1997) 11 SCC 121: AIR 1997 SC 152.

157
Lawyers Cooperative Group Housing Society v. Union of India, CW No. 267 and CM 464 of

1993, Delhi HC Court; Krishna Dhar v. GNCTD, WP (C) 3419 of 1999, December 14, 2005,
Delhi High Court.
158
B.L. Wadhera v. Union of India, (2002) 9 SCC 108: AIR 2002 SC 1913.

159
Lawyers Cooperative Group Housing Society v. Union of India, CW No. 267 and CM 464 of

1993, Delhi High Court.
160
Other judgments include Hem Raj v. Commissioner of Police, WP (C) No. 3419 of 1999,

December 14, 2005 (Del), Delhi High Court; Okhla Factory Owners’ Association v. Govt. of
NCT of Delhi, (2003) 8 DLT 517; Wazirpur Bartan Nirmata Sangh v. Union of India, (CWP
2112/2002); Pitampura Sudhar Samiti v. Govt. of NCT of Delhi, CWP 4215/1995.
161
(1998) 2 SCC 416: AIR 1998 SC 993.

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174 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
Such perceptions demonstrate why the concerns of the poor have
been ignored by both public and private water provision services. In this con-
text, we argue that the only manner in which the poor may be integrated in the
system of water supply is by the provision of land rights and secure tenure.
While this paper does not aim to suggest the modalities or the specific set of
property rights that must be granted to ensure security of tenure, we emphasize
on the importance of these rights for the inclusion of these citizens in the gov-
ernance of urban systems. Apart from the widely accepted impacts of secure
tenure on alleviation of poverty,162 official land rights overcome the roadblocks
of insecure status and lack of official records, allowing for the extension of
the networked water supply to the poor settlements. Private or public water
services may safely invest in extending the infrastructure to these sections of
the population. The UN HABITAT has also stressed on the importance of land
rights to ensure informal residents are seen to have the ‘right to the city’ and
enjoy the full range of citizenship rights.163 This in turn leads to inclusion of
these citizens in decision-making processes and shapes their access to politi-
cal systems, ensuring that their needs are addressed by governance bodies.164
Hence, aims of inclusive decision making and participatory governance in the
water sector, elucidated further in subsequent questions, can be given effect by
granting these rights.

At this juncture, it is important to emphasize that we do not aim

to suggest that the right to water or access to water supply must be contingent
on the grant of land rights. In fact, the normative content of General Comment
15 states that no household “be denied the right to water on the grounds of their
housing or land status”. While securing the right to water, through public water
sources or otherwise, is paramount for the state, we aim to propose secure land
rights as an additional measure to overhaul the larger institutional approach
and system.

A recent Delhi High Court judgment reflects a progressive ap-

proach wherein the Court mandates the state to provide effective resettlement
to evicted slum dwellers, emphasizing that they cannot be treated as ‘second
class citizens’.165 The introduction of the Rajiv Awas Yojana (‘RAY’) and the
Model Property Rights for Slum Dwellers Act by the Central Government
(‘Model Law’) in 2011 also demonstrate a positive shift in the state’s policies.
The objective of RAY is stated as, “Bringing existing slums within the formal
system and enabling them to avail of the same level of basic amenities as the
rest of the town”.166 While the content of the Model Law and the RAY has been
162
Meinzen-Dick, Property Rights for Poverty Reduction (DESA Working Paper No. 91,

December 2009).
163
See nited ation uman Settlement P o amme ( - ), supra note 73, 9.

U
N
s
H
r
gr
UN
HABITAT
164
Meinzen-Dick, supra note 162.


165
Sudama Singh v. Govt. of Delhi, WP(C) 8904/2009.

166
Government of India Ministry of Housing & Urban Poverty Alleviation, Rajiv Awas Yojana:

Guidelines for Slum- Free City Planning, available at http://mhupa.gov.in/w_new/RAY%20

January - March, 2013

 IMPLICATIONS OF WATER PRIVATIZATION 175

criticized,167 and the success of implementation of these centralized schemes
has been questioned,168 we argue that these policies may be instrumental in
marking a paradigm shift in the attitude and perception of the State and its
agencies.

C. THE NEED TO ESTABLISH A COMPREHENSIVE

REGULATORY FRAMEWORK

Advocates of water sector reforms and privatization argue for the

role of the state to be changed from a service provider to the crucial role of
a regulator, to ensure the best interests of both consumers and the managers
of supply systems.169 In fact, it has been asserted that failures in privatization
are in effect a failure of effective regulation by the state, either by contract
or by institutions.170 Regulation by contract171 remains problematic due to the
higher bargaining power of the multi-national corporations, leading to one-
sided contracts with vague targets and performance parameters.172 Ineffective
institutional regulation has directly been linked to governance failure, wherein
countries with weak governance capacity lack the ability to regulate the private
corporation.173

Let us first establish the paramount importance of effective state

regulation while privatizing public utilities, especially water. The supply of
water, particularly networked water supply is almost always characterized as
a natural monopoly.174 This could be due to various factors like expense of
transporting or duplicating of networks, owing to the unique nature of water

Guidelines-%20English.pdf (Last visited on February 28, 2013).

167
National Advisory Council, Draft Recommendations of the Working Group on Urban Poverty

on Reforms proposed for Rajiv Awas Yojana, available at http://nac.nic.in/press_releases/
ray_draft.pdf (Last visited on February 28, 2013).
168
The Urban Vision, Has JNNURM Succeeded in Addressing Urban Poverty?, November 8,

2012, available at http://www.theurbanvision.com/blogs/?p=1060 (Last visited on February
28, 2013).
169
Asian Development Bank, Water for All §37, 47 (2003).

170
Olleta, supra note 90, 84.

171
Supra Section V(C): Biased contract negotiations and nature of contract undermining

efficiency.
172
Sangameswaran, Madhav & D’Rozario, supra note 57 (Regulation by contract has been seen

as time consuming and ineffective, most often leading to renegotiation of contracts. This has
been seen in the case of Hubhli-Dharwad project in India, which was initially contracted for
24/7 water supply. However, soon enough the contract was renegotiated to provide merely 6
hours of water supply a day); akke , supra note 20, 95 (Moreover, sometimes companies set
B
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their original price and profit margin low so as to secure the bid, and then increase the price
through renegotiation, making regulation by contract ineffective).
173
Bayliss, supra note 25; Olleta, supra note 90, 84.

174
In the water sector, multiple networks competing for the same consumers are bound to have

superior infrastructure costs than a single networking system. Hence, owing to the peculiari-
ties of water in a supply network, there is usually a single network owner. Hence, it is widely
argued though there may exist competition for the market, there exists no competition within
the market. It is in this sense that the private agency that controls the water supply network is a

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176 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
in a supply network.175 Since there is little scope for competition, the operat-
ing agency may abuse the monopoly powers and is susceptible to inefficient
management unless regulated.176 Here, even profit motive does not necessar-
ily motivate the private operator to upgrade efficiency or ensure high quality
of output.177 In fact a regime of regulation is even more crucial in developing
countries to safeguard the interests of large sections of the poor, as the primary
goal of any private company will be ensuring economically viable operation.
The regulator then is obliged to ensure that collective interests of the poor are
not marginalized.178 Hence, good governance in case of privatized water supply
requires a robust regulatory framework that covers tariff control, checks on
water quality and environmental issues.179

The inability of regulators to enforce compliance on private com-

panies has been seen as the downfall of privatization worldwide. For instance,
escalation of water tariffs in Guinea post privatization has been attributed en-
tirely to the weak institutional and regulatory capacity of the government. The
regulator was powerless to make the private operator company comply with
its financial disclosure requirements, allowing the private firm to double its
profits, while the customers were being grossly overcharged.180 Similarly in the
case of Manila, the privatization agreement allowed for only minimal oversight
by the regulator.181 The failure of the regulator to enforce the provisions of the
agreement led to rate increases and fall in standard of water quality.182Similarly,
the dramatic failure of privatization in Bolivia’s Cochabamba has been attrib-
uted to the limitations of government capacity to effectively regulate private
sector participation.183 On the other hand, countries that have implemented pri-
vatization successfully, such as the United Kingdom, France and Spain, have
powerful regulators acting as the link between the consumers, the private sup-
plier and the state.184

A significant amount of empirical evidence, along with economic

theory suggests that perverse incentives are bound to arise with privatization
of network water supply, therefore it is appropriate regulation that becomes

monopolist. See nited ation uman Settlement P o amme ( - ), supra note

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gr
UN
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73, 166.
175
Bayliss, supra note 25.

176
a en akke , Good Gove nance in R e t uctu in Wate Su ly 35 (2003).

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pp
177
Id.

178
Halcrow Management Series, Public Private Partnerships and the Poor, 2002, available at

https://dspace.lboro.ac.uk/dspace-jspui/bitstream/2134/9672/2/PPP_and_the_Poor_-_2_
Implementation_-_Complete.pdf (Last visited on February 1, 2013).
179
Bakke , supra note 20, 34.

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180
C. Menard & G. Clarke, A Transitory Regime: Water Supply in Conakry, Guinea (World Bank

Development Research Group, Policy Research Working Paper No. 2362, 2000).
181
Hale, supra note 77, 769.

182
Hale, supra note 77, 789.

183
Nickson & Vargas, supra note 23.

184
See Bakke , supra note 25, 33.

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January - March, 2013
 IMPLICATIONS OF WATER PRIVATIZATION 177

the key determinant of performance.185 Further, it has been widely agreed that
the regulatory regime must be in place before the contract for privatization is
implemented to ensure fairness in the contract bidding and negotiation and
to ensure inclusion of pro-poor policies.186 However India is characterized by
regulatory vacuum when initiating public-private partnership for water sup-
ply. For instance, the Act constituting the DJB prescribes the functions of the
Board and authorizes it to de-centralize the services provided by it to private
entities.187 However, no supervisory power is given to the Board in case of such
de-centralization and no separate independent body has been set up to regulate
the private units.

Many argue that a strong regulatory regime proves to be a disin-

centive for private investment in the water sector. However, we suggest that an
optimal regulation would safeguard the contesting objectives of welfare and
profit.188 If a regulatory framework serves as a tool to remove the distortions or
externalities affecting investment, while maintaining the welfare measures, an
increase in the welfare effects may be observed. This argument can be substan-
tiated by examples of countries where private investment has been substantial,
despite strong regulation.

England and Wales adopted the privatization route in 1989, how-

ever soon the fallouts of equating liberalization and privatization were felt. The
state proceeded with a process of re-regulation, where the government fur-
thered its policies and objectives.189 Despite such regulation, the Office of Water
services estimates an average of £3.7 billion investment per year, compared
with an average figure of £2 billion per year during the 1980s and clearly at-
tributes it to the increasing success of privatisation in England.190 Similarly, in
France, the state enforces strict regulation through quality control and manage-
ment safeguards terms. Yet, the population served by private sector in terms of
water utility provision is more than 70%.191 Hence we assert that efficient state
regulation will support and strengthen, rather than deter private investment in
the water sector.
185
Bakke , supra note 176.

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186
Warwick Smith, Utility Regulators: The Independence Debate (The World Bank Group,

Private Sector Note No. 127, 1997).
187
The Delhi Jal Board Act, 1998.

188
T. N. Srinivasan, Analytical and Regulatory Issues in the Competition for Private Investment

Between and Within Developing Countries, available at http://www.econ.yale.edu/~srinivas/
AnalyticalandRegulatory.pdf (Last visited on May 21, 2013).
189
Karen Bakker & Ben Page, Water Governance and Water Users in a Privatised Water

Industry: Participation in Policy-Making and in Water Services Provision: A Case Study of
England and Wales, 3(1) nt. J. Wate 41 (2005).
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190
The Director General of Water Services, Annual Report 2004-2005, available at http://www.

ofwat.gov.uk/aboutofwat/reports/annualreports/rpt_ar_2004-05.pdf (Last visited on May 21,
2013).
191
Eduard Perard, Water Supply Public or Private, February 2009, available at http://gem.sci-

ences-po.fr/content/publications/pdf/Perard_WaterSupply022009.pdf (Last visited on May
21, 2013).

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D. ACCOUNTABILITY AND TRANSPARENCY

The governance of urban water sector in India is plagued with
institutional inefficiencies, poor operating performance and weak managerial
capacity. We argue that efforts of privatization will be futile unless govern-
ance of water sector is infused with transparency, managerial efficiency and
accountability. The 12th Plan Report192 emphasized that interventions of pri-
vate sector involvement would not be effectual until governance of utilities
is democratized and improved. The Report accentuated the need of reforms
to be directed toward institutionalizing transparency and making the agencies
involved in water supply legally accountable.193

The undermined accountability in water governance may be at-

tributed to the lack of a comprehensive legal framework based on common
principles, and the multiplicity of actors involved in water supply mechanisms.
The existing water law framework in India is characterized by the co-existence
of a number of different principles emanating from different legal instruments,
customary practices and judicial decisions that are not necessarily compatible
with each other.194 This complexity is further compounded by the fact that ‘wa-
ter’ falls within the State list of Schedule VII and hence every state is governed
by a distinct municipal law.195 Here, we would like to clarify the objection is not
to legal pluralism or diversity in the law,196 but to the lack of uniform underly-
ing principles, leading to a chaotic welter of legal instruments. In this scenario,
contracting out operation and management of water supply to private agencies
only increases the range of actors and makes it difficult for citizens to pin down
the obligation on a particular agency. The example of the Hubli-Dharwad pro-
ject demonstrates that the multiplicity of agencies and actors involved make it
impossible to attribute liability or hold any particular agency liable for lapses in
water supply.197 Hence, it is necessary for water sector reforms to address the is-
sue of institutionally reforming public utilities to make them more accountable

192
Steering Group on Water Sector, Planning Commission of India, supra note 13.

193
Steering Group on Water Sector, Planning Commission of India, supra note 13.

194
Cullet & Madhav, supra note 122, 511.

195
The problem lies not only in the fact that each State has a separate water law, but also that

different states have different institutional structures for service delivery. The three broad
institutional service delivery models prevalent in India today are Urban Local Bodies (for
instance in Gujarat and Madhya Pradesh); City-Level Parastatal Bodies (for example the DJB)
and State-Level Parastatal Bodies (existing in Haryana, Rajasthan, Kerela etc). Such lack of
uniformity can undermine accountability in case of large-scale private sector involvement.
196
Joy & Paranjape, supra note 6.

197
The main actors involved in urban water supply in Karnataka involve the following- the ur-

ban development department that is the main agency for urban water supply schemes; the
Karnataka Urban Water Supply and Drainage Board that designs and implements water
supply schemes; the Bangalore Water Supply and Sewerage Board; urban local bodies that
regulate maintenance of all water supply schemes and the Karnataka Urban Infrastructure
Development and Finance Corporation which is the channelling agency for the schemes of
multilateral agencies. See Sangameswaran, Madhav & D’Rozario, supra note 57.

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 IMPLICATIONS OF WATER PRIVATIZATION 179

and bringing uniformity in existing water law before the advent of private sec-
tor involvement.

The other very crucial principle of ‘good governance’ for water

reforms is ensuring a free flow of information and making the decision-making
process transparent.198 For any institution to be accountable, it is necessary
that the decision-makers provide all the stakeholders, including the citizens,
a comprehensive information base.199 The Right to Information Act, 2005 is
a noteworthy success on this behalf; however we argue that its relevance is
limited on two counts. Firstly, international agencies and private companies do
not fall within the ambit of this Act, hence information regarding privatization
contracts with multinational companies may be immune. Second, there is no
system in place to ensure that the municipal bodies ensure dissemination of
all information on a regular basis. A glaring example of this is the DJB project
whereby the implementation of reforms had been a secret affair without proac-
tive consultation with the affected people.200 The Walkerton Inquiry Report201
recommends that all municipal contracts with external agencies should be
made public.202 This has been implemented in Melbourne where all service
contracts with corporatized agencies are made publicly available through paper
copies as well as on the internet.203 We argue for the similar institutionalized
accountability, open decision-making and active dissemination of information
to pave the way for success of privatization.

E. ENCOURAGING PARTICIPATORY GOVERNANCE &

STRENGTHENING ROLE OF LOCAL GOVERNMENTS
The 73rd and 74th Amendments to the Constitution heralded the
era of democratic decentralization for India, by which matters vested in the
state governments were devolved on urban local bodies and village panchayats.
Decentralization is one of the cornerstone principles of water sector reforms.204

However, existing trends in water management and the structure

of water supply mechanisms reveal that in practicality, water is far from being
a ‘local’ responsibility. The 1960’s saw the emergence and establishment of
parastatals for larger urban areas and expanding cities. Presently a number of

198
Bakke , supra note 20, 23.

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199
This is a widely accepted and acknowledged principle of good governance. See Bakke , supra

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note 20.
200
Koonan & Samat, supra note 6.

201
John Livernois, The Economic Costs of the Walkerton Water Crisis, 2002, available at http://

www.uoguelph.ca/~live/WICP-14-Livernois1.pdf (Last Visited on February 4, 2013).
202
Id.

203
nited ation uman Settlement P o amme ( - ), supra note 73, 42.

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204
Cullet, supra note 7, 74.

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180 NUJS LAW REVIEW 6 NUJS L. R ev. 147 (2013)

 
states in India205 have adopted the parastatal model, whereby this state level
body has the exclusive authority over the provision for water supply and sewer-
age services.206 The responsibility for capital as well as operation and manage-
ment lies with this state-level parastatal. Further, different states207 have also
proceeded to set up special purpose organizations whose mandate covers both
water supply and sewerage.208 These special purpose boards at the state level
have full and pervasive control over all aspects of water supply.209 In fact, most
times these bodies are formed such that their mandate and control is exclu-
sive, leaving nominal or no powers in the hands of the local government. For
instance, § 28 of the Karnataka Urban Water Supply and Drainage Board Act,
1973 expressly states that the local authority shall have no power to investigate,
prepare or execute any scheme without the approval of the State Board. Hence
we see, the expected devolution of powers to the local bodies has seriously been
diluted and most of the powers have been usurped by states, violating princi-
ples of democratic decentralization.

The crucial role of decentralization and involvement of local bod-

ies has been stressed upon not only under the Indian Constitution, but also at the
international level through policy documents, where the efficacy of water sup-
ply systems has been attributed to local government participation.210 Local gov-
ernance of water ensures accountability to the local residents and hence, is an
important foundation for the involvement of private players. Institutionalizing
decentralization and ensuring responsibility vests in the local bodies is, we
argue, a fundamental principle of ‘good governance’ in water reforms.

Another important facet of the decentralization principle is par-

ticipatory governance, i.e. ensuring that all beneficiaries and other stakehold-
ers are involved in the decision making process at all stages.211 The Dublin
Principles212 mandate that water management and development should be based
205
The States in India that have internalized the parastatal model as of 2011 include- Haryana,

Rajasthan, Kerela, Uttar Pradesh, Uttarakhand and Odisha.
206
Steering Group on Water Sector, Planning Commission of India, supra note 13.

207
See, e.g., Tamil Nadu (The Tamil Nadu Water Supply and Drainage Board Act, 1970);

Karnataka (The Karnataka Urban Water Supply and Drainage Board Act, 1973); Uttar Pradesh
(The UP Water Supply and Sewerage Act, 1975); Punjab (Punjab Water Supply Sewerage
Board Act, 1976).
208
K. C. Sivaramakrishnan, Drinking Water Supply: Right and Obligation in Wate and the

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a in ndia 260 (2009).
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209
Each one of the Acts for such boards provides that it is the function of such state level board to

regulate and develop water supply and sewerage.
210
nited ation uman Settlement P o amme ( - ), supra note 73, 140.

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211
Cullet & Madhav, supra note 122, 514; Steering Group on Water Sector, Planning Commission

of India, supra note 13.
212
The 1992 International Conference on Water and the Environment in Dublin set out a state-

ment on Water and Sustainable Development, which became known as the “Dublin Principles”.
The Dublin Principles have been adopted by numerous international, multilateral and bilat-
eral agencies, including the World Bank. See International Conference on Water and the
Environment, January 26-31, 1992, Dublin Statement on Water and Sustainable Development,
U.N. Doc. No. 37.819/H/D/Misc. (July 22, 1992).

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 IMPLICATIONS OF WATER PRIVATIZATION 181

on a participatory approach, involving users, planners and policy makers at all
levels.213 The need for user participation is premised essentially on the failure of
centralized schemes to deliver benefits to water users at the local level.214 In this
context, participatory governance is crucial for an array of reasons: it can make
decision-making more effective; it may lead to greater political acceptability of
decisions and most importantly, it fosters accountability.215 In fact, institutions
like the World Bank themselves have been actively promoting decentralization
and participation.216

An integral part of participatory governance in developing coun-

tries like India is pro-poor water governance whereby the urban poor must
equally be a part of the decision-making process as the urban elite: either
through representative political structures or through direct participation in
water management provision.217 We argue that the capacity of the marginal-
ized sections to influence decision making and their participation in water gov-
ernance is imperative to ensure that their interests are internalized. However
with Indian state’s approach of non-recognition of the impoverished sections as
elaborated upon earlier, any attempt at any stakeholder consultancy is almost
always limited to the ‘full citizens’218 and the elite. There is a substantial gap in
participation of those in dire need of access to water, evidenced by the example
of the DJB mentioned in the previous section.219

Participation to ensure efficacy of water reforms, is an umbrella

concept envisaging participation from policy planning and project design to the
implementation and management of water schemes.220 Hence, the lack of con-
sultation and even communication at the initial levels can be seen as a funda-
mental violation of the spirit of democratic decision-making. It is for this reason
we argue for water governance to internalize a democratically decentralized
structure to set the stage for successful and responsive privatization.

213
Another reflection of this principle is in Agenda 21 (which is a plan of action adopted by more

than 178 governments at the United Nations Conference on Environment and Development
(‘UNCED’) held in Rio in 1992). Chapter 18 of this Agenda emphasizes on the need for full
public participation. See United Nations Conference on Environment and Development, Rio
de Janerio, Agenda 21, June 3-14, 2001, available athttp://sustainabledevelopment.un.org/con-
tent/documents/Agenda21.pdf (Last visited on June 21, 2013).
214
Cullet, supra note 7, 75.

215
As identified by Karen Bakker in akke , supra note 176.

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216
World Bank, Water Resource Management- A World Bank Policy Paper, 1993, avail-

able at: http://siteresources.worldbank.org/INTWRD/214573-1111579063201/20424649/
WRMExSumof1993WaterPolicy.pdf (Last visited on February 5, 2013).
217
McGranahan & Satterthwaite, supra note 15.

218
Bakke , supra note 20, 27.

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219
Cullet & Madhav, supra note 122, 511.

220
Cullet & Madhav, supra note 122, 526.

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IX. CONCLUSION

 
This paper has been aimed at debunking the traditional ideologi-
cal opposition to privatization, and reorienting the debate to the core concerns
of water governance. The principal genesis of the entire opposition towards
privatization rests on a foundational assumption- that privatization of water
inevitably leads to commodification of the resource. The criticisms countering
privatization that we have discussed earlier, particularly the invariable tariff
hike and exclusion of the urban poor, although empirically proven, presuppose
that involvement of the private player necessarily entails the commodification
of the resource. In conclusion, we aim to illustrate that the debate against pri-
vatization has been misplaced, and propose a balanced consideration of water
as an economic resource as well as a social good.

The formulation of water as a pure economic good, advocated

by the neo liberal agenda, implies that water will be allocated according to the
purchasing power of individuals to ensure efficient market allocation, thereby
entailing principles of full cost recovery and elimination of subsidies.221 Anti-
privatization campaigners have denounced these policies, stating that such for-
mulation was inconsistent with the conception of water as a ‘public’ or ‘social’
good. They argue that water is a common resource, whose availability should
favour social well being, and therefore, water distribution must be public.222
Principles of market allocation will hamper access to the poorer sections of
society, converting citizens with rights to mere customers of private water cor-
porations.223 Evidently, the ideological overtones of the conception of water as
an economic good versus a social good have subsumed the debate on water
privatization.

We argue that this debate has detracted attention from the

unique nature of water as a non-substitutable and essential resource,224 and
one that has economic value.225 Important policy documents such as the Bonn
Recommendations for Action, demonstrate a middle path by recognizing that
‘water is an economic and social good’.226 The UN Commission on Human
Rights recognises that water is an economic good of great value, however em-
phasising that it cannot be treated like an ordinary commodity subject to free
221
Marin, Sandoval, Tagle, Sanchez & Victor Martinez, supra note 139, 97-100.

222
Marin, Sandoval, Tagle, Sanchez & Victor Martinez, supra note 139, 97.

223
Radha D’Souza, Nation v. Peoples: Inter-state Water Disputes in India’s Supreme Court in

Wate and the a in ndia 238 (2009); Koonan & Samat, supra note 6.
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224
Office of the High Commissioner for Human Rights, The Dublin Statement on the

Strengthening of the United Nations Human Rights Treaty Body System, January 14, 2010,
available at www2.ohchr.org/english/bodies/HRTD/docs/DublinStatement.pdf (Last visited
on February 28, 2013).
225
Bakke , supra note 20, 128.

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226
International Conference on Fresh water, Bonn Conference Report: Recommendations for

Action, December 3-7, 2001, available at http://www.earthsummit2002.org/ic/freshwater/
Bonn%20Recommendations.pdf (Last visited on June 8, 2013).

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 IMPLICATIONS OF WATER PRIVATIZATION 183

forces of demand and supply.227We similarly argue for a conception of water
that prevents the commodification of the resource, and recognizes both the so-
cial and economic value of water, in light of its unique nature.228 Such an ap-
proach allows the intervention of the private player, subject to the supervision
or regulation of public authorities, in light of the essential and basic nature
of water.229 As suggested earlier, establishing a strong regulatory framework,
creating democratic and accountable governance, inclusion of the poor in the
discourse on reforms, prevents abuse by the private player assuaging apprehen-
sions of water being treated as an exclusively economic commodity.

The middle path, advocated by this paper, is essential to balance

the requirement of sustainable water use with the goal of universal and equi-
table access to water. Blanket provision of private services, which eliminate
access for large sections of the urban population, is not the appropriate solution
for sustainable water usage. Similarly, under pricing of water leads to financial
crises of the water utility, resulting in inefficiency and maladministration.230
Therefore, the solution lies in implementation of suitable tariff policies, irre-
spective of private or public management, as has been done in Mexico.231

In conclusion, we elucidate this balanced approach through the

example of Porto Alegre in Brazil. The water supply system in the city dem-
onstrates that the embodiment of ‘good governance’ principles, as prescribed
above, can lead to socially equitable water supply, despite being privatized.
Here distributive privatization has proved to be efficient and inclusive, and at
the same time catering to concerns of sustainability, under a model of what is
termed as ‘participatory budgeting.’ Participatory budgeting is a process by
which citizens present their demands and priorities for civic improvement, and
play an influential role in budget allocations made by the municipalities.232The
Municipal Department of Water and Sewerage, the principal local governance
body, is largely inclusive having more than 1000 citizen registered as members,

227
United Nations Economic and Social Council [ECOSOC], Sub-Commission on the Promotion

and Protection of Human Rights, Report of the Special Rapporteur Mr. El Hadji Guisse,
Relationship between the Enjoyment of Economic, Social and Cultural Rights and the
Promotion of the Realization of the Right to Drinking Water Supply and Sanitation, U.N. Doc.
E/CN.4/Sub.2/2002/10 (June 25, 2002).
228
Bakke , supra note 20, 139.

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229
Relationship between the Enjoyment of Economic, Social and Cultural Rights and the

Promotion of the Realization of the Right to Drinking Water Supply and Sanitation, supra
note 227.
230
Budds & McGranahan, supra note 10.

231
Mexico has implemented a volume based pricing system that prevents wasteful consump-

tion, along with social tariffs and targeted assistance for disadvantaged groups. See Marin,
Sandoval, Tagle, Sanchez & Martinez, supra note 139, 121.
232
World Bank Empowerment Case Studies, Participatory Budgeting in Brazil, available at

http://siteresources.worldbank.org/INTEMPOWERMENT/Resources/14657_Partic-Budg-
Brazil-web.pdf (Last visited on February 13, 2013).

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and each citizen who is registered has equal rights and votes.233 Such partici-
pation accrues the benefits we have stressed upon earlier. In fact, the primary
empowering aspect of this model of participatory budgeting is the active par-
ticipation of low-income segments of the population in the decision making
process and also regular information disclosure fostering accountability. Even
if contracts are granted to private players, the details of the contracts and the
impacts of the services employed will have to be disclosed to the public. This
model has achieved considerable success in the form of piped water being avail-
able to 99.5% of the population of the city including the poor and vulnerable
which around a decade ago was 2%.234 In a city where a vast number of people
live in isolated slums, achieving such a result was possible because of the inclu-
sion of people in the governance and regulation of water.235

The second success of the water privatization system in Porto

Alegre lies in the implementation of the progressive policy of Social Tariff,
which grants the first 10 cubic metres of water at the price of 4 to the poor
and economically weak members of the society in addition to charities and
schools.236 After the initial allotment, water is provided at a base rate for the
sustenance and financing of the system. This is illustrative of the ‘middle
ground’ that we have proposed wherein the right of a person to clean water has
been given priority without jeopardizing the financial interests. Such a model
would encompass the efficiencies of distribution achieved by the private players
and the social objectives of and realization of the right to water.

To conclude, we assert that the water reform agenda in India must

not be misdirected by political agendas or ideological backings of the various
stakeholders. Instead, it must internalize the proposed solutions, by imposing a
non-derogable obligation on the state to ensure efficient and sustainable water
governance. The current opposition to privatization must be readdressed to ac-
count for governance concerns to ensure successful urban water sector reform
in India.

233
dete a ia & nd e Pa o o dei o, he a e fo P ublic P ovi ionin in Po to le e

O
M
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A
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ss
s
C
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T
C
s
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g
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A
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5 (2003).
234
Gianpaolo Baiocchi, Participation, Activism, And Politics: The Porto Alegre Experiment And

Deliberative Democratic Theory, 34, available at http://www.ssc.wisc.edu/~wright/Baiocchi.
pdf (Last visited on February 13, 2013).
235
World Bank Empowerment Case Studies, supra note 232.

236
Ma ia & Co dei o, supra note 233.

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