Water privatisation -- Torrent of trouble -Sudhirendar Sharma

"How is it that water which is so useful that life is impossible without it, has such a low price; while diamonds, which are quite unnecessary, have such a high price?" — Adam Smith

THE FACT that 1.1 billion people, mostly in the developing countries, lack access to adequate clean water is reason enough for the growing water industry to rejoice. Estimated to be worth $7 trillion, the global water industry has assured itself of profits at least for the next 25 years, during which time the number of people without access to potable water will move closer to the incredible 3-billion mark.

Believe it or not, the growing water industry survives on the patronage of the water-stressed people. With odds stacked against them, the poor have little choice. At one extreme are the irresponsive governments that have repeatedly failed to sustain water supplies and at the other are the exploitative multinational corporations that have skillfully controlled the emerging water market. Under a shrinking international aid environment, governments are finding it hard to raise the $31-35 billion needed annually to provide universal access to water.

But this is not quite what the world had promised a decade ago at the historic Earth Summit in Rio de Janeiro. Northern governments have fallen short of their promise to contribute 0.7 per cent of their gross national product (GNP) annually to bring the developing countries at par. According to OECD, official development assistance dipped to $53 billion in 2000, down from $ 69 billion in 1992. Far from being any closer to the 0.7 per cent mark, actual aid spending as share of GNP had slipped to a shocking 0.2 per cent in 2000.

The World Bank and the International Monetary Fund (IMF) have been of no help as both seek to pursue policies that open floodgates for private investment in the water sector only. With national co-financing of World Bank water projects already at its lowest 10 per cent during the decade, the Bank made an already bad situation worse by demanding that the governments `slash spending, pull money out of circulation, and privatise public utilities'.
The World Bank has been assertive in its campaign. Water privatisation is one of the many conditions that determine the extent of loans under the World Bank's Country Assistance Strategy. Paraguay is the latest victim of this revised strategy as the Bank suspended a $46-million loan for not complying with the stipulated conditions attached to the loan.

However, for accepting its pre-condition to raise water tariff by 95 per cent, the World Bank had approved a similar loan of $110 million for Ghana in July 2001. By doing so, the Bank has made its intentions clear: Ensure `full cost recovery' and privatise public sector utilities. No surprise, therefore, that share of private investment to the total fund flow to developing countries has increased to 70 per cent in the last decade.

This is what the World Bank and its affiliated think-tanks were campaigning for the better part of the post-Rio era. Though they have been heavily criticised for their anti-poor policy advice, World Bank officials argue that increased cost recovery and privatisation will actually expand access to clean water. They are not alone in arguing a case for privatisation. The multi-donor World Commission on Water for the 21st Century is convinced that `if the poor have to survive they must buy water for their daily needs'.

But privatisation critics say the Bank's calculus is flawed on numerous grounds. Higher prices for water mean the poor have to use less or go without it. In Ghana, for instance, price increases have already forced many people to cut down water consumption drastically. Public health officials link such reduced access to increased health risks. In South Africa, enhanced water tariff forced people in the Kwagulu-Natal region to consume polluted river water instead — the resultant cholera outbreak claimed some 32 lives in 1999. Cut off from municipal systems, the poor are forced to buy water off the back of a truck and often get a diseased swill responsible for some four million deaths per year.
Protagonists of privatisation are not convinced. They contend that the poor manage to find money for water that can be parleyed into profits for reputable suppliers. In a bid to justify privatisation, a handful of studies are quoted to show that both rural and urban poor are willing to pay higher fees to have a reliable water supply. World Bank-sponsored studies indicate that urban poor people already pay five times the municipal rate for water in Abidjan, Cote d'Ivoire; 25 times more in Dhaka; and 40 times more in Cairo. However, it is not clear if poor can sustain paying the increased tariff for long. They might be paying so much that they can afford to buy cups of water to drink but not 40 litres per day, the minimum necessary to meet basic human needs on a daily basis.

By inefficient handling of water resources and by allowing the municipal infrastructure to crumble, governments the world over have made themselves and their poor citizens vulnerable to onslaught, both in content and design, by forces out to reap a huge windfall.

Because of bureaucratic mismanagement of the scarce resource, per capita water availability in India is down to 2,200 cubic metres per year, from a high of 6,008 cubic metres some 50 years ago. Cashing in on this decline — expected to plunge to an alarming low of 496 cubic metres per person per year in the next 25 years — is the mineral water bottle industry that has seen as many as 180 players in the market selling as much as 1,000 million litres of water each year.

While recession, structural adjustment programmes and other problems have undermined the ability of local authorities the world over to provide their communities with well-resourced integrated public services, MNCs have seized the initiative under a favourable donor environment. Leading water companies, such as Bechtel of UK, Vivendi and Suez-Lyonnaise of France, have made inroads into the developing world, as a result of contracts won under international loans, in return for `tied aid' from their governments.
If the recent violent protests in Bolivia and the emerging opposition in Ghana are any indication, the civil society resents privatisation of water.
Yet, there is no let down as governments in developing countries succumb to donor pressure for facilitating privatisation of their water utilities. Already, some 30 cities in Maharashtra, Karnataka, Andhra Pradesh and Rajasthan are bidding their respective municipal water supply to a handful of powerful MNCs specialising in water.

Tiruppur in Tamil Nadu and Hubli-Dharwad in Karnataka have moved closer to privatising their water utilities. New Delhi's water supply will soon be in the hands of Vivendi. The Ministry of Environment and Forests estimates that $65 billion would be required in water and wastewater sector over the next ten years and has consequently urged State governments to raise water tariffs every two years to become eligible for credit.

Interestingly, crucial decisions about water privatisation and cost recovery between donors and key government leaders are made behind closed doors and without the knowledge and consent of citizens. Forced to sign on dotted lines, democratically elected governments in the developing world are clearly at risk of survival on account of their reduced reliability.
Neither the donors (the World Bank or the IMF) nor borrowing governments are obliged to publicly disclose information about loan agreements. However, this is contrary to Principle 10 of the Rio Declaration that entitles individuals to access information and judicial proceedings, as well as the chance to be involved in decision-making. There are many such contradictions to be addressed.

Ten years after the Earth Summit, the steps towards a just and ecologically resilient world have been tentative, uneven and flawed. But the terrible events of September 11 have made `powers that be' realise the need for closer cooperation with the developing countries. It is clearer than ever before that the model of development based on principles of mass production and economic growth may, indeed, be driving the world to a danger less visible than terrorism but over the long run, more serious. As the world moves closer to the Johannesburg World Summit on Sustainable Development in September, national governments will have to confront businesses that are waging an offensive on many fronts to swing the sustainable development agenda in their favour. Unless countries are permitted to find their own solutions and keep such basic human services as water under their control, sustainable human development is not possible.
(The author is a water expert attached to the Delhi-based Ecological Foundation. He can be reached at sudhirendar@vsnl.net)