Private Water, Public Misery

By Ann Ninan
India Resource Center
April 16, 2003

Sometimes the story is all there in the numbers.

Tirupur, a thriving industrial center in southern Tamil Nadu, which trucks in 400 tankers of water daily from a 50-kilometer radius of the town, is being promised piped water by a private consortium. Tirupur, often called "T-shirt town" because of its enormous production of knitted cotton garments, accounted for 48 percent of India's knitted cotton exports in 2000. An estimated 200,000 to 300,000 workers, many of them

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migrants from poorer rural areas of Tamil Nadu, are employed both in the informal sector and in the town's 4,000 garment factories. Under the proposed scheme, the one billion dollar knitwear industry will receive 115 million liters per day (mld) of water. Tirupur municipality, which includes 60,000 slum dwellers, will get 26 mld, while 792 rural settlements in its neighborhood will share the remaining 36 mld.

The figures clearly show that industry is more important than people for the New Tirupur Area Development Corporation (NTADCL), which is behind a consortium of three companies executing the water and sanitation project. These are India's Mahindra & Mahindra, Bechtel, the biggest US water transnational corporation (TNC), and Britain's United Utilities. Yet, Jayalalithaa Jayaram, the chief minister of Tamil Nadu, while launching NTADCL's Rs 9.6 billion (US$200 million) project in June last year, averred that her government gives priority to drinking water.

Tirupur's private water project that proposes to "integrate water supply, waste management and effluent treatment system" is the first in a string of such schemes all across Tamil Nadu involving private funding in basic infrastructure. Indeed, the NTADCL project is a break with the past in India where water services have been considered a public utility.

Three reasons most often cited as justification for the privatization of water services in Tirupur are: regular and cheap water supply for the towns textile and manufacturing industry; improving the living standards of its poorest people; and reduction in pollution because water will be 'soft' rather than 'hard.'

The reasons for the polluted ground water in Tirupur are not hard to find. Every day, the textile industry uses 90 million liters of water and discharges 87 million liters of wastewater into a dry riverbed, from where it percolates into the underground water system. The ground water in Tirupur is undrinkable because it is very saline and polluted with chemical dyes. Additionally, over 50,000 tons of solid waste produced every year lie in heaps in and around the city. As a result of the polluted groundwater, tankers bring water from farms up to fifty kilometers away and many farmers have now given up farming and instead supply water to industry.

It is this situation that the NTADCL project claims to address. The project is on a Build-Own-Operate-and-Transfer (BOOT) basis with a 30-year time stipulation, at the end of which it is to be transferred to the government. Bechtel is in charge of the 55-km pipeline to deliver water from the Bhavani river into a complex system of 25 reservoirs, which will be constructed by the Indian company Mahindra & Mahindra together with Larsen & Toubro. According to the project document, United Utilities and NTADCL will run the joint venture at a "fixed operation and maintenance fee" that will be recovered entirely from Tirupur municipality.

Water- Commodity or Human Right?

Newspaper reports say that the Mahindra & Mahindra-led consortium has agreed to fix the rate at Rs 45 (US$ 1) per thousand liters (kl) per day, revealing that an agreement has been reached, but no one is telling how this is to be divided between industry and domestic users. A 1998 report states domestic consumers will be charged Rs 5 (US$ 0.10) per thousand liters per day while industry will pay the rest, but officials have not corroborated it. In contrast, Coca Cola in Pallakkad, Kerala pays 2.25 paise (US$ 0.00047) per kl for spraying and cooling, 3 paise (US$ 0.00062) per kl for domestic use and 7.50 paise (US$ 0.0016) per kl for processing!

Is water a commodity or a human right? Developing country governments that are under the charmed spell of the pro-privatization World Bank, Asian Development Bank and other multilateral organizations have come around to a consensus that water is a commodity. On the other hand, civil society groups firmly believe that water is a natural resource that belongs equally to all people and should stay a public utility. The split between the two was again out in the open at the recently concluded Third World Water Forum in Kyoto between March 16 and 23. NGOs, trade unions, indigenous communities and members of the International Water for Life Coalition walked out of the Financing Water for All plenary aimed at endorsing the controversial "Camdessus Report", written by the World Panel on Financing Global Water Infrastructure, a group from the banking, corporate and aid industries, formed in 2001 by the organizers of the World Water Forum. The panel's conclusions were that more money should be spent on water infrastructure, and that this money should be used to subsidize the TNC dominated private water industry to implement these projects.

Civil society groups present in Kyoto, deploring what they called "corporate welfare in the name of human rights" critiqued the corporate model of providing clean water to the 1.5 billion people who are without it, saying that it is all about capital, infrastructure, investments and risk, and little about people or the environment.

Indian groups cite water projects controlled by Bechtel in Bolivia and the Philippines as examples of what India should avoid. Bechtel took over the water supply in Cochabamba city, Bolivia, in end-1999. In the space of a few months the price of drinking water had risen by two and a half times. The reason was a government guarantee to the powerful water firm that user fees would remain the same in dollars, so every time the local currency fell the price would spiral. By January 2000, an aggrieved population had taken to the streets demanding the privatization deal be cancelled. The government had no choice but to give in, although Bechtel now threatens it with a $25 million legal battle for breach of contract.

Guaranteeing Profits and Opening Markets

Has the government of Tamil Nadu similarly guaranteed profitability to investors in the Tirupur project? One such hedge against risk is the creation before the commercial operation of the project of a "Water shortage fund." This special fund, created by the state government, will be parked in a public deposit account to be drawn by NTADCL. It will be large enough to pay the interest and operative expenses of the project in the event of a water shortage in the Bhavani river. Project authorities confidently state the fund is only of "notional" value because in the last roughly 15 years, the water flow level has consistently stayed above the NTADCL's requirements.

Finances for the project include both debt and equity funds. The total equity component will be borne by the state government, Tirupur Exporters Association and the central government via the Infrastructure Leasing and Financial Services Ltd. Loans from international financial institutions and deep discount bonds will also contribute to meeting the project cost. The US Agency for International Development (USAID) has provided loan guarantees for $25 million. According to the USAID website, this program "advances U.S. national interests: economic prosperity through opening markets." The US looks at this project as "Another outstanding example of the type of relationship between India and the United States that needs to be encouraged" and it was under the presence of the U.S. Ambassador to India at the time, Richard F. Celeste, that the project agreement was signed.

The investment has been secured, but the investors will not bear the liabilities in case of depletion of water resources and default on conservation. How does the government propose to guarantee the water flow in the Bhavani? In the Bolivian experience, and closer to home in central India's Chhatisgarh state where a section of the semi-perennial Sheonath river, studded with villages on its banks has been handed over to one individual, people are charged for collecting rainwater from their roofs or water from their wells. But pressure from civil society groups and left party politicians might have forced the government to rethink the project.

Sheonath River: Privatized River Becoming Public Again

Ajit Jogi, the Chief Minister of Chhattisgarh state in central India, has decided to return a river to its people. Five years ago, water supply from a 23.6-km stretch of the semi-perennial Sheonath river was handed over to local entrepreneur Kailash Soni. Now, newspapers have reported that Jogi has asked the state's Advocate General and water resources department to examine how best to terminate the contract with Soni's Radius Water Industry.

The 1998 project, the first case of water privatization in India, which gave Soni a 22-year (renewable) "concession", was signed when Chattisgarh was a part of Madhya Pradesh, its western neighbor. Jogi, who is the first chief minister of the resource-rich state, said this April that his government was willing to pay any price to terminate the scheme called Rasmada. Water activists from groups like the Rashtriya Jal Biradari (National Water Fraternity) and the Jal Swaraj Abhiyan (Water Rights Movement) and the left political parties have been protesting the privatization of the river, saying it violated the basic rights of people over natural resources. Water is categorized under common property resources in India.

Since the Rasmada scheme was commissioned in April 2001, villages on the banks of the stretch of river ceded to Soni have no rights over its water. Fishing is unauthorized activity here, so is diverting water to irrigate fields. Soni has a monopoly on the water supply in an 18-km radius covering the Borai industrial area, close to Durg township. He supplies water to the Chhattisgarh State Industries Development Corporation (CSIDC), which has bulk buyers in distilleries, sponge iron units and thermal power plants (for instance, the Bhilwara group's Hindustan Electro-Graphite Industries or HEG). Currently, the scheme can supply 30 million liters per day to the CSIDC.

The Chattisgarh government's announcement that the scheme is constitutionally illegal is bound to create consternation. The National Water Policy, unveiled in 2002 by Prime Minister Atal Bihari Vajpayee's government, envisages private sector participation in "building, owning, operating, leasing and transferring of water resources facilities." The government has also announced a tax holiday of ten years, not just for the implementing agency, but for investors too. In a speech to the National Water Resources Council last year, Prime Minister Vajpayee said "the cornerstone of the new National Water Policy should be an explicit recognition that water is a national resource and ... the policy should also recognize that the community is the rightful custodian of water," but his government's water policy is unembarrassedly catering to corporate interests.

Typically, development institutions have answered people's lack of access to safe drinking water by instituting "user-pays" systems by privatizing community assets and effectively handing them over to the global water industry. Ahead of the Kyoto conference, Tim Connor from AID/WATCH, which campaigns against private participation in essential water supply, said the policy is being pushed through in three ways: imposing it as a condition of loans and debt relief; bankrolling water TNC's in preference to public enterprises; and persuading governments like in Ghana to sell water utilities to reduce national debt in 2001.

"Globalization Challenge Initiative", a Washington-based NGO conducted a review of IMF loan policies in 40 countries for the year 2000, and found that 12 agreements contained conditions imposing water privatization. These were mainly countries in Africa; the smallest, poorest and most debt-ridden nations.

Water Privatization Wave

By 1999, Chennai, Pune, Bangalore and Hyderabad, were among a few urban centers in India that successfully bid to attract private participation in the water sector, extraction, supply and billing of water charges. Delhi will soon become part of the infamous water corporation Vivendi's giant network of 110 million customers in more than 100 countries. In January 2003, the head of the public utility in the Indian capital said privatization "is to take place soon." Indian authorities are rushing to offer management contracts or grant of concessions to private water firms.

Among the private water supply schemes in the pipeline along the lines of the project in Chattisagarh are the ones at Borgaon, Madhya Pradesh, and Vishakapatnam, Andhra Pradesh. Studies are being done in a number of places to show how much water-starved consumers are willing to pay. World Bank sponsored studies indicate that the urban poor already pay five times the municipal rate for water in Abidjan, Cote d'Ivoire; 25 times more in Dhaka, Bangladesh; and 40 times more in Cairo, Egypt.

The modus operandi is clear -- neglect development of water resources, claim a "resource crunch" and allow existing systems to deteriorate. The poor and marginalized residents of Tirupur who have been hardest hit by scarce clean water due to industrial pollution, will be most affected by the private water industry since water will become a commodity they can ill afford.

Ann Ninan is a Delhi based freelance journalist.

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