Natural Resources

Price on water

Print edition : May 31, 2013

Water that has leaked out of a Kerala Water Authority pipeline is the 'source' of drinking water for this family near Thiruvallam in Thiruvananthapuram. The government's latest order does not mention supplying water to the housing colonies and small communities. Photo: S.Gopakumar

The Malampuzha dam in Palakkad district, the lifeline of the State's rice bowl. Water from the 57-year-old dam was an essential part of the previous UDF government's privatisation plan. Photo: K. K. Mustafah

The UDF government in Kerala proposes yet again to allow private companies to exploit public water resources for private profit.

IT was nearly a decade ago that a Congress-led United Democratic Front (UDF) government in Kerala made determined efforts to allow private companies to draw water from some of the State’s major rivers, irrigation dams and groundwater sources on long-term lease and to make profits out of selling treated water.

Among the water sources identified then were the Periyar river and the dam on the Malampuzha river. Both the rivers, already under stress, were lifelines for lakhs of people. Had the projects been implemented, they would have been severely affected.

Protests followed, and these “investment projects” which had been presented at the first Global Investors Meet (“Rivers for sale”, Frontline, January 31, 2003), were reluctantly dropped by the then UDF government.

Now, in an equally controversial move, another Congress-led UDF government has issued two executive orders that could lead to a large share of the drinking water supply in the State falling into the hands of private players.

The government has also introduced a Bill in the Assembly to establish a Water Resources Regulatory Authority, a move widely perceived as yet another sign of an extensive hike in the price of water in the near future.

The Bill describes the Authority as a three-member panel which will, among other things, establish a new “water tariff system and fix criterion for water charges for different users such as domestic, irrigation and industrial, at different levels”. Tariffs are to be fixed on the basis of “the cost of project management, administration, operation and maintenance” of the individual water resource project.

The government’s grand purpose is yet to be revealed completely. But this much is certain: it plans to establish a limited company, with 51 per cent equity participation from the private sector, for the supply of drinking water across the State. The role of the new company vis-a-vis that of the Kerala Water Authority (KWA), the autonomous agency entrusted by the State legislature with the running of water supply and sewerage schemes in the State without a profit motive, remains, at best, vague. It also appears that the government wanted the new company to become the “nodal agency” for distributing water and “ensuring 100 per cent coverage of potable drinking water in the State within four years”.

An order issued initially on December 31, 2012, said the company was being formed because “in spite of thousands of crores of rupees being spent, Kerala has not been able to achieve 100 per cent coverage of potable drinking water. This situation is aggravated by the increasing contamination (especially biological) of groundwater due to high density of population. This further leads to health hazards causing huge burden on the State exchequer.”

Therefore, it said, the government was giving “administrative sanction” for the establishment of a limited company that would function as a single nodal agency for “constructing, developing, maintaining and operating community-based water filtration and drinking water supply plants across the State.”

PPP model

The new company was to be established on the successful public-private partnership (PPP) model under which the Cochin International Airport Ltd (CIAL) was constructed in the 1990s. In this case, the government will have only 26 per cent of the equity and the KWA 23 per cent.

The order said that the company would provide “dedicated water supply schemes to housing colonies and small communities” through decentralised water supply schemes on a PPP basis. Initially, such schemes were to be implemented “to benefit the people of the coastal areas” and “wherever the KWA has no schemes at present”.

Significantly, the government order also quoted a report prepared by the Managing Director of the KWA on the formation of the company, which indicated that “the revenue of the company was to be from the supply of drinking water” and that “it was to pay the cost of raw water it utilised for supply, at rates to be decided by the State government”.

It also said that the KWA “can consider” bulk supply to the company at tariffs that shall be “different” from the existing KWA tariff. The “income” from such supply could be “shared among KWA and the company”.

The MD’s report, as quoted in the order, also said, strangely, that the prices at which water would be supplied by the company “should be made applicable to the KWA (for the same quality of water). If this is done, the “KWA can also supply water without private participation”.

It also said that “the company shall ensure 100 per cent coverage of potable drinking water in the State within four years on a self-sustainable basis”— that is, before March 2014 in all panchayats, before March 2015 in all municipalities, and before March 2016 in all corporations.

The Board of Directors of the company was to include the State Minister for Water Resources as Chairman and KWA MD and at least one senior KWA engineer “to safeguard the interests of the KWA and to ensure that there is no conflict”.

The order did not clarify whether the government approved of all the proposals in the KWA MD’s report, but, in the end, merely stated that “the government have examined the report in detail and are pleased to accord administrative sanction for the establishment of the company”.

Meanwhile, the Kerala State Water Resources Regulatory Authority law (first issued as an ordinance in November 2011) was introduced in the session of the State Assembly that ended in April. The government had to defer the passing of the Bill because of objections raised by the Opposition and some ruling Front members.

Opposition protests

Widespread protests by the opposition parties, environmental groups and other organisations followed, alleging that the provisions of the Bill and the order announcing the formation of a company were part of a blatant attempt of the UDF government to privatise and “commodify” water, a natural resource and public asset.

For example, while announcing his party’s plans to launch a mass agitation against the move, Pinarayi Vijayan, State secretary of the Communist Party of India (Marxist), the main opposition party in the State, said that the UDF government’s December 31 order had the effect of literally annulling the Kerala Water Supply and Sewerage Act passed by the State legislature in 1986. (That law established the KWA as an autonomous authority for the development and regulation of water supply and waste water collection and disposal in Kerala. It also removed the legal hassles in the way of funding water supply and sanitation projects in Kerala by global investors such as the World Bank, and led eventually to the gradual reduction of State funding for such projects.)

Vijayan said that consumers who were paying Rs.4.20 per 1,000 litres at present would have to pay the new company Rs.250 for the same quantity of water. “What will happen to the poor who cannot afford this water? The proposed company will mean not only privatisation but also extreme exploitation of water. This will lead to grave environmental degradation,” he said, after a meeting of the CPI(M) State Committee in Thiruvananthapuram. In the wake of the protests on the floor of the Assembly, on April 15, the government issued a revised order. But it too reiterated the administration’s resolve to form the company, and only changed its rationale for doing so.

It said the company was being formed because: (a) especially in the urban areas, a substantial section of people were resorting to large-scale use of packaged drinking water by private sector players, some of whom charge exorbitant rates and supply water of questionable quality; and (b) there has been an increased dependence on water supply through water tankers, “a situation which is often exploited by a set of unscrupulous people who supply water of suspicious quality and that too at high prices”.

Therefore, the revised order said, the government is convinced of the need for a company named “Kerala Drinking Water Supply Company Ltd” on the CIAL model, in which the government and the KWA will hold 26 per cent and 23 per cent of the equity respectively, “and balance of equity of the company may be from local bodies, beneficiary groups, residence associations, firms, individuals, etc”.

The second order made no mention of “dedicated small water supply schemes to housing colonies and small communities” and of catering to “people of the coastal areas” or “wherever the KWA has no schemes at present”. Instead, it said, the company would meet the “demand of the public, housing colonies, commercial establishments, industries, etc., for supply of quality drinking water through tankers”.

Moreover, the company “will also produce and supply packaged drinking water at reasonable prices”.

It also mentions a fresh set of sources from where the company would draw water: “abandoned quarries, ponds, brackish water sources, etc”. It also affirms that “under no circumstances the company shall draw water from sources which are used by the KWA for their water supply schemes”.

Unanswered questions

Both orders have been issued by the same senior official and have caused much disquiet and raised several unanswered questions. The second order makes no mention of the company becoming a nodal agency for water supply in the next four years. It is also silent on the alternatives to the controversial provisions in the first one, especially relating to the future ownership of the source water, the income-sharing method with the KWA/local body and, the most crucial issue of the price that the company would eventually charge from consumers for the water that it will draw from the listed non-KWA sources.

Will the local bodies lose their right of ownership of the water, be it “abandoned quarries, ponds or brackish water sources”? What will happen to the people who now depend on this water? Who will decide the price of the water that reaches the end user? What alternative will people who cannot afford the high price have for getting water? What is the guarantee that the government will continue to have control over the company’s decisions in the long run? What is the guarantee that the new company will be any different from the private operators now supplying water in tankers and in convenient packages—especially with regard to its profit motive?

The government move lacks transparency, and several questions have not been answered satisfactorily. Assertions in the revised order that the government “has no intention of privatising drinking water supply system in the State,” or that the role of the KWA will in fact be “enhanced to ensure that piped water supply reaches every household in the State by 2021 and 75 per cent of the households by 2018”, have not helped.

At the time of writing this report, the Opposition Left Democratic Front had announced its decision to launch a mass agitation against the proposed company. A writ petition has also been filed by a former Minister, K.K. Ramachandran, challenging the government order forming the company and claiming that it “was a violation of the right to life under Article 21 of the Constitution as it included the right of access to water”.

The government, however, has entrusted the KWA MD to draft the memorandum of association and the article of association of the company.

No doubt, the present UDF government has been as casual in its approach to forming the water supply company as its predecessor was a decade ago about proposing to allow private companies to exploit public water resources for private profits.

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