Category: infrastructure

Water privatization in Kundapur

A couple of years back, in a blog post (part of which also went into a project report), I’d talked about water privatization. I had said that it is a good thing even if it pushes up costs, because it now offers people the option to get piped water supply. The analysis went something like:

1. People who don’t currently have connections will now get connected. And once they are on the network, they have an option to get clean piped water.
2. For people who already have connections, their monthly costs will shoot up. Maybe double. However, given that the average water bill amount is quite low, and is an extremely small proportion of monthly expenditure. So small that even a 100% increase won’t have much of an impact.

It’s time to revisit that case, given that Kundapur, a coastal town in Karnataka has decided to privatize it’s water supply. To summarize, so far, this town was dependent on ground water. Now, they are getting water from the river Varahi. Residents have to pay Rs. 4000 for the connection (half of that refundable), and the monthly bill will come within Rs. 100, they’ve said.

There are two points to note here. Firstly, this is the first time that Kundapur is getting piped water supply. The second is that there is a huge up-front cost.

When I had talked about privatization giving the option of water supply to everyone, I had said that the costs should be structured such that the fixed charge is low or non-existent, and only usage is charged. This way, I had said, there won’t be any adverse impact on the poor (who are outside the system in the first place).

In this context, a financial restructuring of the Kundapur plan might be necessary. The TMC and the water supply firm will have to work out a scheme where they heavily subsidize the up front fee (to say about Rs. 500) in exchange for a higher per-unit charge for water. That kind of a structure would have several benefits.

Firstly, it would be far more inclusive and more people would be brought into the safe water plan. More people would be able to buy the option to get safe drinking water. Secondly, a higher variable charge will also result in more judicious consumption, which is critical for a limited resource such as fresh water. Thirdly, due to the changed payment structure, the heavy users of water (more likely to be the rich and upper middle classes) will end up cross-subsidizing the low volume users (usually the poor). Thus, the adverse impact on the poor can be brought down, and the people who wil have to pay more would be those who won’t mind paying a bit extra.

Of course, there is still a long way to go. The private partner who will handle the operation and maintenance is yet to be selected. There are also bound to be a large number of protests against the privatization itself. The TMC needs to get past that. Also, it seems to be the first time when such an exercise is being conducted in the country. So, other hurdles also can’t be ruled out.

Nevertheless, this outsourcing of operation and maintenance of water supply is a welcome concept, and if implemented and priced in the right way, might become a model to emulate in the rest of the country.

Cross posted at the Indian Economy Blog

not so janapriya

They were launched with much fanfare six years ago, and were touted to be the next big thing in easing Bangalore’s transport problems. “This is the way buses are run internationally”, politicos and bureaucrats proclaimed. “Why generally waste resources on a conductor, when the driver can do his work also?”

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Water privatization

, , , two others and I initially thought we are going to fraud our project in Infrastructure Appraisal, Financing, Privatization and Regulation (IAFPR). We decided that each of us would put in 4 man hours of work where we would each come up with 4 pages of report and put it together. It just so happened that in my four hours of effort, I got a fairly decent insight which I thought I should share with you.

from what i’ve read up over the last one hour, whenever a public utility provides water supply, a large part of the population (typically the poor) gets left out. however, those who get it get it at affordable rates. the left out have to rely on unsafe alternate sources for their thing.

now, when water services get privatized, prices shoot up. typically let’s say it doubles. however, the terms of contract, if implemented (and they have been in most cases), ensures water supply to 100% of the population, including the poorest.

what is the difference in the situation here? poor who had absolutely no access earlier now have THE OPTION of buying safe water, though at a high price. and who is paying for this option? it’s the haves. people who were anyways getting water, but who now have to pay extra for it. and most of them can actually afford to pay the extra amount (like i’ve paid a couple of bills for my dad, it’s of the order of 100 bucks. so a 100% increase won’t affect me too badly).

the only losers in this deal are the poor who anyway had access to water supply. they get no extra service, but at a much higher cost. if there’s some way in which these people can be compensated, water privatization is the way to go!

of course, one thing i forgot to mention, this scheme will work only if the entire water bill is variable, without any fixed components (else people who won’t want to exercise option would get screwed)

Given another exam in the afternoon I have to now translate this argument to more formal language and put it in a report in 15 minutes. Hope to do a decent job of it.

Transport Systems – A comparative study

I hope you didn’t get put off by the academic-sounding title of this post. It just so happens that I couldn’t think of any better title for it. Anyways, this post has been in the offing for a long time. I had first thought about writing on this subject on a bus ride from Madras to Bangalore 2-3 years ago, even before I started this journal.

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Airport Infrastructure

Today, we had a manager from a consultancy company talk to us about the airline industry. Apart from usual stuff like low cost vs full carrier, cyclicity of the industry, scope for consolidation, etc., one important thing that was mentioned is that most Indian operators have placed huge orders for aircraft. It is expected that by 2010, the number of aircraft in India would’ve grown by a factor of 4 (not exactly sure of this number).

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