Water Privatization
There is a op-ed article in the Chennai Edition of The Hindu today http://www.hindu.com/2006/03/22/stories/2006032202841000.htm
Reflecting the general leftish politics of The Hindu, the writer calls for a constitutional amendment in India to ban privatization of water. Latin American examples are liberally quoted.
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Barely 15 months ago, Uruguay made history with its referendum on the issue of water. The outcome was a first-ever in the world. Close to two-thirds of voters came out in favour of an amendment to their Constitution (now Article 47). One that would assert: “water is a natural resource essential to life.” Also that access to water and sanitation are “fundamental human rights.” And that “public service of water supply for human consumption will be served exclusively and directly by state legal persons.” (Which rules out a private takeover of water.) There’s a basis to that. In Bolivia, lack of clean water plays a role in the death of children under the age of five. Yet when the MNC Bechtel took over the water supply of Cochabamba city in that nation, it raised prices by 200 per cent. Whether people lived or died was of no concern. In Peru, as Sarah Grutsky found, “poor residents in Lima paid as much as $3 per cubic metre of water.” After World Bank and IMF policies were enforced in Ghana, she pointed out, “three buckets of water cost a family almost half of the minimum wage.” |
I don’t know enough about the Latin American situation to comment, but I assume the writer knows about our own backyard in Chennai. Even in relatively good times, water is scarce in Chennai. Government water supply is so pathetic that almost all citizens, rich & poor alike, buy water from private sources, carried by tanker trucks. If Chennai citizens were left to the tender mercies of the government, the only solution would be a massive depopulation of Chennai. So water is effectively already privatized in Chennai, but in a kind of quasi-legal way, with no enforceable contracts or well defined property rights over water.
Most of the problems of water in Chennai actually arise from the informal legal status under which the private water tanker operators function. This drives away credible long term capital and investment. With their capital at risk almost daily (the government could crack the whip and capriciously ban them any time), today’s private operators have to aim for the very short term. Lacking any kind of incentive to build a brand or stay around to serve customers longer term, the operators predictably ignore quality and consistency of the product they deliver. They price the water for the short term (on the age old principle “make hay while the sun shines”!), because there is no such thing as long term customer satisfaction for them - they simply don’t expect to be around.
They also lack the incentives to invest in long term, stable sources of water. So the entire business operates in a “fly-by-night” mode (literally so in this case). It is further exacerbated by the lack of defined property rights over water. In a more market oriented system, farmers will have tradable property rights over irrigation or ground water, with allocations based on the extent and the nature of the land owned. In the present system, a tanker operator can suck the ground water of an entire village on a small plot of land leased from one owner.
Instead of identifying such real problems, the writer indulges in predictable left-wing prescriptions. Just passing a constitutional amendment saying water is essential to life and therefore only the government has to provide it is the kind of “solution” that the left usually comes up with (while we are at it, why not pass a constitutional amendment to abolish hunger, by nationalizing all food production - oh wait, hasn’t that been tried before?)
Water is scarce in Chennai, and most of urban India. The only viable solution to allocating this scarce resource is the free market. With a fully legal private sector water system, Chennai residents can get more and better quality water at lower prices than they currently pay. A constitutional amendment to ban private water will simply drive the private water business further underground, raise prices even more, and cause an even greater deal of misery than exists today.