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Mar 21 2007
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Water Privatization in Nepal: A Fiasco or A Solution?

Prabin Man Singh                                                   
Article No:104, February 13, 2007
Providing access to safe drinking water to all is being the prime target of each country's development goal as prescribes by the Millennium Development Goals (MDGs). The contentious issue is who will provide this basic service- public or private. The genesis and continuity of era of globalization and privatization provides the avenue for the dominance of private companies over public utilities in water service sector In many cities around the world, water services are being pushed for privatization by the multilateral development banks (MDBs) like the World Bank, the Asian Development Bank (ADB) and many bilateral donor agencies. Primarily, the development assistance provided by the MDBs and bilateral donors to the poor countries are tied with the condition for privatization of basic services. In the present context, Nepal has become the latest victim of this privatization drive by the MDBs. While Nepal is about to taste it's celebration on democracy, the Parliament has passed a resolution to privatize the government owned Nepal Water Supply Corporation (NWSC) on December 3, 2006 due to ADB pressure. Will privatization of NWSC resolve the supply of drinking water in Nepal?

Privatization First!

As reported in Kantipur Daily (January 10, 2007), Minister of Physical Planning and Works said that the water privatization act was passed due to ADB pressure. In Nepal, ADB put a pre-condition before the then Nepalese government to privatize the NWSC prior to its funding to the Melamchi Water Supply Project (MWSP) in 2000. The Nepal government succumbed to this ADB pressure. Now, the government is handing over the management of NWSC to a British multinational company, Severn Trent Water Co.

It is widely claimed that the NWSC is not competent enough to deliver water. Accordingly, it was recommended that the NWSC be handed over to private management. Does the private management guarantee the performance? How a deficit of 88 million liters per day (MLD) be matched by privatizing the service provider? What is the strategy to reduce 38 percent water leakage? The capacity of the private management to meet the demand is seriously limited. Is the performance of the private management is measured in term of revenue collection or delivering adequate and safe water at affordable price? These questions have never been answered in public domain.

If the NWSC is really incompetent, then the General Manager and other high level officers must publicly accept their incompetence and resign on moral ground. Instead, these high level officials by defending the reform policies that downsize the employee are ready to work under foreign private management. The NWSC employees are in an indefinite strike demanding job guarantee, after the privatization bid and water tariff, since a week and cut off water distribution to the Palace, the Minister Quarters and many other public places. The government is putting deaf ears on these demands from employee.

Amidst these activities, the Melamchi Board suspended the MWS Project reasoning illegitimate and unacceptable demands by the residents of Melamchi valley! Is this the real cause behind the suspension? Or, the project was suspended to pressurize the government to handover the NWSC to the private management. It is clear that the project will not go ahead until the private management takes the office. Members of Parliament publicly accepted that the ADB officials had pressurized the government to pass the amendments or to forfeit the MWS Project.

Post-Privatization Scenario:

A scenario is pretty clear that as the Melamchi project gets delayed and cost overrun; the private management will be benefited. The management will have strong reason to increase water tariff. The cost of the project is to recover from the consumers as per the 'full cost recovery' principle prescribed by the ADB in its water policy. The British multinational was alleged to overcharge two million pounds from its customers in 2004/05. And interestingly, the Severn Trent Water Co has got the contract being a single bidder. Will the regulatory body under the new management system is strong enough to identify financial discrepancies and impose penalty on the company?

The Company will increase the water tariff from time to time. The tariff was already increased by 15 percent and will increase by 35 percent soon. Certainly, only economic cost benefits analysis will not determined the water tariff rate. The rate must be politically and socially correct. Currently, 50 Nepali Rupees (NRs) per month for a minimum 10,000 liters and Nrs.15 per thousand liters for the consumption above the minimum level are charged. Un-metered households are charged NRs. 360 per month. In addition, 50 percent of the total bill is added as sewerage charge. As per the proposed tariff reform, the volumetric charge will increase to NRs. 19 for 2005/06 and NRs. 23 for 2006/07. And both minimum tariff rate and volumetric tariff rate will increase after 2007 and also volume will be reduced to 5,000 liters. Thus, consumers will have to bear a double burden of increased in water tariff and decreased in the minimum volume of water. Looking at the international experiences and proposed tariff reforms in Manila, South Africa and Bolivia, it is obvious that water tariff will soon be unrealistic and unaffordable to majority. By the end of 2007, the water tariff will increased by more than 150 per cent if above reform hold true. The ADB is also proposing a gradual elimination of all form of subsidies on water.

Human rights organizations and all other concerned organizations and individuals consolidate the campaign against privatization of NWSC. A public debate of privatization on water services must be initiated by the government. The Communities Party of Nepal (Maoist) has already shown its deep concern towards private management of the NWSC. The country is in a transition phase to embrace a new government in office soon. The decision to privatize water services should not be taken under any pressure and in a hurried manner. Amendments on water supply acts and policies must be tabled again in the Interim Statute and later to the Government.
 
[ Prabin Man Singh, an independent research scholar works on environment and International Financial Institutions in Nepal.



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