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  • Water: Will privatization work? - IV
    The fourth in a series of articles, D. Narasimha Reddy critiques emerging global policy advocacy which treats water as a commodity that must be priced.
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    Aug 2002: Subsequent to the Ministerial Declaration of The Hague on Water Security in March, 2000, the World Water Commission, Global Water Partnership, World Water Council and the World Bank, though acting differently, have been advocating global water management as a response towards the water crises around the world. However, there are several perspectives and implementation strategies which need closer scrutiny.

    Courtesy, Center for Resource Education, AP It is widely accepted that in view of the shortage of water (present and future), efficient usage is the only solution for better water resources management. However, the Dublin Principle of water said: "water has an economic value in all its competing uses and should be recognised as an economic good". Endorsing this principle, the crux of the vision of the multilateral financial institutions like the World Bank, as articulated in the World Water Vision, seems to be that "Water is now more a commodity than a natural resource."

    These assumptions are based on understanding that there are six principal drivers: economic growth, population pressure, technological change, social performance, environmental quality and governance and institutions. Water is required for life, food, health and development.

    Given such competing uses of water, the emphasis can be on technologies and institutions. However, there has been no discussion on technology transfer and the financial mechanisms to achieve that. In fact, at the Earth Summit, in 1992, there were intense discussions on global environmental problems (including water). At that stage and later on, developed nations and multilateral institutions such as World Bank and United Nations have pledged and agreed upon transfer of better and efficient technologies for resource management.

    The World Water Vision does not refer to urban and industrial usage of water, which degrades the water quality to the maximum extent, and also inefficient usage. This Vision says efficiency is achieved through pricing and privatization: pricing water will lead to equity, efficiency and sustainability.

    Analysing the present situation, the World Water Vision says that the current crisis in water management is due to institutional failure. In such a case how can privatisation (meaning high competition, assured market) of water (a life-giving important resource) lead to efficient management?

    Everywhere, even in the West, experience has been that privatisation has to be tempered with consumer awareness and activism, and hawkish public institutions. When there is a institutional failure all around there is no guarantee that private management will be efficient and competitive. Already, the powerful elite in several places is controlling water resources, illegally, but with the tacit support of the governments. This situation can be worse with legal privatisation.

    It is equally important to note that pricing does not automatically mean efficiency. If we take the case of oil, a natural resource, has the pricing led to efficiency? Even with taxes and exploitative pricing mechanisms, oil consumption is increasing and nowhere at managing level. Then how can water, essential for all life, be priced and expect that it will lead to efficient usage. The term efficiency itself is undefined and non-specific.

    The World Water Vision says that agriculture is the sector where water wastage is the maximum. Based on this it recommends water productivity, biotechnology and alternative cropping patterns as the solution. However, the discussion on water productivity, and promotion of biotechnology ignores the facts in Third World agriculture. Already, farmers due to several reasons have been raising crops which use the water to the extent it is available. Even in excess usage situations, water gets evaporated or sinks. The impact of excess water usage, if at all, is on the consequence of that usage and it does not make any difference on the quantity of water.

    Further, the World Water Vision says industrial and domestic sectors are subsidising the agricultural inputs (water, power, etc.). This is blatantly false. Firstly, even if there is enormous investment on irrigation structures, agriculture does not get to see that investment as cash. Secondly, irrigation or water investment is miniscule when compared with agricultural productivity in terms of employment, output, exports, taxes, economic growth, etc. Thirdly, all water-related investments were based on developmental function. In fact, now there is a need to emphasis on social and ecological or environmental function to balance the situation.

    Privatisation will make water a 'business of the few', unlike the universally accepted vision of `making water everybody's resource and concern'.

    The present trend in reforms seems to externalize social costs and internalise environmental costs (as demonstrated by the discussion on financial cost and economic value of water in the World Water Vision) - to talk in the language of economics. Is it so much because of environmental concerns and widespread awareness, or we moving inexorably towards a situation wherein having destroyed environment (through ignorance and externalisation) we are going to destroy the poor themselves (by externalising them) in the name of efficiency, equity, balance, etc? Because of this, NGOs and Labor groups have been critical of the Vision document.

    They have expressed serious concerns about the process and contents of the Framework for Action. Although there are some positive action points and recommendations, such as community-based rights, the mechanisms for integrating them into an overall process are flawed. The process is dominated by technocratic and top-down thinking, resulting in documents which emphasise a corporate vision of privatisation, large-scale investments and biotechnology as the key answers. The process gives insufficient emphasis and recognition of the rights, knowledge and experience of local people and communities and the need to manage water in ways that protect natural ecosystems, the source of all water.

    Liberalization of trade in water services could have a damaging impact on the global environment and poor people's access to a clean, safe water supply. The Friends of Earth, an NGO based in UK, claims that further liberalization is being pushed through the General Agreement on Trade in Services (GATS), one of the topics discussed at the World Trade Organisation (WTO) talks in Doha. Hannah Griffiths, Corporate Campaigner for FOE, stated that "private water companies are among the worst polluters" and that water privatization "has brought an increase in the price to the consumer, as well as allegations of bribery, corruption and unfair labour practices". The WTO denies that GATS requires privatization or deregulation of any service. So far no WTO member has made a GATS commitment on water distribution.

    The World Water Vision advocates global management, or globally devised strategy as the best for every region, country and situation. This is an archaic argument. It is widely acknowledged that concerns can be global, but solutions have to be local.

    The main objective of water management is `how people can obtain adequate and equitable supplies of water and energy far into the future, reduce the destructiveness of floods, and protect the watersheds from degradation'. More attention needs to paid to the social and ecological or environmental functions of water, if there has to be a balance in `all competing uses of water'.

    Coming up:
    • V - Concluding opinion.

    D Narasimha Reddy
    August 2002

    D. Narasimha Reddy is Executive Director of Centre for Resource Education, 201, Maheshwari Complex, Masab Tank, Hyderabad 500 028 India. He is also on the Board of the International Federation of Organic Agriculture Movements