Challenges to PPP in Water Management

Traditionally provision of water for drinking and domestic usage has been the domain of government but due to the pressure of increasing population, rapid urbanization and other developmental trends the government is struggling to fulfil this basic need.

 

This has led to government looking at Public Private Partnerships as a way to deal with the issue of water supply. But it is not as simple as just starting a PPP venture and the problem taking care of itself.

 

Although PPPs in water sector in India were started way back in 1990s, the progress of these PPP ventures has not been a smooth affair,Inspite of the government having instituted the National Water Policy of 2012 with provision intended for the privatization of water-delivery services.

 

So what are the reasons for such a situation? Why is successful implementation of PPP for water management in India proving difficult?

 

To understand more about the factors affecting successful private partnerships in water management we spoke to Mr. Arun Lakhani – MD Vishvaraj India,the first company to have successfully implemented 24x7 water supply to the city of Nagpur under a PPP model.

 

1.    Lack of Trust Factor:

In India there is a long standing bias against the private sector as the perception is that the private sector is always looking at making profits at any cost.

 

This inherent lack of trust is one of the biggest challenges facing PPPs in water sector in India. So even though the projects might get a go ahead with the support of the government, it usually ends up achieving limited success without the buy of the public in general.

 

On top of that, private companies usually demand commercial secrecy. This in turn means that the populace does not have access to crucial information. Such a situation can only harm PPPs in the long run.

 

"Private partners in PPP must put in place trust building measures that will eliminate the distrust factor" says Lakhani.

 

2.    Securing Finance Is Not Easy:

As a commercial entity banks offer loans to corporate entities at higher interest rate. The reason is that the private sector has a lot of risk associated with it which has often resulted in higher percentage of payment default.

 

In addition, it is generally the private partner who has a larger financial investment in the project than the public partner. Inability to raise adequate funding often leads to high risk, mismanagement and eventual failure of projects.

 

3.    Lack of Political Will:

Another key challenge facing the PPPs in water sector is the dynamics of politics. There is no denying that political will plays a very crucial role in determining the success of PPP projects.

 

To understand this challenge we don’t need to look too far. One of the prime examples of positive political will is the Alandur Sewerage project.

 

The municipal chairman had personally pursued the private sector to become a part of the project. Backed by strong political leadership, support of opposition parties and the public resulted in a successfully completed project inspite of various hiccups during execution.

 

On the other hand, we have the Pune Water supply project. The project, which even after fulfilling the government regulation, did not happen thanks to change in national and local political landscape.

 

4.    Low Entry Barrier:

The entry point for private partners in water sector PPPs is quite low. As a result of this, inexperienced private players enter the PPP domain which, instead of benefitting the country, has only resulted in failure by encouraging the emergence of unorganised and unqualified players spoiling the market for the experts.