Urban Water Sector Reforms in India: Financing Infrastructure Development Through Market – Based Financing and Private – Public Partnerships

Abstract

A huge population size, a rapidly growing economy and increasing levels of urbanization, coupled with the dwindling sources of freshwater, have made management of urban water supply one of the most important priorities in the development agenda of India. Water supply in India is mainly a responsibility of the individual state governments which in turn delegate powers to the urban local bodies for provision of water and sanitation services to people at the city level. Water utilities in India are grappling with the problem of poor and aging infrastructure, high levels of unaccounted-for water, intermittent supplies, poor water quality and low tariff rates. Apart from the dwindling flow of funds from the state governments and external donors, the main source of revenues for the utilities is water tariffs collected from consumers; however, the latter is rarely enough to meet even the operation and management expenses. Hence, faced with the challenge of financing water infrastructure development and eliminating the management deficiencies of water utilities, India has been actively involved in reforming its water governance system since 1990s through revision of its laws and policies. Learning from the experiences of the rest of the world, India has been encouraging private sector participation in its water sector as well as developing innovative means of market-based financing mechanisms. This paper aims to explore the water sector reform in India and uses examples from the states of Karnataka and Tamil Nadu to highlight the use of private-public partnerships and pooled financing mechanisms to augment water supply.