Water privatization

, , , two others and I initially thought we are going to fraud our project in Infrastructure Appraisal, Financing, Privatization and Regulation (IAFPR). We decided that each of us would put in 4 man hours of work where we would each come up with 4 pages of report and put it together. It just so happened that in my four hours of effort, I got a fairly decent insight which I thought I should share with you.

from what i’ve read up over the last one hour, whenever a public utility provides water supply, a large part of the population (typically the poor) gets left out. however, those who get it get it at affordable rates. the left out have to rely on unsafe alternate sources for their thing.

now, when water services get privatized, prices shoot up. typically let’s say it doubles. however, the terms of contract, if implemented (and they have been in most cases), ensures water supply to 100% of the population, including the poorest.

what is the difference in the situation here? poor who had absolutely no access earlier now have THE OPTION of buying safe water, though at a high price. and who is paying for this option? it’s the haves. people who were anyways getting water, but who now have to pay extra for it. and most of them can actually afford to pay the extra amount (like i’ve paid a couple of bills for my dad, it’s of the order of 100 bucks. so a 100% increase won’t affect me too badly).

the only losers in this deal are the poor who anyway had access to water supply. they get no extra service, but at a much higher cost. if there’s some way in which these people can be compensated, water privatization is the way to go!

of course, one thing i forgot to mention, this scheme will work only if the entire water bill is variable, without any fixed components (else people who won’t want to exercise option would get screwed)

Given another exam in the afternoon I have to now translate this argument to more formal language and put it in a report in 15 minutes. Hope to do a decent job of it.

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