Rs 1,000 Crore? A River Is Yours

Maharashtra's water resources minister finds an ingenious way to raise the Rs 1,000 crore he doesn't have: put a river under the hammer.

The River Of Profit... And Loss

Maharashtra government's justification:

It doesn't have funds to complete construction of the Deogarh dam on the Nira.
The government has no option but to invite bids to sell the river and dam for Rs 1,000 crore.
The state will ensure that the private player provides water at reasonable prices.

Opposition to the government's move:

    * Private company will levy high water rates to recover Rs 1,000 crore, will cut off local communities
   from the river
    * Activists fear that it will divert water from irrigation to industry.
    * Only rich farmers will be able to afford water.
    * Tourism and water sports offered as an incentive could lead to less availability of water.

Maharashtra's minister for water resources, Ramraje Naik-Nimbalkar,is a busy man. After all, it requires considerable ingenuity and a lot of paperwork to try and sell a 208-km stretch of a major river—the Nira—and the Deogarh dam on it to the highest private bidder. The river up for sale runs through the districts of Pune and Satara and is likely to have a command area that could also feed Solapur and Sangli. This is Naik-Nimbalkar's novel plan to generate the Rs 1,000 crore—the minimum price for the river—the state does not have to complete the Nira-Deogarh project, envisaged in 1984 to irrigate farmland. It will be the first major privatisation of a river and a dam in the country where the private player can manage the river and supply water for irrigation and domestic use for profit on a bot (build, operate, transfer) basis.

The private player will invest
Rs 1,000 crore, finish the dam,
build canals. In return, he'll
control the river.

To set the process rolling, the Maharashtra Krishna Valley Development Corporation (MKVDC), which currently controls the river and is under Naik-Nimbalkar, issued an Expression of Interest (EoI). Cleverly worded, the EoI kept the "experience" of the companies which could bid open to generous interpretation—companies just needed to have worked on projects of a "similar magnitude". That means any player who has handled a Rs 1,000-crore project in any area eligible to bid for Nira.

On November 17, five companies—Ashoka Buildcon, IVRCL Infrastructure Projects, IL&FS, Shinde Developers, Indian Hume Pipes Company—responded to the EoI. All have either little or no experience in managing a river or building and operating an irrigation project as envisaged in the Nira-Deogarh EoI. Worse, some have never been even remotely involved in any water projects!

Water is a people's basic right,"
says a water activist. "How can
the state let anyone profit from it?"

Nira may not be the first river to be put on sale. Chhattisgarh's privatisation of the Sheonath river raised hackles in 2002. The proposed privatisation of the Nira-Deogarh project, however, beats it in sheer magnitude. At stake is nearly 208 km of the Right Bank Canal and 21 km of the Left Bank Canal of the project that will irrigate nearly 43,000 hectares of land. The Chhattisgarh government in contrast offered only 23 km of the Sheonath river.

The private player's role too was restricted to supplying water to the Borai industrial area. The sale of the Nira-Deogarh project, on the other hand, is all about supplying water for irrigation. Simply put, the private player will invest money and complete the construction of the remaining 5 per cent of the Deogarh dam, build 164 km of canals and put in place the entire water distribution network. In return, he will have complete control over the river, the dam and its water.

While there are crucial ethical issues involved when privatising something as basic as a water resource, the mismanagement of the Nira-Deogarh project by the Maharashtra government is shocking every which way. To cite a few instances:

Originally envisaged as a Rs 62-crore project, so far, nearly Rs 450 crore has been spent on it: Rs 196 crore in building 95 per cent of the dam, Rs 93.63 crore on canals, Rs 87 crore on acquiring land, Rs 21 crore on rehabilitation, and Rs 50 crore went on what's lumped as "other" expenses.
In 2000-01, the MKVDC estimated it required another Rs 910 crore to complete the project. Last week, Naik-Nimbalkar told Outlook that another Rs 1,000 crore has to be pumped in to complete the project. That is the least amount that the private company which wins the tender for the project will have to shell out.
Anyone who invests Rs 1,000 crore will have to recover the money as well as generate profits. Interest rates paid for loans taken to raise funds for the project will also have to be factored in.
By all accounts, it will take the private player several decades to recover the investment.

Which brings into focus the larger issue: how will the private company recover its investment and post profits when the Nira-Deogarh project's primary aim is to irrigate farmland? Will it mean that farmers, already reeling from several years of drought in the area, will have to pay exorbitant water charges fixed by the company? The government's EoI notes that "the investment made by the developer/consortium is supposed to be recovered through various means, viz, levy of water charges for irrigation and domestic use, fisheries development, tourism activities etc".

Naik-Nimbalkar is clear that MKVDC is in no position to raise the Rs 1,000 crore, and hence the move to privatise the river. Ask him what the farmers will have to pay for their water and he says the Maharashtra water regulatory authority will ensure the prices are "reasonable". But water charges, though critical, are not the only issue here.

The EoI also promises the private company a "reasonable rate of return" via contract farming through land owners. Obviously farmers, who were kept in the dark while the EoI was issued, are up in arms. Says Dilip Ghadge, an onion and sugarcane farmer in the Lonand taluka in Satara district: "What all this means is that the large companies will come and sit on our land while we are driven out. It will be the last nail in our coffin."

Satara-based advocate and water rights activist since 1980, Balasaheb Bangwan, is shocked at the proposed privatisation. "This is a drought-prone area where we have already had a major drought from 2003-2005. The privatisation of the river will break the farmer's back. How can a private company own the whole distribution network of the dam?" he asks.

Besides the economic devastation that this privatisation is likely to cause, there are the social and ethical dimensions that the government has chosen to ignore. "Water is a basic and fundamental right and it is the state's social obligation that everyone has access to it. How can you allow anyone to profit from it," asks Shripad Dharamadhikary of Manthan Adhyayan Kendra, and a water activist for nearly 20 years. "It also speaks volumes about the government's priorities since it doesn't want to spend money on irrigation," he says.

Dr Bharat Patankar, who built up the equitable water distribution movement Saman Pani Watap Chalwal over several decades in southwestern Maharashtra, is shocked at the government's move. He has already written to the prime minister.Ramaswamy Iyer, a former Union water secretary and an acknowledged water expert and author, has stated in unequivocal terms that water cannot be treated as a marketable commodity.

In his book Towards Water Wisdom, Iyer states that "it is doubtful if a life-right or even a use-right can be converted into a tradeable property right". According to him, "the economic rights of some must not be allowed to endanger the fundamental rights of others". As for making profits from water, he points out that "the principle of full cost recovery is applicable to economic uses but not to water as a basic life-support".

So, why is Naik-Nimbalkar pushing for the privatisation of the Nira-Deohar project? "I am from the area (Phaltan), so I know the needs of the people," he claims. "They need water," he told Outlook over the phone. Point taken, but water at what cost? He also says that he is simply implementing the government's policy of privatising water, issued vide a government ordinance dated July 15, 2003 (GR No. BOT/702 (425/2002)/MP-1).

Many water activists, however, say the real culprit is the World Bank. They allege it is the $325 million loan to Maharashtra for "improvements" in the water sector which is behind the proposed privatisation of the Nira. Strangely enough, a project appraisal report (No. 31997-IN) for sanctioning the loan is a "restricted document" which can only be accessed by those in the government in the course of "official duties". As a result no one knows the other plans drawn up by the World Bank for Maharashtra. So much for transparency.

http://www.outlookindia.com/full.asp?fodname=20071217&fname=River+%28F%29&sid=1&pn=1