| What are the problems with Delhi's water supply system? What does the project aim to do? How will the project implement these measures? How will the operators be chosen? Will this amount to the privatization of DJB? Why do we need to bring in outside companies? How will the operators be held accountable? Will there be an independent audit? Will tariffs rise? Will water reach the poor?
At what stage is the project? How will the proposed project benefit the people of Delhi? What was the Bank’s role in the consultancy award by DJB to PriceWaterhouse Coopers (PWC)? What are the problems with Delhi’s water supply system? Despite having enough water, Delhi’s water supply is erratic and unequally distributed. Delhi is well endowed with water: it has more than 200 litres of water per capita per day (lcpd). However, its citizens receive water for only a few hours a day, while less endowed cities in other developing countries like Jakarta and Colombo provide water 24/7. Many cities in sub-Saharan Africa also provide better services to their citizens with much less water.
Inefficient distribution leads to a huge loss of water. As much as 40 percent of the city’s water is lost, mostly due to old and leaking pipes, as compared to an international best practice of less than 10 percent. Detecting and plugging these leaks is difficult when the water supply is intermittent.
Empty pipes pose a serious public health hazard. An erratic water supply is a major public health hazard as water can be dangerously contaminated each time the pipes are empty and pollutants are sucked in. It is internationally acknowledged that the best way of keeping water safe during distribution is to ensure that it keeps flowing through the pipes on a regular (24/7) basis.
Overflowing sewage pollutes both soil and water. The city’s sewerage network has not been maintained. As a result, silted and blocked sewers cause raw sewage to overflow into open drains, ultimately flowing into the Yamuna and converting the river into a fetid sewer. At the same time, wastewater treatment plants operate below capacity as they do not receive the volume of sewage they are meant to treat.
Essential data is lacking. Most performance data are currently rough estimations. The paucity of data on DJB’s operations leads to inadequate monitoring and makes it difficult to hold the utility accountable.
High costs and low revenues have made DJB bankrupt. The DJB is bankrupt. It is usually accepted that the utility distributes only about 60 percent of the water it produces, generates revenues from about 40 percent, and collects about 80 percent of its bills. Thus it generates cash revenues from only about 30 percent of the water it produces, as compared to 85 percent for reasonably well functioning water utilities. Unlike Mumbai and Chennai, and Dhaka in Bangladesh, DJB does not recover its O&M costs. Instead, it meets its large operating losses from an infusion of funds from the Delhi Government and stands indebted to the government to the tune of Rs. 6,000 crores or US$1.35 billion.
What does the project aim to do?
The Government of Delhi plans to implement the first phase of its improvement plan in two of DJB’s 21 zones. This pilot, if successful, can be scaled up to cover rest of the zones. In these two zones, the project aims to : Provide 24/7 water supply within the quantity of water currently available. This will be done by detecting and repairing leaks using modern technology, upgrading trunk mains and individual connections, where typically 70% of the leaks are located, and managing water pressure. Meters will be installed to improve monitoring of demand, as well as billing.
Bring piped water to the poor in resettlement colonies, slums, and JJ clusters whose people are most susceptible to disease and often have to fetch water from long distances.
Improve the operation and maintenance of the sewers and waste water pumping stations located in the two zones.
Improve DJB’s financial footing. This means reducing the high operating costs as well as increasing revenues. Reducing costs requires cutting down the high levels of leakage by the systematic rehabilitation and regular maintenance of the network as well as of individual connections. It also requires refurbishing pumping plants to bring down the high energy costs. Increasing revenue implies improving metering, detecting and regularizing unauthorized connections, and gradually adjusting tariffs.
Upgrade DJB’s capacity and improve customer service. DJB staff are to be trained to improve their capacity, customer service centers are to be opened, and a management information system put in place to effectively monitor operations.
How will the project implement these measures? In the first phase of the improvement plan, DJB envisages delegating the operation and maintenance of the water supply and sewerage systems in the two zones to experienced operators. This is to be done through two separate management contracts with DJB for an initial period of six years. Such delegation of operations and maintenance could improve managerial and technical practices in DJB by helping to inject private sector skills into the public utility. How will the operators be chosen? DJB will award management contracts to operators through an open process of competitive bidding. Before asking for bids, the DJB has clearly laid down specific qualification criteria for bidding companies. A key criterion is that companies should have developing country experience in dealing with specific performance indicators such as reducing water losses, converting erratic systems to continuous supply, etc.
Will this amount to the privatization of DJB? This is not a “privatization” of DJB. Under the proposed scheme all the water and sanitation assets will remain in the public domain. Moreover, tariffs will continue to be set by the Delhi Government, revenues will still be owned by DJB, and staff will remain employed by DJB. Operators will be accountable to DJB for achieving performance targets. The Bank is not proposing privatization of any part of DJB nor is there is a timetable for any privatization. As a matter of fact, at this time, the World Bank would definitely not recommend privatization. Why do we need to bring in outside companies? Upgrading a system to provide continuous water supply requires specific expertise. As developing countries across the world face similar problems, many companies have successfully tackled these challenges and have acquired the necessary experience. Bringing in operating expertise and know-how can therefore upgrade DJB’s operations and train the utility’s staff in management methods that are on par with world standards.
How will the operators be held accountable? Clear performance criteria will be established and recorded in enforceable contracts. DJB will pay the operators a fixed management fee for meeting the specified performance criteria. The management fee will be determined through an open, competitive process. Operators will be paid a bonus if they exceed the minimum criteria, and penalties will be imposed for poor performance. Operators will be contractually required to share part of their bonus with DJB employees seconded to their operations. Will there be an independent audit? Technical audits will be conducted by independent auditors. The auditors will be employed by DJB to review the operator’s performance against agreed targets. The auditor’s report will be a public document. DJB and the Government of the National Capital Territory of Delhi will involve Residents Welfare Associations and NGOs through the Bhagidari initiative to ensure that the social aspect of the audit is properly covered. Will tariffs rise? The pace of tariff increase is expected to be gradual, corresponding to improvements in service efficiency and delivery. This would mean that during the interim period of about five years, it is envisaged that the Delhi Government will have to provide operating subsidies to DJB to cover its operations and maintenance costs. Will water reach the poor? The proposed reform specifically covers the poor. JJ clusters in the two zones will have household connections through shared meters. The operators will also be obliged to set up a Poverty Outreach Unit in both zones and will be contractually required to improve water supply in poor settlements. At what stage is the project? The proposed project is still in its preparation phase. Consultations are underway on all aspects of the project incl. among others, technical, institutional, economic, financial, environmental and social aspects. Once these consultations are completed, the Bank will then appraise the project according to its standard procedures before making any loan proposal to its Board. Though the process of procurement of the operators has begun, it will be completed only after the project has been satisfactorily appraised. How will the proposed project benefit the people of Delhi? Continuous water supply will not only ease the burden on households and provide them with safer water, but will also reduce their costs on buying water from tankers, making extensive arrangements for water pumping and storage, and buying their drinking water or purifying it themselves.
Although tariffs are low by international standards, the cost of making alternative arrangements far exceeds the full cost of providing good quality service. Today, while the poor may be the intended beneficiaries of the low charges, they suffer the most from the poor quality of service that results. As the quality of service improves, customers should have to rely less on expensive “substitutes” such as boosters, storage tanks, and purification equipment.
What was the Bank’s role in the consultancy award by DJB to PriceWaterhouse Coopers (PWC)?
Some NGOs have raised questions about the Bank’s role in the award by DJB of a project preparation study to PWC between 1999 and 2001. The insinuation that the Bank attempted to favor PWC is completely unfounded -- on the contrary, this is an excellent example of the Bank’s close monitoring of the procurement process to ensure transparency and fair competition.
The original shortlist included only developed country firms; this is why the Bank asked that a firm from a developing country be included. In response, DJB included PWC India - based in Kolkata - which was the highest ranked such firm.
DJB evaluated the firms’ technical proposals and submitted its evaluation report to the Bank. Based on the information contained in this report, the Bank raised questions on the sub-criteria that were used to evaluate the proposals on the grounds that these did not adequately reflect the requirements of the terms of reference. The Bank arrived at this opinion after a thorough internal review and after seeking the opinion of an external consultant. Accordingly, it was decided between DJB and the Bank to invite fresh proposals from the same firms.
(In a consultancy contract, the terms of reference are the key as they define the objectives, scope of work, activities, tasks to be performed, respective responsibilities of the borrower and the consultant, the expected results, and deliverables from the assignment.)
When the Bank received DJB’s evaluation report on the revised technical proposals, it asked that one particular evaluator’s scores be removed from the evaluation as they were dramatically different from the others for a particular criterion. The Bank’s action, though uncommon, is not unique. Due to this distortion of the average score, only one firm had a score above the qualifying threshold laid out in the bid documents. On correcting the average by removal of this evaluator’s scores, three firms, including PWC and the original qualifier, passed. When the financial bids of these three firms were publicly opened, PWC won on the combined score because its financial offer was substantially cheaper than the other two.
We see this as ensuring a transparent and fair procurement process for a contract that is being funded with public money. Country Director Michael Carter's statement on the World Bank's role in the proposed project |
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