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INDIAN SCENARIO
Urban Population
Rapid Urban Population Growth. 280 Million in the year 2000 (27.7% of total population). By 2015 it will be 32.5% of total population and it will reach 820 Million by 2051.
Major Challenge
How to keep the pace of infrastructure development in tune with the growth of the urban population.
Section 3
Learning From Other Countrys Experience Brazil is one country which has gone through many challenges in water sector and has finally emerged in improving the situation
Brazilian Experience
Early Phase : 1964 to 1971
National Housing Bank established in 1964 to implement urban development policy. Universal water supply was recognised as priority sector. Municipalities were given a role in the water supply. Municipalities formed autonomous departments or mixed ownership companies. Majority of the municipalities took the responsibility of water supply. Funding from BNH.
Weaknesses
focus was more on construction and expansion and less on operation part. highly centralized system. public involvement in the policy making was systematically warded off. The role of municipalities was reduced only to the signing of the concession agreement. With the end of military rule in 1985, the Housing Bank was dissolved in 1986.
Brazilian Experience Contd From 1964 to 1995, the water supply sector was dominated by public sector companies. Good results however a long period of 30 years accumulated a long list of problems.
Increase in physical losses. Insufficient commercial initiative. inadequate tariff policies and structures. lack of effective regulations. loss of billings and revenue. Overstaffing due to political interference. Delays in responding to opportunities for technical and administrative modernization. large operating costs. Lack of administrative continuity. Un-professional management. Challenges of mobilising the financial resources. The estimated investment requirement for Brazil in mid 90s to provide water and sewerage services were R$ 42 billion over a period of 15 years.
Luiz
Incio
Lula
da
Creation of a Ministry of Cities and the Council of Cities with the purpose of 'proposing goals for the formulation and implementation of national urban development policy, as well as monitoring and assessing its execution". To further promote Public Private Partnership, Federal Public Partnership Law was enacted in 2004. A private trust fund named FGP (Fundo Garantidor de Parcerias Pblico-Privadas) was created as a backstop facility that will guarantee governments financial commitments under PPP contracts.
Brazilian Experience Contd A new regulatory framework has been put in place in 2007 with the passage of Law No.11.445, known as Basic Sanitation Law Integrality of steps and transparency of actions based on information systems. Safety, Quality and Regularity. Municipality the focal point. The standard of service has to be well defined. The municipality has to establish user rights and obligations. Every aspect like planning, service provision, management, fiscalisation and regulation has the social control
Targeted Subsidy
Metering and billing mandatory for all. For poor the bill will be paid by federal district where the monthly consumption is up to 10 cubic meter. The system of targeted subsidy will improve the metered connection. This will lead to improved collection efficiency. PPP model has to vary from one city to another depending upon local conditions.
PPP models
Learning from Brazilian Experience Contd. Flexibility in Private Participation. there are no model approaches that can be adopted by governments for improving WSS services. The PPP model for each city has to take into account the specific conditions as well as the principal reform objectives of that city. Federal Guidance on PPP models. Setting up Standards on concessions that involve payment of subsidies to private partners. In case of India such standardisation of PPP in water sector is yet to be placed properly.
Regulatory Framework. privatization is not a sufficient condition to improve efficiency, unless coupled with regulation to curtain anticompetitive practices. Strive to Improve. Brazil has always looked back and has tried to improvise the policy to improve the water supply condition. Tariff parity between Public and Private sector Projects. The general perception in India is that private sector participation will increase the tariff and most of the groups resisting PPP give this logic. The experience of Brazil breaks this misnomer.
Learning from Brazilian Experience Contd. Cost Recovery. Full cost recovery with a rate of return of 12%. This provided enough capital for rotation and taking up new projects and expansion. Priority Sector. Water supply identified as priority sector. Government Guarantee. A private trust fund named FGP (Fundo Garantidor de Parcerias Pblico-Privadas) was created as a backstop facility that will guarantee governments financial commitments under PPP contracts.
Learning from Brazilian Experience Contd. Dynamic Database. In Brazil, the Sistema Nacional de Informacoes (SNIS) database successfully incorporates benchmarking within water sector. SNIS assist the Federal government in prioritizing water sector investments. Promoting Partnership between domestic and International companies. This type of arrangement help in building the capacity of local companies. Exploring Bond Market for ULBs. Multiple sources of funding including debt from financial institutions and capital markets. Listing of State Owned Companies in stock exchange.
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