Note to the readers: This is a mildly edited transcript of the talk given by the author at the World Without World Bank Campaign Week in 2021 at a panel titled “Privatisation, Commodification and Corporatization: Real Agenda of the IMF and the World Bank”. The author would like to thank Sonal Raghuvanshi for transcription and editorial support.
Thank you for this opportunity to share my understanding of the degree of privatisation and commercialisation pushed by the World Bank and its sister organisations promoting Public-Private Partnerships (PPPs) in India. To begin with, in the next few minutes, I will be discussing the World Bank Group’s project strategies, loans, etc, promoting privatisation and commercialisation in the Indian context, with a focus on urban development and probably if there’s enough time, I’ll briefly also touch, as part of my current work, on the World Bank’s role in the renewable energy sector with a focus on the solar power, specifically.
Connecting the dots
Just to go back a little, post-1990s when the Indian economy was going through the liberalisation process, the Bank took the opportunity to push several sectoral reforms, restructuring, and privatisation projects across the country. It is important to note that this whole idea was underpinned significantly by the Bank’s role as a knowledge provider and generator. The knowledge production aspect was also one of the key strategic principles of its interventions in the country. The Bank’s country strategy of 2004 for India clearly identified that the World Bank Group’s program priorities will retain considerable continuity with the 2002-04 Country Assistance Strategy (CAS), and the emphasis will be on promoting private sector-led growth. And this has been a continued priority area for it in the years to follow. This focus on the private sector continues to be one of the main pillars of the Bank’s CAS in India in the coming years. The ‘World Bank Group Country Partnership Framework for India (FY18-22) notes that the “Country Partnership Framework (CPF) will carry through on lessons learned from the preceding country partnership strategy” and “delivery of development results depends more on the length and depth of WBG engagement than the amount of financing”. Let us take a closer look at the water sector in India in terms of what the World Bank engagement has meant and the transformations it has led to in the last couple of decades.
In the water sector, the major intervention from the Bank to privatise and commercialize began with a comprehensive and wide-ranging review of India’s water sector through the India Water Resources Management Sector review. This review was initiated in 1996 and was a sector-wide program. Its purpose was to collectively assess and establish a reform agenda and action plan for India’s water sector. The review was published in the form of six reports, including one on intersectoral water allocation, the second one on planning and management, the third one on groundwater regulation and management, the fourth on irrigation, the fifth on rural water supply and sanitation, urban water supply, and sanitation and the sixth report was a synthesis of all the above reports.
Interestingly, in 2003, these reports along with the Water Sector Resources strategy for 2003, which was adopted for India by the Bank, emphasised aspects like private sector participation, tariff rationalisation, market-oriented approach, and credible water entitlement which probably has been the ultimate objective of the Bank. Post-1990s, we also saw a very important shift in the way the World Bank interventions were actually happening in India. In the pre-1990s, there were mostly direct loans for specific projects, but in the 1990s there was a shift and this was more of a sectoral approach for reforms and restructuring loans from the Bank’s side and the Bank was also dealing directly with the states compared to its earlier interventions of financing specific infrastructure projects in the water sector.
This followed a series of Bank loan projects to several states like Maharashtra, Madhya Pradesh, Uttar Pradesh, Rajasthan, Karnataka, and others to restructure the water sector. State after state in India has signed agreements with the Bank to receive such loans and restructure their water sectors agreeing to various conditionalities being imposed by the Bank on these democratically elected state governments. These included increasing private sector participation or public-private partnerships in the delivery of water services, rationalisation of tariffs based on user-pay principles, bringing in regulatory mechanisms and commodification of water as a resource.
When one closely looks at the loan documents of these projects, they show that the Bank was keenly pushing recommendations to bring in the private sector and service delivery in operations and maintenance and revenue collection. It was also pushing for the closing of public departments and retrenchment of public servants, an increase in tariffs, and many other such conditionalities. It is important to note that these loans came with the conditionalities like bringing in new water regulatory authority legislation within the states passed by the state assemblies within a given timeline, as also mentioned in the new loan documents. As of now, in India, we have the regulatory authorities in states like Maharashtra and Madhya Pradesh. They have been formed and the legislations have been passed by the state assemblies to bring in these regulatory authorities. In other states like Uttar Pradesh, Gujarat, Arunachal Pradesh and Punjab there have been reports that the processes to form these regulatory bodies have been in motion.
Along similar lines to the electricity regulatory authorities, the water regulatory authorities have been given powers to allocate water resources, optimize their use, and set tariffs among many other powers and functions. Many of these authorities are not fully functional, but nonetheless, these structures exist. One way or the other, we’ll find these authorities pushing their powers in the coming future as and when there is a suitable and popular space for them in the country. And the important part is also that the formation of these authorities has helped the local representatives and the state governments to decouple the whole decision-making processes in the water sector from the political processes.
In addition to these kinds of loan projects, the Bank and its private sector arm the International Finance Corporation (IFC) have also been financing urban water supply projects to bring in the private sector for service delivery in cities like Delhi, Nagpur, Hubli-Dharwad, and primarily, these are some of the model showcase projects, which the Bank wants to develop so that they can create replicable models in other cities. At present, if we look at the current status of these projects, there are serious questions, more than a decade later, about the achievements of these projects in terms of efficiency, private investments, cheaper tariffs, increasing access to the poor and the marginalised. These are the reasons that there have been serious anti-privatisation protests and movements across the country both nationally and locally from Narmada Valley to many other places.
Similarly, we also see there are several Bank loan projects that have been crucial in implementing private supply and PPPs in rural water supply schemes. In some cases, village clusters and groups have been formed to create commercial viability for these projects and then bring them up for tendering as PPP projects. In the previous years, the Bank supported Swajaldhara’s mission for rural water supply was implemented in several states starting from Maharashtra to Rajasthan, Madhya Pradesh, Punjab, Tamilnadu and many others. As has been documented in several studies the experiences of these private water supply projects have not been successful in rural settings. However, it appears that despite these not so successful attempts, it has gone a little further in terms of schemes to form clusters of villages for water supply projects through PPP mode which are more likely to increase the financial viability of the projects.
IFC is also instrumental in the formation of specific PPP cells in the central ministries for creating mechanisms, and transaction advisories for PPP projects in these ministries, from roads and highways to power, ports and many others.
Taking this a bit further from water to the other development projects, in 2005, India launched the Jawaharlal Nehru National Urban Renewal Mission which was focused on urban development projects in 65 cities across the country. The mission was from 2005 to 2012 and the initial layout for the mission was Rs 50,000 crores by the central government. So it was extended a bit further to complete some of the delayed projects, these urban development projects and the mission as a whole pushed privatisation and PPPs in urban services, including water sanitation, solid waste management, transport, and many others. This was done specifically through the reform agenda (mandatory and optional) that was signed by the local bodies under a tripartite agreement to access the central government grants under the Jawaharlal Nehru National Urban Renewal Mission to privatise and bring PPPs in urban services to access the grants, rationalisation of tariffs, implementation user charges for public services for new development projects in these cities. This central government mission consolidated the earlier piece-meal reform measures under one umbrella and brought out a set of 23 reform measures to be adopted by the states and urban local bodies to participate in the mission. There was a clear top-down approach observed where centralised schemes were used to bring in private players for urban services. And it goes without saying that the World Bank financing, as well as its policy recommendations, could be seen in what was happening under the mission as discussed in some of the loan documents as well. This program and its impacts on the local bodies, their finances, and the public service delivery by private payers have been critiqued widely. There have been questions raised by the civil society groups, citizens’ movements and other groups on this approach and its wider implications. So, there are clear indications that all is not well. But this has neither deterred the government nor the IFIs like the World Bank and IFC to continue with their agenda of deepening privatisation in public service delivery.
Since 2015, we have been observing new trends in urban development programs, namely the Smart Cities Mission in India, which is again running in 100 selected cities through the smart city challenge, across the country where the privatisation attempts have gone to much higher trajectories moving away from a sectoral to a city-wide approach. Because this has come in with a model of creating a city-level and city-specific, special purpose vehicle (SPV) companies to plan design, finance, and operate public service projects, in the urban areas across these 100 cities, it has led to a creation of a parallel parastatal structure to the municipal bodies. For this mission, the Government of India has allocated Rs 48,000 crores with similar contributions from the state and municipal governments. As per the mission guidelines, the rest is expected to be raised from local taxes, bilateral and multilateral loans or grants, municipal bonds, private financing and the sale of municipal assets
This approach has wider constitutional implications being that the third tier of representative democracy as given under the Indian Constitution, the municipal bodies are now signing tripartite agreements to transfer many of their constitutional functions and responsibilities to these newly formed SPVs. The municipal bodies are also now expected to raise financing for these SPVs to implement new development projects in the cities through various market and non-market mechanisms. The board of directors of the SPV are nominated by the government from its officers and the others are independent directors, in some cases from the private sector.
The Smart Cities mission has been called by several sections as the wholesale privatisation of urban development, governance, and financing for projects. And of course, the conceptual idea and some of the principles have come from the World Bank approach and recommendations to privatise the urban services. The Bank has not only supported the urban reforms projects financially but also brought in policy suggestions based on the knowledge that it claims to produce.
In the last year, we were also trying to see what the World Bank and IFC are doing in the solar energy sector and it’s been interesting to note that the same kind of processes and mechanisms are being taken further. Considering, solar is one of the much-hyped sectors in India at present, in the sense to achieve its targets under the Paris Agreement the idea is to implement mega renewable energy projects at a fast pace to achieve these ambitious targets. But here, this has taken a kind of a different direction altogether, in the sense that the World Bank is observed financing large scale mega solar projects, again, with the participation from private companies and IFC, acting as transaction advisor, facilitating investments and loans for these private companies, which are acquiring thousands of acres of common land, forest land in the countryside across the country to install these mega solar projects, with multiple implications on livelihoods, water and food security of the local communities.
The operational control and ownership of these projects are with these private companies with technical and financial support from the Bank and its sister organisations for long term project agreement periods. Subsequently, these companies also come to control the land and other resources around these projects. Broadly, these are some of the experiences and analysis of the Bank’s interventions in promoting privatisation and public-private partnerships in the country.
The picture is grimmer and will go into far more depth with the new asset monetisation plan that the government is coming up with alongside the sales and investment plans to base more revenues to invest in other infrastructure projects. But having said that, in the past years, we have seen success stories, though not much at the macro-level (in the national scene), but locally, at the micro-level, under some projects. There have been people’s mobilisation and resistance movements against these changes. Projects have been stalled because of the protest movements on the ground. The private sector’s inherent characteristics of profit-making even from essential public services make for a strong opposition that the private companies face on many counts on the ground.
In concluding remarks, I would like to leave you all with a couple of reminders about the statements that the World Bank officials and advisors have been making about the high expectations from the private players. As has been recognised by some of the senior Bank officials, we need to understand that privatisation as a panacea to improve and reform public services has not been successful in several countries, including India across different sectors. Unfortunately, international financial institutions like the World Bank continue to follow the same path and are not learning from the mistakes in the past decades.
In 2014 the Bank’s water sanitation program reviewed five PPP projects in water supply in five cities in India. The review noted that the PPP projects in these cities have not been able to match expectations and objectives. However, it pushed the responsibility for the failure of these projects on the poor capacities of the local bodies to execute PPP projects and their financing. So it’s more of the same. It needs to be mentioned here that this was not the first time that such exercises resulted in these observations, in fact, some of the earlier similar exercises had come out with similar observations.
At one point, it was about resisting the Bank and I think we need to continue the critique and resistance of the Bank and its policies and programs in India, more so because the Bank is not learning from the experiences on the ground, as well as from its internal discussions, reports, and its own officials saying about what’s happening on the ground. But, the other important area that requires attention is the depth to which many of the Bank’s policies, its ideas, have now been ingrained into the national governments and at the state level. So, now the question is to build and strengthen a wider narrative to communicate the experiences and implications of these interventions to the larger public. And it has to happen at different levels, not only through engaging with the Bank but also with the locally elected governments and their representatives. Otherwise, we need to be prepared that it would be more of the same.
- ‘Initiating and Sustaining Water Sector Reforms: A Synthesis’, World Bank, Washington D.C. and Allied Publishers Limited, Mumbai, 1999
- Solar Power in India: A report on Rewa Ultra Mega Solar Power Project – https://www.cenfa.org/uncategorized/solar-power-in-india-a-report-on-rewa-ultra-mega-solar-power-project/
- Privatisation through Asset Monetisation – https://www.cenfa.org/uncategorized/privatization-through-asset-monetization/
- How Gujarat Fishermen Won US Top Court Ruling Against Global Funding Agency – https://www.cenfa.org/media-coverage/how-gujarat-fishermen-won-us-top-court-ruling-against-global-funding-agency/
Centre for Financial Accountability is now on Telegram. Click here to join our Telegram channel and stay tuned to the latest updates and insights on the economy and finance.