Public-Private Partnerships and Contract Choice in India's Water and Wastewater Sector

Abstract

Public provision of water and wastewater services in urban India has been a noteworthy failure. Open defecation, mixing of untreated wastewater with stormwater and drinking water supplies, and unreliable water services have added up to a severe health and economic crisis. Recent government measures such as the National Urban Sanitation Policy (NUSP) and a draft guideline on allowing Public-Private Partnerships are policy improvements. The success of privatization in extending coverage and health benefits across Asia, Africa and Latin America, coupled with moderate success in efficiency gains has led to widespread use of Public-Private Partnerships (PPPs) in the Indian water and wastewater sector. We analyze 163 water and wastewater PPP contracts over 14 years to identify drivers of a city’s decision to employ more (or less) private participation in a PPP agreement. Cities with larger populations, better PPP regulatory environments, regional party rule and lower sanitation scores accepted greater levels of private participation through PPP contracts. While post-award governance of PPPs remains a major challenge, understanding decision-making by the city administration and private investors allows planners to channel public and private funds to the right projects.

Keywords: Public-private partnerships, water, sanitation, India, JNNURM

JEL Classification: L95, L33, H54