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CASE STUDIES

Title
PRIVATE SECTOR PARTICIPATION IN THE OPERATION AND MAINTENANCE OF URBAN WATER SUPPLY- THE EXPERIENCE OF AJMER (RAJASTHAN)

Sector
Water Supply

Summary
The Public Health Engineering Department (PHED) in Ajmer, Rajasthan, has privatized the operation and maintenance of the filteration plant, pipelines and pumping stations of the new water supply scheme from Bisalpur Dam. This has reduced labour management problems, decreased the time taken for repairs and has resulted in substantial savings in the operation and maintenance cost for the PHED. Consumers have also benefited from a better maintained and more reliable drinking water service.

Ajmer is the largest town amongst the 6 towns covered by the scheme, the projected population of Ajmer for the year 2001 is 73,000, which accounts for about 63 percent of the total population served by the scheme. The major share of water of 85 million litres daily is supplied to Ajmer town alone.

This is one of the few examples of private sector participation in the management of urban water supply in India.

Location
Ajmer is located in the state of Rajasthan.

Situation
Prior to the new water supply scheme, drinking water was supplied to the towns under the scheme from Banas river through an older network of mild steel (MS) pipelines and the pumping stations were run by the PHED.

The PHED decided to privatize the operation and maintenance (O&M) of this new scheme for two main reasons: 1) the Government of Rajasthan had forbidden new recruitment, therefore, PHED could not enlist new staff for O&M of the new scheme; and 2) the equipment in the pumping stations and filteration plant were quite sophisticated and required suitably trained staff for O&M, which the PHED did not have. Therefore, private sector operators were contracted for O&M of the pipelines, pumping stations and the filtration plant, and the PHED was to only supervise the operation and maintenance.

Lead
PHED, Government of Rajasthan

Strategy
In February 1995, the Government of Rajasthan commissioned a major drinking water supply scheme to draw water from the Bisalpur Dam in Ajmer. The PHED, which is the agency responsible for providing water supply in Rajasthan, privatized the operation and maintenance of pipelines, pumping stations and the water treatment plant.

Process
The O&M contracts for the water supply system were awarded through a rigorous bidding process. The bids were for an O&M contract of 2 years covering all possible costs of O&M i.e. fixed costs and event-oriented costs, including price escalations. The PHED awarded the contract to the best qualified bidder offering the lowest evaluated valid tender.

The O&M contract was drafted carefully to ensure efficient service delivery by the contractor, as well as to facilitate the supervision and monitoring of the contractor's performance by the PHED. The terms of the contract included well-defined obligations of the contractor and the PHED, and a balance of performance-linked payment and penalties.

The 112 km. of pipelines are now looked after by a single private firm, Paharia Construction Company, based in Delhi. Two private firms, Hydron and AEC India Ltd. look after the 5 pumping stations between them. The PHED officials closely monitor the operation of the entire scheme. They also supervise the staff provided by the private firms.

Financing
PHED, Government of Rajasthan

Lessons
1. State-level agencies responsible for the entire water supply scheme can successfully assume a new role, that is, from a monopolistic provider to a supervisor of a number of private sector operators.
2. A well-designed contract with clearly defined responsibilities of the government and private sector partners and a performance-linked system of payments and penalties is essential for the success of a public -private partnership.
3. Using private contractors has reduced labour management problems, decreased the time taken for repairs and resulted in substantial savings in the operation and maintenance cost for the public agency.
4. While the system has worked, there is a need for further revisions in the contracting design and procedures to counter the risk of collusion and monopoly.
4. Given the advantages of the system to various stakeholder groups, this is clearly one way to improve urban water supply in India. Using the contracting method would, however, require a careful scrutiny of the ground realities, an assessment of the nature and size of the market, availability of private sector operators and, willingness of the Government agencies to privatise water supply.

Contact


Designation


Organisation
UNDP - World Bank Water And Sanitation Program, South Asia
Address: 55 Lodi Estate
City: New Delhi
State: Delhi
Pin: 110003
Phone: 011-4690488, 4690489
Fax: 011-4628250
Email:
Web: