Leapfrogging Regulatory Instruments in L f i R l t I t t i Water Sector Reforms: Equity and Sustainability Concerns

6th International Conference on Public Policy and Management IIM, IIM Bangalore 29 December 2011
Shrinivas Badiger
Centre for Environment and Development Ashoka Trust for Research in Ecology and the Environment Bangalore

Regulation: Varying Perspectives:

Narrow focus to more informed and inclusive:

Techno-Economists: Command and Control Managers: Efficiency and Returns to Investments Legal Professionals: Rules and Institutions Political Scientists: Institutions and Policy Processes Social Scientists: Social Processes and Societal Interests

Regulation as tool to improve Governance Function

Policy Making (Government)
Eg. Policy decision E P li d i i on subsidy on water charges to poor

Implementation (Utility)
Eg. Actual d li E A t l delivery of f water services

Regulation
(Regulator)

Eg. Resource allocation, p prevention of monopoly p y

Oversight, monitoring, control on adherence of laws, policies, rules and regulations in water sector g Taking crucial decisions on issues of public interest in areas that fall under the jurisdiction of regulation, such as decisions on water charges Three types of regulation: Governance (policies), Utility (service delivery (policies) and prevent monopoly), Resource (allocations, market) Regulation

Regulation as Tool for Controlling Business

Regulation as the administrative mechanism of controlling business through law backed specialised law-backed agencies (rather than through the technique of public ownership)[1]

Regulating Monopolies and Monopolistic Behavior:

Regulation as substitute to competition especially where monopoly exists (Eg. natural monopolies in sectors like water, electricity).

[1] Moran Micheal. 2002. Understanding the Regulatory State British Journal of Political Science 32:391-413 (1-24) Moran, Micheal 2002 State. 32:391 413 (1 24)

Regulation as Tool for Ensuring Public Interest

Regulation is - Ways and means employed by the society to ensure that rational decisions are made (from societys point of view) Regulatory efforts are primarily for betterment of public (public interest)

Nature of Changes by IRA Laws

Institutional Changes Brought in by IRA Laws
Changes in roles, responsibilities, authorities and interrelations among key agencies and actors Changes in basic principles, norms, rules, procedures of sectoral Changes governance

Organization-level

Organizational Changes Ch

Fundamental changes in key governance

matters like water tariff entitlements tariff, entitlements, integrated planning eg. Distribution of entitlements to water users as the a near-perpetual right over use of the near perpet al o er se available share of water resources

Institutional (Other-than Organizational) Changes O i ti l) Ch

changes brought in by IRA laws eg., Transfer of regulatory powers from Government to IRA

Nature of Independent Regulatory p g y Agency/Authority (IRA)

IRA is an autonomous, specialised agency responsible for regulating the g p g g governance of a particular sector. IRA is an expert institution established within and expert by the state - but working as an independent quasijudicial body. body Hence, establishment of an IRA also means transfer of the regulatory powers from the government to the IRA.

Perspectives on IRA: Rationale, Character & Th R ti l Ch t Theories i

IRA as an Autonomous body devoid of political whims and Autonomous fancies IRA as mechanism for separation of the implementer and separation regulator IRA as sectoral experts combined with judicial powers sectoral powers IRA to assure investors of rational decisions on sustained manner - thus attracting private participation IRA as substitute to market competition to regulate monopolistic behavior in Natural Monopolies (Public Natural Monopolies Interest Theory) IRA to serve p a e interests o individuals a d g oups o se e private e es s of d dua s and groups (Private Interest Theory)

Background & St t of IRA i I di B k d Status f IRAs in India

Water S t I W t Sector Improvement/ Restructuring Projects t/ R t t i P j t

Maharashtra, UP, MP, Raj., AP (in-pipeline) WB Funded - varying degrees of reform conditions

IRAs component of WB project (covenants/ conditions or rules of engagement) Laws passed:

MWRRA Act 2005, Arunachal WRRA Act 2006, UPWMRC Act 2008, AP bill passed by lower house, MP and TN bill pending

Karnataka: IRA as a key component of IWRM implementation i l t ti

Organizational Changes

Role of State

Pre-IRA: Policy making, implementing and regulating Post-IRA: Policy making, regulation by IRA and implementation b public or private utilities i l i by bli i ili i

Role of Water Utility

Pre-IRA: Implementing and regulating Post-IRA: Implementing under IRAs regulatory p p g g y purview

Role of Water Users/consumers:

Pre-IRA: Politically influential stakeholder in affairs of the state Post IRA: Post-IRA: Sounding board to a regulator, occasionally a regulator petitioner or public-interest litigator

IRA Model: Positive Provisions

Projects Equity as one of the key elements (unclear in implementation) Setting priority during period of scarcity Integrated approach in terms of Integrated State Water Plan and River Basin Plans (at least in principle) Emphasise on removing irrigation backlog i.e. removing regional imbalance or priority to less developed areas (new water allocations to drought-prone areas) Greater emphasis on tail-to-head irrigation Promotion of efficient use and conservation; Polluter pays

IRA Model: Perceived Threats

Regulation as Tool to Implement Market-oriented Reforms in Water Sector

Water as economic good, full-cost recovery in water services, private participation in water, creation of water markets

Full-scale C F ll l Commercialisation and P i ti ti of W t i li ti d Privatisation f Water Sector

Commodification of Water IRA could be used to ensure return on investment for private developers, substantial increase in water charges Erosion of peoples right over water

Implications at Glance

De-politicization of water sector Dominance of h D i f techno-economic rationality i i li Regulatory capture Unaccountable behavior and bureaucratic tendencies Commercialization b C i li ti based on recovery-principle and d i i l d other reforms Privatization ith t P i ti ti without concrete regulatory purview t l t i Appropriation of water towards higher economic use (in terms of financial benefits) Higher centralization and nationalization of water governance

IRA Model: Implications (1)

Entitlements (still?) linked to land ownership De-politicisation of Water Sector:

No (active) civil society representation in decision making Alienating socio-political considerations, reducing influence of legitimate political activism

Unaccountable behavior (IRA is not accountable to the public -as are the elected representatives through the process of election)

Techno-economic experts (as IRA members) lack inclination-capacityaptitude-authority to address socio-political and environmental aspects i tit d th it t dd i liti l d i t l t in water sector

IRA Model: Implications (2)

Entitlements are subject to priority set in policy

No pro-poor provisions/considerations in entitlement Example: GoM-Industrial uses are prioritized over agriculture use

Water Privatisation:

Implications on rights and tariff structure Water markets will be difficult to regulate due to the decentralised nature of water

Tradability of water may lead to creation of (natural) monopolies & or huge diversion from livelihood-centric (agriculture, domestic, etc) to non-agriculture uses

Practical Approaches: TAPing of PG

Necessary Preconditions for Facilitating Direct Public Control on Governance

T Transparency in procedures and information A Accountability mechanisms for successes and failures P Concrete spaces for meaningful public participation

TAPing of Policies and Governance

Unique characteristics of water and its confluence with equity

Natural resource, no substitute: Renewable to some extent annually; partially and slowly renewable g y; p y y groundwater stocks Generally a common pool resource, and non-excludable. But has the private property character (social and economic good) Fluctuating resource (quantity and quality) both spatially (regions, basins, communities, (regions basins communities households) and temporally (seasonally, annually and at times daily/weekly for marginal households) Diverse and competing users ( t ti Di d ti (at times conflicting) fli ti ) Depletion, degradation causes it to become unusable

Changing Notions in Water Discourse

Influenced by Global processes addressing the issue of water in changing demand contexts Current vision fi l placed on anticipated C t i i firmly l d ti i t d concerns over development/ growth objectives of the developing countries

Largely directed towards commodification or tag it as an economic good for targeted use in select sectors (with some space for its treatment as a social good ~ pressure from human rights groups) Arguments cling on use efficiency and cost recovery g g y y in public sector investments (water utilities, etc)

Ecological good

Water Status and Growth Projections

Key Points

Learning from the ground-below and recognizing/ balancing local needs Equity, Participation and Sustainability as drivers of positive change Emphasis on politics of water Systems/integrated approach to managing water Moving away from sectoral approaches; and managing it as a resource intrinsically linked with other natural resources within a larger ecosystem M Moving b i beyond th I i ti B d the Irrigation Bureaucracy; Recognizing multi-functionality/uses of water Recognizing basic access to water as a fundamental right, not to be interpreted as part of the Right to Livelihood Recognizing it as an economic good for economic uses, over and above basic and subsistence uses..

Acknowledgements:

Divya Badami Rao IITM-Chennai Rao, IITM Chennai Sachin Warghade, PRAYAS-Pune Subodh Wagle TISS Mumbai Wagle, TISS-Mumbai.