"It is worrying that the private finance tail seems now to be wagging the public infrastructure dog." (Graeme Hodge)

There have been several news articles published in the last week highlighting various flaws in privatization schemes and public-private partnership models for infrastructure development. Consider the following examples from sources in Canada, Australia and India:

CANADA - The Westmount Examiner carried an article earlier this week with the headline, "Superhospital could cost more as a public-private partnership" followed by the slug:

"With confirmation from Quebec that construction of the McGill University Health Centre (MUHC) in the Glen Yards will involve public-private partnership, a local coalition of doctors is warning the superhospital could easily end up costing more as a PPP project."

'"It's been proven and the British experience is clear - it's more expensive to go the way of the three-p," said Dr. Paul Saba, a Montreal West doctor and co-president of the Coalition of Physicians for Social Justice.'

The article attributes the higher cost of PPPs to the higher costs of private sector borrowing and the fact that the private sector has to make a profit.

AUSTRALIA - Graeme Hodge, a professor of law and director of the centre for regulatory studies at Monash University, notes that: 'The PPP frenzy seems too like the South Sea Bubble, or the sharemarket tech-boom, with governments behaving less like smart purchasers of modern services, [and more like] dupes of merchant bankers ... carrying forward costs to future generations. Critics of PPPs in Britain [have] called them "public fraud and false accounting, commissioned and directed by the Treasury".'

Incidentally, Hodge also has a new book out titled: The Challenge of Public-Private Partnerships: Lessons from International Experience, 2005.

INDIA - In India, privatization of water is bringing increasing resistance. The cover story in Frontline Magazine (Vol 23, Iss 7, Published by "The Hindu"), titled "Private Water, Public Misery" offers a series of case-studies that highlight the problems on water projects in several regions of India. There are six cases, which are sketched out below for those readers who are too busy to read the full length article:

• The Sheonath River Project gives Radius Water Limited, a private firm, exclusive access to a 23.6-kilometre stretch of river for a period of 22 years. However, villagers were not made aware of the privatization arrangements until well after they were finalized. "We got to know about the privatisation of the river only when RWL began harassing villagers near the river and held self-laudatory press conferences in Delhi," says Lalit Surjan, Editor of Deshbandhu, a local newspaper. "We then began an investigation and were shocked by the findings."

• Trouble is also brewing in Orissa, a region that possesses 11 per cent of the country's water resources, but has just 4 per cent of India's population. Despite plentiful water resources, water is scarce in Orissa. The State government cites a lack of funds, and has been in the process of reviewing and updating its water policy since 2002. Some voluntary organisations have alleged that the State government is planning to treat water as a tradable commodity and that the new policy would allow private participation in water management.

• In New Delhi, there has bee considerable controversy surrounding the "Delhi Water Supply and Sewage Project", better known as the 24X7 Project, as well as intense public scrutiny of the "Sonia Vihar Water Treatment Plant." Currently, the 24x7 project is at a standstill, as concerned social gropus are placing allegations of "privatization" on the State government and on the World Bank.

• In Chandrapur town of Maharashtra, the public tap has water for only two hours a day. But it was not always this bad. Prior to privatization of the town's water distribution in March 2004, water had been available from 1pm to 6pm.

• In Tirupur, in the state of Tamil Nadu, a public-private partnership that handed water rights to a private firm for a period of 22 years is reportedly in danger of unravelling. At issue is the complex cross-subsidization scheme that charges industrial users higher prices in order to subsidize other users of the system.

• In Thiruvananthapuram, a grand scheme proposed by the Congress-led United Democratic Front government in 2001 was to allow private investors to draw 200 million litres a day from the Periyar River and purify and distribute it exclusively to industries, commercial establishments and other bulk consumers. Few details of the scheme were disclosed, and an avalanche of questions about the implications of the schemes for local communities, protests in the project areas, and media criticism saw the government "beat a hasty retreat."

Posted by rjorr at April 17, 2006 5:14 PM