Private water supply augmentation project for Khandwa town in Madhya Pradesh under UIDSSMT - A case study of the impacts of the project by Manthan Adhyayan Kendra

This report by Manthan Adhyayan Kendra discusses the concerns around the private water supply augmentation project in Khandwa town in Madhya Pradesh under the Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT), a Government of India scheme for infrastructure development in small and medium town. 

Khandwa is the first town in Madhya Pradesh to execute a private water project under this scheme, hence the findings of this project would be important for other towns as well which are looking for implementing private water projects under UIDSSMT.

This report basically focuses on the issues related to the new private water supply augmentation project from Chhoti Tawa, a tributary of Narmada River, and a part of the backwaters of Indira Sagar Project on Narmada. It gives a brief picture of the existing water supply system in Khandwa. It also discusses in details the impacts of the new private water supply project and question marks on the project efficacy.The report looks into the alternative systems that could have been operated instead of the current private, long distance and expensive project.

The report makes the following observations regarding financial viability of the scheme -

• One of the main arguments for private participation in water projects is that it would enable water systems to be financially sustainable. However, this project seems to be a wrong example of private participation and financial sustainability. Quite a few of the companies which were involved in the tendering and bidding process questioned the financial sustainability of the project even though the central and state government are providing ninety per cent capital subsidy to execute it. Questions have been raised about the concept of 24x7 water supply for such a small town, high operation and maintenance costs and the idea of ignoring the local water resources.
• The concession agreement was amended five times taking into consideration the comments and suggestions of the potential bidders, before it could be finalised. Yet, the project was pushed even when several of the experienced and specialised water sector companies had found it unviable. 
• It seems that an unviable project has been pushed through, the price for which would be paid by a full generation in Khandwa. Throughout the project period of 23 years the private operator would generate profits from this project.
• The process seemed to be biased towards particular bidders and those who suggested the use of local water resources were shunted out during the bidding process. The awarded concessionaire has cut down the hours of water supply to 6 hours a day in comparison to what was claimed in the earlier project documents to be 24x7 supply.
• The responsibility of distribution and collection of water charges was shifted to the Municipal Corporation after the pre-bid meeting with the potential bidders. It was decided that the company would be responsible only for supplying water up to the inlet of the metering area. The distribution of water and collection of charges would be the responsibility of the Municipal Corporation.
• It is quite clear from the financial statements of Khandwa Municipal Corporation that its sources of revenue are limited (Rs. 10.14 crores for 2009-2010). The water supply expenses are estimated to reach Rs 13.08 crores, which is more than the total revenue earned by the corporation. Then the remaining amount for water supply would be compensated to the private operator from the other heads through which the corporation receives funds from the state government. This would mean that most of the funds received by the corporation would go into running the water project and no funds would be available for other developmental activities in the town.

To conclude, the project that claims to supply reliable and cheap water to the residents of the town has too many questions to answer. When and how that will happen remains to be seen.

The preliminary report of the study had been earlier uploaded on Manthan’s website in English and Hindi.

The paper copies of the study are available at Manthan’s office in Badwani. For further details and to order paper copies, please write to - 

Manthan Adhyayan Kendra, Dushera Maidan Road, Badwani (MP) - 451 551 
or call on - +91 7290 222857/ 9300833001/ 94250 89369 
or e-mail at - manthan.kendra@gmail.com