Effect of institutional structures on urban water delivery systems: a longitudinal comparative analysis

Abstract

The post-liberalisation era has seen several reform efforts in the natural monopoly utility sectors. However, urban water supply systems have been in the background and have seen very limited attempts at effective reform. With the burgeoning urbanization and the essentiality of water for life contrasting with the realization that fresh water is not an inexhaustible resource, the reform of the urban water infrastructure will achieve prominence. The water sector has two features that distinguish it from other infrastructure and has implications for public policy. First, the supply is finite and location-specific. Second, because safe water is crucial for life and health, its availability and affordability for the entire population are of enormous welfare and political importance. The achievement of the objective of affordable provision calls for appropriate institutional arrangements at the local level for equitable access and economically efficient functioning of urban water systems. The challenge for institutional development and policy formulation for the sector is to meet both efficiency and social welfare objectives in the water sector, balancing the needs of consumers, utilities, governments and the environment. Decentralisation has been postulated to bring about efficiency and responsiveness in service delivery. This study attempts to investigate this postulate in respect of urban water delivery systems by contrasting the relative efficiency and access policies of centralised water boards in Bangalore and Hyderabad functioning under the control of the State Government and the decentralised service provision by municipal bodies in Pune and Faridabad. From an understanding of the accountability structures inherent in the institutional construct, the study concludes that efficient service provision does not solely depend on decentralisation but on the presence of factors that tend to promote accountability. Autonomy, clarity in functions, adequacy of revenue assignments and enforcement of a hard budget constraint with predictability of transfers foster efficiency in service delivery but responsiveness is an outcome of the strength of the chain of accountability from the customer/voter to the delivery agent. The chain would also depend on the nature of service provision: whether centralised or decentralised. From the understanding obtained from the study, appropriate recommendations are drawn for the policy maker in designing institutional structures for service delivery.