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Improving Water Supply and Sanitation Services for the Urban Poor in India

 Recognize and Work with Alternative Providers

In addition, alternative service providers, such as SPSPs and community groups, can complement the capacity of the conventional utility by providing services in areas where large utilities are unable to operate. An Asian Development Bank survey showed that SPSPs were providing water to about 6 percent of the population in Delhi, 10 percent in Dhaka, 5 percent in Kathmandu, 36 percent in Cebu, 19 percent in Ho Chi Minh City, 44 percent in Jakarta, and 14 percent in Ulaanbaatar.14

Several innovative projects have incorporated SPSPs into service delivery models for serving the poor and a number of recent publications have examined the characteristics of SPSPs and innovative ways of engaging them to better serve the poor.15

Introduce Accountability and Performance Monitoring Systems

There are a number of regulatory instruments and institutional models that can be used to promote accountability. Experience shows that the choice of a regulatory model should be appropriate for the local context and the size of the market, and it should be consistent with the legal framework and institutional arrangements for the provision of WSS services.Independent regulators (with a high level of discretion) are often presented as the ‘best practice’ but they are not suitable to all environments. They require broad-based confidence (of the policymakers, the public, and the utilities) in their objectivity and fairness, and are best suited for regulating fully autonomous utilities with very large markets. In other contexts, alternatives such as a performance contract monitored by an overseeing agency, or a community-based monitoring system, may work better. Regardless of the regulatory model, it should incorporate pro-poor regulatory principles and mechanisms, and pro-poor regulation:

• Provide a framework for competition so that a wide range of services are available.
• Create incentives (or obligations) forthe dominant operators to extendservices to poor neighborhoods.
• Allow a flexible approach to service quality so that service providers can experiment with alternative technologies and delivery models while respecting basic service quality requirements.
• Establish tariffs that encourage higher access to services without jeopardizing financial viability.
• Establish a framework to deal with the different circumstances and needs of all customers.

In India, the question of which level of government is responsible for economic regulation needs to be resolved. Larger cities, such as those targeted by the JNNURM, should be capable of engaging and enforcing contracts with service providers, but the current capacity and motivation of municipal officers to monitor and enforce contracts is a constraint. For example, in Delhi, many privately-run— and highly profitable—public toilet complexes fell into disuse largely because the municipality did not enforce contract provisions. Both politicians and municipal staff need training in concepts and skills, particularly with regard to distinguishing the governance of a public service provider by the public owner, the enforcement of contracts with service providers, and economic regulation of either a public or private service provider. If the economic regulation of services is considered a function of the state government, it will be easier to distinguish it from ownership governance or contract enforcement by urban local bodies. If such institutions share regulatory responsibility with state governments, their respective roles need to be clearly distinguished and complementary.

14 Asian Development Bank. 2004. The Role of Small-Scale Private Water Providers in Serving the Urban Poor. Case Study No. 11 in Bringing Water to the Poor, Selected ADB Case Studies.
15 See, for example: McGranahan, Gordon, Cyrus Njiru, Mike Albu, Mike Smith, and Dana Mitlin. 2006. How Small Water Enterprises can Contribute to the Millennium Development Goals, Evidence from Dar es Salaam, Nairobi, Khartoum, and Accra. Water, Engineering and Development Center, Loughborough University. See also the list of resources at the end of this report.

Regulation by Contract

A well-designed and credibly enforced contract, whether a performance contract with a public operator or a contract with a private operator, can provide an excellent regulatory framework without an independent regulator. The specificity of their provisions provides security and predictability for all actors in places that lack a regulatory track record or broad public support for independent regulation. Such contracts should specify
(a) the responsibilities and
obligations of the operator, the
contracting party, and consumers;
(b) general service conditions;
(c) fees and tariffs to be charged by the operator;
(d) payments, if any, to be made to the contracting party or to the operator; and
(e) standards (or targets) for improving service quality, coverage (including specific targets for poor communities), technical efficiency, timeframes for outputs and, especially in the case of a public service provider, commercial and financial performance. The operator should also be required to establish a system for responding to customer complaints and mechanisms for facilitating the access of the poor. Incentives for meeting targets, such as linking payment to performance, should be incorporated. The operator should report his performance in formats that are understandable to local government and consumers. A good performance contract (combined with a dynamic utility manager) made a big difference in turning around the performance of Uganda’s National Water and Sewerage Corporation (see Box 8).

Regulation by contract requires a competent overseeing entity that can monitor performance, enforce the contract, and follow-up on unresolved complaints. However, an independent regulator (with a high level of discretion) is not desirable when regulation by contract is used. The experience with the concession contracts in Manila demonstrates why: the discretion of the regulator contradicted the specificity of the contractual provisions, creating uncertainty and confusion.16

A good example of regulation by contract with a private operator is the lease contract in Senegal, which is described in Box 9 and illustrated in Figure 3.

It is not normally appropriate for a contracting or regulating authority to verify every report or make frequent inspections, but some method of verifying the operator’s reports, such as an annual independent performance audit, is desirable. In Thailand, for example, the performance agreement in place between the Ministry of Finance and the Metropolitan Waterworks Authority that provides water supply services to Bangkok is audited annually by a private firm, the Thai Rating and Information Service. Finally, procedures need to be established for dealing with poor performance by the operator and the resolution of disputes.

Other Regulatory Mechanisms

There are several relatively simple and inexpensive regulatory mechanisms, such as regular feedback from users and publication of performance indicators, which are also very effective for monitoring performance and stimulating improvements. Hyderabad introduced the Citizen’s Charter and Grievance Resolution System (see Box 11). The Citizen’s Report Card, first used in Bengaluru in 1994, is another good example. Citizen’s Report Card surveys systematically gather and disseminate public feedback on public services that are not subject to competition and thus may lack incentives to be responsive to customers’ needs. These Report Cards can be used as a combined advocacy and benchmarking tool. Through this medium, citizens can collectively exert pressure for change. Successful application requires
(a) an understanding of the sociopolitical context;
(b) technical competence to execute and analyze a survey;
(c) a campaign to publicize the results and bring about change; and (d) follow-up steps to institutionalize the mechanism and link it to public decisionmaking. The second Bengaluru Citizen’s Report Card in 1999 resulted in several positive responses, such as the creation of the Bangalore Agenda Task Force by the state government to monitor feedback; the initiation of training programs on customer responsiveness by the Water Board; and the introduction of regular consumer satisfaction surveys by the Karnataka Electricity Board.17

Box 11: Hyderabad Metropolitan Water Supply and Sewerage Board’s Public Meetings, Citizen’s Charter, and Grievance Resolution System

In 1998, the managing director of Hyderabad Metropolitan Water launched the Customer Meets Campaign, a two-week initiative intended to improve employees’ commitment to customer care. During the campaign, senior managers held meetings with customers to learn about their service needs and concerns. The diversity and number of citizens who turned up, the directness of their grievances, and the gratitude they expressed for the opportunity to voice their concerns made an impression on management. As a follow-up to these meetings, the Metro Customer Care (MCC) office was created in February 1999 to receive and coordinate responses to complaints lodged by customers using a dedicated telephone number. The MCC standardized and simplified procedures for lodging grievances. An online computer-based program monitors staff performance in responding to complaints. The Citizen’s Charter, launched by the Chief Minister in January 2000, outlines measurable service delivery norms for services provided by the Water Board. Its publication was a landmark, as it publicly acknowledged the Water Board’s commitment to improving service delivery.

Evaluation of results show that the MCC’s contribution has improved response to complaints for all income groups and a majority (96 percent) of MCC customers surveyed found procedures easy to follow. However, the MCC is not specifically aimed at the poor and the number of complaints from poor customers is not commensurate with their numbers, perhaps because they lack access to telephones or because they are less exacting than more affluent customers. Nineteen percent of slum residents reported that the complaint mechanism was more accessible than in the past and 44 percent found it more polite and respectful.

Source: Case Study 8, accompanying volume.

16 Ehrhardt, David, Eric Groom, Johathan Halpern, and Seini O’Connor. 2007. Economic Regulation of Urban Water and Sanitation Services: Some Practical Lessons. World Bank.
17 Wagl?, Swarnim, Janmejay Singh, and Parmesh Shah. February 2004. Citizen Report Card Surveys—A Note on the Concept and Methodology. Social Development Notes, Participation and Civic Engagement, Note No. 91. World Bank.

Getting Started: Actions and Resources

This section suggests the following actions for sector actors: Policymakers and Project Planners

• Clearly distinguish and define the roles of key sector actors (policymakers, governance bodies, service providers, and regulators), separate or combine functions as appropriate to promote transparency and efficiency.
• Give service providers adequate autonomy to make management (input) decisions, combine service development and promotion activities with operations, and hold service providers accountable for results through transparent mechanisms.
• Examine the potential benefits and challenges of private participation (including that of local small private service providers) in urban WSS services, and adapt strategies and contractual forms developed elsewhere to India’s context.
• Examine the potential benefits and challenges of performance contracting with public operators, and adapt strategies and contracts developed elsewhere to India’s context.
• Carry out comprehensive capacity needs assessments for key actors, and develop and implement strategies to broaden and scale up training and capacity-building programs with a new focus on ensuring effective access to service, improving service quality, and promoting financial sustainability.
• Take advantage of training materials developed by WBI and by service providers and institutions in other countries and adapt them to India’s context.
• Design regulatory and accountability frameworks that fit into the existing legal framework and have the broad support of policymakers, the public, and the utilities, including SPSPs.
• Promote and support the start-up of a professional association of water supply and sanitation services providers.

Governance Bodies and Service Providers

• Develop effective internal communication, performance monitoring, and improvement systems.
• Evaluate capacity needs and develop human resources, training, and outsourcing strategies to acquire the necessary skills and capacity.
• Create incentives for managers and staff to improve performance and ensure that all staff support the reforms.
• Change the organizational culture to focus on service quality and customer relations.
• Have performance audited annually and publish audited results.
• Strengthen skills for negotiating with policymakers and overseeing bodies.
• Develop models for engaging with SPSPs to provide services in areas where the utility cannot provide services or where the former can do so more effectively.

Advocates and Civil Society Organizations

• Monitor and disseminate information on the service providers’ performance in poor communities.
• Work with the regulator or the service provider to develop licensing and performance monitoring mechanisms that are appropriate for slums and poor communities and give an accurate picture of the quality of service in those areas.

Table 4: Relevant Case Studies in Accompanying Volume

Case Study Topic
Uganda’s National Water and Sewerage Corporation (Case Study 9) Performance contract with public operator
Hyderabad Metro Water Supply and Sewerage Board, India (Case Study 8)

Customer care office and grievance resolution system

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