Public-private partnership (PPP) is a phenomenon of recent origin, which seems to have gained prominence in the wake of India’s adoption of the policies of economic liberalization at the outset of the 1990s with a view to integrate India’s economy with the global economy. Policy of economic liberalization is an integral part of the process of globalization which entails four main traits – liberalization of national economy by reducing tariffs and cut in import duties, encouragement to foreign direct investment (FDI), emphasis on privatization; and liberalization of foreign trade under World trade Organization (WTO) regime. Thus, the phenomenon of PPP is an offspring of this liberalization policy. The concept of Public-Private Partnership is spurred by the notion of corporate social responsibility (CSR).
Corporate Social Responsibility (CSR)
The idea of Corporate social responsibility (CSR) entails the notion under which business organizations and commercial establishments regard the interests of society by assuming responsibility for the impact of their activities on consumers, suppliers, employees, shareholders, communities and other stakeholders as well as the environment.
This onus or obligation can be construed in terms of extending beyond the legal binding to abide by legislation and ensuring that the business organizations devise further measures by volition to improve the quality of life for employees, their families, the local community and society at large.
Viewed in a broad spectrum, the concept of CSR has emerged as a major buzzword with the members of the business community, academicians, politicians, and the activist groups. The term ‘CSR’ connotes various definitions which lay emphasis on different aspects. However, the definition provided by the World Bank Group’s Corporate Social Responsibility Practice, as a department of Foreign Investment Advisory Service (FIAS) is regarded as most contemporary and most applicable to the majority cases. According to this definition, “Corporate social responsibility is the commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways that are good for business and for development.”
After working with stakeholders around the world, the World Business Council for Sustainable Development (WBCSD) has defined Corporate Social Responsibility (CSR) as .the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life.
Viewed in a broad perspective, the CSR is a fundamental concept like liberty and equality. The CSR is not a static but a dynamic concept which is always redefined in consonance with the changing needs and times. The social responsibilities of a food company are different than those of a transport company. With the passage of time as societal expectations change, so changes the perception of a company’s social responsibilities.
The practice of CSR is subject to much debate and criticism. It is argued by the protagonists of the CSR that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. On the other hand, the critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; still others argue that it is an attempt to preempt the role of governments as a watchdog over powerful multinational corporations (MNCs).
According to David Cavett-Goodwin, companies should first determine what they really stand for, their vision and values, their .corporate magnetic north. Then they should integrate corporate social concerns into the business strategy. In order to make corporate sector more responsive towards CSR, he makes following suggestions:
- focus on individuals, since CSR reaches out to all stakeholders, but will be judged by its implications for individual employees, managers, and citizens;
- determine a corporate legacy by instilling an ethic of education and learning, and by instituting processes to foster this ethic;
- put employees first as business, best assets and ambassadors, and also know their neighbours, both their communities and cultures;
- establish a system for keeping CSR debates and dialogues transparent and continuous;
- form smart partnerships, not for publicity or cover, but to realize CSR goals;
- measure and account for what they do;
- report externally; but report in ways that reach all stakeholders, not just those on their mailing list or on the Internet.
However, David Cavett-Goodwin laments that despite adhering to such measures, there still remain many questions that must be answered by ongoing debate among all sectors. These inter alia include:
- What are the respective roles of government and the private sector in providing social, educational and health services?
- How far along the supply chain does a company’s responsibility extend?
- How should it adapt to local cultures?
- How far into the future should a company plan?
- What is the distinctive corporate contribution to private/sustainable livelihood problem?
There can be differences of opinion with regard to modus operandi in implementing or measuring the CSR goals but no one can deny the urgency and need for the CSR in the corporate sector. Undoubtedly, a coherent, well-concerted CSR strategy, based on integrity, sound values, and a long-term approach, is bound to unfold clear business benefits to the corporate sector and a positive contribution to the well-being of the society as well.
At this juncture, it seems pertinent to draw attention to the recently concluded global survey by the IBM with a view to gauge just how deeply the CSR issue has penetrated the core of the corporation – its strategies and operations. Having surveyed more than 250 executives worldwide, the IBM study has come out with three dynamics that companies should understand and act upon in dealing with CSR, and these are: (a) Impact for business – from cost to growth; (b) information – from visibility to transparency; and (c) Relationships – from containment to engagement.
PPP in India’s Water Sector
In the aftermath of India embarking on the path of economic liberalization, with ample emphasis on privatization, the role of private sector in major sectors of the Indian economy has assumed tremendous significance and within a short span of less than two decades Private Sector has carved out a niche of its own in diverse sectors of Indian economy. The Private Sector is the most important component of the engine of economic growth in India. However, the Public-Private Partnership in Water Sector in India is still at infancy stage and it is the priority area which should receive adequate attention and priority.
Keeping in view, the unequal seasonal and geographical distribution of water in India, the major challenge of water sector in India is how to provide water for over one billion people in adequate quantity and acceptable quality for different uses. Viewed in a broad spectrum, the issue of the water development in India in should be seen in the context of the wider international situation characterized by climatic changes, environmental pollution and the general scarcity of water. Undoubtedly, most of India’s water problems are caused by rapid industrialization and urbanization, however, pollution of rivers and ground water is a major issue in the present context.
Keeping in view the fact that water is a renewable resource in India, nevertheless, India requires appropriate, cost-effective technologies for recycle and reuse of water. The areas of waste water and sewage treatment, filtration and reuse of water and desalination need more attention. Collaborations and technology transfer between Indian and foreign companies/agencies in water sector can bring about a big change in these areas.
It is noteworthy that 11th Five Year Plan had envisaged ambitious goals in industrial and domestic water sector, and their realization requires a sustained and an integrated approach. In this context complementarity between the needs and problems of the Indian water sector and the experience and expertise available in private water sector firms is essential. In spite of considerable progress made in the water sector, it is felt that the social and political visibility of the water problem was still limited in India and that useful lessons can be drawn from the experience of other countries.
In the context of increasing involvement of private sector in water development in India, the rich experience in public private cooperation in water sector in countries like Germany, Netherlands, UK and USA can be harnessed for India. India should seek long-term collaborative approach between the water sectors of India and other countries, instead of an isolated project approach.
The time has come to look at water and energy as “Siamese Twins”, because conservation of water is in fact conservation of energy. There is a need for linking technology with grassroots projects.
Undoubtedly, the urban areas in India are facing major water problems, both in the industrial and domestic sector where access to drinking water, particularly to the poor and the disadvantaged groups is still very limited in many metropolitan areas. Also, municipal management in many areas needs effective training in integrated water management. Though in India the drinking water quality standard is that prescribed by the WHO and there is treatment of water to ensure that in some municipalities, much still needs to be done in other areas. Despite the high priorities accorded to the sanitation and water treatment in the 11th Five Year Plan of India, very little of waste water is treated at present. This is a fertile area where public-private partnership has ample scope.
Partnerships between public and private entities have a proven record for raising project financing and bringing in technical expertise for infrastructure projects, including water and sanitation. They can accelerate solutions and enhance operations and service.
Investment in water and sanitation has indisputable economic benefits. According to the World Health Organization (WHO) estimates, every U.S. dollar invested in water and sanitation generates an economic benefit of $3 to $34, depending on the type of water system installed and the region where the investment is made. Whatever the exact number, investment in water and sanitation not only improves service and quality of life, but also has a direct impact on the economy as well.
The Tirupur Water project is a fine example of public-private cooperation in water sector in India. Initiated in the mid-1990s, this project was formally completed in early February 2006 in Chennai, capital of Tamil Nadu. It is now providing water and sewerage services to thousands of Tirupur area residents. The Tirupur Exporters Association recognized the need to improve the area’s infrastructure to remain competitive in the knitwear industry but did not have the resources to finance the project.
The solution was found in establishing the New Tirupur Area Development Corporation, Limited, a group of private and public entities, which became the first public-private partnership in the water and sanitation sector in South Asia operating on a Build-Own-Operate-Transfer (BOOT) basis.
Presently, Tirupur residents now receive water every day for 4-6 hours, as opposed to receiving water only on alternate days at the best of times prior to the project. Household water connections have increased by 8,000 and local industry now has a reliable source of water. One hundred percent of new domestic users have paid for the water connections to access high quality water – the fee of Rs. 5,000 covers the capital costs of each new connection.
The Tirupur project is a great example of how private sector involvement in public service delivery can dramatically improve access to water and sanitation. In India, where about 13% of the world’s population that is un-served for water and 43% of the world’s population that is un-served for sanitation resides, such improvements show the way forward.
In Ulhasnagar, a suburb 60 km northeast of Mumbai, a large water privatization project is just getting underway. In December 2006 the Ulhasnagar Municipal Corporation (UMC) granted a Rs. 94 crore BOT (build-operate-transfer) contract to two Indian companies, Pratibha Industries Ltd and Unity Infraprojects Ltd. The 30-year concession contract will be spilt evenly between the two companies and involves “complete design, development of independent water source, and augmentation of existing water supply scheme up to service reservoirs, [and] operation and maintenance of the scheme.” As with most concession-type contracts, the company’s revenue’s will be derived from its sale of treated water to UMC. The companies intend to supply the UMC with 118 million litres/day of treated water for a rate of Rs. 5.28/m3. (Comparatively, many of Mumbai’s residents pay only Rs. 3.5/m3).
This points towards urgency for more such projects to be launched in other of India on the basis of public-private partnership so that active involvement of the private players can be utilized for the betterment of the society through improved water and sanitation facilities. Besides, involvement of private players will induce international companies as well as financial institutions like World Bank, International Financial Corporation, and Asian Development Bank etc., to extend requisite loans to facilitate import required technology and expertise essential for water treatment and sanitation facilities.
There lurk some apprehensions in some quarters about the price factor and this issue can be addressed by mutual consultations and subsidies to be provided by the government as well as Indian corporate sector as a part of its CSR obligation. It is advisable that at this critical juncture when water shortage is affecting a large majority of the Indian people, such misapprehensions should be disallowed to hamper the water and sanitation projects.
Keeping in view the social and potentially a sensitive nature of water reforms in India, privatization of water is less willingly appreciated. But things are changing gradually and a few major public private partnership projects involving government agencies and Indian and foreign private companies are being implemented. There is a need to educate the public about the utilities of public-private partnership in the water sector. At the same time, there is also a need for increased interaction between the public and private sectors with regard to water.
By Dr. Arvind Kumar President India Water Foundation
Article published in SAR Economist|January 2009|P.no.41
