Asset sales to private companies occur on a limited basis, in part because of disincentives associated with taxation and financing policies. Private or "investor-owned" water utilities account for about 15 percent of total water sales and revenues. Many investor-owned utilities operate multiple water systems.
Privatization of Water Management
As monopolies, private water systems are subject to economic regulation by the state public utility commissions in addition to all applicable environmental and public health regulations. Economic regulation balances the interests of investors with the interests of rate-payers and ensures compliance with standards related to capital investments, prices, profits, and terms of service. Publicly owned water utilities are regulated in a few states, but private contractors generally are not regulated.
The decision to privatize is complex and can involve significant trade-offs.
The interest in privatization is linked to the mounting pressures on water utilities in terms of replacing the aging infrastructure , complying with stringent regulations, and meeting needs associated with growth. Local officials can implement a variety of safeguards to protect the interests of their cities and their citizens in the privatization process. When considering privatization, city officials should perform a series of analyses to evaluate water system needs, review current technologies, assess vendor interest, compare risks and benefits, consider inventory financing alternatives, and appraise legal and regulatory considerations.
Privatization of Water Management - largest, system
Information sources on how to contract for municipal services are fairly well developed. For example, cities can draw on a wealth of information about competitive bidding processes. Proper design of the privatization arrangement is essential for the success of the implementation process. Parties to an agreement must address several critical and complex issues before signing contracts. With a poorly designed arrangement, any efficiency gains could be more than offset by administrative and other costs, including the cost of dispute resolution.
In addition, the contract must ensure that adequate performance and efficiency incentives will be maintained over time. Successful privatization can make the initial investment in analyzing alternatives and designing agreements well worthwhile.
Salvadorans Protest Renewed Attempts to Privatize Water Resources
Despite their potential benefits, public-private partnerships are not always pursued. A number of barriers to implementation can be identified, including public policy barriers. Many communities do not know that partnerships can be a viable option for their water or wastewater. Persistent concerns exist about the potential monopoly power of unregulated private contractors and the capacity of many local governments to protect their interests and those of their constituents over the long term.
Less Mortality: 3. Hundreds and thousands of people are dying every single day because of the inefficiency of the government. When the government controls water, they do not protect it adequately from pollution and wastage. On the other hand, private companies are good at building systems that minimize the wastage of water. The argument, therefore, is to put these companies in charge of the water resources and save human lives. Water privatization has been at the receiving end of some major criticism.
Some of the important points that have been raised in these arguments are as follows:. Profiteering: The most obvious disadvantage of water privatization is profiteering. Corporations have a tendency to put profits above people. This could be dangerous as far as water is concerned.
People do not choose to drink water. The human body cannot survive without it.
It is, therefore, the perfect product to benefit from. People who need it will pay any price for it. It is therefore very important that regulation of water resources should still stay in the hands of the government. Private ownership and investment along with government regulation have been a beneficial combination in many water privatization experiments. Violation of Human Rights: Many economists believe that access to water is a fundamental human right. If water is treated as a marketable commodity, this right gets violated.
This is because a market-based system will allow the rich to waste water if they want to whereas it would cause a drought amongst the poor. Social status should not affect the access to water. IMF Pressure: Many countries have privatized their water resources because they had no other options. The World Bank, IMF, and other financial institutions would only lend money to these nations if they privatize their natural resources including water. This has often led to protests by the population. The poor were simply being denied water. These atrocities led them to rally on the streets and ensure that the privatization is repealed.
Siphoning of Water: Lastly, people believe that the water resources of a particular place are part of the natural wealth of that place.
However, the private market does not operate like that. There is nothing that would stop corporations from buying up vast tracts of land and siphoning the water underneath to a different location where they can get a higher price for their product. This would disturb the ecological balance of the region.
The efficiency of services is considered to be a given when talking about the privatization of water. However, that is not the case.
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A major lead poisoning incident in the waters of Flint, Michigan is evidence that privatization can go horribly wrong too. View All Articles.
Privatization of Water Management
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