Two stories of ‘not privatization’ in urban water supply in Indonesia and India

‘Post-concession’ water supply in Jakarta

In 1997, the water supply of Jakarta was divided up and assigned to two private companies - PT Aetra in the east and PT Palyja in the west. The private companies operated the water treatment plants and the distribution network in the areas allocated to them. PAM Jaya, the state utility, paid the companies a ‘water charge’ based on the volume of water the private companies supplied to households. The Jakarta government covered the ‘shortfall’ between the water charge and the tariff collected from users.

At the start of the contract in 1997, around 50% of the population in Jakarta had access to piped water supply, and 56% of the treated water was lost because of leakages and illegal use (‘non-revenue water’).³ In the 25-year contract period, the private companies were supposed to improve the distribution and provide piped water supply to the entire population. However, at the end of the concession contracts, the situation had not improved significantly. 

According to official data, at the end of 2022, the service coverage had improved only to reach 60.79%, and the non-revenue water remained at a very high level of 46.66%.⁴ Over the contract period, the companies steadily drew high annual revenues (with an internal rate of return of 15.68% over 25 years) but invested very little in developing or maintaining the water supply infrastructure. Studies have found that water supply expansion and improvements have been concentrated in higher income settlements, while the urban poor found themselves economically, politically and socially ‘disconnected’ from access to piped water supply.⁵

Indonesia witnessed a strong, broad-based civil society movement against privatization that culminated in 2017. The Indonesian Supreme Court recognized the claim of the citizens’ lawsuit and found that the private companies were negligent in protecting the human right to water of the residents of Jakarta.⁶ After that, when the concession contracts ended in 2023, the PAM Jaya took over water distribution in the city.

PAM Jaya branded itself ‘Reborn’ after 25 years and announced an ambitious target of reaching 100% service coverage by 2030. Within this narrative, PAM Jaya signed a new ‘Cooperation Agreement’ for 25 years with Moya Indonesia on 3 October 2022 (PAM Jaya 2022).⁷ A closer look reveals that the role of the same private company continues in a slightly modified manner under the new arrangement.

Through a hurried tender process, the new contract was awarded to Moya to separate the existing and proposed water treatment plants and supply treated water to PAM Jaya. In addition, Moya would also be expanding the distribution network. Interestingly, Moya happens to be the holding company of Aetra – one of the two existing concessionaire companies. Further, the commercialization logic is replicated through the ‘water charge’ that PAM Jaya will pay to the private company for producing treated water. In turn, this would be recovered as the water tariff collected from users. The costs for expanding the infrastructure are also likely to be recovered from user tariffs.

There has been very little public engagement before the new contract was signed. After the contract was awarded for another 25 years, there have been limited ‘socialization’ sessions which emphasise PAM Jaya’s role. There is very little discussion on how the financial commitment of the new contract will be passed on to users, and how the water rights of citizens would be ensured. 

In Jakarta, the role of the private sector has changed, not diminished. In the ‘post-concession’ arrangement, the distribution function will now be handled by the state-owned utility. However, the same private company still continues to be involved in expanding the water infrastructure and supplying treated water by operating existing water treatment plants. The structural and systemic barriers that have curtailed the access of vulnerable and economically weaker sections have been neither acknowledged nor addressed. 

A concession by any other name - ‘24x7’ water supply in Hubballi-Dharwad

A different story is playing out in India. North Karnataka is a region with a history of unreliable and intermittent water access (upto once in 10 days). Through a World Bank project,⁸ continuous water supply was provided in a few areas in three towns in the region. In the pilot areas, covering approximately 10% of the households, the water storage was increased and the entire piped network in the pilot areas was replaced. Following the infrastructure works, a private company took over the distribution in the pilot areas based on a performance-based management contract. The Karnataka Urban Water Supply and Drainage Board, the state operator supplying municipal water, continued operating in the remaining areas. They also monitored the performance in the pilot areas. Water service in the project areas have overall improved, although households still needed to store water for interrupted service. Many households also claimed to receive extremely high water bills.