India – Government funds for sanitation inadequate, private sector should pool in

by Anupam Tyagi, Economic Times – Feb 9, 2012

More people die from inadequate sanitation-related causes in India everyday than 10 aeroplanes filled with 200 people each. This has high economic costs. Therefore, achieving adequate sanitation is an imperative.

A summary of the report on economic impacts of inadequate sanitation in India, released on December 20, 2011, by Water and Sanitation Program (WSP) of the World Bank, shows that lack of adequate sanitation in India resulted in an annual loss of $53.8 billion ($161 billion in purchasing power parity, or PPP) or $48 per capita ($144 in PPP) in 2006, the year of evaluation in the report. This was equivalent to 6.4% of GDP in 2006. 

Most of these losses were related to health (71.7%; $38.5 billion), and mostly concentrated in children below five years. Other quantified economic losses from inadequate sanitation in this report relate to getting access to cleaner drinking water, time losses from not having access to sanitation, and tourism-related losses.

Based on international evidence, even locally-implemented toilet and hygiene interventions could have saved $32.6 billion, equivalent to 3.9% of GDP annually; a potential gain of $29 per capita.

What is the estimated potential size of the sanitation market until 2020, if goals for sanitation stated by government are achieved (household and community toilets, sewage treatment infrastructure, and operations and maintenance)? The annual national toilet and sewage treatment market is estimated at over $6.6 billion annually, with cumulative market during 2007-20 at over $152 billion.

Of the cumulative market, $97 billion, or 64%, can potentially be in infrastructure and $54 billion, or 36%, in operations and maintenance services. In this context, it is clear that government funds allocated to sanitation fall far short of the finances needed to achieve goals stated in government documents.

In the 11th Five-Year Plan (2007-11), the flagship Total Sanitation Campaign (TSC) has been allocated $4 billion in 593 districts for rural toilets. In addition to funding and policy, administrative and governance initiatives have been substantially improved in recent years for TSC.

These include using internet and web-forms for online monitoring of progress, online public availability of village-level data on targets and achievements, online availability of analysis, technical notes and designs, and invitation of feedback from all stakeholders by the implementing departments.

Jawaharlal Nehru National Urban Renewal Mission (JNNURM) is the flagship urban infrastructure programme of the government. It is being implemented in 63 cities accounting for 42% of urban Indian population.

This programme emphasises basic services to urban poor, housing, water supply, sanitation, road network, urban transport, development of inner, or old, city areas, etc. JNNURM consists of sub-missions: (a) urban infrastructure and governance, and (b) basic services to urban poor.Another programme, the Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT), covers the rest (non-JNNURM) of 4,898 cities and towns. About $9 billion have been allocated for urban water and sanitation in JNNURM. Of this, $378 million was approved for sanitation projects (including solid waste management) and $77 million released by March 2011.These funds from central government schemes provide majority of funding for these schemes. These funds may be inadequate to achieve the goals of providing ‘improved’ sanitation envisioned by the UN, which is a lesser goal than adequate sanitation described above, or to service the market size estimated in the WSP report.

How do we fill the gap in financing of sanitation infrastructure? One way is to find funds in government plan and Budget allocations, the other is to look for public and private financing, including public and private international funds. These are complementary and non-competing sources.

Research in economics has shown over past several decades that in many situations, especially in infrastructure and ‘facilitating’ investments, public investments can crowd-in and increase private investments. Sanitation has both public good and private good aspects to it. It should be funded by both public and private finances.

A model where public funds provide the back-end and private funds provide the front-end can fill the gap in sanitation financing. This G-B-C, or Government-Business-Consumer, model can be used at all levels of government, by including local governments.

This may include plan and budgetary funds, state funds, municipal and local government funds, and private funds to build sewers and sewage treatment infrastructure of high quality. This may be done on a build-operate-transfer (BOT) basis, or on a lease-hire-to-businesses basis – like telecom, electricity or transport infrastructure in some places.

Business operators could raise their own finances to deliver services, and government and democratic institutions can play a regulatory role to ensure these ‘natural’ monopolies provide good service at reasonable price to consumers. These businesses may also help households find long-term financing for access to toilets and sustainable sewage treatment systems that have long durability andhigh quality.

(The author is economics faculty at the International Management Institute)

6 responses to “India – Government funds for sanitation inadequate, private sector should pool in

  1. Nripendra Kumar Sarma, Guwahati, Assam (India )

    Dear Friends,
    First and foremost, Governments, both at Central & State level should prioritise the Sanitation Sector. In thsi regard, the importance from State Government is very crucial. Many a times, State Government does not have adequate Budgetary provision in this sector to to even allocate the matching state share of fund in comparion to the Central release of fund.
    Secondly, the involvement of Private player may always be welcome, but it should be developemnt oriented only, giving importance to the local area development responsibility. While doing so, there may be a provision for funding to the village based NGOs / SHGs / CBOs to take up the sanitation activities in a blanket approach and also for ensuring the sustainability of ODF status (once achieved).

  2. Nripendra Kumar Sarma, Guwahati, Assam (India )

    Dear Friends,
    Another aspect in this regard is that the involvement of Private Sector in the rural sanitation sector is not likely to happen to easily. But in India, there might be a policy decision for mandatory provision for utilising MP / MLA LAD fund ( 60 – 70%, if not full ) to ensure Total Enviornmental Sanitation in rural areas in a more effective way.

  3. In fact the problem is too much money and the inability of the system to correctly design, absorb and deliver adequate output and outcomes for sanitation. The Total Sanitation Campaign being a case in point where toilets have been built but usage is abysmal.We should focus instead on the efficiency and sustainability of the utilisation of the funds, learn lessons , carry out mid course correction and then and only then think about more funds.

  4. It does not take much to build a toilet in a village. All it needs a determination, co-ordination and participation of well do people and sense of thrie social responsibility toward ‘not so well to do’ people to adopt a village near their residence to build a toilet for the poor villagers there.

  5. Pingback: Monitoring Challenges: In Water and Sanitation Sector « Quest That Change….

  6. I agree with the main theme that private participation should be encouraged. Also financial institutions should give loans with less interest rates so that the schemes become economically viable.
    If all waste water, solid waste and sewage is treated in a Central Sewage Treatment Plant, it will generate bio gas which can be bottled and supplied to local people. The slurry from gas plant can be further converted in to good quality wormi compost, it will generate substantial revenue for the operator. The toilet seat should have the provision to divert urine which can be collected separately and used as good Nitrogen Fertilizer by mixing it with water.
    This business model has lot of potential and a private player in association with women Self Help group can promote such schemes in villages.
    we can provide necessary help to set up such projects in rural areas.
    Prof.Shrikant Bhate.
    Architect and Social Entrepreneur.

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