Friday 24 April 2009

JUSCO Agreement - Everything You Wanted To Know

P.M.Bhat, Member, Mysore Grahakara Parishat writes


To improve the water supply infrastructure of Mysore, MCC has signed an agreement with Jamshedpur Utilities and Services Company (JUSCO). Many people and organizations are opposing this agreement claiming that it is privatization of water supply, and if not directly privatization, the first step in privatization. The contract which is about 700 pages long is available at MCC's website (click here ) . People can go through it and make up their own mind. We went through the contract and other sources to find answers to some frequently asked questions about the JUSCO contract.

Where does the money for the contract come from?

In 2005, the central government launched the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to upgrade the infrastructure of various cities in India. Under this programme, cities can submit infrastructure improvement projects to the central government. For cities such as Mysore, if the project is approved, the central government meets 80% of the cost and the state government meets another 10%. Therefore, by spending only 10% of the cost, cities can carry out projects which would normally be beyond their financial reach. The contract that MCC has signed with JUSCO to improve the water supply infrastructure in Mysore is one such JNNURM Project.

How did JUSCO get the contract?

MCC prepared a Rs. 230 crore project to improve the water supply infrastructure in Mysore and submitted it to the central government. The central government trimmed it to Rs. 195 crores before approving it. Two tenders were floated for the works. The first one was to build major overhead tanks all over Mysore and supply them with water from the water treatment plants through large underground pipes. Nagarjuna Construction Company won this tender for Rs. 77 crores. The second tender was for creating an Integrated Management Information System for the water supply, doing all the work required to make the present intermittent non-pressurized water supply system into a continuous pressurized 24x7 water supply system and maintaining the system for 6 years. 12 companies participated in the tender process: Subhash Projects & Marketing, JUSCO, JVRCL Infrastructure & Projects, Tata Consultancy Services, Veolia Water of France, Jain Irrigation Systems, Infrastructure Leasing & Financial Services, Jindal Water Infrastructure, Vishwa Infrastructure & Services, Larsen & Toubro, Nagarjuna Construction Company and Ranhill Water Services of Malaysia. JUSCO won the tender with the lowest bid of Rs. 162 crores. Ranhill Water Services made the second lowest bid of Rs. 256 crores and Larsen & Toubro had the third lowest bid at Rs. 305 crores.

It was curious that two companies of the Tata group, TCS and JUSCO competed with each other in the bidding. It was also curious that Veolia and JUSCO which are running a joint operation in India since 2004 bid separately. The variation in the bid amounts was another surprising factor. JUSCO's bid was only Rs. 162 crores, while Jain Irrigations Systems' bid was Rs. 882 crores! JUSCO quoted Rs. 40 crores for management while Larsen & Toubro quoted only Rs. 16 crores (L&T lost out because it quoted an excessive amount on materials).

What are JUSCO's credentials?

According to the JUSCO website (click here), JUSCO has been managing the water supply of Jamshedpur for the last 102 years. In addition to Jamshedpur and Mysore, it has water supply operations in Bhopal, Gwalior, Calcutta, Haldia, Muzaffurpur and Chennai.

According to the website of the Japan Institute of Plant Maintenance, (click here) a public corporation under Japan's Ministry of Economics, Trade & Industry, JIPM gave out Total Productive Maintenance Excellence awards in 2008 to fifty companies all over the world and JUSCO was one of the awardees.

According to the website globalwaterawards.com, JUSCO was one of just 4 nominees for the 2008 Water Company of the Year global award.

What are some of the features of the JUSCO contract?

The contract was signed on 28-11-08. The period of the contract is 6 years. There are conditions which specify how much work should be done in how much time and what performance targets should be achieved in what time. If the work is done ahead of time and the targets met ahead of time, JUSCO gets a bonus. If there is a delay, JUSCO pays a penalty.

Was the contract kept a secret from the citizens of Mysore?

One of the conditions for receiving JNNURM funds is that citizens should participate in the preparation of the project. Such participation has been absent from the JNNURM projects of Mysore city. The officials show dates on which consultation meetings with the public were held, but we have seen no announcements of these meetings. So, if they were held at all, only friends of the officials must have participated in them. Such meeting can not be termed public meetings.

Was it necessary to give this work to JUSCO?

Mysore city water supply is suffering from many serious problems. A significant portion of customers do not have meters. Most of the meters are not working properly. There is plenty of leakage all over the city. As a result of these factors, only a small fraction of the water pumped into the city gets billed. Many customers do not pay their water bills. So MCC is collecting only a fraction of the amount due to it. Due to lack of revenue, maintenance of the system is not possible. In many localities, water is supplied once in few days. When it is supplied, the pressure is low. Quality of water supplied is also poor. So poor that one can not help wondering why we are not having epidemics every day! No one knows where all the underground pipes and valves are. As a result, in many cases, one can not even localize the problem.

These problems are getting worse with time. After spending Rs. 130 crores of ADB loan to provide 24x7 water supply, we are pumping twice the water into Mysore, but the water problem is increasing. Neither MCC nor the Water Board seem to have the technical expertise required to run the water supply system efficiently. MCC does not have the determination to collect its dues in the face of political pressure. Without outside intervention, the situation will soon become irreparable. It is in need of emergency treatment. The only way out seems to seek the help of competent and experienced professionals. But such help does not come cheap.

Does the contract represent privatization? Will JUSCO make unlimited profits from the contract?

For the designated work done by JUSCO during the 6-year duration of the contract, it will get a fixed compensation of Rs.162 crores. Other than the bonuses it will get for reaching performance targets earlier, it will not get any other money. Privatization normally means the opportunity to make as much profit as the company can. Such an opportunity seems to be absent in the contract.

Will the water tax rise steeply after the contract?

According to the contract, JUSCO has no role in fixing the water rates. It is the jurisdiction of MCC. The water tax will increase only if MCC decides to increase it.

But JUSCO has been given the job of making sure that every customer location is fitted with a correctly working meter. If you were paying less water tax because of a defective meter or some other reason, then your tax will increase.

Will public taps be closed after the contract?

This decision belongs to MCC.

Will the contract achieve its goals?

The central government does not seem to have a lot of faith in the ability of local governments to implement the projects themselves. So it is encouraging participation of private companies in the JNNURM projects. But it seems to have forgotten the fact that the job of inspecting and approving the work done and releasing the money rests with the local bodies. That is where the problem seems to lie. MCC gives hundreds of jobs to private companies every year. Works such as road repair have been done by private companies for a long time now. Of late, even works such as garbage collection and management of street lights have been outsourced to private companies. It is clear that none of these works is being done right, which means that MCC officials are approving substandard work and paying the contractors. The goal of the JUSCO contract will not be achieved if JUSCO also does substandard work and MCC officials give it the stamp of approval. There may be organized resistance to meter installation and disconnection of unauthorized connectionss and it is not clear if JUSCO can tackle it.