DATE: 30TH APRIL, 2020

Corporatisation of Municipal Services

APOORV AGRAWAL | SAMRAGEE PAUL | PALLAVI KUMARI| HAREESH GONDELA | DEEPAK RANA| NEETU GODE
 INTRODUCTION- Different definitions

Corporatisation refers to the restructuring or transformation of a state-owned asset or

WHAT IS CORPORATISATION- organization into a corporation. These organizations typically have a board of directors,
DIFFERENT DEFINITIONS management, and shareholders. However, unlike publicly traded companies, the
GOAL government is the company's only shareholder, and the shares in the company are not
PRINCIPLE publicly traded.
BENEFITS Or
KEY FEATURES BY WORLD BANK Corporatisation is defined … as efforts to make SOEs [State Owned Enterprises] operate
as if they were private firms facing a competitive market or, if monopolies, efficient
regulation. This definition includes not only incorporating SOEs under the same commercial
CHAP 1 : INTRODUCTION

laws as private firms, but other steps to put state firms on a level playing field with private
firms by removing barriers to entry, subsidies and special privileges, forcing SOEs to
compete for finance on an equal basis with private firms, and giving state managers
virtually the same powers and incentives as private managers (Shirley 1999:1).
Or
Corporatization is a process by which a public sector service provider is transformed to
one with the commercial orientation of a private company.
Or
Corporatisation refers to the separation of service delivery from policy and regulation,
with the objective of providing for greater accountability and countering overt political
interference in the day-to-day provision of services. The underlying philosophy envisages a
shift from political interference to political oversight.

Samragee Paul_2019murp002
01
Source: A Report on Corporatisation Of Municipal Services Providers by Palmer Development Group in association with the School of Government, University of the Western Cape,
https://ppp.worldbank.org/public-private-partnership/agreements/utility-restructuring-corporatization-decentralization
 The transformation would typically include three ring-fencing activities: Introduction- Goal, Principle and Need
1. Establishment of a distinct legal identify for the company under which the government’s role is clearly identified as owner;
2. Segregation of the company’s assets, finances, and operations from other government operations;
3. Development of a commercial orientation and managerial independence while remaining accountable to the government or electorate

Goal of Corporatisation
The main goal of corporatization is to allow the government to retain ownership of the company while allowing the company to run as efficiently as its private
counterparts. Government departments are often inefficient due to internal bureaucratic conventions. Additionally, the government may consider that joining the
private sector might improve a company's performance. If this is the case, the government might conduct an offering on the stock market to divest the organization.
The goal of corporatization is to create arm’s-length enterprises with independent managers who are expected to account for costs and revenues as though they were
operating a stand-alone company. Corporatization is intended to create greater financial transparency, reduce political interference, and strengthen managerial
accountability.

Principle of Corporatisation
The guiding principle of corporatization is the intent to capture the advantages of a privately run company— including efficiency, productivity, and financial
sustainability—while retaining government accountability.

A successfully corporatized company will be able to demonstrate positive or improved performance results.

Need of Corporatisation
Corporatisation for efficient service delivery Municipalities have responsibilities for service provision, but it is not essential that they need to be the service
providers. This distinction is very useful in that it is the basis for cities to explore more effective and efficient ways to deliver services. Service units which are
corporatized will have their budgets separated or ‘ring-fenced’ from the rest of the municipal budget. They will be managed as operationally autonomous units.
Corporatisation allows the municipality to set policy and service standards and hold the entity to account against those standards. Reporting requirements and
accountability mechanisms must be clearly defined by the municipality. It also offers greater autonomy and flexibility to the management of the corporatized entity
to introduce commercial management practices to the delivery system.

02
Source: Good Practices in Public Water Utility Corporatization , ARD (2006). Samragee Paul_2019murp002
 Introduction- Benefits & Key Features
Benefits of Corporatisation

Corporatization is a complex form of alternative service delivery, but potentially offers a number of benefits for a local authority.
For example, corporatization enables a local authority to overcome legal constraints on its ability to undertake trading activities and thus can generate a new
revenue stream.
It can offer flexibility in employment and reward systems.
And where companies are also registered as charities, it can bring tax advantages and access to sources of charitable income.
The extent to which a local authority is able to realize these benefits depends in part on the legal structure chosen—which may be a private company limited by
shares or by guarantee (the latter may also be registered as a charity), a joint venture public limited company (PLC), a community interest company, or a limited
liability partnership (LLP)

Corporatization has the following key features:

Separate legal entity - The organization is legally established as an independent entity and hence the transfer of control is more durable than under utility
reform.

Managerial autonomy – Management has virtually complete control over all inputs and issues related to production of services.

Transparency and reporting - The utility is likely to become subject to prevailing company law and accounting rules in the country.

Assets and Liabilities - The corporatized utility will have transferred to it the assets and liabilities appropriate for it to perform its functions and to be viable. It
may be that it is inappropriate to transfer all existing debt associated with the service to the corporatized entity if the utility is unlikely to be able to raise revenues to
service the debt and fund existing operations. If a government wants a flourishing utility post-corporatization, it may have to assume or right off a substantial
proportion of such debts. Assets and liabilities should also be correctly valued to avoid allegations (particularly if any part of the entity is divested at a later date)
that there has been an undervalue, or public property is being given away, etc.). One element of assets which can prove contentious is what to do with receivables,
particularly those owed by public entities. A sensible bad debts policy needs to be adopted with only those receivable which have a realistic possibility of recovery
being transferred to the new entity.

03
Source: Good Practices in Public Water Utility Corporatization , ARD (2006). Samragee Paul_2019murp002
 Introduction -Key Features
Board of Directors (BoD): The corporatized entity to have a BoD which will represent shareholder interests and also have fiduciary duties to the utility’s
wellbeing and wellbeing of customers and creditors.

Staffing - It may be possible for the utility to follow different recruiting and staffing rules from the civil service rules, allowing for workforce benefits such as
performance incentives and bonuses, together with more flexibility on hiring of staff and disciplinary procedures. Care will need to be taken to ensure that any
increase in salary is linked to improvements in performance. Redundancy law issues regarding public employees will need to be taken into account. Any benefits
currently available to staff will need to be examined to determine how these can be transferred. In the case of pensions, care will need to be taken regarding any
pensions fund that has been built up and what liabilities are being transferred.

Independent status includes a hard budget constraint or financial “bottom-line”— which makes the organization fully accountable for its financial performance—
with liquidation at least theoretically being the final solution in case of insolvency.

Greater financial independence – need to combine corporatization with reforms allowing for increased portion of revenue coming from sales (rather than budget
allocation), increased possibilities for keeping and using extra revenue, as well as a hard budget constraint: allowing company to retain excess revenues, but is also
making it responsible for losses.

Special Considerations for Corporatization

Governments around the world show a trend of taking back control of services contracted out to the private sector, and this trend in corporatization has become a
popular form of modern government enterprise ownership. Corporatized agencies are fully owned and operated by the state but have separate legal and financial
status. Water and electricity utilities are common examples of this type of corporatization, but the practice extends to a much wider range of goods and services, from
airports to universities and hospitals.

04
Source: Samragee Paul_2019murp002
https://ppp.worldbank.org/public-private-partnership/agreements/utility-restructuring-corporatization-decentralizati
 Case study - Johannesburg
Case Example:

Johannesburg Water (JW) was formed in 2002, a result of the iGoli 2002 transformation plan of the former Greater Johannesburg Metropolitan Council
to turn around the city’s financial situation after bankruptcy in 2001-02. The iGoli 2002 plan required the government to sell non-core assets, restructure
certain utilities, and required that all others become self-sufficient. JW was structured as a corporate entity, wholly owned by the City of Johannesburg,
and was mandated the responsibility of providing water and sanitation to the three million residents of the City of Johannesburg, supplying some
650,000 domestic, commercial and industrial customers. In the subsequent years it has undertaken major projects to reduce unaccounted for water by
repairing and upgrading networks throughout Johannesburg and installing prepaid meters to ensure more efficient use of water. JW has carried out these
capital works in addition to its regular operations and maintenance of the city’s water infrastructure. The important thing to note is that while JW has
been able to provide affordable, clean water to the residents of Johannesburg as per the mandate from the City of Johannesburg, it also remains a
financially sustainable entity.

How corporatisation can be useful to us?

Corporatisation may be particularly appropriate for municipalities with large areas of jurisdiction and large populations in India. However, smaller cities
can pool together to form create regional corporatised entities, in order to capture the economies of scale that larger cities have. The state government
can play a facilitating role in helping set up such regional entities. Cities (or groups of cities/towns) can certainly benefit from corporatised entities
owned by the city (or jointly by a group of cities) that provide services mandated by the city and yet retain their management focus and autonomy,
resulting in high quality and uninterrupted service delivery. The corporatised entity can be compensated by the city for the services it provides and any
cross-subsidisation or free provision of service is borne by the city’s balance sheet. The hard constraint for the city is the balancing of its own balance
sheet. It is also important that the management of the corporatised entity be given contracts with appropriate incentives for achieving desired levels of
service delivery.

05
Source: Pragmatic Municipal Finance Reform: Lessons from policy in South Africa, Brazil and select experiences in Samragee Paul_2019murp002
India by Anand Sahasranaman
 USAID- Framework

The USAID(United States Agency International Development) documented several case

studies of utilities who have undergone corporatization and appear to be on a path to USAID FRAMEWORK
sustainable improvement under the umbrella of Good practices in public water utility

CHAP 2 : CASE STUDY OF USAID FRAMEWORK

KEY CHARACTERISTICS EVOLVED
corporatization AFTER EXAMINING SEVEN WATER
USAID is developing a framework to support design of programs and projects to transform water
UTILITIES BY USAID
service utilities into financially self-sufficient, reliable, good quality providers.
The four set of frameworks under USAID are:
 Good Practices in Providing Service to the Poor;
 Private Sector Participation in Water Toolkit (prepared by the World Bank);
 Good Practices in Water and Sanitation Regulatory Practices;
 Good Practices in Water and Sanitation Corporatization, the focus of this activity;

This framework document provides information on the basic tenets of corporatization—the key
principle, characteristics, mechanisms, and considerations.

The experiences of seven water utilities were examined for examples of good practice in
corporatization.
• Aqaba, Jordan;
• AQUA, Poland;
• COPASA, Brazil;
• Johannesburg Water, South Africa;
• National Water and Sewerage Company, Uganda;
• Public Utility Board, Singapore;
• Sydney Water, Australia.

06
Source: Good Practices in Public Water Utility Corporatization , ARD (2006). Hareesh Gondela_2019murp014
 USAID- Key Characteristics

In order to capture the advantages of a private company, a corporatized company has to emulate the
behaviour of a private company. It does this by adopting 5 key corporate characteristics:

 Sound corporate governance;

 Separate legal entity or company at least partially owned by government (often local government);
 Modern financial management and accounting practices;
 Customer orientation; and
 Effective and transparent use of data to assess and monitor performance.

These characteristics are interwoven and mutually supporting.

CORPORATE GOVERNANCE:

Corporate governance is the core of corporatization. It is the model of governance chosen to emulate a Fig.1 Relationship of Key
private corporation. Characteristics under USAID

• A governance model refers to allocation of performance obligations among stakeholders and a related
allocation of monitoring and enforcement obligations.
• The model makes transparent the objectives, rules, and procedures by which all stakeholders will engage
with the utility.
• Business tools and mechanisms are used within the company to achieve, monitor, and enforce
commercially oriented performance.

07
Source: Good Practices in Public Water Utility Corporatization , ARD (2006). Hareesh Gondela_2019murp014
 USAID- Key Characteristics
A fundamental goal of corporate governance is to protect and enhance the long-term value of the company for the shareholders (government and others).
This means increasing sales, controlling costs, and increasing revenues.

LEGAL STRUCTURE:

• The legal transformation to a corporate entity changes the relationship of the government to the utility, giving government a clear role as owner.
• Under a corporatized legal structure, the corporate board has defined interests or priorities in relation to the company.
• In most cases, the legal regime for a corporatized utility provides a more rigorous system of performance expectations and oversight than the system
within which a government department operates.
• Typically, the legal regime for a corporatized utility provides a greater degree of organizational autonomy.

FINANCIAL MANAGEMENT AND ACCOUNTING PRACTICES

Within a corporatized utility, it is more likely that:

• The utility will have a documented and demonstrated commitment to achieving financial sustainability.
• The utility sees customer revenue generated through core services as a key source of financing (rather than, for instance, government transfers) and
treats consumers and customer accounts accordingly.
• The utility has defined goals to recover, at least, O&M and possibly investment costs, depreciation, and debt service.
• The service goals are established with due consideration of the financial resources available to the utility (including customer revenue, loans, and
government subsidies). There is no financing gap.
• There are channels to ensure that the tariff setting and approval process is appropriate to the overall business, investment, and financing plans.

08
Source: Good Practices in Public Water Utility Corporatization , ARD (2006). Hareesh Gondela_2019murp014
 USAID- Key Characteristics
CUSTOMER AND MARKET ORIENTATION

Within a corporatized utility, it is more likely that:

• There is a formal contract with customers or statement of its service obligations to customers.
• Techniques and mechanisms are developed to encourage and facilitate bill paying and customer outreach.
• Customer satisfaction is measured and evaluated. Satisfaction is seen as important to maintaining a positive revenue stream even when there is
limited competition

TRANSPARENCY AND USE OF DATA

• Transparent framework for setting and measuring achievement against government objectives establishes public credibility, confidence, and
accountability.
• Information provided to oversight bodies allows for Board and management to be held accountable for results.
• Information flows within a company allow better management and targeted activity.
• Data can be used effectively to create a system of incentives linking personal goals (compensation) and corporate performance.

09
Source: Good Practices in Public Water Utility Corporatization , ARD (2006). Hareesh Gondela_2019murp014
 INTRODUCTION

According to UN “Water” has been identified as not only basic and economic necessity but
PRIVATIZATION OF WATER also a requirement of social and cultural good. Global consumption of water is doubling
CHAP 4 : CASE STUDY OF CORPORATIZATION OF

IMPACT OF PRIVATIZATION every 20 years, more than twice the rate of human population growth ,seeing to this it is
CASE STUDY OF INDIAN CITIES understood that due to increasing consumption patterns, water is becoming scarce and this
CASE STUDY WORLD WIDE scarcity is an emerging threat to the global population .

To solve the growing water crisis, the solution that is proposed and pushed by world bodies
such as WTO and IMF through international agreements such as GATS is privatization of
water, which in effect leads to treatment of water as a commodity. The argument put forth for
water privatization is that increased cost for water will promote conservation. This
commodification of water has already happened in several developed countries and is being
pushed in many developing countries through structural adjustment policies. The control of
water by private companies takes away this resource from the public and puts it in corporate
control.
WATER

10
Source:Water Privatization and Implications in India ,2003 Pallavi Singh_2019murp011
 WHAT IS WATER “PRIVATIZATION” OR
“CORPORATIZATION”?
Water privatization or corporatization involves transferring of water control and/or water management services to private companies. The water
management service may include collection, purification, distribution of water, and waste water treatment in a community.
The pro privatization lobby including water corporations, world bank and IMF has aggressively campaigned for water privatization on the grounds that,
while water subsidies promote wasteful practices, commodification of water should allow market forces (supply and demand) to set the water tariff,
which in turn will reduce water consumption and promote water conservation. Furthermore, it is argued that opening this sector to private providers,
will bring in badly needed capital for upgrading and development of infrastructure .

There are several models of water privatization that are currently in trend in different parts of the world.9 Depending on the degree of privatization,
these models can be broadly categorized into:

• public authority retains overall • This model of privatization is usually • The government or public authority
responsibility for the operation and Build, Own, operate used for system infrastructure awards full ownership and
Service contracts

maintenance of the system. and transfer development. responsibility of the water system
including the water source to a private

Divestiture
• Service contract lasts 1-3 years • They run for a long specified period of operator under a regulatory regime.
time such as 20 years.
• This lasts up-to 10- 20 years in form
of a renewable contract.

11
Source:Water Privatization and Implications in India ,2003 Pallavi Singh_2019murp011
 IMPACT OF PRIVATIZATION

From 1990 onwards, private participation in the water sector in developing countries started increasing and a growing number of governments are
turning to the private sector to build, recover, expand and/or operate their water and sanitation networks. In the years up to 1997, more than 90 projects,
in thirty-five countries, about water resource management have been undertaken by the private sector. Hence, it is observed that the private capital
investment for water projects in developing countries is increasing together with the increase in the number of projects.

On the whole, available evidence suggests that private involvement can improve, significantly, service provision to the poor and save budgetary
resources for other, perhaps pro-poor, projects. In many cases, poor households show high motivation to pay for improved services with contingent
valuation studies (Tynan, 2000). Most common developments achieved by private sector participation in water
sector can be categorized into:

• Improvement in water service quality;

• Improvement in water production efficiency;

• Diminished water losses;

• Strengthening of management of the water sector, and

• Enhancement of customer care.

12
Source: The Impact Of Privatisation On The Sustainability Of Water Resources In The United Arab Emirates, Of 2009. Pallavi Singh_2019murp011
 CASE STUDY OF INDIA

Shivnath River, Chhattisgarh:

The Chhattisgarh State Industries Development Corporation (CSIDC),

which is in charge of industrial development in the state, commissioned
the project to meet the demand on water in the Borai Industrial area
situated on the banks of the Shivnath - a non-perennial river. As part of
the project, a 23.6 km stretch of the river was ceded to Radius Water
through a 22-year renewable contract, under which the company had
absolute monopoly over the stretch of river water. The project was
initially hailed as a success by the govt. However, the catch was that the
agreement assured Radius Water of payment for a minimum of four Fig. 2: Shivnath River, Chhattisgarh
million liters of water per day by the state government, regardless of the
amount of water used and irrespective of whether the CSIDC recovers Rain water Harvesting
this amount from the industries.20 The CSIDC lost Rs 12.9 millions
between December 2000 and June 2002.21 Furthermore, Radius Water’s The harvesting of rainwater involves the collection of water from
monopolistic deal with CSIDC and the water resources department surfaces on which rain falls, and subsequently storing this water for
covered ground water as well in an 18 km-radius covering the Borai later use. Normally water is collected from the roofs of buildings and

ALTERNATIVE MODEL
industrial area. The company promptly prohibited fishing in the stretch of
the river and also charged local farmers for access to water from
tubewells. Ultimately, bowing to pressure from several NGOs and
adverse media reports, the government had to scrap the deal.
stored in rainwater tanks or allowed to recharge ground water and
thus providing a perennial source of water. In Indian scenario with its
monsoons, the water harvesting experience is millennial and born of
local wisdom; scientific and still in use; participatory and the basis of
people’s movements; the focus of innovation in the present and the
best way to a non-scarce future

13
Source:Water Privatization and Implications in India ,2003 Pallavi Singh_2019murp011
 CASE STUDY WORLD WIDE
Ghana:

A World Bank “development” loan of $110 million to Ghana was contingent on implementation of water
privatization with an increase of 95% in water consumer fees (96% increase in electricity). The effort to full
cost recovery is a prerequisite to privatization. Pressured by the World Bank, the government is planning to
lease the Ghana water company to two international water companies for profit. A bucket of water which
cost 400 Cedis earlier, costs 800 Cedis now and is inaccessible to the majority of the population who earns
less than 7000 Cedis, a day and do not have regular income. The proposed water privatization is expected to
increase the price further. Various groups in Ghana have mounted an opposition against the privatization.

ALTERNATIVE MODEL

Porto Alegre (Brazil): Participatory Water Management

Water has been under public control in Porto Alegre (Brazil) for the last 15 years. Department of Municipal
Do Agua e Esgoto (DMAE) a public owned not for profit company, is financially independent of the state. It
reinvests profits into improving water supply. This model is one of the reasons that poor communities have
gained access to clean water; their needs are prioritized because they participate directly in deciding about
new projects. Comparable participatory models are in place all over Brazil and have been very successful.

14
Source:Water Privatization and Implications in India ,2003 Pallavi Singh_2019murp011
 CONCLUSION

Responsible water usage can only be achieved by empowering local communities and creating local accountability. Hence, we oppose the kind
of privatization that is being pushed by the national water policy and call upon the government to develop policies that protect water resources,
promote sustainable watershed management and invest in technologies that will increase efficiency in irrigation, industrial usage and improve
water harvesting techniques.

Furthermore, due to the nature of this sector, water privatization, instead of bringing in healthy competition, results in a monopoly sanctioned
by the government agencies. Numerous case studies around the world highlight the other ills of water privatization such as poor quality of
water, unsustainable water mining and lack of transparency and accountability. From the various studies outlined here, we consider the proposed
privatization of water as a violation of basic rights of citizens of India and oppose any means to privatize water in India.

Better and socially responsible alternatives can be found by investing in community based participatory approaches to water management that
ensures equitable and sustainable use of this precious natural resource. All over the world, alternate models such as rain water harvesting, check
dam and bund building, holistic watershed management, integrated river basin management, and irrigation efficiency improvement have all
been demonstrated as low cost successful alternatives to privatization.

10
Pallavi Singh_2019murp011
 CASE STUDY - International
1. UNITED REPUBLIC OF TANZANIA
Several modes of corporatization of municipal services attempted:
• Open competition: through provision of licenses to private firms to provide municipal services.
Management contracts: this has been used to award the rights to firms for running parking lots INTERNATIONAL CASE STUDIES:
within the city center. Franchising: This has been applied in the corporatization of solid waste (as per UNCHAS)
management in the city of Dar es salaam. Concessions: These have been used to award
management of public toilets in Arusha. • United Republic of Tanzania

CHAP 5 : CASE STUDIES

• Compulsory competitive tendering: This has occurred in the corporatization of solid waste
collection and disposal in the city of Dar es salaam where a number of private firms bid for the • East Africa
award of contract of providing this service, which was otherwise being solely carried out by the
Dar es Salaam City Council.
• Shifting of responsibilities: nationalized are re-allocated to the former owners or to a NATIONAL CASE STUDIES:
community-based organization (CBO). Shifting of responsibilities has also occurred in the local (as per GOI)
areas where CBOs have been established and assigned service provision duties. A good example
is the CBO involved in the construction of drainage channels and road resurfacing in Hanna • Ahmedabad
Nassif area.
• Ludhiana
2. EAST AFRICA • Tirunelveli
The services corporatized are mainly solid-waste management & water supply.
• Corporatization is largely serving the municipal services in the middle- & higher-income
• Mumbai
residential areas that can afford to pay for the services. So, a large proportion of the poor and
low-income areas are left.
• Indore
• This raises issues of social equity & social integration & remains an unresolved public policy
issue, i.e. how to provide such services to segments of the population that cannot afford to pay
CONCLUSIONS
for private sector provision of such services.
• Assessment in East African sub-region indicates that the municipal services rarely covers and
serves the whole city.
08
Source- Good Urban Governance Campaign, INDIA Launch, Learning from one another Neetu Gode 2019MURP026
(UNCHAS) and GOI (2001)
 3. Ahmedabad Municipal Coorporation CASE STUDY – Indian Scenario
The Corporation initiated corporatization for improving streets, urban forestry, slum
networking project, city cleaning and planning.

[ ] [ ]
Redevelopment of C.G.
PROJEC

Under Street The investment will be recovered

improvement
taken up Arvind Mills Firm 35 million
Road & commercial artery from advertisement and vehicle
T

by AMC Ltd invested

Partnership of Ahmedabad parking charges
with

AMC provides land, water supply, fencing & tree

[ ]
plantation Recovers investments through
PROJEC

Under Urban Urban forestry is done taken up Community agroforestry & other
on vacant plots based
T

Forestry project by AMC remunerative activities at the

CBOs provide administrative and management
with organizations site.
expenses
(CBO)

[ ] [ ]
Aims at Physical and social infrastructure
Improving the quality
PROJEC

Under Slum taken up The Patani community, Arvind Mills Limited, including health, education, skill
Networking Project of slum communities by AMC SAATH & an NGO. Financial support – up-gradation & access to finance for house
T

(SNP) with SEWA Bank & HUDCO improvement & income generation

[ ] [ ]
Under Clean City Improving the Solid taken up SEWA an NGO, Clean Green Aims at improving hygiene and sanitation by
PROJEC

Partnership Waste Mangement at by AMC Abhiyan -an initiative supported by reorganizing the solid waste collection and
T

with Prarthana Group of Industries and Centre disposal system through neighborhood
Ambawadi area for Environment Education. level collection and disposal.

The Ahmedabad Municipal Corporation took these changes as a challenge and found that the best way to address them was by corporatizing services at
a wide rage of local governance functions which include poverty eradication, health and social infrastructure, and improved urban governance by
mobilizing resources from private sources.

08
Source- Corporatization of municipal services providers - Water Research Commission 2002 Neetu Gode 2019MURP026
 4. Municipal Corporation of Ludhiana (MCL) CASE STUDY – Indian Scenario
• Efficient services at minimum costs, strengthening institutional capacity and human resources
were the main aims.
• The aims were achieved through induction of community participation in management, corporatization and
management reorganization.
• Community Participation: encouraged retired and senior citizens to participate in the 'Manage Your
Neighborhood' scheme as 'Managers without Salary’ (because of insufficient number of supervisors and managers
under MCL).
• The three schemes that operate under Community Participation program:
Park Management Committees Neighborhood Sanitation Committees (NSC) Neighborhood Tube Well Operator
(PMC) Scheme (NTO)

AIM Maintenance of parks Improvement of Sanitation Supervision of tube wells

STEPS MCL Hired gardeners & reimbursed
TAKEN expenses at Rs. 1 per square meter per
month. MCL will carry out all
construction activities & will provide
technical guidance. All Presently there
are 427 under the scheme out of 630
parks owned by MCL.
NSC was formed under which three responsible citizens Under the NTO scheme local persons at a
firom a particular area got their NSC registered with monthly fee of Rs. 1,500 supervise tube
MCL. NSC hires sweepers per norms & monitors sanitary wells.
facilities. MCL partly reimburses expenditure at Rs. 1,200
per sweeper per month in addition to Rs. 2,500 per
sweeper per annum for equipment, etc. The community
also contributes to meet the expenses. Currently 146
NSCs look after 60% of MCL area employing about
2,400 sweepers.

• All these schemes are a great success as they have contributed to efficient management and cost saving for MCL.
• Advertising agencies operate garbage containers under build, own and operate basis (BOO) in lieu of advertising rights. They maintain the
container sites by concealing it by hoarding and preventing garbage spilling by posting a container attendant.
08
Source- Good Urban Governance Campaign, INDIA Launch, Learning from one another Neetu Gode 2019MURP026
(UNCHAS) and GOI (2001)
 5. Tirunelveli City Municipal Corporation of Ludhiana (TCMC) CASE STUDY – Indian Scenario
• Corporatizing garbage collection with the aid of Scavengers Liberation and Rehabilitation Scheme.
• Dependents of TCMC's sanitary workers availed loans from financial institutions for buying tipper autos.
• TCMC hired it for transportation of garbage at Rs. 75 per ton.
• TCMC saved Rs. 0.45 million annually through this system.

• Another project was to convert the 200-acre garbage dumping location into a thick forest area.
• The project of developing a green belt area was contracted out to plant saplings, fence, dig bore wells, install drip irrigation and maintain
for two years.
• Payments are released proportionate to the number of surviving saplings of two years age.

• TCMC's Corporatization project is considered as a success story.

• The major ingredients of it are (i) involvement of citizens, (ii) financial viability for both the Corporation and the private operators,
(iii) involvement of corporation staff as their interests were protected and (iv) commitment and supervision by TCMC.

6. Municipal Coorporation of Greater Mumbai (MCGM)

• Mumbai City has a population of 12 millions spread over a geographical area of 437sq km.
• It generates 6,000 metric tones of municipal solid waste (MSW) daily comprising of 60% household waste and 40% soil, silt and debris.
• MCGM employ about 25,000 staff and spends about Rs. 30 million annually.
• Advanced Locality Management (ALM), Airport Hotel Owners’ Association (AHOA) were introduced to improve the SWM.

ALM is functional in 700

societies
(established in 1998)
[ slums & commercial areas ]
The concept is also applied in AHOA is functional in 45
slums
(established in 1999) [
They associate in house to house
garbage collection and thus improve
cleanliness level. ]
08
Source- Privatization the key to better Government, Savas, E.S, 1987 Neetu Gode 2019MURP026
 CASE STUDY & CONCLUSIONS
7. Slum Networking Project (SNP), Indore
• The project consisted of provision of individual water taps, connection of toilets to a sewage network, installation of
integrated drainage and sanitation system and soft landscaping.
• The project is criticized for neglect of community development activities .
• Community-level organizations were not created and involved in the preparation and implementation of plans. In the absence of this the
project was not sustainable as the project staff were preoccupied with their post-project postings following the termination of the
project.

Conclusions
• Corporatization is interpreted as dispensing with the role of the state and the public sector, it also requires an enlargement and
strengthening of the regulatory role of the state to monitor and enforce contracts as well as protect overall public interest. Therefore,
Corporatization requires strong public presence for it to be efficient and effective.

• There are still differing perceptions of the concept and its application to Corporatization of municipal services as a process and strategy.
This is mainly due to its relatively recent origin and limited adoption and application in only a few countries, as well as the public
policy concerns regarding its impact on the equity.

• The system requires a longer period of implementation and practice in more countries to provide sufficient experiences to facilitate
plausible evaluation.

• Properly done monitoring and evaluation studies are required to arrive at more credible conclusions about the efficacy of
Corporatization of municipal services.

08
Source- The state of Indian Cities, 2001, Nairobi, United Nations Centre of Human Settlements Neetu Gode 2019MURP026
 Indian municipalities have overall EXISTING SITUATION OF MUNICIPAL
responsibility for solid waste Municipal authorities AUTHORITIES
in India are autonomous governments that provide essential services to the
CHAP 6. : CORPORATIZATION OF SWM SERVICE

management (SWM) in their cities. citizens at the local level.

Efficient delivery of public services and infrastructure are pressing issues for municipalities. In
India, SWM is the primary responsibility and duty of the municipal authorities.

• It is estimated that about 1,15,000 MT of • According to the Central Pollution Control

Municipal Solid Waste is generated daily
in the country. Per capita waste
generation in cities varies between 0.2 –
0.6 kg per day and it is increasing by
1.3% per annum.
Board (CPCB), average collection
coverage ranges from 50 to 90 percent.
Furthermore, of all collected waste, 94
percent is disposed of in an unacceptable
manner without any consideration of state-
of-the art engineering principles.

CHETAN VAIDYA,
2009
However, most of them are currently unable Solid waste management (SWM) is costly and complex for local governments
to fulfill their duty to ensure
environmentally sound and sustainable 1. 2. 3.
ways of dealing with FINANCIAL
SITUATION
ISSUES IN

Waste generation, Dependence on Allocation of Failure to

Collection, Government Inadequate Levy SWM
Transport, Grants Funds for Tax or User
Treatment, and SWM Fees
Disposal
01
Deepak Rana _2019MURP019
 Allocation of
1. Inadequate Funds for SWM
ELEMENTS OF WASTE MANAGEMENT SYSTEM
• Municipal decision makers do not give adequate priority A typical waste management system (WMS) in a low- or
to SWM. Financial allocations go for staff salaries as the middle-income country includes the following elements:
first priority, and what is left is spent on visible
infrastructure projects.
1. 2. 3.
• Most of the budget for SWM is consumed in salaries of Waste Segregation,
EXISTING FINANCIAL

Primary waste
sanitation workers and transport of waste. Very little or generation and reuse, and collection and
CHAP. 6 : CORPORATIZATION OF SWM

none is set apart for actual treatment and disposal of storage recycling at the transport to a
waste.
household level transfer station
The percentage of expenditures for various solid waste
CONDITION

services is as follows: 4. 5.
• 70 to 75 percent on street sweeping Street sweeping Management of
• 25 to 30 percent on collection and cleansing of the transfer
• 0 to 5 percent on disposal. public places station or
(Supreme Court 1999) community bin
Failure to Levy
2. SWM Tax or User Fees
6. 7. 8.
Most of the municipal authorities do not levy any sanitation
Secondary Waste disposal Collection,
or city cleaning tax, nor do they impose user fees for
collection and in landfills. transport, and
SERVICE

waste collection service or for any other SWM service.

transport to the treatment of
Very few cities have mustered courage to levy user fees for
waste disposal site recyclables at all
door-to-door collection
points

02
Deepak Rana _2019MURP019
 OPPORTUNITY CHALLENGES

L ESSON
EARNED
• Flexibility • No competition
• Uncertain safety and social benefits for workers

PROS AND CONS OF CORPORATIZATION IN SWM

• Increased
efficiency • No financial mechanism to ensure timely, regular payment
Municipal authorities should consider • Contestability for services
involving the private sector in SWM • Corruption
services to provide efficient services cost- • Unclear or unstable policy toward private sector
effectively. participation
There are three instruments that reinforce Risks and Potential Influence of Partners in Private Sector Participation
commercial operations and can improve

CHAP. 6 : CORPORATIZATION OF SWM

Operational Risk Examples
public sector effectiveness: • Delay in construction
• Corporatization that gives greater Operational
Risk • Cost overrun Quality and
independence and identity. performance failures
• Contracts between governments and

Extent of influence of private sector

• Increasing operation costs
corporate entities.
• Financial independence through pricing Demand Risk Examples
Demand
aimed at cost recovery. Risk
• Change in demand
• Cost increase for resources
• Change of tariffs
Corporatization is changing a Financial
Financial Risk Examples
government department into a joint stock Risk
• Delayed or canceled payment
company in order to increase • Fluctuation of foreign exchange
management autonomy. rates

SERVICE
Some of the market principles that will help Political • Fluctuation of interest rates
Risk
corporate governance are adequate
competition, level regulatory playing field,
and profit maximization. Source: SECO 2005
Extent of influence of public sector
03
Deepak Rana _2019MURP019
 In the current legal situation, the municipal Contracts between governments and corporate entities can address the
authorities may involve the private sector in governance problems of the public sector service(PSS) providers.
the following SWM tasks:
Option General characteristics Aim of PSS
Door-to-door collection of waste, because municipal
authorities do not provide this service. The private partner To increase efficiency of
INVOLVEMENT OF PRIVATE SECTOR IN SWM

SERVICE provides a clearly particular public services

Street sweeping in unserved areas, without disturbing or CONTRACT defined service to the
retrenching existing street sweepers public partner.
CHAP. 6 : CORPORATIZATION OF SWM

The private partner is To increase efficiency of

Provision of large containers for secondary waste
responsible for core service with improved
storage in various parts of the city
MANAGEMEN activities such as management structures
T operating and
Construction, operation, and maintenance of transfer CONTRACT maintaining
stations
Responsible for the The accountability of
Provision of the vehicle fleet and equipment for PERFORMANC performance in the work employees and managers
transporting waste E
AGGREMENTS
Extension of coverage and increased transportation of The private partner is To create
waste without replacing existing workers fully responsible for competition in the market
CONCESSION operation, maintenance,
and investment.
Construction of treatment facilities (composting,
SERVICE

waste-to-energy conversion, sanitary landfill, and so on)

TASKS

The private partner is To obtain benefits of a

fully responsible for management contract but
LEASE
Operation and maintenance of treatment facilities operation, maintenance with improved
and new investment investment planning

04
Deepak Rana _2019MURP019
 Concession Agreement between Service Agreement for Street Sweeping in
Corporation of Chennai and CGEA Asia Hyderabad
Holdings Pte Ltd., Singapore

The scope of work of CGEA, as per the initial action plan, The Municipal Corporation of Hyderabad has awarded 161
includes contracts for street sweeping, adopting a unit area allocation
• Collection of waste from mobile garbage bins method. Three-fourths of the city is divided into 161 units of 8-

STUDIES
• Deployment of rear-lift compacting trucks to deliver the kilometer road lengths. The number of workers to be deployed

CASE
waste to the two transfer stations. for cleaning 8 kilometers of road length is worked out.
• Deploying light vehicles on narrow streets
• Collection of segregated construction debris and garden With the introduction of the unit area method in the street-

CHAP. 5 : CORPORATIZATION OF SWM

waste
The transfer stations and two vehicle workshops owned by the
Corporation of Chennai are managed by CGEA. The waste is
sent from transfer stations and from some select areas directly
to the disposal area.
sweeping operations and the outsourcing of the service, the
corporation is saving about 50 to 60 percent of the cost that it
used its own labor force and is free from several other
postretirement benefits

1. 2. 3. 4.
Involving all Becoming an enabler CORPORATIZATIO Using a regional approach

stakeholders, such as
the local government,
the private sector,
CONCLUSION
of solid waste services that allows for service and
N.
rather than a provider and cost-sharing among
Attracting private sector
Strengthening institutions municipalities and providing
participation as a means
economic incentives for

SERVICE
nongovernmental so that they can monitor of increasing the
organizations, and the and enforce service waste minimization
efficiency of public
public provision or recycling
services while reducing
costs.

05
Deepak Rana _2019MURP019
 Summary
In chapter 1,we tried to cover the concept of corporatisation of municipal services through this presentation by covering different aspects of
corporatisation like different definitions of corporatisation were discussed which were used worldwide in various cases. Then the goal, principle ,need,
benefits and key features of corporatisation were discussed in the section and we ended with the case study of Johannesburg Water, South Africa; and
how corporatisation can be useful in Indian scenario.

In the next chapter i.e. chapter 2, the major factors of corporatisation is discussed with its impacts.

Then later on with the help of the experiences of seven water utilities of good practice in corporatization of Aqaba, Jordan; AQUA, Poland; COPASA,
Brazil; Johannesburg Water, South Africa; National Water and Sewerage Company, Uganda; Public Utility Board, Singapore; Sydney Water, Australia, we
documented the key characteristics used under the umbrella of Good practices in public water utility corporatization which were presented in the report
of The USAID(United States Agency International Development) who have undergone corporatization and appear to be on a path to sustainable
improvement in chapter 3.

In chapter 4 , the focus was on different case studies of successful corporatisation of municipal services in different sectors like WATER, where
privatisation of water and its impact was explained through the case of Chhattisgarh and Ghana.

In the case studies of chapter 5, where national and international cases were discussed, the different modes of corporatisation and different sectors
where corporatisation can be incorporated or being incorporated was discussed through various case studies of water supply and solid waste
management.

In the last chapter of corporatisation of solid waste management was considered where existing scenario of municipal authorities, lessons learnt, pros
and cons of corporatisation, involvement of private sector in SWM services were discussed and the cases of successful implementation of
corporatisation of SWM was also covered.

08
Samragee Paul_2019murp002
 REFERENCE
S:-

1. A Report on Corporatisation Of Municipal Services Providers by Palmer Development Group in association with the School of Government, University of the Western Cape.
2. Good Practices in Public Water Utility Corporatization , ARD (2006).
3. https://ppp.worldbank.org/public-private-partnership/agreements/utility-restructuring-corporatization-decentralization
4. https://www.investopedia.com/
5. The Impact Of Privatisation On The Sustainability Of Water Resources In The United Arab Emirates, Of 2009
6. Water Privatization and Implications in India ,2003
7. Good Urban Governance Campaign, INDIA Launch, Learning from one another (UNCHAS) and GOI (2001)
8. Corporatization of municipal services providers - Water Research Commission 2002
9. Privatization the key to better Government, Savas, E.S, 1987
10. The state of Indian Cities, 2001, Nairobi, United Nations Centre of Human Settlements
11. The Paper by Dr. Chetan Vaidya on Urban Issues, Reforms and Way Forward in India is the fourth Working Paper for 2009. It was commissioned as a background paper for
the preparation of the Economic Survey 2008-09.
12. World Bank Institute. “Improving Municipal Solid Waste Management in India: A Sourcebook for Policy Makers and Practitioners”, World Bank, Washington, DC
13. SECO (State Secretariat for Economic Affairs). 2005. “Public–Private Partnerships in Infrastructure Services: An Instrument for Poverty Reduction and Economic
Development,” SECO, Berne, Switzerland.
14. A Research paper on Pragmatic Municipal Finance Reform: Lessons from policy in South Africa, Brazil and select experiences in India by Anand Sahasranaman

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