The urban water supply system can be privatized, but it should still remain a public service, says an article in the Beijing Times. Excerpt:

Contaminated tap water has forced 4,200 people in Chifeng to seek medical treatment since July 23. A State-owned enterprise (SOE) and a private firm are the two main water suppliers to the city in the Inner Mongolia autonomous region. Government supervision over the SOE is strict but relatively lax over the private firm.

Public utilities will remain essential services irrespective of whether a public institution or private company is providing them. Hence, such suppliers have to shoulder their share of social responsibility.

The way the water supply system is operated can be reformed, but its public service nature cannot be changed. Private companies engaged in the public utilities sector should understand a fact clearly: They are free to make profits but have to fulfill their necessary social responsibility.

Besides, government departments shouldn't drop their guard against water suppliers even if the entire system is reformed. They should continue to monitor the suppliers closely to ensure public interest is not being undermined.

Any problem in the public services sector usually affects a large number of people. A private firm could go bankrupt if it has to pay compensation to all those affected. And once such a company goes bankrupt, the government has to pay the damages. This is why the government should never lower its vigil against firms engaged in public services.

The Chifeng local government has had to pay for the water contamination victims' medical treatment, and the private water supplier may fail to pay full compensation after the court passes its verdict in the case.

In advanced counties, public utility services are insured. Firms engaged in public services have to pay high insurance premiums to ensure that once a problem arises insurers share part of the losses. Plus,a well-established social security network can ease social shocks and reduce the sudden financial pressure on the government.

(China Daily August 6, 2009)