260 JOHAN POST AND ISA BAUD
central government, which controls funds for local authorities, leading to a virtual
paralysis of local government. The privatisation of SWC services in this city has
occurred spontaneously in response to local consumer demand but is not accompanied
by any safeguards on the part of the (local) administration to keep up health and envi-
ronmental standards, to ensure co-ordination among actors, and to minimize
inequality in service delivery.
The impact of contextual factors is clearly visible in the trial and error process that
preceded the adoption of the unit system of privatisation in Hyderabad. The introduc-
tion of a rigid system of contract specifications and performance monitoring resulted
from the desire to correct earlier shortcomings, notably the sensitivity of the system to
corruption and abuse. Furthermore, the current contracting system is largely a product
of political pressures by labour interest groups towards the protection of labour rights
(especially those of MCH workers) and against attempts at reform. However, contract
requirements are such that private initiative is stifled. Technological innovation with
cost saving potential cannot be introduced given the specifications of number of
workers and types of vehicles and equipment. The typical short duration of contracts
also frustrates the willingness to invest and innovate. Furthermore, the authorities
actively prevent concentration of power in the hands of a few contractors, allowing
them a maximum of no more than three unit areas. Although this increases transaction
costs, it also enables the local body to keep firm control on the privatisation exercise
and to adequately carry out its regulatory function. At the same time the small size of
the total area to be serviced by one contractor prevents cost savings through scale
economies (although these are allegedly small in SWC, Cointreau-Levine, 1994: 16).
In other words, the specific contracting mode adopted in Hyderabad may fit the partic-
ular political-administrative circumstances in this Indian city – a relatively solid state
apparatus, a strong concern for public health and powerful labour unions – but it does
not allow to reap the full economic benefits of privatisation. Furthermore, the official
contract system is so inflexible that it cannot be utilized in slum areas, which remain
conspicuously underserved.
Obviously, the private freedom of action is much wider in Nairobi. Here one can
observe a degree of differentiation among service providers with relatively big compa-
nies dealing with high-and middle-income areas for comparatively high fees, and
various small (informal) ones servicing low-income areas at much lower rates. This
situation underscores the potential of the private sector to accommodate the needs of
various population groups, if at least the potentials of small-scale enterprises are
acknowledged.
An important distinction between the Nairobi and Hyderabad experience in SWC
relates to the role of residents’ CBOs. In the latter city the importance of SWC efforts
through CBOs is considerable and collaboration with the local authorities construc-
tive. The support given to the VGDS by the MCH, both politically and financially, is