Sustainable infrastructure development : a transaction cost approach to water supply systems in Tamilnadu, India

This paper analyses the sustainability of present institutional arrangements for rural and urban drinking water supply systems with reference to the state of Tamil Nadu, India, using the theory of transaction costs and related concepts of 'New Institutional Economics'. The introductory chapter emphasizes the importance of infrastructure and its sustainable development for developing countries. The chapter also explains the rationale behind the choice of the water supply sector this study. The second chapter elaborates on the various concepts and the evaluation framework developed by Ostrom et al* that is used in the paper. The third chapter gives a detailed analysis of the comparative performance of the present institutional arrangements for rural and urban water supply systems in Tamil Nadu in terms of transaction costs, and evaluates overall criteria such as efficiency, equity, accountability and adaptability. The institutional arrangements studied are: private systems (hand pumps or deep boreholes with electric motor); rural community hand pumps; rural public standpost systems; and urban schemes with house connections and public standposts. The final chapter discusses how those transaction costs can be minimized and outlines an agenda for further investigation.

*Ostrom, Elinor; Schroeder, Larry and Wynne, Susan (1993). Institutional incentives and sustainable development : infrastructure policies in perspective, theoretical lens on public policy. Oxford, UK, Westview