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Demand for decentralisation of provision of public services is gaining ground in developing countries. Also, the policy advice to decentralise given by international agencies to the developing countries is turning into pressure. However, the benefits of decentralisation are not as obvious as the standard theory of fiscal federalism predicts. This article examines the effect of decentralisation of provision of drinking water in central India. The efficiency of water utilities under the control of the state government and those under the local governments is compared in terms of expense and asset utilisation. It is found that the decentralised provision of water supply is less efficient. The possible reasons for this counter intuitive result are analysed.
Anand N. Asthana (Tue,) studied this question.