In the last two decades, the water sector, especially drinking water policies and programs in India witnessed profound changes following the sector reforms described in Chapter 1. Correspondingly the move has been from a supply side towards demand side water management (Sangameswaran 2010). The basic premise for doing so is the perceived inability of the government to effectively administer the existing water infrastructure, provide water in an economically efficient manner to users and muster further financial resources to infuse in the water infrastructure (Cullet 2006). Regarding the rationale of such reforms, there are differing points that view these either as a response to the failure of the welfare state and of top-down technocratic approaches that require change or a more critical approach that views the reforms as a direct outcome of the pressures of international financial institutions, and of the influence of neoliberalism, or as involving the role of changing rural and urban elites (Sangameswaran 2010). Multilateral institutions (such as the World Bank, DFID) suggested that the state lacked capacity for long-term vision and thus, future lending be made conditional on major long-term policy changes in the sector. The prescriptions were manifold like divesting the state from responsibilities other than policy making; engaging the private sector 171for provision of services and establishing independent regulatory agencies (Wagle and Dixit 2006). The implementation includes legal, institutional, financial and regulatory changes that focus on financial sustainability and technical solutions to the existing problems in the water sector and include suggestions for unbundling of tasks, increasing tariffs, cost recovery for financial sustainability, elimination of subsidies, retrenchment, privatization and public-private partnerships (PPPs) and allocation of water base on market principle (Dharmadhikary and Dwivedi 2009). The main thrust of water sector reforms is to transform the role of the government by transferring a part of the existing governmental prerogatives to users and private actors and also to set up new bodies at the local and state level to take over part of the functions of the government (Cullet 2006). This shift from “government” to “governance” has been associated with the dilution of the role and importance of the state—the state progressively lost some of its central functions to supranational, infra-national levels, and non-state institutions, such as private companies and voluntary organizations (Jessop 1994). Governance thus becomes a process of sharing social, political, administrative aspects, where the state, market and civil society have their own roles, without the state having a central role, since no single sphere is supposed to have sufficient knowledge to dominate the governing model (Rhodes 1997). In this liberal version of governance, institutions are created for coordination among different members of the society, and to prevent conflicts of interest, by defining the rules of the game (Gorringe 1997). It also represents a rediscovery of the role which civil society and the institutions can play in promoting collective private and public ends (Mackintosh 1992). Although not our central focus, we shall explore the implications of such a liberal version of governance in this article. Our major presumption is that what is missing in this literature and larger debate is an exploration of the specific constraints of public utilities responsible for provision of drinking water — aspects of the so called “state failures,” an assessment of the emerging institutional alternatives and its implications.