With only half of Pakistan’s rural population provided water through government sources, many observers may well be led to believe that this is a clear case of government failure. Yet, such conclusions ignore the way development thinking has changed over time. Currently, the new way of providing infrastructure and social services relies increasingly on communities, NGOs and the private sector, with the role of government considerably curtailed. In the Rural Water Supply and Sanitation (RWSS) sector, it is the Uniform Policy which now dominates planning and implementation Unfortunately, succumbing to donor pressure, an illdevised Policy has been approved for the sector which requires prerequisites which are just not available. A socially sensitive engineering department, and organised and active communities, which are the cornerstone of the Uniform Policy, do not exist. Hence the failure of the new thinking in the RWSS sector. While institutional failure and government sclerosis may be amongst the more critical causes of failed service delivery, it may perhaps be more instructive to analyse such institutions in a broader political economy perspective, where reasons for the failure of the state as much as of ‘civil’ society, may provide more useful answers.