Let me answer the question in your title.
Because if even a single person doesn't have water - we risk thousands, perhaps millions, dying from plagues like cholera.
The market is not an option here -because NOBODY can be allowed to have NO water - even if they have no money, not even for a single day.
Forget the humanitarian reasons for that (much  as you're an evil, evil person to do so) - it's simple self-preservation.
Better bad water for everybody -than thousands dead because somebody had none.

Sure, government may be terrible at this - but you know what, every other option is EVEN WORSE.

There's a reason EVERY privatized water supply attempt in history has ended up in violent riots in the streets ! 
Oh and your vaunted private sector is, in reality, far worse at this than government. Coca-Cola ALREADY sells water globally -  as an expensive luxury good.

Government water is, like Churchil's democracy, the worst way  to do it - except for all the other ones.