Water

Water Champion: Keiichi Tamaki
Connecting the Poor for Free?
September 2003

By Ma. Christina Dueñas
Water Knowledge and Communications Coordinator, ADB

Keiichi Tamaki is a Senior Urban Development Specialist in the Social Sectors Division of the South Asia Department. He manages ADB's Nepal Urban and Environmental Improvement Project. Project Brief Nepal's rural to urban migration situation is accelerating. Population growth rates in urban areas are as high as 7%, well over the national population growth rate of 2.3% per annum. Serious environmental issues have emerged as a result of the rapidly increasing urban population. Nepal's urban areas now experience inadequate drinking water supply, haphazard disposal of solid waste and human waste, and uncontrolled urban development. Despite its efforts, the centralized public administration system has failed to respond to these urban management challenges. To address this institutional failure, the Government has embarked on a serious effort to decentralize urban management. The Nepal Urban and Environmental Improvement Project is the Government's initial step to support this decentralization effort. The project is promoting sustainable urban development in nine urban growth centers surrounding Kathmandu Valley: Banepa, Bharatpur, Bidur, Dhading Besi, Dhulikhel, Hetauda, Kamalamai, Panauti, and Ratnanagar. Its five main components are: Municipal institutional strengthening and revenue mobilization Provision of urban and environmental infrastructure Provision of supplementary urban facilities Community development Project implementation assistance The project was approved in December 2002 and is expected to be completed by September 2009.

This project would be the Government's first foray into decentralized and integrated urban improvement projects. What major challenges do you see?

The project covers a wide array of responsibilities that were only recently delegated to Nepal's local governments - water supply, wastewater management, solid waste management, road construction and maintenance, drainage, land pooling¹ and more.

Nepal's Local Self Governance Act was only passed in 1999 so the decentralization process is still at an early stage. When we first started processing this loan, we were dealing with municipal government officials. In 2002, however, political changes in the country led to a drastic transition. Elected local government officials were dismissed and the highest-ranking bureaucrats in the municipalities took over as acting heads. That meant some delays in project processing.

Human resources would also be a major challenge. The more competent personnel are concentrated in the capital city. There are few incentives for these to transfer to the municipal governments, particularly given the traditional view that service in Kathmandu is best for career development.

Typical standpipe and water containers in Nepal

What are the project's main concerns vis-à-vis water supply services?

The project covers 9 towns. Five of these towns involve water supply, two are freestanding systems (Hetauda and Baratpur) and an integrated system is proposed for 3 towns (Banepa, Dhulikhel, Panauti).

Nepal has a number of urban water supply systems currently operated by the Nepal Water Supply Corporation (NWSC). But NWSC's performance to date has been disappointing. Under this project, the municipal governments can choose the kind of institutional arrangements they want to adopt, which can involve private sector participation schemes. The governments submit their proposals to ADB, and we review each proposal's feasibility.

The situation in the 3 towns is a bit different. Banepa, Dhulikhel and Panauti are very close to each other, and our study indicates that an integrated water supply system would be the most cost efficient setup for these towns. The project, therefore, allocated funds sufficient for an integrated system. However, these towns can still adopt independent systems if they really want. They just have to provide additional counterpart funds by themselves, which would be approximately 30% of the total cost for an integrated water system.

Dhulikhel seems to favor this arrangement. The community itself ably manages Dhulikhel's water supply system, said to be the only working system in Nepal, and may opt to preserve this setup. The project gives Dhulikhel the choice to do this, or collaborate, perhaps through a third party, with Banepa and Panauti for an integrated system.

How will the communities be involved in project implementation?

The communities were closely consulted during project processing. They will have a key role in project implementation. For instance, in designing the water supply system for the municipality, they will be consulted vis-à-vis their demand for the service and willingness to pay the corresponding tariffs. NWSC has never done town-by-town tariff differentiation in the past.

Do you think the consumers will resist the new tariffs that will be introduced under the new water supply systems?

Of course we expect some resistance but I'm certain they eventually will be willing to pay. There was a "willingness to pay" survey in Kathmandu and the respondents said they are willing to pay up to $0.80/m3 for their water. At present, the tariff is very low at 8 rupees ($0.10)/m3, and that doesn't even cover NWSC's operations and maintenance (O & M) costs. NWSC now need to rethink its tariff strategy if it is to raise enough funds to cover O & M and have funds left over on new investment that is badly needed.

We suggested to our Nepali partners that the entry barrier to the water supply service should be lowered rather than continuously subsidizing the water usage. When you enter a supermarket, you don't pay an entrance fee. You just pay for the goods you buy. It should be the same with water supply services-you provide the connection for free or for a nominal charge, and charge for what the users consume. A utility operator who intends to start a massive system expansion and seeks an increase in tariff must lower the entry barrier. That's utility operations 101.

Typical dwellings in Panauti

How would this project help the poor?

One aspect of the project that can really help the poor is the sewerage component, because it is the poor who are forced to live in the most unhygienic conditions. There was a pilot-tested sewerage treatment technology using natural reeds as treatment in Dhulikhel and Panauti, and we will try to do the same for all the project towns.

We also recommended giving free or nominal charge for connections to the water supply service, and then charging a flat volumetric tariff. That's the supermarket analogy again. At the moment, the first 10 cubic meters are very cheap, not even covering the O&M cost, and then the price hikes up. With such increasing block tariffs, there's a disincentive for the water utility operator to expand to poor communities because the poor would likely try to limit themselves to the cheaper cubic meters, which means that the operator will lose money by doing such expansion.

What key messages can you give about this project?

To get the project going, human resources are the key. The current view in some agencies is that one has to be in Kathmandu to have a satisfying professional life. This decentralization project hopes to prove that there are many things that bring satisfaction in the local office, and that the local office is where one needs to be to do real local development work. A paradigm shift is needed.

Second, the water supply business is not different from any other utility operation. One needs to follow the basic strategy of lowering the entry barrier and recovering cost through uses for massive system expansion.

A decentralized and integrated project such as this is not an easy undertaking, but this is really the best way to go for serious and long-term urban development. Our Nepali partners are very serious about this, and we are all hopeful that we can meet the project's objectives.

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