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Enabling Private Sector to Do Poverty-Focused Water Distribution (Kathmandu Valley) and Facilitation for Water Levy Arrangements (Melamchi Valley) in conjunction with the Melamchi Water Supply Project
Nepal (NEP)
Keiichi Tamaki (SASS) and Arthur McIntosh (RSAE); Ministry of Physical Planning and Works (MPPW) and Melamchi Water Supply Development Board (MWSDB), His Majesty's Government of Nepal (HMGN); Co-financiers of MWSP include JBIC, NORAD, Sida, NDF, OPEC Fund and JICA
Proposed PRF-project processing time (month / year)
| Fact-finding |
Concept paper to RSDD |
Appraisal mission |
DFID approval |
ADB approval |
Letter of Agreement signing |
Implementation |
July 2002 |
Aug 2002 |
Sept 2002 |
Oct 2002 |
Oct 2002 |
Nov 2002 |
Dec 2002 |
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Poverty in Nepal
- The recent estimate indicates that 42 percent of Nepal's total population are living below the official poverty line, and poverty reduction is the primary objective of the Government's development policy, as indicated in the Government's Ninth Development Plan (1997-2002).
Poverty in Kathmandu Valley
- Although no official estimates of the extent of poverty in Kathmandu Valley are available, data derived from the Nepal Living Standards Survey of 1995/96 indicates that based on a poverty threshold of NRs9,000 per capita per annum, equivalent to about $122, the extent of the urban poor ranges from 10 to 13 percent. However, given that rents and other costs are higher in Kathmandu than in other urban areas of the country, 12 to 15 percent would be a conservative estimate of urban poverty in Kathmandu Valley. Nevertheless, income poverty alone is insufficient to understand the extent of poverty in the valley.
- Most of Kathmandu's poor live in very low quality houses, squatter settlements, or rented accommodation. Rental accommodation is occupied by a range of low-income groups, such as daily wage earners, hawkers, and partly skilled laborers. Squatters live mainly on marginal government-owned land; their population has grown considerably and is now estimated at 18,000. Overall, most poor live in small settlements in the midst of higher-income housing and, consequently, are not very visible.
- Access to reliable water supplies is a problem for most low-income communities. Reliance on public supplies from the Nepal Water Supply Corporation (NWSC) is minimal; most urban poor depend on private or traditional sources of supply. Shallow tubewells are a popular source but these are usually contaminated and responsible for a variety of waterborne diseases. About 67 percent of the population believe that the quality of water supplied by NWSC is poor; almost 72 percent of households in Kathmandu Valley treat their water before consumption. Boiling and filtering, the most common means of treatment, involve considerable expense and impact mainly on the poor. Based on a 1999 survey undertaken during the MWSP project preparation, 36 percent of the households suffer from water-related diseases. Diarrhea, stomach ailments, and dysentery are the dominant health problems and impact significantly on productivity and income because of working days lost and treatment expenses. Although no data is officially available, diarrhea is a leading cause for child mortality throughout Nepal, and Kathmandu Valley in particular.
- The hardships in accessing water in Kathmandu Valley are severe. With piped water supplies limited to two hours every alternate day, most consumers, and particularly the poor, rely on secondary sources. Although the time spent by the poor in accessing water for domestic use varies, approximately an hour is required. A number of domestic functions are undertaken at the water point to minimize the volume of water to be carried home. Women are predominantly the carriers of water. Residents of low-income areas carry home only about 10 liters per person of water every day. This is insufficient to maintain basic hygiene and sanitation standards, and is a prime cause of the high levels of morbidity and mortality.
Poverty in Melamchi Valley
- The project area of MWSP also covers Melamchi Valley, which includes a large part of Sindhupalchok District and a small part of Kabhre Palanchok District, both of which are predominantly rural despite their proximity to Kathmandu. The poverty incidence in Sindhupalchok District is high at about 50-55 percent. Eighty-five percent of the population lives at subsistence levels. Small landholding size (0.6 hectare on average), physical remoteness due to topography and lack of roads, low agricultural productivity, and poor access to health and education services perpetuate poverty in the district.
ADB's Water Supply and Sanitation Sector Strategy in Nepal
- The primary objective of ADB's operational strategy in Nepal is to achieve sustainable poverty reduction. To achieve this, ADB interventions aim to improve efficiency, predictability, transparency, and accountability in key institutions responsible for delivering services, while reducing poverty through equitable access to basic social services to enhance human development. ADB's sector strategy for water supply and sanitation supports the Government's strategy. The most important elements are (i) establishing comprehensive water resource management of river basins; (ii) establishing transparent government policy; (iii) implementing regulatory control of the sector, especially for levels of service, cost recovery, and maintenance; (iv) using the private sector for both development and management; and (v) taking care of the urban poor. ADB will continue to support rural and small towns water supply and sanitation, too. Investments in wastewater may be considered for Kathmandu Valley during 2006-2008 to support the private sector managed utility in attaining self-sufficiency. ADB is also providing regional TA to support (i) the establishment of regulatory systems and networking of water utilities and regulatory bodies, and (ii) private sector delivery of water supply and sanitation services (and solid waste disposal) to the urban poor.
MWSP's Project Justification
- MWSP will provide a least-cost solution to mitigate the socioeconomic stress caused by the inadequate supply of safe water on Kathmandu Valley residents by optimizing water use in the valley as well as developing new water sources outside the valley. This will benefit 180,000 households in the valley by improving water supply services, in terms of quantity, quality, and timeliness of supply, as well as more equitable distribution. The impact ratio for the poor has been estimated to be four times that for the not-so-poor. The Project will also provide socioeconomic benefits to about 40,000 residents of Melamchi Valley by increasing incomes from improved access and expanded markets, reduced workload for women, better education for children, and reduced incidence of trafficking of women. These benefits have not been quantified and, to that extent, the economic benefits are understated.
Proposed DFID PRF Project
- For Kathmandu Valley, the Proposed DFID PRF Project will first carry out a poverty mapping exercise to identify pockets of poor neighborhoods, which deserve some poverty-reduction intervention most. Then, it will focus on the actual modalities to be used for such intervention in conjunction with the prospective Private Operator (PO) contract for the water distribution services. Under the Project, modalities such as pro-poor cost recovery scheme, targeted subsidization and physical service delivery options would be designed.
- For Melamchi Valley, the Proposed DFID PRF Project will facilitate the negotiations on the "water levy" arrangements primarily between Kathmandu Valley water supply customers and Melamchi Valley residents, although there could be some sub-interest-groups. This water levy, which is paid for the river water diverted from Melamchi River to Kathmandu Valley, must be mutually agreed to amongst the parties involved and is expected to become a long-term funding source for sustainable development of Melamchi Valley. The Project will, thus, focus on the use of this fund in a most effective and equitable manner for Melamchi Valley residents.
- ADB's involvement, in particular, in the Kathmandu Valley water distribution became necessary due to World Bank's unexpected pull-out from this important part of the integrated scheme, which is one of the Government's highest priority projects. And, this activity is urgently needed in time for the PO recruitment, which is expected in September 2003. ADB's regular grant or loan financing is not readily available for addressing such an urgent need. Successful implementation of MWSP will have a tremendous positive impact on the country's overall water supply sector reform and can be replicated across the country. Most NGOs are generally supportive of MWSP and formed "NGO Forum on Kathmandu Valley Urban Water and Sanitation." They are expected to be active participants of the proposed DFID PRF Project.
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The main objectives of MWSP are to alleviate the chronic water shortage in Kathmandu Valley on a sustainable basis, and to improve the health and well-being of its inhabitants, particularly the poor. The Project also seeks to develop a comprehensive institutional framework for water resource management within the valley.
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The Proposed DFID PRF Project components for Kathmandu Valley and Melamchi Valley are both basically advisory consultancy assignments. The Kathmandu Valley component involves intensive field survey followed by comprehensive physical/financial/institutional system design while the Melamchi Valley component involves facilitation of the negotiations among parties involved. The durations would be about one year for the Kathmandu Valley component and about six months for the Melamchi Valley component.
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- Stakeholders are MPPW (Executing Agency) and MWSDB (Implementing Agency), and the five beneficiary municipalities are also involved; "NGO Forum on Kathmandu Valley Urban Water and Sanitation" is involved
- SASS will be responsible for overall coordination between the Proposed DFID PRF Project and MWSP
- The Kathmandu Valley component will be implemented as a part of the prospective PO recruitment consultancy while the Melamchi Valley component will be implemented as a part of the PMC for MWSP
- DFID approval is requested in October 2002
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US$150,000 for "Enabling Private Sector to Do Poverty-Focused Water Distribution (Kathmandu Valley component) and US$50,000 for Facilitation for Water Levy Arrangements (Melamchi Valley component); thus, a total of US$200,000
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MWSP's Impact on Poverty in Kathmandu Valley
The major project benefits of MWSP are savings and incremental benefits accruing to water users and to the economy, from the improved water supply and management. An examination of the demand curves indicates that the net benefit accruing to a poor household (benefit less tariff paid) is about the same as that accruing to a not-so-poor household, but the composition of the benefits is different. The poor household has a small absolute savings benefit and a large absolute incremental benefit. Assuming a single rate tariff, the distribution of the net benefits to consumers is about equal to the distribution of the population. However, the relative impact on the poor is better, with impact ratios of net benefit over income estimated at 1.6 for the poor and 0.4 for the not-so-poor. Assuming an increasing block tariff structure, the impact ratio for the poor increases to 1.8, while that for the not-so-poor decreases to 0.3.
MWSP's Impact on Poverty in Melamchi Valley
Several socioeconomic and poverty reduction benefits will accrue to the population (40,000) in the 14 Village Development Committees (VDCs) in Melamchi Valley through the MWSP's project infrastructure construction and the Social Uplift Program (SUP). These include (i) improved access to Kathmandu and within Melamchi Valley using the access roads; (ii) increased incomes from the expanded market and upgraded skills; (iii) availability of electric power; (iv) reduced workload for women; (v) increased gender awareness in the community; (vi) increased adult literacy rates; (vii) better educated children; (viii) greater health and family planning awareness and improved health conditions, especially for women and children; and (ix) reduced incidence in trafficking of girls.
The Proposed DFID PRF Project will help ensure that both positive impacts on Kathmandu Valley and Melamchi Valley described above will materialize by the implementation of MWSP.
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- Project Framework
- Budget Matrix
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