PUBLIC PRIVATE PARTNERSHIP (PPP) FOR EFFICIENT WATER MANAGEMENT IN URBAN AND RURAL AREAS Time: 13:30 hrs. to 15:30 hrs.
PRIVATE SECTOR PARTICIPATION IN WATER SERVICE PROVISION Incorporating Social Policies in Water Contract Design
K. Vishnu Mohan Rao Coordinator Citizen consumer and civic Action Group (CAG) Email: vishnu@cag.org.in, kvishnurao@gmail.com
AGENDA Growth
of Private Sector Participation (PSP) in Water Service Provision Regulatory Framework
Regulatory Organisations
With examples
Incorporating Social Policy in Contracts
With examples
Conclusion
INTRODUCTION Water - public good and vital for human needs Subsidies and social tariffs – Social policies ‘Government failure’ – Private Sector Participation (PSPs) –
Management, lease/affermage and concession contracts Efficiency of private sector and at affordable rates for reasonable rate of return
But high water tariffs & break-down in PSP contracts Indian context - Jawaharlal Nehru Urban Renewal Mission (JNNURM) ‘full cost recovery’/affordability Need to strengthen regulatory framework
REGULATORY FRAMEWORK FOR SOCIAL POLICIES
Set of rules and processes that bind the water and sanitation service providers, Formal rules (laws, contracts, bylaws, etc.) and Informal rules (personal commitments, financial incentives, reputation, etc.). Allocations of main regulatory/monitoring functions to various institutions (Tremolet, 2006)
Regulatory Institutions – (Stern and Holder, 1999) State ownership - ministries or departments, project management unit to monitor outsourced O&M contracts. Jordan – PMU, Regulatory Office, Directorate Office Private ownership - independent regulatory agency (Walker report, 2009) –Regulatory Board
SOCIAL POLICIES IN PSP CONTRACT DESIGN PSP
Contracts differ in risks and responsibilities Social policies in PSP contracts - structure to contracts in favour of poorer citizens 1. Market Structure and competition
Exclusivity – reasonable rate of return Drawback - Cherry Picking” - Restrictive entry of new firms hamper provision of services to the poor a) Social Policy - alternate service providers to serve unserved areas – slums, unprofitable areas Amman, Jordan – licence to private operators to serve unserved areas Abidjan, Cote d’ Ivoire, Private Operator grants licences to the small scale water vendors.
1. MARKET STRUCTURE AND COMPETITION b)
Social Policy Increasing Coverage targets/ Universal service obligations to prevent cherry picking
E.g. Cochabamba, Bolivia, - five-year moving targets until 100 percent water and wastewater network coverage Gabon - Five-year increasing targets differentiating (different targets between main cities and rural areas)
2. SERVICE STANDARDS
2.1Tariff Structure Rate of return on the capital invested by charging all consumer proportional to their usage Drawback- Affordability/Willingness to Pay Social Policy - increasing block tariff, cross-subsidies
No. of blocks, volume of water, block prices Cote D’ Ivoire- social connection and a social tariff block for consumption La Paz and El Alto, Bolivia - Social tariff – first volume 30 m³ consumed each month Special categories – pensioners, special groups
2. SERVICE STANDARDS 2.2 Subsidies - targeted/untargeted Drawback - Very high connection fees Social policy - Connection subsidy – free connection or subsidised rates
La Paz El Alto, Bolivia - Reduced either by exchanging connection fee payment by community work Connection fees in monthly instalments with US $ 15 as down payment with a US $ 5 monthly instalment spread over 60 months. Jakarta, Indonesia – 12/24 months instalments
2. SERVICE STANDARDS
2.3 Water Quality Drawback - Stringent abstraction and discharge guidelines/standards Social Policy - Trade-off between investment and quality standards Low cost technologies to reach the poor, adopt indigenous technologies low pressure pumps/cooperative standpipes/yard-tap Paraguay –
low-cost technologies, using simple well-drilling , techniques and plastic hosing. Reduction in installation costs of small water networks to US$250 per person,
3. SOCIAL RESPONSIBILITIES Depends
on the type of PSP contract Management Contracts- Providing Technical /financial expertise Concession/Affermage/Lease - Developing Propoor schemes when Government policies are not in place Social policy - Allowing alternate service providers to sell water services e.g. Manila, Philippines - Manila Water Ltd Tubig Para Sa Barangay (TPSB) and Maynilad Water Services (Water for Poor Communities ) Cote d’ Ivoire - Water resellers are authorized to build small networks and pay bulk supply tariffs instead of the normal rising-block tariff
THANK YOU
Contact Details – vishnu@cag.org.in, kvishnurao@gmail.com