Charging for sewerage

Transcription

1 Charging for sewerage services a practical perspective Prof. Ir. Mohd. Haniffa Abdul Hamid Ir Dorai Narayana Indah Water Konsortium Kuala Lumpur dorain@iwk.com.my

2 People think mobile phones provide better value than toilets!

3 When nature called... they just did it!

4 The drivers.. Piped sewerage Surface water pollution Sludge management Septic tank Bucket latrine Pour flush latrine Aesthetics Nuisance Ground water pollution Diseases Privacy Dignity Open defecation Pit latrine

5 SANITATION SEWERAGE Piped sewerage Latrines Septic tanks Centralised systems Open defaecation The user s perspective of value

6 SEPTIC TANKS All owner wants if for the sludge to be emptied and taken away. Safety, spills, safe treatment & disposal are not his concern. When owner faces problems of overflow or other symptoms, he requests emptying. Owner is happy as long as he can use his toilet. He may be unaware of the septic tank. Effluent could very well be polluting the drains & rivers.

7 SEWERED SYSTEM Raw sewage outfall They are generally not interested what happens after that. Users just want a toilet that works And a neighbourhood free of sewage overflows Centralised sewage treatment

8 Users do not want this happening in their homes. They also do not want this near their homes they are willing to pay to avoid this

9 Benefits Environmental benefit BENEFIT TO ENVIRONMENT DIRECT BENEFIT TO USER Centralised & Advanced systems: Address Environment On site systems Piped off-site systems: Address Pollution, community concerns Sanitation: Address Public Health

10 In Malaysia: 1994: Federalisation & Privatisation Formed in 1995, as a National Sewerage Concessionaire in Malaysia Operate sewerage services over most of Peninsular Malaysia Operation & Maintenance of sewage treatment plants (STPs) and sewer network Septic tank desludging and sludge management

11 Malaysian context Sanitation / sewerage by local authorities: no direct charging for sewerage in most areas Local Government Act allowed Sewerage Surcharge as part of property charges & frontage charges to cover part of CAPEX Some local authorities charged WC charge Desludging charges were minimal (estimated less that 1% desludged) Privatisation Concession Widespread resistance to direct charges Yr 2000 : IWK acquired by Government CAPEX responsibility assumed by Government High percentage of refusal for desludging services (up to 70%) Unwillingness to pay Stagnant tariff Customers perceive no service Revenue Item Collections RM X 0.8 X Cost * * Current costs. True costs may be up to double the revenue 1.60 X

12 Supply side: Demand vs Supply Investments are wasted because intended consumers simply ignore the resulting systems. Accra, Ghana, after 20 years, only 130 connections to a sewerage system designed for 2,000 connections; Howrah, India, no one was connected to a sewerage system built for workers; Ma an, Jordan, there have been only 690 connections to a system designed for 6,000 connections; Addis Ababa, Ethiopia, after 10 years, only 10 percent connections made to the new sewerage system. In Malaysia centralised sewerage projects in a number of areas have low connection rates Demand side: Middle-income households in Manila (Philippines) and Jakarta (Indonesia), facing an inadequate supply of public sewers, put in their own septic tanks. Overflows from septic tanks have polluted the waterways in both cities. In Jakarta, where many industries rely on groundwater supply, there is an increasing risk of groundwater pollution. While self-provision has addressed private sanitation needs, it has also created costly environmental pollution. Sources: The World Bank, Manila Second Sewerage Project, Draft Staff Appraisal Report (Washington, DC); Vijay Jagannathan, World Bank, 1995; and E.K.V. Dovlo, Managing Director, Ghana Water and Sewerage Corporation

13 GEORGETOWN, PENANG ISLAND -Sewage system built in the 1930s covered most of city -Raw sewage discharged to sea causing massive pollution and eyesore -New STP built at cost of > RM 500 mill -Operating costs jumped -Residents in Georgetown generally perceived no change -Jelutongcoastline transformed

14 SEWERAGE IMPROVEMENT BENEFIT

15 TIJUANA / SAN DIEGO, MEXICO/ USA Tijuana River Valley is on the border of Mexico, south of San Diego, USA. Tijuana River polluted by sewage flows from Tijuana, Mexico. Pollution affected San Diego in the United States. US Congress authorized funds to construct treatment facility in the valley, to treat sewage from Tijuana

16 Wastewater Service as a Public vs. Private Goods Private goods: benefits mainly to individuals and not to the public at large. Public goods: benefits to the public at large; Wastewater collection and treatment, has components of both public and private good. Most countries recognize that wastewater treatment provides a substantial public good, and national budget funds subsidize at least a part of local wastewater treatment. Lack of Demand for Wastewater Services Users are reluctant to pay because they often differentiate between waste collection and waste treatment, with waste collection seen as directly benefiting the system users. Treatment of the waste tends to be seen as benefiting downstream users and is often treated as a wider public good.

17 POLLUTERS PAY VS BENEFICIARIES PAY - SOME THOUGHTS ON SEWERAGE COSTS RECOVERY Sanitation (addressing basic public health) evolving to Sewerage management (providing a better neighbourhood, safeguarding water resources and preserving the environment) Sewerage management deals with community goods. There has always been reluctance among people to pay for such services. While these were Government services, costs were fully or substantially covered from general tax, with minimal direct charges on user. As private sector got involved, tendency is to look at full cost recovery, usually from the user. The individual user is interested for the wastes to be removed out of sight. Sophisticated treatment of the wastewater to produce high quality effluent is necessary to protect the water resources and preserve the environment. This benefits to the Nation increased availability of water resources for drinking, irrigation, aquaculture, tourism related activities and a better environment contributing to the quality of life of the people.

18 FULL COST RECOVERY : FROM BENEFICIARIES - HOW DO THEY BENEFIT? User Community Water resources Economy Wastes removed from premises Clean neighborhood Enhanced property value Pleasant living environment Unpolluted water for drinking and economic use Tourism Enhanced workforce productivity

19 World Bank s Strategic Sanitation Approach: (i) preferences of users (ii) unbundling sanitation services Households pay the bulk of the cost incurred in providing on-site facilities, including on-site sewer connections Residents of a locality collectively pay the additional cost incurred in collecting wastes from individual houses and transporting these to the boundary of the neighbourhood Residents of a city collectively pay the additional cost incurred in conveying, treating & disposing the sewage.

20 UNITED STATES 1970 s -US Govt Construction Grants Program to states for wastewater treatment plant construction. 1981; Subsequenlty reduced to 55% 1987 : Clean Water Act (CWA) $18 billion revolving fund loans to States. 1975: The federal share of project costs was initially 75% Upto1985 total amount of US $41 billion allocated.

21 JAPAN Trend in finance of sewerage construction general account budget :82,909 billion yen expenditure for public works : 6,947 billion yen national expenses for sewerage : 696 billion yen 6,000 5,000 4,878 B ilion ye en 4,000 3,000 2,000 2,442 3,065 3,149 3,379 3,409 2,921 2,433 2,152 2,110 1, ,129 1,099 1,246 1,781 1,262 1, Total expenses for sewerage construction Subsidized expenses National expenses for sewerage Subsidized expenses 50%

22 JAPAN

23 Setting of Appropriate Sustainable Sewerage Charges - Present IWK Model CUSTOMER VIA TARIFF + GOVERNMENT VIA SUBSIDY/ GRANT FUNDING Present tariff model poses a problem in relation to the benefits to customers as against community As investment & sophistication of sewerage assets increases, the community benefits more than the direct customers Hence increasing tariff to cover the cost of infrastructure improvements is seen as not fair to the direct customers SEWERAGE FACILTIES & SERVICES O & M / CAPEX USER COMMUNITY ENVIRONMENT Benefits Environment Cummunity concerns Public Health Tariff + Tax for sustainability Benefits to Community, Environment Possibility of higher cost recovery from tariff alone Benefits to Customers Investment

24 SUGGESTED APPROACH FOR CAPEX AND OPEX APPORTIONMENT CAPEX APPORTIONMENT OPEX APPORTIONMENT CAPEX items having direct impact on customers to be directly recovered through tariff. Balance to be funded from Govt. tax revenue. 30% 70% OPEX recovery from tariff/ tax initially Gradually increasing tariff portion with increased awareness and willingness to pay Eventually resource recovery (water reuse, energy, nutrients ) may contribute significant portion of revenue 50% 50% 60% 40% 20% 50% 30% General tax Tariff Resource recovery revenue 24

25 FEDERAL GOVERNMENT General tax Tourism tax Environment tax STATE GOVERNMENTS Land tax Raw Water tax LOCAL GOVERNMENTS Property tax

26 EQUITABLE CHARGING FOR SEWERAGE Consider perceived value to user -wastes to be removed from premises, and out of sight Beneficiaries from sophisticated sewerage systems are the community, local environment and commercial and industrial enterprises including tourism Appropriate that the user is only charged for the benefit he derives, while the other beneficiaries pay to make up the remaining costs through different tax mechanisms Over time, as environmental awareness grows, a larger percentage of the costs may be borne by the user Resource recovery is a potential revenue source which may eventually enter the equation

27 Note: the views expressed in this paper are those of the authors and not necessarily of IWK. It is hoped that these considerations can form the basis of sanitation / sewerage tariff setting through policies in countries where appropriate.

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