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Country Water Actions

Country water actions are stories that showcase water reforms undertaken by individuals, communities, organizations, and governments in Asia-Pacific countries and elsewhere.

Maldives: Recovering the Full Cost of Delivering Clean and Safe Water
April 2006

The people of Malé no longer drink brackish water. They have safe, desalinated water and they’ve agreed to pay a lot of money for it. The Malé story offers an example of a successful private-public partnership and the implementation of very high tariffs. DESALINATED WATER IS WORTH MALE’ RESIDENTS’ MONEY Faced with the prospect of no freshwater source, the people of Malé, Maldives knew that the solution would come with a price. The question was: are they willing to pay it? In 1995, Malé residents agreed to pay an average of US$ 5.00 per cubic meter (m3) of water. This high tariff, the highest in Asia, was to be used to support the operation of seawater desalination plants that provide 24-hour access to drinking water. In 2000, the tariff rate even increased to US$ 6.40/ m3 but was later reduced to $5.62 in 2005. Contrary to common expectations, this did not stop consumers from using the water. From a customer base of 6,500 customers in 1996, using 395,500 m3 of water, the numbers surged to almost 17,000 customers using just under 2 million cubic meter of water in 2005. The increase in desalinated water use indicates people’s confidence in desalinated water than water from traditional water sources: groundwater and rainwater. Beyond that, this indicates that people— without alternative viable options —would be willing to pay for water that they know to be safe, clean and worthy of its price. FIGHTING WATER SCARCITY WITH THE RIGHT PARTNERS Water is a very scarce resource in the Maldives. Groundwater and rainwater are the major water resources. In the period leading to the 90’s, the underground aquifer had been irreparably damaged by extensive use and pollution. The result was salty water not fit for human consumption. No regulations and standards were issued on groundwater use, and the build up of saline groundwater is evidence of its misuse.

Rainwater, on the other hand, is not disinfected and very few people boil it. There have been incidents when rainwater was tested positive for bacteria. Aside from these geophysical limitations, people perceive water as a free good. The impending water crisis prompted a Joint Venture Agreement between the government and NTR Holding/HOH Water Technology of Denmark, creating the Malé Water and Sewerage Company Pvt. Ltd. (MWSC) in 1995. NTR/HOH, with contributions from the Danish International Development Agency (DANIDA) and the Industrialization Fund for Developing Countries (IFU), took on full responsibility of providing reliable water and sanitation services, including the desalination plant and distribution system for 5 years. This autonomy enabled smooth operations in all work phases and established the business’s financial viability among private investors and the local government. The government, in turn, granted NTR/HOH monopoly of all public water supply and sewerage services for a 20-year period. MALÉ WATER AND SEWERAGE COMPANY: DESALINATING WATER The MWSC produces desalinated safe drinking water and distributes it to 100% of the urban population (104,400 people) in the capital island everyday. It has also expanded its operations to nearby islands of Hulhumale and Villingili. Upon its inception, MWSC established water production facilities and a distribution system to service the whole island of Malé. SeaWater Reverse Osmosis equipment is used in the water desalination plants to produce 3,500 cbm of safe drinking water a day (This has now increased to 7,000 cmb/day). A new water supply network consisting of more than 10,000 piped desalinated water connections distributes fresh water to each customer hooked up to the network by a water meter. MWSC is also responsible for wastewater systems, to which all households in Malé are now connected. The Maldives Water and Sanitation Authority (MWSA), which was formally responsible for the water and sanitation sector, was converted into a Regulatory Body and performs water regulation functions for MWSC to protect consumer interests and the environment. The Regulatory Body was previously lodged under the Ministry of Health but is now under the Ministry of Environment, Energy and Water.

UNDERSTANDING MALÉ’S SUCCESS After the public-private partnership between the Malé government and NTR/HOH, all customers had 24/7 access to clean and safe water. MWSC reached break-even point in April 1997 and by June 1999 had recovered all losses from the starting period. The customer base has also increased --- 16,888 for Male’, 381 for Hulhumale, and 852 for Villingili. The 3-tiered water tariff also provided a lower tariff for subsistence living needs, and rates are higher as consumption increases. The cross subsidy helps MWSC operate on a commercially viable mode. The Government subsidized water is still available through road tap bays and this is designated for the economically weak. Over the years, the consumption from the tap bays diminished, while the average per capita consumption increased Male’s success could be attributed to several factors, among them the following: NTR/HOH was able to take full responsibility for all the project’s main components, thereby facilitating coordination of all operations. The MWCS was organized with a view to efficiency, i.e. maintaining an ever-increasing productivity per staff ratio, having well-defined job descriptions per staff, offering favorable salaries in comparison with other organizations in the country. The initial tariff introduced was progressive, with a built-in support for low-income consumers. A private consumer using 0-90 l/day, for example, had to pay MRf 25.32/m3 while a commercial consumer had to pay MRf 101.26/m3 for any quantity. While tariff has increased since then, the structure remains progressive and has the same built-in support for low income users. Domestic Tariff Consumption between 0-100 l/day MRf 22.00 per cbm

WHAT’S AHEAD In October 2004, MWSC expanded its operations to include the production and bottling of table water and soft drinks not just for the local market, but also for export. The production capacity is 12,000 bottles a day. "TaZa" mineralized water caters to local and the resort market. The investment costs have not yet been recovered. With the people of Malé enjoying safe and continuous water, MWSC intends to focus on Considering the use of alternative power generation such wind power Constructing a wastewater treatment plant as a longterm project MWSC can also purchase more desalination equipment should the actual demand for water exceed the current supply. RELATED LINKS Water Champion: Mohamed Rasheed on Engaging the Private Sector to Invest in Water

Consumption between 101-300l/day MRf 70.00 per cbm Consumption above 310 l/day Institutional Customers the Tariff Commercial Customers the Tariff MRf 95.00 per cbm MRf 75.95 per cbm MRf 101.26 per cbm

_______________________________ *This article was first published online at ADB's Water for All website in April 2006: -the-price.asp. The Country Water Action series was developed to showcase reforms and good practices in the water sector undertaken by ADB’s member countries. It offers a mix of experience and insights from projects funded by ADB and those undertaken directly by civil society, local governments, the private sector, media, and the academe. The Country Water Actions are regularly featured in ADB’s Water for All News, which covers water sector developments in the Asia and Pacific region.