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Water Pricing Experiences
An International Perspective
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WORLD BANK TECHNICAL
PAPER NO. 386
Water Pricing Experiences
An International Perspective
TheWorldBank Washuingon, D.C.
or to members of its Board of Executive Directors or the countries they. The latest edition is available free of charge from the DistributiontUnit. Water-supply-Rates-Case studies. without asking a fee. D.. . France. The World Bank.(WorldBank technical paper.. The typescript of this paper therefore has not been prepared in accordance with the procedures appropriate to formal printed texts. Requests for permission to reproduce portions of it should be sent to the Office of the Publisher at the address. Danvers. D. and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank. ISSN: 0253-7494 Ariel Dinar is senior economidst the World Bank's Rural Development Departmnent.A. Inc. 1818H Street. The World Bank does not guarantee the accuracy of the data included in this publication and accepts. avenue d'Iena.222 Rosewood Drive.W.S.4'336361-dc2l 97-37010 CIP . 20433. II.A. and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. which contains an alphabetical title list with full ordering information.no responsibility whatsoever for any consequence of their use. Sui'te910. Title. TD360. denominations.S.U.U. p.Washington.or fr-om Publications. Subramanian.C.. 386) Includes bibliographical references (p. in Ashok Subramanian is a water institutions development specialist in the Rural Development and EnvirontmentalGroup of the World Bank's MfiddleEast and North Africa Region. The findings. 1818 H Street.C. Office of the Publisher. The material in this publication is copyrighted.Copyright © 1997 The IntemnationalBank for Reconstruction and Development/THE WORLD BANK. no. 20433. All rights reserved Manufactured in the United States of America First printing October 1997 Technical Papers are published to communicate the results of the Bankeswork to the developmnentcomnmunity with the least possible delay. The World Bank. Library of Congress Cataloging-in-Publication Data Dinar. 75116Paris. and the World Bank accepts no responsibility for errors. when the reproduction is for noncommercial purposes.) ISBN0-8213-406-3 1. 1950. interpretations. Washington.S. The complete backlist of publications from the World Bank is shown in the annual Index ofPublications. Ashok Subramanian. to its affiliated organizations. I.A. Some sources cited in this paper may be informal documents that are not readily available. Perm-issionto)copy portions for classroom use is granted through the Copyright Clearance Center.W.shown in the copyright notice above. N. Ariel.represent.U. Ashok. 66. N. cm.1D55 1997 338. Massachusetts 01923. Series. colors. The boundaries. HI.. The World Bank encourages dissemination of its work and wil normally give permission promptly and. 1947Water pricing experiences: an intemnationalperspective /Ariel Dinar.
...... 69 12 NAMIBIA ......................................ALY....... 112 ........ ............................... 19 20 T ISIA....CONTENTS FOREWORD ABSTRACT ... ................ 78 13 NEW ZEALAND ....... 7 FRANCE .37 6 CANADA ..............1 ALGERIA ....... .. 125 21 UGANDA ....................... ................ 134 22 UNITED KINGDOM .Al 25.. Water services categories and costs in Haryana..... 160 iii ........ 85 14 PAKISTAN ......... 17 24 BOTSWANA .....A1 Proportion of water consumed through standpipes versus private connections. vi vii viii WATER PRICING EXPERIENCES: AN INTERNATIONAL PERSPECTIVE ......... 162 ANNEXES 4.......... ACKNOWLEDGEMENTS .... ..... 1i5 SPAIN 15 SUDAN ........... 5 BRAZIL ................................ India .61 9 ISRAEL 10.....64 11 MADAGASCAR ..-----------------------------------------149 25 WATER USER ORGANIZATIONS AND IRRIGATION OPERATION 154 AND MAINTENANCE: FINANCIAL ASPECTS ...... 115 18 TAIWAN (CHINA) 120 TANZANIA ......46 8 INI)IA ..........139 23 UNITED STATES .. 15 PORTUGAL 104 ................................................. U N ................. 92 99 ....32 ............ 54 .. 31 selected locations .... 144 24 CAPITAL COST RECOVERY: WORLD BANK EXPERIENCE IN IRHIGATION PROJECTS .. ............. 1 2 3 4 .... AUTHORS' INFORMATION . 13 AUSTRALIA .
...........3 Increases in water prices in 15 industrial countries. 1995...................................... 7 ................. 1989-90 .. 1995-96 Water consumption. 10 Relationship between pricing reforms and selected country characteristics 15 Drinking water prices .....2 6................. July 1991-January 1996 Water supply and demand by sector......3 12......3 10...... 57 Domestic and industrial water rates in Delhi....... 66 Economic performance of irrigation consortia .. 1994-1995 ... 67 Water tariffs in municipality B...2 14. 74 Water tariffs of Jiro Sy Rano Malagasy.......... 67 69 Water supply in Madagascar..... 1990 ....... 1993......................... Water rates for major crops..2 1....... 88 Metering and its costs: Christchurch City 93 ....... 2 Price ranges for various sectors and countries in the analysis .............................. 78 .1 11............... 26 Tariff schedule.............4 4.......1 6....................... 19 Typical household water use and charges for major Australian urban areas........88 .............................. 1991 .............. Irrigation water tariffs in public irrigation projects............2 9...... 41 Average price for municipal water service.................1 3........6 8..1 1.1 7................ 1924 and 1934 Increases in water rates......................... ... by province and class of service.....3 7..1 10............... Summary of urban residential water charges......... Provincial periodic increases in water rates since 1959 iv ....2 10........ 26 Tariff schedule........ 50 Drinking water price according to the management............................... ... costs......... 87 ................ July 1994........ Concession fees.....4 13.....1 4.........5 10................6 11..3 2....1993-94 .................... 1985-1995 .................... 52 Canal water rates for irrigation in major states of India............ .3 7................ and revenues in Christchurch...............................................1 13. 95 95 . Tariff schedule 1991 contrasted with tariff schedule 1993.......3 3.......2 13.........5 4............ 26 Revenue compared with costs ................................ Mediterranean and Corsican water basins) ..... 1959 ...... withdrawals......................... 43 Water resources................ A8 Urban water prices ...... 1971 and 1989................................................................1 6..............1 8......1 2.................... Examples of consumer tariffs in Namibia Block tariffs for urban water supply .... ......July 1995........... 50 Irrigation water charges by type of water management .4 10..........2 12..............2 2...2 4........................ 1991 ................ 82 ... ... Madras......................................................................... 15 15 Exchange rates 1985-95 ..... 27 29 Utility prices as percentage of total cost................1 14....... 81 Income and expenditures for state-supplied potable water ........... 46 The resource tax from Rh6ne-Mediterranee-Corse Water Agency (covering Rhone Valley..... 42 Unit prices and marginal prices for municipal water service by province 1991 .............................. .. .4 7..............5 7.......... ... 63 Water consumption by sector................... 1990.......... 1995............................... Irrigation water prices............. Bulk water tariff structure in the Barwon region of New South Wales ........... 20 25 Water consumption by sector.. 1993..TABLES 1...............3 4................ 67 Water tariffs in municipality A ........... 1995. and consumption by sector......... 1994....2 7.......... and Hyderabad Salt content and rate of substitution between brackish and high-quality water . 1994.............1 10.......3 14............ 82 .... 1990.....2 12.......................................... ................6 5.......... 34 Frequency of municipal water rate structures by province and rate type...... 51 Water charges collected by water agencies.............. 1995 ... .. 56 ........................ 64 65 Average water tariffs to farmers ...............1 12.................2 4.................
14.4 14.5 14.6 15.1 15.2 15.3 15.4 15.5 15.6 15.7 16.1 16.2 16.3 16.4 17.1 17.2 17.3 17.4 18.1 18.2 18.3 18.4 19.1 19.2 19.3 20.1 20.2 20.3 20.4 21.1 21.2 23.1
Historical operation and maintenance expenditures and revenues per acre .......................96 Water rates for unmetered households .................................................................. 96 Water rates for metered supplies: households and industries .............................................. 97 Water use by sector .................................................................. 99 Lisbon average water prices, 1994.................................................................. 100 Lisbon water prices, 1996.................................................................. 101 Lisbon monthly water fees, 1996 .................................................................. 101 Fundao water prices, 1996.................................................................. 101 Fundao monthly water fees, 1996.................................................................. 102 Prices paid by various sectors for bulk water from public water systems, 1991.............. 102 Water resources and demand in various basins .................................................................. 104 Average tariffs for different categories of users .................................................................. 106 Sample charges to different categories of users .................................................................. 106 Average price of municipal water in Spain .................................................................. 107 Domestic water supply charges in the Khartoum area, 1992-96 ....................................... 113 Water charges for metered residences and industries, January 1996............................... 113 Irrigation water charges, 1991-96 .................................................................. 113 Finances of the National Water Corporation for 1989-95 .................................................. 114 Per hectare cost of producing rice in Taiwan, 1993............................................................. 116 Taiwan Water Supply Corporation supply and consumption, 1990-94 ............................ 117 Various block water rates of Taiwan Water Supply Corporation, 1975-94 ...................... 117 Unit costs of supplying water and charges of Taiwan Water Supply Corporation .......... 118 National Urban Water Authority's tariff structure for Dar es Salaam, 1996.................... 122 Urban water tariffs, 1992.................................................................. 123 Water user fees under the amended legislation, 1994.............................................................. 124 Nominal and real irrigation water prices, 1983-1994 .......................................................... 129 Operation and maintenance costs and water charges, 1990-1994 ..................................... 130 Nominal and real prices for urban and industrial water ................................................... 131 Prices of secondary treated wastewater for irrigation ....................................... ................ 132 Increases in water tariff increases since 1989.................................................................. 135 Tariff schedule, 1989-94 .................................................................. 136 Rates and surcharges for irrigation water attributable to the Central Valley Project Improvement Act .................................................................. 147
FIGURES 1.1 7.1 10.1 13.1 25.1 Water availability: Water scarce countries, 1955-2050 .......................................................... 5 Irrigation water handling in France .................................................................. 51 Average water prices for various consumption bands, 1992................................................ 66 86 Water marketing system .................................................................. Indicative mix of government and user contributions to operation and maintenance .....156
BOXES 1.1 Gujarat plans water cess for industrial houses ................................................................... 4
With water availabilitydecliningin manycountries,it is becomingincreasinglyimportantto allocate and use this importantresourceefficiently. Improvedwater allocationand conservationcan be achieved by implementationof appropriatewater pricing mechanisms. The World Bank Water Resources ManagementPolicyPaper of 1993emphasizesthe role of water pricingas a policy tool. This comparativereport, a result of a two-yeareffort of the staff of the Agricultureand Natural Resources Departmentand country contributors,presentsdetailed and timely informationon water pricing experiencesfrom 22 countries around the world. We hope that the reader will benefit from comparing the past and presentwater pricingexperiencesof manycountries.
AlexanderF. McCalla Director RuralDevelopment Department
ABSTRACT Water pricing is an importantway of improvingwater allocationand encouragingusers to conserve scarce water resources. Prices which accuratelyreflects water's economic,or scarcity value give information to users, which they use to make choicesregardingwater consumptionand use. Thus water pricing can affect water use efficiency,at both the individualand social levels. In practice water pricing schemesmay be designedto meet many objectives:policymakersmay wish to discriminateamong different categoriesof users or use water chargesto raise revenuesfor generalpurposes. Because different levels of decisionmakersmay interpretsuch pricing policies differently,this can lead to undesirableoutcomes and, sometimes,to disputes. This work presents water pricing experiencesacross 22 countriesin various sectors and over time. Country case studies are presentedin a structuredform allowingeasy comparisonof results. The information showsthat countrieshave differentreasonsfor chargingfor water, includingcost recovery,redistribution of income, improvementof water allocation, and water conservation. Pricing schemes often comprise both fixed and variable components. Fixed prices vary greatly across countries, reflecting countries' various objectivesin chargingfor water. However,volumetricchargesfor urban and agricultural water are relatively similar across countries. But per meter chargesfor industrialwater vary more widely across countries,reflectingthe differentuse of subsidiesand the inclusionof pollution taxes that vary by industry. For urban and agricultural water, all developing countries, and some developed countries, set charges on the basis of average rather than marginal cost of supply. Countriesdo not generally adjust chargesby regioneventhoughthe costs of supplyingwater may vary greatly across regions. Agricultural water users generally pay something for the operations and maintenancecosts of irrigation systems, rangingbetween20-75 percent of total costs. Few countriesattemptto recovercapital costsfrom users. The willingnessof countriesto undertakewater pricing reforms and successfullyimplementthem cannot be solely explainedby their water scarcity levels nor by the size of their budget deficits. However, high incomecountriesare relativelymore open to reformingwater pricingpolicies. Almost all countryreports discuss the need for volumetricpricing, metering,moving away from uniform tariffs, and abolishingminimumprices. Many specifythe need to significantlyincrease water chargesto all users. Severalcountryreports discussthe use or the need to use of measures,such as pollution taxes, to protect the environment. Several countriesrecognizethe need to provide incentivesto water suppliersand consumers.
MathewVerghis.ACKNOWLEDGEMENTS This publicationbenefitedmainly from the goodwillof the authorswho contributedchapterson their country's experienceswith water pricing. Wendy Ayres was responsiblefor technical editing and document design. AndreasWildt.some new water-relatedinitiatrives may not have been fully addressedin this publication.handlingand caring is highly appreciated. Pierre Strosserand SophieThoyerfor help and guidance. viii . David Grey. The authors are grateful for the office support from Maggie Wu and Kaye Henry at various stagesof the work leadingto this chapter. The work associated with the compilationof this publication was partiallyfunded by the Agricultureand Natural ResourcesDepartmentof the World Bank.Emile Lorre.MichaelWhitbread. Solomon Alemu.WorldBank summerintern. Kutlu Somel. for the backgroundwork. Claudia Sadoff.copying.BlandinePillet and ThierryRieufor theirsuggestions criticisms. With rapid development that in the water sector in many of the participatingcountries.Yves Retkowsky. Lisa Barczak. Thanks are also due OlivierAlexandre. Letitia Obeng. MariaSalethis gratefulto MichaelWhitbread his commentsand suggestions. for GeoffreySpencerand Ashok Subramanian wishto thank Sofia Valencia. and This report includesinformation was reportedbetween 1995and 1996.Claude Gleizes.GraceAguilarand MicheleRigaudin typing. MarielleMontginoulis grateful to PatriciaCoudray. The work of Patricia Noel. The chapterson Algeria and Madagascarwere translatedfrom French by Arthur Denner. and R. Various chapters benefittedfrom useful and constructivecomments by Masood Ahmad. Yves Merillon.scanning. and the Dinar trust fund. Stephen Mink.
The National Utility Servicesurvey of urban water utility prices in 15 industrial countriesshows that changes in prices between July 1994-July 1995 varied considerably. However.22 percent used rising block rates. to disputes. Yet developingnew water supplies is becoming increasinglycostly. Thus water pricing can affect water use efficiency. Ernst and Youngfind that many utilities are charginghigher pricesthan in the past to encourage consumers to use water more efficiently. The remaining 3 percent used a mixture of schemes. Ernst and Young 1994). falling 18 percent in one countrybut rising 21 percent in another. We are not aware of any studies which have tried to compare changes in water prices with changesin policies across countries. value gives informationto users. Such a study could providean understandingof why variouswater pricing policies are adopted. sometimes. 1 .5 per 1. and 38 percentused decliningblock rates.1 WATERPRICINGEXPERIENCES: AN INTERNATIONAL PERSPECTIVE Ariel Dinar andAshok Subramanian Introduction In countriesin all parts of the world people are demanding ever larger quantitiesof water. funding their operations with customer charges. south. In 1994 the water charge in the west. About 37 percent of the utilitieschargeduniformprices regardlessof quantity consumed. Charges in all regions increased at similar rates.000 cubic feet ($0. This is in contrastto the past when governments met new demand primarilyby searchingfor affordabletechnologiesthat could augmentwater supplies. Several studies exist which explorethe role of water price policies in theory and in practice (Sampath 1992. Both the Ernst and Young 1995 survey of 100 water utilities and the Duke and Montoya 1993survey of 159 water utilities serving major cities in the United States find that residential waterprices increased9. but are determinedto meet other objectives they will not send the right signals to users. To meet demandat reasonable costs policymakers are exploring approaches that better allocate existing water supplies and encourage users to conserve water.1).thereby delaying the need to develop new water supplies. They also find that utilities are sending bills more often to their customers. commonly moving from quarterly to monthly billingas rates increase. Tsur and Dinar 1997). The literature providesmany examplesof the influence water charges can have on water use efficiency. or scarcity.this can lead to undesirable outcomes and. which they use to make choices.7 percent abovethe rate of inflationbetween 1988and 1994. increasingly. They find that. Because different levels of decisionmakersmay interpret such pricing policies differently. Prices which accurately reflects water's economic.if prices do not reflectthe value of the resource. Policymakers may wish to discriminateamong different categoriesof users or use waterchargesto raise revenues for general purposes. In practicewater pricing schemesmay be designedto meet many objectivesbesidesbetter water allocation and water use efficiency. utilities are becoming financially selfsufficient.0038per cubic meter). midwest. In most placesprices rose more than the rate of inflation(Table 1. Water pricing is a key way to improvewater allocation and encourage conservation. and northwestwater scarceregions of the United States was about US$13. This study aims to document water pricing experiences across countries in various sectors over time.at both the individual and social levels. Some surveys concentrate on a particular sector (National Utility Service 1995) or a particular country (Duke and Montoya 1993.
9 1. Countrieswere chosento represent a wide range of natural.2 1ists the countriesand provides indicativewater pnces." as defined by Falkenmark in 1989.92 0.45 7.July 1994.3 2. Methodology Initially 40 countries were selectedto participate in the survey.1 depicts the "water availability index.3 2. This will help the reader follow and compare the case studies. or in important agriculturalregions or populationcenters.45 2.and * Availabilityof informationon past attempts to implement water pricing schemes in more than one sector.8 2.40 1.00 3.06 5. Experts from 25 of the 40 countries responded: some produced the reports. Findings Figure 1. and future perspectives).4 2.84 6. The outline asked for multisectoral information on pricing and changes in pricing policies which 2 have occurredover time (past and present practices. For the most part authors structured their reports in accordance with the suggested outline.3 2.9 2.70 -0.Table 1.04 4.97 8.5 2. and economic conditions. The followingwere key criteria: * The degree of water scarcity.9 3. and was sent to key people in the water sector in 40 countries. Since the countries representedhere were not selectedthrough any particular sampling procedure. others provided the names of another expert who could.45 Rate of inflation 4.98 7. the results should not be interpretedas reflecting the status of water pricing worldwide.0 4.8 5.22 0. However a comparative reading of the country reports reveals patterns and suggestsseveral lessonsand implications. A structured outline was prepared as the basis for the countryreports. Only 22 countrystudies are included in this volume.00 16.5 1. either in the country as a whole. Table 1.04 20.1 Increasesin water prices in 15 industrialcountries. climatic.8 1.8 Source: National Utility Service 1995.July 1995 (percent) Rate of changein prices per cubicmeter Australia Belgium Canada Finland France Germany Ireland Italy Netherlands Norway SouthAfrica Spain Sweden United Kingdom United States -18.7 10. Countrycase studies Here we presentthe findingsfrom a review of 22 country case studies. for . three of the 25 reports were not returned after the final round of review.
the countries in the review. One commonfeature of the water situation is the decline of the "water availability index." The index is calculated by dividing available water resources in a country (assumed to be constant over time) by population. It should be noted that other methods for calculating water availability exist, which may result in different findings and groupingof countries. For example,such methods may take into account the level of water regulation in a country. Figure 1.1 presentsthe water availability index for 1955, 1990, 2025, and 2050 divided into four group levelsof water availabilityper person, based on the 2025 water availability index results. Group A contains
countries with water availability index values of
supply in the years prior to World War II. Although it sounds unbelievable,farmers in India and Pakistan paid fully for their water supply. However,during the 1950smany countriesembarked on huge irrigation investmentprograms intended to bring down the costs of food production. The investments created a financial burden that farmers could not afford to meet. And because governments in pursuit of food security wanted to control their investments, they willingly subsidized the investments. However trends have now reversed, and users are again being asked to choose and pay for the servicesthey desire.
Comparing water charges
less than 1,000; group B covers countrieswith index values of 1,000-2,000; group C contains countrieswith indexvalues of 2,000-4,000; and group D covers countries with index values above 4,000. Two interestingpatterns emerge from the figures. First, the three countries in the Middle East and North Africa have much less water available per capita than other countries in the review, and the amount of water available per person is decliningrapidly. Thesecountrieshad between 2,750-1,000 cubic meters of water available per person in 1955, but by 2050 they will have only 100-500 cubic meter per person. Second, the other countries in the survey either had relatively abundant water supplies in 1955 and high rates of populationgrowth(most of the countries in group B), or moderate water supplies and little or negative population growth (most of the countries in group C). Later we will explore the influence of water scarcity on policy decisions. Countries have different reasons for chargingfor water. Some wishto recover costs, some want to transfer income between sectors through cross-su.bsidization,and others use charges to improve water allocation and water conservation. A recent exampleof water pricing is the water cess (tax) planned by the government of the state of Gujarat in India, for industries (Box 1.1). As reported in various country chapters, in many countries users paid the full costs of water 3
Table 1.2 presents current water prices as reported in the country case studies. Water prices are reportedfor the agricultural,domestic, and industrial sectors in 1996 United States dollars. For most countriesthere is a range of prices presented,representingthe high and low values reportedin the case studies. Local prices were convertedinto constant United States dollars by using the exchange rate of the noted year, then applying United States dollar deflators using information from the International MonetaryFund (1997). It should be noted that the prices presented in Table 1.2 do not represent national average water prices, and are indicativeonly. Values for each sector include fixed and variable prices. The fixed term for the various countries may have different denominators (crop, unit of area, year, season, month, water entitlement,water velocity), which makes them difficult to compare. The huge variation of the fixed element of pricing schemes between sectors and countriesreflects the varying objectives of countries for their pricing schemes (cost recovery,incomedistribution,others). The variable water prices are expressed in 1996 United States dollars per cubic meter and are easy to compare. Hereafter our discussion of water prices refers strictly to prices per cubic meter. Prices per cubic meter for the agricultural and domestic sectors are relatively similar acrosscountries. Prices for industrialwater vary
more widely across countries,probablybecause some countries view industry as an easy source of revenue, capable of subsidizingconsumption in other sectors. In addition some countriesinclude pollution taxes in industrial water prices. Although we did not conduct a statistical analysis, it appears that water prices across countries are not relatedto relativewater availability. Basis of charges For urban water supply, the surveyed countriesare for the most part replacingflat fees with tariff schemes consisting of two parts, a fixed charge and a variable charge. The fixed charge gives the service provider a reliable stream of revenue to cover overhead expenses, and the variablechargeprovidesconsumerswith incentivesto use water efficiently. The feasibility of charging for water by volume used depends on the practicalityof usingmeters. There is considerable variation among countries in the design of block rates. Eight countries use increasing block rates, while a couple use decreasingblock rates. Taiwanuses increasing rates for the first four consumption blocks but decreasingrates for the last three. In
some countries the quantity of water to which the lowestprice applies is so large that few users face the higher charges associated with larger consumptionlevels. This diminishesthe impact of this pricing structure on consumption patterns. Most industrial countries in the survey use increasing block rate schemes, although Canadauses flat rates. For urban and agriculturewater, all developing countriesand some industrial countriesin the survey set charges on the basis of average rather than marginal costs of supply. For agriculture, authorities generally calculate charges by dividingthe average cost of service by area irrigated,often adjustingthe results by season, type of crop, or type of technology used (for example,gravity versus pumping). Charges are not generally adjusted by region even though regional variations in water availabilitymay be responsible for differential costs of supplying water and for technologyused, as in Botswana and Israel. Among industrial countries, France sets urban water prices on the basis of the long-term incrementalcosts of supplyingwater to account for futureresourcedevelopmentcosts.
Box1.1 Gujaratplans water cess for industrialhouses "The Gujarat governmenthas plannedto levy special cess on the water to be suppliedto the industrial housesto partly finance its project to supply drinkingwater to the villages and semiurban centersfrom the Narmadadam, the Water ResourcesMinister,Mr. RaghavjiPatel, said here today. "Talking to newsmen,Mr. Patel said the State Government'splan to supply drinking water to over 8,200 villages and about 130 urban and semi-urbanareas, mostly in the arid Kutch-Saurashtra region, was estimatedto cost 4,700 crores [Rs.470 billion.] "He said the governmentwould also raise funds from its internalresources, assistancefrom the Central Governmentand loan from the Asian DevelopmentBank. He said the details of the proposed water cess had not yet beenworkedout...." Source:The Hindu 1997.
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........ .............. ........
000 25.000 -140.10.000 20.Figure1.000 100. 6 .000 .000 i 80.000 0 Botswana Italy Spain Water per capita France Namibia ld 200.000 i 0 1955 1990 02025 30.000 -160.000 20.) Ic 45.000 180.0100 0 Canada Brazil New Zealand Australia Portugal United States Water per capita Source: Except for Taiwan water data are from Population Action International 1995.000 40.000 40.000-15. Taiwan data from Chingkai Hsiao (personal communication.1 Water availability.000 35. 1955-2050(cont.000 S 031955 a 1990 U 2025 2050 120.000 60.000 - ~os ijI!j1! 5. 1997.
97 1.10 5.79-7.75"s 0.25-1.28-1.0001-0.50 6.22-0.261-0.583 1 0.0004-0.290l 0.67-3.34-1.0046 0.24112 0.0324 0.Table 1.273 0.260-0.136-0.5293 0.14-0.11-0.824' 0.0193 .2 Price rangesfor varioussectors and countriesin the analysis(in 1996US$) Agriculture Domestic Industy Fixed (per hectare per year or season) Algeria 3.33-1.39216 0.25-11.08-0.36 0.38-0.63' 4.54-4.a.1526-.36 0.62-36.72-1.22 0.25 0.07812 0. NewZealand' m Pakistan 0.65 0.72-11.0095-0.075-0.33" 0.58 0.0019 0.17-1.54 0.36-2.0046 1.0042-0.0438 152-171 0.69 0.39812 0.0S22 0.08-0.26 20.0095-0.2517 0.31-.39 0.10 0.48 7.325-1.807 0.48 4.2514 53.63 1.109 .38-0.59 0.45 0.28 n.019-0.52 0.0124-0.0004-0.0195 9-162 0.98-78.3981" 0.77-16.16 0.495 0.0017-0.096-0.057-0272 4.64 0.5292 7 0. 16-164 0.35 0.474 0.062-0.822 0.59' Variable (per cubic meter) Fixed (per household per year or month) Variable (percubic meter) Fixed (per plant per year or month) Variable (per cubic nectr) 0.30-213.22Io 23.42 1.75-2.25-0.028 0.0038-0.38 .40 0.82 3.86-2.19 0.67-3.96-164.46-1937 Portugal' Spain' SudanP Taiwanq Tanzania' Tunisia' Uganda'2 United Statese UnitedKingdomr 0.33" 8.14 6.0248 7 .36-2.26 0.06-0.9-1.64 Australiab Botswanae Brazild Canadae Francer India3 Israel' Italy' Madagascai Namibia".0095-0.705 0.028 1.16-0.020-0.16 6.49-5.164-27.23-0.
Fixedminimumrate.050Ugandashillingsin June 1996. Where this is true. d R$ 0.55Frenchfrancsin 1994. p q r s t u v R$ 0. as in Australia and Brazil.22 Israelishekelsin fall 1995. Perunit of waterentitlement.5NTSin 1994. 4. Few countries attempt to recover capital costs from users.Table 1. g 34. 3. Operation and maintenance costs versus capital recover the smallest proportion of costs from costs For social and political reasons water services have long been treated as public goods and financed by general public revenues.54India rupees in 1995.628. Source: Exchange datafromInternational rate Monetary Fund1997. 1. Yet governmentsoften encounter resistance when they attempt to implement new chargingschemesintendedto recover costs from users. 10cubic metersper month > 17 For standpipes 18 For vendors Exchangerates. 34. 2 3 4 5 6 Depending consumption on tier. In India and Pakistan the state remains heavily involvedin operatingirrigationsystems. However governments of both industrial and developing countries are rethinking this policy. and some are starting to recover at least a portion of capital costs from users. or technical and managerial capacity may be inadequate to assess and enforce charges.2 (cont.54NZ$ in 1995. e 1.60Pakistanrupees in 1995.96in 1995. Indeed countries rarely include asset replacementor depreciationcosts in calculationsof operationsand maintenancecosts (see Spencerand Subramanianin this volume). on Depending industryand location. on Depending dwellingsize. In the developing countries irrigation operation and maintenancecost recoveryranges from a low of 20-30 per cent in India and Pakistan to a high of about 75 per cent in Madagascar. Dependingon state and crop. on Thereare manypricingschedulesfor unmeteredstandpipes and unmetereddomesticpipes. 150PTEin 1996. 16 For houseconnections. 9 Dependingon monthlyrental valueper dwelling. f 5. on Depending scale of irrigationperimeter.62£in 1995. Among the industrial countries surveyed.9Italianlire in 1995.96in 1995. 606 Tanzaniashillingsin 1996.including transferringmanagementresponsibilitiesto user . 10 I 12 13 14 15 Depending crop and irrigationscheme. 120 Pts in 1993.62Nanibian $ in 1995. governments may use non-price measuresto encourage consumers to use watermoreefficiently. on Depending location.000FMG in first half of 1996. By contrast Madagascarhas developedan innovative approach to financing the operation and maintenanceof irrigation systems.30Australian$ in 1996. Nonprice measures to encourage water use effi- operation and maintenance costs has been mixed. USS 1994. h 3. b 1.20Canadian$ in 1991. Italy and Canada 8 ciency In some countries implementing water pricing reforms is very difficult: rural or urban dwellersmay resist paying for water and apply political pressure.) I Per liter per secondper hectare. 8 Dependingon crop andprovince.one US$equals: a DAS0in 1995. 27. Policymakers are gradually recognizinghowever that charging users for water results in more sustainable operation and maintenance of urban and rural water systems. 7 No fLxed chargeswere reported. 0. i j k I m n o 1. Countries' experiences with recovering consumers. 1.82in 1995. Domesticincludesrural areas (firstline) and urbanareas (secondline). c P2. I Tunisiandinar in 1994.
groups or promotingthe developmentof water rights and water markets.
Transferring management responsibilities for operations and maintenance to user groups
somewhatsubjective,were based on two criteria: current pricing practices, and current mode of funding. We placed a countryin the "high"
category if it employed some economic pricing methods or, at the very least, recovered full op-
Madagascarprovides a good illustrationof the potential benefits that might arise by transferring management responsibility to users. Through a series of pilot projects with the involvement of nongovernmental organizations, the government has organized users of rural public standpipeand irrigationsystemsinto user groups, and has transferred responsibility for operation and maintenance to them. The user groups collect water charges and maintain the physical facilities. Tunisiaand Pakistanare now planning similar responsibilitytransfers. Indeed this approach has become the favored way of improving the financial sustainabilityof irrigation systems (Gorriz, Subramanian,and Simas 1995).
Promoting water rights and markets
eration and maintenancecosts and a portion of capitalcosts from users. We placed a countryin the "low" category if it financed water systems primarilywith governmentresources. We also identifiedthree characteristicsthat could influencepolicy reform: the level of development (gross national product per capita), available water per capita, and the size of the budget deficit relative to gross domestic product.' Table 1.3presents the results of the classifications. The following inferences can be drawn. Gross national product. High income countries are relatively open to reforming pricing policies. Australiaand New Zealand,which introduced water charging systems only in the early 1990s,has adopted some quite radical and advanced policies. Canada is the one high income country that is moving only very slowly to
Economists argue that active trading in water rights promotes water use efficiency as markets allocate water to its highest valued use. The potential for water markets to improve resource use is great, particularlyin water-scarce regions. Allowing the transfer of water from agriculture to other users can help meet rising demand without the costly expansion of water supply networks. Interbasin transfers can also help improve water allocation. In the United States and Australiathere is already some form of water trading taking place. Israel is developing a market to facilitate future trading in water rights. No other countries in the survey are planningwatermarketsat this time.
Progress in reforming water prices: A highmedium-low classification We have developed a "water pricing progress index" (WPPI) and classified the 20 coun-
reform water pricing schemes. Botswana and Namibia, two middle-income countries, are making good progress in reforming charging schemes. The city of Windhoek in Namibia, with its progressive pricing policies, may account for the country's relatively high national performance with regard to pricing. Madagascar, a low-income country, has also instituted importantreforms in water pricing. Water availability. We hypothesized that countries with relatively little available water would be more aggressivein reforming pricing schemesthan those with relatively more water, since improvingwater allocation and water use efficiency is especially important to them. Howeverthis relationshipdoes not always hold. For example most countries with low water
availability have made changes only very
Data on the three variables are from the following sources. Gross national product data are from the World Bank (1995), and refer to 1992 estimates. Except for Taiwan, water data are from
tries with fulltries withfull the 22 in the survey data sets of into one of three categories of progress: high, medium, and low. Our assessments,which are
PopulationAction Inteamational data. ~~~~~~~~Taiwan been(1995), and refer to 1990Hsiao. water data have providedby Ching-kai
Budget data are from the International Monetary Fund (1997), and represent an average of 1989-95 estimates.
slowly. By contrast Canada, a water-abundant' country,has made little progresson reform,but Botswana, also with abundant water supplies, has made significantreforms. Like Botswana, Australia and New Zealand have substantial water resources at the national level and have implemented pricing reforms. Both countries have serious regional shortages, such as in the Murray Darling basin of Australia, so perhaps pricing reforms began at a regional level and were later scaledup.
Budgetdeficits. We expectedthat countries with budgetdeficits would be more likely to implementpricing reforns. However our data do not providestrong evidencethat this is the case. Australia,Spain, and the United States have introduced or strengthenedwater charge systems in response to budgetary pressures. However Canada, India, Pakistan, and Tanzania, all countrieswith high budgetdeficits, havenot.
Table 1.3 Relationshipbetweenpricingreformsand selectedcountrycharacteristics High Medium GrossNationalProduct High WPPI Medium Low Australia,France,New Zealand,Spain, UnitedStates Israel,Italy, UnitedKingdom Canada WaterAvailability High WPPI Medium Low Australia,Botswana, New Zealand Brazil Canada France,Namibia, Spain,UnitedStates Italy, Portugal,United Kingdom,Madagascar India,Pakistan, Tanzania,Uganda BudgetDeficit High WPPI Medium Low Source:Authors estimates. Australia,France, Namibia, Spain, UnitedStates Israel,Italy, Portugal, Tunisia,Madagascar Canada,India,Pakistan Tanzania,Uganda Brazil Botswana,New Zealand Botswana,Namibia Low
Brazil, Portugal, Tunisia
Madagascar India,Pakistan, Tanzania,Uganda
Summary: Pricing issues in the surveyed countries The country case studies in this volume provide a perspectiveof present and future water pricing and water managementissues. Most countries are now gradually turning over management responsibilities of water supplies to private enterprisesand nongovernmental organizations. Some countries are developing legal frameworksto decentralizewater management, and encouraging the private sector to become involved through incentives. Still their water supply authoritieshave the power to set and adjust water rates. A large majority of the countries are implementing prices schemesto recover operationand maintenancecosts from users, and
some are also recovering at least a portion of
goals. Although the countries in our study reflect a wide range of physical, economic, and institutional conditions, the case studies show that countries are implementingwater pricing schemes to achieve short-term and long-term policy goals to recover costs, encourage water conservation,and protect the environment. Although the implementation problems facing countriesare different, it appears that efforts to implement water pricing mechanisms are underwaywith modest success. References Duke, E. M., and A. C. Montoya. 1993. "Trends in Water Pricing: Results of Ernst and Young's National Rate Surveys."
American Water Works Association Journal
capital costs. Almost all countryreports discuss the need for volumetricpricing, metering,moving away from uniform tariffs, and abolishing minimumprices. Many specifythe need to significantly increasewater chargesto all users. The country reports identify the development of formal transferable water rights and water markets as crucial issues to consider for managing water resources in the future. The
reports also recognize the need to provide incentives to water suppliers and consumers.
85 (5): 14-23. Engelman, Robert, and Pamela LeRoy. 1995. "SustainingWater:An Update." Population Action International, Population and EnvironmentProgram,Washington, D.C. Ernst and Young. 1994. "National Water and WastewaterRate Survey." New York, New York,August. Falkenmark,Malin. 1989. Fresh Waters as a
Factor in Strategic Policy and Action. Population and Resources in a Changing
These include both performance related incentives for water suppliers to reduce the costs of water supply,and incentivesto consumersto use water more efficiently. Some reports also discuss the use of measuresto protect the environment, such as pollutiontaxes. Several countries are exploring unique
pricing-related issues, worthy of mention. Israel
World. Stanford University: Morrison Institute. Gandhinagar. 1997. "GujaratPlans Water Cess for IndustrialHouses." The Hindu, January 28, page 15. Gorriz, Cecilia, Ashok Subramanian, and Jos6 Simas. 1995. Irrigation Management
Transfer in Mexico: Process and Progress.
is considering chargingdifferent prices for irrigation water of different quality (saline water, wastewater,fresh water), adjusting pricesto reflect water supply reliability,and implementing a resource depletion charge. Several countries are consideringadjusting charges to reflect regional differencesin water supplycosts. A few countrieshave addressedthe need to chargethe end-user for safer drinking water by including treatmentcosts in the watertariff. We have not evaluatedthe impactof water pricing schemes on the attainment of policy 11
World Bank Technical Paper Number 292, Washington,D.C. International Monetary Fund. 1997. International Financial Statistics L (2) February, Washington,D.C. National Utility Service. 1995. "International Water Price Survey, July 1994-July 1995." Paris:NationalUtility ServicePress. Sampath, R. K. 1992. "Issues in Irrigation Pricing in Developing Countries." World Development20 (7): 967-977.
Washington.D. 1997." World BankEconomicReview 11(2): 243-62. Workers in an Integrating World: World Development Report 1995. 1995. World Bank..C.Tsur Y. 12 . and Ariel Dinar. "Efficiencyof Alternative Methods for Pricing Irrigation Water and their Implementation.
. due to the severe drought in North Africa. responsible for operating and maintaining the irrigation and drainage systems. In 1970 the state established the National Water Distribution Company(Societe Nationalede Distributiondes Eaux). However. and 18 percent of water suppliesrespectively. to A subdivision a styleof organization themanagement is for nopoly position of the National Water Dis13 of hydraulicsystems. through the Ministry of the Interior. Urban consumers use about 600 million cubic meters (63 percent). There were a numberof reasons: * Prices remained too low to give the utility financial autonomy Localities. The restructuring. As a result. local governmentmonopolies. and especially since 1970 when a government ministry responsible for water policy was created. frequent restructuring of water institutions has tribution Company. but local water utilities and agencies took responsibility for distribution. recoveringits costs from water users.managementof irrigationsystems was taken over by four district irrigation agencies (office des perimetresirrigues)in large districts and eight local agenciesin smalldistricts.000 local utilities or local governmentmo- made it difficult to establish efficient organizations and pricing systems. However. are financedthroughwater sales and state subsidies. and gave it responsibilityfor producing and distributing water nationwide.2 ALGERIA Abderrahmane Salem Introduction Consumersuse a total of about950 millions cubic meters water in Algeria each year. * 26 departmental concerns (under the jurisdiction of the wali'). and private foreign enterprises. throughout its existence from 1970-1983. also redistributedfunctionsbetween the central governmentand local bodies. There is now a hierarchyof organizational bodies involvedwith water managementand supply. Among these were local water utilities. supplementalirrigationbudgets. many different enterprisessome in operation since the colonial periodsupplied drinking water without intervention from the state.intermunicipal companies. Drinkingwater Huge investmentshave been made in urban water systems since 1962. Irrigationwater Until 1985.many of the companieswere not financially soundor capableof managingthe water supply infrastructure. 2 3 Equivalent a prefector governor. the central government managed irrigationdistrictsthrough specializedsubdivisions. These three groupsof institutionsdistribute 54 percent.since they had traditionally managedwater supply.comprising: * 9 regionalconcerns (under the jurisdiction of the Ministerede l'Equipement). 28 percent. and * 1. the National Water Distribution Company was unable to meet this objective. agricultureuses 280 million cubic meters (30 percent).which commencedin 1983and was completedin 1987. However in 1985. Overall consumptionof water in Algeria has fallen dramatically over the past few years. and placed water revenues into spe3 cial. responsibility for providing drinking water was divided into two segments: the National Water Distribution Company retained responsibility for water production. Before 1970. and industry uses 70 million cubic meters (7 percent). These agencies. challenged the mo- nopolies(under municipaljurisdiction). The utility was expectedto operate withoutstate subsidies. However.
10 ($0. However. hydraulic materials. service enterprises. village.and the tourism sector.and water treatment facilities.3 shows the prevailing exchangerates of the period. This is for two reasons: the drought has resulted in much smaller water production and thus water sales than normal. which equals the charge for the first consumptionblock for domesticusers.05 per cubic meter). Irrigationwaterchargesare meant to reflect 6 full costs of service. 1985.18)per cubic meter to supply water. The tariff system now discriminates among four types of users: domestic.2 presents irrigation waterprices 1985-95. However. 6 14 . and water distributors have been operating at losses.02-US$0.local accounting systemsdid not distinguishbetweenthe costs of water production and the costs of water distribution. among the nine regional enterprises responsible for nearly 60 percent of urban water supplies. Thus price varied by region. Table 2. Irrigationwater prices are expectedto rise further to ensure the financial viability of irrigation 5 water suppliers.and has resulted in relatively high operatingcosts.the government pays many of the costs.and it is likely to be an underes5 Decret85-287.12per cubic meter). leading to higher investmentand operating costs (most water treatment products. rather than to maintain existing ones.14)per cubicmeter. their prices have risen sharply). The new water code is expectedto rectify some of these problems. particularly for capital equipment.1 presents water prices for 198595. Water tariffs for domesticusers depend on consumptionblock. price of water they sell the is set by the governmentwithout any measure to compensare them.10-DAO.08and DA0.60 cubic meter (US$0. The 1985Water Code law (Code des Eaux) was designedto increasethe level of cost recov4 ery for water systems. WhiletheOPI areautonomous.25 per cubic meter (US$0. The irrigation water pricing structure now involvesa two-parttariff. For example. and the other a volumetriccharge. rangingfrom DAO.tariffs have not increased as quickly as costs. For example. in 1974the average price of water was DAO.Presentwater pricingpractices Drinkingwater Until the mid-1980swater chargesto users were well below costs of supply. Revenuesthus covered only 77 percent of costs. and other equipment and supplies are imported in foreign currency. Water tariffs to other users are set in relation to a base rate.October29. and the local currency has been devalued. so surplies hare iortsed s ltimation. and type of user. water transport infrastructure. Furthermore. 4 Irrigation water Pricing structures for irrigation water lag behind those for drinking water.between 1979 and 1985 prices ranged between DAO. The government gave the water enterprisesDA300 million (aboutUS$14 million)to cover the deficit.it cost DA4. but revenue amounted to only DA3. For example in 1992. The situation has worsened since 1990.10 per cubic meter. When the irrigationdistrict agencies took responsibility for the irrigation systems. Abstractingand treating surface water requires large investments in dams. However each locality had its own pricing scheme. and revenues did not cover costs. the technical and financial problems became very apparent. Prices did not reflect differences in the costs of supply. of which there are four. Table 2.16 ($0. At the same time subsidies from the supplementalirrigation budget were used mostly to construct new irrigation projects. Algeria depends on surface water sources for most of its supplies. Table 2. Furthermoretariffs are not adjusted in line with changes in costs. institutions. Before 1985 charges for irrigationwater were very low. This stimulatedinterestin revisingthe waterpricingpolicy. with one part a fixed charge based on amount of water used per hectare (expressed as DA per liter per second per hectare). The marginalcost of irrigationwater was estimatedin 1996 aroundDA18-20per cubic meter.
12 0.29 0.14 0.50 0.35 0.17 0.20 0.3 Exchange rates 1985-95 (DAIUS$) Year Exchangerate 1985-86 5 1987 6 1988 7 1989 8 1990 9.11 0.17 0.1 Drinking water prices (US$ per cubic meter) Domestic Consumption band(cubicmetersper year) 11-100 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 0.60 0.14 0.03 0.24 0.25 0.28 0.24 0.29 0.29 0.17 0.37 0.50 0.14 0.04 0.24 0.25 0.27 0.02-0.there were three consumption bands.35 0.33 0.06 0.15 221-330 0.36 0.29 0.24 0.12-0.40 0.35 0. Table 2.20 0.35 1.20 0.03 Note: Both fixed chargesand volumetricchargesvary by waterdistrict.36 0.04 0.29 0.34 0.06 0.11 0.25 0.32 0.07 0.21 0.07 0.23 0.29 0.83 0.60 0.12 0.29 Institutions Service Enterprises Tourism Note: Between 1985and 1992.34 0.31 0.22 0.02-0.12-0.02-0.06 0.20 0.20 0.16 0.06 101-220 0.3 1991 16 1992 22 1993 24 1994 38 1995 50 15 .31 0.19 0.83 0.29 0. 1985-1995 Fixed charge (per liter per second per hectare) Volumetric charge (per cubic meter) DA 1985 1988 1989 1994 1995 150-200 150-200 150-300 150-300 200-400 US$ 30-40 21-29 19-38 4-8 4-8 DA 0.17 0.25 > 330 0.27 0.12 0.03 0.17 0.50 0.20 0.50 0.00-1. The first band was from 1-220 cubic meters per year.43 0.17 0. Table 2.21 0.17 0.50 0.2 Irrigation water prices.25 US$ 0.Table 2.40 0.07 0.24 0.17 0.
Currentdebatesand futureprospects In 1990 Algeria embarked on large scale economic reform. . October29.is currently considering implementingtariffs which vary by region. Salem. References Algeria. A. D6cret 85-260 Concerning Approvalof a List of Fees for Management Concessionswith respect to their Activities in the Operation and Maintenance of Hydraulic Equipmentin the Irrigation Districts. 1985 (c). 1995. "Projet de Tarification Regionale de l'Eau Potable et Industrielle. 1985 (b). * In 1995 the National Drinking Water Fund (Fonds National de l'Eau Potable) was established to manage funds to expand and renovate drinking water systems and provide subsidiesto disadvantaged regions. distribution entities will be permitted to include management fees in waterprices startingin 1996. Decret 85-266 Concerning the Concession of Public Drinking Water Suppliersand Water Treatment. Decret 85-261 Specifying Personnel Status of Irrigation District Employees. "Etude Sectorielle d'Approvisionnement en Eau Potable et d'Assainissement. 1985 (d). reflectingregional cost differences. Institutional reforms are underwayto increase management efficiency and improve service. Programme di Nations Unies pour l'Developpement/Organisation Mondial de ia Saute 1976. 1995. Of particular importance for water institutions are the following: * The Water Code law is currently being revised to allow private enterprisesand nongovernmentalorganizationsto manage water supply systemsthrough leasingcontracts 7 and concessions. 7 The new Water Code has been published in the official Gazette(June 15. D6cret 85-267 Defining the Modalitiesof Industrial. 1995. moving from a centrallyplanned economyto a market-basedone. 16 . . * To raise revenues for the maintenanceand expansion of facilities.Agricultural and Drinking Water Prices and of Water Treatment. 1985 (a). * The administration.October29." Ministerede l'Hydraulique. Rapportde Synthese. . 1996)." Rapport C Volume 1.
In 1992 the Industry Commissiona federal governmentbody chargedwith assessingindustry performance. are largely ignored. N Opinionsexpressedin flows for environmentaland riparian purposes. corporatizedor privatized. Tariff systems have been designed more to raise revenue than to promote the efficient allocation of a scarce resource. All have been reforming their water policies to some degree. its institutional arrangementsfor supplying water are more appropriateto a water-abundant 8 country. public water utilities have been commercialized.one of Australia's most importantstates. reform of the Australianwater industry has been under way for about a decade. A number of government inquiries have been held. For example.3 AUSTRALIA Warren Musgrave F. has played the major role in allocating water among competing uses. In the southern Murray-Darling Basin the average charge for irrigationwater delivered to the farm would need to rise by 80 percent over 1991-92 levels in order to meet full operations. and cross-subsidies have been common. administration and depreciation costs (Collins 1996). Users have rarely paid the full costs of supplying water. maintenance. and applyto the countryas a whole. Introduction AlthoughAustraliais a relatively dry country. The IndustryCommission estimated that charges would have to rise by about 250 percent if irrigators were to pay the full cost of the system (including capital replacementcosts) and providea 5 percent return on assets.in 1988-89 real rates of return on irrigation and drainage assets varied between-0. and water markets developed. Past experiences Irrigation In the past. Other aspects of water management. Abstractionsare made under a s a this paperare those of the authorand are not necessarilyof the New South Wales Govermnentnor of the New SouthWalesIndependentPricingandRegulatory Tribunal. Indeed. Most urban consumers have not paid for water in accordancewith use.subsidies reduced.reported that charges to users wouldhaveto increasesignificantlyif returns on irrigation assets were to become positive (Industry Commission 1992).2 percent (AustralianWater ResourcesCouncil 1991). The focus of the discussionis on water supply. 17 . rather than price.9 and -5. In Australia the state owns the water. Similar situations prevailed in other states. Institutional issues. Regulation. irrigation water pricing has been determinedmainly by social and developmental considerations rather than by commercial principles.such as drainage. There is now widespread agreement that such arrangements are not appropriate today.and the attenuationof property rights reduced. particularly capital costs. In New South Wales a policy requiring a non-negativereturn on capitalwould require a 50 percent increase in charges to users (Industry Commission 1992). Much of the discussionwhich followswill be general. And prices have been rationalized. A detailed discussionof the situation in each state and territory is not possible here. Specific examples will be taken mainly from New South Wales . Australia has six states and two territories. Rates of return on irrigation assets have been negative. Prices for irrigationwater have been low and entitlements to it poorly specified.
18 . Their introduction was an importantstep. The volumetric pricing structure for bulk or wholesale water in the Barwon Region of New South Wales is shown in Table3. A new "water managementcharge" has been introducedrecently to cover the costs of resource management. During the 1980sthis arrangementwas modified in most jurisdictions and transferable entitlements were introduced. Depreciation costs of the government-owned irrigationinfrastructureis. In particularpermanenttransfers and transfers across spatial boundaries(and thus interbasin transfers) are gradually being allowed. Until the 1980slicensesto abstract waterfor irrigation were attached to specific parcels of land. par- 10 Volumetriccharges were introducedgradually starting in the late 1960s.' On the principle that others benefit. included in the cost calculations. Bureaucrats supervised transfers closely. Users pay for only a portionof operating costs and no capital costs for dams and weirs. While licensing has proved to be a robust institution for the allocation of water in environments with highly variable flows. such as ranchers and farmers of annual crops. Experiencewith the new system has led to a relaxation of some of these constraints. Initially only temporary transfers were permitted. Discussionhere is restrictedto allocationpolicies on regulated streams(streamswhose flowsare controlledby peopleusing 9 storage facilities).the state agency responsiblefor allocating water provides both wholesale services by supplying water to distributors. prohibiting those potentially harmful to third parties.1. allowing them full specified allocationsexcept during the most severe droughts. This covers most water used in the state. Holders of licenses to streams with variable flows or which are highly committedmay rarely receive their full allocations. License holders on regulated streams in New South Wales pay a combinationof license fees (coveringless than the costs of administration).in particular. Over and above their entitlements.receive secure entitlements. All users pay a minimum charge for access to water which is independent of the license and meteringcharges. Holdersof secure licenses pay an additionalcharge. a variety of restrictions were put into place that limited the ability of markets to rationalizethe use of water. without which subsequent reforms to promote more efficient water use ticularlyfor irrigation.Typically.are dissatisfiedand seek better specificationof rights. extractive users pay for only about 70 percent of the costs of supplyingwater from the rivers. Transfers were allowed only among irrigators and could take place only within defined geographical boundaries. includingimproved securityof tenure and specificationof more reliable accessto water. would not havebeen possible. receive their full allocations only when stream flows and water in storageare sufficientlyhigh. however. Other users. abstractors may be granted accessto surplusor off-allocationflows at times of high flows. Irrigators. Fees for licenses for secure allocations are higherthan fees for othertypes of licenses. and volumetric charges where the quantity of water extracted is regulated and can be measured (New South Wales Government Pricing Tribunal 1995). such as towns and certain horticulturists. License holders are entitled to a speci9 fied quantity of water. metering charges where meters are installed (costs of metering are fully recovered). However. One type of license can be converted into the other by means of valley-specificconversionfactors. rights of abstractorsare attenuated in a number of ways. In New South Wales individualsor entities must have a license to use water from regulated streams. Some large water users.as distinct from irrigation operating and supply costs. and retail services by supplyingwater to irrigators. depending on needs.
Urbansector In Australia the supply of water for urban use has nearly always been a public responsibility.Table 3. Consumers have paid operating.95x entitlement ML) x 0. The volumetric charge may be constant or may rise with rising consumption (rising block pricing). Utilities rarely receive direct government contributions for these services. and fnance them by charging higher prices to their other customers. irrigation High security.1 Bulkwater tariff structurein the Barwonregionof New SouthWales Volumetriccharge(Aus$per megaliter) Deliveryservice charge Meteringcharge Total 2. They do not pay volumetric charges. charges for meters. Unregulated stream and groundwater users pay management fees intended to cover the costs of resource management services (New South Wales Government Pricing Tribunal 1995). 19 . Source: New South Wales. based on property value or meter size. Water utilities are increasingly relying on assets they receive from developers.50x entitlement ML) x 0.52 Minimnum annualcharge(Aus$per year) Low security Highsecurity. households receive between 350 and 500 kiloliters of water as part of their base allowance (1 kiloliter = 1 cubic meter).33 (3.other (2.30. depreciation or the costs of asset refurbishment (Industry Commission 1992). owners of relatively expensive properties. who are required to provide water and sewerage services to their developments and to transfer the assets to the relevant water authority without charge at the time of sale (Industry Commission 1992). Holders of licenses for use of water from unregulated streams pay license fees and.50x entitlementML) Note: In March 1996 IUS$ = Aus$1. The Industry Commission reports that during 1988-89 all major metropolitan water supply authorities had sufficient revenues to service debt and pay a return on capital.23 and US$0. In 45 percent of jurisdictions in New South Wales. In about 9 percent of jurisdictions households pay two-part tariffs with no free water allowance (New South Wales Government Pricing Tribunal 1993). where in use. Water authorities are often required to provide services at low or no cost to households as part of government programs of welfare. Where water fees are based on property values.33 (3. Urban consumers typically pay a flat fee for water. For consumption above this allowance they pay by volume used. According to the Industry Commission (1992). and receive a base or free allowance of water.Government PricingTribunal1995. pay a relatively high average price for their water. they may be required to charge uniform rates for service. Or they may be required to provide low or no cost service to lowincome households. such commercial establishments. In 60 percent of jurisdictions consumers pay between US$0. maintenance and administration costs.54 per kiloliter for water used above this level.50 2. Groundwater users pay license fees. to varying degrees. For example. interest expense and.02 0. although the costs of providing the service vary.
Finally. Present water pricing practices Concern over traditional pricing practices has arisen because of their failure to encourage efficient allocation of water. charges based on property values are being replaced with twopart tariffs. Although charges under the new tariff system are often insufficient to fully 20 . 161 287 n. charging systems which are not related to demand make it difficult for water supply authorities to determine levels of investment and service provision which the people truly demand.a. 430 700 unmetered 270 220 330 250 245 230 Accesscharges water 120 311 150 n.a.a. b Brisbanechargesfor propertieselectingto pay meteredcharges. meansnot applicable. In the case of urban water systems.in 1990-91 the average household paid US$0. Free allowances are being abolished. people have become concerned about the financial condition of water utilities and their ability to maintain. Wateruse is assumedconstantthroughout financialyear.a. 74 n.2 shows typical household water and sewerage bills in the major urban areas in Australia in 1993-94. 504 502 502 544 364 458 574 574 490 687 639 Usage charge Environmental levy Totalwater and seweragebill Adelaide Brisbanea Brisbaneb Darwin Hobart Melbourne Newcastle Perth Sydney Other Gosford Wyong 445 18 a Brisbanechargesfor propertytax basedtariff.2 Typical household water use and charges for major Australian urban areas. Table 3. New South Wales Government Pricing Tribunal 1993). Demand management was achieved mainly through exhortation and education rather than through price changes.a. 136 293 111 109 29 24 24 24 n. Table 3.82 per kiloliter.a. 1993-94 (Aus $) Majorurban authorities Average annual water use (kiloliter) 300 n.a. 40 n. More recently. n. Note: n. renew. but the average commercial establishment paid US$7. n. 15 times more.51 per kiloliter of water. and extend their systems and pay dividends to government. such charging systems distort the production and consumption decisions of water users (Industry Commission 1992. 175 11 81 118 89 210 176 sewerage 216 167 167 257 189 311 126 345 252 448 144 n. and because of the inequities generated by providing subsidies to some users at the expense of others. Furthermore.a. the Source: New SouthWalesGovermment PricingTribunal1993. comprising connection fees and charges per unit consumed. n.a.a. There have been significant reforms of both urban and irrigation water charging practices.a.
However.36 across the border in Victoria. Other states are planning to establish similar bodies. particularly in areas where the reliability of water supplyis low (Pigram. It is estimated that charges wouldhave to increaseby about 80 percent to cover all costs and by more to providea return on assets.and reform of the industryhas been slow. The current charge in New South Wales on the Queensland border is US$1. The frameworktargetsthe following: * Pricing reform. The Hunter District Water Board pioneered these reforms in 1982. It reports. In New South Wales the GovernmentPricing Tribunal (now the IndependentPricing and Regulatory Tribunal) is increasinglycontributingto the debate on both urban and irrigationpricing issues. Promoters 21 of transferableentitlementsbelievedthey would lead to overall reformof the industry. groundwater. The success of tradeablepermits has encouraged policymakers to consider developingmarkets for a variety of scarce water resources. In addition reductionsin out-of-doorsuse and peak summerconsumption postponed the supplementationof the existing distribution infrastructure. 1992). narrowing the gap further between revenues and expenditures (Collins 1996). because of restrictions. Transferable entitlements and the establishment of water markets were introduced to improvethe allocationof water while protecting farmerswho had benefitedunder the old system. they improve water allocation by providingconsumerswith incentivesto conserve and by eliminatingthe cross-subsidywhich was part of the traditional system. In Victoria revenuesare sufficientto cover nearly all operation and maintenancecosts. the reforms have entailed mainly higher prices . Water would flow from lower to higher valued uses through the market mechanism.20 per megaliter compared to US$4. In the future while central control may remain high. The Tribunal has already concludeda major review of pricing practices in major urban areas (New South Wales GovernmentPricing Tribunal 1993).jurisdictions and sectors and for greater periods of time.thus higher levels of cost recovery and improved incentivesto conserve water . There is increasing acceptance of the usefulness of tradeable permitsto improvethe allocation of water.94 comparedto US$7. trading in entitlements has not been as active as expected. transfers are likely to occur across greater distances.and the pollution dilution capacity of streams(Agriculturaland ResourceManagement Council of Australia and New Zealand 1994). In 1995 the New South Wales Minister for Land and Water Conservation reported "the current charge in New South Wales on the Victorian border is US$1. Changes in tariff structuresand the developmentof water markets are two aspects of the process.16 per megaliter. The weighted average charge for irrigation water deliveredto the farm in the southernMurray-Darling Basin during 1991-92 was US$10. Local authorities(mainly rural urban entities) and the MinisterialCorporationwhich regulates streams and provides irrigation water serviceshave both been referredto it for review." (New South Wales GovernmentPricingTribunal 1993). Simultaneously.39(across the border) in Queensland" (New South Wales GovernmentPricingTribunal 1995). For irrigation. such as storage space. A centralgovernmentbody. In New South Wales charges for water are still well below those of its neighbors. Currentdebatesand futureprospects Reform of the Australianwater industry is proceedingon a broad front. the Council of Australian Governments has promulgated a Water Policy Agreementwhich provides a strategic frameworkfor the industry. water suppliers have reduced their costs. including full cost recovery and the removalof cross-subsidies * Assetrefurbishment * Clarificationof propertyrights to water .between catchments. Since 1992 real charges have risen by 11 percent.and the introductionof transferability of water entitlements. "Substantial expenditures on water storage and distribution infrastructure have been postponed.cover costs. The price increases have been implementeddespite the objections of irrigators.et al.
* Allocationof waterto the environment * Adoption of trading arrangementsin water rights * Institutionaland organizational reform * Community consultationand education programs. prices should reflect only non-zero opportunity costs. how shouldthe charging systems be devised? Somepeople arguethat equity requireschargesto coverat least a portionof the capital costs.the existing capital assets effectively have zero opportunity costs.mainly on the basis of the circularity involved in its deternination (Wells 1995). The history of cooperative federalism in Australia and the power of the federal government (compliance with Council of AustralianGovernmentsprinciples is a conditionfor states to receivepayments from the federal government resulting from a wider program of competition reform) suggest that the prospects for the implementationof the Agreementare good (Pigramet al. Howevernot all statesembrace the Agreementand there may be scopefor interpretationof its provisions. Others argue that. 1994). The expert group also considereda number of alternatives for valuing assets. particularlyif they are not to be expandedor replaced." The group recommendedthe use of deThe deprival value is the value to the entity of the future economic benefitsthat the entity wold forego if deprived of the asset (Steering Committeeon NationalPerformance Monitoring of Government TradingEnterprises1994). The implicationsof this agreementare substantial. includinghistorical cost. For irrigationwater pricing issues. the upcoming work of the Ministerial Corporation to the New South Wales IndependentPricing and Regulatory Tribunal is particularly important. Council of Australian Governments has formed an expert group to establish methodologies for asset valuation and determination of costs to be recovered. The issue has not yet been settled. If the latter view prevails. net present value of earnings. The Council has agreed to an implementationtimetable. The Tribunalwill make recommendations the on followingissues: * Costs that should be recovered and who shouldpay * The defnition of relevant capital costs * The appropriate degree of attenuation of * * * * * * * * * * * * * * property rights. but some have expressed dissatisfactionwith the approach. particularly with regard to the securityof supply The extent to which transferability of entitlementsshouldbe liberalized The appropriate way of adjudicating the tradeoffs between consumptive use and the environment The rate of return the government should receiveon its rural water assets The impact of alternative price regimes on financialand environmentalsustainability The recovery of costs of managing common propertycatchments The appropriate nexus between price and regulationin determiningwater quality standards Whether or not compensationshouldbe paid to losersunder the reforms The regulation and pricing of groundwater use The optimal way of allocating water resources. Two central questions are: To what extent should chargesbe set to cover the typically large capital costs involvedin water storageand reticulation?And. defining and measuring costs is not straightforward. However. " prival values. for efficiency. deprival values and variants of renewals accounting. which are stochastic in supply and demand Thetreatmentofjoint costs The appropriaterelationshipsof government agencies responsible for management. these methodologies may be used by water utilities to set charges and report on performance. Ultimately. operation and regulationof the water resource system The replacementof assets and their funding The appropriate structure of fixed and variable charges The use of differential prices and crosssubsidies 22 . then charges per unit of water would be very low .
Johnstone." In: Commodity Markets and Resource Management. 1994.J.J. and D. Scoccimarrow.J.. Musgrave.New SouthWales. References Agriculturaland ResourceManagementCouncil of Australia and New Zealand. Industry Commission. New SouthWales. D. Canberra.. The developmentof socially-optimalwater charging systems is not easy because of conceptual and measurement problemsthat remainto be resolved. 1992. Australian Bureau of Agricultural and ResourceEconomics. Occasional Paper. R. 1994. Inquiry into Water and Related Services Sydney.* The valuation and pricing of non-extractive water. Antony.M. Collins.1994. 23 . Hooper.B.J. sented at the Conferenceon Regulation of Public Monopolies." Water 24 (4): 21-25. V. J.New SouthWales. Young. 1993. Steering Committee on National Performance Monitoring of Government Trading Enterprises. 1994. Norris. Australia's progress in attacking these problems should be of interestto more than a local audience. Principles for Bulk Water Pricing in New South Wales. University of New England. Its report is anticipatedwith great interest. Canberra. and M.M. Review of the Asset Valuation Guidelines of the Steering Committee on National Performance Monitoring of GTE's. Water Resources Australian and Waste Water Disposal.J. 1996. Pigram. Industry Commission. G. Collins.J. 26. Canberra. GovernmentPublishingService. Anderson. Coelli. 1995. Transferable Water Entitlements in Australia.R. 1991. 1995. Bryant.J. WarrenF. "Cooperative Federalism and Water Reform.and Warren F. Conclusion In Australiawater charge systemshave not been devisedeither to provideincentivesfor the efficient allocation of water resources or to recover costs. Australian Bureau of Agricultural and Resource Economics. Financial Corpo- Government Pricing Tribunal of New South Wales. D. Pigram. Interagency Performance Review. Canberra." Natural Resources.J. D. October 16. but much remains to be done. Delforce. L. Sydney. Proceedings of the National Agricultural and Resources Outlook Conference 1996. "Water Reforms and Farm Incomes in the Southern Murray-Darling Basin. Proceedingsof the National Agriculturaland ResourcesOutlook Conference 1994. Government Pricing Tribunal Of New South Wales. P. Melbourne.ReportNo. Musgrave.R.L. Canberra.. 1992. Gaffikin. Dudley.. Paper pre- rate Management Committee. and M. Clearly the task facing the Tribunal is complex and will involve a comprehensive review of water resource economics. Guidelines on Accounting Policyfor Valuation of Assets of Government Trading Enterprises: Using Current Valuation Methods. Australian Water Resources Council. N. Sydney. Center for Water Policy Research. Reforms are now underway. Property Rights in Water and Water Related Other Related Resources. "Managementissues for Irrigation in the SouthernMurray-Darling Basin.
rainwatercatchment. defined as villages with district administrative headquartersor more than 5. However. The Water Utilities Corporationis responsiblefor supplyingwaterto all urban and miningcentersexceptOrapa. Still policymakers hoped. Syndicates operate and maintain the boreholes. industries.which are responsiblefor managing the country's water supply systems.with assistancefrom the Swedish International Development Authority. indeed the administrativecosts of collection exceeded the revenue collected. few villagers actually paid the tariff.1 shows the water demands by sector in 1990. Farmers had responsibilityfor operating and maintainingthe dams. The district councils.000 people in 1975.By 1982most majorrural villageshad replaced their traditional sources of supply boreholes. 24 . the local currency.which receives water from the mining company. The tariffwas intendedto instilla sense of ownership among villagers. and rivers and streams . The ministry constructssmall dams in farmingareas used for livestock and assists syndicates(user groups). Table 4.hand dug wells. From its inception.Botswanawas still using the SouthAfrican RAND for currency: I PUJLA I = RAND. The tariff was abolished in 1979. institutions. The Ministry of Agricultureis responsible for supplyingwaterto farmersand herders. In 1993the ministry changed its policy and asked farmers to contribute15 percentof damconstruction costs. commercialenterprises. but pay nothingfor the water. Village householdswere chargeda flat 1 tariff of P22 per year for water from standpipe supplies.with piped water systems. which mainly involved building and maintainingfencingaroundthe damsand keeping the spillwaysin goodrepair.are also water supply authorities. Until 1993the ministry suppliedwater to farmers at no charge. Thereare two watersupply authoritiesunder the ministry. under the Ministry of Local GovernmentLands and Housing.4 BOTSWANA Jane M Thema Introduction In Botswana the Ministry of Mineral Resources and Water Affairs is responsiblefor nationalwaterpolicy. and The Department of Water Affairs is responsiblefor supplyingwater to the 17 major villages in Botswana. When therural water tariff was introduced. Past experiences Urbanwater The Water Utilities Corporation was establishedby an act of Parliament in 1971 to supply water to the urban areas.definedas settlements with morethan 500people(250 peopleif it is a remote area settlement).the Departmentof Water Affairs and the Water Utilities Corporation. Rural water In the early 1970sthe governmentinitiateda ruralwater supplyprogram. The water supplyauthorities provide water to residences. Theyare requiredto obtain 12 1976.the Corporationset water charges to coverits costs and generatea reasonable returnon its assets so that it could finance new capital investments. Newer figures are being computedto use for national development plan 8. because standpipes were relativelyrare and allowedusers "P" stands for PULA.which arefree of charge. The ministryalso gives grants to syndicates to finance a portion of the costs of sinking water rights from the Water Apportiomnent Board. introduced in boreholes for livestock watering. The district councils are responsible for supplying waterto ruralvillages.
8 54. The tariff was to be reviewed annually and adjusted to reflect changes in costs and inflation.2 116. generating sufficient revenue to cover 40 percent of operation and maintenance costs.3 18.to save time while providing better quality water.5percentof total demand.9 100.1 0. villagers would value and maintain them. 1990 Consumption (million cubic meters) Settlements Urban Major villages Rural villages Agriculture Livestock Irrigation Forests Mining Wildlife Energy Total 33.8 46.2 35. In 1990 tariffs were raised (Table 4. In accordance with these principles. efficiency. and cost recovery.4 6.9 Percent 28.2 16. policymakers realized that government could no longer afford the massive subsidies being given to construct and maintain rural water supplies. In 1975 households were allowed to obtain private connections.2).8 6.7 5. and households with private connections pay a concessionary rate for the first five cubic meters of water consumed. The tariff was intended to limit the burden on the government budget and. for which they paid a flat rate of P0.0 Note: Industrialand commercial otherthan miningaccount 3.3 5.30 per month.8 19.1 1. Table 4. they are gradually rising. encourage water conservation.8 0. Present water pricing practices Rural water The current pricing policy is based on the principles of equity. by increasing it periodically. For equity. Once the rural water supply cost and tariff study was completed in 1988.1 Water consumption by sector.9 16. for Source: Ministryof FinanceandDevelopment Planning1991. While tariffs are still too low to fully cover costs. 25 .1 20.0 2. This was double the rate of recovery in 1989. water from standpipes is supplied free of charge. However the government never actually carried out the review. Equity requires that no one be denied access to safe water because of inability to pay.1 17.4 30.6 7. an incremental or rising block tariff system was introduced in 1990. Efficiency requires that prices reflect the marginal costs of supplying water. when revenues covered just 20 percent of costs. and tariffs were not adjusted for the next fifteen years. Financial sustainability requires that revenues equal the costs of supplying water.7 6.
1995-96 and 1996-97.990 48 42 39 36 44 Source: Ministry Finance Development of and Planning.590 8.45 0.220 6.760 17.220 14.4 Revenue compared with costs Year 1988-89 1989-90 Operationand maintenance (billionP) 5. However the tariffs were not actually adjusted Table 4.800 7. 26 . and increases of no more than an averageof 45 percentfor the next three.30 0.730 10.3 presentsthe 1993tariff schedule. In 1993the cabinetapproveda tariff increase of 50 percent for 1993-94.50 a Band4 is applicable periurban onlyandis equivalent thebulkrateforurbanareas.60 1.050 23.860 5. Table4.400 6.The seventh national developmentplan of 1991-92 specifieda target:by the end of 199697 revenue from villagers should cover all recurrent costs for water supply. 1994-95.90 3 4a 21-40 >40 1. Monthlyconsumption (cubicmeters) 0-5 6-20 >20 Tariff (P per cubic meter) 0.3 Tariff schedule.1990 Band 1 2 3 until 1993aftertheyhad fallen in real terms by 35 percent.960 24.80 3.920 2.870 Percentrecovered 33 37 1990-91 1991-92 1992-93 1993-94 1994-95 11. various years.20 Table 4.2 Tariffschedule.1993 Band 1 2 Monthlyconsumption (cubicmeters) 0-5 6-20 Tariff (P per cubic meter) 0. to areas to Table 4.790 Revenue (billionP) 1. The tariffs introduced in 1990were to be reviewedeach year and adjustedto reflectchangesin costs and inflation.
65 0.4 provides data on revenues compared with costs from 1988-89 to 1994-95. for which consumers pay. 0.40 0. Already in major villages 70 percent of water consumed is through private connections. As a result revenue collection from major villages is improving.82 0.85 2.5 pre-sents the 1992 changes in the tariff structure.28 1.50 3.Clearly tariffs will not be sufficient to cover recurrent costs as stipulated in the national development plan by 1996-97. set by the Department of Water Affairs. This makes water affordable to low income consumers. Villagers pay only about 15 percent of the costs of these services.50 0.40 n. Its tariff structure involves rising block rates: rates are low for a specified initial consumption level.65 2. while en-couraging conservation among higher income users.28 1. It should be noted however. The national development plan proposes that users pay 30 percent of costs by the end of the next plan period. Although the cost per capita is higher in the rural villages than in the major villages. Block tariffs were restructured in 1992 to more closely reflect water scarcity: the quantity of water eligible for the lowest tariff was reduced from the first 15 cubic meters to the first 10 cubic meters.20 New (October 1993a) 1 2 3 4 5 Raw Water 3.a. March 2003.50 3. Government pays the full costs of standpipes. Table 4. and 27 .75 2. the district councils use the same tariff schedule as the major villages.50 0.55 0. However. By contrast. Table 4. Even if tariffs are raised as scheduled.65 2.5 Tariff schedule 1991 contrasted with tariff schedule 1993 Band Monthlyconsumption (cubicmeters) Gaborenel Lobatse Old (March 1991) 1 2 3 0-15 16-40 >40 0. while the quantity subject to the highest tariff was reduced to 25 cubic meters and above from 40 cubic meters and above. Annex Table 4. they will cover only about 60 percent of recurrent costs.20 4.20 Specialtariff 0. 2.20 2. The central government provides grants to the rural villages to finance the deficit. and are higher for consumption above this level. to in Source: Ministryof MineralResources WaterAffairs1994. Urban water The Water Utilities Corporation sets water charges to fully recover costs.A1 shows the proportion of water consumed through standpipes compared with private connections for typical major villages.65 Tariff Jwaneng Francistown SelebiPhikwe 4 Rawwater 0-10 11-15 16-25 >25 0.55 2.85 1.55 2.20 2.50 Specialtariff a The revisions the bandswere implemented October1992. the budget burden of standpipes is declining in major villages as more households choose private connections.85 1.10 2.85 2. that 41 percent of water from private connections carries the concessionary tariff applicable to the first band of water consumed. as stipulated by the act. in rural villages 85 percent of the water consumed is from standpipes.30 2.a.55 1.85 n.60 3. Table 4.
Rural water users paid 44 percent of total costs in 1994/95. So policymakers reluctantto are revisethem in linewith costs or commercial practices (tariffswere last revised in October 1993).it cannot enforce its water chargesor raisethe revenuesits needs to function.Urban watertariffs are set by supplyregion: tariffs in the Gaborone-Lobatse area are higher than tariffsin the Jwanengarea. Tariffs do not reflect the recurrent costs of rural water supply.so the water utility does not have strong incentivesto collect debts or review tariffs. For example. and telecommunications Rural. US$1 = P2.manyof the usersin default are other governmentdepartments. Urban.82 (P =US$0.5 kilometer from its water source (annual fuel costs: 3 P4.and pay for water according to quantity consumed. Since the water institution cannot disconnect government departments. Institutional.users in both Kasane and Mahalapye pay the sametariff for water. Currently the costs of operating and maintaining water systemsare paid with govthe erinent allocations. - power. all other factors being equal.4 do not includecosts of producingwateror of fuel. By 1995-96.553). In addition.1 The tariff remains too low to achieve the cost recovery objective.35) in December1995(Bankof Botwana 1995). Anotherproblemis that there is no clearpolicy regarding debt collection. As a result. 95 percent of urban households received water through private connectionswhichare metered. Urban. and sometimes request connections for which they have no intention of paying. Successes Rural. This reflectsthe differentialcosts of supply.making it difficultto rapidly identify and follow up probemsor identifyusers whohave not paid their bills. Therehas beena slightimprovement in revenue collectionsrelative to costs in rural areas. Consumers know this.900)while Kasane is only 0. For example. which is now embarkingon two major investmentpro-grams:the Gaborone-Lobatse's water system upgrade project and theNorth SouthCarrierWaterProject. accordingto the nationalwater master plan and water use and affordability studies. and as a result revenues do not come close to covering costs. people treat water as a scarce commodityand waste very little. and chooseto situate in regions with relativelyabundant and cheap water.this policy masks differential costs of supply.which are higher in the water-scarceGaborone-Lobatse than in area the Jwaneng area.found a sharp drop in water use following the real increase in the average price of water which occurredin the mid-1980s. Manufacturersregard charges for utilities-water.while failingto identifya specificmeasureof elasticityof demand. These studies. This has seriousimplicationsfor the via-bilityof theWaterUtilitiesCorporation.the cost figuresshown in Table 4.compared with 37 percent in 1989-90 (Table4. these costs are combined with the department's otherfuel and transportation costs. Currently water suppliersdo not have legal authorityor in-house capacityto collectdebts. The departmentcandisconnect consumerswho have not their bills. The Department of Water Affairsstill processesits recordsmanually. It is not howeverable to meet the rates of return specifiedin its charter.earning only a smallprofiton sales. but has no legal means of recoveringthe debt. Users with private connections can easily afford to pay double the current chargesfor water. meaning that water 28 The costs are expressedin 1995/96prices. thus leading to the need to developnew resources faster than would otherwise be the case.yet Mahalapyeis 45 kilometersfrom its reservoir(annual fuel costs: P368. Water intensive industries will factor these costs into their location decisions. Difficulties users in someareas subsidizethose in others. Uniform tariffs are set for all supply areas. The Water Utilities Corporation has succeeded in operating on a commercial basis. as too high. 13 While administratively simple. The low tariff also inflates demand.4). . Tariffs send signalsto water users on the costs of supplying water in each region.
11 0.80 1.62 0. Becausethis is likely to benefitlarge consumerswhilepenalizingsmall ones. now beingprepared. Policymakersare currently considering introducing a tariff for commercial and industrialusers. The current tariff structure provides a concessionary for the first consumption rate band .especiallyin the urban areas. Therefore governmentdepartmentshave no incentiveto pa theirwaterbills.Yet there is no clear justification for giving businesses or high income consumers the concessionary rate. decisionmakerswill likely allow small business owners to elect whether or not to participate.is likelyto makethe water supply authorityresponsible wastewatermanagement for and reuse. * Targeting of concessionary tariffs. Subsidiesfor standpipesupplies constitutea significantgovernmentburden. Many standpipeconsumersare accustomedto paying tariffs. * Responsibility water accounts. Currently for the Ministry of Finance and Development Planning settles government accounts. Comparedwith the currenttariff.5-2 percent of total productioncosts for industrial and commercial consumers.20 1.6 (AdvisoryCommitteeon Water Tariffs 1995).77 0.62 0. 1995 Utility Industry Hotel Concrete Bakery Packaging Brewery Abattoir Textile Other Water 1.72 1.60 0. Although sensible.39 0. as shown in Table 4.but the rationalefor this is unclear.74 Power 3.and for high incomeand low-income consumers.36 1.80 0.33 1. especially in urban areas. Futureperspectives Urban.74 0.Table 4. Debates Issues beingdebatedinclude: * Charges for standpipe water supplies.33 5.43 0. The national water master plan and the water use and affordabilitystudy recommendedthat standpipe consumerspay a flat rate tariff.53 0.08 1.85 Telecommunications 0.21 0.08 Source: WaterUtilitiesCorporation1995. Financingthe latter project will require tariff increasesof about 7 percent per year until the date the systembecomesoperational.99 4.81 2. The eighth nationaldevelopmentplan.this change may make tariff adjustments even more difficult to achieve. A recent survey by an interministerialadvisory committee on water tariffs shows that water tariffs constitute 0. Currently 29 . Current debates and future prospects * Urban-ruraldifferencesin the basic needs water band.6 Utility pricesas percentageof total cost.for businessesand households.81 0. Currentlythe size of the bands differs. the businesstariff will involve a higher tariff for the first consumptionband but lower tariffs for higherconsumption bands.
" Gaborone. It is expectedthat rural consumers will pay an increasingproportionof the costs of supply. Water UtilitiesCorporation. Botswana.Botswana. Gaborone. Ministry of Finance and DevelopmentPlanning. "Botswana National Water Master Plan Study.September. Draft Final Report:' Gaborone. "Annual Report." Gaborone. 1991." Operations and Maintenance Division. "Annual Statements of Account 1988/89-1994/95. Final Report. 30 .Gaborone. Bank of Botswana. 1992. The eighth nationaldevelopment plan is likely to include increasesin tariffs to generate sufficientrevenuenot only to coveroperatingand maintenancecosts but also a portion of capital costs. Ministryof MineralResourcesand WaterAffairs. "Urban Water Tariff Review.Botswana.but the Water UtilitiesCorporation operates on a commercialbasis. Various years." Gaborone." Gaborone. . July.December. "Operations and maintenance Statistics. "National DevelopmentPlan 19911997.Botswana.Botswana. Funding Options Study Module Report. "Survey of Water Tariffs. so will almostcertainlyhaveto raisethe rates." Binnie Burrow Botswana Limited.September. Ministryof MineralResourcesand WaterAffairs. Department of Water Affairs. Gaborone. Botswana:Government PrintingOffice. 1995.seweragechargesare includedin the rates levied by urban councils.August. References Advisory Committee on Water Tariffs. 1995. "Water Use and Affordability Study. Various years. "North South Carrier Water Project PreImplementation Consultancy. Botswana. Rural." ARUP. 1995. Botswana. Botswana: Government PrintingOffice. Final Report on Phase 2 SMEC/Knight Piesold. Ministry of Finance and Development Planning. 1991. Gaborone.
88 3. 1989 1990 1991 1992 1993 1994 20.72 21.01 1.A1 Proportionof water consumedthroughstandpipesversus privateconnections.72 68.47 61.85 18.64 20.97 81.68 4.80 7.72 15.65 40.58 97 117 123 205 266 263 45.094 77 122 91 77 74 110 Kasane 1989 1990 1991 1992 1993 1994 212 292 258 409 432 455 53 30 34 34 26 29 Kanye 704 142 362 51.41 13.54 23.68 3.18 8.000cubic connections meters) Percent standpipes Tlokweng 1989 1990 1991 1992 1993 1994 367 443 481 706 671 730 17 1 18 54 27 14 Mahalapye 1989 1990 1991 1992 1993 1994 517 654 588 758 896 1.10 6.13 47.93 31 .074 167 677 63.91 14.35 81.02 10.28 307 428 363 522 544 776 59.95 766 182 386 50.58 57.18 19.93 80.64 986 205 560 56.40 740 145 407 54.20 61.05 282 360 390 546 503 586 76.54 10.20 10.94 60.76 15.76 50.76 1.26 8. selectedlocations Year Production (1.36 864 187 481 55.04 77.71 25.000cubic meters) PrivateconnectionPercentprivate (1.Annex Table 4.03 Source: Derived fromDepartnent Water of Affairs.26 4.000cubic meters) Standpipes (1.75 70.34 65.25 6. operation maintenance and statscs.41 74.
However.000 cubic meters depending on whether the project was public or private. interest in chargingusers for has grown.000cubic meters of water averaged about US$20 for low-value crops . It is believedthat introducing water charges will achieve a more efficient allocation of water resources and generate funds for sustainableoperation and maintenance of existinginfrastructure.1). In 1995tariffs for irrigation water supply ranged from US$3 to US$40 for 1." and the Water Act. which states that "common use of public goods can be free or providedfor a fee accordingto specific legislationat the federalor state level.a gift of god. Tariffs are allocated to the sponsoringagency and distributed to the irrigationdistricts. Federal waters are those that flow across state boundaries or along the boundaries between two or more states or a foreign country. Presentwater pricingpractices Currently there are no bulk water fees for the use of water for irrigation or urban water supply. The granting of formal water use rights has been limited to hydroelectric and public irrigationprojects.and the Vacacairiver in Rio Grande do Sul. and Santa Catarina have already enacted water laws for state waters which include provisions for the 32 establishment of water tariffs for bulk water supply. Over the past few years however. The tradition of treating water as a public good. In the meantime. Ceara. Piracicaba and Capivari rivers in Sao Paulo. Studies to support the establishmentof bulk water tariffs are being carried out for the Curutriver in Ceara. to be estimated in accordancewith the amount of waste contained in effluentdischarges. Thus the current practice is to charge users for the operation and maintenance costs of water resourcesprojects.implementingthe policy still requires the passage of regulations of the law. free to all. which statesthat "charges can be imposedfor the commonuse of waters in accordancewith laws and rules of the administrativeregion where they belong. Congressapproveda new federal water law (law 9433) in January 1997. expected no sooner than the end of 1997." The states of Sao Paulo. Hydropowerproducers do pay tariffs. Chargesfor irrigationwater The currentwater chargingsystem for public irrigationprojects is inconsistent. The Brazilian legal framework for water resources managementis based on the constitutional distinctionbetween federal and state waters. By contrast the net economicbenefits of 1. the establishmentof tariffs for federal waters is supported by the country's Civil Code. as conflicts over water-use have intensifiedand public resourcesto develop water supplies have become scarcer. rather than an economic good has stymied the developmentof a manageablewater use rights system. and whetherthe water was suppliedthrough gravity or pumping (Table 5. Farmers using public irrigation projects pay a tariff for operation and maintenanceof the systems. Urban water users pay a fee covering the costs of water treatment and distribution and sewage collection. Femeas river in Bahia.5 BRAZIL Luiz Gabriel Todt deAzevedo Introduction Until recentlymost Braziliansviewedwater as a free good . Water and environmentallaws in some states also include provisions for the establishment of pollution charges. but not for investmentor resourcecosts. Bahia. The law permits the establishmentof bulk water tariffs for federal waters. There is currently a strong movement in Brazil to developwatertariff systemsat the federal and state levels. amongothers. State waters are situated entirely within the territory of a single state.
The irrigation law (law 89. The district is undertakingan effort to collect unpaidwater bills.and between US$50-US$400 for high value 1 crops. Per hectare values are computed by dividing the total value by the number of hectares under irrigation:in 1995 the Kl value for public irrigation projects was R$3.700 water bills have been issued.000 cubic meters). while the value attributed to the K2 coefficient was about R$1. The value of these bills totaled R$1.4 Thus the economicviability of irrigated agriculture for the production of grains and other low-value crops is linked to efficient operation and maintenanceof projects. Furthermorecharging farmers for the water on the basis of use alone sometimes leads to a failure to cover the fixed operation and maintenance costs of projects.Bahia.one representingthe fixed operation and maintenancecosts.42 million. A revised tariff system is under consideration for some projects. The K1 tariff is paid to the sponsoringfederal agency. for exampleJaiba. under implementationin the state of Minas Gerais. Charges watersupply and sanitation for State-runcompaniesprovidedrinkingwater and sewage collectionand treatment services in most urban areas. Since the project started operation. The main objectives of the project are to help the state companiesoperate on a commercialbasis. However in November 1996 the state of Ceara began charging water utilities US$10 for 1. K2 is supposed to cover the operation and maintenance costs of the project. Water users pay a monthly fee for water. and accountablefor their actions. The law does allow irrigation districts to charge a fixed minimumvalue of 30 percent of the forecastedvolumetricbill to cover fixed operation and maintenancecosts. Water charges and receipts for the irrigation district are illustrativeof Brazil's irrigationtariff system.600have been paid (66 percent). The value attributed to the KI coefficient was about R$370. nearly 29. Farmers choosing not to 14 growcrops one seasonwould still be responsible for the fixedoperationand maintenancecosts.69) per hectare per month.000(52 percent) has been paid.autonomous. Similar efforts are being initiated in other states. is one of Brazil's best managedpublic irrigationprojects. KI reflects capitalcosts of the project.000 (26 percent). and is calculatedbased on the assumptions of a 50 year repaymentperiod and a subsidized interest rate. In addition it is implementinga public awareness campaignto encourage users to pay voluntarily. Irrigation water is metered in most public irrigationprojects.96 . which averaged US$0. However this is not always sufficient. and include privatizationof urban water supply and sewage servicesand the establishmentof tariffs which can providefor the long-term sustainabil33 Brazil's currencyunitis the real (R$). The Jaiba irrigation project. In the past revenues rarely covered costs. and is estimated as a function of the volume of water used (R$ per 1. Until recently state companiesdid not pay bulk water fees. including a lack of clarity as to what methodologyto use to estimate its annual value. particularly since farmers choosing not to grow crops in a seasonrarely have to pay K2 chargesat all. 1984) requires that water tariffs for public irrigation projects be set as the sum of two coefficients.000 cubic meters of bulk water. since revenues from this source are somewhat unpredictable. US$1. While the two-parttariff may make sense. the way the federal government calculates the K1 tariff leads to many problems. and become financially self-sufficient.05million (74 percent).58 (US$3. and the other the variable costs. of which R$742. Ki and K2.0= R$0.while the K(2component is normally paid directly to the water users district. of which 19. In response most state companieshave tried to reduce their expenses by shrinking their staffs and modernizingtheir systems. The ongoing federal Water Sector Modemization Project is supporting the modernization of water supply and sanitation agencies in Santa Catarina.42 per cubic meter in 1989-90. The approachwould involve dividingthe K2 coefficient into two factors. Unless it is successfulthe project will not havethe fundsit needs to operatesustainably. and Mato Grosso.496.
Table 5.000cubic meters as a realistic tariff: a tariff at this level would require poor urban 34 .11 10.and studiesare underway in others. Chargesfor hydropower Brazilian hydropower producers pay fees for the use of water.a 15. Analysts studyingthe impact of charges on the water company's financial health chose US$18 per 1. 1995itsvaluewasUS$3. appropriatetariff structure.08.20 14.1 Irrigationwater tariffs in publicirrigationprojects. The key constraintin setting the bulk watertariff is that it not exceed the user's ability to pay.' 19 .the Secretariatof Science and Technology for research.35 23. The fees and royalties are divided among the states and municipalities where the projectsare located.the National Departmentof Water and Electrical Energy for its monitoring networksand safety programs.80 9.24 9.84 4. and the Brazilian Institute of Environment for studies and water qualityimprovements.84 9.a19.00 6.98 13.ity of water supply and sewage systemsand deliveryof high quality services.1995 Project Pirapora Gorutuba Jaiba Estreito Sao Desiderio FormosoA Nilo Coelho Bebedouro Mandacaru Tourao Manicoba Curaca Propria Itiuba Cotinguiba Boacica State MinasGerais MinasGerais Minas Gerais Bahia Bahia Bahia Pernambuco Pernambuco Bahia Bahia Bahia Bahia Pernambuco Alagoas Sergipe Alagoas K2 (US$ per 1.95b 8.28b 3. A bulk water tariff study is underway in Ceara to establish an initial tariff level.86 a Gravity Systems b Pumping Systems Note: TheKI coefficient standard. and timetable for increasingtariffs.62. Currentdebatesand future prospects Bulk water supply tariffs The chiefwater resourcemanagementissue in Brazil is the establishmentof bulk water tariffs. Bulk water tariffs are already being implemented in many states.69 hectare is in per month.36 b 16.36.40 10. Ceara. Some major studies are presented here.50 8.000cubic meters) 33. The water tariff will help pay for new water storage and conveyance infrastructure.70 8. while foreign firms pay royalties.
Lanna (1995) conducteda study to determinebulk tariffs for flood irrigation of rice in the state of Rio Grande do Sul. While the Cariri market is a small isolated system. Here analysts are calculating tariffs as the sum of the marginal cost of developing new supplies and the marginalcost of increasingtreatment capacity to treat effluents. In addition it was assumed that the water company would pay US$1 per 1. He estimated the cost of urban water supply and wastewater treatment to be betweenUS$l0-US$62 per 1. Investigators are considering implementingbulk watertariffs in the Piracicaba watershedin the state of Sao Paulo. Estimates of the second 35 factor are based on the pollution load (tons of biological oxygen demand (BOD) per day).51and US$0. assuming that investments are uniformly spread over a ten-year period. but both state and federal governmentsare studyingexperiencesin the United States West. Makibara(1995)has studiedthe use of variable or seasonaltariffs to reflect differencesin water availabilityregionallyor seasonallyand differencesin the potentialof wateruse to damagethe environment. In 1992 users paid US$1. Lanna has also carried out tariff studies for the states of Santa Catarinain the south and Mato Grosso in centerwest Brazil. The use of marketsto allocatewater Policymakers are considering developing water marketsto allocatewater. This is the only documentedexample of tradable water rights in existence in Brazil.18 per cubic meter for permanentwater rights in Colorado. and Brito (1995) studiedwater markets of the Cariri region in the state of Ceari. The authorscomparethe prices Cariri users paid in 1993 for water rights to the prices that users in the United States West and Australia paid for water user rights in 1988 and 1989.000 cubic meters) while their willingnessto pay for water for irrigation or hydropower in this particular basin was relatively low (US$0. while operation and maintenance costs would increasefrom US$1. Bahia. Local rice farmers found these values very attractive. and about US$0. water losses would be 30 percent of the wateryield from reservoirs. The present value of the stream of income (which generates a rate of return of 8 percent) is very close to the present value of the US$11 million 0 water resources program launched in 1994. Australia. the water company's revenues would grow from zero in the first year to US$17. the possibilitiesof allocatingand enforcing waterrights in rural areas. the unit price of water would increase from 60 percent of the final tariff (US$18 per 1.families to pay about 1 percent more of its income for water.33 per 1. Goncalves. neglecting the effect of subsidies. Garrido (1994) conducted the initial. which have existed for more than a century.5per 1.000 cubic meters)to 100 percentin the fifth year. and stabilizeat this level.000cubic meters (assumingan interest rate of II percent and a 20-year repayment period) to US$14. Rio Grande do Sul. His innovativeapproachused the willingness-to-pay methodologyto set ranges for bulk water tariffs rather than the more commonly used marginal cost method. Sdo Paulo. He estimatedthat the marginalcapital cost of building two new dams to supply additional water varied from US$22. and the willingnessof waterusers to pay and cooperateto assure a securewater supply.000cubicmeters respectively). Under these assumptions. Chile.000cubic meters.5 million in the tenth year. The study found that users willingnessto pay for drinkingwater was relatively high (US$31 per 1. After the tenth year costs and revenueswould be stable. Kemper. pioneering work for the Femeas River. and Mexico.7 million in the tenth year. as part of a detailed bulk water tariff study for Bahia. This attractiveresult is also predicatedon the assumptionthat the water company does not pay for the past investments of the federal government.5 (assuming an interest rate of 8 percent and a 50-yearrepaymentperiod).000 cubic meters of water released from federal reservoirs (currently there is no charge).the percent of users payingwould grow from about 30 percent the first year to 70 percent the fifth year. The price .8 million in the first year to US$6.11 per cubic meter in Australia. it provides indicationsof the value of water. Water markets are uncommonin Brazil.
December. Lanna. 1995. Brazil.August 15.users paid in the Cariri region in 1993 corresponds to about US$0." Staff Appraisal Report 12836-BR.: Experiencia na Bahia. Currently the state of Ceara is offeringa ten year concessionto build and operate a water plant for the city of For- sos Hidricos. KemperK.D. Latin America and CaribbeanRegion.. P. so tariffs would have to cover all costs of supplying water and collecting and treating wastewater both capital costs and operation and maintenancecosts. but considerably less than in the United States.a pelo Uso da Agua: Reflexoes a Respeito de sua Aplicaq&o no Brasil. 36 . Secretaria de Recur- Brazil is also experimentingwith privatizing water suppliers. Robert R.000 people) and collect water tariffs in exchangefor an investmentof US$37 million to build the plant. which is somewhathigher than in Australia. A. Privatization development. 1995.. Thus users in the poor and undevelopedCariri region value water about as highlyas users in industrialeconomies. Water Allocation and Trading in the Cariri taleza (500. Heame and William Easters (1995) show that users paid between US$0. and L. Instituto de Pesquisas Brazil now recognizes the potential of water chargesto allocate water efficientlyand provide water suppliers with funds to operate and maintain water systems sustainably. Working Paper. WorldBank. These companies would operate on a commercialbasis. L. "CearaUrbanDevelopment and Water Resource ManagementProject." Revista Brasileira de Engenharia -Caderno de Recursos Hidri- and in selected basins in Bahia within the next two to three years. The coun- Hidraulicasda UniversidadeFederal do Rio Grandedo Sul. References Azevedo. Some irrigation and hydropower projects have already been privatized. Garrido R. Cobran. "Brazil: Managementof Water Resources. Natural Resources and Rural Poverty Division.C..co da Cobran. World Bank. 1995.14 per cubic meter per year. Makibara.H. In addition. In November 1996the state of Ceara initiated its program to collect bulk water supply tariffs.06-S$0. Simpson. William Easter. 1995. Estudospara a Implantaq. Washington. Departnent of Water and Electrical Energyof the state of Sao Paulo. Environment.Recife. 1994. Souza. In Proceedingsthe Annual Conference of the Brazilian Water Resources Association. "A Cobranca da Agua como Bem Comun. D." Economic Notes 4. operation and maintenance of waterresourcesprojects. E. Tariff systems are likely to be implemented in the Piracicaba watershed in Sao Paulo Hidricosno Estado de Sdo Paulo. 1994. G. the Brazilian government is interested in developing a legal framework which would decentralizethe management of water resources and would provide incentivesfor private sector participationin the cos 13 (June).a pelo Uso dos Recursos try is quickly movingtowards establishingwater tariffs for all major users categoriesin the country. GoncalvesY." World Bank Technical Paper 315. J. and Brito W. and K. M. 1995.51 per cubic meter for water rights in the Elqui and Limay watersheds in Chile. Saneamnento Habitacao do e Estado da Bahia. Superintend8nciade RecursosHidricos. Conclusions Region. "Water Allocation and Water Markets: An Analysis of Gains from Trade in Chile. Country Department I. Heame. Valor Intrinseco da Agua. 1995.
Federal laws govem water use in the Yukon and NorthwestTerritories.even wherewater resourcesare scarce or there is conflict over access to resources.Armidale. and regulate activities which affect wateruse or water quality such as navigation and fishing. in general. water charges have historicallybeen relatively insignificantfor allocating accessto wateror as a source of revenue. including environmental costs. As a result. In the past water utilities receivedoperating support and capital grants from the federal and provincialgovernments.there are many similaritiesin the system of water charges.in turn. Researchsupport from the universityis gratefullyacknowledged. delegateresponsibilityfor municipal(residential and commercial)water tariffs to regional and municipal water agencies in their jurisdictions. Three issues are important: the constitutionalauthority to set water prices.6 CANADA Theodore M Horbulyk Introduction History of water pricing practices Presentwater pricingpractices Institutional contextfor water pricing Water pricing policies and managementin Canada have focused on managing water sup5 ply. 1990a). not demand. is This chapter was prepared while the author was Visiting Associate Professor in the Departmentof Agriculturaland Resource Economicsat the Universityof New England. However. One of the five key recommendationsof the water policy is to improve water pricing practices (Karvinenand McAllister 1994).However. The historical constitutional authority for settingand collectingwaterchargesrests largely with the ten provinces. at the provincial government level. This has generatedinterest in charging consumers for water and wastewater treatment on the basis of use (Renzettiand Tate 1994). Further refinements in the policy were made in 1990 (Environment Canada 1987. Still. governmenthas reducedits support.in recent years. Water chargesdo not. Many provinces did not introduce volumetric-chargesuntil the 1980s (Tate and Scharf 1996).chargingfor water on the basis of use has not played an importantrole in allocatingwater. the distinctionbetweenwholesalelevel and retail level water prices. In 1987 a new water policy was adopted. of supplying water or of treating wastewater. Theseprovinces. In the mid-1980s the federal government initiated a study of water policy.and the distinctionbetweenpricing policies as applied to surface water versus groundwater. Foremost. coverthe social marginal costs.many homesand apartment buildings lack water meters. Provincesretain the authority to establish prices for water which users acquire directly from a surface or groundwatersource rather than from one of the regional agencies. and may constrain government controlin some instances. and this is a barrier to introducingvolumetric-charges." Except for water used in hydroelectric generation. 37 In Canada federal and provincial governmentsdelegatemost of their authorityfor setting charges for the use of surface water to other agencies. . The specific regulations governing access to water (includingwater use licensing and water charges)vary considerablyfrom provinceto province. Federal laws also establish guidelines or set minimum standardsfor water quality and transborderflows. The authorityto regulate and to charge for wateruseby aboriginalpeoples on aboriginallands appears to be unresolved constitutionally. many regional and municipalwateragencies and utilities have failed to maintain or to reinvest in the physical infrastructurenecessary to continue providingwater service at historical levels. Australia.
Thus. water charges to farmers are defined as resource royalties. Specifically. However. Only a small fraction (2. improvementdistricts. but less than 150 hectares were irrigated (Canada1989). The most commonsystem involvescharginga flat rate per hectareper year. 10-13. and resource royalties for another 19 percent of the irrigationwater. cultural. Retail rates applyto transactions between the licensees and individual end-users such as householdsand farmers. farmerspaid service charges for about 61 percent of Canada's irrigation water. the pricing practicesthat applyfor water in municipal. The other three provinces charge accordingto volume (Renzettiand Tate 1994). These are retail chargesto consumersand are based on the costs of providing water-related services.and ManitobaProvincial Government1993).000hectares) of cultivated lands in Canada were irrigated in 1988. have not until recently regulated access to or use of groundwater(Karvinenand McAllister 1994). and the federal govermnent are exploring the possibility of developinggroundwater pricing policies (see Canada 1987. leviedon the use of the waterresourceitself. although irrigated area 6 has been growing. All prices are reported in US$ (1988) with US$0. 2-3. Other systems involve charging by volume used and charging a flat rate per 16 This review of irrigationwater pricing is based on Canada (1989). pp. If prices for surface water rise. British Columbia 1993. such as storing and conveying the water. the three western and relatively arid provinces. municipalities and agencies may increasinglytap groundwatersuppliesas a substitute. in turn. or about 950.Other means of allocatingaccess continueto be important. municipal agencies charge retail prices for water obtained from groundwatersources on the same basis as for surfacewater sources. farmers do not pay the full costs of supplying the water.wholesale and retail.' Most of the irrigatedarea is in the western provinces. Two provinces. Alberta and Saskatchewan. Ontario and Nova Scotia) have two separate water pricing structures for the use of surface water . Surface water Irrigation water Four of Canada's ten provinces (British Columbia.pp. Groundwater Neither the provinces nor the federal government currently charge fees for the direct abstraction of groundwater. Here irrigation districts. individuals are responsible for irrigation in centraland eastern provinces. Ontario charges fees per unit of time ratherthan of volume.industrialand electricpoweruses.British Columbiaand Quebec. The featuresof this systemwill be elaborated by considering.033 per day per cubic meter in 1988. Even here. In contrast. Canada's system of water pricing is principallyone in which each provincedelegates its authority for setting retail prices for surface water suppliesto municipalagencies and irrigation districts. andSaskatchewan."' These are British Columbia. and administering the system. The rate structuresemployed vary considerably even within a single province. 1' There was also a charge for the agricultural use of water in the Yukon and Northwest Territoriesof US$0. Saskatchewan. In 1988 farmers paid something for about 80 percent the total volume of water used for irrigationin Canada (this water was applied to 72 percent of the irrigated land area). In other cases. 1990a. 38 . British Columbia and Manitoba.and other agencies that fall under the provinces' jurisdiction are responsible for supplying irrigationwater. Wholesalerates applyto transactions between the provincial governments and their direct licensees (such as municipal agencies or irrigation districts). for BritishColumbia come from pp Values Alberta.81/Canadian$. Farmers pay both charges for about4 percent of irrigationwater(Environment Canada 1989). Based on data from 1988 farmers pay for irrigation water in three of Canada's ten provinces (Environrent Canada 1989). Charges are most often defined as service charges.agripracultice4-6. Two provinces.7 percent.
762 (87 residentialor commercial water rate schedules. Rather water is apportioned according to established water rights. the public supported the introduction of tradable water entitlements. However. such as light manufacturersor shopping and office complexesconsumeabout 100 cubic 8 meters water per month.20 flat rate per hectare per year." In most cases municipalagencieschargeusers for both the supply of water and the provision of sewage or wastewater services.811 acre feet) for individualusers and US$0.50 to US$36. In Saskatchewanthere is no wholesale or retail charge for irrigators drawing water directly from natural water courses.90 per cubic decameter. In Alberta most irrigationwater is provided at retail rates by irrigation districts. Accordingly. The public also opposed the use of resourceroyalty charges.with charges for the latter often blended with the former. and from US$7. As in the case of municipalwater supplies.000 cubic meters or 1 million liters or 0.20 per cubic decameter.523municipalities percentresponserate) and obtained2.the following will review the prices charged for this bundle of water supply and collectionand treatment services.198per cubic decameter for users served by a local authority. . This water is typically conveyedto individualirrigatorsin lined canals. 93 percent have municipal water supply systems.year.165 per cubic decameter (equivalent to 1.00 per hectareper year under permanentrights.1995). pay accordingone of a dozen regional rate schedules. Another quotedrate is US$3. Is uses of water. there is excess demand in some or all years for irrigationwater. Recent legislation eliminates a provision in the govermment'searlier policy proposalsallowingthe use of diverse economic instruments. In Alberta there is no wholesale charge for water nor is there a charge to individualirrigators. In British Columbia the wholesale (marginal)price of irrigationwater in 1988was US$0. Irrigators receiving water from irrigation districts or drawing water from reservoirs or conveyed in canals or the like. somejurisdictions are facing growing conflicts over access to water and budget shortfalls. Of the responding municipalities. Tate and Lacelle sent mail surveys to all Canadian municipalitieswitb populationsabove 1.2.000. the existing pricing scheme plays no allocative role: at the prices being charged.and this may renew interest in reforming water pricing practices. A typical (retail) flat rate charge would be US$90 per hectare per year which is equivalent to about US$11.00per hectare per year under terminable rights.except as otherwisenoted in Table 6. Some schemes use pumps and pipes to convey water.50to US$27. where there are growing conflicts over water use. and 88 percent of these providesome level of sewage treatment(rate and Lacelle.' Some of these districts maintain two rate schedules whereby users with permanentwater rights pay a lower charge than those with terminablewater rights. Some governmentsand water agencies are followingdecades old pricing and 39 This review of municipal water pricing practices draws almost entirely on Tate and Lacelle(1995).which protect the interestsof established water users. regardless of area irrigated. Retail prices charged by irrigation districts in 1988rangedfromUS$6. Under the new Water Act.including water pricing. In 1991. The recent experience of Alberta. to allocate water. Generally. may be instructive. They received replies from 1. licensesor other sharingrules. Across Canada there appears to be increased interest in reexamining charging systems used for iffigation and other agricultural allocation practices that are no longer entirely satisfactoryto the agencies. A typical retail price in 1988 was US$12.325 of 1. Urban water In Canada households consume about 25 cubic meters of water per month. volumetric charges are imposed only when a pre-determined minimum level of use is exceeded. In this provincewater policy has been under review since 1991. Thesemunicipalities cover 87 percent of Canada's urban population and pump about 83 percent of all municipalwater supplied in Canada. the governmentwill be able to imposefees only for water used for electricity generation (AlbertaLegislativeAssembly 1996).89 percent have sewage collectionsystems. Commercial users. In many areas.
' As noted by Renzetti and Tate (1994). Table 6. Moreover. which significantlyraises the cost of providing waterand sewerageservices.) The spatial pattern of charges reflects.however (Tateand Lacelle 1995).the price charged when householdsincrease their monthly consumption of water by one cubic meter above the monthly allowance. for example.1. 6. Provincesare listed geographicallyfrom west to east."the effect of includingsuch a populationweighting makes less than 1 percent difference in the national total. and use larger quantitiesthan the base allowance.3 also shows the marginal price of integratedwater and sewage servicefor residential water users . Tate and Lacelle acknowledgethis potential limitationof their published data. Less than 1 percent of the rate schedulessampledare hybrids ("other") that combine. This price measurealso includes chargesthat are not based on volume used (price per cubic meter is estimated by divided the average monthly bill by the average monthlyvolume used).1). It is likely that new and increasing sewage charges are responsiblefor a large part of the price increase(Tate and Lacelle 1995).3 shows the mean per unit price paid for integrated water and sewage service under constant unit charge rates as well as for the first and last available blocks of the block rate schedulessampled in the survey.even where rate schedulesare not flat rate by design.which is often set higher than the averagehouseholdconsumptionlevel. Indeed.Tables 6. These constant unit charges generallylie between the first and last publishedblockrates in a givenprovince. Table 6. Column (a) shows the amount of the chargethat is made for '9 The number of users affectedby the variousrate schedules employedand the chargesthat they face are not evidentin Tables 1.2 and 6. They show a considerablechangefor someprovinces. In a numberof provincescommercialwater rates are lowerthan residentialrates. they often are in effect This is because tariff structures often contain a flat fee for a pre-determined level of consumption. or slightly more than the overall rate of inflation (during the same period.2 showsthe averagepriceper cubic meter of water consumed based on representative levels of monthlyuse for a typical residence and a typical commercialestablishmentserved by the surveyed municipalities. More than 25 percent of the rate schedules apply constant unit charges per cubic meter of water supplied(Table 6. or more recently. The constant unit charges have increased by an average of 63 percent over the period 1986through 1991.In many provinces(and nationally)the majority of users do not pay marginalcharges.2 and3. the water supply alone. and the two Arcticterritoriesare listedlast. 20 40 . in part. The favored decreasingblock rate structuredominates the block rates sampled and thus the national averages. the rate schedules that are in use reflectthe adoptionby many municipalities of the pricing methods endorsed by the American Water Works Association(1991). 1986 through 1991. forming a two-part tariff. those of the Canadian Water and WastewaterAssociation(1993). sincethese estimatesarenot population-weighted. multiple sets of de9 clining or increasingblock charges. Canada's consumer price index rose about 27 percent). About 19 percent of the rate schedulesapplied decreasingblock rate charges. Permafrost is a feature in some parts of the Yukon and Northwest Territories. the range of climaticand geophysicaldifferencesof 20 the country. They show that for the "average monthly dollar charge per household.3 presentresults from a 1991 municipal pricing survey reported by Tate and Lacelle (1995).1 shows that morethan one-halfof municipalagenciescharge flat rates which do not dependon the volume of water used. In some cases these rate schedules also contain a fixed charge. Note that these values are defined only for the sub-sampleof households in each provincethat pay for water by volume used. while only 3 percent used increasing block rates (3 percent). nearly one-half of the householdscovered by the 1991 survey lacked water meters capable of measuringthe volumes of water consumed. and column (b) shows the integratedpaymentfor water and wastewater service together (sewage charges account for about 40 percent of the integratedcharges. Price increases averaged about 33 percent nationwide over the five year period. Table 6. Table 6.
1 Frequencyof municipalwater rate structuresby provinceand rate type.Table 6. 1991 Typeof municipalwater rate structure (percentof rate schedulesofferedin eachjurisdiction) Flat rate (a) British Columbia Alberta Saskatchewan Manitoba Ontario Quebec New Brunswick Nova Scotia Prince Edward Island Newfoundland Yukon and Northwest Canada (mean) 57 20 12 19 37 71 68 28 64 90 39 50 Constantunit Decreasing charge block rate Increasing block rate Other (e) 2 2 1 0 1 0 0 0 0 0 0 1 (b) 17 47 52 16 33 24 10 3 36 7 61 27 (c) 20 25 23 64 25 3 19 70 0 4 0 19 (d) 4 7 11 0 4 1 2 0 0 0 0 3 Source: Adaptedfrom Tate and Lacelle 1995. Many municipalities claim not to have the financial resources needed to maintain or to expand the water supply and associated wastewater treatment facilities that they are responsible for providing. Those municipalities that undertake reforms in municipal water pricing will have to take responsibility (regulatory and financial) for assuring that all establishments are equipped with water meters. Some agencies will want to raise revenues by charging users by quantities consumed. Industrial water pricing In five of Canada's provinces industries were not charged for water used on a self-supply basis in 1988. Currently. for example hydraulic mining. This reviewof industrialwater pricing is based on Canada (1990b). Introducing charges based on these characteristics would lead to more efficient allocation of water. However metering technology is now capable of measuring both. (The use of water for hydroelectric generation is discussed below. and for cooling.21 Industries typically use this water for activities such as manufacturing and processing. In many cases the charges for water was identified as being for the use of services or water infrastructure and were not considered a resource royalty.) In Canada's five other provinces and two territories industries paid something for water. few people pay for water on the basis of time-of-use or place-ofuse. Important issues to be resolved in setting tariffs for municipal water use in Canada include a chronic and perhaps worsening (capital) funding shortfall by the water utilities. 21 41 .
0 +22. Consider an industry that uses about 1.22 0.at US$0. either in seeking solutions to conflicts over water access or when various governments find it necessary to find new sources of revenue either to develop water resources or for other purposes.37 1. assuming consumption of 100 cubic meters per month) (d) 0.81/Canadian$ 1988.69 0.48 (b) 0.38 0. The rates in effect in 1988 varied widely across the country and bore no obvious relationship to the rates charged for municipal or agricultural uses in each jurisdiction.02 and US$0. respectively.59 0.50 1. The Territories.44 (US$ per cubic meter.3 +41.35 0. (See Environment Canada 1990b. two used decreasing block rates.74 0. Source: Adaptedfrom Tate and Lacelle 1995.0008 per cubic meter. assuming consumption of 25 cubic meters per month) (a) British Columbia Alberta Saskatchewan Manitoba Ontario Quebec New Brunswick Nova Scotia Prince Edward Newfoundland Yukon and Northwest Canada (mean) 0.89 0.00036 per cubic meter and US$0. 1991 Residentialwater supplyonly Residential water supply plus sewage Changein (b) 1986to 1991 (Percent) Commercialwater supply plus sewage (US$ per cubic meter. at US$0.4 +14.17 1.85 0.Table 6.71 0.83/Canadian$.by provinceand class of service.) It appears that water charges for industries have not received the same degree of public scrutiny as for municipalities.8 +23. British Columbia had the highest rates US$0.066 per cubic meter respectively.28 0.8 +31.34 0.143 per cubic meter. with US$0. In 1988 Nova Scotia and Manitoba reported the lowest incremental rates.69 (c) +35. Saskatchewan and Alberta had higher rates of US$0.5 Note: Dollarvaluesare 1991US$ converted.2 Averageprice for municipalwater service.2 +33.61 0.72 0.48 1.0 +46. US$0.67 0.32 0. Policy makers are likely to focus on this issue in the future.65 0.43 0.500 cubic meters per month on a self-supply basis (about 1.1 +34.6 +25.49 0.53 0.09 0. 42 .5 cubic decameters per month). Four jurisdictions used a constant unit charge rate structure in 1988. and one used increasing block rates.4 +40.59 0.42 0.34 0.018.36 0.9 +38.94 0.80 0. Some jurisdictions also offered a partial credit for clean return flows such as occur when water is used for cooling.50 0.45 0.83 0.
26 0.08 n.30 n.58 0. and released at times of the year.60 0.94 0.too few observations.5 -53.a.92 0. makingmarginalprice effectivelyzero.23 0.7 +51. In some cases water is added to hydroelectric storage reservoirs at times of the year.a. This reviewof waterpricing for power generationis based onCanada (1990c).a.22 0.72 0. when it is not useful to other users.74 0.3 (c) 0.98 0.28 0.a.4 +53.27 0.48 0.64 0.60 +63.0 +37.30 n.5 n.55 0.51 Canada (mean) a 0. c Not available.9 +71.70 0. Note: Dollar valuesare 1991US$ convertedat US$0.a.c n.a.17 n.17 n.68 0.43 0.b n. It does not appear that any of the rates charged depends on the storage season and few depend on the specific location of the water source (Environment Canada 1990c).49 b 0.a.64 (b) 0.25 0.30 0.no relevantrates.Table 6.c 1.a.58 0.6 +35.c -71.63 0.b 0.71 0.28 0. b Not available.52 0. Pricing of waterfor electric power generation There also exists in Canada a series of rate structures that apply to the use of water for the generation of electricity by hydroelectric and 2 thermal steam technologies. In many cases power generators pay flat rates or multi22 part tariffs based on some combination of installed or utilized levels of water storage or electric generation capacity.23 0.b 1986-91 (e) +47.62 0. 2 Since almost all of the water used for generation is returned to water courses for the benefit of other users. Many jurisdictions that charge for hydroelectric uses do not charge for thermal uses. Source: Adaptedfrom Tate and Lacelle 1995.3 Unit pricesand marginalpricesfor municipalwater serviceby province1991 (all pricesexpressedin Canadiandollarsper cubic meter) Constant unit charge Averageprice first block Averageprice Marginalpricea Percentage lastblock for residential change in (a) use of 25 cubic meters/month (a) British Columbia Alberta Saskatchewan Manitoba Ontario Quebec New Brunswick Nova Scotia Prince Edward Island Newfoundland Yukon and Northwest Territories 0.63 0.b (d) 0.67 0.83/Canadian$. If 43 . such as late spring.b 0. when it can be used in agriculture.9 +85. such as midwinter.84 0. few specific details will be reported here.15 1.29 0.2 Thirty-sixobservations were excludedsince minimum-use levelswere not met.
Water pricing reforms are Progress Report. . Rising to the Surface:Emerg- . Pricingpolicy reforms for irrigationusers may raise questions 44 Companiesin Canada. BritishColumbia. 1993. . Rates.or locationof-use. again raising interest in using water pricing to allocateresources. 1994. Ottawa. 1 prepared for Stewardship of the Water of British Columbia. Socio-EconomicDivision. Tate and Scharf 1996). 1993.Ottawa. Ottawa: Supply and ServicesCanada. Instead.William O. Water Charges to Agri- based instrumentsto allocate water from surface water sources. Federal Water Policy. Water Charges to Power These piece-meal or sector-by-sector reforms are almost certainto draw attentionto the potential to rationalize water pricing and managementacross sectors and users. Water Charges to Industry (Excluding Hydroelectric Generation) likely to also be used to encourage industrial users to reuse their wastewater (Renzetti and Tate 1994. Fourth Edition. British Columbia Environment. 1989. Environment Canada. Interdepartmental Committee on Water. and Mary Louise McAllister. will for the first time allow market forces to play a direct role in allocating water rights in times of scarcity.Colorado. Federal Water Policy: A groundwatersources. historical pricing practicesthat charge for hydroelectric generation but exempt thermal electric generation may face increased scrutiny.especiallyas some jurisdictions seek to move away from flat rates. 1996. It is also well-documrented water storageregimes that may harm fisheries and other instream uses. Moving to market- Rate Manual. The Water Act. Further pricing policy reforms may be inevitable. Canada. Municipal Water and Waste Water The proposed move to create transferable water entitlements. 1990b. For example. 1988. References There is little evidence so far that Canadians are ready to widely implement relatively sophisticated forms of water charges. 1987.it is likelythat recent trends will continue. 1990c. regulators and users alike will likely draw more heavily on cultural Users in Canada.such as for irrigationusers in Alberta." Background Report No. such as differentialcharges for time-of-use. Water Planning and Management Branch. especially from irrigatorsand industries whose own accesshas becomedeterminedby markets. "GroundwaterManagement. and those who store or draw water for electric generation. Victoria. Quebec. and the increase in the Alberta LegislativeAssembly. Alberta: Queen's Printer.Hull. Edmonton.5). Currentdebatesand future prospects aboutrates beingpaid by those who would draw water from the samesource. there may be increasing pressure to rationalizethese uses and thus to use water prices as a means to allocate water. American Water Works Association. Ottawa: Supply and Services Canada. including the introductionand reform of wastewater charges. 1990a.there is growingcompetitionfor use of the same water at the same time. Water Planning and ManagementBranch. Canadian Water and Wastewater Association.. This will force them to raise a larger proportionof their revenues from users. . and work to improve utilizationof return flows if these become the least-cost sources of supply under a new market-based allocation policy.attempt to reduce conveyance losses. 1991. Indeed. Karvinen. At the same time water agencies will be seeking new ways to finance capital investments and operatingexpensesas subsidiesfrom the federal and provincial governmentsdecline. SocioEconomicDivision. Water Planning and Management Branch. includingmunicipal and industrial users.Ottawa. Manual of Water Supply Practices: Water use of water metering. Denver. SocioEconomicDivision.will put pressureon other aspects of water supply. 1988. . Statues of Alberta 1996 (Chapter W-3. 1988.
1995. Scharf. Ottawa:Minister of Supplyand ServicesCanada. 1996. Centre for ResourceStudies.draft document No." ManitobaRoundtableon Environmentand Economy.Alberta. Lacelle. 30. 45 . Water Usein CanadianIndustry. Renzetti. 1994. Water and Habitat Conservation Branch. Environment Canada. Municipal Water Rates in Canada: Current Practices and Prices. 31." Paper presented at the 1994 Annual Meetings of the Cana dianEconomicsAssociation. Manitoba Provincial Government. Donald M. Tate. and David N. Canadian Wildlife Service.. Social ScienceSeriesNo.. and D. "Provincial Water Policies: Applying the Policies for SustainableDevelopment Our of Water Resources. Ottawa.The University of Calgary. 1991. Tate. 1991.Manitoba. M. Kingston. 1993.ing GroundwaterTrends in Canada.Calgary. Social ScienceSeries No. Steven. Ontario: Queen's University. and Donald M. Winnipeg. Tate. "Water Pricing in Canada. 8. Donald M.June.
* A fee for the cost of purifying water and conveying it to the end user. The charge is based on the polluter-payerprinciple.7 44 42 7 7 100 Ministere l'Environnement. The value added tax is included in the price for water.9 4. Charges for the three main users of waterare describedbelow. and is determinedat the river basin level. * A pollution tax that theoreticallyreflects the cost of environmental externalities.4 5. Table 7. as with other goodsand services. Table 7. de In France. which metered water use and charged for water according to consumption. river basin organizationsare responsible for managing water resources and supplyingwater to users.7 FRANCE Marielle Montginoul Introduction In France water rights are public and nontradable.7 16 13 12 59 100 2. determinedat the level of the river basin.3 37. and nothingmore. hydroelectric power stations use more than half of all abstractedwater. but returnnearly all of it to the watercourses. determined at the local level. a value added tax was levied by the National Fund for the Development of Water Conveyancewith various adjustment and compensation objectives.1990 Withdrawals Billions cubic meters Percent of total Net consumption Billions cubic meters Percent of total Urbanwater Irrigation Industriesnot connectedto a distributionsystem Hydroelectricpower stations Total Source: 6. The concept of setting chargesto reflectthe economicvalue of water started at the end of the nineteenth century with the establishment of distribution companies. Urbanwater For urban water. As demand for urban water steadily grew (by 1-2 percent per year over the 46 .withdrawals. Past experiences Historically.and consumptionby sector. Cities and farms are the largest net consumers of water.4 0. charges for water have been differentiatedby use.4 0.1 presents estimatesof water abstraction and net consumption for different water uses.5 2.1 4. River basin organizations all employ the same water charging structure. which containsfour main components: * A levy that theoretically reflects the economic value of water.1 Water resources. service charges originally reflected the cost of conveying the water. * For drinking water.4 22.
They are responsible for applying the user-pays and polluter-pays principles by means of taxes. Charges were raised to reflect the increased scarcity value of the resource and the costs of purifying water for drinking. Irrigation Farners have paid for irrigationwater ever since large-scale transfer and storage works were first constructed. irrigation works were built throughout the entire country. required towns to balance the water service budgetand notjust the town's global budget by January 1993. subsidies.water charges were based on area irrigated. the pollution tax and the resourcetax. regulations. The steady increasesin water chargeshave stimulated industriesto reduce their water consumptionsignificantly. has been in existencesince 1954. Sincethe beginningof the 1970sregulations for water managementhave been increasinglyrestrictive at the European level.which increasedwater charges to users. In theory. built in 1171 and extended for irrigationin 1235.2) is set to manage water demand and to cover the costs of modifying waterways to cover the costs of infrastructureand to compensate people who are harned as a result of the change. and new sourcesof clean water became increasinglyscarce. Currently. water abstraction for irrigationgrew by 43 percent during 1975-88. depending on local political decisions.water treatmentwas introduced. . * To price water closer to its true economic value. An accounting instruction of November 1992. the tax is set to assure budget balance. Presentwater pricingpractices Water charges in France take different forms. Large-scaleirrigation works were first constructedin the relatively dry regions in the south. and 47 taxes and chargescollectedby the state or other organizationsinvolved in managing and supplyingwater. river water quality used for the abstractionof drinking water. part of a national law. and waterquality of sensitiveecosystems. Farmers pay pollution taxes for water used for cattle.the tax should cover the costs of treating the contaminatedwater. In practice. The resource tax (Table 7. Historically. The National Fund for the Development of Water Conveyance.which is related to the volumeabstracted. 1992 forbids the use of a two-part tariff for drinkingwater. * A consumption(or net withdrawal) component-the differencebetweenthe abstracted volumeand the returnflows. levies. However. To T include costs of environmentalexternalities in prices. As a result. Two types of taxes are used. management of the resource. In 1992a new water bill was adopted.specificto drinking water. The pollutiontax is set to reflect the concentrationand nature of pollutants in industrial and householddischarges.past 100 years). Since 1964 water agencies have also included pollution charges in water bills. Industry Industries connectedto the water distribution network pay the same charges as other users. comprisinga fixed charge per hectare and a volumetriccharge.farmers pay a two-parttariff. EuropeanUnion Directivesset standardsfor drinking water quality.during the 1970s. Regulations Regulationshave been passed to meet three objectives: * To comply with norms of the European Union. The 1964 water law created basin committeesand water agencies. An early exampleis the case of the Saint Julien Canal. but not for water used for crop irrigation. It is comprisedof: * A catchment component. Resourcetaxes were introducedat the same time as the creation of water agencies.which manage water in six French hydrographic basins. The drop in demand is also due to the declineof water-intensiveindustriesin France.and the grantingof concessions. The water law of January 3. Indeedduring the 1980s industrial water use fell by about 20 percent.
This is calculated on the basis of the length of the watercourse made dry as a result of the diversion. The second component is a 48 . Mediterranean and Corsican water basins) (1994 US$) Urbana Catchment Consumption Drinking water' Total 908 280 4.000 cubic meters from groundwaterwater sources.296 5.180 Industry' 908 13 n.a. the Canal de Provence Company.000cubicmeters from groundwater Provenceto sprayirrigate50 hectares. or tariff type (fixed-rated. and season of use. Thus. b City in water-abundant zone I withdrawing 200. mode of management. Al- though they benefit from advantages generally reserved for state-owned enterprises (such as the access to public funds). nature of the demand (year-round or seasonal only. Sale of untreatedwater: The case of the Canal de ProvenceCompany Regional development companies (societ6 d'amenagement regional) were created in France between 1955 and 1960 under the auspices of the Ministry of Agriculture to promote agricultural development. Table 7. distance from water source and pumping costs.027 per (0. sets water charges to fully cover longterm incremental costs. Canal de Provence Company differentiates its rates according to category of user.180 Urbanb 908 190 4. two-part. d Irrigatorswithdrawing 200. An example of charges set by a regional development company.a. location.0031 per (0. proportional.a. is not applicable.0065 per cubic meter) cubic meter) cubic meter) cubic meter) cubic meter) a Southwestern town withdrawing 200. so it difficult to calculate average prices. c Industrial establishmentof Franche-Comte (zone 1) pumping200. in southeast France.309 (0. Current water charges Water charges vary for individual users. 5. The fixed rate consumption tax includes a water allowance of 100 cubic meters for each cubic meter per hour subscribed for irrigation water. is discussed below.000cubicmetersfrom groundwatersources.a. and its importance for drainage.2 The resource tax from Rh6ne-Mediterranee-Corse Water Agency (covering Rhone Valley. Irrigationd 227 401 n. and others).278 922 628 1.0047 per (0. which sells untreated bulk water.000cubicmeters from groundwater sources. Irrigatione 908 401 n. they are private companies required to balance their budgets. Charges for water for normal use have three components. * A materials extraction component. in f Wateragencieslevy a separatetax on drinkingwater in additionto taxes for catchmentand consumption. e Irrigatorsdiverting200. Water charges vary according to use.0252per (0. which is based on the tonnage of extracted alluvial materials. n.000cubicmetersin Provenceto sprayirrigate50 hectares. The first consists of either an annual tax proportional to the rate of outflow diverted by the consumer or an inclusive fixed rate consumption tax.* A water diversion component. peak period or security only). These companies currently sell bulk water to irrigators and others.
with charges ranging from US$0. However.39per cubicmeter.the chargesranged in from zero to US$4. For example.75 per cubic meter (with a standard deviation of US$0. The Conso 2000 (1995) survey of over 1. Chargesvary with river basin. The local body may manage Urban water.000 inhabitants. Seineet-Marne had the largest variations charges of any department.51 (with a standard deviation of US$0.11 per cubic meter.22 per cubic meters. Average water prices have increasedrapidly sincethe beginningof the 1990s due to the promulgationof new national and European regulations. However.and large-size cites. 49 . * Urban:US$0.4. Water charges increased more in large cities than other settlements between 1990 and 1994. Water charges in the countryside are 8 percent less than in towns (the standard deviation in charges is also higher in the countryside). The Ministry of Agriculture. According to the French nationalconsumercouncil. charges grew faster in small towns between 1992-1994. described in Table 7. In 1993 consumers paid an average US$0. The third component is a supplementary pumping tax. Geographicaldisparity.41per cubic meter.93.57 per cubic meter in townswith less than 500 residents. Water tariffs for different uses US$2. The results by river basin are presentedin Table 7.56 in 1995.200 towns found that water charges averaged US$1. The national average was US$2.volumetric charge. Average charges however mask considerable variationin chargesto differentusers. Type of service management. covering the cost of fuel when the company is requiredto pump waterto supply its customers.in 1995chargeswere 30 percent higher when water was managed by private companies rather than local authorities. This is partly because private water companies deliver higher quality service.55 per cubic meter in 1990to US$2. * Industry:US$0.34in the Departmentof Essonne. Charges for purifying drinking water and treating wastewater are still low.Food and Fisheriesestimatedthat in 1994 in rural towns (with fewer than 2. Local administrativebodies (the mayor or the president of union towns) are responsible for drinking water purification. According to Boistard (1993). they may raise rates at any time.36per cubic meter.and US$3.31 per cubic meter for bulk water. * Nonagriculturalirrigation (gardens. In constant dollars. This was comprisedof different chargesfor different uses: * Agricultural irrigation: US$0.84) with delegated management. The board of directors of the Canal de Provence Company reduced water rates by 50 percent in 75.05per cubic meter. and have maintained the lower prices. This can be explainedby the low level of investmentin these activities.21to US$4.62 per cubicmeter in Paris to this responsibilitydirectly or may delegate it to private enterprises. data collectedin 1994by a consumerassociation show inconsistencies.the average charge with direct managementwas US$1.3. The rate of increase slowedin 1995.71).from US$1. Charges for drinking water in France is comprised of different elements.000 inhabitants). In Ile-de-France in 1992 prices ranged from US$1. Type and size of town. and averaged US$ 0. and US$2.00 per cubic meter in towns with more than 200. Nevertheless. which is based on volume used and time of year (charges are higher for water used between May 15 and September 14 than during other times of the year). Water charges are generally higher in small rural towns than in medium.36per cubicmeter. the lack of informationon total costs makes it difficult to separateout this item from total costs. average charges (including taxes) have increased by 65 percent from 1990 to 1995. in RhoneM6diterranee-Corse 1992. lawns): US$0.
Table 7.14 1. drip. Information on irrigation water charges in France is not readily available. Moreover.0 33.5 46.01 2. industries are required to pay water agency taxes depending on the quantity of water abstracted and consumed.45 Delegatedmanagement 2.4 Drinking water price according to the management. 50 . de personalcommunication.5 100 100 SyndicatProfessionnel Entreprises Servicesd'Eau et d'Assainissement. Figure 7. Table 7. Industrial water.17 0. In either case. and the quantity and type of pollutants discharged. than for water delivered by water agencies. Industries connected to the urban water distribution network pay the same for water as domestic consumers. Estimates of irrigation water charges are presented in Table 7.88 2.5. 1992-94 (percent) 35 17 41 7 Wateragencyand NationalFund for the Development WaterConveyance of taxes Drinkingwater distributionservice Wastewatertreatmnent Taxes Total Source: 0.56 15.40 1. others). Thus. industry benefits from important discounts.70 1.91 1. Irrigation water charges depend on the water management mode. Charges are higher for water conveyed to the field by a wholesaler like a regional development company or a farmer's group cultivating irrigated lands (association syndicale autorisee).40 2. companies pay highly variable water taxes. la Pecheet de l'Alimentation. 1994 (US$ per cubic meter) Riverbasin Adour Garonne Artois Picardie LoireBretagne Rhin Meuse RhoneMediterranee Corse SeineNormandie Directmanagement 1. Irrigation water.1 presents water management modes.65 2. charges are higher when collective networks are used to convey water to the fields than when regional development companies convey water from rivers.45 2.85 0. such as a regional development company. des de cited in Retowsky1995.29 1. as industry consumes more water than households and water pricing is regressive (decreasing block pricing).86 1.14 2. Industries pay less for untreated water delivered by a bulk water distributor. They may also supply water to themselves by pumping directly from an aquifer or river.3 Urban water prices (1995 US$) Elements US$ per cubicmeter Percent Contribution overall to price increases. But.89 Source:Ministerede l'Agriculture.0 5. For this discussion charges are estimated using information on charges for other uses and data on irrigation such as the technology in use (sprinkler.
... Farmers also have a choice between fixed rate withdrawal charges or volume-based water charges: volume-based charges are generally 51 . If these were included... ...002 per cubic meter SCP (1993) US$0. The water agency sets resource charges on the basis of river basin and the location of user..... regionaldevelopment companies I untreatedwater .5 Irrigation water charges by type of water management Regionaldevelopment companies Collective network Resupplied rivers Farmersgroups Individualirrigation Withregional development companies CACG (1989) US$0....171per cubicmeter CACG(1990) US$0...022per cubicmeter Tarn (1994) US$0...058US$0...1 Irrigation water handling in France Ministryof Agriculture .. irrigationwater sold to companies l (drinkingwater) collectivenetwork resupplied river farmers' farmer associations I farmer farmers' fanner associations I farmer (withoutintermediary) i farmers' associations I farmer farmer Table 7.049US$0...081 per cubicmeter Alone Wells NonResupplied resupplied rivers rivers Water agency charge Water agency charge Charente (1997) US$0..118per cubicmeteron average) Water agency charge SCP: BRL: CACG: Canal de ProvanceCompany Bas-RhoneLanguedocCompany Amenagement Coteauxde GascogneCompany des Water charges shown here do not include pumping costs.... the per meter cost of water from individual systems would likely exceed that of water from collective systems.. ..18per cubicmeter (US$0...150per cubicmeter BRL (1993): US$0.......... .....Figure 7.
L. D. Ministere de l'Environnement." 52 .002-0.8 percent between 1992 and 1995. Conso 2000.011-0. While prices increased by 7. 1994. Pillet B. and T. Approche d'un Prix de la qualitede l'Eau et de la Desserte.012 none not known notknown References Boistard.0045 0." Thesede doctorat. Nicolazo J.1995(US$ per cubic meter) AdourGaronne Groundwater 0. charges are set on the basis of the principles that users should pay for their services and polluters should pay for the costs of wastewatertreatment or environmentaldamage. Charges collectedby wateragencies in different regions of the country are presented in Table 7. "Qualite et Prix des Services Publics de Distributiond'Eau Potable.006-0.Paris.). Johanetand Sons. Loi n° 92-3 janvier 1992 sur lt eau.041 LoireBretagne 0. "Note sur la Tarification du Bien et ServiceAEP: Logique et Structure.011 none (fixed rate) Non-resupplied rivers 0. 1992.0045 ArtoisPicardie 0. Water charges could thus reach US$2. Johanet et Ses Fils (eds. Pavard L. Currentdebatesand futureprospects In France charges for drinking water have increased significantlyover the last five years. Les Agences de l'Eau. prices still vary considerablyamong users." Mai." Agence de I'Eau Artois-Picardie.006-0.012 none 0. 1995. JORF du 4 janvier. Rieu. increased costs of water purification. Industrial water prices are likely to follow the same path. Ecole Nationale des Ponts et Chussees. 4eme edition.003 not known Resupplied rivers 0. In P.6 Waterchargescollectedbywater agencies. Table 7. 1992.017 0.0045 notknown 0. But chargesfor irrigationwater still do not fully incorporate these principles: farrners still pay less than industrialor domesticwaterusers. 1995.Normandie Corse 0. It is also uncertain that charges are high enough to truly encourageconsumersto conserve.Groupe 2.less per cubic meter to encourage farmers to install meters. 1995." Economie et Statistique 258-259:95-104. "Gestion Durable des Eaux Souterraines.006-0.and the need for water agencies to fully cover their costs.] Paoli. it is anticipatedthat they will increase by only 4.004-0. Paris: P.001-0.04 0.7 percent between 1995and 1998. These increasesare required to pay for the increasingly stringent European drinking water standards.012 Rhin-Meuse Rh6neSeineMdditerranee. It is expectedthat industrieswill respond by adopting measuresand technologiesto save and reuse water. Journal Officiel de la Republique Francaise. In general. 1993.92 per cubic meter by 1998. "La Situation de l'Eau en France. Irrigationwater chargesare also likely to rise.P. Drinkingwater prices are likely to increase slowly between 1995 and 1998. "Enquete Eau : Prix et Qualitdde l'Eau.6. Paris.Paris. Farmers are likely to gradually install meters and pay for water on the basis of consumption. Yet.
" Revue de l'Agence de l'Eau Adour-Garonne 3-8. "Evolution du Rapport Prix de l'Eau per ServicesRendus. 59: 53 . Vacher J. Paris. 1995. "Le prix de l'Eau pour l'UsagerDomestiquedans le Bassin AdourGaronne. Retkowsky.P.Centre Regional de la Prodcuvite et des EtudesEconomiques." Ministere de l'Environnement.Y. 1994.Novembre.Montpellier.
Table 8. However. This will require radical changes in the institutions -water policy. However India's current water charge system originated with the British colonial administration (Vani 1991. and season). the continuity and dependability of irrigation services. The British treated irrigation projects as commercial ventures. the benefits of water in terms of incremental yield. Policymakers lowered the internal rate of return to 3. The authorities periodically revised the internal rate of return (and water rates). quantity of water used (determined indirectly by area. based very closely on this post-colonial model. generate employment. Although policymakers tried twice to use a volume-based charging system (1854 and 1917 for the Ganga Canal).1 shows the overall and crop-specific canal water rates. and to 6 percent after 1921 (Sangal 1991). to 5 percent during 1919-1921. Today's water charge system is. Water pricing policy implemented within a carefully designed institutional framework would be an effective way to achieve water use efficiency. After independence attitudes towards water charges changed. and set water rates on the basis of an internal rate of return commensurate with the rate prevailing in the London money market. 54 . Maloney and Raju 1994).governing water supply development.8 INDIA R Maria Saleth Introduction In India. from the 4 percent prevailing before 1919. Because the minimum benefit-cost ratio for project acceptability was low . states and provinces have jurisdiction over water management and have the responsibility of flxing water rates. and 1. water resource management is emerging as one of the major issues facing the country. and use.9 percent in 1949.050 cubic kilometers in 2025. Authorities viewed irrigation projects as routes to development rather than purely commercial ventures. doing so proved impractical with the technology available at the time. and increase food security. and will likely to exceed 750 cubic kilometers in 2000. However authorities continued using the area/crop/season based method of determining water charges. All states except the seven northeastern states impose charges for canal water either directly or indirectly. crop.water rates were also low. Water rates vary widely both across and within states. rather than by developing new supplies. and irrigation system costs (Government of India 1972). and Tamil Nadu. In the long-run the gap between supply and demand must be closed by increasing water-use efficiency. Past experience Water charges in the form of land revenue were common before British rule in the kingdoms of Andhra Pradesh.5 for projects elsewhere . distribution. then substituted the benefit-cost ratio criterion for project selection in 1958. important to augment income. They differentiated the area-based rates by crop and season to account for variations in water demand. Water consumption has been rising rapidly: consumption was 540 cubic kilometers in 1985. water law.0 for projects in drought-prone areas and 1. the amount of water available from storage and groundwater is not likely to exceed 600 cubic kilometers by 2000 (Central Water Commission 1995).1. Karnataka. and working expenses. Among the criteria for setting rates were farmers' capacity to pay (as determined by yield). Present water pricing practices Irrigation water charges According to the Indian constitution. and water administration. The charges were set to cover all costs and generate a return on capital. Instead the British decided to charge for water on the basis of irrigated area.
77 for dry lands (Government India 1992).0. 2 55 . and Maharashtra they are substantially higher(Sangal 1991). add fees for irrigation cess. 20 per hectare for a flow irrigation system and Rs.In West Bengal water rates vary only by season and in Kerala rates are based only on irrigatedarea.11 per hectare). Orissa. category of user (private parties. but in Goa. Bihar chargesdifferentrates for long leases(Rs. In Gujarat." Demand-ratesapply to outof-turn single waterings and agreement-rates applyto regular irrigationservice.15 per hectare).Gujarat.but volumetricrates are used for cooperative and state-owned lift systems. a cooperative. 25 per hectare) (Rath and Mitra 1989). 400 per hectare).41-54.80 for 10 cubic lifts metersbut waterfrom cooperativelifts costs only Rs. but in TamilNadu fees amount to 37-75 percent of water rates. Governmentof India 1992). US$ = Rs. and Uttar Pradesh private lift ratesare one-halfto two-thirdscheaperthan state lift rates.Punjab. Bihar.65(1989-90).rates per of cubic meter of water are higher for state-owned lifts than for cooperativelifts. 51. Two states imposebettermentlevies on irrigated land: Tamil Nadu (45 percent of land revenue)and WestBengal (Rs. Maharashtra and Madhya Pradesh also distinguish between "demand-rates" and "agreement-rates. 74. government lift schemes). Demand-rates are doubleagreement-rates (Government India of 1992). Haryanainto three. 1.or the state. In Gujarat. Volumetricrates applyprinarily to sugar and rice cooperatives and state-owned lift irrigation schemes in Gujarat and Maharashtra (Government India 1992).Karnataka. The rates for water from nonperennial systems are about one-half those for perennial canals. 35-90 per hectare for a single watering. Othercharges Most states impose other levies on canal water in additionto watercharges(CentralWater Commission1988. In all other statesthe area-based water rates are highly differentiated only by not crop and season but also by categoryof project.and Maharashtra. This is because rates for state systems include the costs of operation and maintenance. Notably. Charges for lift irrigation are further refined depending on whether the owner is private. Keralaand Fourstates. In Gujarat water from state-owned costsRs.24-19. 10 for a lift irrigation system).40-380 per hectare depending upon crops) and an employment guarantee scheme (Rs. 89. ratesvary betweenRs. depending on crop and season. and Maharashtrairrigation cess equals 20 percent of the water rates. and Madhya Pradesh have separate rate structuresfor perennialand nonperennialcanals. Only Madhya Pradeshhas a crop cess (Rs. Waterrates alsodifferdependingon whether irrigationis flow or lift.10-Rs. For examplein TamilNadu assessments wet lands for range between Rs. cooperatives.and TamilNadu are based on assessmentsof landrevenue. Governmentof India 1992). Himachal Pradesh. 0. irrigation type (flow or lift).25.which are higher for irrigated than rainfed lands.seasonalleases(Rs. Water chargesfor projects built prior to British administrationin Andhra Pradesh. In Maharashtra. Area-based ratesapplyto privatelift irrigationsystems. Tamil Nadu. Andhra Pradesh has divided its canals into two water rate categories.45per hectare).23 of The variationsin water rates across project categoriesreflectthe dependability continuity and of irrigation services. 0. Maharashtracharges range betweenRs. 1991. 16. InterestinglyMaharashtra uses the revenue it collectsto financeprimaryeducation(Rs. Haryana.30 dependingon the season(Maloney and Raju 1994). and other factors (Sangal 1991. and a single watering (Rs. 0. This exchangerate applies to all waterrates reportedin the text unless otherwise specified.36 per hectare compared with Rs. Generally. and TamilNadu five. 7.
3 5.1991.2 1.7 2. well capacity. They are highest in Gujarat.770 3.6 1986 1983 1981 1975 1985 1989 1990 1981 1974 1982 1962 1983 1977 Andra Pradesh Bihar Gujarat Haryana Karnataka Maharashtra Madya Pradesh Orissa Punjab Rajasthan Tamil Nadu Utter Pradesh West Bengal 99-222 30-158 40-830 17-99 37-556 65-1.2 7. 15 per hectare (US$ = Rs. n.1 3.7 16.812 1.169 4.364 1.6 3.407 714 3.1 0.97). Tamil Nadu. 110 61 n.Table 8.a. and generally reflect factors such as water availability. per hectare) Paddy Wheat Sugarcane (Rs. and income from miscellaneous sources averaged Rs.a. Chargesfor groundwaterfor irrigation Charges for groundwater for irrigation from state or public tubewells are set according to the same principles as charges for canal water: charges must cover operation and maintenance costs. 16. As percent of benefits As percent of working expenses 1. Income from nonirrigation sources tripled between 1976 and 1988. Together these two states accounted for over 70 percent of total nonirrigation income (Central Water Commission 1990).3 a Waterbenefitsare computedas the incremental yieldfrom irrigatedlandscomparedwith unirrigatedlands. 5 per hectare.a. Of course the agreements may also reflect personal relationships and local customs.0 10.1 12. Nonirrigation related revenue accounted for nearly one-third of total canal project revenue during 1989-90 (Government of India 1992).555 2. although some contracts are by season.000 15-297 6-185 14-81 20-143 6-65 7-327 74-593 222 89 110 74 99 n. and Uttar Pradesh. n. 36 per hour. and type of pumpset (diesel or electric). 29 74 n.4 3.a. By contrast charges for water from private wells are set through negotiations between buyers and sellers.1 Canalwater rates for irrigationin majorstatesof India.9 0. selling timber.6 3. 12.457 27 33 139 70 58 90 140 66 53 93 9 111 7 0. 4. 49 143 125 na. and other activities.1 5. which 56 . 143 n.639 3.a.7 1.a. 30 million (US$ = Rs. Charges for groundwater are usually by the hour. Charges for nonirrigation purposes Canal projects also earn income by selling water to domestic and industrial users.6 4.2 25. crop patterns.3 9. 59 40 49 n.a.405 4. rising from Rs.a. ranging between Rs. n.6 10. 370 158 830 99 556 750 n. The increase in nonirrigation receipts is most pronounced in Maharashtra (nonirrigation income rose 11 times) and Madhya Pradesh (6 times).528 1. Source: Govermnentof India (1992)and CentralWaterConmnission 1990.45) to Rs.a.and 1995. During 1989-90 income from nonirrigation-related water sales averaged Rs. leasing fishing rights.per hectare) Rs.2 46.a.a. 5. n.370 2.a. n.8 2. This reflects the growing demand for irrigation water from other sectors. Groundwater charges are lowest in Andhra Pradesh. 1989-90 State Range Crop-specific rates Water benefitsa Gross receipts per hectare Year rates last revised (Rs. 76 n. 62 237 n.735 5.0 3.3 35. 99 million (US$ = Rs.65).a.2 2.
Domestic and industrial water charges Charges for domestic and industrial water are either subsidized or set to recover costs.2 Domestic and industrial water rates in Delhi. Madras.20 20. people are eager to sell water.65(1990). Water theft. and region (urban and rural).00 Industrial 0-50 50-100 > 100 5. water charges for nonirrigation purposes are differentiated according to purpose (domestic. and water table decline.00 a Thereis a surchargeat 30 percentfor Delhiand 20 percentfor Madras. Asopa and Dholakia 1983). However. 3 per cubic meter per month for domestic users to Rs. 34. and corruption contribute to poor revenue collection experience. Broadly.hotels. either because they are defective or have been vandalized (50-80 percent of the meters in some towns do not work). The price of electricity strongly influences the attractiveness of extracting and selling groundwater. as in urban slums and rural areas.00b 2. However meters often do not work properly.00 6.00 0. Seasonal payments are in the form of water rent.00 7.Ob Nondomestic' 0-50 > 50 3.00 200.Rs. commercial. b Fixedminimumrates. others. and vary from Rs. Urban water supply enterprises (in all major cities) or local bodies like municipalities and panchayats (in other cities and rural areas) set water charges. Households without meters. Where electricity rates are low and charges are flat rate. and volumetric pricing seems to be more in theory than in reality. 16. so users pay for what they use. 20-60 for 57 .50 10.hospitals.200 200. Table 8.00 2.00 7. water charges are set on a bulk rate basis. 12.47 (1992). In Bombay.50 3.50 > 50 0. per Hyderabad(1992) Cubic meters Rs. offices. and water to industry to support industrial development.00 0-15 15-25 > 50 30. illegal tapping. ranging between Rs. and 50-66 percent of output in Gujarat (Janakarajan 1993. and are equivalent to 33 percent of the irrigator's crop output in Tamil Nadu. and c Includesshops. which are subject to approval by state governments. per Madras(1990) Cubic meters per Rs.00 0-50 50-100 > 100 Per cubic meter 3.70 0-50 > 50 1.54 (1995). 24.householdindustries.00 4. 25-45 per hour (US$ = Rs. The gov-emment supplies drinking water as part of its basic needs program. income group.00b 7. Most urban water is metered.97) (Shah 1993). and industrial).00 5.50 8.and Rs.has better organized and competitive groundwater markets. and Hyderabad Delhi(1995) Cubic meters Rs.00 5. Eventually they lead to higher pumping costs.00 100. pay a fixed charge for private connections.500 >500 5. low power rates also encourages aquifer depletion. per per month cubic metere month cubicmetee per month cubic meter Domestic 0-20 >20 0.35 0. Note: US$= Rs.
34. cinemas. 26. In Madras . actual receipts fall short of full operation and maintenance costs. 200-250 per hectare to cover operation and maintenance expenses. since funds are not available to undertake even routine maintenance of canal and drainage works. They charge between Rs. who pay according to area irrigated.commercial and industrial users (US$ = Rs. Thus by 1989-90 operating losses had accumulated to Present water pricing policy: difficultiesand problems The area-based water charge method for irrigation is quite complicated to administer in India. Punjab. or through legal channels as in Andhra Pradesh. this fee equals 2 percent of water rates. The water charge system also contains no incentives which would lead to the efficient a serious problem. In Bihar and Rajasthan receipts do not cover even the And the administrative cost of collection. Kerala. All water charges are also subject to a surcharge.private groups are active in supplying water especially for hotels. so resist revisions either politically. as in Gujarat and Karnataka. The private suppliers transport water by tanker truck.2 presents water rates in Delhi. since in most states the area-based rates are differentiated by many factors. and linking rate increases to improvements in irrigation services would help to win farmers' support for rate changes. which have had considerable external assistance to develop urban water supply projects. While land productivity and crop prices have almost doubled since the 1960s. Karnataka. have higher water charges than other cities. private water companies have been pmrviding an increasingly large proportion of the city's water in recent years. These two cities periodically review and revise their water rates to assure that rates cover all cash-based costs. Uttar Pradesh. The complexity of the system provides vast scope for discretion in Furthermore. and West Bengal the irrigation department carries out the assessments 58 about Rs. have absolutely no reason to conserve water. and their water suppliers perform relatively well financially. For example. or a department not directly linked to irrigation performs both tasks. 300 and Rs. but the revenue department collects the fees.19). No wonder then that irrigation projects sometimes turn out to be nonviable. The farmer's lobby is politically strong. Table 8. Farmers do not participate in setting rates. In Andhra Pradesh. Inadequate cost recovery also adversely affects irrigation system performance. assessing -water charges. administration is inefficient: either different departments carry out the functions of assessment and collection. Collections would need to be at least Rs. In addition households pay a water benefit tax that comprises from 6-9 percent of the ratable value of residential properties. . In Haryana.a coastal city with serious water scarcity problems (the groundwater is salty and unusable for drinking) . water rates continue to remain low and outdated (Central Water Commission 1989. 20-70 per hectare (Government of India 1989). Madras. and it lacks incentives to encourage efficient water use in the face of escalating water scarcity. In nearly all states. 16. and the cost per hectare of constructing new irrigation systems has risen almost 20 times. commercial establishments. 20 billion (US$ = Rs. In no Indian state does the water rate structure bear any relationship to the costs of producing bulk water nor its scarcity value. 1992). allocation of water Farmers. Orissa and Tamil Nadu the revenue department performs both functions.65) (Government of India. and Hyderabad. Involving farmers in the rate-setting process. and upper income households. 800 (US$ = Rs. recovery rate is fast declining: it has fallen from 64 percent in 1974-75 to 8 percent in 1988-89 (Central Water Commission 1995). Charges for industrial water are higher than for domestic water and include fees for wastewater discharge as required under the Water Cess Act (Prevention and Control of Pollution) of 1977. yet in 1989-90 collections amounted to just Rs. The most serious problems with India's irrigation charge system are: charges are too low. Government of India 1992). Although they still supply a relatively small proportion of total water supply. Madras and Hyderabad. in Delhi.54) per tank load (which comprises about 5-8 cubic meters) depending on the season.
35. The Union Ministry of Water Resources has recently appointed a committee to study the legal. the irrigationdepartmentwill buy water at an agreed price for distribution to farmers. Thefocus of the debateon waterchargesremains on recoveringcosts rather than promoting water use efficiency. Policymakers are also considering privatizing canal irrigation.Indeed the rate structure provides incentives to maximize water per unit of output instead of maximizing output per unit of water.let alonereflectthe resourcevalue of canal water. Under the new scheme. As long as rates are lower than the marginalbenefits of applying water. The state will allot the projects -with investments between Rs. Overthe past twentyyears expert groups. To reform the irrigation sector. as for the Narmada project in have discussed changing both the level of irrigation water charges and the method of assessingthem. 10 million-Rs. Therefore groundwater charges do not serve as a signal of the real value of the resource. This reportnot only emphasizedthe need to recover more of the costs of water supply 59 Gujarat and the Upper Krishna project in Karnataka. economic. to build/own/transfer the irrigation department.40 billion .54). Both forms of private sectorparticipation are likelyto lead to greaterfinancialdisciplinein constructing operatingirnigation and projects. but also recommends eventually moving to a volume-based rate structure and a group-based distribution system for canal water. The state of Maharashtra has already invited private bids to manage 52 irrigation projects valued at Rs. also contributedto the debate (Governmentof India. The Vaidyanathan Committee report.to private investors to Policymakers Indiahavelong debatedwain ter charge issues. The report recommends implementing a two-part tariff comprising a flat annual fee of Rs. including the Irrigation Commission (1972). the report recommends a three phase program: simplification of existing rates to involve just area and season. which deals with irrigation water pricing. 1992). and waterlogging and soil salinity problems have become serious threats in many irrigated areas in India. Charges for groundwater are far higher and more marketoriented than canal water rates. Groundwater development and sales are very profitable in Gujarat and Tamil Nadu. moving to volumetric pricing and group-based distribution. but this is not true everywhere in India. 34. In addition. and there are no insti- . Groundwater is used much more efficiently than canal water. and successive Finance Commissions or to build/own/manage. For example. Recently. due in part to private sector participation in developing the resources and in part to costs of development. private funding is being mobilized to finance new irrigation projects. user groups would have a central roles in both fee collection and system maintenance. This is especially likely to be true where electricity tariffs are low and flat-rate. 50 per hectare and a volumetric charge.which advocatesadoptinga marketbased approach to national economic management. and are generally sufficient to fully cover operating costs. and technical questions of privatizing public irrigation projects and to identify projects that could be given to the private sector to manage. However groundwater charges are rarely high enough to cover capital costs or resource costs. 150 billion (US$ = Rs. In the latter case. Current debates and future prospects (operation and maintenance costs plus one percent each of capital cost and depreciation allowance). Authoritiesagree that water rates must be revisedperiodicallyto generatethe revenue needed to cover the full operation and maintenancecosts and a portion of the capital costs. In some places misuse and waste of canal water is raising the groundwater table. the National Commission on Agriculture (1976). The changes in water chargescurrentlybeing consideredwill not even equalize the prices of canal water and groundwater. The higher water rates proposedby the VaidyanathanCommittee would still comprise only about6 percentof the gross value of output. and irrigation system modification for better water control and distribution.the debatehas becomemore focPolused due to the releaseof the New Economic icy of 1991. in Uttar Pradesh the average income from water sales covers less than 60 percent of pumpset operation and maintenance costs (Shankar 1992).
1994. "Economic and Social Implications of Groundwater Irrigation: Some Evidence from South India. Managing Irrigation Together: Practice and Policy in India. Agricultural and Natural Resources Department. 1991." New Delhi. Summary and Recommendations.. New Delhi: Segment Books. Kripa. D. If a water pricing system is to be used to encourage efficiency and still meet equity concerns. . "Water Related Statistics. "Efficiency and Equity Considerations in Pricing and AlPolicy location of Irrigation Water:' Research Working Paper 1460." Vol. Review of Agriculture. "Financial aspects of Irrigation and Multi-purpose River Valley Projects. R. M. 1972. 1989. Groundwater Markets and Irrigation Development. 1990. V. N.tutional mechanisms to limit water withdrawals' such as quotas. 1992." (Chairman: A. New Delhi: Sage Publications. Sangal. Future water resource management in India depends on how quickly and imaginatively institutional reforms are implemented to move India towards a more market-based approach to water management. Yacov. C. Irrigation sector reform. 29(39): A147-A155. Vaidyanathan). 1983. and the formation of more locally managed water rights systems would be the major elements of the new water institution. H. . Washington. M. "Rates for Surface Water in India. Tushaar. P. I. Saleth. Vani. Mitra. Janakarajan. Dynamics of Groundwater Irrigation. "Report of the Irrigation Commission. N. World Bank. New Delhi. Raju. "Economics of Irrigation in Water-Scarce Regions. and Ariel Dinar. "Pricing of Irrigation Water in India. 1992." Indian Journal ofAgricultural Economics 48 (1): 65-75. Planning Commission. S. Tsur. C. S. "Role of Panchayat Institutions in Irrigation Management:' Indian Law Institute. and Policy:' Economic and Political Weekly. 1995. "Report of the Working Group on Major and Medium Irrigation Programmes for the Eighth Plan. 60 . 1993. References Asopa. Central Water Commission. Shankar. 1995. neither volumetric charges nor group-based distribution would improve incentives enough to encourage true water use efficiency (Saleth 1994). 1992. "Report of the Committee on Pricing Irrigation Water. it must be a part of an institutional framework centered on a system of water quotas (Tsur and Dinar 1995). 1989. Shah. New Delhi. Maloney. New Delhi. and K." Artha Vignani31 (1). Law. Dholakia.. Government of India. 1994. increased private farmer and corporate involvement. Bombay: Oxford University Press." New Delhi. "An Overview of Water Rates for Surface Irrigation. Rath. S. 1991. 1993." New Delhi. V." Planning Commission." New Delhi. Centre for Management in Agriculture." New Delhi. "Performance Appraisal of Gujarat Water Resources Development. "Towards a New Water Institution: Economics." Economic and Political Weekly 26 (46): 2645-51. and B. Indian Institute of Management. K. and A. Ahmedabad. 1988.
Tier pricing was introduced between 1974-76. farmers have been transferring water quotas since the mid-1980s.9 ISRAEL Dan Yaron Introduction There are three categories of water in Israel: fresh water from natural sources. Thus water is allocated through a mixture of political and institutional means. US$0. Tier pricing was again implemented in 1989 and continues in use today. which it uses to subsidize water from high-cost sources. and US$0. regardless of the cost of supplying water. It is a system that has evolved to meet egalitarian and efficiency objectives. To avoid the punitive charges. Present water pricing practices Agricultural water pricing By the beginning of the 1970s pressure to modify the traditional system of allocating water was growing. were able to keep them. farms which had quotas before the new system was established. Mekorot. This system has not changed since its establishment. Yet. The government does however impose a tax on water from low-cost sources. tier pricing reduced water consumption by 11 percent. Cities and towns had priority in water allocations over farms.26 per cubic meter for the final 20 percent (all prices as of autumn 1995). Water charges depend on use: farmers pay the lowest charges. prevents socially undesirable outcomes that might occur if water 61 . This chapter focuses mainly on fresh and brackish water. it is believed. Allocating some water through quotas. For water from Mekorot farmers pay US$0.responsible for about 80 percent of Israel's agricultural output . (The water law is based on the philosophy that water be allocated to users for their own use only. The Water Commissioner sets water charges for water delivered by the national water company. with markets operating at the margin. which varied according to type of farm and the region.) Still. Noncooperative private farms received water quotas according to area irrigated and the prevailing irrigation norms. for which the allocation and pricing rules are clearly defined. Cooperative agricultural settlements (kibbutz and moshav) . According to Dlayahu and Avivi (1976). farmers generally obtain additional water through interfarm water transfers (usually indirectly through water supply companies). and reclaimed sewage (which has been developed in recent years). The restriction on transferring water quotas from farms to other sectors has led to large inefficiencies.19 per cubic meter for the second 30 percent. and markets. there have been large changes in farming over the past thirty years. despite the law. industries pay higher charges. Charges do not depend on location: users in all parts of the country face the same charges. Private and cooperative water suppliers set prices without government interference. Farmers using more water than the quota provides pay much more for the excess (Water Commission various years a). However. brackish water from natural sources. and households pay the most. but abandoned in 1977 due to farmers' political pressures. including the spread of greenhouse vegetable and flower production. Past experiences According to Israeli water law of 1959 the nation owns all water from natural sources and the Water Commissioner controls its use. In the early 1960s a system of water allocations was developed.received water quotas according to number of agricultural units on the settlement and the quotas per unit.16 per cubic meter for the first 50 percent of their water quota.
In 1989-1990 cities and towns earned on average profits 26 percent above their costs. municipalities often profit from their water supply services.20 in Rehovot. The Finance Committee of the Israeli parliament (Kneset). Urban and industrial water pricing For water from Mekorot. Of course. it is now important to include the lowquality water in the quotas as a substitute for high-quality water wherever possible. industries pay US$0. with the growing demand for high-quality water by towns and cities and its growing scarcity. the wealthier the community the higher the profit margin (Eckstein and Rozovitz 1993). But if all waterwere priced at marginalcost. while kibbutz and moshav farms needed 11-24 percent less (Water Commission various years b). US$0. 62 . and disposal which varies by location. Consumers also pay a municipal tax for wastewater collection. deflated by the rate of substitution.withoutincurringadditionaltransactions costs. final consumers do face tiered charges. quotas to farms cannot simply be canceled.40 in Tel Aviv. Raanana's was 80 percent. Neither industries nor municipalities face tiered charges. and US$1. and US$0. it is time to revise the current system of allocating water. brackish water sources. between 1988-1990 cities and towns required 17-25 percent more water than quotas provided. However. this price is generally set high enough to cover the municipality's cost of operations in addition to its wholesale water costs. a result of the Water Commission's desire to encourage private investment in the development of low-quality water sources.26 per cubic meter. Water from these sources is not included in the quotas.were allocated purely through markets.48 per cubic meter in Haifa. Pricing of low-quality water Farmers and farmer organizations have developed low-quality. treatment.47 per cubic meter for consumption above this level. consumers pay US$0. However.18 in Kfar-Sava (Water Commission various years a).the marginalpricewater shouldequal its marginalcost. The gap between the demand for water and what is available through the quotas is growing ever larger. with the approval of the Minister of Finance and Minister of Agriculture. 4 Whatever its advantages. And using a tiered pricing structure transfers some 2 rent from water suppliers to farmers. periodically adjusts prices of water for industrial and domestic use.00 per cubic meter for the second block (seven cubic meters per household per month).water supplycompanies would appropriate huge rents. Herzliyah was 135 percent. and cities and towns pay US$0. For example. since farmers would resist such action. US$0. and on setting prices for reclaimed sewage water. The Water Committee is now working on establishing rules for incorporating reclaimed sewage for irrigation into quotas. These recommendations are now being implemented. However. and that charges be tiered. A committee appointed by the Water Commissioner recommended that brackish water be made part of the quotas depending on its salt content (and therefore the degree to which it could substitute for fresh water). The current quota system has not been adjusted to account for the rising urban population or the changes in the agricultural production technologies that have taken place over the past 30 years. Some cities had even higher profit margins: Tel Aviv's profit margin was 44 percent. For example.35 per cubic meter. One rule is widely accepted: the generator of the wastewater (generally municipalities) should pay the costs of treating the sewage to acceptable standards. and Bat-Yam's was 169 percent. paying US$0.68 per cubic meter for the first block (typically eight cubic meters per household per month). Tier pricing givessome of the rent to farmers. 24 the prices that municipalities may charge households. so the long-run incrementalcost of supplying water is rising. For efficiency. The Ministry of Interior sets The less-expensive sourcesof water are developedfirst. US$1. It also recommended that its price be linked to that of high quality water. In general.
References Dlayahu. Domestic and agricultural users have different requirementsfor water in terms of quality. Economic Department. Department of Allocationsand Permits. S. the allocation and pricing of highquality water supplied to agriculture is a key issue (Table 9.Tel Aviv. In addition. Bar-IlanUniversity. Ideas for reform fall along a spectrum. 1996." Research Report submitted to Water Commission.000 1. Avivi.Tel Aviv.with some arguing for modifying the current system(adjustingquotas to reflect actual use.400 1.1 Salt content and rate of substitution between brackish and high-quality water Salt content.leaving the market to allocatewaterto its highestand best use. and the ratio between peak and average demand. Finally.shortand long-termreliabilityof supply.variousyears (a)." Water Commission. includingthe need to rationalizewater pricesamongdifferentusers... 600 1. "Water Supply Services in Municipalities. New ideas for the pricing of high-quality water are now beingdebated.34 Current debates and future prospects quifer's location (water is more costly in the A major weakness of the current water charging pricing system is that charges do not vary by region. and M.26 1. Economic ConsultantOffice.07 700 1.Tel Aviv. Rosovitz.40totaldissolved to solids. most water plants supply both domestic users and irrigators.13 1. Yet. 63 . "The Effect of Tier Pricing of Water for Agriculture on its Use.200 1.04 a Roughly equivalent 0. . and others maintainingthat the current system shouldbe scrappedcompletely.Romat-Gan. prices do not necessarily reflect the real marginal cost of supply on a regionalbasis. and S. althoughcosts of supplyingwater do.E. Policymakers recognize that prices which fluctuate in response to changes in the water table in aquiferscan encourageconsumers to conserve when levels are low.10 800 1. Also being discussed is the use of water pricing as a means to better match supply and demand. Water Commission. 1976.1).19 1. Eckstein. parts per million chlorine" 400 500 Rate of substitution: brackishwater/highquality water 1.02 1. This means that irrigators receive much higher quality water than they actually need. various years (b). at much greatercost than is necessary. Prices should also reflect water quality in the aquifer and ac souththan in the north).Table 9. or providinga rebate for unused quotas).
The Consortia for Integrated Land Reclamation. rainfall is unevenly distributed in both time and space. enacted in 1933. During the 1950s and 1960s the consortia organized and financed the drainage of large marshes scattered throughout Italy. River flow regimes are very irregular. which at the time were breeding grounds for the insects carrying marshyfever. and placed restrictions on its use. been the fundamental law on fresh water and land reclamation. People or entities wishing to use the water were required to obtain special state concessions and pay annual rents.6 41. but there is considerable variation among cities.3 61 100 12 6 28 46 26 13 61 100 Source: Nebbia 1993. In the early 1960s the consortia supported new agricultural development by developing irrigation systems. 1971 and 1989 1971 Billion cubic meters percent 1989 Billion cubic meters percent Domestic Industry Agriculture Total 7 9.10 ITALY Stefano Destro Introduction Italy receives about 300 billion cubic meters (1. especially in southern Italy. until recently.1). People in larger cities. while the consortia have paid operating costs.000 millimeters) of rainfall each year. Water tariffs were calculated on the basis of average consortia costs.7 22. The consortia played critical roles in fostering rural development in Italy. The initiatives were intended to be private but very often they have been established through law.9 16.3 25. However. were responsible for implementing initiatives under the law. which makes rivers unsuitable as direct sources of water supply. This act declared all major water sources to be public water. The government has extensively subsidized land reclamation and irrigation projects. farmers paid an area-based rate. Italy's available water resources total about 110 billion cubic meters per year of which 35-40 billion cubic meters are available for irrigation (Institito Nazionale di Statistica (ISTAT) 1993). Past experiences The Land Reclamation Act. Table 10. Per capita water consumption in Italy is 220 liters per year. paying nearly 100 percent of the capital costs of waterworks.1 Water consumption by sector. self-governing private institutions. Overall water consumption is 46-50 billion cubic meters per year (Table 10. As a result. was a milestone for water management in Italy. and has. mainly in 64 . It is estimated that some 140 billion cubic meters of water a year are lost to evaporation. farmers and other end-users have paid only maintenance and repair costs for waterworks and the cost of energy used to distribute the water.
Since 1974 provincialor local Committees on Price have calculatedwater imposed by the InterdepartmentalCommittee on Price. In the first half of the 1980s. consume about 400 liters per year. Perhaps for this reason Italians spend US$2.000 9.water prices were controlledto prevent them from rising faster than the rate of inflation. Until 1974 the InterdepartmentalCommitteeon Price set water tariffs. About 35 percent of water users do not receive sufficient quantities of drinkingwater. let alone the full costs of services. rather than commercial principles.communitieswere permittedto raisewater prices. Tariffs did not include the costs of depreciation. 1973 (US$per hectare) 85 39 20 27 1978 (US$perhectare) 138 47 33 149 46.3).1). Governmenthas financed all major waterworks (dams.and that irrigationwill improvethe net incomeof people living in the region.southern Italy Orangetrees. Drinkingwater shortages are especially prevalent in southern Italy. Nearly all households and enterprises in Italy have pipedwater supplies. the Consortiafor Land Reclamationand Irrigation still receive subsidiesof differenttypes. The result is a general failure to recover even the operating costs of supplyingwater.700 6. The tariff structurealso requires that water prices equal the average costs of supplying water.5 million for bottled mineralwater.2 Averagewater tariffs to farmers sometimesof poor quality.2.9 millionfor public water supplies. canals) and owns these structures.distribution 65 .northern Italy Meadows. northern Italy Horticulture crops. But in 1985.7 millionhectares of which 2 million are in northernItaly. covering2. 10. Presentwater pricingpractices Irrigation Water Recentlythe governmenthas reduced many of its subsidies for water systems. Maintenance. The water pricing policy in Italy has been guided by a range of social and developmental considerations. The tariff structure involves step-rates. while people in most southern cities consume less than 200 liters per year.000 10. However. with a low rate for the first consumptionstep (Figure 10. Currently there are 199 consortiaentitledto abstractwater for irrigation. and farmers pay much less than any other users (Tables 10. Average annual water consumption (cubic meters hectare) per Rice.the north. and did so withoutconcernfor the actual costs incurred. as comparedwith US$2. In some parts of Italy. Charges for irrigation water were so low that irrigation systems tendedto be very inefficient. Increasingly the watershed authority is refusing to grant farmers permission to drain wetlands unless they can show that doing so will not threaten the natural systems.000 Drinking water Many different public and private enterprises provide drinking water. Thus per capita consumption is 40 percent higher in northern Italy than in southernItaly.southern Italy Source: Medici 1974and 1980. excessive water use has started to threaten natural systems. Howeverwater quality is not always high because pipes are Table 10.
330 43 12 consortia collect enough revenue to cover their costs: indeed most make losses. Concession fees amount to only 0.3 Concession fees.25 percent of total costs.38 . 1994 Unit of measurement Domestic Industry Agriculture Hydropower module module module nominal kilowatt Concession fees (1994 US$) 1. The fee varies depending on the sector concerned. Note: A moduleis equivalentto 100liters per second. Source: Malaman andProsperetti1995. completed in 1994. 1992 (1992 US$) US$ per cubicmeter . but vary charges according to soil quality and crop.1 Average water prices for various consumption bands. and overhead costs make up the majority of the consortias' costs. Consortia set water prices in accordance with the principle of average cost pricing. few Table 10.23 96 144 216 288 cubicmetersper year Source: MalamanandProsperetti 1995. Figure 10. consortia do not have provisions in their balance sheets for depreciation.820 13. According to a study carried out in 1990. Total payments from farmers cover only 60 percent of the total fixed plus variable costs (Vacca.85 . A recent update of the study.4). Persons or entities given a formal concession by the government have to pay an annual fee. 66 . All consortia use area-based charges regardless of the amount of water supplied. found that the situation has not improved over the last decade (Table 10. Atzori.(pumping). and Linoli 1994). Since the state owns all waterworks.58 .
5 Watertariffs in municipality A Cubicmetersper year < 80 81-200 201-500 >500 Source: BollettinoUfficialedella Regionedel Veneto1995. Each supplier serves an average of about 8.50 Table 10.15 22. resulting in very low distribution efficiencies.400 37.20 .56 53.75 7.000 users.11 82.63 Source: Vacca.000 355.57 .4 Economicperformance irrigationconsortia(US$ per hectare) of Irrigated area (hectares) Northwest Northeast Center-south 279.67 18. This example shows how confusing the situation in Italy is due to the absence of a framework law for drinking water.190 134.Table 10.15 .11 Average deficit 2.40 .and Linoli 1994.5 and 10.43 .Atzori. Tables 10. After years of debate. Table 10.38 29. Unit price (US$per cubicmeter) . Parliament finally issued a new framework law on water resource management at the beginning of 1995.110 Average cost 35. illustrating the variation in tariffs characteristic of drinking water supply in Italy.48 3.25 Total 768. Drinking water Thousands of public and private enterprises supply drinking water. Unit price (US$per cubicmeter) .55 29.28 . Because there are so many different suppliers it is difficult to analyze current conditions in this sector.36 Average receipts 32.6 present water prices for two municipalities.6 Watertariffs in municipality B Cubicmetersper year < 108 108-144 144-216 216-288 > 288 Source: BollettinoUfficialedella Regionedel Veneto1995.30 .86 67 .
1995. 1995." Edagricole. when implemented. "Gli Utilizzi dell'acqua in Agricoltura." In R. A. A. "L'irrigazione Pubblica in Italia: Tariffe e Coperturadei Costi. 1995. All waters are public and must be managed according to the principle of sustainability. 1993. 11Mulino. and C.the law will provide an appropriateframeworkfor efficient water allocation and use by all water users. Bologna. Malaman (ed. 1994. L. Federgasacqua. "Le Risorse Idriche in Agricoltura.. Gutierrez. "La Gestione dei Servizi Idrici in Italia. II. 1995. La Gestione delle Risorse Idriche. Malaman. Il Dottore. La GestioneDelle Risorse Idriche. II Mulino.). R. Nebbia. "DeterminazioneTransitoria delle Tariffe Idriche." Irrigazionee Drenaggio.) Roma. G. September15. 1980. 1995. 84.Currentdebatesand futureprospects The Framework Law on Waters 36 dated January 5.private and public enterprises shouldbe reorganizedto encourage efficiencyin operations. 68 . References Bollettino Ufficiale della Regione del Veneto. "Per L'attuazionedi un Programmadi Irrigazionein Italia. The key points of the law are: I." In R. 1974. Bologna. Malaman (ed..Parte II. Medit 4. IV.Bologna." In R." ScienzeAgrarie 10(24): 3-26. Medici. "I Prezzi dell'Acqua. "L'irrigazionein Italia.Water supply services are to be integrated with sewage services. G. III. Medici. La Gestione delle Risorse Idriche. The law emphasizes the importance of demand management to minimize the environmental impacts of water consumption. Capria. Risultati di un'indagine. Atzori. Drinkingwater is top priority. 1995. the law aims to integrate water supply and sewage servicesto define a life cycle price of water.".Dati E Commenti. Principles and Issues in Water Pricing Policies.Bologna." (Internal paper. G.G.G. No."(InternalPaper. "Metodo Normalizzato per la Determinazionedella Tariffa di Riferimento.) Federgasacqua. 1995.Local governments shall determine water Caia. Malaman (ed." GenioRurale6: 9-20. In effect. Otheruses are allowedprovidedthey do not affect the quality or quantityof waterused for drinking. Bologna. M. Vacca. R. II prices accordingto a normalizedmethodthat will be defined by the Ministry of Public Works. and A." In R. A. Prosperetti. Hamdy. Lacirignola. and L. La Gestione delle Risorse Idriche. Water charges must generate sufficient revenue to coverall investmentand operating costs and should reflectthe quality of water supplied.. Il Mulino. Roma. Linoli.).). Mulino. It is expectedthat. especially with reference to future generations. 1993. Malaman (ed. "La Nuova Legge Quadro sulle Acque. Malaman. 1995 provides guidelines on water management.).
2 2. 1993 Percentof populationwith accessto variouswater sources Running water Urban Rural Total 17.5 13.800 millimeters at Maroantsetra the country's northeastern coast. By contrast more than 71 percent of rural households draw water from springs. receives less than 600 millimeters of rain each year.11 MADAGASCAR Felix Rabemanambola Introduction The importance of water in the Malagasy's (resident of Madagascar) life is apparent in the proverbs and sayings that.2 35. with annual averages ranging from about 380 millimeters per year at Faux Cap. wells or cistern trucks (Institut National de Statistique 1993).5 Springs Riversand streams 9. Less than 5 percent of people in Madagascar have running water in their homes (Table 11. the country's most arid zone. Table 11.6 20.6 4.6 percent with running water in the home. streams and rivers. and 3.2 Suction pump 3. resources are abundant.6 percent with access to public fountains).5 2.4 28. have acquired a near sacred character.0 Source: InstitutNationalde la Statistique1993. Overall 33. to nearly 3.1 21. This proverb aptly captures the two principal uses of water drinking and economic production.8 0.0 100.5 0.2 100.3 42. because of the philosophy and traditions they express. The southern part of Madagascar's is dry: it is necessary to drill progressively deeper to find groundwater.4 percent of Malagasy households get their water from public fountains. One common saying is "Vary sy rano: an-tsaha tsy mifanary.5 0. Madagascar's southernmost point.1 3. Nearly 60 percent of households get their drinking water from either springs. pumps.0 100.2 Well Cistern truck 0. 69 .500 millimeters rainfall per year. The southeast receives about 2.000 millimeters per year.0 2. In the east. Rainfall in Madagascar is unevenly distributed.3 Other Total 17.2 percent of rural households have access to treated water (0. but increasingly polluted. but rainfall is irregular. Rural households are much less well served: only 4. The tropical northwest receives about 1. an-trano tsy mifandao" (As rice and water keep company in the rice fields.1). water is needed to grow rice and to cook it as well.1 Water supply in Madagascar.9 24. or rivers and streams.4 1. so do they in the home). In other words.500 millimeters rainfall per year.6 11.6 Public pump 36. where rainfall can reach as high as 5. The south southwest. More than 75 percent of urban households have access to water services of some kind.8 0.
Water rates for Jiro Sy Rano Malagasyare set at the governmentcouncil level.a non26 Modified by ordinance 75-032. this institution is also responsible for undertaking studies. and distribution facilities which had been operated as local government monopolies or privateconcessions. all operations and assets and liabilities of the colonial company were transferred to Societe Malagachede l'Eau et de l'Electricite. issued February 4.a state-ownedand operated company formed through the merger of the two water companiesfollowingtheir nationalizationin 1975. Ordinance 74-002.has managedthe production and distributionof water for most urban centers. stipulatesthat the state has responsibility 25 for managing water supply and electricity. As part of the reorganization. FifanampianaKristiana ho an'ny Fanmpandrosoana eto Madagascar (FIKRIFAMA).ordinance 74-003 (February 4. a public industrialand commercialconcern createdin 1986. Finally it is responsible for carrying out nationalobjectivesin the water and electric27 ity sectors. because there is no single institutionmanagingrural water supply. 1974. managed water supply. As part of the reorganization. Three major nongovernmentalorganizationswith religious affiliationshave been operating in rural areas for quite some time. established. Communitiescontinue to manage water supply in a few secondary centers . The followingdescribesthe development of institutionsmanagingwater and water pricing in the country. Since 1974 Jiro Sy Rano Malagasy has been responsiblefor operating and maintaining drinkingwater facilities in urban areas.Societe d'Energie de Madagascar was empoweredto carry out its assigned operationsand was put in charge of the Gerance Nationale de l'Eau.although with technicaland financialdifficulties.operates in 2' southern Madagascar around Ambovombe. the Societed'InteretNational de l'Eau et de l'Electricite was created. when Jiro Sy Rano Malagasy(JIRAMA). New statutespertainingto this institutionissued in 1995make it possiblefor the new companyto extendits operationsthroughoutthe country.the Soci&e Malagache de I'Eauet de l'Electricite.new projects. Urban There have been three distinct periods of Madagascar'srecent past which have influenced the developmentof water institutionsand water pricing practices. The second is the post-colonialperiod. 2t Decree86-412. The GeranceNationale de l'Eau was also importantduring this period. Rural watersupply Pricing practicesfor rural water supply are much less clear than for urban areas. during which the Soci6te Malagache de l'Eau et de l'Electriciteheld the monopoly for water production and management. Starting in January 1974. when the colonial company. The third is from 1974-75 until the present. Ordinance 75-032 of October 17. 27 Subsequently modifiedby ordinance90-007.the Operation Alimentation en Eau dans le Sud. Along with Jiro Sy Rano Malagasy.and defined its functions and prerogatives as well as the provisions of commerciallegislation(requiringit to adhere to 2S the principles of commercial accounting) to 26 which it is subject. This ordinancegivesthe state exclusiverights to manage all operationsto produceand distribute drinkingand industrialwater. The first is the late colonial period (1950-1959). Societe Eau et Electricitdde Madagascar. transport. and gradually took charge of the electricity and water production. Water prices reflectthe various ways of managing water systems and the operating structuresestablished in different periods. 70 . 1974).Past experiences Water prices in Madagascarvary according to the context or the area (urban or rural) to which they apply. Within this general framework.and extensionsof existing services. 1975.
they collecta fee for each can of water 29 US$1 = FMG (Malagasyfranc) 3. but charges(for consumptionabove 10 cubic meters per month) were only FMG 263. Householdspay a low tariff for their first 10 cubic meters of water. 1974) requires user chargesto cover operatingcosts of the water company. In return. Lines at public standpipesare becoming increasinglylong. The adjustmentshave led to sharp increasesin water prices. Since 1986 Op6rationAlimentationen Eau dans le Sud has been managingwater supply for a few small centers. For example.an organizationfinancedby the European DevelopmentFund. in 1990 the average cost of supplying waterwas FMG 289 per cubic meter. Water pricing practices for irrigationwaterwill be presentedbelow. middlemencollect water in 220 liter barrels or in 20 liter cans and deliver to customers.such as the exchange rate and the price of crude oil. regardedas an essentialminimumquantity. These groupsnearly always supply water services either for free or for a small symbolic charge. to the great resentment of water users. Ordinance no. Householdscurrentlypay FMG 1.93 during the first halfof 1996. FIKRIFAMArequires villages receivingits assistanceto build gravity-fedwater supply facilities. Leroy and Gatin 1994).including interest charges and depreciation. Village watercommitteesmanage the public fountains.profit organization. The AES sells water from cistern trucks at a price of FMG 40. During 1987-90 Jiro Sy Rano Malagasy recovered 65-97 percent of its 71 averagewater costs throughuser charges. Users pay higher tariffs for quantities above this basic level of consumption. In these villages diseases from drinking contamihated water are very common.570 per cubic meter for running water (for quantitiesabove 10 cubic meters per month).000for a cistern of 6 cubic meters: users collect the water in 12-15 liter buckets.so most urban dwellersreceivewater through public standpipes or from water vendors. The cost of private connections is much higher than most households can afford. Cost recovery. In 1992. US$1 and =FMG 330in 1990. In 1990-91 it was expected that water charges would be set to achievethese goals. and raise a sufficient surplus to finance new investments. The agency has also built water conveyance systems in rural areas. Aroundthese points. after a period in which the FMG depreciated rapidly. it was decided to adjust waterrates everysix monthsto allowwater rates to reflect more closely the costs of supplying water. and informalwater sellinghas been growing in some neighborhoodsof Antananarivo.the nation's capital. 74-002 (February 4. . However collectionsfrom water users fell short of fully recoveringcosts. Op6rationMicrorealisations.999. In populated neighborhoodsof Antananarivo water supplypoints are few. 1987) as a presidential project. is one of the most active nongovernmentalorganizationsin the country (Direction Generale du Plan 1980.and pay a small fee each year to cover the costs of minor repairs such as faucet replacements. In 1996 the price of one cubic meter of water was six times higher than in 1990. or 91 percent 29 of averagecosts. and in othermajor cities. Two other nongovernmentalorganizations with religious affiliationsoperate almost exclusively in areas where they have built churches. This is a significantimprovementfor the water company. Publicstandpipes. Presentwater pricingpractices Urbanwatersupply Jiro Sy Rano Malagasytariffs are uniform throughoutthe country. Irrigation The Rural EngineeringOffice has always been responsiblefor managing irrigationwater. which can now adjust rates in line with changesin key parameters. was createdby decree 87-360 (September 29. This group operates primarily in the in the high plateaus where the country's poorest and most isolated villages are situated. It manages federally-financedsmallscale pump or gravity-fed systems throughout the country.
or damage or steal faucets. 30 72 . Prices vary from city to city depending on how acute the city's water problem is. Some water committees collect as much as FMG 1 million (Leroy and Gatin 1994). However. Most customers are families without private connections or small businesses such as inexpensive restaurants.300 per cubic meter. The FIKRIFAMA is an nongovernmental organization which provides almost exclusively gravityfed water systems principally to communities in the high plateaus. The FIKRIFAA4 experience. In some cases. Thus work cannot begin until the community establishes a village water committee.000 per cubic meter (BURGEAP 1996). Since more than 71 percent of households get their water from springs or streams and rivers. In the five other major provincial towns.000) to pay for upkeep and minor repairs.000 per month.distributed. and have led to reduced water wastage and water losses. Water committees must deposit sums above FMG 300. the situation is similar to that in Antananarivo. From these funds. Thus water vendors are charging FMG 3. communities must request them and agree to participate in all stages of the project . The sums collected by the water committees thus vary according to the number of families served. water committees keep on hand a small sum (currently around FMG 50. Water committees or water supply point committees at the public fountain level have been formed in many places. It is very difficult to estimate what proportion of the city's population purchases water from vendors. fines of FMG 5. Furthermore. The money collected is not sufficient to cover the costs of supplying water. households with private connections sell water: prices range from FMG 10-50 per 10-15 liter bucket or FMG 1.300-3. often at very high prices.000. Users who do not pay their share lose their right to be part of the users' association and forfeit their right to draw water from public fountains or water supply points. where users buy water. water committees are imposing discipline on water users. but they have encouraged users to take more responsibility for the management of their water supply. this is not necessarily the case in southern Madagascar.000 for failing to participate in site cleanups and fines of FMG 500 for stealing faucets. This discipline is a strong point of FIKRIFAMA's program. In some populated neighborhoods in the capital. they are taking measures to stop users from leaving taps open for long periods of time. To transgress dina is to risk incurringseveresanctions the not only on oneselfbut also on one's entire family. In the past two years the government has been encouraging public fountain users to participate in water management. Indeed.600-7. In certain neighborhoods.from the system's conception to its management and maintenance. To receive its services.000 in a The dina are specificconventionscustomaryat the community levelwhichapplyuniformlyto all members of the community. do not participate in site cleanups. Village water committees are responsible for maintaining the water systems and ensuring that they function properly. The cases discussed below provide some a representative sample of water pricing issues in rural areas. In Antsiranana households pay quarterly dues of FMG 1. Each family pays the water committee a flat fee of FMG 1. the practices pertain to only about 27 percent of rural households. Monthly or quarterly dues are collected from water users for the upkeep and repair of public fountains. prices have reached FMG 5. they may charge as much as FMG 100-150 for a 20 liter can of water. They are also responsible for making sure that members of the users' associations abide by the agreed clauses.500 per cubic meter of water (US$1-US$2 per cubic meter). but it is likely to be significant. Rural watersupply Rural water consumers do not generally pay for water on the basis of quantity consumed. A study of small water vendors found that vendors charge FMG 40-50 for a 10-15 liter bucket of water. They impose sanctions on users who do not pay their dues. 30 or the dina. to prevent Jiro Sy Rano Malagasy from cutting off water supplies.
and communication effort. AES charges much less for water than the private vendors (Table 11. The specific strategies of the agricultural water policy are to: * Establish and support water users associations (associations des usagers de l'eau) in all irrigation perimeters. along the Amboasary-Ambovombe-Beloha-Tsihombe route. The policy makes AES responsible for managing water supply in the five centers. According to FIKRIFAMA.000 per 6 cubic meters tank-full. and the communities they serve responsible for collecting funds from water users at their public fountains (which are metered) on the basis of volume drawn. launched in March 1994 and completed in January 1995. Under the contract. in five small centers in the south of the country (Isoanala. users pay enough to cover about 90 percent of total costs. Each family pays a monthly contribution to the fund. AES supplies water from cistern trucks originating in Amboasary-South (about 60 kilometers from Fort-Dauphin). In the extreme south of Madagascar. The 150 Water Supply Points Project. and improve the quality of life in rural areas. Water committees agree with users on mode of payment. including public fountains. The village agreed to provide an access route between the water supply point and the village. * Mobilize resources of all subdistrict operators. and create a network for the sale of spare parts at fixed prices. * Give responsibility for managing irrigation systems to water users associations in accordance with their abilities. In 1995 following an intense information. which is generally in cash or in kind (usually rice). The local people resist paying because they think it is unfair that they should have to pay while urban consumers do not.000 to maintain the pump (purchasing spare parts.000 each). While this contribution is small relative to the actual cost of supplying water.2). reduce the financial contribution of the state in irrigation. * Help the state disengage from its role in managing and maintaining irrigation networks. The funds now average about FMG 42. which traditionally have been served solely by private water vendors. financed by FAD. The community sets water charges at a level to meet this payment and any additional expenses. Agricultural water The objectives of agricultural water policy are to maintain irrigation infrastructure. train the water supply point committees (cornit de point d'eau) and repair persons. paying for repairs. The AES.500. and because they believe that the services of AESa public institution . The AES experience. such as wages for the person hired to collect water charges at the pump. Thus far contributions have been sufficient to meet 80-90 percent of expenses. and paying for a quarterly inspection visit costing FMG 2. manages and operates water supply systems.000 per 220 liter barrel (US$3. In 1992 the AES started serving small localities in areas with acute water problems.should be free. was responsible for drilling 150 wells and equipping them with India Mark II hand pumps (Bergeron 1995). Tsivory. * Ensure the effective participation of water users in start-up activities. The private water vendors were often charging exorbitant prices. furnish labor. Beraketa. villages had to make a contract with the UNICEF project.40 per cubic meter) for water of often questionable quality (muddy and untreated). Households pay FMG 800 per month for water.bank account bearing the name the water committee. the AES instituted a new policy. Andalatanosy. for FMG 40. UNICEF agreed to drill the wells and outfit them with curbs and sinks. 73 UNICEF and the 150 Water Supply Points Project for Southern Madagascar. it is high compared with average incomes in the region. The community pays AES FMG 2. To obtain a water supply point. education. . up to FMG 3. accelerate rural infrastructure investments.000 per cubic meter. and establish and maintain a village fund of FMG 50. and Antanimora) as part of the Southern Water Supply Project. The water committee is responsible for managing these tasks.
86 1.77 0.45 3.33 1.77 1.74 0.74 0.74 0.00 > 100 m/month Collectives(decentralized) Community services Fountains Other Special uses 1. 1995 Aug.74 0.21 0.21 1.77 1.10 1.10 1. * Borrowing funds as needed.77 1.67 1.58 0.25 1.77 1.58 1.65 0.10 1.58 1.64 1.04 2.75 2.00 1.77 1.33 1.00 1.74 0.74 0.10 1.82 2. * Ensuring that members or the enterprise properly maintain the irrigation networks and ensure their safety.77 60 60 11 11 0.74 0.* Refurbish and build rural infrastructure by making decentralized groups responsible for water conveyance in rural areas.77 0.77 1.67 0.74 1.17 3. article 2).33 0. its responsibilities include: * Distributing water to the land parcels.78 0. July 1991-January 1996 Percentincreases July 1991 Cessions Consumption Electric Individuals Smallconsumer(100 m3 ) 0. in principle.10 1.58 1.04 1.77 77 14 0.10 0.67 0.77 1. 1995 Jan.41 2. The collectivity.71 0.10 2.21 1. 1996 Accumulated Annual average 1.78 0.58 1.71 0.99 3.10 1.32 4.21 1.78 0.67 4.74 1.10 1. * Ensuring that laws are enforced (including the dina).28 3.77 1.00 1.64 1.21 1. Table 11. through the water user associations (which function as financially autonomous nonprofit corporations or independent cooperatives) to take over the management of irrigation infrastructure.71 1.77 77 77 51 14 14 10 Source: Jiro Sy Rano Malagasy 1997.74 1. Irrigation water pricing reflects these goals.74 0. according to statutory procedures and with the advice of the appropriate department of the agriculture ministry. * Determining when and where new supply points should be opened.33 1.64 1.00 3.86 0.71 0.49 1.77 77 14 Oct.86 0.65 0.77 5.21 1. 1992 July 1993 March 1994 July 1994 Jan.74 0.26 1.58 1.10 0.21 1.77 1.77 1.78 1.29 3. * Establishing and approving annual operation and maintenance budgets. 1990. According to article 5 of this same ordinance.2 Water tariffs of Jiro Sy Rano Malagasy.22 110 3. includes "persons cultivating land served by the hydroagricultural networks of the locality and all those who use its irrigation or drainage water for any other economic purpose" (ordinance 90-642 of December 19.74 0.86 0.00 3.33 1.74 0. 74 .77 1.33 1.77 1.10 1.06 1.21 1.65 < 10 m3/month > 10 3/month m Administration < 100 m 3/month 1.74 15 15 15 3 3 3 Saleto boats Construction Waterbrute 2.65 0.67 0. 1992 Jan.77 5. contributing to the improvement of public health.74 1.77 15 77 77 3 14 14 1.04 1. The strategies now being implemented are designed to allow users.74 1.
the plan calls for implementingan effective "social connections"policy. The decentralized institutionswill have much more autonomy than in the past in administrationand financial 3 management.incentivesfor private connections. the plan stresses the key role that decentralizedinstitutions need to play in managingnot only facilitiesand water works but also water resources. includingground and surface water resources. Sincethe costs of supplyingwater differ between cities. fountains. the water chargeswill also differ (CNEA 1995). users will pay in accordancewith ability to pay and the level of servicerendered. It is intendedthat water charges will comprise two components:an investmentcomponent (including depreciation).cost recovery improves. and can reach 100percentfor large irrigationperimeters. Cost recovery in urban areas is an immediateobjective. which was about 7 percent of the water it supplied for all uses. In rural and poor periurban areas. For urban areas.7 million cubic meters of water betweenOctober 1994and September1995. and range between FMG 25.and decentralization. Jiro Sy Rano Malagasyprovidedindustries with about 3. where the water users' associations have taken responsibility for management. in the westcentral part of the country. in accordancewith the principlesof rationalmanagementand social equity. Urbanwaterpricing A study is presently underway to develop recommendationsfor a national water pricing Law no.* Managingfinancialresources for the benefit of irrigationusers. This would likely give thefokontany influencein determiningwater rates. Recently.' This will give communities greater freedom to manage their own development.000 for large irrigation perimeters (grandperimetresirrigues).and an operations and maintenance component to cover recurrent costs. The perimeterswhich have transferredresponsibility for managingthe irrigationnetworksto the water users' associations have been the most successful at covering costs. For example. Industries obtain water from a variety of sources. 93-005 of 26 January 94 conceming the general orientation the decentralizaton of policy. and around FMG 45. and other sources. For rural areas. Encouraging households to take private connections is another major element of the strategy. Within the frameworkof the decentralization process now under way. the sector strategy and plan of action recommends revising connection fees to encourage households to take private connections. There are no data availableon the water consumption of industries obtaining waterfrom sourcesotherthan the wateragency. The ordinancealso requires water users to pay the upkeep costs of irrigationinfrastructure except by the express waiver of the operating structure. Rates of cost recovery vary according to district: they average 80-90 percent.is running smoothly.people's quality of life is raised.which they treat themselves. central authorities have suggested entrustingbasic village structures called fokontany with the management of natural resources. 31 . Industrial water Industriesconsumeonly a small proportion of Madagascar's water resources. Industriesoutsidethese zones or urban areas obtain water from rivers. Currentdebatesand futureprospects The sector strategy and action plan (strategie sectorielle et plan d'action) calls for users to pay the full costs of water supplies in the futurein order to ensure the sustainabilityof water services(CNEA 1995).the large irrigation district of Dabara. Jiro Sy Rano Malagasy supplies drinking water to industries situated in industrial zones or in urban areas where it is active. Annual upkeep costs are assessedon a per hectare basis. and water waste declines. The sector strat75 egy and action plan focuses on three major issues for the future:cost recovery.000 and 30.000 for small irrigationperimeters (petits perimetres irrigues).depending on where they are located. When a large proportionof a nation's populationhas private connections.
education. Japan International Cooperation Agency. such as the Water Supply Sector Project (Project Sectoriel d'Alimentation en Eau) now in the process of being prepared. Groupe de Recherche pour la Connaissance du Sud Tulear. 1995. It would be best to involve the water users' associations in the management of rural drinking water supply points (as is already the case with water conveyance systems built by the Rural Engineering Office). two management schemes are envisaged: either the communities manage the facilities themselves. Fevrier. Jiro Sy Rano Malagasy (JIRAMA). 1997. Fleuves et Rivieres de Madagascar. Janvier. 32 gascar. or they hire private fountain keepers to manage them. BURGEAP. Ferry. "Etude de l'exploitation des Eaux Souterraines dans la Region du Sud-Ouest de la Republique Democratique de Madagascar. ORSTOM. Mai.being the first to successfully incorporate lessons from the past. and is encouraging others to replicate it. 1995. Overcoming public resistance will require an intensive information. Fivondronampokontany d'Antsirabe I Entreprise d'Etude Pluridisciplinaire." 76 . communication campaign. Chaperon. "Projet de Concession des Bornes Fontaines Etude Prealable a la Vente d'eau aux Borenes Fontaines" (Phase I). "Evaluation Participative par les Ben6ficiaires du Projet Eau. water users may still resist paying for a commodity that they received for free in the past." Bureau de Recherche Geologique et Miniere. "Etude de l'amelioration de la Gestion des Points d'eau Collectifs d'Antananarivo. including UNICEF and the nongovernmental organizations of FIKRIFAMA and Cari3 tas Madagascar. Etude DINIKA 1990-91 sur la Situation du Secteur de l'eau et de I'assainissement a Madagascar en 1991. "Programme d'Hydraulique Villageoise: 150 Points d'eau dans le Sud de Madagascar. Institut National de la Statistique. "Rapport sur le Seminaire National sur l'Eau Domestique. References Bergeron." Projet PNUD per BIT MAG/71/534. Avril. G. Recensement G6neral de la Population et de l'Habitat 1993. DINIKA. 1993. Paris. P. Fevrier. 1994. Direction Gen6rale du Plan. R6sultats provisoires. However. 1991.system. J.." Rapport final. Resultats au I per leme. Danloux. involve a number of actors. and L. "Etude de l'Alimentation en Eau Potable des Quartiers Peripheriques d'Antananarivo. while introducing new pricing practices in accordance with the sector strategy and action plan. Comite de l'Eau et de l'Assainissement. For public water supply points.2 This project -involving both urban water supply and rural water supply is important . It is certain that prices will need to reflect real operating costs. Several new projects. . Under the Kreditanstalt far Wiederaufbau(KFW) financed project to rehabilitate water and sewerage systems in Mahajanga. 1996. water users will make contributions towards the upkeep of the communal water points. because this would make it possible both to rely on existing infrastructure and benefit from the experiences of the water users' associations in managing irrigation networks." Rapport final. Rural water pricing The sector strategy and plan of action endorses FIKRIFAMA's rural water supply approach (and that followed by UNICEF's 150 Water Supply Points Project). 1989. while individual contributions will likely be modest at first." Septembre." Rapport Economique et Rapport Technique. 1980. 1991. Decembre. Strategie Sectorielle et Pland'Action pour l'Eau et l'Assainissement. is being prepared with advance funds from the IDA. "Water Tariffs in Mada- The Water Supply Sector Project (Projet Sectoriel d'Alimentationen Eau). 1995. .
. . 1995a. World Bank. 77 . Roland and Paul Gatin.Avril. 1994. 1994." 12691-MA." Comite de l'Eau et de Avril. Ministere d'Etat a l'Agriculture et au Developpement Rural. 1994.Leroy. "Politique de D6veloppement Rural. 1995b." Fevrier. Enquete aupres des Beneficiaires du Projet Sectoriel de l'Alimentationen Eau Decembre. "Rapport d'6valuation: Deuxieme Projet de Rehabilitaitondes Primetres Irrigues. "Documentde base de la Strat6gie Sectorielle et Plan d'Action.20 Juin. Rapport d'6valuation du Projet d'Appui au Programe de Vulgarisation Agricole. I'Assainissement.
13 4 46 10 1 79 140 81 67 15 3 129 295 a Includesindustrialdemand. mines. The colonists soon realized that the only way to develop urban settlements and permanent livestock farms in the waterless interior was to tap the groundwater sources or the unreliable ephemeral surface water sources.1 Water supply and demand by sector. 1 n. However. They started a concentrated borehole drilling program in 1903 and created a network of water points for livestock farming throughout the largely uninhabited interior.1 presents current water supply and consumption statistics by sector in Namibia. Table 12. Namibia is one of the most sparsely populated countries in the world. pipelines. Initially the government supplied the water to consumers at no charge. Table 12.6 million people. demand for water grew so rapidly that the central goveniment was unable to fund the increasingly expensive expansion from the national budget without contributions from users.a. With about 1. Namibiais not heavily industrialized. They achieved this through the development of borehole wellfields and long distance water supply systems. and farms. Water is thus a very expensive commodity in Narnibia. the colonists had to establish large and reliable water supply schemes in areas with few available water resources.a.a.a. The country is extremely arid. 78 . To develop industries. ephemeral rivers flow during the rainy season. 1995 Water supplied (million cubic meters) Sector Government Municipalities Private Sector Total Percent of total 27 23 5 1 44 100 Domestica Livestock Mining Tourism Irrigation Total 65 21 5 1 50 142 12 n. There are no perennial rivers in the interior of the country. Rural communities therefore depend on groundwater for their water supplies. n. Central government (with local authorities with sufficient capacity) was responsible for building and managing the water supply infrastructure.9 people per square kilometer. Rural farming communities are sparsely distributed and small in number.300 square kilometers and has a population of about 1. n. which relied on storage dams and water transport systems such as tanker trucks.12 NAMIBIA Pieter Heyns Introduction Namibia is a large country of 824. meansnot applicable. or canals. Namibia became a German Protectorate in 1884.
but not rural consumers. Although the German authorities and the South West Africa Administrationintendedto developwater supplies for the good of the countryand supplythe water at no charge to consumers. those using larger quantitiesthus subsidizethe consumptionof the poor. A smaller De- 30 (1) u of the Local AuthoritiesAct. The policythus requires beneficiaries receivingservicesin excess of basic needsto pay an increasingproportionof costs of thehighervalue services. and no capital costs. as applicable in Namibia. In 1990 Namibia became independentand the Department of Water Affairs was incorporated into the Ministry of Agriculture Water and Rural Development. through the Departmentof Water Affairs.and that essentialwater supply servicesmust be available to all Namibiansat a cost which is affordableto the countryas a whole. which occupied German South West Africa in 1915 during the First World War. Between 1969 and 1971 bulk water tariffs coveredonly a portion of operationand maintenance costs of the bulk water supply infrastructure. supplied water in bulk to the Second Tier or Communal Land Authorities and to the Third Tier local Currently the tariffs for state-supplied bulk water are levied and periodically revised in accordance with Article 66 of the Water Act. 151 of 1971 in terms of Section 180(1) of the Water Act. By 1977 water charges generatedenough revenueto pay some capitalcosts. introduced a bulk water tariff of US$0.the need for water charges quickly became apparent. Howeversince 1994 some municipalitieshave used block tariffs. mines. At this time policymakersdecided to charge the mining industry the full financial costs of supplying water.15 per cubic meter: thus state subsidies still made up 32 percentof the total costs. Consumertariffs normally involve a fixed charge plus a volumetriccharge.regardlessof location or 3 the cost of deliveringwater to them. Insteadregional authoritiespaid for the waterof rural communities. In 1994 the Governmentdecided to commercializesome of the responsibilityfor water supply by creating a Water Corporation which became responsible for supplying bulk water to municipalities. partmentof Water Affairsretainedresponsibility 79 .which was referredto as a First Tier Government Authority.Presentwater pricingpractices The evolutionof water chargesystems In 1920 the Union of South Africa. but still not enough to cover capital costs. The water distributors are responsible for settingtariffs to final consumers. This policy is based on the recognitionthat the overall sustainabilityof the water supply dependson the abilityof suppliers to become financially self-sufficient. but consumersstill paid only US$0. Act 54 of 1956. charging a low tariff for a minimum (lifeline) quantity of water and much higher rates for larger quantities. The Department of Water Affairs. The Secondand Third Tier Authoritieswere responsible for distributingthe water to the consumers under their authority. Theytypically set tariffs to cover their expendituresfor bulk water (or the costs of operatingtheir own water schemes). Neither bulk water charges nor final consumer charges changed. In 1954 the government. became the Mandatory for the Territory and establishedan Administration.Act 32 of 1995. Consumer tariffs are similarly levied and adjusted from time to time by the local authorities in terms of Article 33 Municipal and Village Board Authorities. and promulgated by Proclamation No. The local authorities chargedurban consumersfor water.06 per cubic meter (1954 dollars) which was uniform for all bulk water consumers.22 per cubic meter (1979 dollars) to supply water. industrial enterprises and irrigation schemes. The Division of Water Affairs in the Administrationbecame a Directorateof the Departmentof Water Affairs in the Republic of South Africa. By 1979 it cost US$0.plus the costs of distributingthe water. villages. By 1972 bulk water tariffs generated enough revenue to cover full operation and maintenancecosts. In 1969 the water supply institutions in Namibia were reorganizedand the uniformbulk water tariff policy changed. However in 1993 the Namibian Government approved a Water Supply and Sanitation Sector Policy for the country and adoptedan overalllong-termsectorpolicywhich strengthenedthe water tariff policy principles already in place.
Unit prices were not adjusted. The minister in charge of Water Affairs is responsible for ensuring that tariffs comply with government policy and that any adjustments in tariffs or tariff structures are warranted and reasonable. and rise thereafter to achieve full cost recovery in nine years. Water for mining companies. The operation and maintenance costs are variable.) Thus bulk and consumer water tariffs policies now reflect the reality that water is a scarce commodity in Namibia. Housing developers pay the costs of extending the supply network to the housing development. It is considered appropriate to bring sanctions against consumers who do not pay for water. farmers pay a higher tariff for water for livestock. Between 1969 and 1984 the full financial cost of water for the mining industry was calculated by dividing amortized costs of supply by the quantity of water that mining industries estimated they would use. irrigation. The principles of water pricing Water tariffs in Namibia are subject to annual revision and periodic adjustment. plus a volumetric charge which covers operation and maintenance costs. which includes a natural resources fee. so the revenue shortfall became worse over time as mining companies became more efficient in their water use. Most communities currently pay operations and maintenance costs. although some communities receive subsidies for these. including water for livestock on both subsistence and commercial farms. With such limited water resources. Policymakers decided to raise tariffs gradually starting in 1995 to achieve full cost recovery for bulk water supply schemes by 2000. (Real tariff increases are less since inflation runs at about 10 percent per year. and state support can be withdrawn if communities do not comply with the terms of the agreements.for administering the Water Act and providing water to disadvantaged rural communities as part of the social responsibility of government. Unfortunately. Authorities assess the ability of communities to pay for services before granting subsidies. Tariffs rose by 30 percent in 1995/96. Namibia must prioritize the uses of water across competing demands. In 1985 this method of calculating water charges was changed. Water for human consumption in the rural areas is higher priority than water for livestock. Water tariffs must cover operation and maintenance costs between 1995 and 1998. Regional and local councils are responsible for approving consumer tariffs. depending on volume consumed and hours of operation. The state determines the degree to which individual sectors and entities should receive water based on their expected contribution to the overall development objectives and plans for the country. To prevent overgrazing by livestock. The process of raising tariffs in rural areas has also been accelerated. Currently urban consumers pay a low tariff for a specified lifeline quantity of 10 cubic meters per household per month. The second priority is industrial. Water supply institutions are responsible for establishing the appropriate consumer water charge policy in line with the national water supply policy. however assistance should be given to those who cannot afford to pay. mining. and recreation water supply. They are expected to rise 20 percent in 1997/98. these unit charges often turned out to be too low to generate sufficient revenue to fully cover costs because mining companies generally used less water than they had estimated. Industries and commercial enterprises pay charges intended to cover the full financial costs of supplying water. Mining companies now pay a monthly lump sum which covers amortized capital costs. The first priority is domestic water supply. For rural water supply. . and 15 percent per year starting in 1998/99 until tariffs reached levels allowing full cost recovery. In some cities consumers face increasing block rates. and 20 percent in 1996/97. communities and authorities must agree on their respective 80 responsibilities and commitments as a condition of government support. so the costs of supplying a minimum quantity of water for basic needs is subsidized by other rural water users.
15 0.43 0.80 0.32 per cubic meter.they maypay less dependingon the value of the agriculturaloutputrelativeto its socioeconomicbenefits.28 12. Outjo and Grootfontein supply their own water from groundwater sources.08 Table 12. Rundu is next to the perennial Okavango River. pipelines (amortization period 30 years).30 14. Thus policymakershave taken action to ensure that water users pay the full costs of supplyingwater. Otjiwarongo is in the central northern area (rainfall of 450 millimeters per year) and obtains water from groundwater sources.000 15. Commercial farmers who build and operate their own irrigation schemesdo not receivestateassistance. Oshakati gets water from a huge piped water supply scheme drawing water from the perennial Cunene River on the northwestern border of the country.220 16.1. The direct running costs of state-supplied water in fiscal 1994/95 was about US$15. or about US$0. However.3 presents inforrnation on consumer tariffs by location and water source. Income from water sales was US$21. Bulk water tariffs are now set separately for each water scheme.33 17.31 (0. Table 12.819 17. Maintain the existing infrastructurewill also require substantial resources. The unit cost of water supply is derived by adding together the capital costs and operation and maintenancecosts.000cubicmeters) Runningcost (millionUS$) Unit cost (US$/cubicmeter) Income(millionUS$) Unit income(US$/cubicmeter) Profitor deficit(US$/cubicmeter) 55.24 per cubic meter of water supplied (irrigation water excluded).26 (0.32 0.Irrigation water. then dividing the total by the quantity of water supplied. 81 . they do not pay bulk water tariffs. Current debates and future prospects Water tariffs mined by amortizingthe capital costs over redemption periods related to investment type-dams (amortization period 45 years).27 (0. Keetmanshoop is in the extremely arid southern part of the country (rainfall of 150 millimeters per year) and gets water from a state dam.01) 65. and Katima is next to the Zambezi River on the northeastern border: rainfall in both places averages 600 millimeters per year).78 0.11 0.93 0. Farmersnornally pay the full financial costs of state-suppliedirrigation water. water pumped from the mine is supplied to consumers.24 21. Since these towns so not receive water from the state.009 17.11 0.8 million. and mechanical/electricalinstallations (amortization period 15 years).455 19.23 (0.05) 55.2 presents more informationon costs of supplying water and revenues from water sales.04) 58. Capital costs are deter- US$0. Water suppliersthus collected a profit of US$0.31 17.15 0. Tsumeb is a mining town.52 0.091 15.98 0.08 per cubic meter.60 0. Table 12.2 Income and expenditures for state-supplied potable water Expenditure income watersaleper fiscalyear and from 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 Potable watersold(1. The deficit between running costs and income has been eliminated since Namibia became independent.02) 58. which will require enormous resources.30 (0. or about Namibia must invest in new water infrastructure to grow and develop. includingcapital and operation and maintenance costs.51 0.30 15.03) 57.
21 0.06 Windhoek Band (cubicmeter per month) 0-10 10-30 30-60 60+ Tariff (US$ per cubicmeter) 0.37 0. As proof of their effectiveness.02 1.71 1. Table12.22 2.22 1.59 1.01 WalvisBay Band (cubicmeter per month) 0-15 15-25 25-85 85+ Tariff (US$per cubicmeter) 0.32 0.Table 12. The media is also playing an important role in encouraging consumers to save wa- ter.21 n.62 2.67 1.32 0.26 0.a. n.52 0. 0. Water pricing. It is therefore essential to implement measures to dampen demand and conserve water.meansnot applicable.41 0.a. water demand in the city of Windhoek has remained at 1990 demand levels.22 n.09 0.32 0.52 2. n.17 0.29 0. n. Table 12.a.41 0.23 Tariff Consumertariff Basic charge Unit cost n.29 0. although its population has grown by 50 percent.28 0. n. n.a.23 0.35 0. n.44 0.a.51 0.29 0.a. n.67 4.a. n. Total 0.a.18 0.4 provides information on consumer tariffs involving increasing block tariffs.49 0.03 0.36 0.47 0. Operating 0. 2. especially steep block tariffs have also been effective.73 1. In many parts of the country the water supply authorities are already using all their water resources. and water awareness has become a regular feature in schools and community development programs.3 Examplesof consumertariffs in Namibia(US$ per cubic meter) Bulktariff Actualcost Capital Keetmanshoop Otjiwarongo Oshakati Rundu Katima Tsumeb Outjo Grootfontein 0. Indeed some local authorities have implemented effective water demand management strategies.03 n.a.a.46 82 .a.84 0. Developing additional water supply infrastructure is getting more difficult and expensive.26 0.41 0.11 0.59 0.4 Block tariffs for urban water supply Gobabis Band (cubic meter per month) 0-10 10-60 60-20 120+ Tariff (US$ per cubicmeter) 0.a.18 n.72 1.a.
and consumption above 30. and US$0. Very few communities have yet organized waterpoint committees to collect fees from residents to pay the costs of operating and maintaining their water installations. based on the assumptions that low income households average eight persons and that each person needs 40 liters water per day.000. plus a fee per irrigated hectare. In the past authorities have supplied water without charge as a social good. reclaimed wastewater water.000 and 20. 0.000 cubic meters per hectare.Block tariff bands are set in accordance with the particular circumstances of each town. "Feasibility Study on the Water Supply to the Central Namib Area of Namibia.004." Windhoek. authorities may cut electricity supplies instead. "Perspective on Water Affairs in Namibia.0327 per cubic meter for consumption between 15. respectively. obtains water from groundwater sources supplemented with water from a state dam. Department of Water Affairs SWA/Namibia. "Directorate of Water Affairs: 25 years of Water Supply to South West Africa. The town has set the lifeline quantity at 15 cubic meters per household per month. and a unit cost of US$0. and impose penalties on people or entities that misuse water. depending on local operating costs and the responsive of consumers to price incentives. A typical example is a board levy of US$15. . . 25. Various years." Govemient of Namibia. Volume 3. References Department of Water Affairs. To enforce payment of water bills. People are now resisting paying for water. Regional and local authorities have the power to limit industrial and agricultural water use.0218. located in the wetter central eastern part of the country (400 millimeters per year). Annual Reports of the Department of Water Affairs. 1996. 1991.000. . plus US$ 40. Irrigation water. 0. water suppliers are not permit83 ted to cut water services since water is essential to life." In Water Demand. Some communities with diesel-driven borehole installations pay for fuel and related transport costs.000 cubic meters." Annual Cabinet Submissions 1991 to 1995. This is an acceptable approach to managing water demand. "The Determination of Bulk Water Supply Costs and Tariffs for State Water Schemes. 20. plus a unit charge which rises with consumption. Households must pay their water bills before they may again receive electricity.6 per hectare per year. adjust tariffs. 1993.000 and 30. Windhoek is in the central highlands and receives 350 millimeters rainfall per year. and water from state dams. Poor households in cities often fail to pay their water bills. It is also their responsibility to remind their constituents of the need to save water to advise them on ways to save water. 1989/90 to 1994/95. Windhoek. Local councils determnine consumption bands the and related unit costs. Conclusion Inhabitants of this desert country have traditionally viewed rainfall and water supplies as a gift of God." Department of Water Affairs. .000 and 25. Windhoek. In Namibia periodic water shortages and droughts make it necessary to impose water use restrictions. This approach is proving an effective means of enforcing water charges. The town obtains water from the aquifer of an ephemeral desert river. Heyns P. September.000. . However. In Windhoek and Gobabis the lifeline quantity is I 0 cubic meters per household per month. Windhoek.0107. Rural communities are still receiving subsidized water supplies.4 per hectare per year for the first 15. Walvis Bay is a coastal town in the Namib Desert where the annual rainfall is between zero and 10 millimeters per year. The city obtains water from an integrated water supply system using groundwater. Tariffs for irrigation water consist of a fixed levy per hectare per year used to support the irrigation boards. "A Digest of the Water Supply and Sanitation Sector Policy of the Government of Namibia. Gobabis. 1954 to 1979.
. Water Demand Managementin Urban Namibia. WATCOMProjectPhase 2-Financial. 1994.June. Accounting and Tariff Policies for the Bulk Water Supply Company. Moorsom R. Coping with Aridity.Ministry of Agriculture.D. 84 . Water and Rural Development. Cityof Windhoek. Van der Merwe B. Regulations.Washington. "Model Water Supply mibia." Ministry of Local Government and HousingAugust.C.September. Brandes and Apsel Verlag. 1995. 1995(a). 1995(b). Frankfurt.Namibia. The Namibian EconomicPolicy Research Unit." City Engineer's Department. 1994. Ernst and Young. Drought Impacts and Preparedness in Na- Van der Merwe B. . "Water Demand Managementin Windhoek.
The customers have to pay the retail price for delivered water.given that the Treaty of Waitangi guaranteesMaori"the full exclusiveand undisturbed possessionof their landsand estates. with minor exceptions. Mean rainfall over much of the country ranges from 600 to 1. Collecting revenues for water services this way ensured that costs were covered by local residential and business property owners without external subsidies. In many cases the local council was the government's agent responsible for allocating the rights to abstract water.13 NEW ZEALAND Frank Scrimgeour Introduction In New Zealand. For these irrigation schemes the government charged a nominal price for the water. although there are significant local variations (Duncan 1987).1. and urban water schemes for both and 3 commercial consumers5 (480 billion cubic meters per year) and domestic consumers (280 billion cubic meters per year).forests. the government has been the monopoly supplier of water to retailers who are responsible for distributing water to consumers. has claimed ownership of water in lakes and 3 streams 4 and has been responsible for allocating water to differenf users (Sharp 1991). The retailer has to pay the wholesale price for the water right and the infrastructure needed to harness the water and deliver it to the distribution system. water is generally not a problem. 37 The authoris gratefulfor information providedby 17 local Thisincludesindustrialand institutional consumers. authorities oneirrigation and company. In addition to consumptive uses.140 billion cubic meters per year). Water is priced in two markets: wholesale and retail. At the wholesale level. but did not charge for them for the water rights.500 millimeters per year. the government was also a retailer when it owned 53 community irrigation schemes. and policy advice should be kept separate from the delivery of services. 85 . urban water schemes required the relevant city to fund the capital works associated with abstraction. The largest users of developed water supplies are agriculture (1. Historically. watering 160. to a lesser extent. At the national level a ministry of environment was established to provide policy advice to the government.000 hectares of land. revenues This has been contested. The price of water to customers (the retail price) was usually based on property taxes which were assessed on either the land value or capital value of property other than land. New Zealand rivers are widely used for recreation. given the country's temperate climate and its many rivers and lakes. The market for water is illustrated in Figure 13. Historically. to deposit wastewaters. to generate electricity and. They of payonly for abstractions rightsand infrastructure. At the regional level regional councils were formed 36 In some cases major industrial users obtain abstraction rights (for their own use) independent city watersupplies. the government.fishesand otherproperty." 34 35 collected did not cover the operating costs of these schemes. 3 Present water pricing practices7 Current institutional andpolicyframework During the 1980s the government attempted to reform water institutions responsible for allocating and pricing water to encourage efficiency and protect the environment. But this charging structure also provided no incentive to conserve water because there was little relationship between the 36 amount of water consumed and money paid. Two principles guided the reforms: government generally should not be involved in commercial activities. By way of contrast. let alone the capital or resource costs.
and other nonconsumptive uses.. With regard to pricing. these may functionas departmentsof councilsor be set up separatelyas local authority trading enterprises or companies wholly owned by the council. impoundsurfacewater. Wholesale price Retailer: City water services Irrigation company Customers Retail price Regional councils. Regional councils charge for the processing of resource consent applications on a user pays basis of actual and reasonableexpenses.who becameresponsiblefor operatingthem. water. safeguarding life-supporting (b) the capacityof air.or community-ownedirrigation schemes must to Figure 13.the councilmonitorscomplianceand requiresholders to pay for all actual and reasonablecosts of compliancemonitoring. councilshave attempted to make users pay all operational and capital expenses necessary to maintain the water system. - Urban water agency pricing goals servationand the protectionof waterresources. They in turn require users to have a "resource consent" to take surfacewater. During the 1980s and 1990smost councils soughtto improvethe The purposeof this legislationis to promotethe sustainable management natural and physicalresources. and ecosystems. soil. ecoto nomic.remedying. or install or alter a bore.Sustainablemanof agementis definedas managingthe use development protecand tion of naturaland physicalresourcesin a way or at a rate which enablespeopleand communities providefor their social. Regional councils are also active in education to promote water con- economic efficiencyof their water services primarilyby reformingtheir institutionalstructures and pricing policies. Most councils created separatebusinessunits or water agencies to manage the water supply functions.and given primary responsibility for environmentalprotection. Act 3S Water agencies have attempted to reformulate charging mechanisms to provide consumerswith incentivesto conservewater. Underthis new regime council-owned water schemes and privately. and cultural well-beingthe health and safety while (a) sustaining the potential of natural and physical resources (excludingminerals)to meet the reasonablyforeseeable needs of futuregenerations. Furthermore.They also hope that reducedpressureon natural waterwayswill help preservethem for recreation. Policymakersbelievethat appropriatewater pricing edue televel ofrnetenter to will reduce the level of investmentnecessary to satisfythe demandsof residentsand so delay the needfor new infrastructure.water agencies recognizethat provision of water at reasonable cost is importantfor sustaininglocal economies.and (c) avoiding.or mitigatingany adverse effects of activities on the environment (Resource Management 1991). However. They have not expected current users to pay for expansionof the systemor to pay a dividend on fundsinvested.once a resourceconsent is issued. divert or dischargesurfacewater. The governmentsold its irrigationschemes to new owners. River Abstraction .tourism. Regional councils are requiredto maintainaccurateinformationon the water resources of their region and to manage these resourcesin line with the objectivesof the 38 ResourceManagementAct. 86 . Urban water agencies.1 Water marketing system apply for water rights from their regional councils.
At least one city appears to charge nonresidential users substantially more than residential consumers while another city distinguishes between consumers who are rate payers and those who are not.a. and also adjusts the price according to season. the country has 20 urban areas with 20.0005 per $1. Several use decreasing block charges.65 NZ$1 in November1995.78 n.1 Summaryof urban residentialwater charges.2 illustrates the prevalent system of charging a fixed fee to domestic consumers.50 0. Data available from Christchurch city are summarized in Table 13. The desire for reform has been mitigated to some extent by concerns about social equity.000 (assuming capital costs are amortized over a period of 20 years at an interest rate of 10 percent). This charge system provides adequate funding to operate and maintain the system without external assistance.3. and eight use fixed charges exclusively.30 n. The fixed charge in this example is based on a property tax to both domestic and commercial and industrial users of approximately $0. three water agencies charge on the basis of volume.a. and fears of voter rebellion against rising user charges. so that as consumption increases the marginal price to the nonresidential consumer falls.a. More than 85 percent of New Zealanders live in urban areas. but it fails to match charges expenditures to consumption. commercial and industrial users receive a water allowance. The degree of urgency agencies feel to revise pricing policies has depended on anticipated future demand (forecasts of population and economic activity) and availability of water stocks at modest cost.a. and pay $0. Table 13. Cost for an urban water agency of using a marginal costpricing mechanism The introduction of volumetric pricing requires investment in meters and funds for meter reading and billing. the desire of most cities to maintain attractive gardens.00 of capital value. which is approximately 7 percent of the total cost of providing water services. meansnot available Note: All cost and pricedata are denominatedin New Zealanddollars:US$. Mean 0.000 or more residents.a.1 summarizes pricing policies for domestic water for the 15 water agencies. four use two-part tariffs.27 per cubic meter for consumption above the allowance. Most water agencies distinguish between residential consumers and industrial or commercial consumers.46 n. 101 266 Meteredcharges (NZ$per cubicmeter) Low 0.1995-96 Number agencies Low Volumetric Fixed and volumetric Fixed 3 4 8 n. High 1. n. Some charge more for water above a specified monthly amount. and a fixed fee plus a volumetric charge to industrial users. Currently consumers face a variety of pricing mechanisms.87 0. Pricing data were obtained from 15 water agencies representing 53 percent of the urban population of New Zealand. In the sample. involving a fixed charge and a volumetric charge.12 0.otherwise firms will find other suppliers or move. Table 13.a.a. The complete metering 87 . Table 13. Current practices of urban water agencies. The annual cost of metering is $930. 54 153 High n. 26 65 Fixedcharges (NZ$per year) Mean n.
300 40 millioncubicmeters $6. they must first decide on the funding target.5 7. However: 39 It is usually assumed that developers will pay levies to fund the capital costs of expanding supplies due to growth.qualityassurance.0 8. Thus far. * Using metered charges alone provides consumers with strong incentives to adjust consumption. and revenues in Christchurch. water agencies then have to decide whether to use fixed fees. None have set charges high enough to yield a return on assets or capture any of the rents.000 $330. Councils recognize that there are fixed investment costs regardless of level of consumption and that there are also marginal costs of consumption. and the impact of the charging mechanism on consumption. However. the preferred instrument.6 Includesexpenditures headworks.3 Metering and its costs: Christchurch City Numberof customers Capacityper year Capitalcost of metering Annualreadingandbillingcosts Total cost of meteringper cubicmeter Total cost of meteringper customer 114.14 Having determined what current charges should cover.000.1 1.000 $. Table 13. 1994-1995 Consumption (billioncubicmeters) Residential Commercial Miscellaneous Total a b 28. Table 13. since the marginal cost is nearly zero. or where it is thought that the costs of metering would be large relative to potential gains in efficiency.reticulation. Yet. on which consumers the burden should fall.4 38. most water agencies have set prices to cover current operation and maintenance costs. Price determination by an urban water agency Councils are responsible for setting water prices.1 Total 13. the revenue stream 88 .of a city is important in the move to volumetric charges because incomplete metering generates significant conflicts between unmetered and metered users due to real and perceived inequities.meterreadingand billing. * Relying on a fixed fee provides no incentive to adjust consumption.2 Water consumption. this method is still used in many areas where meters are not yet in use.0 13.1 Revenues (NZ$per meter) Residential Commercial Miscellaneous Total 4. costs. on Capitalexpenditureon water assets.6 Costs (NZ$per meter) Operations and maintenance a Capitalb 6.1 1. volumetric charges.023 $8.1 9. or 39 both.
Furthermore the introduction of volumetric charges may result in consumption declining by more than operating costs. Separate reticulation is necessary to overcome this problem. Although consumption varies between suburbs with different soil types. account for the water. Most water agencies have debated whether to adjust charges for geographic or household variables. or where agencies have lost records. Community consultation for such a move is standard and requires significant interaction between councilors. which are generally unmetered (because of the expense of maintaining a meter that will rarely be used and because of the risk of a little used meter locking up in a fire). With respect to different households. However. and an average of 20 percent. it also reduces the incentive to conserve water. meters have to be installed. as opposed to a property taxes based on capital or land value. water pricing is not the best approach to address equity issues. Finally. people are connecting illegally. and can vary significantly from year to year as consumers adjust demand in the face of different climatic and economic circumstances. of water is not accounted for. 89 . mains are being flushed after repair. creating funding problems for water agencies. and the wider public.which results from such a charging structure is less stable than that from fixed fees. water agencies recognize that they do not have information about household composition and other characteristics and. about 4 percent of bills are never paid.' Unless the multiple parties can agree to a sharing arrangement. the only option for these multiple dwellings is to charge fixed fees. It appears that in most New Zealand cities at least 10 percent. and implement the regime on multiple dwelling properties. fire services are drawing water. Having determined the funding target and the type of charging structure. or pipes are leaking. Water agencies can obtain estimates of price elasticity of demand from economists or by observing Complicatingfactors associated with volumebased charges The introduction of volume-based charges provides numerous challenges for the water agency to overcome if it is to be able to collect revenues and provide incentives to conserve. Accounting for the water in a system is more difficult than identifying consumers. * Relying on a combination of a fixed fee and a metered charge reduces the volume-based cost (and the political costs. Separatereticulationand metersare being providedin new multiple dwelling properties. Prices are sometimes higher for commercial users (due to their perceived ability to pay) and sometimes lower (for large volumes) due to the lower marginal cost of supplying large volumes. is a significant political step for most cities. problems regularly occur on multiple dwelling properties which have only one water meter. Often. agency staff. even if they did. the installation of meters can be very costly. It is unusual for 40 consumers' responses to new pricing mechanisms put in place in other municipalities. which costs several hundred dollars per unit. all consumers need to face incentives to adjust consumption. and reduces the variation in water agency income. Where pipes have been laid many years ago. Some of this is due to illegal connections to fire mains. Pumping costs vary with the topography of suburbs but generally it is too costly to determine the different costs of supplying different suburbs to be worthwhile. water agencies must accurately predict the impact of pricing practice on consumption. Even with legal connections. A slight variation on this combination approach is to charge a flat fee for a annual allowance. Having resolved all the previous issues. Most water agencies distinguish between commercial and domestic consumers. Water may be unaccounted because meters are malfunctioning. water agencies still have to decide who should bear the burden and whether there should be variations from a standard schedule of prices. Politicalfactors associated with pricing reform The introduction of volumetric charges for water. minimize illegal behavior. given that historically consumers have not paid for water on the basis of use). A water agency must be able to locate the pipes.
but transfers the rents to the new owners unless the tradable permits are initially auctioned off or the rents are taxed away. all the existing flows of some river systems have already been allocated. For urban water schemes. Allocation through bureaucracies on the basis of scientific information alone does not ensure efficient allocation because it does not take into account the value of water in alternative uses. It is also likely that more flexible arrangements will develop whereby individual consumers can resell their rights within a given time period when their demand is less than their right to consume. they do not necessarily set charges high enough to collect a return on capital. the challenge is to complete the metering system to allow all schemes to price water on the basis of volume used (with or without a fixed fee). water pricing policies are likely to change at both the wholesale and retail level. the constituency for change is small. many are ambivalent about the "user pays" principle. Thus.00 per hectare for spray irrigation. some participants have raised technical questions in large part to stop a move to volumetric pricing. Maoricurrentlycomprise 14 percent of the New Zealand'spopulation. yet those who will be adversely affected identify their costs and actively participate in the political process. Irrigation companies: Current policies and practices Irrigation companies do not receive subsidies from the government and must collect sufficient revenues from users to at least cover operating costs. Future wholesale pricing decisions rest on who owns 4 enough to extract some of the rents. As most irrigation companies are owned by farmers served.00 per hectare for assessed dryland. $11. Generally. Although people generally sympathize with enacting water conservation programs. If there is no need for emergency expenditures during the year. Sixty-six per cent of the revenues raised cover running costs while the remaining 33 percent is for emergency capital expenditures. " As long as ownership lies with the crown. they would probably price water high 90 wholesale pricing decisions rest on who owns Maoriarethe indigenous peopleof NewZealandwho retain significantconstitutional rights on the basis of the Treaty of Waitazi signedwith Britishsettlers in 1840.such a changes to be agreed and implemented in less than one year. prices will more accurately reflect capital costs. During the process of public consultation.50 per hectare for border dikes. Irrigation companies are likely to introduce variations in their charges as they collect information on the relative costs of supplying water to different customers.and their approach to charging. Some water agencies have introduced new policies slowly to minimize the political repercussions from change while others have preferred to delay decisions until after local elections. Current debates and future prospects Perspectives onfuture pricing and institutions As the population and economy grows. However. there will likely be a move towards developing water markets and transferable permits for those wishing to abstract water. which raises the challenge of reallocating flows from those who have rights to new or different consumers. If Maori were to regain their water rights. such as repair of the wash out of a river intake. Future retail decisions will evolve in response to experiences with volumetric pricing. This approach will help overcome the allocation problem. A crisis developed in Auckland during 1994 as the city's water reserves were nearly depleted due to unusual weather patterns. A typical example is the Lower Waitaki Irrigation Scheme which charges $27. It is particularly important that water agencies pay attention to fluctuations in water demand and supply. and prefer that the burden falls on others than themselves. funds collected for this purpose are rebated at the end of the year. Encouraging consumers to cut water use would have been easier if the volumetric charge for water had been raised while storage levels were low and re- the surfaceand groundwater. Officials responded by rationing water and conducting a public relations campaign to encourage consumers to conserve. this is less likely to occur. 41 . If nonfarmers become either part-owners or develop new schemes. and $11.
1991..Christchurch.WashingtonD. closer attention will be paid to the cost of capital.duced once normal conditions returned. 1987. Consumers will likely to resist paying the full costs of major new schemes. May. "Improvingthe Efficiencyof Water Allocationto Different Users:theNew ZealandExperience." Environmental Resources and the Market Place. 1991. Further steps are necessary to facilitate the transfer of water between differentusers and to take account of the capital costs of water infrastructure. "Evolutionof Water Institutionsin NewZealand.Frank. "River Hydrologyand SedimentTransport. Duncan. Applying for a ResourceConsent.G. As charging systems are further refined. Resource Management 1991. Inland Watersof New Zealand Wellington: DSIR Bulletin241.M. Sydney: Allen and Unwin. New ZealandGovernment.C.H. and will instead try to obtain subsidies from the city or the national governmentto pay a portionof the costs.B." Paper presentedat the InternationalConferenceon Water Quantity/Quality Conflictsand their Resolution.J. ResourceConsent InformationSeries.M. References CanterburyRegionalCouncil. 1992. Viner (ed. 1994. The developmentof more rational pricing policies is well underwaywithin New Zealand. Sharp. 91 . but there are still considerable institutional problems to be overcome." In A. Act Scrimgeour.). Wellington.B. The current allocation of rents to existing consumersis a political issue which will be reviewedfrom time to time. As the reforms consolidatethere will be further gains in the efficiency of water agencies and irrigation companies and more careful use of water by consumers.
In 1873 the Northern India Canal and Drainage Act-VIII was passed. when the government created the public works department to develop and maintain irrigation works and provided it with separate funds. Past experience Pre-1959 Former Punjab area. Initially farmers paid in the form of agricultural produce. 2 The levy consisted of a percentage of the average market prices of different commodities.typically set to partially recover operation and maintenance costs. In 1934. Charges thus varied each year with fluctuations in agricultural prices. Khairpur. For canals which operated seasonally. Rates for summer (kharif) crops were the same regardless of whether watered with yearround or seasonal canals.14 PAKISTAN Khalid Mohtadullah Introduction Most of Pakistan's water comes from glaciers. and is based on a mix of market prices for various conmodities that changes from time to time. Separate schedules were prepared for other canals once they were operational (Table 14. The provn- cial governments determine these charges as a fraction of average costs of irrigationwater supply. In this region. landlords paid a composite levy for both abiana 4 and land revenue. after six years of stable rates. The water rates in Northwest Frontier Province were fixed a level similar to those in Punjab. but differed for winter (rabi) crops.7 million acre feet). Southern zone. farmers paid one-half the levy for canals operating year-round. the occupiers established the rates for the Kabul River. The history of water pricing may be divided into two periods: pre1959 period and post-1959 period. Northwest Frontier Province. Average annual inflows are about 140 million acre feet. Rates were established for each canal or project to cover its construction costs. and remained in effect until 1959. and industries consume the rest. and 13 for Northwest Frontier Province. To establish the new rates. Farmers in the Indo Pakistani subcontinent have been paying water charges for many centuries. 92 . In 1955 inTigation charges for all canals were returned to the 1924 level (Water and Power Authority Development 1978).1). water charges were reduced to reflect the dramatic declines in agricultural prices and farm incomes that started in 1930. In Pakistan government has been responsible for developing and maintaining most irrigation systems. This led to the existence of numerous rate schedules. In this region. 6 for Bahawalpur. households. The levy was separated into its two components in 1959 to eliminate differences in charge systems between the southern and northern zones. But in 1854. snow melt. and Lower Swat canals in 1931 and for Paharpur canal in 1936. Agriculture uses 97 percent of the country's developed water supplies (135. and parts of Balochistan. These costsare recalculated from time to time. 42 Abiana is localtermfor irrigatonwaterchages. regularizing irrigation water charges. Cities. Upper Swat. comprising old Sindh. canals were classified as barrage canals (including both year round and seasonal canals) or non-barrage canals. farmers began using money to pay their water charges. The percentage of costs to be recovered is a political decision. including 21 schedules for old Punjab. The first schedule specifying irrigation charges for different crops was prepared for the Upper Bari Doab Canal in 1891. Post-1959 A new charging system was introduced in 1959. and rainfall outside the Indus Plain.
such as fodder.14 Note: US$ = 34. farmers still paid less than the costs of operation and maintenance: between 1981/82-1991/92 farmers paid 46 percent of operation and maintenance costs in Punjab.25 5.3 presents the increases that occurred periodically in different provinces between 1959 and 1993 (Government of Pakistan 1978. Despite the increases in water charges.50 3.18 0.75 4. since little water is metered.16 0.00 US$ 0.11 0. Introducing metered charges would be expensive and would require high reliability of irrigation systems. This amount was divided by the village cultivated area expressed in "produce index units.Table 14.15 0.4 shows revenues. eliminate corruption. The flat-rate charge system also placed a greater burden on small landowners and those at the tail-end of 93 . since they know the size and class of their landholdings.1924and 1934 (per sown acre) Water rates 1924 Rupees Sugarcane Cotton Rice Maize Wheat: Year round Summer (kharij) Winter (rabi) 12 6. The charge system made no allowance for cropping patterns or the intensity of irrigation. and provide certainty to landholders with regard to their obligations. and subsidies of irrigation systems in Pakistan from 1980 to 1990.32 0. Farmers were responsible for the charges whether or not they actually cultivated their land. rice.25 US$ 0. Few farmers in Pakistan pay for water on the basis of use. This system is easy to understand and manage.25 4.19 0.5 4. and flat rates.50 6.22 0.15 Water rates 1934 Rupees 1. expenditures. charges which vary based on irrigation output and class of land. Present water pricing practices In Pakistan there are three types of water charges for irrigation water: volumetric charges.25 5. and 1990. Nationwide farmers pay only about 20 percent of total operation and maintenance costs of irrigation systems (Government of Pakistan 1990)." Total charges (or the level of taxation) equaled the produce index units.12 0. But it could provide incentives to encourage water conservation. Table 14. and 15 percent in Balochistan.13 0. The flat rate charge system had several important drawbacks.13 0.00 5.25 7. Usman 1992). This meant that farmers of high return crops.6 rupees Source: Government Pakistan1970. Most farmers in Pakistan pay for water on the basis of irrigation output and class of land. Flat rates were computed as the average charge of the previous three years (1968/69-1970/71). and cotton.5 5. like sugarcane. of Table 14. 31 percent in Sindh. paid the same water charges as fanners of low return crops. Farmers can accurately estimate their irrigation water charges well in advance of harvest and budget for the payment.15 0.35 0.1 Waterrates for major crops.50 5.2 shows the increases in water charges that occurred in 1959 for various crops. 42 percent for Northwest Frontier Province. Table 14. In Sindh Province a flat rate charge system was introduced to simplify administration.
and there has been inadequateexpendituresfor operation and maintenance leading to water losses and inefficiencies (Governmentof Pakistan 1990). water suppliers routinely inflate their costs and underreporttheir revenues. While it is possible that most farmers would adjust their choice of crops in the long-run. Provincial agricultural departments provide limited information about water requirements of crops as part of the package of services they offer on the technology of cropproduction.46-4. Finally there are considerable problems with corruption and poor execution of internal control procedures. Rao 1984). Although there are no reliable estimates of the extent to which irrigators inflatetheir costs.6 provide information on water charges for households and industries. The experts working with farmers under the provincialagriculturaldepartmentsare mainly concernedwith lining the watercourses and providing information to farmers through the water users' associations on proper use of irrigationwater. the current method of assessingwater rates has ledto fluctuationsin farmerincomes. small farmers have less scope for substitution because they grow much of their output for their own consumption.00 (121-173 rupees) per month. 94 . irrigation-intensity based water rates have far greater impacts on small farmers than large farmers. farmers do not actively participate in designing and operating irrigation systems.5 and 14. Urban and industrial water supply For urban and industrial users water charges may be either fixed fees or volumetric charges. Wolf 1986). Tables 14. Sindh's flat rate charge system was abolished in April 1980. Rising of the Indus Plains. Provincial irrigation departmentshave primary responsibility for the operation and maintenance of irrigationsystem and do not deal directlywith the farmersto help them improvetheir water-use efficiency. Ilyas 1994.collections are inadequatedue to inadequateenforcementof charges. and reduce the incomes of those least able to afford the losses (Chaudhry. and Chaudhry 1993. Households with metered supplies tend to pay more.currently there are no extension servicesto help farmers better manage and operate the irrigationworks. It also appears as if provincial irrigation departments are overstaffedby up to 50 percent (Wolf 1986). making it difficult or impossible for them to substitute their labor for that of hired workers and save money (Government of Pakistan 1994). Farmers are not involved in operating and maintaining the irrigation systems. and Chaudhry 1993. Other problems. and as a result the systems do not truly reflect farmer demand (Government of Pakistan 1994). In addition. Farmers need much more help than this if they are to make the changes necessary to truly improvewateruse. Extension services for water management It is essential that farmers improve their water-use efficiency. Majid. Corrupt government officials often charge farmers fees which do not appear in the budgets (Chaudhry. the experience of India with similar irrigation systems suggeststhat true expendituresmay half of the amount reported in government budgets (Wade 1982. especially in the arid areas Currentdebates and future prospects Difficultiesand debates Among the weaknesses of current water chargesystemfor irrigation crop-basedrates are: are not based on the potentialreturnof the crop. Ilyas 1994). about US$3.5-5. Majid. who tended to use less water than other farmers and who in the past paid lower fees to reflect this. Indeedthey do not have expertisein this field.irrigation systems. Residenets of dwelling units sizes 188-250 square yards pay fixed fees averaging US$2.19 (88-145 rupees) per month. if sufficient water is to be available in the future to meet the Pakistan's growingwater needs. Proposals to implement it in Punjab were never implemented. However.
Table 14. 34.and Bahawalpur.60(currentUS$) Source: Governmentof Pakistan1970.02 0. Note: US $ = Rs.5rupeesper acre.56 0. This represents a slight reduction from 1959 rates in old Punjab. 1959 Increase per acre Rupees Wheat Rice Cotton Sugarcane Foddera Maizeb Pulses Oilseeds Minor crops Gardens a b 0. and slight increases in Sindh.62 2.43 6.18 0. Table 14. Northwest FrontierProvince.003-0. Punjab and Northwest Frontier Province 10 10 20 15 25 25 25 0 25 0 25 Sindh 10 10 20 15 25 25 25 25 10 0 0 Balochistan 0 10 0 45-56' 40-41b 25 25 0 25 10 0 95 .05 0.10-0.2 Increases in water rates.01 0.005 same as maize same as maize same as maize same as maize Total chargeswere set uniformlyat 3.37 0.3 Provincial periodic increases in water rates since 1959 (percent) Percentage increases Years 1963 1965 1968 1969 1977 1980 1981 1982 1985 1991 1993 a 1970 b 1972 Source: Governmentof Pakistan1978.07 0.19 same as maize same as maize same as maize same as maize US$ 0.37 1.
05 63.72 0.96 3.72 2.and miscellaneous receipts.24 35.5 percentin Balochistan.25 2.98 1.45 59.45 0.65 73.Table 14.46 4.It is assumedthat the receiptshavebeen not changedover this period.3 percentin Punjab.5.4.73 24.53 19.77 38.60 = 96 .10 1.60.73 149.75 25.57 Revenue per acreb Rupees US$ 15.000 1.08 31.501-2.67 a Includesoperationand maintenance costsfor canals.388 2.operationand maintenancecosts per acre have been projectedto have risen by 5.5 Water rates for unmetered households Average rental value Rupees < 400 401-500 510-720 721-1.08 0.tubewells.65 118.370 4.98 3.500 1.71 0. CurrentUS$.43 3.70 24.41 1.68 20.81 4. Table 14.55 2.13 2.73 98.60 3.84 2.200 Water rate per month Rupees 34 50 85 145 202 209 219 225 60 percent of average rental value US$ 0.52 77.7 in NorthwestFrontierProvince.83 24.000 1.63 .50 Note: 1US$ Rs.04 6.90 0.9 percent in Sindh. b Includeswater rates. 34.500 Area of house Square yards 62 125 188 250 375 500 750 1.60 103.48 124.25 102.83 0.94 1.12 1.84 6.44 2.15 4.90 Subsidy per acre Rupees US$ 38.33 4.60 0.90 0.25 3.55 127.85 2.158. drainage.33 6.08 31.18 1.389-4.and 6.499 > 4.88 88.88 143.10 112.98 28.95 49.and others.03 1.71 0.60 1. 34.77 55.4 Historical operation and maintenance expenditures and revenues per acre Year 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 Cost per acrea Rupees US$ 53. IUS$ = Rs.10 1.371-4.75 0.001-1.58 131.57 0.19 5.78 31. Note: For the period 1989-91.
there is a need for new institutional approaches (World Bank 1994). The provincial irrigation departments shall be transformedinto autonomousbodiesprovincial irrigation and drainage authorities under statutory arrangements - much more in the operation and maintenanceof the irrigationsystems and managementof their finances. 2).71 1.more equitabledistribution of water supplies. The next stepswill dependon experiencein implementingthe reforms. Pakistan Development Review 32 (4). "ReducingGovernment Liabilities. .43 13. . 1990. If the pilot projects succeed. and higher farm output and incomes.000 > 20. including new institutions which involvefarmersin all aspectsof irrigation system management. Islamabad. vol. "Irrigation Water Charges with authority to collect revenues and expend funds. tradeable water rights.Table 14. Financially self-accountingarea water boards will be createdalong the linesof area electricityboards. Produced for the Governmentof Pakistanby John Mellorand Associates. References Chaudhry. and at a point in the future. Provincial Irrigation and Drainage. 1993 (a).00 0.34. This would be a bold decision to transform the largest irrigation system in the world. Pakistan's extensive irrigationand drainagesystems have been deterioratingbecauseof inadequatemaintenance and utilizationbeyond design capacities. 1 and appendices vol. .02 Pricing and institutional reform issues The proposed reforms will involve farmers As the developmentof water supplies becomes increasinglycostly it is essential to recover costs from users.Effective Performanceof Irriga- . 1970.Majid.001 Note: IUS$= Rs.40 0.November.001-20. and Needed Redistribution.21 0. Assessment. "Nation Wide Study for Improving Procedures for Assessment and Collection of Water Charges and Drainage Cess. Farmers using common distribution networks shall be encouragedto form water users groupson a pilot basis.30 0." Water and Power Development Authority.40 35.000 5. Governmentof Pakistan. Based on the results of the pilot projects a model will be developed to implementnationwide. 1993.34 0. It is hoped that these groupswill play an importantrole in the operation and maintenance of distribution works.the units can increasethe level of participation and extend the program to the remainingcanal commands. June. Among the options being consideredare market-basedincentivessuch as volumetric charges for irrigation and drainage. 1978. Both these approacheswill requiremajor institutionalchanges. The govemnment now taking steps to reform instituis tions. "The Policyof IrrigationWater Pricing. The role of farmers organization will be crucial for the success of the system.35 11.60 7." In Pakistan: Aims. Akhtar Hussain CommitteeReport1.000 gallons) Residences Gallons per month Rupees US$ Rupees Industries US$ < 5." (main report. 97 and Cost Recovery. The reforms should lead to more reliable water supplies. To make irrigation systems financially sustainable.6 Waterrates for meteredsupplies:Householdsand industries (rates per 1.65 24. preferably around canal commands. and Chaudhry.70 15.
Wolf. "Water Resources Management:Pakistan Experience. Ilyas.Sri Lanka." Irrigationand Power Department. England. I. 1993 (b)." Report 11884-Pak.Lahore. Shams ul. M. Colombo. "The System of Administrative and Political Corruption: Canal Irrigation in South India. "Introduction Discussionon to Water Rates.C. James. London. 1986. CommentsOn Cost Recovery and Irrigation Water Pricing. "Cost and Framing of Irrigation System Operation and Maintenance in Pakistan. 1984." Overseas DevelopmentInstitute Paper lOF.D. "Water Markets Plan to Harm smallFarmers. "Irrigation Water Charge Structurein Pakistan. 1994. 1982. Washington.September 30-October 2. Producedfor the Governmentof Pakistanby John Mellorand Associates." InternationalWater and Irrigation Management Institute (IIMI). 1994. Wade. Agriculture Operations Division. M. Rao. 1). "Pakistan Irrigation and Drainage: Issues and Options. Robert. 1992. Usman. World Bank. 1993.Inc.C." The DailyDawnD. D.vol. P. Mulk. "Agricultural Prices Study (main report). 1994. 98 . Producedfor the Govemnment Pakistanby John Mellorand Asof sociates. ." Paper presented at the First Annual International ConferenceValuing the Environment.K." Journal of DevelopmentStudies 18 (3): 287-328. SouthAsia Region. Washington. 1993. "Institutional Reforms to AccelerateAgriculture"(main report.tion Departmentand use of Abiana (Water Rates)for IncreasingFarm Output.
Betweenthe late-1930s and the mid-1970s. However there were restrictionson its use . beneficiarieswere expected to pay two annual fees. set by the state and collected by farmers' associations. Water pollution was an issue in only in few subsectors(Fradeand Alves 1991). Water is consideredprivate if it comes from most sourceson private lands.1 Wateruse by sector(percent) Sector Agriculture Hydroelectricity Industry Urban Share 59 24 11 6 owners of water are free to use and manage it with few significant restrictions (Cunha et al. Water from springs on privateland is also public if it flowsto public water sources. subjected the perpetratorto fines and penalties.the governmentbuilt irrigation systemsto providewater to irrigate75. Table 15. Water is defined as public if it comes from lakes and lagoons. rivers and streams.000 hectares of farmland. The beneficiariespaid less than the costs of operations and maintenance.1presents the shares of water use by sector (Direc9cao Geral dos Recursos Naturais 1992).15 PORTUGAL Jodo CastroCaldas Introduction Public bodies or private individuals can own water resources in Portugal.and springs. However. The first of the two fees 99 . Publicly-owned water can be granted to individual users through concessions for hydraulic projects. including lakes and lagoons (not fed by public water sources). Private Table 15. Water pricing structures for public irrigation systems illustrate some of the problemsof past water pricing practices. 1980). Past experiences In the mid-1970s Portugal's public water system served only 46 percent of its population. there was no charge for the use of public water.includinga prohibition against the significant discharge of pollutants . groundwater. Traditionally. Industriesownedmost of their water resources.which made it easy for them to avoid viewing water as an economic good.which if violated. Public water granted in perpetuityfor irrigation is also considered private. the state imposes fees to cover the costs of impoundingor consumingwater which exceedthe publicbenefits from the project. irrigated area never exceeded 60 percent of plan (it is 7 percent of total irrigated area in Portugal) (Direc9cao Geral dos Recursos Hidraulicos 1987). Once the irrigation works were completed. or springs on public land. and fees and penalties for the dischargeof pollutants. In the early 1990s it was estimated that about 43 percent of Portugal's 16 billion cubic meters of available water resources were being utilized.with municipalities paying the remainingcosts using state subsidies (Frade and Alves 1991). navigable channels. In these cases.
Table 15.3 Adaptedfrom Fradeand Alves 1991. the largest consumers paid a larger share of the burden.2PTE per cubic meters for office and commercial consumption.6 percent. to 410 hecto cubic meters 43 per year. including operation and maintenance costs and capital costs. Tables 15.average regional prices for household users can vary from 61-165PTE per cubic meter.7 1980 37. Industry Most industries supply their own water.no farmerpaid more than the incrementalincrease in the value of the land due to the investment. For example.6 1982 42.8 1981 40.was distributedamongindividualbeneficiaries in accordancewith amount of irrigated land they owned. Yet costs were not shared equally by all users: 43 1 hecto cubicmeter= I millioncubicmeters 100 . the economic and social value of the irrigatedcrop.the overexploitation of groundwater aquifers requires many industriesto use water-savingtech1US$= 150PTE I Developments in Lisbon illustrate the changesoccurringthroughoutPortugal.to 405.from 670 PTE per month for households.2 1983 48. By the early l990s water users were paying enough to cover nearly all system costs. and soil quality.6presentthe prices and fees of the city of Fundao. and encourage consumers to conservewater and pay for it (Table 15.5 and 15.consumptionper capita rose 14. Until the middle of the 1970s. The second fee was meant to reimbursethe government for its capitalexpendituresover a periodof -intended 50 years.revenueswere sufficientto cover operation and maintenancecosts. Interest rates to farmers varied dependingon soil quality:however.3and 15. Thus the volumeof water suppliedby publicsystemsrose by nearly 74 percent. reflecting different cost recovery and revenuecollection policies.9 PTE per cubic meter for consumptionbelow six cubic meters per month and 179.720PTE per monthfor large users.1 1984 55. the percentage of population served rose from 46 to 65 percent. regulations ensured that lower-incomehouseholds paid less.2Lisbonaveragewater prices. but not to coverthe capital costs (Baptista 1993).3 Source: 1976 40. reaching 110 liter per person per day. Betweenthe mid-1970sand the mid-1990s.9 1985 61. Indeed.1994(PortugueseEscudo(PTE) per cubic meter) 1975 41. Presentwater pricingpractices Urban The main developmentin the urban sector over the past twenty years has been growing water use per person and an increase in the percentageof the population served.5 1987 68.4 1977 40.to cover operationand maintenance costs .6 1978 40. Different municipalities charge different prices and fees. This increasingdemandhas led state and municipalauthoritiesto search for ways to transferoperationaland investmentresponsibilities to the private sector. and the service fees from 170-670PTE per month.6 1986 64. in 1996the price of water in Lisbon was 22.4. often from groundwatersources. The volume-basedprices and service fees are presentedin Tables 15.2) as an economic good (Frade and Alves 1991). This fee was adjustedby applyinga coefficientreflectingmetereddeliveries of water per hectare. However.' Fixed fees also differed depending on type of consumer.9 1979 35.
2 Table 15. Irrigation water pricing policy may encourage farmersto use water more efficiently by encouraging farmers to grow watersaving crops and adoptingmore efficient irrigation technologies.720 Table 15. About 90 percent of Portugal's 660. The case of Sorraiaillustrates the impact of price levels and structures on choice of crop grown. 1996 (PTE per cubic meter) Level of consumption (cubic meters per month) Less than 5 5-10 10-15 Price 55 70 80 15-20 Greaterthan 20 170 300 101 .5 FundAowater prices. Table 15.4 times morewaterthan cities.4 179. Public investmentsin irrigation sys- tems have been relatively small and have not expandedsignificantlyrecently. 1996 (PTE per cubic meter) Level and type of consumption Lowest household consumption Highest household consumption Lowest commercial and other consumption Highest commercial and other consumption Fee 670 294. The new common agricultural policy and GATT agreements. 1996 (PTE per cubic meter) Level and type of consumption Price Household less than six cubic meters per Household more than six cubic meters per Commercialand other consumption 22.nologies and practices as total water consumption by industry increases.000 irrigatedhectares are watered by privately-owned managedirrigation and systems. has created a new frameworkfor farm production. Frade and Alves (1991) estimate that at the beginning of the 1990s.540 1. Agriculture Irrigation uses more water than any other sector in Portugal.3 Lisbon water prices. In 1996 industriesin Sines. an industrial area in the south. Farmers' profits now dependon their ability to compete with agricultural producers in other countries. which created a common European market for agricultural products and eliminatedprotection of the agricultural sector.industriesused about 1. paid 55 PTE per cubic meter for water.consuming60 percent of the total developedwater supplies (Direc9ccoGeral dos RecursosNaturais 1992).000 hecto cubic meterswater per year.9 79.4 Lisbon monthly water fees.330 405.2.
Table 15.6 FundAomonthlywater fees, 1996 (PTE per cubic meter)
Level and type of consumption Lowest consumption Highest consumption Fee 170 1,000
In 1991 farmers in Sorraia grew three main crops on 13,000 hectares irrigated with a public system: rice (46 percent of irrigated area), maize (27 percent) and tomatoes (12 percent). About 17,200 cubic meters of water per hectare were applied for rice, 7,100 for maize, and 5,400 for tomatoes. Charges for water used for rice were based on quantity alone, while charges for maize and tomatoes were, in addition, based on area cultivated and crop grown (volumetric charges accounted for 80 percent of total water charges in the case of maize and 63 percent in the case of tomatoes). Water charges averaged 1.43 PTE per cubic meter for rice, 1.78 PTE per cubic
meter for maize, and 2.26 PTE per cubic meter for tomatoes. Thus, average water charges were lowest for the most water consumptive croprice. Historically, prices of irrigation water have not been set to encourage efficiency. Instead prices have been set to provide subsidies for the cultivation of particular crops or to support agricultural prices. Charges for irrigation water have rarely covered operating and maintenance costs. Urban and industrial water users pay two to five times more for water than farmers. Table 15.6 presents water prices paid by various sectors for water from public water projects.
Table 15.7 Prices paid by various sectors for bulk water from public water systems, 1991
(PTE per cubic meter)
Region Sorraia Divor Mira Roxo n.a. meansnot available. Agriculture 1.43 2.50 2.65 2.90 Urban n.a. 4.5 6.0 7.7 Industrial 6.8 7.0 8.0 10.0
Current debates and future prospects Urban The main goal for the urban sector is to increase the percentage of the population served by public water systems to 95 percent by 2020, compared with the current 65 percent. Another goal is to increase the supply per capita to 150 liters per person per day supply by 2020, an increase of 36 percent over the next 25 years. If
these goals are achieved, water supply will exceed 900 hecto cubic meters per year in 2020, an increase of nearly 120 percent over current levels. Portugal is committed to developing a water pricing structure so that prices are sufficient to cover all costs of the system, provide incentives to conserve, and are affordable to low-income households. These objectives can be reached through a tiered pricing system, with low rates for a minimum monthly quantity for households and higher rates for higher levels of consump-
tion (Frade and Alves 1991). The movement towards privatizingurban water supply services will help in achievingthe goals.
to pay a larger share of the costs of providing irrigationwater. References
Baptista, F. 0. 1993. A Politica Agraria do
Estimates suggest that industrialwater demandwill reach nearly5,000 hecto cubic meters by 2020, an increase of 400 percent over the early 1990s. This is in spite of an expectedincrease in the use of water-savingtechnologies. Water pollutionwill be the main problemarising from water use by industry. So far, Portuguese industryhas largely been able to avoid fully internalizingthe costs of its pollution, but this is not expectedto continue. Water charges in the futurewill certainlyinclude the costs of treating discharges, resulting in sharply higher water chargesto industry(Frade and Alves 1991). Agriculture Irrigated area in Portugal is expected to increaseby more than 200,000hectares over the medium-term,mainly through the construction
of new public irrigation systems and the reha-
Estado Novo. Porto, Potugal: Edig6es Afrontamento. Cunha, L., A. Gon,alves, V. Figueiredoand M. Lino. 1980. "A Gestao da Agua. Principios Fundamentais e Sua Aplicacao em Portugal" Fundacao Calouste Gulbenkian, Lisboa. Direcgcao Geral dos Recursos Hidraulicos. 1987. "Inventario dos RegadiosExistentes no Continente." Lisboa. DirecgcaoGeral dos Recursos Naturais. 1992. "A Utiliza,co da Agua em Portugal." Lisboa. Frade, V. and A. Alves. 1991. "O Mercadoda Agua em Portugal." Volume I and II, Direcccao Geral dos Recursos Naturais, Lisboa. Leal, G. 1991. "Os Regadios." In Enciclopedia
Portugal Moderno (Agricultura e Pescas).
bilitation of the existing systems. Still to be resolved is the questionof how to charge for irrigation water. Decisions will depend on overall agriculturalpolicies. With the increase in urban and industrial demand for water, it is almost certainthat some water will be reallocatedfrom agriculture,and that agriculturewill be required
Lisboa,Portugal:Edic6esPomo. Pereira, L. S. and V. C. Paulo. 1985-1987. "Agriculturae Gestao da Agua." Avalia9ao e Previs6es de Necessidadesde Agua para Rega em Portugal. In Anais do InstitutoSuperior de Agronomia, XLII, 133-165.
16 SPAIN Josefina Maestu Introduction Water in Spain is a highly valued resource. Much of Spain's history has been linked to coping with its water cycle - droughts, seasonal variations in rainfall, and floods. Water is relatively scarce and impressive public and private effort has been devoted to assuring it is available when and where it is needed. Today there are more than 1,000 dams in Spain covering more than 5 percent of its total surface area. Spain has 9,600 kilometers of irrigation channels and pipes and 5,000 kilometers of urban channels and pipes. Water capacity in Spain totals about 53,000 million cubic meters, including 40,500 million cubic meters of regulated surface water, and 14,000 million cubic meters of renewable underground water resources. About 80 percent of the developed water supplies is used for irrigation, 11 percent is used for municipal purposes, and about 5 percent is used for industry. Groundwater sources supply about 22 percent of the water used in irrigation and 25 percent of the water used in cities. Water availability varies by region. Water scarcity is especially acute in southern Spain and the Balearic Islands: these regions have shortages even in years of average rainfall (see Table 16.1).
Table 16.1 Water resources and demand in various basins (million cubic meters per year)
Basin Irrigation use Other uses Total Resources Surplus or deficita
Norti Galicia-Costa Ebro CuencasIntenas de Catalunya Duero Tajo Jucar Guadiana Guadalquivir Segura Sur Baleares Canarias
548 405 6,820 290 3,508 1,947 2,402 2,231 3,097 1,626 827 275 267
1,531 388 4,631 1,012 594 1,500 1,145 323 919 235 336 105 105
2,079 793 11,451 1,302 4,102 3,447 3,547 2,554 4,016 1,861 1,163 380 372
7,526 1,580 14,364 1,571 8,623 7,174 3,582 3,329 3,542 1,515 1,119 372 372b
-5,447 -787 2,913 269 4,521 3,727 35 775 -474 -346 -44 -8 0
a There are localdeficitsthat lead to overexploitation aquifersof about 6,000millioncubicmetersper year. of b Includingwaterfrom desalination. Source:NationalHydrological Plan 1993.
The discharge levy. greater transparency in water bills.and public uses). regulation levies. inde46 US$1=120 pesetas. and irrigation associations. lasted four years.2depicts the average tariffs chargedto different categoriesof users.000 millioncubic meters.March 1993 105 . Water basin agencies. 45 Water basin agencies use three types of tariffs. and distributionof water. or public companies(Seville). At the same time. mixed public-private bodies (Barcelona).A two-tierwater management system jectives in mind.farmers were offered loans at interest rates of 1. The increasing social. The agencies are responsiblefor developing water resources. In addition. Table 16. environmental. tariffs for water use. and dischargelevies. Subsidies ranged from 60-100 In Spain there is a distinctionbetween resource development.is leading policymakersto consider demand management measures. Agencies now often use two-part tariffs with increasing block rates. Municipalitiesare responsiblefor collectingand treatingwastewater. operate in 11 water basins in Spain. will doubleover the next 10years and triple over the next20 years if current water use trends continue. tariffs now often fully cover operating costs and an increasingshare of capitalcosts Tariffs for resource development The water deficit. irrigation waterassociationspay accordingto hectares covered.the traditional supply-side solution . However. in turn. suchas residential. The local units are. responsible for distributing water and sanitation services to urban users. and prices which differ depending on class of user. currently estimated at 3. is calculated individuallyfor industrial and municipalwater systems by multiplyingdischargevolumes by a coefficient reflecting the concentration and composition of pollutants being discharged. These tariffs are calculatedindependently each waby ter confederation.and affected12millionpeople.their delivery is often contracted out to private enterprises (Zaragoza). industrial. Today Spain is designing a system of tariffs to provide incentives to improve wateruse efficiency.commercial.which have evolvedfrom user organizationsestablishedin 1926to developand manage basin resources. and financial costs of developingnew water supplies. and supplying water to municipalities. Two key issues facing decisionmakers today are managing cyclical droughtsand dealingwith the increasing concentrationof water demand along the coast and during the summerdue to the development 4" of tourism and irrigated agriculture. industries. independent industrialusers.and farmers.and are designedto cover the capital investmentand operation and maintenance costs of specific waterworks. Presentwater pricingpractices Water tariffs of basin agencies were designed in the first half of the centuryto increase farmers' rents with economic developmentobThe most recent drought ended in late 1995.and for each user (based on the capital and operational costs of the user's infrastructure). Major problems today percent of the cost of waterworks. includingcapital and recurrent costs. Both regulationlevies and tariffs for water use. including the development of local water markets in places where there is significant competitionfor water. planning. Urbanconsumersand independent industrial users pay by cubic meter.purification.' However. and hydroelectric producers pay according to kilowatt hours of electricity produced. municipal water tariff structures are now being designed to recover costs and provide incentivesto conservewater. and the collection and treatment of wastewater. are paid by beneficiariesof water infrastructure.5 percent to cover the residual investmentcosts. intendedto account for environmental externalities.the transportation. In 1985 a new law was enactedbased on the principlethat the people benefiting from water investments should pay their full costs.
004 0. about 150 million cubic meters are movedfrom the Ebro to the north.045 0.2 Averagetariffs for differentcategoriesof users(US$ per cubic meter) IrrigationAssociations 0.02 0.02 0.0008 Source: Ministry Public of Works.002 0.003 0.027 0. Table 16. 106 . Source: Ministryof PublicWorks. Enviromnent and 1994.013 0.0015 0.01 Guadiana: Montijo Pefiarroya CuencaAlta Vicario Tajo: Alberche Entrepefnas Jerte Arrago 25 26 14 26 0.011 0.004 0. in accordance with 1985 water law.01 0. and about 40 million cubic meters are moved from the Ebro to ter for irrigationwater and US$0. The regulation levy for the TajoSegura water transfer is US$0.0004 0.002 0.003 0.and Enviromnent1994.002 0.007 0.3 includes examples of the variationin regulationleviesfor differentusers.02 0.004 Hydroelectricity companies 0.003 0.0015 0.008 Municipalsupplyorganizations 0.013 0.045 a Volumetric price equivalentto or less base charge.Transport.0001 0.93 4 12 64 0.01 0.3 Sample charges to different categories of users (US$) RiverBasin Irrigation per hectare per year per cubic metere Municipal per cubic meter Industrial per cubic meter Duero: Almar Duero Pisuerga Arlanz6n 160 20 27 58 0. Chargesfor water transfers.0004 0.004 0.01 0. About 300 millioncubic meters of water per year are transferred betweenthe Tajo and the Jucar and Segura rivers. Transport.01 0.16 per cubic me- maintenance. Table 16.004 0. This levy is comprised of an annual rental fee for the use of the infrastructure(derived by multiplyingthe present value of the initial investment costs by 4 percent) and the annual costs of operation and Catalonia.0006 0.004 0.027 0.027 0.pendent valuation by each basin agency means that tariffs within and betweenbasins are highly variable.004 0.002 0. Table 16.19 per cubic meter for municipal supply.
Many cities use seasonal rates to encourage conservation in periods of higher water demand. In small. in most cases. Coastal cities may collect a larger proportion of revenues through fixed charges than inland cities. Table 16.86 per cubic meter. Types of municipal water pricing structures. The ten largest cities in Spain charge for sanitation and wastewater treatment.4 Average price of municipal water in Spain (US$ per cubic meter) Water Supply 0. In Barcelona. Barcelona (US$1. US$0.Municipal water charges Ninety-six percent of municipal water in Spain is metered. farmers in traditional irrigation projects who do not benefit from public infrastructure or 107 .56 Sanitation 0. Industries pay more for sanitation and wastewater treatment than commercial and domestic users. In Spain.16 Total 0. Different industries pay different prices for water.and medium-size cities. and thereby discourages building excess capacity. They are designed to cover the costs of irrigation infrastructure. It encourages users to assess their true needs.98 Note: Averagepricesweightedby consumptionin differentblocks.27 per cubic meter. In bigger cities.and Segura 1995. and Madrid . Service quotas and consumption charges to industrial and commercial users often vary according to diameter of water meter.00 per cubic meter) have the highest water prices (Table 16.25 Wastewater treatment 0. industries face the same tariff structure and levels as domestic users.4).according to the pollution content of the discharges by each industry.12 per cubic meter (Ceuta).25 per cubic meter. in order to distribute fixed infrastructure costs between permanent and nonpermanent residents.98 per cubic meter.33 versus US$0. commercial users pay US$1. Source: SpanishAssociationof WaterSupplyand SanitationSurvey 1994. based on the area irrigated rather than on volume of water used. Irrigation water charges Water prices paid by farmers are. maintenance and operations both of the basin authority and the irrigation association.in cities such as Barcelona.98 per cubic meter. About 38 of Spain's 50 main urban centers covered in the survey use increasing block rates to encourage the largest users to conserve. Variations in prices are due in part to the practice of some municipalities of including sanitation and wastewater treatment services in the price for water.75 per cubic meter) and Madrid (US$1. and domestic users pay US$0. industries typically pay a two-part tariff-a fixed charge depending on volume contracted. which makes up between 8 and 33 percent of the total tariff.29 cubic meter (Huesca) and US$0. as in other Mediterranean countries where water is pricing structures that promote conservation are well established scarce (see Aguas de Barcelona 1992 for survey results). Valencia. Water prices average about US$0. Charging on the basis of water meter diameter is intended to reflect the differential costs that larger users place on the design of the system. but there are cities with prices as low as US$0. In addition. 16 percent of municipalities (mainly smaller cities with direct municipal management) subsidize water. However. and a variable charge (increasing block tariff or flat rate) depending on volume consumed. industries pay an average of US$0. Wastewater charges are set according to water use and .
7per hectareper year.16 per cubic meter (US$1. Farmers pay a fixed charge of US$129per hectare(to cover the costs of rehabilitating existing distribution channels to prevent water losses).the private costs of dams and reservoirs. US$54. and US$0. year) and US$0. Currentdebatesand futureprospects Recent experience with water pricing in Spain can be summarizedin terms of financial efficiency. flat rates per volume (where there is metering).3 to US$266 per hectareper year (Centro do de Estudios y Experimentaci6n Obras Puibli1995).05 per cubic meter. The total charge averages US$258 hectare. and US$0. of which US$112.03 per cubic meter.1 per hectare for operating and maintenancecosts (primarily energy). Farmers also pay fees to irrigationassociations. The San Martin de Rubiales cooperative provides water pumped from the Duero river to 225 hectares. There are three types of pricing struc- tures for irrigationwater: flat rates per hectare.and fees to cover the resource costs of the water basin agencies.farmersmay also pay up to US$0. This makes it difficult to raise tariffs or to fully apply the principlethat the user should pay. cas Transport. * In about 16 percent of municipalities.who use infrastructure that has already been paid for. which amountsto about 190 million dollars (including the management costs of basin confederation). Farmers which are membersof water associations (cooperatives) in Genil-Cabra (Cordoba)and San Martin de Rubiales (Burgos) pay two-part water tariffs (Segura 1995).and equity.pumping. and two-parttariffs involvinga fixed chargeper hectare irrigated and a charge per volume of water consumed. sustainability.the private costs of dams and reservoirs. * The level and structure of tariffs does not provide incentives to Spain's largest water users-irrigation farmers-to use water efficiently. Tariffs for urban water users are more progressiveand efficient.8is the volumetric charge. Many of these are small municipalitieswith servicesprovidedby nonspecializedmunicipal officers.5per cubic meter in times of droughtor for occasional or emergencywater. Farmerspay a fixed rate of US$58.200 per hectare per year): the higher chargesare paid by associationsobtainingwater from groundwatersourcesthat need pumpingor from major water transfers.pumping. and the Environment (1995) estimates that water associations pay between US$0. with a range from US$8.5 is the fixed chargeand US$145. development is little information available on There prices paid by farmers to their water associations. This is not sufficient to cover the water bill of the central government.33per hectare for the resource (payable to the basin authority). However.008 per cubic meter (US$60 per hectare per. The Ministry of Public Works. The movementtoward providand ing servicesprofessionally throughwater supply agencies (which charge enough to cover their costs) has enabled many municipalities to remove water services from their general budgets. Problems with the present system of water tariffs * Tariff revenuesof basin agenciesare not suf- ficientto pay for the Clean Water Bill. The Genil-Cabracooperativesupplies irrigationwater pumpedfrom the Genil river to 15. A recent study carried out in 42 irrigated areas estimated that farmers pay an average of US$84.and fees to cover the resource developmentcosts of the waterbasin agencies. * Charges for municipalwater and sanitation services are set by regional govermments. Each year basin agencies collectbetweenUS$140152 million. Farmers pay fees to irrigation associations.000hectares.operating costs are subsidized(SpanishAssociation of Water Supply and Sanitation1992). Present pricing structures for irrigation water.observations show that farmersin some associationspay nothing. pay little or nothingfor water. 108 .
There is a growing consensusthat tariffs should generally be increased and should be similar across sectors. the water price of US$0.03 percent of total costs). includingwater supplyagencies. Somebelievethat to provide incentivesto conserve it is essential to move to full economicpricing of water and to encourage the developmentof water markets.and increasedpractice of including wastewater collectionand treatmentcosts with water tariffs. and encourage them to take measures to conserve water and reduce water losses. including types of crops grown . Some analysts argue that water prices should reflect farmers' abilities to pay and shouldbe set with considerationfor their impact on agricultural production. Othersargue that water is more than an economicresource. and. This would delay the need to develop new water supplies.gas services)becauseit is a public good. Conclusion To finance the investmentsproposedin the DraftNational HydrologicalPlan (1993) and the costs of managingpublicwater suppliesrequires a new tariff system. * Beneficiaries of public waterworks should pay the full costs of the water supply.argue that tariffs shouldreflect the differentialcosts of conveying and treating water and the operational costs of different agencies.public authorities should consider the economicand social impactof reduced productionand job losses in settingwater tariffs (Sumpsi-Vifias 1994). recently. * Water tariffs should includecorrectioncoefficientsto reflect relative water scarcity and externalities.which would also reduce water losses. Others. family size. Tariffs can also have an important role in encouragingwater conservation . Others argue for subsidizingthe consumptionof the poor throughmore direct instruments. polluters should pay the full external costs of their activities. users know about it.a major priority of government. Other important trends in pricing include more transparent water accountingand clearer water bills. with different tariffs based on household income levels. 1994).16per cubic meter covers all resourcedevelopmentcosts (but accounts for only 0. A major institutionalreform under study is the developmentof water markets for allocating water. This creates confusionand has ledto some nonpaymentof bills. They cite mainly empirical studieswhich show that changesin wateruse and allocation do not come about withouttechnical and institutional prerequisites in place: water-savingtechnology (drip irrigation. reduced use of cross-subsidies. Water bills also include surcharges for water-related environmentalservices. and credit lines must be available to finance their purchase. These analysts also argue that the usefulnessof water pricesto encouragewater use efficiency and conservationdepends on local circumstances.Debatesand consensus Views on how to charge for water range across a spectrum. Some political parties argue that water prices for lower incomegroupsshould be subsidized through free or low-cost provision of a monthly minimumvolume of water. not just those who benefit from public waterworks. differences in water endowmentsshould be solved through interregionaltransfers. In addition. and that private appropriation water has led to of the displacementof communities. Consumer associationsargue that domestic users across Spain should pay the same water 109 tariff (as they do for electricity. Others challenge the assumptionthat raising water prices will lead to greater efficiency (Naredo. in Almeria. For example. but is too low to encourageusersto conservewater. especially during droughts or in areas . et al. Tariff increases would provide signals to farmers regarding relative water scarcity. types of industry. sprinklers) must be available. raising tariffs would provide basin agencies with resourcesto finance maintenanceand replacementof shared infrastructure. The Draft National HydrologicalPlan proposes the following: * All users should pay a basic tariff. In urban areas water bills are becoming increasingly complex.telephone.
Ministerio de Agricultura. Madrid. 1993.M. 1994." Revista de Estudios Agrosociales 16 (Enero-Marzo). Centro de Estudios y Experimentaci6n do Obras ThTblicas (CEDEX)." (mimeograph). May 17-19." Paper produced for Eurostat project on Environmental Pressure Indicators. "Evolution of Water Tariffs in Spain and Present Debates. ECOTEC Research and Consulting. MolinaHerrera. 13-16 Diciembre de 1993. J. "Aprovechamiento del Agua en las Zonas Regables Espafiolas. 1994. 1996. Ministry of Public Works. 1993. National Plan for Sanitation and Wastewater Treatment.." (mimeograph). 1995. 1994. Ministerio de Agricultura. "Comparacion de la composicion del Precio del Agua en Diferentes Ciudades Europeas. Transport and the Environment. "European Water Pressure Index. Porta Vista. Aguilera. F. "Inforrnacion Tecnica y Gestion Economica del Agua en los Regadios Espafnoles. Pesca y Alimentacion. Segura. Ministerio de Agricultura. References Aguas de Barcelona. Ministerio de Agricultura.1995. . "Eficiencia Tecnica en la Utilizacion del Agua para Riego. Murillo J. "El Coste del Agua y el Consumo. J. Villasante. Morocco. 1994. Madrid. Lopez-Galvez. Pesca y Alimentacion. Colegio de Ingenieros de Caminos.. Draft National Hidrological Plan. "La Gestion del Agua para Regadio. El Caso de Almeria. 1993. Ministry of Public Works. Madrid. Pesca y Alimentacion. J.M. Economia y Medio Ambiente: Interdependencias Fisicas y la Necesidad de Nuevos Conceptos. Fernando. 1995. Madrid. J. F. J. Experiencia de Casos Reales. "Mercados de Aguas: LEntelequias economicistas o soluciones a los problemas de asignacion?. "Agua." Revista de Obras Publicas 3320 (140): 1933. Marrakech. A. A major step in this direction was included in the Draft 1996 National Irrigation Plan of the Ministry of Agriculture. Spanish Water Accounts. Gasc6. Madrid.M. El Suministro de Agua Potable en Espana. ECOTEC Research and Consulting. Losada. Maestu. Directorate General for Water Quality.. 1993. 1992. "Tasas por el Provechamiento del Agua. Madrid. "Consideraciones al Nuevo Sistema Tarifario del Regimen Economico Financiero. Ministry of Public Works." Gestion y Financiacion (mimeograph). Madrid. 1994. 1994. Estudio Comparativo del Canon de Uso del Agua en los Paises de la Comunidad Europea. Madrid. Garrido. Pesca y Alimentacion. Pesca y Alimentacion. Ricardo. and J." El Boletin 9.M. Organisation of Economic Co-operation and Development. 1993. Argentarian Foundation. France. Aguilera. ." Revista de Estudios Agrosociales 16 (Enero-Marzo)." Paper presented at the CIHEAM conference. Maestu." Revista de Estudios Agrosociales 16 (EneroMarzo). Naredo. Josefina. Paris." Ministry of Public Works. Maestu. Pricing of Water Services." (mimeograph). Forthcoming. Josefina. 1994. A. Transport and the Environment." Paper presented at the Conference on Hydrological Planning. Madrid.where there is strong competition for water (Maestu 1996). Ministerio de Agricultura. ECOTEC Research and Consulting. 1994. J. 1987." Revista de Estudios Agrosociales 16 (Enero-Marzo). Naredo. 1995. Transport and the Environment. "Difficulties and Opportunities for Reasonable Water 110 Management in Spain: The Flexibilization of the Water Permitting System" In The Economy of Water in Spain. Canales y Puertos. Garcia Canton. "La Industria del Agua. Naredo. Transport and the Environment. "Influencia de los Aspectos de Organizacion y Gestion en Ia Eficiencia de los Sistemas de Riego. 1995. Spanish Association of Water Supply and Sanitation (AEAS).
1994.Sumpsi-Viflas. Ministerio de Agricultura. 111 . Pescay Alimentacion. J." Revista de EstudiosAgrosociales 16 (Enero-Marzo).M. "El Regimen EconomicoFinanciero del Agua y la Agricultura.
Charges vary according to region. 112 . and the Sudan Plantation Syndicate was responsible for financing and managing the project. which are now much higher than before. Table 17. built in 1925. In July 1995 the govemment created the Irrigation Water Corporation. overall charges are set to cover maintenance and operation costs of artesian wells. Rural consumers pay flat rates. and responsibility for operating the scheme was split between the government. The and Sudan government was responsible for providing the water. Each scheme sets its charges to cover actual operation and maintenance costs. Table 17. now water charges comprise no more than 6-7 percent of production costs. The govemment receives a share of revenue from water charges for its role in supplying irrigation water. Water pricingin the past In the past the govemment heavily subsidized irrigation. Charges vary according to the crop irrigated. which irrigates 920.2 shows water prices for metered households and industries. the Sudan Gezira Board. The collection experience was far better than for irrigation water since household consumers were treated individually.3 shows irrigation water charges for the past five years for selected irrigation schemes. which happens seasonally. In 1956 when Sudan became independent the institutional arrangements were changed. The first modem irrigation scheme was the Gezira Scheme.1 presents information on domestic water supply charges in the Khartoum area. In 1981 it imposed charges for irrigation water for the first time to recover some of the costs of the irrigation system. This scheme. The Irrigation Water Corporation finances its activities through water user charges. In some residential areas. However the govemment never collected more than a fraction of the intended amount. Monthly charges for domestic water were set at a flat rate according to the size of the dwelling. which are based on house size. municipal. Industries also pay for water on the basis of use.17 SUDAN Ahmed M Adam Introduction In Sudan 90 percent of developed water supplies are used for irrigation. and the main water users. an institution independent of the Ministry of Finance. houses have meters and consumers pay by quantity consumed. and people living in houses less than 400 square meters paid the least (class 3). yet farmers generally pay only after they receive funds from selling their output. In its first year of operation the Corporation had problems managing its cash flow since it incurs operation and maintenance expenses throughout the year. Table 17. Present water pricing practices The govemment has recently adopted a free market approach to water supply. significantly cutting its subsidies and reducing its involvement in the sector. started as a joint venture of the Sudan govemmnent the Sudan Plantation Syndicate. when measured as a proportion of total production costs: previously the government collected agricultural output from farmers worth 40-50 percent of total production costs. and industrial water supply. Farmers also resist paying the charges. The Corporation needs time to convince farmers that the water charges are actually much less than under the old system. People with houses over 600 square meters paid the highest rates (class 1). those with houses 400-600 square meters paid less (class 2).000 hectares.
a.500 1.a.000 800 1.000 7.500 2.290 2.600 1800 7. January 1996 (Sudanese pounds) Volume(cubicmeters) 0-15 15-40 >40 Note: IUS$ = LS900 Tariffper cubicmetera 100 75 90 Source:Ministryof Irrigationand WaterResources.500 Source:DirectorGeneralof NationalWaterCorporation(now KhartoumWaterCorporation).100 In 1995/96government foundedthe IrrigationWaterCorporationandreducedsubsidiessignificantly. Table 17.Table 17.700 2. wheat.332 cotton 1. 1992-96 (Sudanese Pounds (LS) per dwelling) House class 1 2 3 July 1992 (US$=LS90) 450 275 175 October1993 January 1994 (US$=LS200) (US$=LS350) 800 550 325 1.200 n. Table 17.500 1.3 Irrigation water charges. Charges for domestic and industrial water supplied outside the Khartoum area will likely rise in the future as subsidies from Khartoum 113 . Current debates and future prospects It is almost certain that the new Irrigation Water Corporation will collect much more revenue from farmers than was true in the past.000 850 May 1995 (US$=LS650) 2.000 1.300 1.and sunflowers.350 2.1 Domestic water supply charges in the Khartoum area.900 2000 9.groundnuts.300 1.500 n.250 7.300 1. other' 1.500 1.2 Water charges for metered residences and industries. and especially the extent to which the irrigation services increase their incomes.000 750 500 August 1994 (US$=LS500) 1.300 1.250 I.000 2.400 1.430 cotton 2.190 10. 1991-96 (Sudanese pounds (LS) per acre) Irrigation scheme 1991/92 (US$ = LS90) cotton Gezira Rahad North Halfa Suki a b 400 393 346 n. Clearly the willingness of farmers to pay will be based on the services they receive from the Corporation.000 January1996 (US$=LS900) 3.550 1.650 1. since the new institution does not receive subsidies from the government.a. other' 273 314 258 334 1992/93 (US$ = LS200) 1993/94 (US$ = LS350) 1994/95 (US$ = LS650) 1995/96' (US$ = LS900) cotton 1. Source: Ministryof Irrigationand WaterResources. Othercropsare sorghum.200 4.600 other' cotton other" 6.800 5. otherb 900 1.
This is no longer the case. Various documents.223 1. In the past the National Water Corporation controlled water supply for the entire nation. Various documents.4 shows total expenditures and revenues of the old National Water Corporation from 1989-95.960 57 Source. Various years.720 1.state are phased out. References Ministry of Irrigation and Water Resources. Khartoum. 114 .903 4. Table 17. Various years.887 (336) 2.917 (803) 4.4 Finances of the National Water Corporation for 1989-95 (millions of Sudanese pounds) Houseclass Expenditure Revenue Surplus(deficit) 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 (US$=LS 12) (US$=LS 15) (US$=LS90) (US$=LS200) (US$=LS350) (US$=LS650) 126 130 4 184 369 185 646 782 136 2. Khartoum. Director General of National Water Corporation (now Khartoum Water Corporation). DirectorGeneralof NationalWaterCorporation (now KhartoumWaterCorporation). charging uniform tariffs for all localities. Table 17.
irrigation cost.000 millimetersrainfallper year.5NT$ All figuresare from 1994. 115 .160 hectares of upland fields. providing subsidies of NT$1. and treatment of self-suppliedwater. Water demand for domestic use is increasing rapidly: daily per capita consumption has doubled over the past twenty years.6 billion cubic meters water each year in Taiwan. The per hectare fees depended on crop variety.447.500 hectares of rotation-cropped field.0 in 1994. piping. and 11. Revenues collected from project beneficiaries were intended to cover the costs of operations and maintenance. Presentwater pricingpractices Irrigation Water Irrigation associations.1).18 TAIWAN (CHINA) Ching-kai Hsiao and Ching-Ruey Luo Introduction Rainfallin Taiwan (China) is ample.and rely on municipal water systems for only relatively small amounts of water. Irrigationwater is not metered. During droughtsfarmerssometimes pump groundwater or purchase water to supplementthe allocationsthey receive from irrigation associations.s Altogetherthe irrigation associationsprovidewater to about370. but it is not evenlydistributedin spaceor time. from NT$3.4 It appearsthat prices are too low to significantlydampen consumers' demandin all sectors. whilecoastal plains receive about 1.400hectares of double-cropped fields.and farmers pay for it on the basis of area irrigatedand volume consumedby irrigationassociations.66 percent). More than 70 percent of municipal water is for residential use. from 224 liters to 450 liters. Governmentmade up the shortfall. based on the price of rice). Over the same period water priceshave nearlytripled.900 hectares of single-cropped fields. Although irrigation fees representedan average of only about2 percent of total farm costs (with a range of 0.including252. commercialand other uses. they were reduced by 30 percent in 1990(Table 18. Most water-intensiveindustries in Taiwan have developedtheir own sourcesof supply.180 hectares. Of water used by agriculture. Farmers must be members of the associations to acquire water from them.manage most of the irrigation systems in Taiwan. Agriculture uses about 77 percent of developed water supplies. About 78 percent of rain falls betweenMay and October: high mountainregions receive about 3. In the past.437 bil4s 1994exchangerate: IUS$=27. Some districts suffer from periodic droughts during the dry season.3 in 1975to NT$9.500 millimeters.the smallest is Liukung IrfigationAssociationwhich provides wa4 ter to only 295 hectares.irrigation is responsiblefor 76 percent. the most important source of revenue for irrigation associations were membership fees. 23. They ranged from 20 kilogramsto 300 kilogramsof rice per hectare per year (farmerspaid the fees in cash. yield. and broadly the benefits farmers received from irrigation. with revenuesfrom constructionfees for irrigation projects and governmentalsubsidies providing additional funds. the remainder is used for aquacultureand livestock. and industry uses 9 percent. There are 17 irrigationassociations.900 hectaresof cropland. Consumersuse a total of about 17.corporate bodies organized by farmers under the Water Conser47 vancy Law and Rules for IrrigationAssociations . the remainder is for industrial. 83. The largest is Chianan Irrigation Associationwhich provides water to some 78. Industries pay the costs of pumping. urban consumers use 14 percent.
In addition. watering only 330 hectares per cubic meter (based upon gross requirements at turnout) in most irrigation districts. As populations grew. water was relatively plentiful.5 per kilogram (US$0.330 25. The Taiwan Water Supply Corporation was formally established in 1974 by merging 116 . When irrigation systems were first being developed. assuming a rice price of NT$16. Rice farmers generally used continuous irrigation.760 5.340 Percentof total costs that is water 0. and institutional changes are essential.39 Rice is Taiwan's staple food. policymakers acknowledge that developing and managing irrigation is no longer simply a matter of engineering.88 7. Then in 1992 the government agreed to pay all irrigation fees.650 30.540 348 5.240 5. an agency of Taipei metropolitan government.750 432 637 72.020 4. so did the demand for rice and the water needed to irrigate paddy land.300 5. The subsidies amount to about NT$1.460 3.140 Percent 25.820 25.6 per kilogram). the central govem- ment provides NT$1.760 73.39 billion and the provincial government provides the remainder. Irrigation water authorities have never used pricing strategies to deal with water shortages.87 billion.lion. Instead.900 77. Municipal water supply Two agencies are involved in managing the municipal water supply in Taiwan: the Taipei Water Department. Rotational irrigation-which uses 25-50 percent less water than continuous irrigation-replaced the older practices in many places.200 370 1. such as irrigation practices and technologies.480 Secondcrop 4.44 2.460 Secondcrop 6. Table 18. Conserving and reallocating water is now becoming critical. they have relied on nonpricing practices.66 0.1993(NT$) JaponicaRice First crop Seed and seedlings Fertilizer Labor Mechanization Chemicals Materials Water Total 5.1 Per hectarecost of producingrice in Taiwan. At the same time industrial and income growth increased competition for existing water resources.950 3. attempts were made to increase the efficiency of irrigation water use.490 5. and no restrictions were placed on them. However.610 28. a public utility supported and supervised by the Taiwan provincial government. Since developing new water resources was costly and took time. But this method was very inefficient.870 71. and irrigation was developed primarily to irrigate rice. In 1991 the fees were reduced further to 20 kilograms of rice per hectare per year.460 30.790 356 315 30. and the Taiwan Water Supply Corporation.960 India Rice First crop 5.660 5.720 26. or about NT$330 per hectare per year. water was distributed very inequitably.
a.000 4.5 31-50 4.020 1.070 1.710 1. n.a. n.001 3. n.00 1982 6.001 7.a. more than 60 different water rate schedules were in use among the original 128 public water supply systems.3 Various block water rates of Taiwan Water Supply Corporation.a.00 51-200 10.50 >2. 117 .a.500 million cubic meters water per year.00 1991 8.50 n.000 8.00 >51 11. Table 18.00 11-30 8. 3.50 31-50 8.2 presents figures on capacity and consumption from 1990-94. 1975-94 (NT$ cubic meter) 1975 Averagerates First block Monthlyusage Rate Secondblock Monthlyusage Rate Thirdblock Monthlyusage Rate Fourthblock Monthlyusage Rate Fifth block Monthlyusage Rate Sixth block Monthlyusage Rate n.a.50 201-2.00 31-50 9. 1990-94 (million cubic meters) 1990 Capacity Consumption 1.50 51-200 5.a.a.00 >51 10.128 local public water systems to consolidate water supply in twelve public water supply districts. meansnot applicable.50 201-2.50 11-30 4.50 >2.570 1994 2.420 1992 1. n. n.30 <20 2. It serves 3.00 11-30 6.470 1993 2. n.00 51-200 7.930 1. 1994 9. water rates could vary by as much as eightfold.50 21-30 3.50 1979 4.60 <10 5. Table 18.50 >2.340 1991 1.50 31-50 6.000 6. At present the Taiwan Water Supply Cor- poration has the capacity to supply about 2.50 n.630 Before the creation of the new utility.00 31-50 11.95 <10 3.2 Taiwan Water Supply Corporation supply and consumption.820 1.00 11-30 9. The Taiwan Water Supply Corpora- tion implemented a uniform block pricing system in 1975 and has adjusted the rates four times since.00 201-2. Table 18.9 million households in Taiwan Province and the Kaoshiung metropolitan area.3 presents Taiwan Water Supply Corporation water rates.25 <10 7. Table 18.001 5.00 <10 7.a.
Taichung). although costs of supplying water can vary significantly across space.41 6.46 4.27) (0. References Hsiao.33 6. Current debates and future prospects Current water charges in Taiwan are not high enough to fully cover the costs of supplying water. Which include capital recovery and operation and maintenance costs.64 Price Revenue 6.16 1. regardless of quantity used.28 6. Water authorities and related or- ganizations should consider many factors when establishing the level and structure of water charges.25 0. this body has paid insufficient attention to the financial requirements of the utility.29) The Taiwan Assembly is responsible for regulating and approving Taiwan Water Supply Corporation's water charges.84 Sales cost 1. including economic efficiency. it did not allow changes in rates between 1982-91. National Chung Hsing University.09) (0. Organisation for Economic Co-operation and Development. environmental impact.40 6. Ching-Kai. 118 . France. although demand and supply fluctuate enormously over the year.09 0. 1995.57 0. Pricing of Water Services. Table 18. not just a commodity.28 0.59 0. Paris. charges. Furthermore.4 Unit costs of supplying water and charges of Taiwan Water Supply Corporation (NT$ per cubic meter) Production cost 1988 1989 1990 1991 4.31 6.89 0. Table 18. it would not lead to the efficient allocation of water. However. and acceptability to users. The Water Supply Act (enacted by Taiwan Province) sets the rules for water pricing in Taiwan: the average price of water should be based on "all water services costs. "Management System of Irrigation in Taiwan. 1987. Consumers pay a flat fee for the first block. and by volume for larger quantities.53 Total cost 6. cost recovery. charges do not vary by season.13) (0. To assure the efficient allocation of water.29 0. The Taiwan people increasingly view water as an environmental good. Irrigation associations and the Taiwan Water Supply Corporation should be given the authority to set and adjust water rates to meet their financial needs.35 (0." While pricing water this way would provide for full cost-recovery. Neither volumetric charges nor connection charges vary by location." Journal of Agricultural Economics 57: 85-111 (Research Institute of Agricultural Economics.57 0. pricing systems should involve marginal cost pricing.31 Financial cost 0. although the utility proposed them several times. season.4 presents data on unit costs of supplying water and water. summed together and divided by the total quantity of water expected to be sold.96 Administrative cost 0.83 4. Water charges are too low to fully cover costs or to provide incentives to conserve.60 6. that should be used in an economically and environmentally efficient manner. Rate structures should allow prices to vary depending on block.Taiwan Water Supply Corporation uses increasing block rates for the first four blocks and decreasing block rates for the last two. to generate a unit cost. and location of use. Consumers also pay fixed connection charges.43 4.
" Water Resources Planning Commission." Social Science Series 27. D. ChianMin.. Tate. "Managementof Water Resourcesin an Island Nation: The Taiwan Experience.M. Ecosystem Sciences and Evaluation Directorate. 119 . 1991. Ottawa. Taipei. Ministry of Economic Affairs. and D. Economicsand Conservation Branch.M. EnvironmentCanada. "Municipal Water Rates in Canada.1992. 1989: Current Practices and Prices. Lacelle. Wu.
local authorities. Tanzania has abundant groundwater resources. While the country has a narrow coastal plain along its eastem boundary on the Indian Ocean. it is relatively dry. missions. most of its territory covers the highlands of the great Africa plateau with elevations between 1. Victoria. and the cost-sharing arrangement ended. rainfall and evapotranspiration. Financing for these came from the central government. Water Development and Irrigation Division performed maintenance and repairs in exchange for an annual deposit of 1 percent of total capital costs of all projects in areas under theirjurisdiction (Warner 1970). where rainfall is greater than 1. The second was development of rural water supplies for domestic and livestock use.19 TANZANIA Mark R Mujwahuzi Introduction Tanzania is a large country with an area of about 937. Dodoma. who were other government departments. Perennial rivers flow in the southern. where rainfall is less than 800 millimeters per year. and even private estates. Rainfall in Tanzania is highly seasonal: water levels in lakes and rivers rise during the rainy season and recede during the dry season.5 degrees south of the equator. who owned them after construction was complete. depending on topography. The government became actively involved in constructing rural water supply systems starting in 1945 with the establishment of the Department of Water Development. Water users paid charges set at levels high enough to cover capital costs and operation and maintenance costs. Clients. Water users paid for water when they collected it at the kiosk (Lwegarulila 1975). Past experiences Charging for water in a systematic way began around 1930. Once in operation the water supply schemes were expected to be self-supporting. Tanganyika. However in some parts of the country groundwater may contain high concentrations of salt and fluoride. Groundwater is rapidly becoming a major source of water in the country. the Water Development and Irrigation Division was involved in three types of activities. Eventually the department assumed responsibility for irrigation development. Singida and Arusha. The first was the development of domestic water supplies for outstations and minor settlements. The rural local authorities were required to pay operation and maintenance costs but only a portion of capital costs. Water availability varies greatly throughout the country. when the government started developing water supplies. and its name was changed to Water Development and Irrigation Division.000-2. and Nyasa receive about 800 millimeters of rainfall each year. minor settlements. paid the full capital costs of the water system in advance of construction (Warner 1970). During its first 20 years of operation. most of the country receives much less. River flows are intermittent in the central and northern parts of the country.000 meters. The public works department built water supplies systems for townships. outstations. major administrative centers. In 1969 the central government took on the responsibility for all operation and maintenance costs of rural water 120 . and a few private estates and missions. Local authorities remained responsible for operating costs. Groundwater quality is generally good. western and northern highlands. hydrology.000 millimeters per year. particularly in the semiarid regions covering parts of Shinyanga. In 1965 the central government assumed full responsibility for capital costs of rural water systems. The third was development of water supplies under prepaid contracts.000 square kilometers. and water users paid for the water they consumed (Water Development and Irrigation Division 1961). and set water prices accordingly. Although Tanzania lies just 1.
This was because tariffs were low. Since September 1992 the water authority board has had the authority to raise tariffs by up to 10 percent two times a year. However revenue from charges fell well short of the costs of producing and distributing water. the only way that the National Urban Water Authority was able to survive was by reducing payments to creditors and by relying on the Treasury for import support to purchase chemicals. and Tanga. A numberof municipalities. Im-mediately thereafter the 1996. rural users did not pay for water. not the agency.projects. In 1992 the government decided to decentralize the power of setting and approving tariff changes. The minister must grant a special concession for tariff increases above th. including Arusha. The water policy requires the waterauthorityoperatedat a loss and accumulated huge debts. billing and collection performnancewas poor. Urban consumers who had house connections or who obtained water from metered public kiosks continued to pay for water.). Kibaha and Bagamoyo. 121 . In 1988 the tion of the costs. With operating losses and accumulated debts. In 1991 to help the water authority become financially self-sufficient policymakers proposed that the National Urban Water Authority Board be empowered to increase tariffs by up to 10 percent without prior approval of the Cabinet. Eventually the government also stopped charging for water dispensed from public kiosks in cities and towns (Warner 1970). However as elec-tricity rates and chemical prices rose the operating deficit reappeared and debts mounted once again.s level. The minister responsible for water can increase tariffs by up to 15 percent two times a year. The National Urban Water Authority was expected to be financially self-supporting. Yet the power to raise tariffs was vested in the Cabinet. Political economy of water charges In 1981 the government established the National Urban Water Authority through an act of Parliament. Therefore in its first years of operation chemicals) amountedto about 2. and unaccounted for water losses were large (Swere 1994. are imple- Cabinetfinally agreedto raise tariffsto coverthe costs of production. and that the minister responsible for water be empowered to approvetariff increasesof up to 15 percentwithout prior approval of the Cabinet (Swere 1994). and introduced a differential mentingthe new guidelines. Eventually it stop-ped paying that urban consumerspay the full costs of water supply and that rural dwellers pay at least a per- the power company and the government store which supplied it with chemicals. Thus the water authority in conjunction with the ministry can effectively increase tariffs by up to 32 percent a year. for a total cumulative increase of up to than 21 percent per year. Moshi. But currently it operates only the systems in Dar es Salaam and its two satellite towns. Table 19. which commenced operations in 1984.1presents water tariffs for Dar es Salaam.) (1US$ = 335 Tshs. In September 1992 the water institution's ag-gregate liabilities to the Tanzania Electric Supply Company and Ministry of Water Central Store (which supplied the Presentwater chargingpractices From 1971 to 1991. and the water institution recognized that tariffs had to be raised. collections were too low to cover even operation and maintenance costs.4 billion Tanzanian shillings (Tshs. effective May rate structure. and abolished all rural water user charges (Lwegarulila 1975). National Urban Water Authority was able to meet its financial ob-ligations through user charges. The agency. when a new water policy was adopted. was meant to operate all the country's urban water systems. The water policy adopted in 1991 changed Tanzania's approach to financing both urban and rural water systems. And while urban consumers continued to pay for water. Ministry of Water 1995). The Cabinet did not act because of the political difficulty of raising tariffs.
1994: US$1.00 15. In Arusha.40 154.are responsiblefor collectionof water charges in all towns other than Dar es Salaam. Revenue collectionfollows the government's financial regulations of "appropriation-in-aid. In the past government providedsubsidiesto watersuppliers to enable them to meet their expenses.Table 19.00 15. domesticcustomers.40 US$ 4. Revenue collection in schemes operated by urban water supply and sewerage engineers Like the regional water engineers.." Water chargesare meant to supplementthe government'sfinancialcontributions to urban watersuppliersfor operationand maintenancecosts. The regionalwater engineershave not been particularlyeffectiveor efficientin collectingwater charges.60 US$ 5.00 = Tshs.06 Note: Aprl 30.00= Tshs.are having difficulty collectingwater charges.and has started billing the occupants.00 221. collecting fees from users. As a result the departnenthas collectedTshs.2presentsgovernment-set watertariffsfor cities and townsotherthan Dar es Salaam. However. The water boards are also starting to sell water from kiosks and standpipesby the cubic meter.45). Therefore poor revenue collection performance did not affect the operationsof water suppliers.60 254.00 15.00 15.60 254.40 221. Theseefforts are yielding results and revenue collectionsare rising. Howeverthe agencyis aggressively trying to identifywater users and has introduceda computerized waterbilling system. 479. Moshi and Tanga . Peoplewho do pay may wait months or even years after receivingthe bill beforeremittingpayments. Wardexecutiveofficershave been giventhe responsibilityfor operatingand maintainingall water kiosks and standpipesin their wards.00 15.40 221.00 178.00 89.87. the semiautonomous urban water and sewerage boards - Regionaldevelopment directors. The presenttariff structureresults in crosssubsidization among differentgroupsof customers: commercialand industrialusers pay more.the watersupplier is visiting all buildingsto identify its industrial.30 216. It has disand covered numerous illegal connections. Revenue collection for urban water systems operated by regional water engineers autonomous.nowthat water suppliersare financially establishedJuly 1.for example.May 1996:1US$ 606 Tshs = = Source: National Urban Water Authority 1996.they can no longer rely on govemient subsidiesto covershortfalls.00 100. and subsidize domestic and institutional consumers.throughregional water engineers. This is a tremendous achievement:in 1993-94the water suppliercollected only Tshs. Table 19.00 54.00 177.354 millionduring the first year of operation. 1996:1US$ 550 Tshs. commercial. Many consumersdo not pay their bills either becausethey do not receivethem or becausethey simplyignorethem.1996 Customercategory Domestic Institutions Commercial Industries Irrigation Brickmakers Expatriates Old tariff (Tsh per cubic meter) Newtariff (Tsh per cubic meter) Percentage increase 185.00 254. 122 . and relayingthe revenueto the waterboard. 523.1 NationalUrbanWaterAuthority'stariffstructurefor Dares Salaam. 110 million (1993: US$1. 1994 in Arusha.
In the past water rights were issuedonce and for all for a fee of only Tshs.2 Urbanwatertariffs.Table 19.The water boardswhich managewater systemsshould have the power to set tariffs to cover operation and maintenance costs withouthavingto clear them with the ministry responsiblefor water affairs.53 92. it introduced a new water-userfee for various user categories. 123 . They shoulddisconnect customerswho do not pay.31 407. tariffsshouldreflectall the costs involvedin supplyingwater. Water-right application fees and water-user fees In additionto watercharges.vigorouslyfollow-up with people or organizationsin arrears and personally contact the heads of entities which are major consumers.98 92. 1992(Tshs. the initiatives creating autonomous urban water and sewerage institutions shouldbe strengthened.50. In addition.31 35. The waterpolicyof 1991requiresruralconsumers to pay the costs of operation and maintenance and the costs of expansion.3showsthe water-rightapplicationfees and the newwater-user fees. Policymakershave recentlyset new fees for water-right applications.Table 19.00. water suppliers should take actionto enforcewatercharges.16 72.And in 1994. Furthermore. Source: Swere 1994. With inflationthese fees shrunkto representlessthan the cost of the paper used to prepare water-rightcertificates. Individual communitiesare free to decide how they wish to raisethe revenue.usersmust also pay to obtainthe rightto use waterthroughwaterright applicationfees and water-userfees.throughthe waterutilization general amendment regulations. Rate 21.per cubic meter) Category Domestic Industrial Institutional Commercial Agricultural Expatriate Note: US$1.and aggressively track downillegalconnections. charge late fees and interest chargesfor people who submit paymentspast the deadline.14 Tarifs for rural water supplies Future prospects To improve financial performance of water suppliers.335.00= Tshs. provide performance-related incentives encouragewaterutilityemployeesto to deal with revenuecollectionmoreefficiently.
M. Ministry of Water.A. farming. Dar es Salaam.) Fees Water-right application domestic/livestock/fish for farming Water-right application irrigation/power/industriaVcommercial for All otherapplications Appealsto the minister Water userfees 7. 1994. Swere. Ministry of Water Development and Power. "The Economics of Rural Water Supply in Tanzania. Water Development and Irrigation Division. "Water Tariffs and Tariff Structures. 1994(Tshs. National Urban Water Authority." AL4JI Review." Dar es Salaam.000 7. F. "A Short History of Water Development and Irrigation in Tanganyika:' Water Development and Irrigation Division. Tanzania." Paper presented at 16th Annual Water Engineers' Conference.districtcenters. September 7.rural:100 cubicmeters fish Irrigation: 1. Dar es Salaamn. 1995.000 40. pp. 124 . 1970. "Water Resources Development in Tanzania during the First Decade of Independence." Economic Research Bureau Paper 70. University of Dar es Salaarn. 1-13. "Tariff Structure for Dar es Salaam. D. R.000 Domestic. Warner. Singida." Dar es Salaam.3 Wateruserfees underthe amendedlegislation.000 35. "Water and Sanitation Sector Review. 1975. 1961-1971. livestock.19. 1996. 1961.Table19.000cubicmeters Powerroyaltyper installed capacity IndustrialVmechanical: cubicmeters 100 Commercial regionalcenters:100cubicmeters 20 15 25 50 40 References Lwegarulila.
He estimated two types of costs using 1970 prices: operation and maintenance costs and total irri- Past experiences Waterfrom public infrastructure gation costs. 1963. water cost about 0. Among the treasures are the Roman aqueduct between Zaghouan and Tunis.004 TD per cubic meter (US$0. An agrarian reform in the early 1950s led to the creation of the "perimetres publiques irriguees. Carthaginians.20 TUNISIA Zekri Slim. The first attempt of set water tariffs in the modem era occurred in 1969. water cost about 0. to pay the costs of the irrigation systems. in cash or kind. Public infrastructure includes dams and canals conveying water to the farm gate. These civilizations all had an influence on the legislation and institutions that currently govern water resource management in Tunisia (Caponera 1976). Under the legislation farmers are obliged to make contributions. Sghaier 1995).C.a vegetable producing region. Arabs. This tariff was set to recover maintenance and operating costs. Romans. 1958. and number 71-9 February 19. A water management strategy was adopted to increase water supply while protecting groundwater resources from overuse and salinization through the intrusion of seawater.0108 TD per cubic meter (US$0.0043 TD per cubic meter (US$0. The size of the contribution is determined as a proportion of the incremental increase in the value of the irrigated land. 1976). Ben Khelil completed Tunisia's first comprehensive study on water pricing in 1971.0082per cubic meter). Thus farmers are required to pay at least a portion of irrigation system costs. 1971) (Abdelhadi 1995.0076 per cubic meter) (Ministere de I'Agriculture 1980). 1960.in the Haute Vallee de la Medjerda. Thus for example in the Cap Bon region. He adjustedoperationand maintenance costs. number 6-60 July 26. number 63-18 May 27. the remnants of which can still be found scattered throughout the country. Between 1962-71 public investment in water systems comprised 27 percent of total investment in agriculture. Between 1982-91 this percentage climbed to 41 percent of agricultural investment (Mallek 1988. El Echi Med Lazhar. The Phoenicians. and the man-made underground galleries calledfoggara in the southern part of the country. Caponera. for each perim6tres publiques irriguees The governmenthas financed most irrigation infrastructure in Tunisia." The creation and management of the perim6tres publiques irriguees and water use is subjectto special leg125 dependingon the profitabilityof the crop being grown. the Aghlabid pools in Kairouan. and Sghaier Mongi Introduction Tunisians have had long experience managing water in the arid and semi-arid North African environment. Total irrigationcosts included capital costs in addition to operation and mainte- . industry. The introduction of new technologies for surface water exploitation begun during the 1950s with the construction of large hydraulic projects intended to meet the rapidly rising demand for water for irrigation. and urban use. L'Office de Mise en Valeur de la Vallee de la Medjerda introduced a charge of 0. an orangeproducingarea. which included energy and labor costs. dating back to 1000 B. It was hoped that the water charges would encourage farmers to view water as an economic good rather than a free good and use scarce water resources more efficiently. Implementing this legislation was neither easy nor automatic.0206per cubic meter). and Turkish all constructed water works. islation (Laws number 58-63 June 11. Indeed it was only partially implemented in the perimetres publiques irrigu6es of Basse Vallee de la Medjerda (Ministere de l'Agriculture 1980).
but they also provided public services.004) per cubic meter and 600 TD (US$300) per hectare per year for a period of ten years in Basse Vall6e de la Medjerda (1979 prices).023 per cubic meter) in the Haute Vallee de la Medjerda. L'Office de Mise en Valeur de la Vallee de la Medjerda.030 TD per cubic meter (US$0. 1986b). * Water charges should be part of an integrated development strategy (L'Office de Mise en Valeur de la Vallde de la Medjerda 1976). The fixed charge per hectare was considered too much for farmers to pay in relation to their returns. In addition. The total cost of water was estimated to be 0. and farmers paid only the per cubic meter charge. However tariffs were never set to equal total costs. not annually. Prior to 1991 l'Offices de Mise en Valeur were in charge of managing irrigation water. comprising a fixed charge per hectare and a charge per cubic meter. In fact the requirement of the law that farmers pay investment costs was never implemented. 1980).006 TD (US$0. the law governing perimetres publiques irrigudes stipulated that capital costs be paid at the time the project was constructed. However the two-part tariff was never implemented. maintaining perimetres publiques irriguees (32. maintaining.nance costs.000 hectares and 3800 farmers). Implementation of the proposed water charge policy faced some difficulties. especially on land which was served by irrigation systems but which farmers which not using fully.026) per cubic meter (1986 prices) (Ministere de l'Agriculture. and that the incremental income generated by applying water exceeded the cost of water. Among its objectives were: studying. except when water was used to grow forage or leg126 umes. set to cover capital costs. They provided most of their services on a commercial basis. was the first of these institutions. Operation and maintenance costs were about 0. The charges were set quite arbitrarily and fluctuated from year to year (Ministere de l'Agriculture 1985).012 TD per cubic meter (US$0. On the basis of this study authorities proposed implementing a charge system with tariffs differentiated by crop (Ministere de l'Agriculture. It concluded that the productivity of water varied widely by crop. In 1971 the objectives of charging for water were made more explicit: * Farmers should pay the true costs of water to reflect resource scarcity. The fixed charge was intended to encourage farmers to irrigate all their land with irrigation potential. A second study estimated the total cost of water to be 0. Policymakers believed that high water charges were discouraging farmers from using the irrigable land intensively.033 TD (US$0. However the Commissariats Regionaux de D6veloppement Agricole took over this responsibility in 1991. Khelil estimated the total cost to be 0. for which the government paid. established in 1958. constructing. The study concluded that recovering the full costs of the iffigation investment would be impossible. L'Offices de Mise en Valeur were financially autonomous state-owned enterprises.057 per cubic meter) in the Cap Bon region. such as extension.0455 per cubic meter) including investment costs (1986 prices). providing . It was estimated to be 69 TD (US$55) per hectare per year (1986 prices).0573 TD per cubic meter (US$0. 1986a). The study also proposed covering investment costs by charging either a fixed rate per hectare or folding the investment costs into the per meter charge for water. The study estimated the total cost of water to be 0. A more recent study suggests that returns to farmers would not fall significantly if they started paying the full operation and maintenance costs of irrigation (Ministere de I'Agriculture 1985).045 TD (US$0.005 per cubic meter) for the Basse Valle de la Medjerda (1985 prices).008 TD (U$0. and extending the irrigation network. To increase the use of irrigation water l'Office de Mise en Valeur de la Vallee de la Medjerda proposed a two-part tariff structure. Since the 1980s the government has considered charging farmers for water to recover investment costs and has examined the capacity of farmers to pay (Ministere de I'Agriculture. * Water charges should not be set at levels that would constrain the development of irrigation. and only 0.037 per cubic meter) and the operation and maintenance cost to be 0.
the number of associationsin charge of irrigationwater management grew from 25 to 37 associations 127 between 1993-95. and Monastir. Table 20. Table 20. and the methodof waterchargesused. The gradual shiftingof responsibilityto associations will help to improvecost recovery and at . In 1988 the AgriculturalStructuralAdjustment Program introduced a program to gradually increase irrigation water charges to fully coveroperationand maintenancecosts of irrigation systemsby 1995. Kebili and Sidi Bouzid. These figures showthat water prices increasedby only 1 percent a year between 1983-94 in the governorate of Ben Arous. Bizerte. This represented only 7. containing detailed information about the water source. The change in the ratio between costs and prices showsthe steadyprogressbeing made towards fully recoveringcosts from farners.Beja. Kasserine.2 presents the operation and maintenancecosts and water prices in selected governorates.extensionservicesto farmers.WorldBank 1985). collecting water charges.this has not yet been put into practice (Abdelhedi 1995). The Commissariats Regionaux de DeveloppementAgricole uses three types of water charges: a lump sum per hectare when meteringis not available. Establishingassociationsis difficult for two main reasons: often irrigation infrastructure is degraded and requires considerable new investment(for exampleBasse Vall6e de la Medjerda).and farmers are accustomedto receiving the assistance and services from the Commissariats Regionaux de Developpement Agricole. This required a 9 percent increase in real charges and a 15 percent increase in nominal charges by 1995. However the four years of drought that occurred since 1988 have made it impossible to implement the program completely. By contrast water prices are only 62 percent of costs in the governorates of Gafsa. The associations manage areas irrigated with groundwaterin oases and some areas irrigatedwith tubewells. The law also stipulates that the CommissariatsRegionaux de DeveloppementAgricole must establish contracts with farmers or farmers' groups. for example in Bizerte. The new institutions are responsible for managing and maintaining the irrigation infrastructure within the perimetres publiques irriguees and organizing water distribution. A recent survey of farmers in areas with public infrastructurerevealedthat 12 to 33 percent. Beja. Thetable also showsthe annualaverage increasesin water prices for the governorateswhere the Commissariats Regionaux de DeveloppementAgricole are responsiblefor water management. and providing short-term-creditfrom the public budget (Ministere de l'Agriculture 1983. Associations d'inter8t collectif have recently been createdto manage part of the public infrastructure. supportedthe movegivingwater managementresponsibilityto associations(Ministerede l'Agriculture. farm area. The program is nearly completed.under the Ministry of Agriculture.putting inputs and outputs on a market basis. cropping system.1 presents nominal and real waterprices between1983-1994. dependingon the region. and a two-part tariff with a fixed per hectarecomponentand a volumetriccomponent. Present water pricing practices In 1989 the Tunisian parliament approved laws (number 89-44 March 8. The table shows that prices are higher than costs in some governorateswith importantirrigated areas.7 percentof the 481 associationsd'intr8t collectif in the country. Althoughthe water code requires that the institution use rising blockprices to encouragefarmers to use watermore efficiently. and Offices de DeveloppementAgricole .public institutionswith financial autonomy.Jendouba.Offices de Mise en Valeur.a per cubic meter tariff for perimetrespubliquesirrigueeswith meters. Jendouba. The developmentof associationsin the areas which depend on public infrastructurehas been very slow. However water prices rose by 11 percentper year in the govemorateof Jendoubaover the sameperiod.1995b). 1989) to create new CommissariatsRegionaux de Developpement Agricole. For example in the governorates of the northern part of the country where the most important irrigationdams are situated Ariana. which comprises about one-thirdthe total irrigated area in Tunisia.
All urban householdshave accessto clean water. and a hourly charge. The amount of water granted by the water right depended on farmer's financial contributions to explore for and convey water: land ownership and water rights were not related. The most important rule of the associationswas to give each of its members formal water rights. due to the existence of clear water rights and reasonable management rules (Ministere de l'Agriculture 1995a). One of the main objectives of the government program promoting associationsis to give responsibilityto them to manage irrigation infrastructurein the oases and recover the costs of the irrigation system. respectively." a strategicstudy conductedby the Minis128 try of Agriculture. Groundwater Groundwater is used for irrigation in the central. The water code of 1975 transformed the water right to a water-useright. the French. Furthennore in other parts of the country the govemnment provided the funds for water supply. Insteadthey have the right to use water in proportionto the land they own (Abdelhedi 1995). so labor costs per hectare are very high (Ministere de l'Agriculture 1991.and establish the rules and the share for each member. construct infrastructure. through water charges. In 1970 the "Plan Directeur des Eaux du Sud. Revenues covered 44 percent and 21 percent of operation and maintenancecosts and depreciation costs. The interventions ultimately encouraged farmer dependency. . Groundwater prices vary widely between regions and within the same region. Householdsuse about 60 percent of water for these purposes. For example in 1993the price of water in the Kebili and Gueliadaoases was 124 TD (US$124) per hectare per year. Ownerscould sellor rent water rights. Two charge systems are in use: a fixed per hectare annual charge. In the Souk el Biaz oasis it was 538 TD (US$538) per hectare per year.showedthat the costs of providing water exceeded the financial capabilities of existing associations. The associationsrelied on their own financialresourcesto explorefor water.700 hectares.the same time better the quality of service providedto farmers. Half of the groundwaterisexploiteddirectly by farmers. Farmers in the oases cannot sell or rent the water. These huge differences in prices for water are mainly due to the different costs of producingand distributingwater due to the presenceof economiesof scale. As a result the govemient intervenedthrough the Offices de Mise en Valeur and later the Commissariats Regionaux de D6veloppementAgricole. but only 57 percent of rural households do. The groupementd'interet hydraulique for planningactivities providedtechnical assistance to the associations. Public standpipes account for 21 percent of water consumption. a system which remains in effect today. and marginalization of association activities (Ministere de l'Agriculture 1995a). Some oases cover very small areas. where average rainfall ranges between 100 and 250 millimetersper year. Currentlythere are some 160associationsin the southern part of Tunisia managing water for an area of about 21.based on traditionaluse rights. Membersno longer felt the need to organize into the associations. administration passed a law allowing farmers to constitute associationsd'int&& collectif (Caponera1976). By contrast farmers in the oases had to pay for the irrigationsystemsthemselves. These organizations successfully managed water when there was enough water to fully meet demand. This fundamental change had an important influence on associations d!int6r8tcollectif.industry uses 13 percent. and tourism uses 6 percent. southern and Cap Bon parts of Tunisia. Historicallynongovernmentalorganizationswere in charge of water managementin the oases. Domesticand industrialwatercharges Currently 15 percent of developed water supplies in Tunisia is used for urban and industrial needs.and 1995a). In 1933to make the southern associations (associationsd'interet collectif and groupement d'intdret hydraulique) official. including investment costs.
031 0.044 0.035 0.794 0.035 0.049 0.026 0.023 0.024 0.038 0.035 0.032 0.023 0.054 0.026 0.058 0.015 0.937 0.020 0.021 0.010 0.042 0.018 0.053 0.021 0.034 0.012 0.060 0.063 0.060 0.026 0.031 0.030 0.031 0.078 0.026 0.000 0.030 0.020 0.037 0.035 0.012 0.023 0.020 0.033 0.054 0.034 0.041 0.043 0.054 0.009 0.058 0.034 0.041 0.046 0.018 0.017 0.014 0.023 0.049 0.010 0.033 0.051 0.038 0.033 0.056 0.055 0.053 0.039 0.038 0.039 0.030 0.056 0.019 0.010 0.023 0.017 0.024 0.058 0.018 0.020 0.020 0.020 0.041 0.030 0.039 0.043 0.016 0.036 0.858 0.035 0.880 0.020 0.026 0.035 0.006 0.021 0.027 0.041 0.058 0.050 0.018 0.038 0.015 0.042 0.034 0.027 0.020 0.018 0.037 0.029 0.018 0.015 0.a.020 0.050 0.063 0.035 n.044 0.023 0.020 0.043 0.033 0.000 12 5 7 1 12 5 12 5 12 5 18 11 17 10 15 8 15 8 17 10 13 6 13 6 14 7 12 5 11 4 percent increase 19S3-94 233 64 77 8 260 77 233 64 250 72 540 214 470 180 386 138 386 138 457 173 283 88 280 87 320 106 233 64 230 62 129 .035 0.056 0.030 0.050 0.047 0.047 0.a.012 0.033 0.038 0.035 0.034 0.021 0.037 n.028 0.035 0.034 0.043 0. 0.a.054 0.024 0.038 0.035 0.012 0.014 0.033 0.039 0.020 0.026 0.033 0. 0.031 0. 1983-1994(Tunisian dinars per cubic meter) Govemorate 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Percent Total increase per year Ariana nominal real Barous nominal real Nabeul nominal real Bizerte nominal real Beja nominal real Jendouba nominal real Siliana nominal real Sousse nominal real Monastir nominal real Mahdia nominal real Kairouan nominal real Kasserine nominal real Sidi Bouzid Gafsa nominal real nominal real Kebili nominal real US$/TD 0.034 0.064 0.015 0.015 0.025 0.014 0.026 0.018 0.019 0.038 0. n.018 0.018 0.021 0.020 0.033 0.045 0.046 0.037 0.045 0.048 0.030 0.010 0.066 0.033 0.023 0.a.063 0.046 0.023 0.043 0.800 0.030 0.050 0.024 0.014 0.047 0.062 0.044 0.034 0.061 0.018 0.049 0.035 0.027 0.035 0.020 0.039 0.014 0.030 0.035 0. 0.036 0.008 0.058 0.049 0.030 0.038 0.018 0.038 0.047 0.033 0.058 0.028 0.037 0.060 0.1 Nominal and real irrigation water prices.057 0.025 0.024 0.016 0.057 0.035 0.049 0.050 0.033 0.033 1.030 0.030 0.023 0.032 0. n.014 0.679 0.020 0.050 0.012 0.048 0.012 0.063 0.034 0.052 0.041 0.064 0.034 n.012 0.068 0. n.018 0.050 0.046 0.052 0.021 0.024 0.048 0.014 0.038 0.031 0.033 0.020 0.835 0.029 0.018 0.037 0.054 0.020 0.078 0.054 0.016 0.022 0.034 0.038 0.054 0.045 0.042 0.028 0.030 0.a.021 0.057 0.058 0.022 0.015 0.025 0.038 0.029 0.037 0.058 0.043 0.023 0.045 0.031 0.058 0.028 0.046 0.054 0.030 0.044 0.026 0.029 0.060 0.039 0.033 0.043 0.061 0.062 0.021 0.021 0.037 0.779 0.020 0.045 0.025 0.032 0.025 0.038 0.033 0.040 0.040 0.024 0.024 0.068 0.030 0.020 0.051 0.043 0.017 0.030 0.016 0.042 0.Table 20.023 0.a.829 0.068 0.030 0.017 0.008 0.049 0.029 1.044 0.060 0.038 0.043 0.068 0.035 0.015 0.043 0.028 0.037 0.014 0.018 0.061 0.018 0.051 0.023 0.014 0.010 0.036 0.017 0.920 0.061 0.033 0.022 0.064 0.030 0.030 0.019 0.057 0.025 0.059 0.050 0.027 0.
053 0.084 0.2 Operationand maintenancecostsand water charges.050 0.037 0.050 0.058 0.038 0. Although the current price structure leads to much greater water use efficiency.058 0.071 0.031 0.035 0.090 0. The prices include a component representing 60 percent of wastewater treatment costs.070 0.054 0.051 0. tourist businesses.078 0.037 0. Urban and rural consumers pay the same prices for water.038 0.020 0.063 0.030 0.075 0. Industries.060 0.058 0.Table20. This figure does not include capital costs. and standpipe users are also quite sensitive to water prices.052 0.033 0.058 0.064 0. By con- trast demand has fallen by 1.8 percent for consumption above 150 cubic meters per quarter.066 0.020 0.050 0.096 0.019 69 59 68 66 106 110 62 77 59 48 65 48 43 42 58 0.058 0.043 0.069 0.042 0. By contrast domestic consumers using tess than 20 cubic meters per quarter receive significant subsidies: they paid only 28 percent of the total costs in 1992.071 0.056 0. Between 1983-92 industrial water demand has fallen by 3.046 0.040 0.068 0.044 0. public standpipe users.023 68 40 60 51 112 132 139 98 56 45 78 22 43 58 63 0. In some cases the demand has shifted towards alternative cheaper sources of water.052 0. 0.043 0.044 0.060 0.079 0. the tourist sector.037 0.038 0.042 0.044 0.043 0.071 0.038 0.039 0. and shift to alternative water sources or employ more efficient technologies whenever they can.025 0. The last row of Table 20.057 0. Some households use groundwater without treating or boiling it before using it.065 0.a.059 0.035 0.038 0.047 0.037 0. especially groundwater used to water gardens. 1993).033 0.033 0.054 0.3 shows real and nominal water prices for 1983-1992 (Lahoual.034 0.068 0.058 0.058 0.050 0.054 n.066 0.046 0.038 0.062 n.080 0.014 0.045 0.056 0.3 percent per year and tourist sector water demand has fallen by about 4.068 0.111 0.056 0.3 shows the nominal cost of producing and distributing water.056 0.018 0.027 88 75 72 72 102 158 148 77 89 50 71 36 54 57 71 0. Industries.050 0.a.086 0.040 0.037 0.057 0.043 0.051 0.050 0.049 0.129 0.045 0.105 0.089 0.033 0.047 0.055 0. which can cause illness.050 0.020 0.019 63 64 76 75 79 81 51 65 60 41 56 45 43 13 48 0. 1990-1994 (Tunisiandinarsper cubic meter) 1990 Cost Price Cost/ price Cost 1991 Price Cost/ price Cost 1992 Price Cost/ price Cost 1993 Price Cost/ price Cost 1994 Price Cost pdlce Ariana Ben Arous Nabeul Bizerte Beja Jendouba Siliana Sousse Monastir Mahdia Kaairouan Kasserine Sidi Bouzid 0.031 0.a. it has also led to financial problems for the water suppliers due to the drop in demand among consumers who subsidize other users.110 0.060 0.058 0.068 0. The demand for water in the lowest (and least expensive) consumption band has grown about 3 percent a year due primarily because of new subscriptions (demand per household fell by about 4 percent between 1983-92).078 0.117 0.062 0. 130 .064 0. and domestic consumers using more than 150 cubic meters of water pay prices which slightly exceed the costs of water.058 0.042 0. 0.063 0.065 0.058 0. et al.054 0.144 0.027 0.046 0.028 0.038 0.087 0.049 0.065 0. 0.049 0.6 percent per year.034 0.051 0.072 0.093 0.033 97 79 107 109 183 71 126 94 54 62 57 61 Gafsa Kebili Table 20.033 0.035 n.030 0.051 0.044 0.053 0.063 0.038 0.033 0.056 0.032 0.
316 0.090 0.135 0.132 0.410 0.08 7.312 real 0.627 0.559 0.381 0.340 0.93 -4.623 0.303 real 0.195 0.080 0.565 0.129 0. 131 .477 0. Its low price is intended to encourage farmers to use treated wastewater for irrigation.080 0. In 1993 about 2.582 0.17 -0.221 0.095 0.156 0. This is inequitable.145 0.135 0.510 0.094 0.106 0.494 0. In regions which have a long history of using treated wastewater for irrigation.618 0. Source: Lahoual.613 0.150 0.526 0.184 real 0.651 0.647 nominal 0.090 0.Table 20.577 7.080 0.309 0.484 0.111 0.578 0.425 hectares were irrigated with treated wastewater.582 0.524 1.599 0.12 Cost Note: The domestic consumption figures are for a period of three months.340 -0.645 0.605 0.3 Nominaland real pricesfor urbanand industrialwater (Tunisiandinarsper cubic meter) 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Percent change Domestic (cubicmeters) <20 nominal 0.565 0.132 0. Reused wastewater Since 1960 Tunisia has had experience using secondary treated wastewater for irrigation. et.586 0.150 nominal 0.161 0.14 -1.97 4.598 nominal 0. wastewater costs much less than conventional water.200 0.630 0.385 0.03 6.165 0.121 0.437 0.22 -2.480 0.506 0.196 0.374 real 0.659 0.524 0.466 0.00 real 0.158 0.217 0.129 0.138 0.333 0. Without strong price incentives farmers are reluctant to do so.419 0.242 0.095 0.115 0. with certain restrictions.577 0.562 0.626 0.568 0.639 0.447 0.149 nominal 0.470 0.229 0. Currently some 100 hecto cubic meters of wastewater per year undergo secondary treatment and are made available for irrigation.542 0.370 0.577 0.83 6.311 0.193 0.178 0.461 0.269 0. fearing potential environmental and health impacts and disliking the restrictions placed on crop choice.208 0.297 0.513 0.609 0.132 0.322 0.15 -1.4).099 0.136 0.426 0.207 0.25 0.153 0.100 0. al.355 0.569 nominal 0. 1995). Prices of treated wastewater vary widely between regions (Table 20.334 nominal 0.590 0.639 0.189 0.135 0.406 0. such as Kairouan. since farmers using treated wastewater can grow only a limited set of crops.272 0.511 0.258 0. 1993.161 0.02 5.320 0.430 0.280 0.308 0.137 0.118 0. It is estimated that by 2010 treated wastewater will be used to irrigate about 28.547 Public standpipes Industrial Tourism nominal 0.595 0.29 7.162 0.571 0.524 0.22 0.167 0.120 0.086 0.204 0.459 0.26 0.272 0.129 0.22 real 0.540 0.080 20-40 40-70 70-150 >150 real 0.086 0.160 0.97 5.118 real nominal 0.346 0.334 0.572 0.121 0.315 0.481 0.559 0.619 0.339 0.117 0.326 0. In regions where the use of treated wastewater is new.267 0. such as Ariana.279 0.320 0.236 0.584 0.139 0.573 0.095 0.326 0.598 0.088 0.084 0. prices tend to be equal to prices of conventional water.674 0.95 -0.658 0.162 0.500 hectares (Zekri et al.642 0.416 0.
1995.030 0.99 11. 1983. "Gestion et Entretien des Perimetres Irrigues. "Etude des Possibilitds et des Limites des Associations d'Interets Collectif dans la Gestion des Ouvrages Hydrauliques du P.64 6.E.a.032 0. Ministere de l'Agriculture. DEGTH et CNEA. Aper.041 0. 1980." Rapport Definitif.a. "Code des Eaux: Une Strategie Moderne. "Recouvrement des Investissements et des Frais d'Entretien et de Fonctionnement de l'Infrastructure Hydraulique du P.064 0. D.. 1991. Caponera. DEER.069 0.a.a. "Tarification de l'Eau dans la Basse Vallee de la Medjerda.069 0. Marrakech." L'Office de Mise en Valeur de la Vall6e de la Medjerda.90 8. "Droit des Eaux dans les Pays Musulmans. Bouzaiane." Vol. "Etablissement d'une Tarification du Cubic Meters d'Eau d'Irrigation pour les Grands Am6nagements.060 0. Tunis. Ben Khelil. .048 0. Daousas." DGGR et CNEA.51 7.051 0. M.029 0. 1986b. 1971. DEER.053 0. M." L'Office de Mise en Valeur de la Vall6e de la Medjerda." Seminaire International sur les Aspects Economiqes de la Gestion de l'Eau dans le Bassin Mediterraneen.4 Prices of secondarytreatedwastewaterfor irrigation(Tunisiandinarsper cubic meter) 1991 1992 1993 1994 1995 Average percent increase 13. M. Cas des Associations d'Interets Collectif du Jerid. Direction de l'Hydraulique et des Amenagements Ruraux. 0. Mallek. A. . .a.04 0. Fondation de l'Eau.055 0. n. "Etude des Possibilites et des Limites des Associations d'Interets Collectif dans la Gestion des Ouvrages Hydrauliques du P. Dossier 7. La Tarification Binome.D. S.057 0. . de References Abdelhedi. n. 1995.044 0. May 17-19.026 0. C.D.u Methodologique et Elements d'Analyse. Direction des Etudes. Ministere de l'Agriculture. 1985.050 n. T. 0. Maroc. Rassemblement des Donnees et Diagnostic. 1: Rapport de Synthese.054 0. Tunisie. M. 1995b.E." DEGTH et CNEA. CIHEAM. . 1993.027 0.S. A." SONEDE. n. 1995a.D. MAMVA et IAV Hassan II. . DGGR et CNEA. 1988. "L'Hydraulique Agricole durant les Differents Plans. 1976. L'Office de Mise en Valeur de la Vallde de la Medjerda. L." Guide de l'Eau. "Approche d'une Nouvelle Tarification de l'Eau d'Irrigation sur le Primetre de la Basse Vallee de la Medjerda.051 n. des Statistiques et des Analyses Economiques.a.032 Ben Arous nominal real Kairouan nominal real Source:Minist&re I'Agriculture1995b.023 0. Lahoual." Ministere de l'Agriculture.56 Ariana nominal real 0. Tunisie. 1986a. "Etude Economique sur l'Eau Potable en Tunisie. Tunisie." Direction de la Planification.N.055 0. "Recouvrement des Investissements Hydrauliques en Tunisie. Rejeb.027 0.Table 20. "Etude de la Gestion et de la Tarification de l'Eau d'Irrigation au Niv- 132 .050 0.S. n. Mamoghli.E. Tunisie." Bulletin d'Irrigation et de Drainage de la Food and Agriculture Organization 20 (1).
Marrakech." Tunisie. May 17-19. 5396-TU. Tunisie.T. 1995. "Les Externalit6sNegatives de l'Utilisation des Eaux Usees Traitees en Agriculture.. Sghaier." Vol 1: RapportG& neral. DGGRet Groupement CNEA-BRLi. "Tarification et Allocation Optimale de l'Eau d'Irrigation dans les Systemesde Productionde la Region Oasienne de Nefzaoua (Sud de la Tunisie). Belgium. 1985. Ghezal. S.D." Seminaire Internationale sur les Aspects Economiquesde la Gestion de l'eau dans le Bassin Mediterraneen. Diagnostic de la Situation Actuelle. 1976. Washington." These de Doctorat. K. 1995. "Etude de la Tarification de l'Eau d'Irrigationdans la Basse Vallee de Ia Medjerda.eau des Perimetres Irrigues. July 1995. Maroc. World Bank. Universite de Gand. Rapport d'Evaluation.M. 133 . 1995.C." Ministere de I'Agriculture. Djebbi. "Projet National d'Amelioration de la Gestion du Secteur Irrigue. L'Office de Mise en Valeur de la Vallee de la Medjerda. Aloui. L. Middle East and North Africa Region. Zekri. ECA/MENA Technical Department.
charge systems should be easy to understand and administer. In Uganda prices of water have tended to be influenced by social factors. The water charge system was based on the following principles: water is a scarce good so prices should be set to encourage consumers to conserve. Mbale. Most of the water supply installations in urban areas not served by National Water and Sewerage Corporation have virtually ceased to function due to the near absence of financing. Many of those who did were civil servants living in towns. Jinja. lakes. It does receive grants and loans for major development works. mainly from boreholes with handpumps and protected springs. Austria. and the European Union. Gulu. prices should ensure social equity. 21 percent to industries and commercial enterprises. Water charges did not come close to reflecting the costs of supplying water. and established a tariff system. Very few people benefited from these subsidies. The government of Uganda owns The National Water and Sewerage Corporation. Water pricing practices in the past In 1971 water was declared a gift of God and made available to consumers free of charge. however. but overall the water utility must be financially viable. The Corporation then took on the responsibility of operating the water supply systems in six additional towns. Germany. Kampala. There are currently about 34 urban centers in Uganda with some form of piped water supplies. and does not receive subsidies for these. rivers and underground aquifers. Kampala. Water charges were incorporated into house rents (house rents were also heavily subsidized). bringing the total to nine. Jinja. The Corporation is responsible for financing its recurrent expenses and minor capital expenditures. Before the National Water and Sewerage Corporation took over water supply and sewerage services in 1972.21 UGANDA Hillary Onek Introduction Uganda has abundant sources of water supply including streams. Mbarara and Tororo-obtain their drinking water from the piped water network. It is estimated that only about 40 percent of the people living in rural areas (where 90 percent of Uganda's people live) has access to safe drinking water supplies. In these towns. But in 1984 the government changed its policy. water utilities should be financially self-supporting. It is estimated that only 15 percent of the inhabitants in these towns have adequate water supplies. Masaka. sometimes far from their dwellings. and Entebbe. The National Water and Sewerage Corporation was established in 1972 with the objective of operating urban water and sewerage systems within Uganda on a nationally self-supporting and sustainable basis: some towns and subscribers may cross-subsidize others. natural wells and springs. Kreditanstalt fur Wiederaufbau. The Minister of Natural Resources has the power to designate the National Water and Sewerage Corporation responsible for any of Uganda's urban water systems through statutory instruments. Rural people without access to safe drinking water obtain water from unimproved and often unsafe sources. through the government from agencies such as International Development Association. Lira. Initially the Corporation was responsible for the water and sewerage systems of Uganda's three largest towns. water charges were set mainly to satisfy the desires of the urban inhabitants. and 29 percent to government offices and other institutions. About half the residents of the nine major towns with water systems operated by National Water and Sewerage Corporation-Entebbe. 134 . and charges should be different for different categories of users. and consumers were paying no more than a token fee for water. 50 percent of water supply is distributed to residences.
2providesdetailedtariffdata.1 Increasesin water tariffincreasessince 1989 (percent) Percent increase March 1989 360 60 November 1989 May 1990 69 September 1991 August1992 16 45 Introduction Commercial of Transactions Levya August 1993 March 1994 25 20 60 a SinceMarch1994 0 Commercial Transactions government of 15percentapplied all waterand sewerage starting Levy: tax to bills in July1993. the NationalWaterand Sewerage Corporationintroduced a new charge system which differentiatedbetweencategoryof consumer(domestic. institutionaland government. At the sametime. both and are adjusted sd that revenues cover costs. Expectedrevenuefrom tariffs is comparedwith plannedexpenditures. In Ugandathere is little irrigation. One is full cost recovery. Increasesin tariffsare made only after considering the unit costs of production. Table 21. Starting in September 1993. all from to of connection. Tariffsare reviewedeach year as part of the budgetingprocess.with poor urban householdspayingthe lowest rates.were combinedintoa singlecategory:morethan250 users. Unmetered chargeswere set accordingto the numberof taps for residences. In the past all consumersother than public standpipeusers were chargeda fee for sewerage equaling 50 percent of their water charges. proceeds whichareforwarded thegovernment Uganda.affordability.the two bands for assessedgovermnentlinstitutional indusand trial and commercial categories 250-500users (numberof personsdrawingwater from the connection) and more than 500 users. Irrigators tend to grow crops generating high returns such as flowers and fruits. Table21. the and level of inflation since the last tariff increase. water charges are based on a numberof principles.Commercialusers pay three times as much per cubicmeterthanpersonsobtainingwaterpublic standpipes. Charges also reflectthe differentlevels and costs of providing services: supplyingwater through standpipes is far less costlythan pipingwaterto individualusers. it introduceda tiered tariff for industrialand commercial users and a minimum charge for enterpriseswith metersdependingon the size of the 135 . whetheror not they were connectedto the main sewagesystems. the utility introduced minimum charges for governmenttinstitutions and industry/commercial usersand for publicstandpipes.1 shows increasesin water tariffs since 1989. Table21.Therationaleis that waterusedfor commercial industrialpurposesis an inputto and businessactivitiesand generatesprofits. Howeverstartingin June 1990. In September 1993. and irrigationis not needed for subsistence crops. The countryenjoys abundantrainfall.and the numberof consumersfor institutionsand government offices.and none which is publicly-supported. Importantfeatures Tariffswere set to differentiate betweendifferent categoriesof consumers. Presentwater pricingpractices Currently. industrial and and commercial consumers).
800 145 Sept.500pernmonth 243 Minorindustrialand commercial Metered(percubic meter) 243 315 380 425 315 380 455 510 380 550 660 740 550 660 790 890 660 1.500per month 243 > 1.310 6. 1992 15. Commercial consumers pay 1. Standpost consumers pay 400 shillings per cubic meter (US$0. and is Note: Minimumcharges.500 cubic meters per month.070 320 395 2. depreciation and capital costs are included in the tariff.745 5.250 3.480 27.264 shillings (US$1.056 1.056 (US$1.460 9.35) for consumption over 1. 1989-94 (Uganda shillings) Dec.all operation and maintenance costs. 1991 10.75).056 a For institutions governmentofficeswithoutmeters. The lowest rate per month is 3. 1989 Publicstandpipes Unmetered(permonth) Metered(per cubicmeter) Domesticuse Unmetered(per month) 1 tap 2-4 taps 5-8 taps over 8 taps Metered(per cubicmeter) Institutionsandgovernment Metereda(per cubicmeter) 5. 1.930 11.2 Tariff schedule. and 1.00).969 shillings (US$3.050Uganda shillings= US$1.325 385 475 3.440 4.9 The exchangerate in June 1996was about 1.930 14.750 250 April 1995 30. Another is social equity.and seweragechargesare not included.500 cubic meters per month. Unmetered residential consumers pay flat rates.208 3.monthlyconsumption estimated.100 6.430 190 225 1.connectionfees. Water charges for the less privileged are about one third charges to more affluent commercial and industrial users.250 6.056 shillings per cubic meter (US$1. penalties.520 74 June 1990 9.375 125 Sept. Table 21. 49 136 .20) per meter for the next 501-1.312 4.700 220 270 2.424 1.00) shillings per cubic meter for the first 500 cubic meters.720 616 760 Major industrial commercial and Metered(per cubicmeter) First 500 permonth 243 501-1.550 17. Commercial consumers must also pay surcharge of 100 percent for sewerage while standpost consumers do not. Flat rates are based on the number of taps for domestic consumers.700 210 Sept. but commercial and industrial consumers pay increasing block rates. 1993 18.968 112 133 1.050shillings).620 8. (US$= 1.088 18.000 400 736 2.424 shillings (US$1.696 11.310 6. reconnection fees.264 1.38) while commercial and industrial consumers pay 1.
and arfor rears are high.25)for householdsto 125.300shillings (US$118. They are thereforemuch more able and willingto pay than in the past.000accountsby the end of 1995. Difficulties The attitudethat water is a free gift of God still persistsand not all consumerspay their water bills in a timelymanner. Finally consumersview reconnectionfees. Many consumersbelievethat it is fairerto raisechargesper cubicmeter of waterthanto raise minimumcharges.Successes Because of the move to full cost recovery. leaving the Corporation with responsibilityonly for producingand distributingwater. This discouragessome consumersfrom using the standposts. Becausewater is moreavailableand affordable.37)for consumerswith 1/2 inch pipes. The Corporation is currently enjoying a monopoly watersupplyand sewerageservices.is valuedat very lowlevels. 137 . governmenthas giventhe the Corporationresponsibilityto operate the water and seweragesystems in three additionaltowns. The increasing block pricing strategy for industrial and commercialconsumersis workingeffectively.Measuresare currently be- ing taken to regularize standpost vending and controlthe pricesvendorscharge.even when they can afford to pay for water from taps. changing the tariff structureis difficultand cumbersome: tariffs cannot be set or changed without govemient cabinetapproval. poor inhabitants sometimespreferto collectwater free of charge from the nearest wells and borehole pumps . In some of smallerurban centerswhere the Corporation operates. Residential consumersespeciallylikethe flat rate chargesystem. It is difficultto stop vendors from chargingexcessivepricesat standposts since the Corporationdoes not currently license them. Because of its good performance. This because the labor of the people who collectthe water.280 shillings (US$36.and introducinga flat monthlyservicefee. While the Corporationis a monopolyand can therefore set pricesat any level it pleases. the National Water and Sewerage Corporation has been able to sustain its operationsand even expand its manpower development programs. Currentdebatesand future prospects Pricing The Corporationis currently reviewing its tariff structure. on However.chargingflat fees for sewerage rather than basing the fees on water consumption. Revenueshave risen.licensingpublicstandpostvendorsto reduceor eliminatethe rentwhich unregulated vendors currentlyextractfrom the system. Many consumersdo not understandor are willingto pay the surcharge sewerage. However.it may be appropriate privatizesome to of its activitiesto improveits efficiency.sinceit makesbudgetingfairly easy. usuallychildren. Among the options being consideredare abolishingminimumchargesand replacing them with volumetricchargesbased on actualmeter readings. The number of consumers the utility serves has grown from 30.it has chosen to keep its tariffs affordableand has avoided consumerresentment. so the Corporationis developing its operationalcapacity. imposed on consumers who are disconnected for nonpaymentof water bills as excessive. the private sector could handle bill processing and collection.reducingor reformulating new conthe nection and reconnectionfees in order to encouragemore consumersto join the Corporation network. bringing the systems under its managementto twelve. publichealthand hygienein the towns wherethe utilityoperateshas improved.it still does not fully utilizeits powers. Currently these chargesrange from 38.000 accounts in 1993/94to approximately 59. This discourages potentialconsumersfrom applying for water connections. For example. Whilethe utilityhas the authority to disconnect nonpaying consumers and take them to courtfor outstanding charges.suchas Guluand Lira.
" 138 .References National Water and Sewerage Corporation. Annual Reports 1993. Statute Supplement No.1991-96. NationalWater and Sewerage Water Tariff. Various years. 1994. "Backgroundto the National(Uganda)Budget. . "National Water and Sewerage Corporation Statute. 1994-1996". 7. 1995." . Various years. Uganda. "Board Proceedings. 1994. 1995. Variousyears.
and the densely-populated Thames region receives some 700 millimeters. charges comprised annual fixed access fees (or minimum charges) . after the 1974 reorganization of the water industry. Until 1993 the charging schemes varied by region. Since 1968 abstraction charges have been levied. return flow rates.plus unit charges levied on the quantity of water authorized for abstraction. By law. and the degree of support provided to maintain river flows. Charges were not generally based on actual use. regardless of ability to pay. on. receives about 610 millimeters rain per year. paid for water according to the rental (ratable) value of the propsources are relatively plentiful. but rainfall is not well distributed in relation to population. or adjacent to their property. when considering the high levels of water reuse.860 million liters per day) is taken from surface water sources. industries. river quality. Department of Environment 1994). domestic water supply was provided to all as a universal service. However. Indeed. in some areas concessions were made to spray irrigators. the regional water authorities could set charges high enough only to recover resource management costs. fish farms. Authorization (or availability) charges were calculated by establishing a basic price per authorized unit and then adjusting the price using weights to take account of factors such as season. who paid a proportion (normally 25 or 50 percent) of the charges for authorized abstraction. charges were typically too low to act as a demand management tool. abstractions in Scotland and Northern Ireland are not licensed and measuired. Good data on abstraction are available only for England and Wales. 139 . Virtually all domestic.000 millimeters per year (1. Typically. 80 percent of abstracted supplies (25. providing 50 percent of supplies. Wales. and others with 100 percent return flows) is already close to exceeding 1-in-50 year drought rainfall levels. the 10 multi-purpose regional water authorities took over this responsibility. for example. and became liable for further payments in years when actual usage exceeded that proportion. Excluding abstractions from tidal sources and those for uses with 100 percent return flows. the abstraction of water (excluding water for power stations. but is less to the south and east. There are no charges for abstraction. industry and power stations use 17 percent. averages more than 1. source. In England and Wales a license system has gradually replaced the common law approach since 1945. northwest and southwest England. The 29 catchmentbased river authorities initially deternined the rates. But in southeast England and East Anglia groundwater is more important. Abstraction charges Piped water charges Traditionally.400 millimeters in Scotland). and farmers obtained riparian rights under common law to abstract water from below.designed to recover the basic administrative costs of the licensing system . East Anglia. Northern Ireland. and many commercial properties. where water reHistorically. This common law system remains in force in Scotland and Northern Ireland. public water supply agencies. Annual rainfall in Scotland. the public water supply sector uses 80 percent of abstractions. In the drier south and east. and agriculture uses 3 percent (Water Services Association 1995. in the Thames area abstraction exceeds this threshold. all of which are relatively sparsely populated.22 UNITEDKINGDOM Judith Rees Introduction The United Kingdom is well endowed with water resources. Over England and Wales as a whole.
0 While the use of standardized national factors is administratively simple and give the appearance of fairness (abstractors are treated the environment. abstractions from sources where there has not been capital investment (including all ground water) are multiplied by a factor of 1. in accordance with the 1989 Water Act and subsequently the 1991 Water Resources Act. and paid on the basis of quantities used. factor of 0.000 cubic meters 5 in Northumbria.000 cubic meters in Yorkshire to £16. charges were briefly based on the "community charge" (poll tax). a fixed annual fee assessed on each adult occupying the property. Annual charges are calculated from a standard formula. effluent dilution). C = Loss factor.6. but most pay for water as part of their local council rates. factor of 0. summer only. low loss (mineral and vegetable washing. factor of 1. In Northern Ireland some properties are metered.22 per 1. and abstractions from tidal waters are multiplied by a factor of 0. SUCs for 1995-96 ranged from £6. while removing the inconsistencies. including the costs imposed on the environment" (Department of the Environment 1992).003. In England and Wales the privatization of water suppliers in 1989 initiated a move away from basing water charges on local tax assessments. Under this system charges are not related to consumption so consumers have no incentive to conserve. factor of 1. This varies by year and by region. factor of 0. Charges are now based on the council tax liability of properties. In Scotland.erty. nonevaporative cooling). However. High loss. depending on National River Authority regional expenditure. Present water pricing practices Abstraction charges in England and Wales Following the privatization of the water and sewerage utilities.61. In 1996 the National Rivers Authority became part of the Environmental Agency. Moreover.16. factor of 1 (spray irrigators). It was widely accepted that the inherited abstraction charging schemes lacked consistency and failed to "bear any relationship to the full costs imposed by particular abstractions. although new properties are normally metered. This is no longer the case.29 per 1. Today the different regions use different charging systems.6. where: V= Licensed volume. most commercial and industrial use). it is not effectiveas a 140 50 £1=US$1. SUC = Standard Unit Charge. fish farms. the resource conservation and river management functions of the regional water authorities were transferred to the National Rivers Authority. very low (power generation. In the meantime properties pay for water on the basis of historic ratable values. Indeed a law was passed requiring all companies to implement new charging systems by 2000. In practice this means that charges are low since the National River Authority undertakes relatively little capital investment in river flow management. medium loss (public water supplies. industry and some commercial enterprises had meters. Year-round. the National River Authority cannot set charges higher than are needed to recover costs properly charged to the water resources account. the normal basis for assessing local govemmnenttaxes. winter only. B = Season factor. water companies undertake most such investments. However. the national scheme introduced in 1993. Until the late 1980s all regions of the United Kingdom used this system. is far from setting charges which reflect the impact of individual abstractions on water resources and the demand management tool since. Abstractions from sources where there has been capital investment are multiplied by a factor of 3.03. V x A x B x C x SUC. which is established by assessing asset values and placing properties into one of eight charge bands. A = Source factor.2. factor of 0. . The national scheme imposes an application charge for all new or revised licenses and an annual charge based on the authorized abstraction volumes.
Mid Southern."' The governmentset the limits to be effective during the first five years of private operations. and environmentalsustainability.when the Director General of Water Services established new limits on annual price increases under the retail price index ± an adjustment factor "k" system of price controls.same way regardlessof location). Annual operating costs would amount to approximately £13 (Ofwat 1995).and allowcustomThe "k" is a number specific to each company. Anglian. They will continueto be revisedeveryfive or ten years. and 51 percent lower (Thames) than Northumbria. The government. since their charges are unaffected unless they forego part of their license. coupled with the high profits made by privatecompanies. 51 . which the consumer must ultimately bear. These expenses. These conditions will apply in resource-scarceareas where incremental supply costs are high.which have negligible effect on resource availability. However. Severn Trent). can only be justified economically and socially where meteringis the cheapest method (in economic and environmentalterms) of maintaining supply and demand balances. and installing the more common external meter would cost £200. the regionally-based standard unit charges reflect past investmentsand have little to do with current water availability. The rate of increase was slowed in April 1995. In addition. Other difficultiesarise due to the use of authorizedquantity as the sole measure of volume. However. 36 percent lower (Southern). although there are wide variations among companies.the Secretaryof Stateset the adjustin ment factors.which they are reluctantto do since licenses normally have a significantasset value and may be difficultto obtain or renew if water demandchanges in the future. equity. includingthose which target high peak users such as sprinkler users and swimming pool owners. there is no incentiveto make such returns in upstream parts of the catchment. unmeteredsewage bills rose 141 between 52 and 122 percent. surface. limit the National River Authority's ability to charge more for abstractions in water-short areas and low-flowperiods. A number of companies have begun selective metering programs (for example. means that water price levels have become a politically contentious issue.less attention is now paid to the spatially differentiatedcosts and impacts of abstraction. the economic regulator.and indicatesthe company'sallowablechangesin annualcharges.however. The national scheme also takes no account of the value of return flows: water companies are placed in a single loss factor category regardlessof the water return point.where they could add to river flows and be made available for reuse.a region with a large resource surplus. Piped water charges Since water suppliers were privatizated water charges have increased markedly. The highest charges are in Northumbria. given the prohibition against charging more than is neededto recover cost. Today average water charges are still not high by international standards:average householdbills are currently £99 per year for water and £112 for wastewater. An abstractortaking water from an overused catchment or depleted aquifer will pay the same amount as one utilizing a source with excess capacity. Further. Between 1989 and 1994-95 unmeteredhousehold bills increased between 50 and 150 percent (in nominal terms) depending on the water company. It is recognized. At the timeof privatization 1989. And.in 1994 the DirectorGeneral of Water Servicesresetthem.that introducing universal metering immediately would be prohibitively expensive: installing internal meters on existing properties would cost about £165 per property. In addition all companies have optionalmeter schemes. the steep increases. and the National River Authorityand Environmental Agency all favor the introductionof metering and tariffs based on consumptionto promote efficiency. Industries and private water companies have no incentive to conserve (through recycling or increased leakage detection). Thus. Areas with the lowest margins between effective rainfall and actual abstractionshave chargeswhich are 14 percent lower (Anglia). or tidal abstractions. chargeslevied on winter only. in addition to the long-standing debate over chargingmethods.
and nonevaporative cooling) it is inevitable that their customers would pay most of the increase in raw water costs. Folkstone and Dover Water Company 1995). and prefer to retain fixed annual fees. For example. resource shortages could be exacerbated. importantly. however. South East Water) will install them free of charge. Some authorities are reluctant to accept the greater instability in revenue that metering potentially brings. mineral washing. Although some water companies have announced their intention to progressively introduce metering (for example. comparison of consumption during the hot summer of 1995 among metered and unmeasured users showed that metering largely removed the peak-use component (Mid Kent Water Company 1997. it is by no means certain that it will allow their use to manage water demand in the near future.from 2. However. universal right. there is considerable political opposition to increasing water charges. In smaller-scale trials conducted from 1989-92 in 11 districts using a variety of different tariff structures. weekly and daily peaks were reduced by 25-35 percent (Department of Environment 1993. Although the percentage of households and businesses with meters has grown considerably since 1991-92 . metering also significantly reduced peak demand (Binnie 1992).8 to 7 percent of households and 66 to 76 percent of businesses over 72 percent of all piped water is still provided on an unmeasured basis. opposition to raising prices remains strong. There is now considerable evidence in the United Kingdom that metering does reduce consumption. average annual demand per household fell by approximately 11 percent: in dry summers monthly. personal communication. The National River Authority and Environmental Agency are. environmental damage could arise. . permit trading is not without problems. However. although some companies (for example. It is widely accepted that current charges provide little incentive to conserve. investigating the practical implications of introducing incentive charges. Studies are also being conducted on the potential role of tradable permits in improving water use efficiency: tradable permits are thought to be less politically contentious than environmental taxes. average daily demand fell by 22 percent between 1987 and 1992. Current debates and future prospects Abstraction charges Although the government favors the use of economic instruments for environmental management. if currently unutilized or underutilized licenses are traded. viewing water as an essential. The droughts of 1989-92 and 1995-96 have highlighted the need to treat water as an economic good and to employ demand management measures to help achieve supply and demand balances. if trading increased consumptive use. let alone the costs of environmental externalities. moved water between catchments or shifted the location of return flows. Their introduction will depend on the willingness of the government to change the law and remove the current prohibition on collecting revenues in excess of costs. As the water companies account for 81 percent of consumptive abstraction (the remainder is for fish farming. still others are concerned for the health and hygiene of low-income families. However. and the government has not made the installation of meters compulsory. Anglian and South East Water) there are still many within the industry who doubt that the costs can be justified by reductions in demand and delayed development of new capacity. Na142 tional River Authority 1995). and some are suspicious that metering will be an excuse for water companies to increase prices and profits. others are reluctant to contemplate the redistributive effects which would result from metering.ers to choose their payment methods: under most schemes the customers pay a subsidized rate for meter installation. Recent research suggests that raw water may be seriously underpriced: in the Thames region it is estimated that the abstraction charges cover only 10 percent of the cost of incremental expansion. Some people oppose metering on ideological grounds. In a large-scale trial conducted in the Isle of Wight. More recently.
1995. 1994. References Binnie. 1995. "1995-96 Annual Abstraction Charges. And progresscould be more rapid. . the Way Ahead.London." London. it has not yet introducedlegislation to changethe law. especiallythose with high property assessments. . Rees J. "Digest of Environmental Protectionand Water Statistics." National River Authority.A decisionwill have to be made soon about allowable charging methods for nonmetered households after 2000: the law prohibits the use of property assessmentsas the basis of water chargesafter that date. Water Services Association.." National River Authority. Folkstone and Dover Water Services. 1991." Birmingham. But if current trends continue. Williams. 1994. However. 1991. National Rivers Authority. "Saving Water: The National River Authority's Approach to Water Conservationand Demand Management. Althoughthe current governmenthas announcedits intentionto allowthe current systemto continueand refuses to allow the use of the new council tax as the chargingbase. "Water for Life Strategiesfor Sustainable Water Resources Management. 1994. Departmentof the Environment. "Water Facts 1995. 1993. "Future Charges for Water and SewerageServices. a numberof companiesstarted to require sprinkler users and swimmingpool ownersto use meters. and S. but trials could be undertakenin the near future. Bristol. The Labourgovernment may allowthe use of a counciltax based system." Paper presented at the Paying for Water Symposium. Following the 1995-96 drought.J." London.London." In OfWATAnnual Report 1995/96.London. "The Impact of Metering on Peak Water Use. "Demand Management. 1996. "Water MeteringTrialsFinal Report. "Paying for Water." Councilfor the Protectionof Rural England. 1995." Birmingham. 1992.which have proved attractive to customers. "Using Water Wisely:A ConsultativePaper. others have introduced free meter optional schemes. . 1992. Bristol. January28. Birmingham." Birmingham." National Metering Trials WorkingGroup.A. OfWat. the proportion of metered householdswill increase to 14 percent by 2000 and 33 percentby 2015.It is likely that policymakerswill be cautious before introducingtradeable permits. much will depend on politics and the attitude of the new Labour govemnment. C. Tariffs and Metering. 143 . Piped water charges No one expects an immediatemove to metering and charges based on use." London. . 1995. "1995-96 Reporton Tariff Structureand Charges.
A district needing to increase its water supplies would compare the cost of developing new facilities to store and deliver water using its own water rights with the cost of purchasing water from other sources. Water districts were formed with legal authority to place liens on the property of owners who failed to pay their assessments. such as rivers.or federally-financed water facility. of its water from a larger "umbrella" district or a state. but do not charge for the use of the resource. prices also include payments made to the external water authority. Revenues through tax assessments Both urban and agricultural districts may obtain revenues from tax assessments based either on the value of property or the number of acres of land owned.23 UNITED STATES Richard W. or rainwater collected in impoundments. Where districts purchase some. Water is provided to final users through a variety of institutional arrangements. private parties generally can sell or lease them. owners of water rights can sell water. Opportunities for selling water are not normally available to urban water users. These state agencies charge fees for filing and processing new permits and for reviewing and processing changes in the use of existing water rights. Such assessments on land were based on the rationale that all property owners within a district enjoyed a benefit from the availability of water. these assessments were used to provide financial security for district water suppliers. Urban residents normally receive water from local water districts (city. including the costs of building and maintaining facilities within the district. but may be available in varying degrees to individual farmers within in an irrigation district. or all. Of course. Therefore. once water rights are in private hands. most districts price their water to cover costs of delivery. 144 . In the past. state agencies. This is because farmers use larger blocks of water and because their supply is typically a larger fraction of an agricultural districfs supply. the demand of final consumers will to some degree depend on the availability of alternative water supplies which they can exploit themselves. Accordingly.even if they did not use the resource. large industries in rural areas are particularly likely to have their own supply sources. In such secondary markets. groundwater. Industries may receive water from urban water districts. to other water users. in places where there are functioning wholesale markets for water. the market price will be determined by the costs of designing and constructing new storage and delivery facilities.reflected in the increased value of their land. or may have their own sources of supply. Farmers often receive irrigation water from irrigation districts that construct and maintain water storage reservoirs and delivery canals for shared use. rather than the federal government. or other special water district). generally grant rights to use water for a particular purpose at a specified location. the price would normally reflect a value for the resource. Most urban and agricultural water districts are organized under state laws which limit the charges they can impose to no more than their costs. the costs of purchasing water rights. and the demand of final consumers. However. In places where there are water markets. county. that is they can husband the resource at its opportunity cost. the legal and engineering expenses of transferring those water rights to new users. and individuals aware of these opportunities can price water to themselves at the regional market value of water. Districts. and the costs of obtaining permits for any new facilities. with certain restrictions. Wahl Introduction In the United States. industries.
Some utilities in water-shortareas use increasing block rates. rather than on wholesale water markets. the long-run marginal costs of expandingwater supplies are generally increasing. But. although pricing in the latter is clearly influenced by the former.Charges based on property assessments provide no incentive to conserve the resource. flat rates by customer class are the most common. while others have charged uniform rates. has historically charged more to userson higher elevationlands. PresentWaterPricingPractices The rest of this chapter focuses principally on issues of pricing water to final consumers. Costs for wastewater treatment may be included in charges for water. Nevertheless. The Westlands Water District in Califomia. once justified as quantity One specialcase deservesmention:in order to promotesettlementof the arid western United States. and increasing block rates. For example.by payingpositive but below-marketinterestrates.particularlyfor residentialurban customers. but no higher. Specific rates and block sizes are typically differentiatedamong various customer classes.were able to price water at far less than the economiccost of delivery. but legislation rarelymandates rigorousexaminationof rate structures. water suppliers are not profit-makingenterprises. The practice of settingprices to reflect averagecosts derivesprincipallyfrom the legal requirementin most districts that charges 145 discounts. and public uses (such as parks and municipalbuildings)(Beecher. under which new residentialsubdivisionsor businesses are chargeda one-timesystem connectionfee to defraya portionof the cost of increasingsystem capacity. The districtexpects this percentage to decline still furtber (MetropolitanWater District of SouthernCalifomia 1990). commercial. principally because Congress extended repaymentperiods(Wahl 1989). But. which supply water to about 20 percent of the irrigatedacres in the West. A growing response intended to reflect the higher costs of facility expansionis the use of "tap" fees. Federally subsidized irrigation water must be set to recover costs. In the past.Mann.the percentageof revenuescollectedthrough propertytaxes by the Metropolitan Water District of Southern California fell from over 80 percent before 1950 to less than 50 percent since 1970. industrial. American Water Works Association 1991. American Water Works Association Research Foundation 1997). and Landers 1990. Since the most economical water sources are typicallydevelopedfirst. Urban and hydropowerusers received smaller subsidies. Waterrate structures Nearly all water districts charge for water on the basis of their average costs. Therefore. Rate structures employed by water districts include flat-rates. pricing water at average cost leads to undervaluationand overuse. declining block rates. have been criticized as wasteful by economists and others.1). Declining block rates. for example. such as residential. and over the past three decadeshave beenemployedless and less. State or federal legislation may contain general exhortationsto conservewater. both urban and agricultural water districts are becoming more aware of the economic consequences of water . irrigation districts receiving water from Bureau facilities. As a result. because pumpingcosts are higher and the price of water purchased from the federal Central Valley Projectis higher(Table 23. and amongurban waterdistrictsthis practicehas been declining. Subsidies grew from levels of around 14 percent near the beginning of this centuryto levelsof over 90 percent in the 1980s.and offered interest-free loans for the construction of irrigation water systems. some agriculturaldistricts have chargeddifferent rates based on the cost of de-livering water to different locations within their districts. the United States Congress established the Bureauof Reclamationin 1902. just how to employ long-runmarginal cost pricing remains controversial and problematic for both practical and theoretical reasons.
from US$16 per 2 acre foot" to US$40 per acre foot. such as project storage. districts have allies in the United States Congresssupporting their efforts to preventrate increases. For example. in some cases. The Act establishesa three-tieredrate for water prices: higher rates are chargedfor water above 80 percent and 90 percent of historicalcontract amounts.1 illustratesdepictstypical rates. Water rates in the CentralValley Project vary by region. increasing charges to water districts through the introduction of tiered rates and a flat surcharge of US$6 per acre-foot (Table 23.4 hectare. and additional pumping charges. For example. These agenciesobtain water from their own sourcesin additionto the MetropolitanWater District. Umbrelladistricts Another issue in establishing incentive prices is the relation betweenregional umbrella districts and their member water districts. to incorporate incentivesfor conservation.00 per acre foot) for water volumes 54 above 3.00 per acre foot because it was collecting more than neededto recovercosts. Unless otherwise noted. In addition to 146 1 acre foot= 0. with water in the first tier costing US$36 per acrefoot and water in the secondtier costingUS$60 per acre foot. In 1987the PachecoWater Districtadopted a similar a system of crop-specifictiered rates. In 1989the Central CaliforniaIrrigation District adopted a tiered rate that is independentof the crops grown:chargesfor water almost tripled (from US$5. An analysisof different rates structures by urban districts has become more common.50 per acre foot to US$15. in 1988 the Broadview Water District increased its chargesfor water used above 90 percent of historical averages by 2. where water 53 application rates are computed by crop. Furthernore. All districts receivingwater from the large federal Central Valley Bureau of Reclamation project are requiredto use incentivepricing under the CentralValley Project ImprovementAct of 1992 (Title XXXIVof Public Law 102-575). This legislation illustrates the complex links between conditions external to a district and its own pricing structure. Establishedto protect the fishery and recreational resources in California rivers and estuaries. Wichelns 1991). and placing additional revenues in a fund to buy water from the affecteddistrictsand other sources(Wahl 1994). the Metropolitan Water District of Southern California is the residual supplier of water to some 27 member agencies. . pticesarein 1988 dollars. Table 23. Any increase in prices which the MetropolitanWater Districtestablishesfor new supplies will be significantly diluted if member agencies average the new fees with the those reflecting the costs of obtainingwater from other sources. canal conveyance. Subsidy reform There have been several attemptsto reform the subsidizedpricing of irrigationwater of federal projects. this legislation adopts a three-pronged approach: reallocating some water for instream use. One significant exception is the Central Valley ProjectImprovementAct. In 1989the district lowered the second tier to US$10.pricing. based on the services provided. and 52 53 based on the accountbalances of individualdistricts.5 times. The MetropolitanWater District has argued that it may do little good for it to price water at longrun marginalcost if its membersdo not. Prominent examples of incentive pricing have been institutedby a few irrigationdistricts in California'sCentral Valley seekingto reduce the applicationof irrigationwater to lessen the outflow of contaminateddrainage water from their districts (Thomas and Leighton-Schwartz 1990.25 acre-feetper acre. and an increasingnumberof water utilitieshave tried to modifytheir rate structuresto avoid disincentives to conservation (such as declining block rates) and.1). Proposalsto raise prices have had little success because districts have long-term contractsfor water. all US " I acrefoot = 1235cubic meters. The contractual relations between umbrelladistricts and their members is an area that needs to be addressed if incentive pricing is to be fully effective.
The adoption of policies to facilitate market transfers of water may prove an easier route to encouraging more efficient use of water than legislatively mandating pricing reforms.05 Pricing of the resource It is unlikely that states will begin to impose a resource charge for the abstraction of surface water. that may lead to the adoption of guidelines for irrigation districts to use in setting prices. the legislation reduces deliveries to districts and facilitates the marketing of district water for both commodity and instream uses.51 18.15 13.Delta MendotaCanal WestlandsWaterDistrict. However.Madera Canal DelanoEarlimartIrrigationDistrict. The measures primarily establish rules for depositing and withdrawing water and involve charges only to cover costs of engineering. The Bureau of Reclamation adopted such a policy in 1989.23 53.San Luis Canal Madera IrrigationDistrict. Fraint-KemCanal 7. imposed taxes on pumping that were expected to increase over time.38 46. the existence of markets should lead districts to value water internally at its external opportunity cost . administration.raising federal charges to Central Valley Project irrigation districts.46 31. These latter provisions may lead districts to reexamine their internal pricing structures.12 48. given the long history of not doing so.04 27. there have been some initiatives at the state level to charge for water extracted from groundwater sources . The Bureau of Reclamation is now preparing a study of incentive pricing.85 42. particularly for subsidized irrigation water on fed- eral projects (Wahl.25 68.51 24. and applied it to all of its projects. local and state governments have instituted a variety of measures to allow use and recharge of groundwater basins.NorthernSacramento River Colusa CountyWaterDistrict.largely to limit the use of the resource.46 25. Tehamna Colusa Canal Westlands AgriculturalWater District.15 17. 1989).94 30. tieredrate) plus Up to 80 percent 80-90 percent 90-100 percent AndersonCottonwood Irrigation District.19 59.08 37. In other locations in the West.94 24.1 Rates and surchargesfor irrigation water attributableto the Central Valley Project Improvement (1994 US$ per acre foot) Act BeforeAct After Act (US$6surcharge.60 20. in addition to other measures. Arizona's Groundwater Management Act of 1980. Table 23. 147 . Over the long-term.if not to formally price water at that level.04 21.43 88.52 39.73 88.52 33. and water losses.63 63.
The National Regulatory Research Institute. Denver. With the ongoing declines in federal funding for major facility construction. water suppliers and state and federal administrators and law-makers are likely to pay increasing attention to water pricing incentives internal to districts. policymakers may experiment with estab-lishing public funds to buy water from willing sellers for such uses. Columbus. and David Zilberman (eds. Patrick Mann. to assist in institutionalizing regional markets for water. Boston: Kluwer Academic Publishers.Market incentives to individuals within districts Since most final consumers of water obtain their water from districts. fisheries.and the need to control irrigation drainage to prevent pollu-tion. and the Bureau of Reclamation. and James Landers. 1994. and to find other means to lower the transactions costs of water transfers. This issue is especially important in irrigation water districts. Water Conservation Pricing Approaches of the Metropolitan Water District. The increased competition for water will also require water institutions to pay more attention to the need to provide water for instream uses . 1997.and profit from the sales. Baltimore: Johns Hopkins University Press. ." In Ariel Dinar. 1990. may evolve to address a variety of pressing water management issues. References American Water Works Association. Ohio. Colorado. Property Rights. The Economics and Management of Water and Drainage in Agriculture. and Michelle LeightonSchwartz. Long-term Effects of Conservation Rates. * Increased demands for instream uses. 1991. "Increasing Blockrate Prices for Irrigation Water Motivate Drain Water Reduction. Richard W. the development of water markets. The Central Valley Project Improvement Act facilitates user-initiated transfers (which are not addressed by California state water law). California. Water Rates Manual (Manual M-1).C. Natural Heritage Institute. Gregory A. Wichelns. 1990. Because of increasing competition for limited water resources. both intrastate and interstate.." West-Northwest Journal of Environmental Law and Policy 1(1): 49-69. Legal and Institutional Structures for Managing Agricultural Drainage in the San Joaquin Valley: Designing a Future. Thomas. the protection of the environment. and the administration of interstate water compacts. a continuing issue is likely to be the freedom individuals have to sell their water allocations to others . Wahl. 1989. Washington.recreation. and habitat for endangered species . Current debates and future prospects The future of water pricing in the United States is likely to reflect two basic trends: * Greater attention to incentive pricing. American Water Works Association Research Foundation. 1991. San Francisco.). Denver. 1990. In addition to promulgating regula-tions to protect instream environments. Janice. California. Los Angeles. D. Markets for Federal Water: Subsidies. Beecher. These devel-opments will have impacts on future water pricing at the wholesale and retail levels. Cost Allocation and Rate Design for Water Utilities. Dennis. Ohio State University. regional institutions. 148 . where individual water allocations may be large. "Market Transfers of Water in California. Resources for the Future. Colorado. including the provision and pricing of agricultural drainage services. and requires that districts complete a review within 90 days. Metropolitan Water District of Southern California.
The Bank has maintained that users should pay fees to cover both operations and maintenance costs and a portion of capital costs. unless there are specified reasons (for example. thus permitting investment to be replicated. Bank policy Two World Bank documents. and the Water Resources Management: A Policy Paper (1993) spell out the official Bank policy regarding cost recovery. most Bank loans contain covenants to ensure that water charges are appropriate.24 CAPITAL COST RECOVERY: WORLD BANK EXPERIENCE IN IRRIGATION PROJECTS Anne Marie del Castillo Introduction The World Bank has encouraged governments and others to recover irrigation system costs from users for many years. equity or regional development goals). why governments choose not to do so." Some merely stated that a study would be undertaken to determine what should be done. there is adequate recognition that the longer-term objective is to have a system of resource mobilization that covers capital costs. The Vice President's policy note states: The longer term objective of cost recovery should be to have a system of resource mobilization that will finance capital costs. Capital costs are those associatedwith the initial construction. the Vice President's policy note. resources are mobilized from the parties who benefit directly from irrigation. unless there are specified reasons why governments choose otherwise. According to the Water Resources Manaccording Policy Paper: agement .5 Although they have often been ignored.A Policy Paper: 55 Operations maintenance are the annualcostsof and costs operatingand maintainingthe irrigation facilities. so permitting the replication of investments. In very few cases were significant capital costs recovered. The same review found that covenants requiring the recovery of operations and maintenance costs had not been complied with in at least two-thirds of the irrigation projects reviewed (World Bank 1986a). have often been quite vague.upgrading and majorrehabilitation irrigationfacilities. The note requires that at project appraisal: there are assurances that sufficient funds are available for operations and maintenance. Long-term objectives should also include capturing rents from those who benefit directly from irrigation. The proportion of operations and maintenance costs recovered generally ranged between 15 percent and 45 percent of total costs. Nearly half of the covenants dealing with investment costs that were reviewed by the World Bank's Operations Evaluation Department contained wording on cost recovery levels such as "as much as possible" or "a reasonable portion of investment costs. of 149 . particularly those dealing with recovery of investment costs. "Financing Operations and Maintenance in Irrigation" (1984). Nevertheless because of the covenant's wording it is not possible to state with certainty that the covenants were violated. making it difficult to determine whether or not a country has complied with the covenants (World Bank 1986a). However the loan covenants. Most Bank-supported irrigation projects include arrangements to recover operations and maintenance costs and a few have incorporated measures to recover a 5 portion of capital costs. and the effects of the proposed fiscal system on farmers' incentives is analyzed.
and consumers. Bank experiences enough to provide information on actual costrecovery experience. Thereare a numberof Bank-supported irrigationprojectsthat havebeen underwaylong 150 The Regional DevelopmentCompany and National Departmentof Drought RelatedWorks have issued satisfactory legal regulationsto en- . The evidence suggests that farmers want and are willing to pay for. However. is responsible for delivering water to farmers and collecting fees (p. Brazil In accordance with the existing federal irrigation law of 1979 and its regulations (decree 89496). which. they reduce. beneficiaries would be able to pay the capital costs of the irrigation system over 25 years. In Brazil irrigation water charges consist of a two-part tariff containing a volumetric water charge to cover operation and maintenance costs. since they are not required to cover their costs. operation and maintenance costs of off-farm infrastructure. become less willing to pay for poor-quality services provided. which in turn deliver highquality services for which consumers are willing to pay (p.. the government is entitled to recover from small farmers public investments to acquire land and on-farm equipment. Under the project the newly created irrigation districts would collect water charges and use the revenues to pay the Regional Development Company and the National Department of Drought Related Works for operation and maintenance of the main irrigation works and to finance their services. in turn. and Peru are reviewed below. 50). in the interim.. The Executive Secretariat for the National Irrigation Program is moving towards improving the enforcement of water charges through existing legal measures.. According to the project's financial study of farm models. for farmers with less than nine hectares.. but cost recovery fees that ensure the financial viability of water entities are a more realistic immediate objective. and a per hectare water charge to recover the public investments in off-farm irrigation infrastructure. the practical problems of pricing for irrigation services are sometimes complex (p. farmers who benefit from irrigation schemes must pay water charges. Chile. In many cases the record of poor collection can be attributed to lack of political determination to enforce collection and limited motivation of agencies to collect. Therefore. In addition. high collection rates often reflect decentralized management and enforced financial autonomy and accountability of water entities. The record of nonpayment and noncollection of fees for water is long and well-documented. Korea. 54). costs are recovered over 25 years at an annual interest rate of 6 percent. It reflects two problems: weak incentives to collect and limited willingness to pay because services are poor. including making beneficiaries' land rights contingent on the payment of water charges.For irrigation. The five-year Brazil National Irrigation Program: Northeast Irrigation I Project includes provisions for recovery of investment costs (World Bank 1990). costs of extension services. . Since such fees are often significantly below the opportunity cost. Failure to recover costs and to reinvest in the systems leads to a vicious cycle whereby service declines with collections . 49). The financial analysis assumed that farmers would pay investment costs. reliable supplies of irrigated water. other mechanisms such as water trading or administrative reallocation are needed. One way to circumvent some of these issues is to measure the water delivered to a water users group... in turn. and.. prices reflecting opportunity costs are desirable.. Experience from projects in Brazil. According to the terms of the loan. Conversely. Mexico.. but do not eliminate the misuse of water resources. in addition to land and costs of improving their farms.
is characterized by its strong market orientation. the Korean farmland improvements associations or water users' associationsare responsible for recovering costs from farmers for projects completed and transferredto the associations. The investment costs would be divided by the total number of water rights (acciones)within the project: beneficiaries would pay the costs in proportionto their share of water rights. which in 1995was equivalentto US$30). such as the Miho WatershedDevelopmentProject (World Bank 1986b).5 percent 151 lower than farmers choosing the wheat index. Korean farmland improvements associationsare requiredto pay between30 percent and 100 percent of its capital costs. The first was that water chargeswould be set at levels sufficient to fully recoveroperationand maintenance costs and public investmentcosts for off-farm infrastructurein real terms. The government provided assurances at negotiationson two key issues. Cultivators of small household plots and farmers in extremepoverty could pay less than 25 percent of the capital costs.the level of direct cost recovery could be below 50 percent. The governmentprovidesa grant for the whatever capital costs are not paid for by farmers. and stabilizein the fifth year. The Irrigation Development Project in Chile makes provisions for recovering capital costs (World Bank 1992). It is too early to assess the performance of this project in cost recovery. an approach many consider to be the most advanced in Latin America.and the Ogeso Area DevelopmentProject Stage I (World Bank 1980a).along with agriculturalservicesin general. The rate of interest could not be less than the rate on long-term paper issued by the central bank. However. Whentaking over projects. Its irrigation system is designed within the context of a water rights market. The second was that water charges would be adjusted progressively beginning in the first year of cultivation according to a methodology acceptable to the Bank.net of taxes. farmers choosing the development unit method would pay a rate of interest 1. the Yong San Gang Irrigation Project Stage I and II (World Bank 1980b). beginning in the first year of cultivation. The level of direct cost recovery would be negotiated with the beneficiaries for each investment.5 percentwith an initial grace periodof five-years. Farmland improvement associations set irrigationchargesat levels to cover all operating and maintenancecosts and their share of the capital costs. However.the final design has been completed.its success will depend upon the effectivenessof the publicagenciesin collectingwater charges.net of taxes.sure that beneficiaries are charged for investment and operation and maintenancecosts. . to be estimated after. Grace and repaymentperiods would be negotiated on a project-byproject basis. and repaymentcould not extend beyond 25 years. Records indicate that farmland improvement associations have been very successful in collecting charges from farmers and repaying the government loan. commercial farmers would be required to pay a minimum of 50 percent and small farmersa minimumof 23 percent. Repayment is over 35 years at an annual interest rate of 5. The costs to be recovered are based on the cost of investment. It would be between 100 percent and 50 percent of the cost of the investment. plus finance charges of 3 percent annual interest. Farmers could choosewhichevermethod they preferred. Within each subproject. The charges would increase graduallyover a period of four years. However grace could not exceed four years. Korea In many Bank irrigationprojects in Korea. Chile The Chilean approach to managing irrigation systems. Repaymentwould be indexedby the "developmentunit" (unidad de formento. The proposed water charges would be reviewedwith the Bank prior to making the adjustments. a governmentstandardused to index public benefits. If the investmentbenefitedsmall farmers in marginalareas.or the wholesale price of wheat. amortizedover 35 years.
The second is a water levy (canon de aqua). and recovering 80 percent of investment costs for deferred maintenance works. but is uniform within districts. The first is a "water users' association" component (ingresos de lajunta de ususarios) intended to raise funds to finance operations and maintenance. and operation of reservoir and canal gates). or to special irrigation projects. The next highest charges are applied to newly irrigated land. To calculate water charges to recover capital costs. which requires beneficiaries to pay up to 90 percent of the reimbursable costs of the investment. The project contains provisions for the recovery of 100 percent of total investmnentcosts . This is also 10 percent of the water users association component.In the Korean Paju Irrigation System Project. The third is an amortization component to recover the cost of public investments in irrigation storage infrastructure. authorities classify land into four grades intended to reflect differential benefits from the project. Farmers pay water charges semiannually or annually for a maximum of 40 years. The operations and maintenance charge varies among the five districts or subprojects which comprise the Paju Irrigation System Project. except when special projects authorities decide otherwise. Mexico Provisions for capital cost recovery are incorporated into the Ley de Contribucion de Mejoras pro Obras Publicas Federales de Infrastructura Hidraulicos. calculated as 10 percent of the first component. Revenue from this levy goes to the agricultural development fund. including the rehabilitation and modernization of existing systems (World Bank 1995). Charges are adjusted semiannually to reflect changes in the consumer price index. not yet consolidated. 152 This was a substantial increase over the little to zero capital cost recovery required in earlier projects. The highest charges are applied to newly irrigated land which is consolidated as a result of the project. and the operating budget of the Adminsitrador Tecnico. The average per hectare administrative cost is applied uniformly throughout the Paju. not yet consolidated. but irrigation costs are calculated separately for each district. The National Water Commission (Comision Nacional de Aqua) calculates the reimbursable costs. In general the tariffs do not reflect the true cost of water. Peru The existing legislation in Peru defines two classes of water tariffs. The National Water Commission set the goal of recovering 30 percent of new construction capital costs under the US$400 million Iffigation and Drainage Project (World Bank 1991). the conservation and improvement of common irrigation infrastructure. The commission's commitment to recovering a portion of capital costs is clear through its efforts in several districts in the northwest and north regions of the country: water users are paying 15 to 25 percent of capital costs for ongoing rehabilitation and modernization works. water charges consist of two components: one to cover operations and maintenance and one to recover capital costs of the project (World Bank 1980a). which are defined in the same law. The operations and maintenance fee comprises two distinct components. Recently government policy for irrigation has focused on improving efficiency by giving full responsibility to water users for operations and maintenance of their irrigation systems. Except in very few cases irrigation water tariffs are unrealistically low and do not raise sufficient funds for proper operations and maintenance of the irrigation systems (the amortization component is usually not recovered). one for agricultural use and the other for nonagricultural use (Supreme Decree 003-90-AG 1990). The lowest charge is applied to previously irrigated land. but which is consolidated as a result of the project.fondeagro. one for administrative costs and one for costs of operating the irrigation system (for example pumping. For agriculture the volumetric water tariff includes three components. Charges may be reduced by presidential decree based on the ability to pay. Lower charges are applied to land that had irrigation facilities before the project.
C. December. 1984." ProjectPerformance Audit Report3048. Washington.D. 1996. 1990. more profitable farmers within the same water users association will pay more to insure full cost recovery. October. D. Washington." Staff Appraisal Report9779. .D. Where this is true. January. June 27. Recently approved legislation gives ownershipof irrigationinfrastructureto the users. 1992. Vice President's Policy Note: Financing Operations and Mainte- ment:A Policy Paper. .for rehabilitation. 153 .D. Commercialbanks will extend creditto users at market rates througha line of credit financed by the World Bank for this purpose. 1991. May. Washington." Project Completion Reports. 1993." StaffAppraisalReport 13542. June.6197. . Washington." Staff Appraisal Report. "KoreaYongSan Gang IrrigationProjectStageI." . "World Bank Lending Conditionality: Reviewof CostRecovery A in IrrigationProjects. October. nance in Irrigation. "Chile Irrigation Development Project. "Mexico: Irrigation and Drainage Sector Project. who repaythe loanto the banks. small farmers (those with less than 3 hectares) may not be able to repay the rehabilitation costs in addition to the higher operations and maintenancecharges.D. . ." OperationsEvaluation Department.C. "Korea Milho Watershed Area Development Yong San GangIrriand gationProject StageII.C.C. Depending on the system and the nature and scope of works required. References WorldBank. 1980a. 1986b. In World Bank. 8038BR. 1986a. 1993." ProjectCompletion Report 7041. "Peru IrrigationSubsector Project." Staff Appraisal Report 10850-CH. Water Resources Manage- 1980b. "Brazil National Irrigation Program. Washington. June.March.C. "Korea OgsegoArea DevelopmentProject StageI. .
so it is difficult to make cross country comparisons of who pays for what (costs in this context include recurrent costs of operation and maintenance and administration and replacement costs. often through taxes on irrigated land sent to the treasury. service provision. the difficulty of ascertaining just what the operation and maintenance expenses are and how much users are charged.1 places countries in a government-user contribution matrix in accordance with their relative shares in financing irrigation operation and maintenance. Why are water users' organizations involved in irrigation financing? In many developing countries government allocations for operation and maintenance and rehabilitation of irrigation systems are well below the expenditures necessary to sustain water supply systems in perpetuity. however. Do water users now pay for irrigation services? The size and extent of user financing in countries today is often difficult to pinpoint. and the difficulty of linking all types of user payments . The data come from country and World Bank reports on irrigation projects. Other obstacles to sustainably managing irrigation systems are the rising share of staff salaries and benefits in total operation and maintenance budgets at the expense of works expenditures. and the absence of a direct management link between user payments. In addition cost categories and criteria for allocating costs are not standardized. While a country may have some systems financed largely with user contributions. Consequently. there is considerable interest in how water users' organizations work and the ways they manage and finance water systems. irrigation agencies are devolving management responsibilities .including financing of operations . because of administrative weaknesses and user unwillingness to pay for poor water services (World Bank 1986). Among the reasons are the indirect manner through which country's collect contributions.to water users' associations.including cash and in-kind contributions and taxesto irrigation services. User fees generally are insufficient to fill the gap due to unrealistically low fees for water services and low levels of collection. like the water users' associations. The underlying principle is that beneficiaries of water services should pay the costs of the desired services. Realizing that irrigation system operations are unsustainable and reacting to pressure from finance ministries.25 WATER USER ORGANIZATIONS AND IRRIGATION OPERATION AND MAINTENANCE: FINANCIAL ASPECTS GeoffreySpencerand Ashok Subramanian Introduction In most countries state agencies have traditionally been responsible for water resources development and management. and operation and maintenance expenditures. A country's position in the matrix is based on nationwide experience and the authors' assessments of the relative contributions of the public and private sectors towards expenses. water users are taking on an expanding role in managing water systems and in financing irrigation operations. Figure 25. but not capital cost for enhancement or modernization). The data were cross-checked with published literature wherever available. Consequently organized groups of water users. Increasingly. this alone is not sufficient to qualify it for placement in the lower right hand part of the figure. have a role to play in setting service levels and negotiating the terms and scope of user fees (Jones 1995). 154 .
irrigation. progressively. collect water use fees. Determine operations and maintenance cosls In conjunction with determining service levels. In Chile water users' associations are responsible for the op eration and maintenance of entire systems including headworks and diversion weirs. In Mendoza. and overhead costs.Al lists a range of services agencies are likely to provide and gives an illustration of cost analysis carried out in Haryana. Users in informal or formal water users' associations are responsible for tertiary watercourse level operation and maintenance. The managing agency must complete an exercise to identify the full range of services it provides . In some countries staff costs comprise up to 50-60 per cent of total operation and maintenance costs. and pay for operation and maintenance. In the countries in this part of the figure users pay about 30 to 50 per cent of operation and maintenance costs. flood control.and allocate costs to each service category. India (World Bank 1983). The case of Colombia is different. In all these countries water users' associations recruit their own staff. Users are also expected to pay some fees to the irrigation agency for its services. A system of checks and balances has been instituted to ensure that water users' associations are accountable to their members and that the government agency is accountable to the water users' associations. Prominent irrigating countries like India and Pakistan are in this category. specifying expenditure categories staff. and others . and Simas 1995). federations of water users' associations are being formed and taking over the responsibility of managing operations and maintenance upstrearn (Gorriz. Annex 25. What are the lessons of experience? Country experience shows that five key issues or activities must be addressed if water users are to successfully manage and finance irrigation systems. The government is responsible for managing the main systems with contributions from water users' associations. The government manages the few large scale systems but is progressively handing responsibility for their management to water users' associations. Argentina water users' associations have full financial responsibility for operation and maintenance and administrative costs. Users contribute about 50-75 per cent of operation and maintenance costs. The middle section of Figure 25. such as works. Subramanian. analysts must estimate operation and maintenance costs for system level and type of service. water in bulk. At times of budgetary pressure. equipment.1 depicts countries where government and user contributions are relatively similar. but they receive subsidies for rehabilitation and modernization works. drainage. Users in countries in this category are fully responsible for watercourse operation and maintenance. material. vehicles. All countries in the upper left-hand corner of the figure are increasingly collecting a larger proportion of funding from users. cuts are most likely to be made in the nonstaff portion of the budget. 155 . But. In Mexico users are responsible for the operation and maintenance of tertiary and secondary canal systems.The top left-hand corner of Figure 25. The irrigation agency is normally responsible for operation and maintenance above this watercourse level. water supply. in most countries the public sector irrigation agency is the primary financier of operation and maintenance. In Nepal farmers have traditionally managed a majority of irrigation systems. The bottom right-hand corner of Figure 25. Although there are a few examples of systems for which users pay 100 percent of the operation and maintenance costs.1 depicts countries with a relatively small government role in financing irrigation operation and maintenance.1 depicts countries with a large government role in financing irrigation operation and maintenance. In the Philippines and Morocco governments manage large-scale surface systems. Here water users are assuming responsibility for operation and maintenance in an increasing number of irrigation districts.
Here managers hired by water users' organizations prepare irrigation plans at the level of the modulo. The plans are then discussed with the national irrigation agency to determine the final allocation of water. and duration are critical variables of irrigation water supply. Involve users in defining service levels Irrigation water is a valuable input into agriculture production. timing. Egypt has developed a program to deliver information through the Irrigation Advisory Services.Figure25. The service advises the water users' associations on the costs of irrigation services and options for setting and collecting service fees. Mexico carried out a successful program to disseminate information and train farners and agency staff. system operation and maintenance. conveyance losses. and organizational issues for water users' associations. 0 Indonesia Senegal Madagascar E > Cd 0 ~~~~~~~~~~Turkey ~~~~~~~~~~~~~Vietnam Philippines Moro c ~~~~~~~~~~~~Colombia\ Mdexio Increasing user contribution Informnationon costs of services and benefits to be derived from the project must be provided to project beneficiaries. The managers take into account cropping plans. Therefore it is crucial that water users' associations are involved very early in designing the project so that the level and type of services provided truly reflect farmers desires. If users are involved in determining service levels. constituted exclusively for water users' organizations. quality.1 Indicativemix of governmentand user contributions operationand maintenance to (nationalaverage) Nigeria o r2 K c. Topics covered in the program included water management. and the need to distribute water equitably. each covering about 5. operating rules of the system were usually taken as given and users were generally not expected to pay for capital or operation and maintenance costs. In the past.000-8000 hectares. Water 156 . Quantity. accounting and financial management. they are much more likely to value and pay for the services. In Mexico water users' associations are becoming involved in water management.
The federation and local water users' associations played an active role in preparing the project and were involved in discussions of service options and costs at all times. such as droughts and floods. Committees decide on types of services. Assess user willingness and capacity to pay Users will be willing to pay for services to the extent that they derive benefits from the project through improved reliability of water services. and set water service fees. However. These diverse sources of income may be particularly important during periods of bad weather.users' associations pay the full operation and maintenance costs at the secondary level and below. They also pay a portion of the operation and maintenance costs of higher levels of the system. and Reiss 1993). so these may have to be reviewed and strengthened to allow farmers to derive the full benefits of the project. when service levels and costs are determined. In China water users' associations earn income from the sale of fish and the collection of fees from fishermen and recreational water users. al. Farmers are much more willing to pay for irrigation operation and maintenance if they receive higher incomes from the application of water. increases in service fees or water charges. Thus farmers may be unwilling to assume new responsibilities. and easily understood . In the past the general norm has been to involve water users informally at the project design stage. 1992). Incremental costs of irrigation projects are often less than 20 to 30 percent of the incremental income generated from the projects. For the user these benefits must substantially outweigh the opportunity costs of participating in meetings of the water 157 users' organizations. The committees comprise 5 to 10 representatives of producers and 5 to 10 representatives of the office. In Mali in the Office du Niger. Surveys. In some cases water users' associations may find that incremental income gains from the use of installed technology (for example. pumping stations) will not outweigh the costs of operation and maintenance and replacement (Johnson. and agricultural extension services. and increased returns from agricultural production. administratively simple. market access. with considerable success (Whittington. better access to water of the preferred quantity and quality. Water users' associations may also generate income from sources other than user fees. Determine appropriate charging mechanisms There are a number of alternative charging mechanisms available for agencies and water users' associations to use in structuring charge systems. water supply and sanitation sector managers have been experimenting with establishing formal methods using focus groups and participatory approaches. focus groups. and costs of new responsibilities for operation and maintenance. joint committees have been established for operation and maintenance in every region. and contingent valuation techniques have also been used in selected sites to assess demand and willingness to pay for services. The committees also directly manage and make decisions on the use of 50 percent of the user fees collected for operation and maintenance. In Chile the national federation of water users' associations was involved in designing a World Bank supported irrigation project (World Bank 1992). Fee structures should be equitable. For instance some irrigation districts in the western United States rely on revenue from power sales to balance their irrigation budgets. This in turn raised the output of dry season rice by 10 per cent in the sample area studied. Later water users' organizations were given the right to approve all investment proposals and other project components. and the decentralization of management of the late 1970s and early 1980s led to the expansion of irrigated area and to equitable distribution of water during the dry season. et. Of course income also depends on output price policy. In the Philippines system rehabilitation. improved operation and maintenance. when crop output and farmer incomes may fall. manage expenditures (including procurement matters).
while retaining incentives for consumers to conserve. 158 In Vietnam the provincial and national governments finance new irrigation systems up to a command area of 150 hectares. each member must provide up to 20 person days per year to maintain the tertiary as well as secondary systems. and deliver water to users. Assets range from minor tools and equipment. The use of volumetric charges solves this problems. designed are and appropriately fordemand. Land with access to irrigation and drainage systems is almost always worth more than land without such access. or both instead of money to pay operation and maintenance costs. farmers have no incentive to use water efficiently. However because the fees are not related to volume of water consumed. This method has the advantage of being relatively simple to understand. even with adequate maintenance. A significant cost of irrigation services is depreciation of the assets used to store. However depreciation costs are usually neglected in calculating the costs of water services regardless of whether irrigation agencies or water users' associations provide irrigation services. for example Vietnam. materials. In-kind contributions. Many countries use two-part tariffs structures comprising a fixed fee to cover fixed overhead expenses.This helps ensure designs that of irrigation systems cost effective. and depreciation will accelerate. User fees. Provision is also sometimes made for collecting and retaining disaster funds by water users' associations. but this clearly favors the high volume user. This structure has the advantages of providing a reliable stream of income for water suppliers. Care of assets is vital if water system performance is to be sustained. Landowners pay some proportion of their property value in taxes. In some places. transfer. cost estimates (and hence of user fees) include depreciation costs. Replacement of assets. and a variable fee based on use. The problem with this method is that the treasury generally collects land taxes and the taxes are not transparently linked to the provision of irrigation services. However in many places measuring water use may be difficult. Property taxes. pumping stations. The value of assets declines at different rates: each year owners lose a significant noncash value as assets depreciate. Also valuing and revaluing land demands enormous administrative resources. Often agencies use a combination of the two methods. Below this level farmers are responsible for building the channels. Therefore agreements between irrigation agencies and water users' organizations should include standards for operation and maintenance carried out by water users' organizations. designs. In Mexico the hydraulics committee at the district level approves the annual operation and maintenance program proposed by the water users' organizations.by both users and people who administer and collect the fees. In some places permanent tax committees have been set up to regularly review and decide upon the basis and rate of taxation. Water users' associations also use other charging methods such as setting fees by the season. and materials in some instances. although the government provides surveys. Designing charge systems should be a topic in training programs for water users' organizations. Once schemes are completed and given to farmers associations. canals and drains. Water charges collected through property taxes are based on the value of the irrigated land. In turn the water users' associations charge individual members on the basis of area irrigated and type of crop. so that farmers learn the implications for efficiency and equity of using various charge systems. 56 . User fees are generally calculated on the basis of irrigated area. and sometimes major structures such as dams. In Mexico for instance the National Water Commission (Comision Nacional de Aqua) charges the water users' associations for quantity taken at the turnout of the secondary canal. Without proper maintenance service life will be shortened. motor vehicles and heavy equipment. alsogenerates It a sense ownership project of among beneficiaries. Farmers sometimes contribute labor. buildings and housing.56 Maintenance and ongoing replacement programs for all assets Increasingly countries requiring are in-kind cash and contributions payforcapital to costs.
Under this arrangement the agency and the water users' organizations agree on mutual rights and responsibilities. They are entirely responsible for managing the water system and financing a portion of the irrigation infrastructure. Determining costs is a first step. It is also essential that the irrigation agency has the autonomy (and the responsibility) to organize irrigation financing (Small. Provide direct links between user fees and services In some places farmers may be reluctant to pay user fees because they do not see a link between their contributions and the irrigation agency and its services. The associations can collect fees at lower cost and apply sanctions to enforce payment more easily than government agents. Experience from the Philippines shows that water users' associations are highly effective if they are organized and have a role and incentive to collect the fees. It is essential to collect adequate data about the location.need to be planned and implemented in an effective and economical manner. such as the finance ministry. collects the revenues. due to high staff costs. They hold general meetings when members discuss financial performance including the accounts and audits. It may be important to assure that water users' associations' have access to credit for equipment purchases as they assume the responsibility for the assets. ultimately delivering them to the consolidated fund of the treasury. Better fee collection does not solve the problem of high costs of agency provision of services. age. condition and serviceability of all assets for this. As a result fee collection markedly improved. 159 . In India pilot projects in Maharashtra allow water users' associations to retain a proportion of collections as a bonus. water users' associations should still collect the fees. Ideally water users' associations collect fees for services provided and manage the lower parts of systems (Subramanian. Often another agency. In the future the money cycle must be made transparent. If the government manages the system using fees collected from users. which cover the agency's operation and maintenance costs for the parts of the system under its control. and Carruthers 1991). and Meinzen-Dick 1997). They pay for water delivered in bulk from the agency. Water users' organizations keep transparent accounts and conduct regular audits to show their members that the financial management of the organization is sound. The finance ministry usually allocates funds to the irrigation agencies without linking them to revenues collected. Water users' associations often need training and assistance to prepare an asset inventory and formulate an effective maintenance and replacement program. Jagannathan.
07 0.57 414.11 0.45 211. based on need.50 5.34 6.40 0.09 7. cities.22 0.15 1.00 71.00 160.55 413.50 5.586.00 256.00 1.38 31.855.32 0.to calculatethe unit costs for each particularservice(Table25.40 0. It also delivers bulk water to New Delhi.11 2 1 4 4 1.75 6.23 0.85 0.56 2.79 20.81 0.57 232. Second they quantify serviceseither in terms of the annualvolume suppliedor the area benefiting from drainage and flood control or other Table 25.16 0.46 0. First analystsallocateto users as preciselyas possible their share of the costs.48 0.22 0. Rate factor New rate (US$/1.11 1.73 Total annual expenditure (millions US$)a services.95 0.20 12. industry.16 13.India the irrigationdepartment manages water supplies for irrigation.17 Projected.64 0.22 5. and power stations. The rate factor representsthe relative value of bulk water supply to cities.12 0.India In Haryana.17 1.019.530. Thus municipalitiespay twice as much as rural village consumers.18 0.power.and industries pay four times as much.88 1.60 0.cost and quantity. The figures presented in the table are based on preliminaryestimates made during the preparation of the Haryana Water Resources ConsolidationProject and are being updated.36 0. 160 .09 7.76 0.116.38 0.53 0.21 0. rural villages.50 7.37 1 4 0.43 31.62 1.02 0.00 118.Annex 25.68 53. and cattle ponds.53 0. and reflects the priorityof services in times of shortage and the customer group's ability to pay. These figures are used here for illustrativepurposesonly.83 21.88 2.07 182.76 3.38 0.38 0. rural villages.34 14.96 3.17 0.19 0. The governmentis implementinga general policy to recover the costs of each of these servicesfrom the beneficiaries.000 cubic meters) New total revenue (millions US$) Existing rate (US$/1.22 6.A1 Costs of water servicesin Haryana Quantity (millions cubic meters) Bulk water supply Urban Rural villages Industry Power plants Subtotal Agriculture Bhakra system Flow systems Lift systems Lift commands Subtotal Western Jamuna system Flow systems Lift systems Lift commands Subtotal Cattle ponds Deliveries to New Delhi Grand Total a 4.40 1. The cost recovery plan consists of two steps.A1 Water services categories and costsin Haryana.A1). They use the two factors.666.37 0.000 cubic meters) 330. industry.
WorldBank TechnicalPaper 354." Staff Appraisal Report 10850-CH." Staff AppraisalReport 12813-IN. Washington. Sagardoy (eds.and Jose Simas. . 1995.). "World Bank Lending Conditionality: Reviewof Cost Recovery A in IrrigationProjects. 1992. "Irrigation Management Transfer in Mexico: Process and Progress.D. World Bank.References Gorriz. Sri Lanka. Rome: Food and AgricultureOrganization of the UnitedNations. 1993. Washington. China. . User OrganizationsforSustainableWaterServices.C. Whittington. "Chile IrrigationDevelopment Project. Subramanian. 161 .D. 1997. and Peter Reiss. Jones. Cambridge. al. Washington.William I. 1995. Washington. Cecilia. D. et." Word Bank Technical Paper 292. D. Washington.Wuhan.D.Washington.C. Ghana United Nations Development Programme-World Bank Water and SanitationProgram.).C. "Haryana Water Resources ConsolidationProject. and Ian Carruthers.L. September20-24.H.N. InternationalIrrigation ManagementInstitute Short Report Series on Irrigation ManagementTransfer 1. UK: CambridgeUniversityPress." Operations Evaluation Division. Johnson. Colombo. 1992. Household Demandfor Improved Sanitation Services: A Case Study of Kumasi.D. Ashok Subramanian.Dale. Johnson. Sam. Small.and J. Ashok." OperationsEvaluation Department Report 6283..and Ruth Meinzen-Dick(eds. S. 1994.D. Irrigation Management Transfer.C. D. Farmer-FinancedIrrigation. Washington.A. Vermillion. Can FarmersAfford to Use the Wellsafter Turnover? A study of Pump Irrigation Turnover in Indonesia. 1983. 1995. 1986. Selectedpapers from the Intemational Conferenceon IrrigationManagement Transfer. October16. VijayJagannathan.C.C. Leslie. Water and SanitationReport3.C. 1991. "World Bank and Irrigation.
R.ORG Joao de Castro Caldas. Horbulyk.Professor.. Waterand RuralDevelopment. Phone: (55) 61 3291041 Fax: (55) 61 3291010 E-mail:LAZEVEDO0WORLDBANK. 9015 HoneyBee Lane Bethesda.USA.Sudan.Consultant.249 11 771680 Luis GabrielT. of Namibia.AUTlHORS' INFORMATION Ahmed M.PrivateBag 13193. Li-MingConservancy EngineeringConsultantsCo.conj. Taichung.Professor.Taiwan.Professor.Taiwan(China). Box for 878.Department WaterAffairs.BancoMundial. 303/304.Euro-InConsulting.Calgary. Phone: 351 1 363 78 24 Fax: 351 1 362 07 43 Anne Mariedel Castillo.MD 20815 StefanoDestro. Phone:(886-4)287-3442 Fax: (886-4)287-3442 PieterHeyns.Tapadada Ajuda.C.ResourceManagement.Ministryof Irrigationand Water Resources.NW.Ed.Departmentof Economics.SeniorEconomist.Portugal. 1399Lisaboa Codex.. Khartoum.Canada T2N 1N4. WorldBank.TheUniversityof Calgary.it@internet ArielDinar.MestreVenice. Azevedo. Phone: (403) 220-5857 Fax: (403) 282-5262 E-mail: horbulyk@acs. Undersecretary Irrigation. DC Phone:(1-202)473 0434 fax: (1-202)522 1142 E-mail:ADINAR@WORLDBANK. Taichung.ca Ching-kaiHsiao.vol. RampaCavalcavia#28.DF.30171Italy Via Phone:39 41 531 6744 Fax: 39 41 531 9555 E-mail:euroinit@mbox. Adam.Windhoek.Departmentof AgriculturalEconomics. 20433. FinancialCorporate Center. 162 . 1818H St.National ChungHsingUniversity. Phone:(264-61)296-9111 Fax: (264-1)224-512 Ching-Ruey.Brasilia.O..ORG TheodoreM. Alberta. Ministryof Agriculture.ucalgary. Phone:(249) 11 780167 Fax: (249) 11 773838.InstitutoSuperiorde Agronomia.P.Brazil.SCNQuadra02 . Washington.O. Republicof Namibia. Ltd.Director. 70900.
and Consultant. Phone: 92 42 9202226 Fax: 92 42 6278837 E-mail: Info@wapda. BP 5095. B. Phone: (33 04 67) 04 63 48 Fax: (33 04 67) 63 57 95 E-mail: marielle. R6sidence Clairbois 40 Ave. Phone: (256-41) 256761-3 Felix Rabemanambola. 6A. Sydney. Uganda. 674 Antananarivo 101. Managing Director. Box 7053. Modesto Lafuente 63.fr Mark Mujwahuzi. Comite de l'Eau et de l'Assainissement.montginoul(cemagref. Premier's Department.pk Marielle Montginoul. Tanzania. Madrid. Pakistan. Ecotec. Pakistan Water and Power Development Authority (WAPDA). Professor. Member and Managing Director (Water). London. F-34033 Montpellier Cedex 1. Head Office. Institute of Resource Assessment.com. Aldwych. Research and Consulting Ltd. Phone: (213-2) 54-15-88 Fax: (213-2) 91-28-77 163 . Consultant-Member of the Conseil Superieur de l'Equipement. Australia 2000.Cemagref Montpellier. 1 Farrer Place. Phone: (255 51) 73733 Fax: (255 51) 43393 Warren Musgrave. France. Onek. Tel: (261-2) 304-64 Fax: (261-2) 285-08 Judith Rees.brain. Professor. Lahore. WC2A 2AE. Mohammedi Bir Mourad Rais. University of Alcala de Henares. National Water & SewerageCorporation. Madagascar. University of Dar-es-Salaam. 28003.. Algiers.O.O. Phone: 341-5350640/6332743 Fax: 341-5350640 Khalid Mohtadullah. Phone: (44-171) 955-7607 Fax: (44-171) 955-7412 Abderrahmane Salem. WAPDA House. P. Box 35097. former Director of Planning at the Ministere de l'Hydraulique. Secretariat d'Etat a l'Economie et du Plan. Algeria. Phone: (61-2) 228-4918 Fax: (61-2)228-3015 Hillary 0. Economist. London School of Economics and Political Science. Kampala. Associate Lecturer. 361 rue JF Breton. Dar-es-Salaam. P. Spain.P. Special Adviser in Natural Resources. Madrid. Governor Macquarie Tower. Plot 39 Jinja Road. Irrigaiton Division . Houghton Street. Level 31. Shahrah-i-Quaid-i-Azam.Josefina Maestu.
Thema. New Zaland. DC 20433. Planning Unit. Reader. India Phone: (91-11)725-7288/7424/7365 Fax: (91-11)725-7410 E-mail: rms@ieg. Institute of Behavioral Science. Botswana. Campus Box 468. Senior Water Resources Engineer. Maria Saleth. Delhi-110 007. Environment and Behavior Program. University of Waikato.ernet. World Bank. Ministry of Mineral Resources and Water Affairs. Faculty of Agriculture. Boulder. 76100. CO 80309. University Enclave. NW. Washington. 1121 Zaghouan.in Frank Scrimgeour. USA. World Bank. Economist.ORG Ashok Subramanian. Senior Lecturer.nz Geoffrey Spencer. DC 20433. Tunisia. NW. Researcher. Ecole Superieure D'Agriculture De Mograne.ac. 1818 H St. Department of Agricultural Economics and Management. Slim Zekri. Hebrew University of Jerusalem. Dept. Gaborone. Rehovot.edu Dan Yaron. USA. Phone: 216 2 660 043 Fax: 216 2 660 563 164 . Phone: (267) 3604600 Fax: (267) 372738 Richard W. Senior Planning Officer. Senior Institutional Specialist. Wahl. 1818 H St. Phone: (1-303) 499-8638 Fax: (1-303) 499-8638 E-mail: rwahl@colorado.R. Washington. University of Colorado. Private Bag 0018. Phone: (1-202) 458 2642 E-mail: GSPENCER@WORLDBANK. of Gestion De Development et de Analyses de Donnees. Phone: (1-202) 473 0359 E-mail: ASUBRAMANIAN@WORLDBANK. Institute of Economic Growth. Israel. Professor Emeritus of Agricultural Economics. USA. Department of Economics. Hamilton. Phone: (64-7)838-4415 Fax: (64-7)838-4331 E-mail: SCRIM@waikato.ORG Jane M.
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Industry and Energy Department. 358 Ayres.andFinance: Transition Centraland The in EasternEurope. and McCalla. 343 Kottelat and Whitten. A Mining StrategyforLatin Americaand the Caribbean No. Analyse d'une r6partition niveau de vie du No. Civil ServiceReformin Francophone Africa:Proceedings a Workshop of Abidjan. CleanFuelsforAsia:Technical Optionsfor Moving toward Unleaded Gasoline Low-SulfurDiesel and No.Floor. 366 Carvalho and White. TheFinancingofPensionSystems in Centraland EasternEurope: Overviewof MajorTrendsand An TheirDeterminants. 373 Onursal and Gautam. 349 Cummings. The Roleof Governmentand thePrivate Sectorin FightingPoverty No. 371 Essama-Nssah. 361 Laporte and Ringold. and Wood. 368 Pohl. TheLegalFrameworkfor Water Users'Associations: Comparative A Study No. Njobvo. 356 Aryeetey. Combiningthe Quantitativeand QualitativeApproaches PovertyMeasurement Analysis: to and The Practiceand the Potential No. Anderson. Reviewof Early Childhood Policyand Programsin Sub-Saharan Africa No. Services. Montagne. 347 Stock and de Veen. and Meinzen-Dick. Fiszbein. 341 Goldstein. 345 Industry and Mining Division.1989-1995 No. Global FoodSupply Prospects. Financial MarketFragmentation Reformsin Sub-Saharan and Africa No.January23-26. 370 Dejene. 346 Psacharopoulos and Nguyen. 362 Foley. and Robelus. and Olson. and Porrata. editors. Freshwater Biodiversity Asia. Povertyand IncomeDistributionin Latin America:TheStory of the 1980s No. 352 Allison and Ringold. 365 Pratt. User Organizationsfor SustainableWaterServices No.1990-1993 No. Changesin the WageStructureduring EconomicTransition Centraland EasternEurope in No. 340 Rutkowski.Listeningto Farmers: Participatory AssessmentofPolicyReform in Zambia's AgricultureSector No. Busia. and Vietmeyer. 369 Costa-Pierce. SectorInvestmentProgramsin Africa:Issuesand Experiences No. 339 Andrews and Rashid. Preker. 353 Ingco. for Rome. and Tembo.VolumeI No. Morley. Adeyi. Hettige. McCalla. Lubrano. Nissanke. and Tounao. 374 Jones. Jagannathan. 375 Francis. and de Haan. Adeyi. Lawali. and Djankov. 351 Psacharopoulos. Competition Policyand MERCOSUR .Tenenbaum. Claessens.MedicinalPlants:Rescuinga Global Heritage No. Labor Marketsin Transitionin Central and EasternEurope. Lesecteurinformelet les institutionsde microfinancement Afriquede l'Ouest en No. 355 Lambert. ExpandingLabor-based Methodsfor Road Worksin Africa No. and Atomate. and Chellaraj. Trendsin HealthStatus.Privatizationand Restructuringin Centraland EasternEurope: Evidence and Policy Options No. and Johnsen.VolumeII. Services.November1996 No. Mitchell. 338 Young. 385 Rowat. 382 Barker. Trendsin Education AccessandFinancingduring the Transition Centraland EasternEurope.MeasuringEconomicBenefitsforWaterInvestmentsand Policies No. 342 Webster and Fidler. Dinar. Preker. editors. Le Gall. Srivastava. StatisticalAnnex No. 360 Salman. AgriculturalTradePolicies the Andean Group:Issuesand Options in No. Trendsin HealthStatus. Lintner.andFinance: Transition Centraland The in EasternEurope. Governance RegulationofPowerPoolsand System Operators: International and An Comparison No.RECENT WORLD BANK TECHNICAL PAPERS (continued) No. Hirji. Background A PaperPrepared the WorldFoodSummit. Madon. Yanda. 377 Walsh and Shah. Dinar. Vehicular Pollution: Air Experiences from SevenLatin AmericanUrbanCenters No. FromFarmersto Fishers: Developing ReservoirAquacultureforPeopleDisplaced Dams by No.Shishira. 344 Klugman and Schieber with Heleniak and Hon. and Chellaraj. IntegratedLakeand Reservoir Management: WorldBank Approachand Experience No.Juedicial Reformin Latin AmericanCourts:TheExperience Argentinaand Ecuiador in No. 354 Subramanian. with SpecialReference Fish in to No. 364 Josling. 367 Colletta and Reinhold. 348 Goldstein. Investing in Pastoralism: Sustainable Natural Resource in Arid Africaand the MiddleEast Use No. Land Degradation Tanzania: in Perceptionfromthe Village No. and Steel. Milimo. The NigerHousehold EnergyProject: PromotingRuralFuelwood Marketsand VillageManagement Natural Woodlands of No. A Survey of HealthReformin CentralAsia No. de Lusignan. in No. and Woolf. 1996 No. New EvaluationProcedures a New Generation Water-Related for of Projects No. 350 Buscaglia and Dakolias. Lee. 357 Adamolekun.
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