WB recommends water tariff hike

The World Bank (WB) has recommended the raising of water tariffs, in order to meet costs needed for expansion and maintenance, despite Sri Lanka’s water tariffs being high compared with the South Asian average, a study released by the WB last month (September) showed.

Whereas the South Asian average water tariff is US$ 0.17 per unit of water, in Colombo it was five US cents (Rs 7.56)* more, at $ 0.22 per unit. However, in Sub-Saharan Africa, water tariffs were nearly four times more than that at Colombo, at $ 0.78 per unit, the report showed.

The WB further said, that water tariffs in Sri Lanka are subsidized.

“If capital investment cost, operation and maintenance cost, replacement cost, environmental cost and opportunity cost are all included, only about one-third of the total cost of water supply is recovered from consumers according to some estimates,” it said.
Although water tariffs were increased in 2009 and again in 2012, they are still too low for cost recovery beyond operation and maintenance costs, the Bank said.

Rural water supply (RWS) coverage in Sri Lanka is 97% as per 2015 estimates whereas that of the urban sector is 98%, the Bank said. WB said, that 18% of the island’s population are urban and the balance, rural.

The Bank further said, that the national target for pipe borne water connections, where such water supplies are considered as being ‘safe water,’ is a coverage of 60% of the population by the year 2020.

Much of this expansion is through the National Water Supply & Drainage Board (NWSDB) network, the main provider of pipe borne water, where the provision of such water covers only 48% of the population currently, the WB revealed.

NWSDB estimates that this effort would require an annual investment of $80 million from last year (2016) onwards, but has projected a substantial gap in investment.

Calculations based on international data and information from WB projects suggest that during the 2010-20 period, improvements to the water and sanitation sector would require an annual investment of between $75.5 million to $154 million, or 0.13 to 0.26% of GDP.

The investment gap is proposed to be met partly through funds from the government and multilateral and bilateral donors, which may not be sufficient for the scale of investment required. There is a need to leverage private finance on a fiscally sustainable basis, such as through public-private partnerships, which can help……to address gaps in the urban sanitation subsector, the WB said. WB, Asian Development Bank (ADB) and Japan International Cooperation Agency (JICA), during the 10-year period 2007–16, have together contributed a total of $1,970.3 million for the development of Sri Lanka’s water supply and sanitation systems, supporting total project costs of $3,388.1 million, the report said.

‘This compares with an average total annual investment in, water supply and sanitation systems, in the country of about $200 million during the period 2007–11, indicating the high share of investment contributed by the three development partners in the sector,’ the Bank said.*** *Calculations are done on the basis that the buying rate of the US dollar among commercial banks on Tuesday (3 October) was Rs 151.13 to the dollar according to the Central Bank of Sri Lanka. **In general, goods purchased under credit lines to the Government of Sri Lanka such as from the aforementioned donor agencies are duty free. Therefore, when the WB says that total project costs were $ 3,388.1 million, such costs, which otherwise would have had been charged for the relevant imports such as pipes and fittings are also included in such costs. *** This $ 200 million comprises Government of Sri Lanka’s share of costs for such projects.