MIT OpenCourseWare http ocw mit edu 11 479J 1 851J Water and Sanitation Infrastructure in Developing Countries Spring 2007 For information about citing these materials or our Terms of Use visit http ocw mit edu terms 1 Understanding the Potential for Pro Poor Utility Reform in the Water Sector MIT W S Infrastructure in Developing Countries Feb 20th 2007 Genevieve Connors The World Bank Note Photos to illustrate this lecture are appended at the end 2 The Puzzle of Slums If the world s slums dwellers are willing to pay for improved W S services why aren t utilities willing to supply such services to them 3 Why do Utilities Fail Poor People Some common arguments Government inefficiency Political expediency Low affordability Competition for scarce resources Inherent nature of slums 4 1 Government Inefficiency Most water utilities are public SOEs Public supply has resulted in gross under provision and inefficient performance Civil service in need of reform currently with bad incentives and weak capacity Financial bail outs create a dependency and low level equilibrium trap Solution seen as private sector participation in one form or another But 5 Reflections on Argument 1 Water is essential to life a human right a commodity with public goods aspects so government must supply Piped water as a service lends itself to monopoly provision which precludes market competition so government must supply Any monopoly will be plagued by similar problems regardless of asset ownership so solution has nothing to do with private versus public 6 2 Political Expediency Politicians are unwilling to serve poor They focus on that which is expedient to their political careers new visible short term ribbon cutting projects Result is a build neglect rebuild cycle Vote bank politics exacerbates this the poor vote in greater numbers than the rich so a perverse incentive to keep them poor The record is clear that political commitment to raising water tariffs has been slim But 7 Reflections on Argument 2 Stereotypical view of politicians Too much blame apportioned to them Elected leaders trapped by their environments e g few in India who campaign on public services platform ever win Utility staff are rent seeking and may even be more to blame for exclusion of the poor Venal behavior is far reaching anyway not just in politics 8 3 Low Affordability Given low wages the poor simply cannot afford to pay for piped water Connection fees are impossibly steep Tariffs are generally affordable but minimum consumption requirements push up the unit costs for the poor Standards are high and no possibility for cost recovery of investments But 9 Reflections on Argument 3 Poor pay more per unit liter cubic meter of water from vendors than utility customers pay the water company In addition poor incur high coping costs for low levels of service storage health time etc Connection fees can be spread over time Low cost technologies more appropriate for the poor are an option e g condominial sewers shared taps etc Historically middle class rarely ever paid full cost recovery so why should the poor 10 4 Competition for Scarce Resources Resources like water and money are scarce especially in developing countries Increasing incidence of water conflicts is a good indicator of the scale of problem In India water demand expected to exceed all supplies by 2050 Network infrastructure expensive and poor cannot finance own construction Utilities and local governments are cash starved and poor have no influence on budget expenditure But 11 Reflections on Argument 4 Water scarcity never invoked as a reason to halt connections for middle class Poor consume far less water anyway Absolute value of subsidies going into the water sector is huge and badly targeted For example 95 of water subsidy resources in South Asian cities go to existing utility customers Elite capture is real problem since middle classes now feel entitled to cheap water 12 5 The Nature of Slums Legal economic political and physical conditions which define slum areas make them difficult to serve Slums are often illegal informal dense badly planned narrow deeply political etc Land tenure is absent or ambiguous preventing utilities from connecting people at all Slums reverse the common order of urban development from planning servicing construction occupation to opposite pattern But 13 Reflections on Argument 5 Despite tenuous claims to land titles slums have been there for decades anyway Reverse development cycle just means utility must be ready to step in post facto Utility just needs to change its delivery style organizational structure fee structure and technical products on offer so that it is capable of serving slums 14 Snapshot of the BWSSB Parastatal created in 1964 to supply W S to Bangalore Serves city corporation area of 4 3 million people Circa 100 lpcd available in theory Primary source Cauvery River 100 km away One of leanest utilities in India circa 2 000 staff Large segments of city area and population not connected High connection fees but highly subsidized tariff Public taps for the poor 15 Pro Poor Reform AusAID pilot project in 3 slums Establishment of Social Development Unit 46 slums targeted circa 10 of slums Half of these slums successful circa 5 of slums On average 66 of households per slum connect 15 NGOs CBOs brought in to mobilize communities Bold policy changes at the utility 16 Slum Program Beneficiaries Beneficiaries of BWSSB Slum Program 2000 2005 Individual Connections Shared Connections Households People 600 9 690 4 000 26 Post Pilots 4 330 12 4 378 25 500 Total 4 930 21 5 068 29 500 3 Pilots 17 Reform Pressures INDIA SHINING PRECEDENTS AusAID Master Plan Pilot Projects Experiments with changes in policy THIRD FORCE S M Krishna Government New Global IT City Infrastructure Problem New breed of NGOs New captains of industry NEW PROBLEMS No more funding for public taps Network expansion program 18 Policy Reform Executive Board adopts a resolution to consider documents other than land title as proof of occupation and amends Act election cards ration cards ID card Board agrees to experiment with service levels and offer shared connections for groups of poor households Board approves a new connection fee structure for poor households from 40 to 12 based on plot size income means testing Board introduces new tariff structure which lowers monthly bill lowers minimum consumption 19 Organizational Reform Creation of an in house slum unit in 2002 charged