ADB aid in improving water supply system

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KATHMANDU, Apr. 15: Asian Development Bank (ADB) has approved a 1.4 million US dollars Technical Assistance (TA) grant to help prepare a project to improve the water supply and sanitation sector of Nepal's Kathmandu Valley under a private sector participation scheme.

According to a press release of the ADB the total cost of the TA is estimated to be US dollars 1.75 million equivalent.

Of ADB's contribution, $700,000 equivalent will come from its Japan Special Fund, financed by the Government of Japan, and $700,000 equivalent from the Government of Norway. The remaining US $ 350,000 equivalent will come from the Government of Nepal.

The TA, due for completion in the latter half of 2004, will also assist the Government in overall sector reform, drafting legislation and institutional reform proposals, and integrating them into a package to improve water supply and sanitation service delivery.

These activities will take place in the context of the Melamchi Water Supply Project (MWSP), being carried out with the assistance of ADB and several other development partners, to tackle a chronic shortage of drinking water in the Kathmandu Valley.

This consists of a river water diversion scheme from the Melamchi Valley to the Kathmandu Valley, distribution network rehabilitation and improvements, construction of a water treatment plant and bulk distribution system, wastewater system improvement, and policy and institutional reforms.

"To ensure the success of the MWSP, the TA will address such issues as governance, private sector participation, establishment of a regulatory mechanism, cost recovery, and affordability of services," says Keiichi Tamaki, an ADB Urban Development Specialist.

"Following studies by ADB, the World Bank, and UNDP, there is a clear consensus that private sector participation for managing and improving water distribution and sanitation services are essential to the sector's development."

Progress in the sector has been held back by the lack of a clearly defined policy for Urban Water Supply and Sanitation Services in Nepal.

The water supply utility, the Nepal Water Supply Corporation (NWSC), has failed to supply efficient and affordable services or significantly to expand its service coverage for residents of the Kathmandu Valley.

A key element to be addressed by the TA is the recruitment of a management contractor for the project.

An earlier scheme supported by another development bank to finance private sector participation for managing water distribution was unsuccessful because of difficulties in recruiting a private operator under the management lease contract model with a large capital investment funding requirement.

The eventual loan project arising out of the TA would likely be a sector development programme, with about two thirds of the loan financing the management contract and remainder for restructuring the NWSC.

A broad range of stakeholders and beneficiaries will be consulted to devise a pro-poor and gender-sensitive water supply service delivery strategy, the ADB stated.

"The TA will work to ensure that equitable water services for the poor are achieved and that there is broad-based public involvement in the reform process," says Tamaki.