National 8 (Spotlight Weekly)

Water Worries

The ADB approves a loan package for reforms in Kathmandu Valley water services and hopes it will ease the critical drinking water shortages

By A CORRESPONDENT

In what has come as a good news to hundreds of thousands of residents of the Kathmandu Valley, the Asian Development Bank (ADB), on December 18, approved a US$ 15 million loan package, which consists of a program loan and a project loan, to support institutional reforms to improve the delivery of water supply and wastewater services to Kathmandu Valley, according to press release issued by the ADB headquarters in Manila, Philippines.

The Kathmandu Valley Water Services Sector Development Program aims to establish an institutional framework and operational environment that will pave the way for providing efficient and affordable water supply and wastewater services.

Queue of buckets : Waiting to Quench the thirst

A program loan component of US$ 5 million will support institutional reforms, including the restructuring of the Nepal Water Supply Corporation (NWSC), which is currently responsible for water supply and wastewater services in Nepal's urban areas, including Kathmandu Valley.

It will also set up three key water bodies - the Water Authority (WA), Water Utility Operator (WUO), and National Water Supply Regulatory Board (NWSRB) - to be responsible for policy setting, operation and management of water systems, and regulatory functions to protect consumer interests, respectively.

A project loan of $10 million, to be carried out over six years, will support a performance-based management contract and related advisory consulting services, and bring in computerized billing and accounting systems, adds the press release.

The performance-based management contract will introduce private sector participation modality for the management of water supply and wastewater service delivery in Kathmandu Valley. A competitive recruitment process of the management contractor (MC) will start promptly, it is stated.

The operation of the urban water supply and wastewater services in Kathmandu Valley currently served by NWSC will be reassigned to the new WUO under an operating license awarded by the WA.

"In addition to improving the performance and quality of services, an important objective of the performance-based management contract is to introduce a commercially driven operating culture and practices so that the operations will be sustainable and effective even after the end of the contract," says Keiichi Tamaki, an ADB Senior Urban Development Specialist.

“Nepal's urban water supply is handicapped by poor management in its distribution systems, inadequate water resources in particular for Kathmandu Valley, and lack of consistent tariff policy,” states the ADB release. “This has left NWSC under-funded, under-managed and unable to provide even the most basic services to many customers.”

Current piped water supply demand in the valley, including unaccounted-for water, is estimated at 150 million liters per day. However, in the dry season, production capacity reaches only between 65 and 85 million liters per day and falls short of needs even in the wet season.

In the face of such a shortage, NWSC rations water to sections of the metropolitan area in rotation. This leaves many parts of the city with water for only a few hours every two to three days, and even then the pressure is often low and quality poor.

The management contract will be for an initial period of four years from December 2004, extendable upon satisfactory performance by an additional period of about two years. "Indicators to judge performance will include the supply of water of a potable standard, at adequate pressure, and - ideally - on a 24-hour basis," Mr. Tamaki adds.

A differentiated tariff schedule will be proposed under which customers who receive a reliable and improved level of services will be charged a higher tariff.

"An increase in tariffs will be needed to cover the immediate costs of operating and improving services," says Mr. Tamaki. "However, studies have repeatedly shown that the public is willing to pay for a decent level of piped water supply services."

The ADB loans come from its concessional Asian Development Fund, with the program loan having a 24-year term and the project loan a 32-year term, both including a grace period of eight years. Interest for both is 1% per year during the grace period and 1.5% per year afterwards. The Government will contribute about US$ 5 million, which will be generated by the WUO by means of improved tariff revenues, toward the total project cost of US$ 15 million, the ADB release further adds.