The Water and Sanitation Program March 2009 is an international partnership for improving water and sanitation sector policies, practices, and capacities to serve poor people Guidance Notes 72231 Improving Water Supply and Sanitation Services for the Urban Poor in India Guidance Notes Improving Water Supply and Sanitation Services for the Urban Poor in India In 2006–07, the Water and Sanitation Program–South Asia (WSP–SA) initiated a research to identify barriers to service delivery for the urban poor. The findings of the research have been presented in the Guidance Notes on Improving Water Supply and Sanitation Services for the Urban Poor in India. The Guidance Notes provide a systematic analysis of the barriers to service delivery for the urban poor and recommend practical solutions and strategies for overcoming these barriers. The Guidance Notes are based on an in-depth research of various initiatives from across the world (including South Asian, African, and Latin American countries) and consultations with urban poor communities across four major Indian cities (Mumbai, Bengaluru, Vadodara, and Delhi). An accompanying volume, Global Experiences on Expanding Services to the Urban Poor, is a documentation of ‘Global and Indian Case Studies’ and ‘Consultations with Urban Poor Communities’. Contents Acronyms and Abbreviations 4 Section 1: Introduction 5 Purpose of the Guidance Notes Overview of the Current Situation Obstacles to Improving Service for the Poor Section 2: Give the Poor a Voice 9 Promote Meaningful Participation in Planning and Design Publish the Stories of the Poor Inform and Educate Poor Communities Empower the Poor to Act within and beyond Their Own Communities Getting Started: Actions and Resources Section 3: Take Vested Interests into Account 17 Incorporate Informal Service Providers into the Solution Getting Started: Actions and Resources Section 4: Eliminate Administrative and Legal Barriers 21 Delink Service Provision from Land Tenure Institutionalize Simplified Procedures and Provide Assistance Getting Started: Actions and Resources Section 5: Strengthen Capacity, Autonomy, and Accountability of Service Providers and Provide Incentives to Serve the Poor 25 Separate and Clarify the Responsibilities of the Actors Strengthen Capacity Recognize and Work with Alternative Providers Introduce Accountability and Performance Monitoring Systems Getting Started: Actions and Resources Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Section 6: Adopt Appropriate Investment Finance, Cost Recovery, and Subsidy Policies 37 Adopt Realistic Cost Recovery Policies and Targeted Subsidies Develop a Cost Recovery Strategy Subsidize Investments Restructure Charges and Payment Practices to Accommodate the Poor Promote, Legitimize, and Finance Small Private Service Providers Getting Started: Actions and Resources Section 7: Overcome Physical and Technical Barriers 45 Protect Water Resources Adopt Appropriate Technologies and Delivery Systems Getting Started: Actions and Resources Section 8: Summary of Policy Issues 49 Policy Framework List of Policy Issues Associated with the Proposed Strategies Resources 53 Accompanying Volume1 : Global Experiences on Expanding Services to the Urban Poor 1 Includes documentation of ‘Global and Indian Case Studies’ and ‘Consultations with Urban Poor Communities’. Acronyms and Abbreviations ADB Asian Development Bank BMC BrihanMumbai Municipal Corporation BWSSB Bangalore Water Supply and Sewerage Board CAESB Water and Sanitation Company of Brasilia CBO Community-Based Organization CRC Citizen Report Card IDA International Development Association JNNURM Jawaharlal Nehru National Urban Renewal Mission KES Kenyan Shillings KIWASCO Kisumu Water and Sewerage Company LWSC Lusaka Water and Sewerage Company MBK Maji Bora Kibera (Better Water Supply for Kibera) MDGs Millennium Development Goals NGO Nongovernmental Organization NWSC National Water and Sewerage Corporation of Uganda O&M Operation and Maintenance OBA Output-Based Aid OPP Orangi Pilot Project PERPAMSI Professional Organization of Water Enterprises of Indonesia PKR Pakistani Rupees SANAA National Autonomous Water and Sewerage Service of Honduras SONES National Water Company of Senegal SPSP Small Private Service Provider TCC Tiruchirapalli City Corporation ULB Urban Local Body WAVE Women’s Action for Village Empowerment WBI World Bank Institute WSS Water Supply and Sanitation (or Sewerage) WUP Water Utility Partnership for Capacity Building 4 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Section 1 Introduction These Guidance Notes focus on practical actions—many of which can be implemented at least partially within the existing framework. inequality in distribution of basic Purpose of these objective, though more appropriate policy frameworks would ensure an services and the hardships faced by Guidance Notes enabling environment and are essential the poor, especially women. for long-term sustainability of services Access to As policymakers and service providers for the poor, especially for addressing Improved Water Supply in India take action to improve water many of the financial barriers discussed and sanitation services for the poor, in Section 6. For this reason, desirable Despite the expansion of water supply they can take advantage of lessons policy initiatives are listed at the end infrastructure, those who have access from several experiences in India and of each section and a final section to infrastructure do not necessarily get elsewhere. There are relevant summarizes them. adequate services, and the poor examples, both within India and continue to rely on alternative sources throughout the developing world, Overview of the that are often very costly to the of initiatives that have led to consumer and incur hidden costs to improvements for both the poor Current Situation society. India has successfully population and the service providers. expanded water supply infrastructure in India could learn from the lessons of The poor in India face severe hardships cities, but this has not necessarily these examples, adapting them as because they lack convenient access translated into improved service to the appropriate, as the country addresses to efficient water supply and sanitation poor. Figure 1 shows the percentage the needs of the urban poor and strives services. According to the 2001 of households that had access to a to meet the Millennium Development Census of India, more than 28 percent source of safe water (that is, piped Goals (MDGs) for water supply of India’s urban population lives in water supply, tankers, hand pumps, and sanitation. slums. Attempts to serve them to date and so on) versus the percentage have been sporadic and largely based of households that actually had a The Government of India’s Jawaharlal on notions of charity, rather than household connection to the Nehru National Urban Renewal Mission treating the poor as legitimate piped system.2 (JNNURM) provides a framework for customers of the utility. As a result, this, targeting 63 key cities and urban The graph shows that more than slum areas receive low-quality services areas, focusing on services to the poor 95 percent of urban households had that create a net drain on utility as one of its explicit missions. These access to safe water sources. resources. There are increasing calls Guidance Notes are aimed primarily at However, having access is not the from the poor and civil society project planners, service providers, and equivalent of receiving adequate organizations that represent their community leaders, but provide some service. Only 74 percent of the interests to address this problem and suggestions for policymakers as well. population had access to piped water the Government of India is taking supply and 55 percent of households They have been developed in important steps in that direction. had household connections. The collaboration with the Ministry of A visitor to a poor part of any city in remainder, primarily poor households, Housing and Urban Poverty Alleviation India will see two common scenes: must rely on standpipes, neighbors’ and the Ministry of Urban Development. women lining up with pots waiting for connections or alternative sources. The intent is to identify barriers to water, and men and children defecating Women, especially, spend hours and providing adequate services for the in the open. In Mumbai, a city of adjust their work schedules and poor and to propose practical solutions sleeping patterns to stay up late at based on the experience of a number 15 million people, more than half the night to fetch water. Recent research of relevant cases that have been population lives in slums. Nearly 30,000 shows that standpipe users are not reviewed for this purpose. These families live on the pavements. The satisfied with the hours of supply or the Guidance Notes focus on practical Mumbai water utility produces an quality of water provided. actions—many of which can be average of 158 liters of water per capita implemented at least partially within the per day, but this production figure does 2 World Bank. January 2006. India Water Supply and existing framework. Promoting policy not represent consumption by end Sanitation: Bridging the Gap between Infrastructure and Service. Background Paper, Urban Water Supply and reform per se is not the primary users. It also conceals the acute Sanitation, p. 12. 6 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India are not maintained and cannot be Figure 1: Percentage of Households with Access to a Source of Safe Water and Percentage of Households considered safe and sanitary. In many with Private Connections cases, sewers are not really a viable option: they do not function properly due to inadequate water for flushing, blockages, and the frequent failure of pumping stations. Disposal of sewage is frequently neglected. Many residents of slums defecate in the open and, even when they use toilets, most of the human waste goes into open drains. According to the 10th Five Year Plan, ‘Three-fourths of surface water Source: For 1991, Census of India; for 1993, Demographic and Health Survey 1992/93 and National resources are polluted and 80 percent Sample Survey Organization (NSSO); for 1996, NSSO; for 1999, National Family Health Survey of the pollution is due to sewage alone.’ 1998/99; for 2000, Multi-Indicator Cluster Survey. The lack of viable sanitation solutions in slums contributes to serious health Intermittent supply, which results in wide difference in rates of access to and environmental risks for the entire unreliable and inadequate quantity and sewerage infrastructure among the population of Indian cities, not just those contaminated water, affects the rich 13 states for which access rates are living in slums; the poor are, however, and poor alike. As a result, large shown. However, as in the case of particularly vulnerable to infection from numbers of households rely on water supply, access to infrastructure contaminated water. The health impact expensive tanker supplies and water does not necessarily translate into of unsafe water and lack of basic vendors. With over 13,000 tankers, the adequate service. Often public toilets sanitation facilities are well documented. tanker industry in Chennai mines the surrounding farmland for water, using Figure 2: Percentage of Population with Access to government-subsidized power Sewerage in 13 States of India intended for agriculture purposes. In Delhi, about 1,400 water tankers supply water to residents. Half are privately controlled, and it is alleged that the owners are allowed to flout rules, pilfer water or extract it illegally. They then sell it at predatory prices. Access to Safe Sanitation The health and environmental costs of inadequate sanitation in slums are huge. It is estimated that only about 28 percent of the urban population has sewerage connections and only about 63 to 73 percent has a household toilet connected to a sewer or onsite disposal.3 Figure 2 shows that there is a Source: World Bank. January 2006. India Water Supply and Sanitation: Bridging the Gap between 3 See Footnote 2. Infrastructure and Service. Background Paper, Urban Water Supply and Sanitation, p. 15. 7 • The poor may be unaware of • Increasing block tariffs penalize Obstacles to administrative and legal households that share a Improving Service requirements, or find it difficult to single connection. understand them and comply. for the Poor • Small-scale service providers lack 4. Strengthen capacity, autonomy, adequate finance to extend Why do poor people not get access to and accountability of service providers networks into peri-urban services? Consultations with a broad and provide incentives to serve informal settlements. range of stakeholders in India resulted the poor. 6. Overcome physical and in the identification of obstacles to • Public service providers sometimes technical barriers. improving service to the poor. These lack the autonomy, as well as obstacles have been grouped under six financial and human resources and • The overexploitation and proposed action areas as follows: incentives required to provide degradation of water resources services to the urban poor. affects the poor disproportionately. 1. Give the poor a voice. • Municipalities and utilities are not • Physical and technical challenges • The voice of the poor, too often, is held accountable for the provision of make extending formal piped water not heard and misperceptions about satisfactory water supply and supply and sewerage networks into them persist. sanitation services. informal and unplanned settlements 2. Neutralize vested interests. • The services provided by small more difficult. private service providers (SPSPs) • Water vendors, organized crime, What can be done to remove these are not recognized, encouraged, corrupt public officials, and barriers? Practical strategies are and regulated. dishonest utility staff may have a proposed in the following six sections vested interest in preventing better 5. Adopt appropriate financial policies. of this document. These are illustrated services for the poor. • Tariffs do not cover the full cost of by case examples of initiatives to deal efficient services. with the obstacles.4 3. Eliminate administrative and legal barriers. • Poor households find it difficult to Each section ends with suggestions pay connection fees upfront. for getting started. There is (a) a list of • Land ownership and tenure issues relevant actions and strategies that the often create a barrier to the • Poor households find it difficult to key players (policymakers/project provision of service to the poor. pay monthly bills. planners, governance bodies/service providers, and community leaders/ advocates) can implement; and (b) a list of the relevant cases included in the accompanying volume. The final section lists the policy reforms that would help to enhance and consolidate the success of these efforts. Resources, including publications and organizations, are listed at the end of these Guidance Notes. 4 Detailed case studies are presented in the accompanying volume. 8 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Section 2 Give the Poor a Voice Giving the poor the opportunity to participate in planning and design can make the difference between success and failure. and resources. In their haste to qualify participation of beneficiaries in Obstacles for funding or achieve quick results, planning. A model of a bottom-up local officials and utility managers may approach that promoted meaningful The voice of the poor is not heard too bypass the time-consuming and participation in Brazil is described in often, and misperceptions about potentially messy participatory process Box 1. Another example of effective them persist. unless it is required as a precondition of consultation in the context of the Project designers and service providers funding.5 Project designs sometimes Slum Sanitation Project in Mumbai is often assume they know what type of include a requirement that a certain described in Box 2. services the poor want and are willing percentage of residents make an to pay for. It is assumed that the poor initial contribution to capital costs or cannot pay for services and that these sign a ‘commitment to connect’ to should be provided free of charge. services as a sign of their interest in the Politicians exploit the poor by promising project, but there is a distinct difference free services in exchange for their votes. between pressurizing residents to sign Such assumptions and practices result up for a project as compared to in costly and unsustainable supply- enabling a community to take some driven public programs to provide initiative and contribute to the services. In contrast to common project design. perceptions, evidence collected during the field work for these Guidance Notes Meaningful consultation involves shows that it is feasible for many of the eliciting ideas from the beneficiaries poor to be legitimate customers who prior to the design of a project or pay their bills. To promote that program. It helps to ensure that the objective, it is essential that their project design is responsive to opinions be heard. demand, and that beneficiaries understand and accept their roles and responsibilities. Rallies, essays by Promote school children, drawing and painting Meaningful competitions, radio talk shows, articles in newspapers, and information posted Participation on a municipal website are good ways in Planning to publicize a project and build awareness, but they do not necessarily and Design constitute meaningful consultation per se. Similarly, surveys may provide useful Giving the poor the opportunity to data for assessing demand and participate in planning and design can attitudes, but do not constitute active make the difference between success collaboration or create community and failure, so adequate time and cohesion. Managers of the Jawaharlal resources should be allowed for Nehru National Urban Renewal meaningful consultation during the Mission (JNNURM) have become preparatory phases of projects. aware of these distinctions. As a result, Standard technical solutions are not JNNURM guidelines are being revised always appropriate. Consultation with to promote more meaningful beneficiaries helps to assure that appropriate technological solutions will 5 be selected, but project designers need See, for example: Baindur, Vinay. September 5, 2005. ‘For the People, by Diktat.’ India Together op-ed. to be aware that consultation takes time http://www.indiatogether.org/2005/sep/gov-nurm.htm 10 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Box 1: PROSANEAR Project, Brazil: People Were Asked What They Wanted Prior to planning water supply and sanitation projects, PROSANEAR teams went into communities to ask what kind of water project the people wanted, if any, and what kind they would be willing to support with their money and labor. Residents were allowed to talk about the full range of problems they faced, but once the discussion turned to the importance of water supply and sanitation, they were generally eager to hear how PROSANEAR could help them. Neighborhoods were allowed to choose from a range of simple, innovative systems that made water and sanitation affordable and environmentally appropriate for poor crowded settlements. There were no blueprints. In many places, groups of households were batched together in a creative condominial sewerage system approach that not only made the networks more efficient and affordable but also forged new bonds among neighbors. PROSANEAR sought to make a permanent impact by mobilizing local clubs, as well as women’s, sports, and religious groups, to educate people about the importance of sanitation and teaching them how to operate and maintain their new systems. The results were powerful, and they went far beyond the better health and greater convenience enjoyed by 1 million people newly connected to water taps and toilets. For example, getting formal postal addresses and water bills in their names meant they had graduated from squatter status to resident—a new status in society. Source: World Bank. 2006. Community Participation and Low-Cost Technology: Bringing Water Supply and Sanitation to Brazil’s Urban Poor. Water and Sanitation Feature Story #10. See also Case Study 3, accompanying volume. Box 2: Stakeholder Participation in the Slum Sanitation Program in Mumbai The Slum Sanitation Program initiated by the BrihanMumbai Municipal Corporation in 1995 with World Bank support was based on a demand-driven and participatory approach, in which the municipality would provide the initial capital to build community toilet blocks, while community-based organizations (CBOs) or small local business enterprises would take full charge of operation and maintenance (O&M). Nongovernmental organizations (NGOs) were engaged to mobilize communities, facilitate relationships with the local government, and train the communities in essential skills and attitudes. They initially carried out a general information campaign that assessed the willingness and readiness of the communities to participate in the sanitation scheme. Once communities mobilized and demonstrated an interest, CBOs or local enterprises were created (if not already existing and active). These organizations were then registered to obtain legal status, which allowed them to manage the community sanitation block (that is, obtain water, sewerage and electricity connections, sign a memorandum of understanding with the Corporation, open and maintain a bank account to deposit the maintenance fund and earnings, pay utility bills, and so on). It was only after the CBO or local enterprises had collected at least 50 percent of the expected maintenance fund from prospective users and had developed a technically sound and community-endorsed plan for the toilet block, that the Corporation issued the building permit and the actual construction of the community toilet block began. Participation in the formal process of planning the services, creating a viable business entity, having it registered, opening a bank account, and working with the Corporation provided invaluable experience, created confidence, and inspired further entrepreneurial and community activities on the part of participants. In one case, a local enterprise that operates the toilets has also established a preschool in the new community center that was built adjacent to the toilet block. Source: Nitti, Rosanna, and Shyamal Sarkar. 2003. Reaching the Poor through Sustainable Partnerships: The Slum Sanitation Program in Mumbai, India. World Bank. Urban Notes No. 7. See also Case Study 2, accompanying volume. 11 Publish the Stories of the Poor The stories of the poor themselves give statistics a human side and can be used to improve the impact of research reports and policy papers. Sector actors should capture and enlist the media to disseminate stories that translate service delivery inefficiencies and deficits into their impact on daily life at the personal or household level. Poignant examples of the contrast between those households without easy access to safe drinking water and sanitation services, and those with access, can help to create an environment for making politically difficult or unpopular decisions viable, especially when combined with a broader strategic communications campaign to promote the expansion of services and more flexible approaches for children. These toilets are inadequate for the 25,000 people Inform and to serving the urban poor. A few they serve, but at least they have Educate Poor representative examples of the daily reduced open defecation to impact of poor service provision that some extent. Communities were recently collected in India include:6 • One woman said it took her The poor are often unaware of official • In a community where the half-an-hour to fill two buckets of policies; and their attitudes and Corporation does not provide water, water from the hand pump. Each behavior may impede their access to most residents pay the plumber and day, her family requires up to 10-15 services. Like many users, they may get a water connection at a buckets. In the morning, she have misperceptions about the need to common point near their homes. fetches water for the morning pay for public services. They may not The rest get their water from the chores and immediate needs. After be fully aware of the health impact of tanker mafia. returning from work, she fetches poor sanitation practices. Many are water for the rest of the day. • In one area, there were 28 toilets illiterate and unaware of their rights. funded by the World Bank or the • Women dislike defecating in the Educational programs that give the state and Member of Legislative open in broad daylight. They go in poor the information and skills they Assembly (MLA) funds, and eight groups at night. need to participate as well-informed World Bank-funded toilets especially citizens are an essential component of • Because of the lack of water, the residents do not bathe every day, any effort to promote their participation 6 These and other examples were collected during field work which causes health problems— in planning and management of for slum consultations conducted by Geeta Sharma, WSP-SA, along with NGO partners between December 2006 and skin rashes, boils, and so on. They services. Programs to promote January 2007 in Mumbai, Delhi, Bengaluru, and Vadodara. For details, see accompanying volume. wash clothes once a fortnight. constructive attitudes and behavior that 12 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India will enhance their chances of getting and making effective use of services (for example, regular payment of bills and good hygiene) are also essential. Education that builds such skills and attitudes not only has a positive effect on access to water and sanitation services, it can also help develop basic financial management skills with broader applications and development impact. Empower the Poor to Act within and beyond Their Own Communities Community-based organizations and their federations can help the poor take action on their own behalf. All the strategies described above involve some form of outreach to the poor. These are essential to ensure that the formal structures and decisionmaking activities actively seek to serve the poor better. But it is equally important and effective for the poor to take action for themselves. By doing so, they gain self-respect and important skills, as well as better services. They also dispel commonly held notions that the poor are helpless or lack initiative. Self-help activities can be initiated by a dynamic individual within the community or a nongovernmental organization that is committed to the interests of the community. However, when an outside organization initiates action, it is 13 essential that the community actively single individual’s commitment and While local community user groups expresses its demand and willingness leadership skills. are useful for solving local problems, to pay for services, and that the federations and networks enable poor leadership quickly be assumed by A number of well-documented cases communities to act beyond their someone in the community. demonstrate the willingness and ability boundaries to influence policies or of the poor to create or manage their There is no blueprint for creating such access sources of development own services. organizations because the social assistance. In Tiruchirapalli city, Tamil dynamics in each community are often The Orangi Pilot Project in Karachi was Nadu, a network of self-help groups is unique—only a savvy resident is likely one of the first to demonstrate that the enabling poor residents get funding to appreciate them fully. In fact, poor want good quality services and and assume responsibility for local initial success often hinges on a are willing and able to pay for them. sanitation (see Box 3). 14 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Box 3: Community-Based Organizations and Federations (Karachi and Tiruchirapalli) Two South Asian experiences—the Orangi Pilot Project (OPP) in Karachi, Pakistan, and the activities of self-help groups in Tiruchirapalli city, in the Indian state of Tamil Nadu—provide useful lessons about how community involvement can help projects. Orangi is Karachi’s largest katchi abadi (informal settlement) and has a population of 1.2 million. The OPP was established in 1980 by Dr. Akhtar Hameed Khan, the renowned Pakistani social scientist. The OPP provided social and technical guidance to enable low income families to construct and maintain an underground sewerage system with their own funds and under their own management. The project has shown that poor people can finance and build sewers in their communities. Working together internally as well as with the government to achieve their objectives has given community members dignity as well as confidence in themselves. To date, the people of Orangi have laid down 1.3 million feet of sewer line and invested about PKR 57.2 million (US$700,000).7 About 900,000 people in 94,122 houses have benefited. The average cost of the system is very low—about PKR 1,000 (US$13) per household. The residents of Orangi maintain the system themselves at no cost to the government. The OPP Research and Training Institute is currently assisting initiatives in a number of other areas in Pakistan and other countries. Training in the OPP model has been provided to groups from Nepal, Cambodia, Vietnam, Sri Lanka, Thailand, the Philippines, Central Asia, Zimbabwe, and South Africa. In Tiruchirapalli city, about half the 339 community toilets in the city are being managed by community-based organizations and half are managed by the city corporation. Since 2000, 41 of the community-managed toilets have been managed by local Sanitation and Hygiene Education (SHE) teams supported by the nongovernmental organization Gramalaya and the Women’s Action for Village Empowerment (WAVE), a federation of SHE teams. In each community, the SHE team organizes its members (all women) into two to seven self-help groups with 15 to 20 members each. Each self-help group takes responsibility for managing the community toilets—collecting user fees, keeping accounts, and depositing the income in a bank account—for a month at a time. During that month, members of the responsible self-help group rotate as caretaker and fee collector for a day at a time. In addition, most SHE teams employ two cleaners and a watchwoman. User fees are used to cover operation and maintenance expenses. Each SHE team elects two members as team leaders who are responsible for operating the bank account and represent the SHE team at WAVE meetings. When a major expenditure on toilets is required, SHE teams can take a loan from the WAVE federation. For slum communities, the primary benefit of the community-managed toilet complexes has been access to clean and safe sanitation facilities and a decrease in water-borne diseases. The women who participate have gained new skills and confidence, which they often apply to other arenas in their communities and households. From the city corporation’s perspective, one of the major benefits is that this arrangement reduces costs as a result of community-managed toilets. While some of the smaller toilet blocks require subsidies, these can be justified by the overall benefits. Source: Case Studies 5 and 7, accompanying volume. Existing community development societies, neighborhood groups, and neighborhood committees of women (that have been functioning since they were formed under the Swarna Jayanti Shahari Rojgar Yojana8 of the Government of India in 1998), are well placed to play a meaningful role in articulating the concerns of the poor and playing a role in planning, designing, and managing services. 7 US$1 = PKR 78 (as of September 30, 2008). Conversion rates are from www.exchange-rates.org/history/PKR/USD/T; all conversions in the text are approximations. 8 Literally, the Golden Jubilee Urban Employment Scheme. 15 Getting Started: and accomplishments of the urban poor, and about strategies • Develop a supportive framework for interfacing with community- Actions and to improve access to services. managed services. Resources • Make information available in Advocates and formats that are accessible Civil Society Organizations This section suggests the following to the poor. actions for sector actors. • Act as intermediaries between • Plan for an effective interface service providers and Policymakers and Project Planners between community-managed poor communities. • Avoid top-down planning. services and the formal service provider. • Deliver educational and • Make meaningful participation by awareness programs aimed at project beneficiaries mandatory. Governance Bodies enabling the poor to act on their Facilitate beneficiary involvement in and Service Providers own behalf. project design and development of proposed solutions. • Create a specialized unit within • Identify and work with dynamic the utility to communicate with individuals in the community • Allow adequate time for poor communities and facilitate to provide leadership for consultation and participation access to services. self-help initiatives. by beneficiaries. • Develop a client-oriented culture • Encourage participation in • Hire qualified NGOs to facilitate within the utility. political processes. mobilization of poor communities. • Train staff in effective client • Promote networks among • Publish information for the general relations skills, particularly for community organizations with public about the living conditions serving the poor. common interests. Table 1: Relevant Case Studies in Accompanying Volume Case Study Topic PROSANEAR Project, Brazil (Case Study 3) Community participation in project planning Orangi Pilot Project, Karachi, Pakistan (Case Study 5) Self-help organizations, self provision of services Temeke District, Dar es Salaam, Tanzania (Case Study 14) Federation of water user associations Tiruchirapalli, Tamil Nadu, India (Case Study 7) Community-managed toilets Federation of Water Associations: Giving the Poor a Voice, Federation of water associations Manila, Philippines (Case Study 4) Mumbai Slum Sanitation Program, Community and local enterprise Maharashtra, India (Case Study 2) operation of toilets 16 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Section 3 Take Vested Interests into Account Regularization of informal service providers often helps utilities to reduce illegal connections and corrupt practices by staff, lower water prices, and improve the reliability of services. Obstacles Water vendors, organized crime, corrupt public officials, and dishonest utility staff may have a vested interest in preventing better services for the poor. When the poor cannot get piped water supply services legally they are forced to provide for themselves in some way—legal or illegal. In cities with a high percentage of unserved populations, such as Dhaka, Manila, and Karachi, the amount of money that passes hands informally in the water sector to provide water to the unserved population is reportedly greater than the revenue of the formal service provider. Vested interests will naturally oppose any changes to the status quo that threaten their source of revenue. Sometimes confrontations can be avoided by giving informal and illegal service providers new roles or incentives that bring them into the formal system. Ultimately, improving transparency reduces opportunities for illicit activities. Incorporate Informal Service Providers into the Solution Institutional arrangements and legal reforms that incorporate informal informal service providers often helps are adaptable to other environments. In vested interests into the formal solution utilities to reduce illegal connections and some places, formal utilities have hired reduce opposition and improve corrupt practices by staff, lower water vendors who lost their markets when transparency. Such arrangements prices, and improve the reliability of piped services were extended and benefit both sides: the informal services—especially if adequate improved. In Paraguay, local private providers gain security and legitimacy, regulatory arrangements are introduced. firms that won contracts to build and and the utility or alternative service operate new water supply systems in organization can take advantage of the Such solutions must be tailored to each previously unserved neighborhoods knowledge and skills informal providers situation. There are, however, a number were encouraged to hire small-scale have accumulated. Regularization of of cases that might provide models that service providers (known as aguateros) 18 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Box 4: Water Kiosk Operators Unite in Kenya In the informal settlement of Kibera in Nairobi, Kenya, more than half-a-million poor people get water from over 650 informal local water kiosks. The kiosk operators lay pipes, as much as 1,500 meters long, to connect their storage tanks to the local utility network. Although the utility recommends that water be sold for Ksh 19 per jerrycan (about US$0.10), the prevailing price is usually Ksh 2 (the equivalent of US$1.30 per m3, or eight times the utility’s domestic tariff), primarily because of the costs associated with establishing and running water kiosks: capital investment, bribes paid to utility staff to obtain and retain a connection, and the high tariffs associated with higher consumption blocks. During water shortages, the prices are even higher, soaring to Ksh 5 or even Ksh 10 per jerrycan. The utility historically had little incentive to address the problems in Kibera. This was because (a) revenue collection in the settlement was negligible; (b) there were many illegal connections; and (c) the water delivered to Kibera was estimated to be less than 10 percent of the city’s total consumption. Instead, the utility simply used water rationing to limit its losses. Until recently, the utility considered kiosk operators to be part of the problem and driving them out of business was seen as an effective measure to reduce unaccounted-for-water. In May 2004, following an intervention by WSP–Africa, kiosk operators decided to form an association, which they called Maji Bora Kibera (MBK), Swahili for ‘Better water services for Kibera’. They drafted a constitution, formed an executive committee, and applied for official registration. Soon a joint task force was formed with members from the utility, MBK, and WSP–Africa. At the suggestion of the utility, the MBK wrote a letter stating clearly the problems faced by water vendors and offering to cooperate with the regularization of their connections, pay bills regularly, stop paying bribes, report leakages, and expand service to unserved areas. The utility was asked to provide a regular supply of water, adopt better billing and collection practices, and provide engineering advice for network improvements. The letter was a watershed in vendor-utility relations. The MBK and the utility continue to build their relationship. The MBK is working on a number of initiatives to strengthen self-regulation and address the remaining barriers to good services. While there remains some concern that the association could be an obstacle to long-term change in Kibera (if the members were to protect their own interests at the expense of consumers), there is also a recognition that both the utility and vendors can gain from further collaboration. Source: Brocklehurst, Clarissa. June 2005. Rogues No More? Water Kiosk Operators Achieve Credibility in Kibera. Water and Sanitation Program Field Note. to handle day-to-day operations.10 The case of water kiosk operators who entered into formal service arrangements with the Nairobi Water Company in a slum in Nairobi, Kenya (see Box 4), provides another potentially promising example. 9 Kenyan shillings. 10 Triche, Thelma, Sixto Requeno, and Mukami Kariuki. December 2006. Engaging Local Private Operators in Water Supply and Sanitation Services, Initial Lessons from Emerging Experience in Cambodia, Colombia, Paraguay, the Philippines, and Uganda. World Bank. Water Supply and Sanitation Working Note 12, p. 16. 19 means of increasing transparency, Getting Started: make, into account in formulating policies and regulations and neutralizing opposition, and Actions and planning projects. reducing costs. Resources • Assess the business dynamics of • Use neutral intermediaries who are existing informal operators to trusted by both parties (such as This section suggests the following determine why their activities respected local or international actions for sector actors: are so lucrative. nongovernmental organizations, or professional mediators) to promote Policymakers and Project Planners • Determine whether owners of rental dialog between formal and informal dwellings have vested interests. • Take the role of informal or illegal service providers. actors (and other vested interests), • Incorporate existing vested interests Governance Bodies and the contributions they can into solutions, where feasible, as a and Service Providers • Hire disenfranchised vendors to work in the utility when expansion eliminates their markets. • Team up with informal service providers to improve service and cost recovery in marginal areas. Advocates and Civil Society Organizations • Act as intermediaries between informal or illegal service providers and the formal sector. • Help informal or illegal service providers to create institutional structures that will promote cooperation among them, and enable them to negotiate with formal structures. Table 2: Relevant Case Studies in Accompanying Volume Case Study Topic Parivartan Program, Ahmedabad, India (Case Study 1) Politicians who undermine the scaling up of the program by providing funds outside the program Nongovernmental Organization-Assisted Water Points: Difficulty with mastaans, musclemen or Social Intermediation for Urban Poor, influential persons who control slum areas Dhaka, Bangladesh (Case Study 11) Temeke District, Dar es Salaam, Resistance of water vendors to water Tanzania (Case Study 14) services improvement program 20 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Section 4 Eliminate Administrative and Legal Barriers Simplifying procedures for connection, billing, and collection services, and maintenance arrangements are part of the institutional process of recognizing the differences between customers in planned and unplanned areas of the city. Obstacles ‘proof of occupancy’ documents such as ration cards, identity cards, election Institutionalize cards or electricity bills instead. (See Simplified • Land ownership and tenure issues Case Study 10, accompanying often create a barrier to the volume.) The Ahmedabad Municipal Procedures provision of service to the poor. Corporation allows connections and and Provide • The poor may be unaware of other improvements to proceed once administrative and legal residents obtain a ‘no objection Assistance requirements, or find it difficult to certificate’ from the owner of the land. Formal institutions can be very understand them and comply. Nongovernmental organizations intimidating for the poor unless special working with the Ahmedabad Municipal policies often prevent utilities arrangements are made to promote Corporation have helped the from providing connections to residents and facilitate access. Connecting a communities to obtain these who do not have legal tenure. Most large unserved population is a major certificates. (See Case Study 1, legislation on land tenure is outdated, long-term undertaking that will require accompanying volume.) irrelevant to current realities, and ongoing support and assistance even cannot be enforced. Complex Another approach to get around the after poor residents are connected. As procedures not only constitute a barrier lack of land tenure is to make a single part of this long-term effort, utilities and for the poor, they create opportunities bulk water or sewerage connection at municipal service providers need to for bribes to be extracted from existing the border of the community and allow adjust their systems to attend to this or prospective users, and such bribes communities or small-scale service new, potentially large, customer base. represent a heavier burden for the poor providers to operate services. Several Simplifying procedures for connection, than for the nonpoor. of the previously cited cases—for billing, and collection services, and example, in the Orangi community in maintenance arrangements are part of Delink Service Karachi, Tiruchirapalli city in the institutional process of recognizing Tamil Nadu, and Kibera in Nairobi, the differences between customers in Provision from Kenya—used this model. Box 5 planned and unplanned areas of the Land Tenure describes another example in city. In India and throughout South Asia, Tegucigalpa, Honduras. the percentage of inhabitants living in Legal reform is needed to enable the poor to gain secure tenure, adequate housing, and services. In the meantime, though, innovative strategies to get around land tenure requirements can sometimes be found at the local level. One such approach is to allow alternative documentation. The Bangalore Water Supply and Sewerage Board (BWSSB) had a longstanding requirement that only slum residents presenting both land title documents and recent property tax receipts could qualify for individual water and sanitation connections but, as part of its program to promote connections in WSP–LAC slums, agreed to permit residents to present lease documents and other 22 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Box 5: Community-Managed Services in Tegucigalpa, Honduras About 380,000 people live in poor peri-urban areas of Tegucigalpa. One-third of these peri-urban residents do not have direct access to the water supply network and most do not have access to sewerage. Many of the peri-urban settlements cannot be connected because of the topography (hillsides with steep slopes and unstable terrain), others because of their illegal status, and some because of the lack of adequate resources to extend the network. Residents of these areas obtain water from a number of sources, including tankers, rainwater catchments, and community wells. With the assistance of several international development agencies and nongovernmental organizations, the National Autonomous Water and Sewerage Service (SANAA) is introducing alternative water and sanitation systems in these areas. These systems receive bulk water from SANAA or its tankers but are managed internally by the community. Three water supply models are used. The preferred model involves a metered connection to SANAA’s network that feeds a community storage tank, to which the secondary network within the community is connected. Where connection to the network is not feasible, the community storage tank is supplied by tankers. The third option is a rainwater catchment and filtering system. A revolving fund is used to finance construction and the beneficiary community repays the fund at zero interest over 5 to 10 years. Communities that wish to benefit from this program must establish a water administration board with four officers selected by the community. The water boards operate and maintain the system, collect fees from the users to cover their own costs as well as the bulk water charges and the capital cost. They organize committees and engage staff to maintain the system, operate community water taps, collect fees, and prevent theft. Committees are also established to educate the community about water use and hygiene. Source: Rivera, Kenneth. Improving Water Supply, Sanitation, and Health Services for Low-Income Urban Communities in Latin America—A Case of Tegucigalpa. Building Partnerships for Development, draft of May 2006 (part of field research conducted in seven Latin American cities). (See also Case Study 15, accompanying volume.) Box 6: Dedicated Units in Water Utilities (Hyderabad and Bengaluru) Hyderabad Metropolitan Water Supply and Sewerage Board created a Single Window Cell to receive, process, and coordinate water and sewerage connection applications. The Single Window Cell distributes a detailed two-page brochure that clearly explains the application procedures. A dedicated team of staff and contract laborers installs all approved new connections for which payment has been received. These reforms have reduced the time required to process connections from six months to three months and have significantly increased the number of applications processed. The Bangalore Water Supply and Sewerage Board has a Social Development Unit, which focuses on connecting households in slums to piped water and sewerage. This unit is headed by a proactive senior development specialist who interacts directly and effectively with community groups, nongovernmental organizations, and influential individuals to promote communication, implement connection programs, resolve complaints, and so on. The Social Development Unit also uses NGOs as intermediaries to assist households with the application process and facilitate communications. To promote connections, the unit has introduced a reduced connection fee and simplified connection procedures. It also accepts ‘proof of occupancy’ in lieu of the requirement for land tenure. Residents of slums are encouraged to connect to the Board’s water supply system and are actively discouraged from resorting to illegal means. Connection charges vary on the basis of house size: Rs 550 (US$12)11 for houses of less than 150 square feet, Rs 800 (US$17) for houses of 150–600 square feet, and the full rate of Rs 1,800 (US$39) for houses over 600 square feet. Slum dwellers are allowed to pay the connection charges in two installments. Source: Water and Sanitation Program–South Asia. January 2007. Bangalore Water Service Delivery, Ingenious Model Shows the Way. Case Study. (See Case Studies 8 and 10, accompanying volume.) 11 US$1 = INR 46 (as of September 30, 2008). Conversion rates are from www.exchange-rates.org/history/INR/USD/T; all conversions in the text are approximations. 23 unplanned parts of cities is significant was originally used in Bengaluru, has of poor communities from/to which a and growing. A permanent body that been introduced in several countries. community-based organization or can help institutionalize effective (See discussion in Section 5.) small-scale private operator can take approaches throughout the utility responsibility for the operation and will make it less likely that changes in Getting Started: maintenance of network services management or political leadership within the community. will undermine or reverse this Actions and • Simplify procedures and forms, and initiative for expanding services in a Resources translate forms and instructions into sustainable manner. local languages. This section suggests the following The Hyderabad Metropolitan Water • Create dedicated user-friendly units actions for sector actors: Supply and Sewerage Board (in to promote service to the poor. addition to the Customer Care Office Policymakers and Project Planners described in Box 11) created a Single • Design access mechanisms • Initiate land tenure reforms. (for connections, complaints, Window Cell to receive, process, and coordinate water and sewerage • Amend municipal laws and and so on) that are appropriate connection applications. Another regulations that make it difficult or for the poor, and appoint potentially effective model is a impossible for the poor to qualified professionals or engage dedicated unit within the utility that get services. nongovernmental organizations to communicates with poor communities, assist the poor with procedures • Authorize alternative documentation and forms. assists them with formalities, promotes requirements for connections. appropriate services, and liaises with Advocates and other stakeholders. The Social Governance Bodies Civil Society Organizations Development Unit in the BWSSB, India, and Service Providers • Assist poor residents to obtain is an example (see Box 6). • Adopt alternative documentation documentation required Successful programs have involved not requirements, such as proof of for connections. only changes in organizational culture residence or no-objection from the • Support communities to negotiate and staff attitudes, but also the owner of the land, to allow those with the utility for the establishment of establishment of client-friendly who lack land tenure to qualify for a bulk connection and to create service connections. CBOs or engage small-scale private mechanisms that facilitate communications with customers. The operators to operate services. • Explore alternative service models Citizen Report Card, a tool for such as installing bulk water or • Develop programs to assist the poor assessing customer satisfaction that sewerage connections at the border with procedures and forms. Table 3: Relevant Case Studies in Accompanying Volume Case Study Topic Ahmedabad Municipal Corporation (Case Study 1) Alternative documentation Bangalore Water Supply and Sewerage Board (Case Study 10) Alternative documentation; dedicated unit in utility to promote service to the poor Hyderabad Metro Water Supply and Sewerage Board Dedicated unit in utility to promote connections (Case Study 8) Orangi Project, Karachi, Pakistan (Case Study 5) Bulk connection at border of community Tegucigalpa, Honduras (Case Study 15) Bulk connection at border of community Tiruchirapalli City (Case Study 7) Bulk connection at border of community 24 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Section 5 Strengthen Capacity, Autonomy, and Accountability of Service Providers and Provide Incentives to Serve the Poor The roles and responsibilities of policymakers, service providers, governance bodies, and regulators need to be clearly defined and separated to ensure the autonomy and accountability of service providers. financial viability, efficiency, service utilities will be unable to satisfy the Obstacles quality, customer relations, and demand of 100 percent of urban specifically targeting the poor. households for the foreseeable future, • Service providers lack the autonomy Reflecting this, training programs focus taking advantage of the services of as well as financial and human primarily on technical and engineering the SPSPs should be an essential resources, and incentives required, skills and only rarely address component of strategies to expand and to provide services to the commercial, managerial, and strategic improve services to the urban poor. urban poor. aspects of WSS services, let alone Working with SPSPs will require • Municipalities and utilities are strategies for serving the poor.13 innovative approaches to link them with not held accountable for the formal utilities, introduce appropriate In the absence of efficient autonomous provision of water supply and regulatory mechanisms, and devise service providers, the distinction sanitation services. strategies for eliminating illegal and between the utility and the municipal abusive activities without driving the • The services provided by small administration is blurred; managers of SPSPs out of business. private service providers are the services do not control the not recognized, encouraged, resources required to provide the This section will focus primarily on the and regulated. services and cannot be held institutional, regulatory, and capacity accountable. There is a lack of clarity issues. Mechanisms to address cost The poor performance of water supply regarding the roles of state recovery are discussed in more detail in and sanitation (WSS) services in India is governments, state government Section 6 because a strategy to due in large part to inappropriate utilities, municipal bodies, community improve cost recovery must also institutional frameworks, lack of organizations, and private players. In address the financial constraints and regulatory mechanisms, inadequate such cases, targets for service quality affordability issues that are specific to financial resources, absence of are typically not established or providing services to the poor. appropriate attitudes and skills, and a monitored. Tariffs rarely cover costs lack of explicit directives and incentives and, as a result, financial viability and Separate and to serve the poor. In fact, there are no sustainability are undermined. fully autonomous water and sanitation Therefore, many urban utilities fail to Clarify the utilities in Indian cities and few, if any, provide satisfactory service to a large Responsibilities permanent monitoring and regulatory part of the population—particularly mechanisms. A few metropolitan cities, the poor. of the Actors such as Delhi, Chennai, Hyderabad, and Bengaluru, have WSS boards with In contrast to the prevailing conditions, The roles and responsibilities of limited functional autonomy. In Kolkata the Jawaharlal Nehru National Urban policymakers, service providers, and Mumbai, dedicated departments of Renewal Mission’s mission statement governance bodies, and regulators the municipal corporations manage emphasizes the importance of need to be clearly defined and WSS operations. In the remaining improving the efficiency and separated to ensure the autonomy and cities, WSS services are either operated accountability of service providers and accountability of service providers. by a state-level specialist agency with introducing institutional models that In small towns with simple systems and limited autonomy, or are managed enhance the viability of services. limited human resources, it is not jointly with other services by a always realistic or meaningful to municipal department.12 Small private service providers (SPSPs) completely separate these roles. are active throughout India—filling in Until recently, the emphasis in India has In large urban areas, and particularly in part of the large gap between demand been on creating infrastructure rather large countries with many large urban and the formal utilities’ ability to provide than promoting strong institutions, centers, it becomes even more services. Since, in most places, formal important. In the latter context, clearly 12 India, Water Supply and Sanitation, Bridging the Gap distinguishing among the following between Infrastructure and Service. Op. cit., p. 9. 13 Ibid. pp. 20-21. actors and their roles is recommended: 26 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India • Policymakers set overall service asset owners. They provide technical and financial criteria to coverage and quality objectives, strategic direction, mobilize achieve the objectives set by social policies, and cost-recovery investment finance, approve policymakers and their governance policies. They should set guidelines, annual budgets, and appoint the bodies. To do this, they need establish programs, and create management team in a manner that adequate autonomy (for example, institutions to promote and regulate is consistent with established control overstaffing, financial the achievement of service policies. Governance decisions resources, and procurement) and objectives, financial viability, and should be based on long-term protection from political interference. efficiency. The respective roles and strategic and financial criteria rather Their financial accounts should be responsibilities of policymakers at than short-term political interests. ring-fenced to promote financial the state and municipal levels need viability and accountability. • Service providers plan and to be clear and complementary. supervise the development of • Utility regulators (or economic • Governance bodies (for instance, infrastructure, and manage and regulators) compensate for the the boards of utilities) represent operate services on the basis of lack of competition in monopoly services by ensuring that tariffs are reasonable, that is, commensurate with the cost and quality of services, and enforcing service standards. A good regulatory system is predictable, credible, and transparent. The roles of state and municipal governments regarding regulation should be clear and any conflicts or overlapping responsibilities should be eliminated. • Other specialized regulators usually enforce technical, labor, health, and environmental standards. Here, too, the respective roles of state and municipal governments should be clear. • When two or more service providers carry out complementary functions—for example, when one entity is responsible for asset management and another for operations, or when a large utility provides bulk treated water and SPSPs manage distribution and commercial activities—their respective responsibilities need to be clearly delineated. Institutional reforms should be tailored to fit the country and local context. There is a great deal of literature and an 27 accumulated body of experience on universal blueprints or ideal institutional operations from policymaking and institutional reform of water supply and models to achieve them. Care should be regulation, as well as promoting sanitation services, covering topics taken to tailor institutional reforms to financial and managerial autonomy. such as the creation of autonomous each country and urban context. public companies, governance, The examples presented in Boxes 7, 8, The existence and potential role of contracting private operators, and and 9, and in the case studies and SPSPs should be recognized and taken creating regulatory frameworks. other listed resources, are intended to into account. Outsourcing the However, while the basic principles— management of services to private promote an understanding of some of separation of roles, managerial operators or putting public operators the conditions that promote success autonomy and accountability, and financial viability—are universally under performance contracts have been and to stimulate the exploration of desirable and applicable, there are no shown to be effective ways of separating these and other models. Box 7: Engaging Local Private Operators for Water Supply and Sanitation Services Contracts with private operators, if well designed and appropriately monitored, can be an effective way to introduce autonomy and accountability. Until recently, tenders for private operators of water supply and sewerage services were aimed at large international firms, but in a number of countries tenders are increasingly aimed at local private operators, particularly in small towns with 10,000 to 50,000 residents. The experiences of Colombia and Paraguay (where, since 2001 and 2002, respectively, local firms have been engaged to operate water supply services in large urban or peri-urban areas with poor populations) may be relevant to large cities in India. In Colombia, the poor performance of services operated by local governments led to the decision to engage private operators. In Paraguay, it was the high cost of subsidies required for investments and the failure of user associations to set tariffs high enough to repay loans for capital investments that led to the decision. In both countries local private operators have been engaged to construct or rehabilitate the infrastructure and operate the service for 15 to 20 years. In Colombia, most of the operators are companies with experience in providing other urban services, such as solid waste management. In Paraguay, large construction companies have sought the contracts but the government usually engages an experienced small local private operator (aguatero) to manage operations once construction is complete. In both countries, it is estimated that private operators are contributing about 20 percent of capital costs. The remainder is financed by grants from the national or local governments, using their own funds or the proceeds of World Bank loans. In Colombia, the municipal government contracts the private operator. In Paraguay, they are contracted by community- based user associations. In both cases, the national governments provide support to the local entities during the preparation and procurement process but the local entities assume full responsibility for day-to-day supervision of the operators. While competition for the contracts was somewhat limited in Colombia (only one or two bidders), it was strong in Paraguay (four to eight bidders). The contracts include very specific service targets that the operators are required to achieve. In both countries a national regulator specifies formulas and rules for setting tariffs. The contracts were in their early stages at the time they were reviewed in 2005, but initial results were mostly positive. In both countries, previously unserved neighborhoods were getting connections. In Paraguay, the cost of government investment subsidies had been cut in half. One of the lessons learned in Paraguay was that user associations need intensive training and support initially to ensure proper monitoring and a healthy relationship with the operator. In addition, user associations that receive a small percentage of the operators’ tariff revenues are most likely to provide effective overseeing. Source: Triche, Thelma, Sixto Requena, and Mukami Kariuki. December 2006. Engaging Local Private Operators in Water Supply and Sanitation Services, Initial Lessons from Experience in Cambodia, Colombia, Paraguay, the Philippines, and Uganda. World Bank, Water Supply and Sanitation Working Notes, No. 12. 28 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Box 8: Successful Performance and Incentive Contracts in a Public Company: Uganda’s National Water and Sewerage Corporation The National Water and Sewerage Corporation (NWSC) is an autonomous state company that provides water and sewerage services in the larger towns and cities of Uganda. Until 1998, in the absence of an effective accountability framework, the NWSC had made a number of poorly conceived investments. The company was very inefficient and financially unsustainable: its fixed assets were underutilized, 51 percent of water was unaccounted for, it was grossly overstaffed, and it was unable to service its debt. In 1998, a new general manager began to introduce performance incentive programs and a client-oriented culture with a strong emphasis on service quality. Substantial improvements resulted, but by 2000 it was clear that achieving financial sustainability would take several more years of effort. In 2000, the Government of Uganda and the NWSC agreed to a three-year performance contract under which the latter’s debt service obligations were suspended in return for continued performance improvements. The performance contract specified the actions that the NWSC must take and the targets it was expected to meet with regard to a number of key operational and financial indicators. A Performance Contract Review Committee was established to monitor and report on the NWSC’s performance. In 2003, the Review Committee found that the NWSC had performed very well with regard to qualitative targets such as updating the asset registers, introducing incentive contracts with its area managers, and outsourcing noncore activities. It had met or come close to meeting quantitative targets for collection efficiency, connections, metering, and staff per 1,000 connections, but had fallen short with regard to financial performance, and remained unable to service debt. Nevertheless, the performance contract and the internal management initiatives that had been introduced had established a solid foundation for further improvements. The government and the NWSC entered into a second performance contract for 2003–06, which introduced more meaningful financial indicators based on ratios rather than absolute results. In 2003, the NWSC also began to introduce an innovative strategy for improving its area managers’ accountability and autonomy. In January 2004, following an internal competitive bidding process in which all area managers were allowed to participate, two-year Internally Delegated Management Contracts were awarded for all NWSC service areas. By 2004, as a result of consistent improvements in operations and cash management, the NWSC’s revenues exceeded operating costs (including depreciation) for the first time and the company was on the road to financial sustainability. Compared to its performance in 1998, coverage in the NWSC’s service areas increased from 48 percent in 1998 to 68 percent in 2006. Total connections increased from 50,826 to 125,000. Unaccounted-for-water was down to 31 percent (35 percent in Kampala and 16 percent in other service areas). Annual turnover increased from about US$11 million to US$30 million, and operating profit after depreciation improved from a loss of US$0.4 million to a surplus of US$2.2 million. The government and the NWSC agreed to a third performance contract for 2006–09, which emphasizes the extension of services to the urban poor with the goal of achieving full coverage by 2015. Source: Silva Mugisha. April 2006. Performance Assessment and Monitoring of Water Infrastructure: An Empirical Case Study of Benchmarking in Uganda; Triche, Thelma, and Steve Ostrover. March 2005. Assessment of the Long-Term Financial Sustainability of the NWSC, Report 1 of the Review and Update of the Implementation Strategy for Reform and Divestiture of the NWSC, submitted to the Ministry of Finance, Planning and Economic Development. See also Case Study 9, accompanying volume, and the NWSC’s website at www.nwsc.co.ug 29 Box 9: Regulation by Contract: The Senegal Lease Contract In 1995, the Government of Senegal launched wide-reaching reforms in the urban water sector. The state-run water company was dissolved; a new asset-holding company, SONES, was created, and a private operator was engaged to run the systems. These reforms resulted in significantly better services and financial health for the sector. The contractual framework included a concession contract and a sector development contract between the government and SONES, and a contract with the private operator. This 10-year affermage (usually referred to as a ‘lease contract’ in English—though it is not really an accurate translation) was innovative in that it provided financial incentives for the private operator to achieve ambitious performance targets for leakage reduction, improvements in billing, and collection efficiency. The regulatory framework was built into the contract and was coherent (that is, it linked service levels to tariffs), credible, and transparent. SONES’s monitoring capacity was strengthened through a practical training workshop early in the contract period, and an objective outside conciliateur was engaged when needed to verify performance and resolve conflicts. (Figure 3 illustrates these arrangements.) The operator’s remuneration was based on its performance and, although it was independent of the tariff, the government committed to gradually increasing tariffs to the full cost recovery level (including debt service) and had a strong incentive to respect this commitment because it was essential to ensure the financial health of the sector and expand services. Tariffs for water supply were increased about 3 percent (in real terms) per year over 1996–2002. Several factors contributed to the success of the reform: the use of an appropriate form of contract that was tailored to local conditions; strong political will and good leadership within the government; a well-designed process; and flexibility and innovation when it was needed. Design and preparation included the development of a financial model that could be used to set and revise performance targets, project revenue requirements, and calculate the associated tariff increases. Good relationships among the parties and an effective dispute resolution process meant that the private operator and the state asset-holding company were able to reach an agreement on how the former was reimbursed for lost earnings when the latter experienced a delay in the completion of investments. The reform has had positive outcomes for the poor, in part due to the nature of the operator’s incentives, and in part due to the government’s policy of subsidizing connections in low-income neighborhoods. However, in 2004, some issues still remained due to the tariff inequities that result when multiple households use a single connection, and the fact that nonpoor households were benefiting from the subsidized block of the tariff, especially if they consumed no more than 10 cubic meters of water per month. Source: Brocklehurst, Clarissa, and Jan G. Janssens. January 2004. Innovative Contracts, Sound Relationships: Urban Water Sector Reform in Senegal. World Bank. Water Supply and Sanitation Sector Board, Discussion Paper No. 1. Strengthen professionals and service providers management, benchmarking, should include a variety of customer and community relations, Capacity complementary components communications, and outreach to and approaches. the poor. The content of training programs must be broadened to target a wider range • Broaden the focus to include • Move beyond conventional forms of of actors and, in contrast to the service quality, efficiency, and training: Training programs need to historical emphasis on engineering and service for the poor: The content of be scaled up and new types of technical skills, focus attention on training programs for WSS staff and training mechanisms need to be improvements in service quality, managers needs to be broadened introduced to meet the growing access, and sustainability. Programs to include training in corporatization, needs of the sector as well as to to strengthen the capacity and private sector participation, tariff motivate and enable staff to serve professional development of sector setting, financial and commercial the poor effectively. Intensive 30 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India training programs, mentoring, Box 10: Professional Association of on-the-job training, continuing Indonesian WSS Service Providers education courses in formal institutions, short seminars, online Municipal WSS services in Indonesia are provided by some 300 semi- courses, and study tours to autonomous municipal water utilities (PDAMs). After the financial crisis locations where the poor are getting that hit the country in 1998, most water utilities struggled financially and adequate services are among the the quality of the service provided deteriorated under the combined many innovative approaches that pressure of population growth, aging infrastructure, inefficiencies, and can be used to meet these needs. low revenue. Corporatization of water utilities, improved performance, • Create incentives and buy-in: and increased accountability and provision of timely and accurate Without incentives and prospects information to decisionmakers—are part of the challenges to be met. for promotion, training is not likely Water utilities are members of a Professional Organization of Water to bring about any changes in Enterprises (PERPAMSI), headquartered in Jakarta with 28 provincial services for the poor. Internal centers. The mission of PERPAMSI is to assist its members improve communications and awareness the management of their water supplies, assets and finances, as well programs and incentives for staff to as to provide training and certify professional staff. In addition, PERPAMSI provides training in public awareness, negotiations with support the reform and improve local governments, and customer outreach. A strong PERPAMSI is services for the poor are essential. considered a strategic element for improving WSS services throughout The creation of career paths that the country. Through a training arrangement, the World Bank Institute include specialization in services for assists PERPAMSI in the three areas of (a) public communications and the poor is also important to create information services; (b) performance benchmarking; and (c) utility staff professional pride and commitment. training programs. The program includes the training of PERPAMSI’s • Target nontechnical audiences: In trainers in its provincial centers; the trainers will in turn train staff in the addition, training and awareness member water utilities. WBI is also supporting PERPAMSI build programs need to be aimed at stronger ties with universities and training institutions, to strengthen policymakers, regulators, PERPAMSI’s capacity, and engage it in the delivery of appropriate consumers and consumer training services. associations, consultants, Source: World Bank. January 2006. India Water Supply and Sanitation: Bridging the Gap nongovernmental organizations, between Infrastructure and Service. Background Paper, Urban Water Supply and Sanitation, p. 41. and private sector firms that support the WSS sector. • Take advantage of existing training and certification programs, normally be carried out in-house materials: A large body of training and offer valuable opportunities and the functions that could be materials has been created by the for networking. Promoting the contracted out. Decisions about World Bank Institute (WBI) and by development of local private service outsourcing must also take into WSS training institutes in other providers should be an essential account whether qualified countries. The potentially relevant component of the strategy. companies or individuals are materials need to be identified and available to provide the service • Outsource: It is often practical and adapted to the Indian context. and whether outsourcing is cost-effective to increase capacity • Professionalize: A professional by contracting outside entities to cost-effective. The contracting of association of WSS service provide specialized services (such NGOs to liaise with slum providers similar to that created in as information technology, vehicle communities by the Social Indonesia (see Box 10) would help repair, community mobilization). Development Unit in Bangalore is an create a professional identity and a Managers should identify the example of effective outsourcing sector-specific constituency, provide essential functions that should (see Box 6). 31 Recognize and Introduce markets. In other contexts, alternatives such as a performance contract Work with Accountability monitored by an overseeing agency, or Alternative and Performance a community-based monitoring system, may work better. Providers Monitoring Regardless of the regulatory model, it In addition, alternative service Systems should incorporate pro-poor regulatory providers, such as SPSPs and principles and mechanisms, and community groups, can complement There are a number of regulatory pro-poor regulation: the capacity of the conventional utility instruments and institutional models by providing services in areas where that can be used to promote • Provide a framework for competition large utilities are unable to operate. accountability. Experience shows that so that a wide range of services An Asian Development Bank survey the choice of a regulatory model should are available. showed that SPSPs were providing be appropriate for the local context and • Create incentives (or obligations) for water to about 6 percent of the the size of the market, and it should be the dominant operators to extend population in Delhi, 10 percent in consistent with the legal framework and services to poor neighborhoods. Dhaka, 5 percent in Kathmandu, institutional arrangements for the 36 percent in Cebu, 19 percent in provision of WSS services. • Allow a flexible approach to service Ho Chi Minh City, 44 percent in Jakarta, Independent regulators (with a high quality so that service providers can and 14 percent in Ulaanbaatar.14 level of discretion) are often presented experiment with alternative Several innovative projects have as the ‘best practice’ but they are not technologies and delivery models incorporated SPSPs into service suitable to all environments. They while respecting basic service delivery models for serving the poor require broad-based confidence (of the quality requirements. and a number of recent publications policymakers, the public, and the • Establish tariffs that encourage have examined the characteristics of utilities) in their objectivity and fairness, higher access to services without SPSPs and innovative ways of engaging and are best suited for regulating fully jeopardizing financial viability. them to better serve the poor.15 autonomous utilities with very large • Establish a framework to deal with the different circumstances and needs of all customers. In India, the question of which level of government is responsible for economic regulation needs to be resolved. Larger cities, such as those targeted by the JNNURM, should be capable of engaging and enforcing contracts with service providers, but the current capacity and motivation of municipal officers to monitor and enforce contracts is a constraint. For example, in Delhi, many privately-run— and highly profitable—public toilet complexes fell into disuse largely 14 Asian Development Bank. 2004. The Role of Small-Scale Private Water Providers in Serving the Urban Poor. Case Study No. 11 in Bringing Water to the Poor, Selected ADB Case Studies. because the municipality did not 15 See, for example: McGranahan, Gordon, Cyrus Njiru, Mike Albu, Mike Smith, and Dana Mitlin. 2006. How Small Water Enterprises enforce contract provisions. Both can Contribute to the Millennium Development Goals, Evidence from Dar es Salaam, Nairobi, Khartoum, and Accra. Water, Engineering and Development Center, Loughborough University. See also the list of resources at the end of this report. politicians and municipal staff need 32 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India training in concepts and skills, particularly with regard to distinguishing the governance of a public service provider by the public owner, the enforcement of contracts with service providers, and economic regulation of either a public or private service provider. If the economic regulation of services is considered a function of the state government, it will be easier to distinguish it from ownership governance or contract enforcement by urban local bodies. If such institutions share regulatory responsibility with state governments, their respective roles need to be clearly distinguished and complementary. Regulation by Contract A well-designed and credibly enforced contract, whether a performance contract with a public operator or a contract with a private operator, can provide an excellent regulatory framework without an independent regulator. The specificity of their provisions provides security and predictability for all actors in places that lack a regulatory track record or broad public support for independent regulation. Such contracts should customer complaints and mechanisms monitor performance, enforce the specify (a) the responsibilities and for facilitating the access of the poor. contract, and follow-up on unresolved obligations of the operator, the Incentives for meeting targets, such as complaints. However, an independent contracting party, and consumers; linking payment to performance, should regulator (with a high level of (b) general service conditions; (c) fees be incorporated. The operator should discretion) is not desirable when and tariffs to be charged by the report his performance in formats operator; (d) payments, if any, to be regulation by contract is used. The that are understandable to local made to the contracting party or to the experience with the concession government and consumers. A good operator; and (e) standards (or targets) contracts in Manila demonstrates performance contract (combined with a for improving service quality, coverage why: the discretion of the regulator dynamic utility manager) made a big (including specific targets for poor contradicted the specificity of the difference in turning around the communities), technical efficiency, contractual provisions, creating performance of Uganda’s National timeframes for outputs and, especially uncertainty and confusion.16 A good Water and Sewerage Corporation in the case of a public service provider, (see Box 8). commercial and financial performance. 16 The operator should also be required to Regulation by contract requires a Ehrhardt, David, Eric Groom, Johathan Halpern, and Seini O’Connor. 2007. Economic Regulation of Urban Water and establish a system for responding to competent overseeing entity that can Sanitation Services: Some Practical Lessons. World Bank. 33 Figure 3: Regulatory example of regulation by contract Other Regulatory Mechanisms Organizations Supporting with a private operator is the lease There are several relatively simple and the Contract in Senegal contract in Senegal, which is inexpensive regulatory mechanisms, described in Box 9 and illustrated in such as regular feedback from users Figure 3. and publication of performance It is not normally appropriate for a indicators, which are also very effective contracting or regulating authority to for monitoring performance and verify every report or make frequent stimulating improvements. Hyderabad inspections, but some method of introduced the Citizen’s Charter and verifying the operator’s reports, Grievance Resolution System (see Box such as an annual independent 11). The Citizen’s Report Card, first performance audit, is desirable. used in Bengaluru in 1994, is another In Thailand, for example, the good example. Citizen’s Report Card performance agreement in place surveys systematically gather and between the Ministry of Finance and disseminate public feedback on public the Metropolitan Waterworks Authority services that are not subject to that provides water supply services to competition and thus may lack Bangkok is audited annually by a incentives to be responsive to private firm, the Thai Rating and customers’ needs. These Report Cards Information Service. Finally, can be used as a combined advocacy Source: Ehrhardt, David, Eric Groom, Jonathan procedures need to be established for and benchmarking tool. Through this Halpern, and Seini O’Connor. 2007. Economic dealing with poor performance by medium, citizens can collectively exert Regulation of Urban Water and Sanitation the operator and the resolution pressure for change. Successful Services: Some Practical Lessons. World Bank. of disputes. application requires (a) an Box 11: Hyderabad Metropolitan Water Supply and Sewerage Board’s Public Meetings, Citizen’s Charter, and Grievance Resolution System In 1998, the managing director of Hyderabad Metropolitan Water launched the Customer Meets Campaign, a two-week initiative intended to improve employees’ commitment to customer care. During the campaign, senior managers held meetings with customers to learn about their service needs and concerns. The diversity and number of citizens who turned up, the directness of their grievances, and the gratitude they expressed for the opportunity to voice their concerns made an impression on management. As a follow-up to these meetings, the Metro Customer Care (MCC) office was created in February 1999 to receive and coordinate responses to complaints lodged by customers using a dedicated telephone number. The MCC standardized and simplified procedures for lodging grievances. An online computer-based program monitors staff performance in responding to complaints. The Citizen’s Charter, launched by the Chief Minister in January 2000, outlines measurable service delivery norms for services provided by the Water Board. Its publication was a landmark, as it publicly acknowledged the Water Board’s commitment to improving service delivery. Evaluation of results show that the MCC’s contribution has improved response to complaints for all income groups and a majority (96 percent) of MCC customers surveyed found procedures easy to follow. However, the MCC is not specifically aimed at the poor and the number of complaints from poor customers is not commensurate with their numbers, perhaps because they lack access to telephones or because they are less exacting than more affluent customers. Nineteen percent of slum residents reported that the complaint mechanism was more accessible than in the past and 44 percent found it more polite and respectful. Source: Case Study 8, accompanying volume. 34 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India understanding of the sociopolitical • Examine the potential benefits and contracts developed elsewhere to context; (b) technical competence to challenges of private participation India’s context. execute and analyze a survey; (c) a (including that of local small private • Carry out comprehensive capacity campaign to publicize the results and service providers) in urban WSS needs assessments for key actors, bring about change; and (d) follow-up services, and adapt strategies and and develop and implement steps to institutionalize the mechanism contractual forms developed strategies to broaden and scale up and link it to public decisionmaking. elsewhere to India’s context. training and capacity-building The second Bengaluru Citizen’s Report • Examine the potential benefits programs with a new focus on Card in 1999 resulted in several and challenges of performance ensuring effective access to service, positive responses, such as the contracting with public operators, improving service quality, and creation of the Bangalore Agenda Task and adapt strategies and promoting financial sustainability. Force by the state government to monitor feedback; the initiation of training programs on customer responsiveness by the Water Board; and the introduction of regular consumer satisfaction surveys by the Karnataka Electricity Board.17 Getting Started: Actions and Resources This section suggests the following actions for sector actors: Policymakers and Project Planners • Clearly distinguish and define the roles of key sector actors (policymakers, governance bodies, service providers, and regulators), separate or combine functions as appropriate to promote transparency and efficiency. • Give service providers adequate autonomy to make management (input) decisions, combine service development and promotion activities with operations, and hold service providers accountable for results through transparent mechanisms. 17 Waglé, Swarnim, Janmejay Singh, and Parmesh Shah. February 2004. Citizen Report Card Surveys—A Note on the Concept and Methodology. Social Development Notes, Participation and Civic Engagement, Note No. 91. World Bank. 35 and ensure that all staff support the reforms. • Change the organizational culture to focus on service quality and customer relations. • Have performance audited annually and publish audited results. • Strengthen skills for negotiating with policymakers and overseeing bodies. • Develop models for engaging with SPSPs to provide services in areas where the utility cannot provide services or where the former can do so more effectively. Advocates and • Take advantage of training materials Governance Bodies Civil Society Organizations developed by WBI and by service and Service Providers providers and institutions in other • Monitor and disseminate • Develop effective internal information on the service countries and adapt them to communication, performance providers’ performance in India’s context. monitoring, and poor communities. • Design regulatory and accountability improvement systems. frameworks that fit into the existing • Work with the regulator or the legal framework and have the broad • Evaluate capacity needs and service provider to develop support of policymakers, the public, develop human resources, training, licensing and performance and the utilities, including SPSPs. and outsourcing strategies to monitoring mechanisms that are acquire the necessary skills • Promote and support the start-up appropriate for slums and poor and capacity. of a professional association of communities and give an water supply and sanitation • Create incentives for managers accurate picture of the quality of services providers. and staff to improve performance service in those areas. Table 4: Relevant Case Studies in Accompanying Volume Case Study Topic Uganda’s National Water and Sewerage Performance contract with public operator Corporation (Case Study 9) Hyderabad Metro Water Supply and Sewerage Customer care office and grievance resolution system Board, India (Case Study 8) 36 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Section 6 Adopt Appropriate Investment Finance, Cost Recovery, and Subsidy Policies Targets for cost recovery that are realistic and charging methods that take the constraints faced by the poor into account are more likely to lead to financial viability as well as improved access for them. management, improvements in justify proposed increases within the Obstacles operational performance, redesign of context of a medium-term plan, identify tariff structures and connection the risks associated with failing to • Tariffs do not cover the full cost of charges, gradual tariff increases, and a recover costs, and provide evidence efficient services and there is a campaign to increase connections. that consumers are willing and able to perception that the poor are unable Targets for cost recovery that are pay the proposed tariffs. They must and unwilling to pay for service. realistic and charging methods that also demonstrate that they are taking take the constraints faced by the other steps to reduce costs and • Poor households find it difficult to poor into account are more likely to improve cost recovery. pay upfront connection fees. lead to financial viability as well as It may be possible to improve financial • Poor households find it difficult to improved access for them. A few performance without increasing tariffs in pay monthly bills. relevant strategic approaches are real terms by improving the efficiency of proposed below. • Increasing block tariffs penalize technical and commercial operations households that share a Adopt Realistic and increasing connections. This will put the utility in a better position to single connection. Cost Recovery attract additional finance for expansion. • Small-scale service providers It will also provide resources to expand lack adequate finance to extend Policies and and improve services to the poor. networks into peri-urban Targeted If a large tariff increase (in real terms) is informal settlements. Subsidies required, even after taking into account Services that are not financially viable the effects of efficiency improvements cannot be managed and operated Cost recovery can be improved by and increased connections, the efficiently, and will not be sustainable. (a) reducing costs through efficiency increase should be phased over time Financial autonomy is an essential improvements; (b) charging an average and accompanied by perceivable component of managerial autonomy tariff that reflects costs; (c) structuring improvements in service. Real and accountability. Managers who do tariffs to balance efficiency increases should, of course, be in not have adequate resources or have considerations with targeted subsidies addition to automatic increases to little control over financial resources that promote affordability; and reflect inflation. Phasing a tariff increase cannot make optimal decisions. (d) introducing strategies to improve the over a few years is feasible only if a Dependence on public subsidies collection of tariffs, including billing and reliable operating subsidy is available makes the services vulnerable to collection strategies that are tailored to (or debt service can be suspended) political intervention and changes in conditions in poor neighborhoods. during the interim. If this type of political priorities. A vicious circle Development of a realistic strategy to financial assistance is not available, develops: when tariffs are too low and improve cost recovery and maintain a larger increase may be acceptable a utility cannot pay its debt, the financial viability while expanding if customers support the reasons for government must help out and, as a service to the poor requires considering the increase. A well-planned public result, tends to get involved in day-to- a number of factors. awareness and educational campaign day management. The Jawaharlal that precedes the increase is essential Regulators are understandably Nehru National Urban Renewal Mission to build support. reluctant to increase tariffs and must recognizes this and encourages levying reasonable user charges so that be convinced that a tariff increase is The tariff structure may create within seven years revenues will cover justified before giving approval. If economic distortions or undermine the at least the cost of operation and politicians are playing the role of tariff financial performance of the utility, maintenance. Achieving this will require regulator, the task is even more particularly if the lowest tariff does not a multifaceted strategy that might complex. Utility managers should learn cover the full cost of operation and include improvements in financial how to prepare tariff proposals that maintenance and/or if the tariff paid by 38 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India the largest consumers is so much Expanding service to the poor may mentioned below.) Service levels also higher than the full cost of providing the result in a higher average cost because affect financial viability. Individual service that large consumers have an of physical conditions, higher collection household connections for water and incentive to reduce their consumption. costs, and lower average consumption sewerage are often the preferred Cross subsidies must be designed from connections in poor households. options, but when many households carefully to minimize these effects. It should not be assumed that individual are served through a single water In localities where there are not a household connections will result in connection, water consumption per sufficient number of higher income higher levels of consumption—such connection may be higher than the residents to subsidize the poorest assumptions have proven unfounded, utility’s average and make up for some residents through a reasonable especially when cheap alternative of the higher costs. Similarly, block surcharge, cross subsidies are sources are available. This creates toilets increase economies of scale. generally not a viable option. a dilemma that needs to be Financial projections and the design of acknowledged and dealt with cross subsidies should reflect these Colombia and Chile have developed realistically. Practices that would reduce factors. Tariff rules should seek to two different but viable approaches to the cost of serving poor neighborhoods balance the need to ensure financial subsidies on the basis of household should be introduced. Community viability with the broader benefits of income. The need for cross subsidies is management of billing and collection, delivering services to the poor, and minimized because the poor are and outsourcing the installation of provide for offsetting any negative subsidized primarily by transfers from connections, have reduced costs in financial effects on the utility. the central governments.18 some locations. (Examples of these are General operating subsidies and blanket investment subsidies usually benefit the rich more than the poor, unless tariffs are structured to ensure that only the poor benefit from the subsidies. In general, subsidies should be targeted at the poor and should be limited and temporary. Subsidizing investments and/or connections in poor neighborhoods is preferable to subsidizing monthly consumption because the former is both targeted and limited in scope, and is generally sufficient to ensure that the poor will be connected and stay connected. Many studies show that the poor are willing and able to pay tariffs that cover the full cost of operation and maintenance for water supply services.19 Charging such tariffs not only promotes the financial viability of the services; it helps the poor become legitimate customers and gives them a stronger voice. If subsidies for consumption are to be maintained over an indefinite period of 18 Information on Chile and Colombia’s subsidy programs may be obtained from the respective water supply and sanitation regulators, the Comisión de Regulación de Agua Potable y Saneamiento Básico in Colombia, and the Superintendência de Servicios time, the source of funding should be Sanitarios in Chile. 19 See for example: Guha, Shion. May 2008. ‘Valuation of Clean Water Supply by Willingness to Pay Method in a Developing Nation: reliable and should not undermine the A Case Study in Calcutta, India’, The Journal of Young Investigators, Vol. 18, Issue 5. financial viability of the utility. 39 Develop a depreciation or debt service) and revenues. Calculate the required suppresses the demand of large customers below levels required to Cost Recovery average tariff to achieve the cost maintain financial viability. If relevant, recovery objective for both water propose a more efficient or fair tariff Strategy supply and sanitation, and structure and project its impact on appropriate tariffs for each tariff demand and revenues. A cost recovery strategy includes block, if relevant. efforts to reduce costs, ensure • Justify any proposed investments commercial performance, and the • Evaluate operational and on the basis of expansion and adoption of tariffs that cover the cost of commercial performance to improvement priorities, technical an efficient service. Some of the key determine whether costs can be and financial feasibility, including steps in developing a cost recovery reduced or revenues increased realistic estimates of demand and strategy and a tariff proposal are: without a tariff increase, or to cost effectiveness, and the • Evaluate demand of various mitigate the required tariff increase. availability of investment finance. categories of customers (including Propose a realistic improvement poor households) through program to improve operational and • Evaluate the ability of poor willingness-to-pay studies, taking commercial efficiency, and project households to pay upfront capital into account seasonal variability its impact on financial performance. contributions or connection and the availability of alternative charges and to accumulate • Evaluate tariff structure to determine sources of water and sanitation that adequate funds to pay monthly whether it promotes efficiency, are free, or lower in cost, than the bills, and propose mechanisms to maximizes revenues, or unfairly proposed service. address these constraints. penalizes any group of consumers, • Build a financial model that will be such as poor households who • Identify and secure sources of used to project costs (including share a single water connection, or any subsidies that will be offered to promote expansions and connections in poor neighborhoods. • Taking into account all of the above, calculate the required average tariffs for both water supply and sanitation and develop a strategy for increasing the average tariff to achieve the cost recovery objective, including the identification of sources of any temporary operating or capital subsidies. This type of model building and analysis requires the services of a team that has expertise in financial analysis, economics, operational efficiency, engineering, investment planning, and sociology. The Government of Senegal used a process similar to that described above to develop its cost recovery strategy. (See Box 9.) 40 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Subsidize contribute something, even if nominal, to the cost of investments, because it has been tested in a number of countries in Latin America, Africa, and Investments motivates them to get more actively Asia. The operator must prefinance the engaged in the planning process. investment and receives the subsidy A full or partial subsidy for investments Higher levels of subsidies may be after the desired outputs are achieved. may be justified in poor urban required for sanitation but can usually It is most often used to promote and communities as long as poor be justified because of the public reward investments that serve the customers can pay tariffs that cover the health and environmental benefits. poor. The subsidy is usually specified costs of operation and maintenance. It cannot be emphasized enough as an amount per connection and There are a number of studies that that if investments are subsidized, is paid on the basis of the number demonstrate that the poor are willing they should nevertheless be demand- of poor households that are and able to pay at least part of the driven, the result of meaningful actually connected.20 cost of investments in water supply. participation of the community in the Investment subsidies, thus, need not planning process. A number of countries have introduced cover the entire capital cost, nor should transparent, targeted subsidies for it be assumed that they are needed in One way to structure investment investments that expand services to the all cases. There are real benefits subsidies is to provide them as output- poor. Examples of targeted subsidies associated with requiring users to based aid (OBA). The OBA approach are presented in Box 12. Box 12: Targeting Investment Subsidies for the Poor in Cambodia, Colombia, Paraguay, the Philippines, and Uganda The governments of Colombia, Cambodia, Paraguay, the Philippines, and Uganda used the proceeds of World Bank loans or International Development Association (IDA) credits to expand and improve water services for the poor while promoting the engagement of private operators. In most cases in Colombia, Cambodia, the Philippines, and Paraguay, private operators were selected via a competitive process in which they specified the investment subsidy they required. In some of these, the subsidy was specified as lump sum investment, in others as an output-based aid subsidy per connection. In either case, the subsidy is paid after the investments are completed or customers are connected. These operators are required to operate the systems under contracts that resemble concessions or lease contracts for 10 to 25 years, and are responsible for all maintenance and replacements during that period. The subsidy is not intended to cover the full cost of construction; the unsubsidized portion is recouped from users through connection fees and tariffs over the life of the contract. In Colombia, tariff rules require that the average tariff includes the full cost of replacement of assets even if the initial investments are subsidized and there is no debt service. However, the tariff structure is such that low-income households do not pay any charges for capital investments. Nonpoor consumers pay tariffs that cover the full replacement cost of infrastructure and those in the two highest income brackets pay, in addition, a surcharge to subsidize consumers in the two lowest income brackets. In this way, the higher income consumers do not benefit from the investment subsidies. In Uganda, the government planned and bid-out the construction and operation of water supply systems for small towns separately from contracts with private managers. The investments were largely funded by government grants using donor credits or grants and tariffs are expected to cover only operation and maintenance costs. Since almost all residents of small towns are considered poor, all benefited more or less equally from the investment subsidy. However, the towns were required to mobilize a portion of the construction cost and the relatively more affluent residents were generally required to contribute more than less affluent residents. Tariffs cover the cost of operation and maintenance. Uganda is now planning a pilot project under which private firms would both construct and operate the systems and would receive an output-based aid subsidy per connection. Source: Triche, Thelma, Sixto Requena, and Mukami Kariuki. December 2006. Engaging Local Private Operators in Water Supply and Sanitation Services, Initial Lessons from Experience in Cambodia, Colombia, Paraguay, the Philippines, and Uganda. World Bank. Water Supply and Sanitation Working Notes, No. 12. 20 It is worth noting that OBA investment subsidies are sometimes referred to as connection subsidies because they are paid on the basis of the number of connections installed. This is a misnomer because the subsidy is usually intended to cover the cost of the major system components, not individual connections per se. In many OBA projects, the users must still pay a connection charge. 41 Restructure the Social Development Unit was able to reduce its average cost of Pradesh, a grant from the state was used to reduce the charge (see Charges and connections and introduce reduced Box 13). Faced with the problem of connection charges for smaller houses extending services into poorer Payment by hiring a private plumber to install neighborhoods and towns, the large Practices to the connections. urban water supply utilities in two African countries, Côte d’Ivoire and Accommodate However, when the charges reflect Uganda, reduced connection charges actual costs and efficiency is good, the Poor but the charge is still a barrier to by adding a surcharge to the tariffs paid by all users. In some donor-financed connection for poor households, there Reduce Connection projects, part or all of the cost of is a growing recognition that reducing Charges for Poor Households connections may be financed by the the connection charge by subsidizing project. In Buenos Aires, poor Connection charges that create barriers connections is a viable and appropriate households were charged lower for poor people may be reduced by component of a strategy. A number of connection fees in return for providing improving efficiency (that is, lowering ways have been used to structure and labor during the construction and the cost of installing connections), fund connection subsidies. Utilities installation process. Similarly, poor subsidizing connection charges, and often find that the additional revenues households in the peri-urban areas of eliminating bribes. Upfront connection generated by new connections and the Ciudad del Este in Paraguay earned charges, and the bribes users must reduction of the costs of operating connection vouchers when they pay to middlemen who facilitate standposts more than compensate for worked on the construction of the applications, can present barriers for internally subsidizing connection water supply system.21 the poor because accumulating the charges. Allowing the charges to be required sum is difficult for people who paid in installments that are free of Removing bureaucratic barriers and live from day to day. Plans that allow interest is another solution. In Andhra improving the efficiency of the poor users to pay the connection charge in installments over a year or two are sometimes proposed but these Box 13: Subsidized Connections in Andhra Pradesh may not be the optimal solution because they may include high interest In the late 1990s, the residents of Vijayawada (population 1 million) in charges and can increase monthly bills Andhra Pradesh, India, got their water from about 900 private hand-bored by as much as 100 percent. High bills wells and a municipal system serving 36,000 house connections and increase the risk of disconnection due 6,500 public standposts. Most of the standposts had lost their taps and ran to delinquency in payments and continuously. At that time, the municipality’s charge for a house connection undermine the objective of keeping the was Rs 4,000 (US$87), and the monthly consumption fee was Rs 40 poor connected. (US$0.86). The state government of Andhra Pradesh released funds under the National Slum Development Project to provide a 50 percent subsidy Sometimes, connection charges have toward the connection costs. When the Vijayawada Municipal Corporation nothing to do with the actual cost of announced this program, there was an overwhelming response from slum installing a connection per se. High dwellers, and more than 5,000 came forward offering to pay the Rs 2,000 connection charges may need to be (US$43) deposit. Using the cash inflow, the municipality was able to extend evaluated to determine whether they its distribution pipelines to several unserved areas. are justified and to bring them in line Source: Arvind Kumar (Indian Administrative Service, Municipal Commissioner, Vijayawada Municipal with the actual cost of making a Corporation). April 9, 1999. connection. Collection charges may be exorbitantly high due to the inefficiency of the utility. In that case, the 21 Triche, Thelma, Sixto Requena, and Mukami Kariuki. December 2006. Engaging Local Private Operators in Water Supply and Sanitation Services, Initial Lessons from Experience in Cambodia, Colombia, Paraguay, the Philippines, and Uganda. World Bank. appropriate strategy is to reduce costs Water Supply and Sanitation Working Notes, No. 12. (Vol. II, Unpublished Case Studies, is available from The World Bank Energy and by improving efficiency. In Bengaluru, Water Department.) 42 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India connection application process may administration. (See Case Study 4, allowing communities to appoint also reduce the cost to users, accompanying volume.) several authorized vendors would especially to those who have been increase competition and drive prices Eliminate Distorted paying bribes to utility staff or down. If effective competition cannot Tariffs for Poor Households middlemen to speed up the process. be created, the regulator or the The creation of a dedicated unit There are several situations in which community may set a maximum tariff to within the utility (such as the Social the poor pay relatively high tariffs for be charged by vendors—taking into Development Unit in Bangalore Water basic consumption. Administrative or account the vendor’s reasonable costs. Supply and Sewerage Board) regulatory actions may be required to In such cases, regulation and and engaging nongovernmental eliminate these distortions. Block tariffs enforcement at the lowest level feasible organizations to assist the poor with are generally designed to provide a low is preferable. the application process have produced lifeline tariff for a basic essential Posting the allowed on-sale tariff as good results. household consumption and to well as the tariff paid by the vendor discourage excessive use by those for bulk water will help to prevent Introduce Frequent who consume more than a basic excessive prices and make the margin Collection of Water Charges volume of water. However, such tariffs charged by the vendors transparent. If the very poor have difficulty may penalize the poor when several Allowing authorized vendors to be accumulating monthly fees, it may be households use one connection. A eligible for the same tariff as individual possible to increase the frequency of system of verifying the number of poor households may also help to reduce collection at the community level. persons or households using each the on-sale tariff. Keeping tariffs below the full cost of connection and adjusting the applicable operation and maintenance is not tariff accordingly can be introduced to Promote, desirable or effective. In fact, it may solve this problem. Assuming the basic Legitimize, reduce the utility’s incentive to collect essential consumption for a family of charges. More frequent collection of five is 10 cubic meters of water per and Finance charges may be a viable solution. month, if five families share a single Small Private For example, in the Manggahan connection, the lifeline tariff would be Floodway area of Manila, community applied to a total consumption of Service Providers representatives collect water fees from 50 cubic meters from that connection. Legitimizing and providing finance to connected residents on a daily or Such a system is best administered at small private service providers (SPSPs) weekly basis and pay the monthly bills the community level, perhaps by a can be an effective way to promote the to the utility on behalf of the residents. community association, and the expansion of acceptable services to A 15 percent surcharge is added to the number of persons should be verified unserved neighborhoods. There are tariff to cover the cost of community periodically to prevent abuse. relatively few SPSPs for water in India. Water charges may also be distorted Private operators of toilet complexes when poor people pay their water are more common. Projects to promote bills as part of their rent. Greater SPSPs often use the OBA approach. transparency can be achieved by A recent report reviews the early requiring landlords to inform tenants of experience of several World Bank- the amount of the water bill and to supported projects that promoted the justify the amount included in rent. contracting of local private operators— many of which are SPSPs.22 Similar Resale of water by vendors who have initiatives are being funded by the private connections (with or without Global Partnership on Output-Based lifeline rates) can result in excessive Aid and other donors. prices if there is little or no competition. Legitimizing the resale of water and/or 22 Triche, Thelma, Sixto Requena, and Mukami Kariuki. Op. cit. 43 of subsidizing connection Getting Started: proposals to ensure that the connections are sustainable, that charges without undermining Actions and is, that poor households are willing the financial viability of the utility. and able to pay monthly charges. Alternatively, adopt methods Resources for collecting connection charges • Legitimize and support SPSPs that eliminate the barrier The following actions to fill gaps in service to the without increasing monthly are recommended: poor communities. bills excessively. Policymakers and Project Planners Governance Bodies • Work with poor communities to and Service Providers improve collection of bills through • Make cost recovery and long-term financial sustainability a high priority. • Develop realistic financial models practices such as daily or weekly to project costs and revenues, and community collection. • Issue cost recovery and subsidy calculate the required average Advocates and guidelines to clarify concepts and tariff to achieve full cost recovery Civil Society Organizations promote standardization of methods over time. in each state (if not throughout • Carry out willingness and ability- India). Standardization of methods • Identify inefficiencies in operations to-pay studies to determine the will make it possible to compare and commercial functions and conditions under which poor performance and establish focus on improving those, which households want and can pay for benchmarks across utilities facing will result in greatest cost savings. household connections. similar conditions and will promote exchange of ideas. • Adopt lifeline rates that cover • Support communities to organize operation and maintenance costs. connection campaigns, frequent • Establish efficiency and cost collection of bills, and other • Simplify and redesign tariff recovery targets as a condition of activities that make household blocks to eliminate subsidies investment lending and grants. connections a feasible solution. for customers who are not poor • Approve tariff increases and and also extend the lifeline • Assist households that share a changes in tariff structure that are rate to those households who single connection to qualify for aimed at improving cost recovery share connections. the lifeline rate. and long-term sustainability. • Determine whether the connection • Organize communities without • Use output-based aid schemes to charge is a barrier to household access to piped services to promote connections in poor connections for poor households. appoint and negotiate with communities, but scrutinize such Evaluate the feasibility and impact vendors to ensure fair prices. Table 5: Relevant Case Studies in Accompanying Volume Case Study Topic Manila, Manggahan Floodway (Case Study 4) Network of user associations that bill and collect water tariffs within the community Uganda’s National Water and Sewerage Subsidized connection charges Corporation (Case Study 9) Bangalore Water Supply and Reduction of the cost of installing connections Sewerage Board (Case Study 10) through outsourcing 44 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Section 7 Overcome Physical and Technical Barriers India has adopted the Dublin Principles regarding the need for integrated water resources management to protect the environment, and the economic pricing of water, to ensure efficient use of water resources. Ahmedabad Municipal Corporation’s the expansion of services to the poor Obstacles electricity consumption is used for even more difficult than it is when pumping water, mainly because the resources are plentiful. Recently, in • The overexploitation and city’s water pumping system is Chennai, the government made it degradation of water resources antiquated and inefficient but also compulsory to construct rainwater affects the poor disproportionately. because Ahmedabad is located harvesting structures in every building • Physical and technical challenges close to a dry region and much of after the city faced an unprecedented make it difficult to extend formal its water must be pumped from water shortage. Two years later, the piped water supply and sewerage underground wells, an extremely groundwater levels in Chennai have networks into informal and energy-intensive process. risen substantially. unplanned settlements. India has adopted the Dublin Principles Rather than reacting to near-disasters, Inadequate attention to managing regarding the need for integrated water public authorities and utilities should water resources is leading to the resources management to protect the adopt comprehensive strategies for overexploitation and degradation environment, and the economic pricing reducing water losses. They should of water resources in India and of water, to ensure efficient use of also encourage the adoption of water exacerbates the already difficult service water resources, but further action is saving technologies and low-cost and environmental conditions in poor needed to implement these principles sanitation at the household and urban neighborhoods. One observer in their true spirit. In particular, far community level. described the situation as follows: more attention needs to be directed “In India the exploitation of toward sanitation and the safe disposal Adopt Appropriate of wastewater. groundwater has been encouraged, Technologies and but little has been done to recharge In addition to the broad problem of it. As a result, groundwater tables water resources, there are often Delivery Systems nationwide are falling. In years when specific physical and technical rains are low, this problem becomes Some appropriate technologies are challenges associated with providing an emergency. The poor who already widely used in India. Others services in poor neighborhoods. depend on dug wells (which dry that have been successfully introduced Conventional water distribution elsewhere might be adaptable to local first) are the first to suffer.�23 networks and sewerage often conditions. These include: In water scarce areas or during the dry cannot be used. This may be due season, the poor are vulnerable to to geography or geology, or to the • Connect flush latrines with septic exploitation by vendors charging lack of roadways under which pipes tanks: On-site sanitation options excessive prices. In Chennai, more can be laid. Innovative alternative are already widely used in than 13,000 tankers are mining the technologies are needed to overcome urban areas of India where it is surrounding farmlands for water. With these barriers. impractical to lay sewers and where agriculture in crisis and groundwater residential plots are large enough to levels insufficient for farming, farmers Protect Water absorb effluents. find it easier to live off the money they earn from the private water operators. Resources • Condominial sewerage systems: The unit to which service is provided In Ahmedabad, overharvesting of Government and utilities should is a group of houses, rather than groundwater has caused the city’s encourage the use of water-saving individual houses. Small bore water table to drop an average of technologies and simple but safe connection branches that run from seven feet per year in the past sanitation. Overexploitation of water the main sewer through household 20 years. About 75 percent of the resources, which is already a serious lots with a direct connection to each problem in many places, increases the house are constructed with smaller 23 Pushpendra Agarwal, 2001. cost of water supply services, making pipes and installed at shallower 46 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Box 14: Condominial Sewerage in Brasilia Between 1993 and 2001, Brasilia’s water and sewerage utility CAESB applied the condominial model on a massive scale in both low-income peri-urban neighborhoods and in more affluent areas of the capital. An estimated 188,000 condominial connections benefiting 680,000 people were installed. Sewerage treatment capacity was also increased using adapted technologies. Substantial cost savings resulted from several alternative technical practices. For example, in Santa Maria, a large neighborhood that typifies the system as a whole, the average public network length is about 2.8 meters per connection, compared with about 5.6 meters per connection for conventional systems. In addition, whereas conventional network design usually calls for a minimum pipe diameter of 150 millimeters, pipes of 100 millimeters were used for 56 percent of the system. The pipes were also laid at a minimum depth of 0.5 meters, compared to the conventional 1.0 to 1.3 meters, and simple inspection chambers were installed instead of high-cost manholes for 84 percent of the inspection points. Throughout the metropolis, the condominial branches conformed strictly to standards of pipe location, hydraulic capacity material specifications, and building regulations, but a few exceptions were made to accommodate highly localized physical conditions. Residents at the level of each condominium were allowed to choose among three location options for the branch routes: through the backyard, the front yard or under the sidewalk. Routing through the yard has the advantage of being less expensive to install, but the household is responsible for maintenance. With the more expensive option of routing under the sidewalk comes the advantage that the utility assumes responsibility for maintenance. As the cost of condominial branches (US$2.8 million) was borne by the beneficiaries, CAESB’s costs (US$1.7 million) were much lower than for conventional sewerage. However, it was estimated that consumers paid no more for the condominial branches than they would have paid for conventional connections. About 1.5 percent of households opted to install the branches themselves and consequently paid no connection charge, but were expected to pay for materials. Finally, the regular sewerage charges for households that opted for routing through the yard were discounted by 40 percent. Prior to undertaking investments, CAESB undertook a process of social intermediation. During a series of meetings, the approach was explained and each community chose an option and signed the required agreements. This process did not result in any delays in the execution of the works. In lower-income communities, especially, the mobilization efforts led to greater contact among neighbors and built social capital. The alternative technical practices have resulted in neither a higher incidence of obstructions nor a higher cost of maintenance relative to the pre-existing conventional system. Source: Melo, Jose Carlos. August 2005. The Experience of Condominial Sewerage Systems in Brazil, Case Studies from Brasilia, Salvador, and Parauapebas. World Bank. grades than conventional sewers, • Interceptors and shallow sewers: to a filter and then to a ground resulting in cost-savings. These could be an option for level storage tank from which (See Box 14.) neighborhoods with septic tanks. it is pumped by hand to an • Low-cost sewage treatment elevated tank. • Bulk sewerage: A sewerage connection is provided at the technology adapted to local • Community storage tanks: boundary of the community into conditions, using low-cost materials When service is unreliable or which the community-managed and construction techniques. intermittent, large storage tanks can internal sewerage system • Rainwater collection system: Roof be installed in poor communities to is discharged. channels divert rainwater increase the hours of availability. 47 • Bulk water supply: Water is supplied successfully argued that primary Getting Started: to a community tank to which the treatment was better than no collection community connects its internal or treatment at all but the distance rule Actions and distribution system. Consumption remained a barrier.24 Since the objective Resources is invoiced on the basis of a of the distance rule is to protect health macro-meter at the tank, which and avoid eyesores in residential The following actions are recommended: registers the consumption of the neighborhoods, it might be just as Policymakers and Project Planners entire community. effective to substitute stringent safety measures and aesthetic designs for a • Adopt flexible standards that • Relaxed standards: In Manila, permit the use of alternative private operators and community rule regarding distance. Regulation technologies and levels of service associations have installed should be flexible enough to allow in poor neighborhoods. water pipes and connections improvements. The best should not be above ground. the enemy of the good. • Enforce land-use, technical and environmental standards in • Street or block metering for water a manner that allows gradual and supply: Meters are installed at the phased improvements. end of each street or block. Billing of Governance Bodies each individual connection is based and Service Providers on average consumption. • Adopt aggressive programs to Urban land-use ordinances or technical reduce water losses. and environmental regulations may prevent or discourage the use of • Encourage the use of water-saving alternative technologies. For example, technologies and low-cost sanitation in Recife, Brazil, in the mid-1990s, an by customers. environmental policy that favored • Consider alternative technologies tertiary treatment of sewage threatened when faced with physical to block the construction of simple conditions that prevent the use of condominial sewerage systems with conventional technologies. primary treatment in urban slums. Similarly, the requirement that Advocates and wastewater treatment plants be located Civil Society Organizations a minimum of 100 meters from • Assist communities to examine residences made it difficult to build alternatives to conventional small-scale treatment plants in densely infrastructure and adopt inhabited slums. Project designers appropriate solutions. Table 6: Relevant Case Studies in Accompanying Volume Case Study Topic Lima, Peru (Case Study 16) Condominial sewerage Tegucigalpa, Honduras Study (Case Study 15) Bulk water supply Orangi Pilot Project, Karachi, Pakistan (Case Study 5) Bulk sewerage connection Manggahan Floodway Communities, Manila (Case Study 4) Street or block metering 24 Establishment of a Regulatory Framework for Water and Sewerage Services in the Municipality of Recife, Initial Diagnosis. Report submitted by Deloitte Touche Tohmatsu to the Secretary of Infrastructure and Public Services, Municipality of Recife, January 1997, Part VIII. A. Environmental Standards. 48 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Section 8 Summary of Policy Issues Improvements in the planning and delivery of services are essential to promote more efficient use of water resources, but must be complemented by an effective framework for overall water resources management. Policy Framework The JNNURM seeks to redress this by improving the quality of life of that cover at least operation and maintenance costs; (c) introduce When India’s Prime Minister Manmohan urban residents through security of improved accounting and transparency Singh launched the Jawaharlal Nehru tenure, improved housing, and in local budgets; and (d) institutionalize National Urban Renewal Mission essential services. a higher degree of community (JNNURM), on December 3, 2005, he participation in the decisionmaking The JNNURM recognizes that this will referred to the fact that in the early part processes. These are sweeping require reforms in policies, laws, of this century 50 percent of the changes and the success of the statutes, and procedures, particularly population of India will be living in cities. mission will depend on its ability to those that inhibit the functioning of land Rapid urbanization has already enlist the support of a large number of and housing markets, to align them outpaced infrastructure development partners and stakeholders. with the contemporary needs of India’s and has been accompanied by a proliferation of slums, increased cities and towns. To achieve its These guidelines recommend practical homelessness, growth in urban poverty objectives, in addition, the JNNURM tactical strategies for overcoming and crime, and an increase in pollution recognizes the importance of obstacles to improving water supply and ecological change. To date, efforts institutional reform and the need to and sanitation services for the urban to address urban problems have improve the performance of municipal poor but, in many cases, overcoming focused on the planning and government and service providers. the obstacles will require more than implementation of development It will encourage and assist city tactical strategies. It will require projects but too little attention has been governments to (a) improve property changes in policies or legislation, or paid to the people themselves. tax collection; (b) apply user charges their implementation. Even where policy reform is not essential, the proposed strategies might benefit from a more supportive policy or legal environment. A diagnosis of national, state, and municipal policy and frameworks, and how they are implemented, may be needed to determine where the gaps, overlaps, and inconsistencies exist. Some policy changes and legal amendments will undoubtedly be warranted. However, in many cases, while current policies themselves may be adequate, their implementation is weak, or they may not be understood and appreciated by the key actors. In those cases, strategies to improve the implementation of policies may be needed.25 25 This might seem like a daunting task in the Indian context but, if properly focused, it is quite feasible. A useful approach would be to establish an evaluation methodology that could be applied in all the states for the purpose of reviewing their legal frameworks and proposing revisions. Initially the approach could be piloted in one or two states and a representative number of municipalities. Once the methodology is refined it could be used by other states. Such an exercise was carried out in Mexico in 2003-04: the legal frameworks of all 31 states, the Federal District, and several major cities were reviewed. 50 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India List of Policy Issues Associated with the Proposed Strategies Some of the key policy issues that need to be addressed in the context of the proposed strategies have been identified in each of the previous sections of these Guidance Notes. These are consolidated below. Give the Poor a Voice The relevant policy reforms that would enhance the voice of the poor in planning and delivering service improvements include: • Establishing requirements for greater transparency in all aspects of service planning and delivery, and more public access to information. • Initiating policies that would Strengthen Capacity, • Formulating local policies to print promote more competition among Autonomy, and Accountability materials in local languages. small service providers. of Service Providers • Setting down requirements or • Creating policies and procedures to Legislation or de facto practices incentives for utilities to create the promote transparency and public regarding the respective roles of key institutional mechanisms to promote access to information. actors and their institutional formats better client relations and special may not clearly distinguish roles or Eliminate Administrative units to assist the poor. and Legal Barriers promote accountability. This may result • Removing barriers that prevent the in gaps or overlapping responsibilities. Lack of land tenure is one of the Regulations or their enforcement may poor from participating in elections major barriers to access to services not allow for adequate flexibility in and running for office. by poor households. Removing this technical solutions. Reforms may be Take Vested obstacle requires: needed to ensure: Interests into Account • Initiating land tenure reform. • Adopting management models that Policy reforms that would reduce • Linking service provision to promote the autonomy and opportunities for illegal activities that long-term occupancy, not accountability of service providers. inhibit reform include: land ownership. • Establishing effective tariff • Legalizing and regulating small • Streamlining or simplifying regulation, mechanisms for service providers. procedures for poor residents. monitoring service quality, and 51 incentives for service providers to • The principle of full cost recovery framework for overall water resources operate efficiently and provide for services. management. This requires national, reliable services. regional, and local solutions. In poor • Targeted subsidies for investments communities this often has to do with • Clarifying the responsibilities of and connections (but not tariff the specific local topography or states and municipalities and the subsidies) for poor households, geology and requires local adaptations elimination of any overlaps, where warranted. and solutions. Existing legislation inconsistencies, and gaps in should be evaluated to determine • Tariffs that recover all operation their roles. whether it promotes: and maintenance costs at • Adopting minimum standards that the minimum. • Coherent national, regional, and can be adapted to local conditions • Reliable sources of subsidies so local approaches to effective water and needs. that the financial viability of service resources management. providers is not compromised. Adopt Appropriate Investment • The reduction of water losses by Finance, Cost Recovery, and Overcome Physical and utilities and the adoption of Subsidy Policies Technical Barriers water-saving technologies by customers. All the recommended actions require a Improvements in the planning and supportive and rational financial delivery of services are essential to • Flexibility for environmental framework. Existing laws should be promote more efficient use of and technical standards and evaluated to determine whether they water resources, but must be management models to be adapted allow and provide for: complemented by an effective to local needs and conditions. 52 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India RESOURCES Give the Poor a Voice Eliminate Administrative and Legal Barriers Baindur, Vinay. September 5, 2005. ‘For the People, by Alfaro, Raquel. November 1997. 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Sponsored by Central Public Health and Environmental organization that promotes access to safe water, sanitation, Engineering Organization (CPHEEO), Ministry of Urban and hygiene education (www.wateraid.org) Development, Government of India. Water, Engineering, and Development Center, Pickford, John. 1995. Low-Cost Sanitation: A Survey of Loughborough University, United Kingdom Practical Experience. WEDC. (www.wedc.lboro.ac.uk) World Bank. January 2006. India Water Supply and Sanitation: Bridging the Gap between Infrastructure and Service. Background Paper, Urban Water Supply and Sanitation, pp. 18-19. 56 Guidance Notes: Improving Water Supply and Sanitation Services for the Urban Poor in India Water and Sanitation Program– South Asia World Bank 55 Lodi Estate New Delhi 110 003 India Phone: (91-11) 24690488, 24690489 Fax: (91-11) 24628250 E-mail: wspsa@worldbank.org Web site: www.wsp.org March 2009 WSP MISSION: To help the poor gain sustained access to water and sanitation services. WSP FUNDING PARTNERS: The Governments of Australia, Austria, Belgium, Canada, Denmark, France, Ireland, Luxembourg, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom, the United States of America; the United Nations Development Programme, The World Bank, and the Bill and Melinda Gates Foundation. AusAID provides WSP–SA programmatic support. AUTHORS: ACKNOWLEDGMENTS: These Guidance Notes have been authored by Thelma Triche and Arthur McIntosh. These Guidance Notes have been peer reviewed by Catherine Revels, Chris Heymans, The case studies and slum consultation and Ravikumar Joseph (WSP–SA); Anup Wadhawan (formerly with WSP–SA); documents (accompanying volume) have Glenn Pearce-Oroz, Mario Alejandro Suardi, Genevieve Connors, and Raghu Kesavan been compiled by Geeta Sharma and (World Bank); Jeremy Colin (Water Sector Specialist); and Arnab Roy (Kolkata Urban Shikha Shukla. Services to the Poor Program). Thanks are also due to P.K. Mohanty (Joint Secretary, Ministry of Housing and Urban Poverty Alleviation, Government of India) and TASK MANAGER: Alkesh Sharma (UNDP) for lending their experience and inputs to the development Geeta Sharma of this document. Editors: Meenakshi Shedde and Anjali Sen Gupta Pictures by: Arthur McIntosh, Geeta Sharma, WSP–SA, The findings, interpretations, and conclusions expressed are entirely those of the Sajid Darokhan, and WSP–LAC author and should not be attributed in any manner to The World Bank, to its affiliated Created by: Write Media organizations, or to members of its Board of Executive Directors or the companies Printed by: PS Press Services Pvt. Ltd. they represent.