Charging for sewerage

services a practical services a practical

perspective
Prof. Ir. Mohd. Haniffa Abdul Hamid
Ir Dorai Narayana
Indah Water Konsortium
Kuala Lumpur
dorain@iwk.com.my
People think
mobile phones
provide better
value than toilets !
When nature called ..
. they just did it!
Septic tank
Surface water
pollution
Sludge
management
Piped
sewerage
The drivers..
Open
defecation
Diseases
Privacy
Dignity
Bucket
latrine
Pour flush
latrine
Pit latrine
Aesthetics
Nuisance
Ground water
pollution
SANITATION SEWERAGE
Latrines
Septic
tanks
Piped
sewerage
Centralised
systems
Open
defaecatin
tanks
The users
perspective of value
SEP!" AN#S
All owner wants if for the sludge to $e
emptied and taken away% Safety&
spills& safe treatment ' disposal are
not his concern%
Owner is happy as long as he can use
his toilet% (e may $e unaware of the
septic tank% Effluent could very well
$e polluting the drains ' rivers%
)hen owner faces pro$lems of
overflow or other symptoms& he
re*uests emptying%
SE)E+ED S,SE-
They are generally
not interested what
happens after that.
Raw sewage outfall
Users just
want a toilet
that works
And a
neighbourhood free
of sewage overflows
happens after that.
Centralised sewage treatment
Users do not want this
happening in their homes .
They also do not want
this near their homes
they are willing to
pay to avoid this
En!irnmental "enefit
Benefits
DIRECT DIRECT DIRECT DIRECT
BENEFIT TO BENEFIT TO BENEFIT TO BENEFIT TO
USER USER USER USER
BENEFIT TO BENEFIT TO BENEFIT TO BENEFIT TO
ENVIRONMENT ENVIRONMENT ENVIRONMENT ENVIRONMENT
Sanitation: Address
Public Health
Piped off-site
systems: Address
Pollution, community
concerns
Centralised &
Advanced systems:
Address
Environment
On site
systems
USER USER USER USER
In Malaysia:
1994: Federalisation & Privatisation
Formed in 1995 , as a National Sewerage Concessionaire in
Malaysia
Operate sewerage services over most of Peninsular Malaysia
Operation Maintenance of sewage treatment plants !S"Ps# and
sewer networ$
Septic tan$ desludging and sludge management
Malaysian conte%t
Sanitation & sewerage 'y local aut(orities)
no direct c(arging for sewerage in most areas
*ocal +overnment ,ct allowed Sewerage Surc(arge as part of property
c(arges -frontage. c(arges to cover part of C,P/0
Some local aut(orities c(arged -1C c(arge.
2esludging c(arges were minimal !estimated less t(at 13 desludged#
Privatisation Concession Privatisation Concession
1idespread resistance to direct c(arges
4r 5666 ) 718 ac9uired 'y +overnment
C,P/0 responsi'ility assumed 'y +overnment
:ig( percentage of refusal for desludging services !up to ;63#
<nwillingness to pay
Stagnant tariff
Customers perceive -no service.
= Current costs> "rue costs may 'e up to dou'le t(e revenue
1.60 X
Cost *
0.8 X Collections
X Revenue
RM Item
2emand vs Supply
S#pply side$
7nvestments are wasted 'ecause intended consumers simply ignore t(e resulting systems>
,ccra, +(ana, after 56 years, only 1?6 connections to a sewerage system designed for
5,666 connections@
:owra(, 7ndia, no one was connected to a sewerage system 'uilt for wor$ers@
MaAan, Bordan, t(ere (ave 'een only C96 connections to a system designed for C,666
connections@
,ddis ,'a'a, /t(iopia, after 16 years, only 16 percent connections made to t(e new
sewerage system>
7n Malaysia D centralised sewerage proEects in a num'er of areas (ave low connection 7n Malaysia D centralised sewerage proEects in a num'er of areas (ave low connection
rates
%emand side$
MiddleFincome (ouse(olds in Manila !P(ilippines# and Ba$arta !7ndonesia#, facing an
inade9uate supply of pu'lic sewers, put in t(eir own septic tan$s>
Overflows from septic tan$s (ave polluted t(e waterways in 'ot( cities> 7n Ba$arta, w(ere
many industries rely on groundwater supply, t(ere is an increasing ris$ of groundwater
pollution>
1(ile selfFprovision (as addressed private sanitation needs, it (as also created costly
environmental pollution>
Sources:
The World Bank, Manila Second Sewerage Project, Draft Staff Araisal !eort "Washington, D#$%
&ija' (agannathan, World Bank, )**+% and ,-.-&- Do/lo, Managing Director, 0hana Water and Sewerage #ororation
GEORGETOWN&
PENANG ISLAN%
F Sewage s'ste1 2uilt in the )*34s
co/ered 1ost of cit'
F !aw sewage discharged to sea
causing 1assi/e ollution and
e'esore
F 5ew STP 2uilt at cost of 6 !M F 5ew STP 2uilt at cost of 6 !M
+44 1ill
F7erating costs ju1ed
F!esidents in 0eorgetown
generall' ercei/ed no change
F(elutong coastline transfor1ed
SEWERAGE SEWERAGE
I'PRO(E'ENT
)ENE*IT
"iEuana Giver Halley is on t(e
'order of Me%ico, sout( of San
2iego, <S,>
"iEuana Giver polluted 'y
sewage flows from "iEuana,
Me%ico>
Pollution affected San 2iego in
TI+,ANA - SAN %IEGO&
'E.ICO- ,SA
Pollution affected San 2iego in
t(e <nited States>
<S Congress aut(oriIed funds
to construct treatment facility in
t(e valley, to treat sewage from
"iEuana
Wastewater Service as a Public vs. Private
Goods
Private goods: benefits mainly to individuals and not to the public at
large.
Public goods: benefits to the public at large;
Wastewater collection and treatment, has components of both public
and private good. Most countries recognize that wastewater treatment
provides a substantial public good, and national budget funds subsidize
at least a part of local wastewater treatment. at least a part of local wastewater treatment.
Lack of Demand for Wastewater Services
Users are reluctant to pay because they often differentiate between
waste collection and waste treatment, with waste collection seen as
directly benefiting the system users. Treatment of the waste tends to be
seen as benefiting downstream users and is often treated as a wider
public good.
POLLUTERS PAY VS BENEFICIARIES PAY
- SOME THOUGHTS ON SEWERAGE COSTS RECOVERY
Sanitation (addressing basic public health) evolving to Sewerage
management (providing a better neighbourhood, safeguarding water
resources and preserving the environment)
Sewerage management deals with community goods. There has
always been reluctance among people to pay for such services.
While these were Government services, costs were fully or
substantially covered from general tax, with minimal direct charges on
user. user.
As private sector got involved, tendency is to look at full cost
recovery, usually from the user.
The individual user is interested for the wastes to be removed out of
sight.
Sophisticated treatment of the wastewater to produce high quality
effluent is necessary to protect the water resources and preserve the
environment.
This benefits to the Nation increased availability of water resources
for drinking, irrigation, aquaculture, tourism related activities and a
better environment contributing to the quality of life of the people.
FULL COST RECOVERY : FROM BENEFICIARIES
- HOW DO THEY BENEFIT?
J 1astes removed from premises
J Clean neig('or(ood
<ser
J /n(anced property value
J Pleasant living environment
Community
J <npolluted water for drin$ing and
economic use
1ater resources
J "ourism
J /n(anced wor$force productivity
/conomy
Wrld )ank/s Strategic Sanitatin Apprac0$
(i) preferences of users
(ii) unbundling sanitation services
Households pay the bulk of the cost incurred in providing
on-site facilities, including on-site sewer connections
Residents of a locality collectively pay the
Residents of a city collectively pay the
additional cost incurred in conveying ,
treating & disposing the sewage.
Residents of a locality collectively pay the
additional cost incurred in collecting wastes
from individual houses and transporting
these to the boundary of the neighbourhood
19;6As F <S
+ovt
Construction
+rants
Program to
states for
wastewater
treatment
plant
19K1@
Su'se9uenlty
reduced to
19K; ) Clean
1ater ,ct
!C1,# L1K
'illion
revolving fund
loans to
,NITE% STATES
plant
construction>
19;5) "(e
federal s(are
of proEect
costs was
initially ;53
reduced to
553
<pto 19K5
total amount
of <S LM1
'illion
allocated>
loans to
States>
3,379
4,878
3,409
3,149
4,000
5,000
6,000
B
i
l
l
i
o
n

y
e
n
Trend in finance of sewerage construction
general account budget 82,909 billion yen
expenditure for public works 6,947 billion yen
national expenses for sewerage 696 billion yen
+APAN
2,442
3,065
3,379
3,409
2,921
2,433
2,152
2,110
833 1,129 1,099 1,246 1,781 1,262 1,067 890 735 696
3,149
0
1,000
2,000
3,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
B
i
l
l
i
o
n

y
e
n
National expenses for sewerage Subsidized expenses 50%
Total expenses for
sewerage construction
Subsidized
expenses
+APAN
Setting of ,ppropriate Sustaina'le Sewerage C(arges
F Present 8W. Model
Present tariff model poses a pro'lem in relation to t(e
'enefits to customers as against community
,s investment sop(istication of sewerage assets
increases, t(e community 'enefits more t(an t(e direct
customers
:ence increasing tariff to cover t(e cost of
infrastructure improvements is seen as -not fair. to t(e
direct customers
C,STO'ER (IA
TARI**
GO(ERN'ENT
(IA S,)SI%1-
GRANT
2
F<N27N+
Nenefits
7nvestment
)enefits t C#stmers
)enefits t Cmm#nity&
En!irnment
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,SER CO'',NIT1 EN(IRON'ENT
SEWERAGE *ACILTIES
3 SER(ICES
O M &
C,P/0
Possi'ility of (ig(er
cost recovery from
tariff alone
"ariff O "a% for
sustaina'ility
S,GGESTE% APPROAC4 *OR CAPE. AN% OPE. APPORTION'ENT
CAPEX items having
direct impact on
customers to be directly
recovered through tariff.
OPEX recovery from tariff/ tax initially
Gradually increasing tariff portion with increased
awareness and willingness to pay
Eventually resource recovery (water reuse, energy,
nutrients ) may contribute significant portion of
C,P/0
,PPOG"7ONM/N"
OP/0
,PPOG"7ONM/N"
56
recovered through tariff.
Balance to be funded
from Govt. tax revenue.
nutrients ) may contribute significant portion of
revenue
;63
?63
563 563
+eneral ta% "ariff Gesource recovery revenue
C63 M63
563
?63
563
*E%ERAL GO(ERN'ENT
General ta7
T#rism ta7
En!irnment ta7
STATE GO(ERN'ENTS
Land ta7
Raw Water ta7 Raw Water ta7
LOCAL GO(ERN'ENTS
Prperty ta7
EQUITABLE CHA!I"! F# $E%EA!E
Consider &er'eived val(e to (ser ) *astes to +e
re,oved -ro, &re,ises. and o(t o- si/0t
Bene-i'iaries -ro, so&0isti'ated se*era/e syste,s
are t0e 'o,,(nity. lo'al environ,ent and
'o,,er'ial and ind(strial enter&rises in'l(din/
to(ris,
A&&ro&riate t0at t0e (ser is only '0ar/ed -or t0e A&&ro&riate t0at t0e (ser is only '0ar/ed -or t0e
+ene-it 0e derives. *0ile t0e ot0er +ene-i'iaries
&ay to ,a1e (& t0e re,ainin/ 'osts t0ro(/0
di--erent ta2 ,e'0anis,s
#ver ti,e. as environ,ental a*areness /ro*s. a
lar/er &er'enta/e o- t0e 'osts ,ay +e +orne +y
t0e (ser
eso(r'e re'overy is a &otential reven(e so(r'e
*0i'0 ,ay event(ally enter t0e e3(ation
Note: the views expressed in this paper are those of the authors and not necessarily of
IWK. It is hoped that these considerations can form the basis of sanitation / sewerage tariff
setting through policies in countries where appropriate.