Dr. Doulaye KonEawag/SandecDoulaye.Kone@eawag.ch www.sandec.ch/ Financial and Economic Aspectsof Faecal Sludge ManagementFaecal Sludge Management in Developing Countries

1Cost for whom ?5Savings + benefits of iFSM2How to make cost comparable3Costing examples4Financing mechanism6Agronomic aspectsContents

4Which financing mechanism ? Indiscriminate and illegal dumpingHealth risks and water pollutionThe challenge

All FS to designated treatment or disposal site

The challengeSeptic tanks emptied at shorter intervalsPit emptying affordable4Which financing mechanism ?

1Cost for whom ?Household:cost for pit emptying (and re-construction)Collector/hauler:Cost of vehicles and their O+M (incl. salaries)

1Cost for whom ?FSTP holder/operator:cost for treatment plant construction, O + MFarmer:Cost of organic fertilizer and organic fertilizer transport

2 How to make cost comparablee.g.: Price charged to household for pit emptyingCost shaped to allow for comparison of treatment or management systems?Financial costEconomic cost

2 How to make cost comparableCost elements:Capital (or investment) cost $Annual O + M cost $ p. yearSystems not comparableCost elements:Annualised capital cost $ p. year(~ amortization)Annual O + M cost $ p. yearSystems still not comparableCost elements:Annualised capital cost $ p. ton TSper unit FS treatedAnnual O + M cost $ p. ton TSSystems now comparable !

3Costing examples100,000 inhabitants20,000 m3/yr - 500 t TS/yr20 % uncertainty rangeComparing cost of FS treatment alternatives

_1099310717.doc

0

10

20

30

40

cost [US$/t TS]

Settling/ thickening tank

Settling ponds

Constructed wetlands

Settling pond, Buobai

Drying beds

Annualised capital cost of different FSTP

_1099311670.doc

0

10

20

30

40

cost [US$/t TS]

Settling/ thickening tank

Settling ponds

Constructed wetlands

Settling pond, Buobai

Drying beds

Annualised capital cost

_1099310873.doc

0

5

10

15

20

25

30

cost [US$/t TS]

Settling/ thickening tank

Settling ponds

Constructed wetlands

Settling pond, Buobai

Drying beds

Annual O+M cost for different FSTP

_1099311788.doc

0

5

10

15

20

25

30

cost [US$/t TS]

Settling/ thickening tank

Settling ponds

Constructed wetlands

Settling pond, Buobai

Drying beds

Annual O+M cost

_1099310528.doc

0

5

10

15

20

25

30

cost [US$/t TS]

Settling/ thickening tank

Settling ponds

Constructed wetlands

Settling pond, Buobai

Drying beds

Annual O+M cost for different FSTP

(20% uncertainty range)

20

30

40

50

60

cost [US$/t TS]

Settling/ thickening tank

Settling ponds

Constructed wetlands

Settling pond, Buobai

Drying beds

Total annual cost

3Costing examplesComparing cost of FS treatment alternativesfor Nam Dinh (2,500 m3 septage/yr ~ 50 t TS/yr)Treatment optionAConstructed wetlands

BDrying beds +

CSettling / thickening + pondsInvestment cost *O+M cost p. yearCap $ 23,200O+M 1,400

Cap24,350O+M2,010

Cap24,100O+M6,180

Land required200 m2

290 m2

245 m2

(* Note: Cost of one mini tug = $ 24,000 !)OtherBest productsO+M need lowPlant care

Polishing treatment requiredO+M high

Less pumpingorganic fertilizer volumin.O + M high

In general, funds can originate from:General tax revenuesSubsidies and transfersDirect user chargesSanctionsAdvance disposal feeIncome from sales or recyclables and recovered resourcesDonor money

Tipping feesLicense feesWhich financing mechanism?4Which financing mechanism ?

TaxesCentralized tax collection and distributionLack of transparencyWeak financial base and poor collection ratesStrong competition for budget shares User charges give the solid waste agency some autonomy by eliminating the need to compete with all other government agencies for their share of general revenue. User charges also may render the solid waste agency more directly accountable to residents for the cost and value of services that they provide. (Cointreau-Levine 1995) Which financing mechanism?4Which financing mechanism ?

Principles of tariff calculationProcess of service provision(Public) Service providerPrinciple of Cost RecoveryWhich costs should be included/considered?calculation base:provided byTotal cost4Which financing mechanism ?

Principles of cost recoveryBUT: Which costs should be included/considered in a charge or fee?AND: Which costs or which handling stages should be covered through taxes?cost componentshandling stagesOperation andMaintenance costInvestment costAppropriate Technologies to adjust overall cost to ability-to-pay!What are lessons learnt from solids waste management?Replacement cost4Which financing mechanism ?

ServiceMoney Flux Leasing Control Fees CooperationFarmersHouseholdsManualEmptiers Waste Collection(NEERE)MechanicalEmptiers (ADSI) National Water& Sanitation Office (ONEA) MunicipalityEngineering Departments DonorsAgenciesWomensCoordination NGOStakeholders analysis4Which financing mechanism ?

Secondary StakeholdersE1: Official Engineering departmentsE2: ONEAE3: NEEREE4: womens Coordination E5: Donors agenciesCE1BASecondary StakeholdersE1: Official Engineering departmentsE2: ONEAE3: NEEREE4: womens Coordination E5: Donors agenciesCE2E5BA1D1AB1B2C1 E3 E4Secondary StakeholdersE1 Engineering departmentsE2: ONEAE3: NEEREE4: Women CoordinationE5: Donors agenciesE 1InfluenceImportanceStakeholder analysis

Primary stakeholdersA1 Municipality

B1 Mechanical emptiers

B2 Manual emptiers

C1 Farmers

D1 HouseholdsD4Which financing mechanism ?

A planning tool helping to create the MARKET for a sustainable business 4Which financing mechanism ?

Financial sustainability of FS emptying service providersPerformance is largely influenced by :Trucks status (2nd-3rd hand)O&M skills and teams efficiency at workDistance to disposal sitePolice harassment4Which financing mechanism ?

Sustainability of mechanical emptying

Jeuland (2002) and Steiner (SANDEC) 2002The solution:incentives and sanctionsReversing the money flux ?Household (pit owner)FS treatment plant operatorTransport and Truck capital costAdministration, office cost, etc.O+M costCapital coststakeholdercostmoney flowLegend revenue?~30 FS delivery remuneration~15 AuthoritySubsidySanitation tax~50~45Pitemptying fee~30 Collection companyLicense charge~5 organic fertilizersale~13(~10)(based on Kumasi, Ghana, FSTP @ 200 m3/d)Based on costing data from Ghana4Which financing mechanism ?

If the dumping of FS is remunerated (Blue line), how much external money (i.e. sanitation tax) is needed to finance a treatment plant and what is the correspondent emptying fee or WTP? Money flux model for decision making (Ouahigouya)4Which financing mechanism ?

5Health savings and benefits Defining impacts and benefitsFocus on health

_1099375874.doc

Improved FS Management

Health sector

morbidity and mortality reduced

Environment

less pollution

Population

higher amenity

(less odours, emptying affordable, etc.)

Better livelihood

Saving on med. medmedical

treatment cost

Higher productivity

Water res. protected protection

Impact quantification

Monetary

valuation

of :

Monetary

valuation

of :

Monetary

valuation

of :

_1099377359.doc

Improved FS Management

Health sector

morbidity and mortality reduced

Environment

less pollution

Population

higher amenity

(less odours, emptying affordable, etc.)

Better livelihood

Saving on med. medmedical

treatment cost

Higher productivity

Water res. protected

Impact quantification

Monetary

valuation

Monetary

valuation

Monetary

valuation

_1099377448.doc

Improved FS Management

Health sector

morbidity and mortality reduced

Environment

less pollution

Population

higher amenity

(less odours, emptying affordable, etc.)

Better livelihood

Saving on med. medmedical

treatment cost

Higher productivity

Water res. protected

Impact quantification

Monetary

valuation

Monetary

valuation

Monetary

valuation

_1099377505.doc

Improved FS Management

Health sector

morbidity and mortality reduced

Environment

less pollution

Population

higher amenity

(less odours, emptying affordable, etc.)

Better livelihood

Saving on med. medmedical

treatment cost

Higher productivity

Water res. protected

Impact quantification

Monetary

valuation

Monetary

valuation

Monetary

valuation

_1099376353.doc

Improved FS Management

Health sector

morbidity and mortality reduced

Environment

less pollution

Population

higher amenity

(less odours, emptying affordable, etc.)

Better livelihood

Saving on med. medmedical

treatment cost

Higher productivity

Water res. protected

Impact quantification

Monetary

valuation

Monetary

valuation

Monetary

valuation

_1099373941.doc

Improved FS Management

Health sector

morbidity and mortality reduced of excreta-rel. infections

Environment

less groundwater and

surface water

contamination

Population

higher amenity

(less odours, emptying affordable, etc.)

Better

quality

of life

Saving on medical

treatment cost

Higher

productivity

due to less illness

Environment protection

savings

Impact quantification

Monetary

valuation

of :

Monetary

valuation

of :

Monetary

valuation

of :

_1099374649.doc

Improved FS Management

Health sector

morbidity and mortality reduced

Environment

less pollution

Population

higher amenity

(less odours, emptying affordable, etc.)

Better livelihood

Saving on med. medmedical

treatment cost

Higher productivity

Environmental protected protection

Impact quantification

Monetary

valuation

of :

Monetary

valuation

of :

Monetary

valuation

of :

_1099373829.doc

Intervention

Improved FSM

Health sector

morbidity and mortality

reduction of excreta-

related diseases

Environment

less groundwater and

surface water

contamination

Population

higher amenity

(less odours, affordable

emptying, etc.)

Better

quality

of life

Saving on medical

treatment cost

Higher

productivity

due to less illness

Environment protection

savings

Impact quantification

Monetary

valuation

of :

Monetary

valuation

of :

Monetary

valuation

of :

5Health savings and benefits UncertaintiesHow much does i - FSM reduce diarrhoea incidence ?How to value gained productivity ?Reliability of input data (e.g. cost of 1 diarrhoea case) ?Are there additional important cost and benefits ?

5Health savings and benefits Estimating impact and benefits from reduced diarrhoea incidenceAssumption:improved FSM (i-FSM) 3 % reduction of morbidity from diarrhoeaSavings and benefits in $ / ton TS

Type of benefit

AFRO-D (Ghana)

SEARO-B (Thailand)

AMRO-B (Argentina)

Averted health treatment cost

67

65

98

Gained days from less illness (productivity gain)

36

56

83

Averted fatalities (productivity gain)

52

17

19

Sum of benefits

155

138

199

5Health savings and benefits Benefit-cost ratioBenefits and cost in $ p. ton TS:GhanaThailandArgentinaSettling + stab. pondsConstr. wetlands + stabilization pondsSettling ponds + co-treatment with wastewater in pondsFS treatm. cost439259

Haulage cost283838Disposal373737Total cost 108167134Total benefit155138199Benefit-cost1.40.81.5

6Agronomic aspects Ability and willingness-to-pay for the hygienically safe organic fertilizerWhere and in what form do the farmers want to buy the organic fertilizer ?How much would the organic fertilizer cost ?Where can I buy organic fertilizer ?Main questionsWhat is the agronomic value of the organic fertilizer ?

6Agronomic aspects Nam Dinh study (2001):-Farmers indicating that they do need organic fertilizer-Organic fertilizer from FS and org. MSW accepted-WTP depends on potential agron. benefit and distance to sales outlet-Tentative WTP max. 15,000 VND (~ $ 1) / 50 kgWillingness-to-pay (WTP)Kumasi (Ghana) study (2001-02):-Peri-urban veg. farmers wtp $ 3.0 / bag of 50 kg or $ 84 p. year-Urban staple crop farmer wtp $ 2.0 /bag of 50 kg or $ 10 p. year

6Agronomic aspects Nam Dinh study (2001):-Preferred: sale of organic fertilizer in 50 kg bags at coop outletsAgron. value: % of dry solid (recent field studies):-N:Ghana 0.5 Argentina 1.0 Thailand 3.0-P2O5. 0.6 0.4 1.2-Org. matter: 23 27 60Willingness-to-pay (WTP)

Dr Doulaye Kon

Eawag/Sandec Switzerlandwww.sandec.chDoulaye.kone@eawag.chTel.+41 44 823 55 53Photo: toiletmuseum.com/techno.htmlThanks !