charging for sewerage services-a practical perspective

8/11/2019 Charging for Sewerage Services-A Practical Perspective

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Charging for sewerage

–perspective

Prof. Ir. Mohd. Haniffa Abdul HamidIr Dorai Narayana

Indah Water Konsortium Kuala Lumpur

[email protected]



People think

mobile phonesprovide bettervalue than toilets !



When nature called ………..

……. they just did it!



Septic tank

Surface water

pollution

Sludge

management

Piped

sewerage

The drivers..

Opendefecation

Diseases

Privacy

Dignity

Bucket

latrinePour flush

latrine

Pit latrine

Aesthetics

Nuisance

Ground water

pollution



SANITATION SEWERAGE

LatrinesSeptic

Pipedsewerage

Centralisedsystems

Open

defaecatin

tanks

The user’sperspective of value



SEP!" AN#S

All owner wants if for the sludge to $eemptied 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 generallynot interested what

Raw sewage outfall

Users justwant a toilet

that works

And aneighbourhood free

of sewage overflows

.

Centralised sewage treatment



Users do not want thishappening in their homes ….

They also do not wantthis near their homes

– they are willing topay to avoid this



En!irnmental "enefitBenefits

DIRECTDIRECTDIRECTDIRECT

BENEFIT TOBENEFIT TOBENEFIT TOBENEFIT TO

USERUSERUSERUSER

BENEFIT TOBENEFIT TOBENEFIT TOBENEFIT TO

ENVIRONMENTENVIRONMENTENVIRONMENTENVIRONMENT

Sanitation: AddressPublic Health

Piped off-sitesystems: Address

Pollution, communityconcerns

Centralised & Advanced systems:

AddressEnvironment

On sitesystems



In Malaysia:1994: Federalisation & Privatisation

• Formed in 1995 , as a National Sewerage Concessionaire inMalaysia

• Operate sewerage services over most of Peninsular Malaysia

• Operation Maintenance of sewage treatment plants !S"Ps# andsewer 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 CP/0

– Some local aut(orities c(arged -C c(arge.

– 2esludging c(arges were minimal !estimated less t(at 13 desludged#

• Privatisation Concession

– idespread resistance to direct c(arges – 4r 666 ) 78 acuired 'y +overnment

– CP/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 revenue1.60 XCost *

0.8 XCollections

XRevenue

RMItem



2emand vs SupplyS#pply side$

• 7nvestments are wasted 'ecause intended consumers simply ignore t(e resulting systems>

– ccra, +(ana, after 6 years, only 1?6 connections to a sewerage system designed for

,666 connections@

– :owra(, 7ndia, no one was connected to a sewerage system 'uilt for wor$ers@

– MaAan, Bordan, t(ere (ave 'een only 96 connections to a system designed for ,666connections@

– ddis 'a'a, /t(iopia, after 16 years, only 16 percent connections made to t(e new

sewerage system>

– 7n Mala sia D centralised sewera e ro ects in a num'er of areas (ave low connection

rates%emand side$

• Middleincome (ouse(olds in Manila !P(ilippines# and Ba$arta !7ndonesia#, facing an

inadeuate 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 groundwaterpollution>

• (ile selfprovision (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%

Sewage s'ste1 2uilt in the )*34s

co/ered 1ost of cit'

!aw sewage discharged to sea

causing 1assi/e ollution and

e'esore

5ew STP 2uilt at cost of 6 !M+44 1ill

7erating costs ju1ed

!esidents in 0eorgetown

generall' ercei/ed no change

(elutong coastline transfor1ed



SEWERAGEI'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 2ie o in

TI+,ANA - SAN %IEGO&

'E.ICO- ,SA

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 atlarge.

• Public goods: benefits to the public at large;• Wastewater collection and treatment, has components of both publicand private good. Most countries recognize that wastewater treatmentprovides a substantial public good, and national budget funds subsidizea eas a par o oca was ewa er rea men .

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 asdirectly benefiting the system users. Treatment of the waste tends to beseen as benefiting downstream users and is often treated as a widerpublic good.



POLLUTERS PAY VS BENEFICIARIES PAY- SOME THOUGHTS ON SEWERAGE COSTS RECOVERY

• Sanitation (addressing basic public health) evolving to Seweragemanagement (providing a better neighbourhood, safeguarding waterresources 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 orsubstantially covered from general tax, with minimal direct charges on

.

• As private sector got involved, tendency is to look at “full costrecovery”, usually from the user.•The individual user is interested for the wastes to be removed out ofsight.

•Sophisticated treatment of the wastewater to produce high qualityeffluent is necessary to protect the water resources and preserve theenvironment.•This benefits to the Nation – increased availability of water resources

for drinking, irrigation, aquaculture, tourism related activities and abetter environment contributing to the quality of life of the people.



FULL COST RECOVERY : FROM BENEFICIARIES

- HOW DO THEY BENEFIT?

J astes removed from premises

J Clean neig('or(ood<ser

J /n(anced property value

J Pleasant living environmentCommunity

J <npolluted water for drin$ing andeconomic useater resources

J "ourismJ /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 providingon-site facilities, including on-site sewer connections

Residents of a city collectively pay theadditional cost incurred in conveying ,

treating & disposing the sewage.

es en s o a oca y co ec ve y pay e

additional cost incurred in collecting wastesfrom individual houses and transportingthese to the boundary of the neighbourhood



19;6As <S+ovt

Construction

+rantsProgram tostates for

wastewatertreatment

19K1@Su'seuenlty

19K; ) Cleanater ct!C# L1K

'illionrevolving fund

,NITE% STATES

p ant

construction>

19;5) "(efederal s(are

of proEectcosts was

initially ;53

re uce to

553

<pto 19K5total amount

of <S L1'illion

allocated>

oans to

States>



4,878

4,000

5,000

6,000

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

2,44 2

3,065, ,

2,921

2,4332,152 2,11 0

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

National expenses for sewerage ≒ Subsidized expenses ×50%

Total expenses for

sewerage constructionSubsidized

expenses



+APAN



Setting of ppropriate Sustaina'le Sewerage C(arges

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-

GRANT2

F<N27N+

enefits

7nvestment

)enefits t C#stmers

)enefits t Cmm#nity&

En!irnment

P u ' l i c

: e a l t (

C u m m u n

i t y

c o n c e r n s

/ n v i r o n m e n t

,SER CO'',NIT1 EN(IRON'ENT

SEWERAGE *ACILTIES

3 SER(ICES

O M &

CP/0

Possi'ility of (ig(ercost recovery from

tariff alone

"ariff "a% for

sustaina'ility



S,GGESTE% APPROAC4 *OR CAPE. AN% OPE. APPORTION'ENT

CAPEX items havingdirect impact oncustomers to be directly

• OPEX recovery from tariff/ tax initially• Gradually increasing tariff portion with increased

awareness and willingness to pay• Eventually resource recovery (water reuse, energy,

nutrients ma contribute si nificant ortion of

CP/0

PPOG"7ONM/N"

OP/0

PPOG"7ONM/N"

56

recovere roug ar .

Balance to be fundedfrom Govt. tax revenue.

revenue

;63

?63

563 563

+eneral ta% "ariff Gesource recovery revenue

63 63

563

?6363



*E%ERAL GO(ERN'ENTGeneral ta7

T#rism ta7

En!irnment ta7

STATE GO(ERN'ENTSLand ta7

Raw Water ta7

LOCAL GO(ERN'ENTSPrperty 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, so0isti'ated se*era/e syste,sare t0e 'o,,(nity. lo'al environ,ent and'o,,er'ial and ind(strial enterrises in'l(din/to(ris,

• Aroriate t0at t0e (ser is only '0ar/ed -or t0e+ene-it 0e derives. *0ile t0e ot0er +ene-i'iariesay to ,ae ( t0e re,ainin/ 'osts t0ro(/0di--erent ta2 ,e'0anis,s

• #ver ti,e. as environ,ental a*areness /ro*s. alar/er er'enta/e o- t0e 'osts ,ay +e +orne +yt0e (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 tariffsetting through policies in countries where appropriate.

charging for sewerage services-a practical perspective

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