Water Utilities Weather Triple Crisis Impact

Up until 2008, water utilities in developing countries  have been able to deal with the outfall of the global food, fuel and financial crises, according to a new report released by the World Bank and the World Bank-administered Water and Sanitation Program (WSP).

The International Benchmarking Network for Water and Sanitation Utilities(IBNET) Blue Book is the first published benchmarking of data collected over the past decade from 3,000 utilities in more than 100 countries that helps water utilities and governments improve services for all, including the poor.

“The IBNET Blue Book summarizes more than a decade’s effort of the World Bank and WSP to set and encourage the use of performance assessment standards for water utilities in developing countries,” said WSP Senior Water and Sanitation Specialist and coauthor Alexander Danilenko. 

The report also showed that utilities demonstrating openness and transparency by participating in the voluntary data collection performed by IBNET made significant progress towards sustainability over time.

“Up until the impacts of the fuel crisis were felt, the ability of utilities to cover at least their basic operation and maintenance costs was improving,” said World Bank Lead Water and Sanitation Specialist and coauthor Caroline van den Berg. “Indicators of staff productivity and revenue collection periods also showed improvements. Service tariffs are also on the rise, indicating an improved ability to recover costs.”

“Although utilities are becoming more sustainable, their ability to extend new water and sewerage coverage tends to be more dictated availability of public funding than internal cash generation in utilities,” said Danilenko.

An important element of subsidies in the sector are so-called cross-subsidies, whereby one group of customers is paying higher than average tariffs which is then used to subsidize another group of customers, mostly residential customers. The IBNET Blue Book shows there is a direct relationship between the level of cross-subsidies and the proportion of non-residential water consumption in total water consumption. The higher the levels of cross-subsidies, the higher the proportion of residential, and the lower the proportion of non-residential water consumption in total water consumption. Yet, high levels of non-residential water consumption do not automatically translate into more revenues per cubic meter sold, and hence there seems to be an optimal level of cross-subsidies where a relatively modest level of cross-subsidies (between 1 and 2) optimizes the average revenues per cubic meter of water sold.

However, subsidies are not an easy solution to improve affordability. As was shown in a report by Kristin Komives, Vivien Foster, and Jonathan Halpern (Water, Electricity and the Poor: Who Benefits from Utility Subsidies? World Bank, Washington D.C., 2005) subsidies tend to be regressive, trending differently between countries. Interestingly, in almost all regions for which data are available, users that depend on smaller quantities of water pay significantly more per cubic meter than larger quantity consumers do. This is partly the result of tariff structures that tend to have high fixed costs, which disproportionally affect those consumers of small quantities of water. Another striking feature is the high tariffs being paid in Africa, especially as service levels tend to be relatively low there.

During the launch of the Blue Book held Wednesday, January 12, 2011, in Washington, DC, the authors gave an overview of the performance of water and sewerage utilities around the world between 2000 and 2008.

“The information provided in the IBNET database has already proven useful in several countries, including India, where officials have already begun to roll out service level benchmarking to over 1600 municipalities,” Danilenko said.  “In Albania, the IBNET testing resulted in the development of professional benchmarking systems, which have been used by the Ministry of Water to develop universal water improvement programs.”

The IBNET Blue Book is available as an online ebook or PDF. Hard copies may be purchased online or at the World Bank’s Infoshop retail bookstore in Washington, DC. To learn more about IBNET and to access the IBNET database, please visit www.ib-net.org.



Related links:

www.worldbank.org/water or www.wsp.org

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