ADB Putting Pressure on GoN to Raise Water Tariff

(Courtesy: Ratna Sansar Shrestha)

The vernacular daily “Kantipur” has reported on 5th January 2009 that ADB has written to GoN re tariff increase being pre-condition for ADB’s support for Melamchi Diversion Tunnel (MDT), (by a letter dated 28th December). In other words ADB is holding the construction works of MDT to ransom to fulfill its covenant related to tariff increase. It is unbelievable as the story sounds outrageous. Therefore, I am unable to believe that an institution like ADB will be part of anything as such (bullying tactic).

Moreover, it has been reported that someone in ADB has been going around claiming that the Water Supply Tariff Fixation Commission exists because of ADB and if that is true then it is more unlikely that ADB would write such a letter because this action both undermines and impairs the independence of the Commission as the decision regarding tariff is in the purview of the Commission and pressurizing GoN for the purpose doesn’t make sense.

Let’s look at it from another perspective. Multilaterals in Nepal have been recommending and implementing “foreign management” as the best panacea for improvement of public enterprises which languish due to political (and otherwise) interference and for such institutions being unable to function independently and autonomously. In this backdrop it is unthinkable that ADB will take any deliberate action as such to undermine and impair the independence and autonomy of the Commission. Therefore, I hope that the news-story is a fig of imagination of the reporter.

The reporter further goes on to portray the two of the three members of the commission as anti-Melamchi. I am sure that ADB didn’t feed this to the reporter. I have no information about the involvement of the other two members in the debate related to Melamchi. However, this scribe has been actively campaigning to solve the water supply problem of Kathmandu valley for the longer term (2 m3/s of water will not be adequate by the time this project will be completed and the rampant scarcity will persist and as it took 30 years, hopefully, to take off the first stage, it will take quite a while for the second and third stage to leave the drawing board) and also resolve electricity crisis to an extent by generating hydropower (no financial obligation on GoN and ADB for the purpose) by using the same tunnel for multipurpose Melamchi which will also benefit farmers in Terai as water in the dry season will become available to irrigate 30,000 ha in Terai without any additional investment. Moreover, with about 1 billion liters of water flowing even during the dry season in the Bagmati River (it couldn’t be called a river now as it is full of sewage) this river will have a new lease of life. This definitely doesn’t make me anti-Melamchi.

Although the experiment of the World Bank with foreign management in two prominent banks, in the name of financial sector reform, has failed very badly (after spending Rs 7 billion and 6 years), at the insistence of ADB the water utility management of Kathmandu valley has been entrusted to a foreign management team. In a period of less than a year, the new management has submitted 3 (one informal and 2 formal) proposals for the escalation of water tariff to the Commission. As ADB’s name has been linked with the water tariff increase it is worthwhile to look at the issue a little closely.

Nobody in the right mind will disagree that any enterprise, including a utility, needs to be operated sustainably. However, as water supply is an essential service and it touches upon the lives of the poor and deprived segment of the society, a utility as such should not be too focused on tariff increase in isolation as long as there are other ways of achieving the sustainability. In other words, increase of tariff should be resorted to only after all avenues for sustainable operation of the utility have been exhausted. In this respect the utility is in a position to implement various measures to operate it economically, efficiently and effectively before resorting to tariff increase.

Besides, the only ground cited for tariff increase is the inflation over last 4 years. However, the utility is ignoring the increase in its consumers by 15% over the same period due to which the consumers have been effectively forced to pay at a higher rate (pay same amount for dwindling volume of water) as the volume of water supplied by it has not changed since 2004.

I am sure everyone will agree that a tariff increase is like a bitter pill which needs to be sweetened by improving the services of the utility. Otherwise, the consumers could rise against the measure thus deteriorating the law and order situation already standing at the precipice.

Therefore, it makes no sense to take up the issue of tariff increase in isolation and stake the reputation of an institution like ADB.