Nepal water supply and sanitation sector issues paper

Report No. 11479-NEP CON"D M IML NEPAL WATER SUPPLY AND SANITATION SECTOR ISSUES PAPER February 18, 1993 South Asia Country Department 1 Energy and Infrastructure Operation Division FOR OFFICIAL USE ONLY FILE COPY CONFIDENTIAL: Report No.:11479-NEP Type: (SEC) Title: WATER SUPPLY AND SANITATION SE' Author: LEGRAIN, X. Ext.:82568 Room:E-9007 Dept.:SA1EI Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Acronyms and Abbreviations ADB Asian Development Bank ARIC Administrative Reform Implementation Committee CHRDU Central Human Resources Development Unit CP Community Participation DDC District Development Committee DTO District Technical Office DWSO District Water Supply Officer DWSS Department of Water Supply and Sewerage FINNIDA Finnish International Development Agency GKDMPS Greater Kathmandu Drainage Master Plan Study HMG His Majesty's Government of Nepal HRD Human Resource Development IDA International Development Association INGO International Non-Government Organization KAP Knowledge, Attitudes and Practices M&E Monitoring and Evaluation MEC Ministry of Education and Culture MHPP Ministry of Housing and Physical Planning MLD Ministry of Local Development MOF Ministry of Finance MOH Ministry of Health NGO Non-government Organization NPC National Planning Commission NWSC Nepal Water Supply Corporation ODA Overseas Development Administration (United Kingdom) O&M Operations and Maintenance RWSG-SA Regional Water and Sanitation Group - South Asia (UNDP/World Bank Water and Sanitation Program) RWSS Rural Water Supply and Sanitation SRDP Sector Review and Development Plan 1991-2000 (HMG, MHPP 1991) SSNCC Social Services National Coordinating Council SWMRMC Solid Waste Management and Resource Mobilization Center TDFB Town Development Fund Board UAFW Unaccounted for Water UNCHS United Nations Center for Human Settlements (Habitat) UNDP United Nations Development Program UNICEF United Nations Children's Emergency Fund UUC Urban Utility Consultants UWSSRP Urban Water Supply and Sanitation Rehabilitation Project (Fourth IDA-financed project to support NWSC) VDC Village Development Committee WHO World Health Organization WRA Water Resources Act 1992 WSS Water Supply and Sanitation Currency Equivalents 1 US$ - 29.3 Nepal Rupees (1990) 1 Nepal Rupee - 0.034 US$ 1 US$ - 30.9 Nepal Rupees (1991) 1 Nepal Rupee - 0.032 US$ 1 US$ - 42.8 Nepal Rupees (1992) 1 Nepal Rupee - 0.023 US$ NEPAL: WATER SUPPLY AND SANITATION SECTOR ISSUES PAPEX TABLE OF CONTENTS Acronyms and Abbreviations Summary and Conclusions Sector Policy Matrix Pag~e A. BACKGROUND.......................................................... 1 1. Objectives of the Paper ......................................... 1 2. Sector Background and Government Sector Strategy................ 2 3. Donor Intervention in the Sector................................ 3 B. SECTOR OBJECTIVES................................................... 4 C. SECTOR PERFORMANCE.................................................. 7 1. Performance in Achieving Overall Objectives..................... 7 2. Adequacy of Water Supplies...................................... 8 3. Environmental Improvements and Sanitation....................... 10 4. Government Performance.......................................... 12 5. IDA Performance................................................. 14 D. INSTITUTIONAL ISSUES................................................ 15 1. General......................................................... 15 2. Central Functions ............................................... 16 3. Urban Sector.................................................... 22 Background.................................................... 22 Objectives and Options for Urban Water Supply................. 24 Strategies and Actions........................................ 26 4. Rural Sector .................................................... 30 Background.................................................... 30 RWSS Institutional Objectives................................. 32 RWSS Planning................................................. 32 Central Department Roles in RWSS.............................. 33 Community-Based Approaches.................................... 34 Rural Water Supply Fund....................................... 36 Summary of Actions for RWSS................................... 37 5. Private Sector.................................................. 38 Page E. FINANCIAL AND RESOURCE MOBILIZATION ISSUES.......................... 39 1. General......................................................... 39 2. Sustainability.................................................. 41 3. Efficiency of Design and Use.................................... 41 Price and Value............................................... 42 Responsiveness of Demand to Price............................. 42 Efficiency Pricing Criteria................................... 43 4 . Equity .......................................................... 46 5. Subsidies ....................................................... 47 6. Tariff Commission......ion..... . . ............................ 48 7. Action Steps for Resource Mobilization.......................... 49 F. SANITATION AND DRAINAGE............................................. 50 1. General......................................................... 50 2. Urban Sanitation................................................ 51 G. WATER RESOURCES AND WATER RIGHTS.................................... 56 H. INVESTMENT PROGRAM.................................................. 61 ANNEXES Annex I: SRDP Executive Summary Annex II: Statistical Tables Annex III: Health and Sanitation Annex IV: Community Participation in Donor Programs Annex V: Private Water Treatment Annex VI: Organizational and Technical Improvements Required in NWSC TABLES Table 1: Development Expenditures on Water and Sanitation.............. 3 Table 2: Water and Sanitation Coverage: Targeted and Actual............ 12 ANNEX TABLES Annex 2: Table 1: Forecast of GNP, Government Budget, Development Expenditures on Water , Sanitation and Power Annex 2: Table 2: SRDP Projected Capital Investment Costs for the Water Supply and Sanitation Sector Annex 2: Table 3: Sector Budget for Water Supply Annex 2: Table 4: Sector Budget for Sanitation Annex 2: Table 5: External Funding in the Sector Annex 2: Table 6: Summary of Donor Assistance to the Water Supply and Sanitation Sector Annex 2: Table 7: Development Plan WSS Expenditures: SRDP and Eighth Plan Compared Annex 2: Table 8: Eighth Plan Drinking Water and Sanitation: Existing Situation and Plan Coverage Targets L4ge Annex 2: Table 9: NWSC Operating Ratios 1989-91 Annex 2: Table 10: Rural Income Distribution Annex 2: Table 11: Urban Income Distribution Annex 2: Table 12: Urban Water Supply Performance Indicators Annex 5: Table 1: Monthly Household Cost of Treating Drinking Water Annex 5: Table 2: Comparison of the Cost of Boiling Water by Energy Source BOXES Box 1: Water Supply Demand Design Standards............................... 9 Box 2: Planning Kathmandu Valley Water Supply............................. 17 Box 3: Potential Response of Population to Efficiency Pricing............. 43 Box 4: Cost Effectiveness of Hygiene Interventions........................ 51 BIBLIOGRAPHY This report was primarily written by Mr. Frank Mitchell (CONS). An initial mission was undertaken on this study by Mr. M. Whitbread (CONS) in December 1991. Following the reorganization of IDA's-South Asia activities and the reassignment of South Asia staff in December 1991, a follow-up mission comprising-Messrs. F. Mitchell (Economist), X. Legrain (Financial Analyst), C. Chandler (Engineer), P. Lochery (Engineer), T. Tenzing (Engineer), and Ms. J. Viloria (Participation Specialist) visited the country in June, 1992. The report also includes the findings of a mission in July 1992 by Mr. M. Vermersch (Consultant, Engineer Management Specialist). Peer reviewers for the report are Mr. Couzens (SA2IN), Mr. Pfohl (TWUWU), Ms. Nassau (EC3IV) and Ms. Kudat (EMTEN). Messrs/Msdms. X. Legrain, P. Mitra, F. Temple and A. 0. Hamilton are the Task Manager, Lead Economist, Division Chief and Director, respectively of this economic and sector work. Summary and Conclusions Overview i. Despite the high priority awarded to water supply and sanitation in Nepal and rising public investments over the last decade, there remain major shortfalls in the level and quality of service coverage. The institutions created to serve the public have not been responsive to their customers' needs. In too many cases, sustainability has not been achieved, as major additional investments are needed to repair earlier ones. Nepal's Eighth Plan (1992-1997) recognizes that the shortfalls arise less from inadequate investment than from deficiencies in sector institutions. The past HMG and donor approach has been to address sectoral problems through increasing investments in hopes of strengthening institutions in parallel with investments. This has not led to the desired results. The failure has important human consequences since water- related diseases continue to be the leading reported causes of mortality and morbidity in Nepal, despite reductions in infant and total mortality in recent decades. ii. A new approach is now required, in which commitment to policy and institutional improvements takes precedence over initiating new investments. Donors also are insisting on improved performance to justify allocations of constrained resources (see para xxxii). The overall framework of the Eighth Plan 1992-1997, emphasizing the need for more decentralization, cost recovery, community participation, and private sector involvement, is sound. Similar prescriptions appeared in previous plans as well, however. Special efforts are needed to counteract the tendency of institutional inertia to frustrate change. iii. The most critical changes required concern institutional roles, policies on resource mobilization, and emphasis of investment programs. iv. Institutional Changes: Early actions are required in respect of central institutions, and in the urban and rural areas: 1. Central Government: The roles of central Government need to be redefined. Specifically, a. Central Government needs to cease its role in direct service delivery and improve its capacity for policy setting and donor coordination, monitoring and evaluation, research and development, and human resource development; b. A supra-sectoral agency (e.g., the NPC) needs take responsibility for policy, especially where this requires trading off interests of different concerned sectoral ministries (e.g., MLD, MHPP, MOH, MCE and MWR). c. All WSS services should be provided by local bodies (government or private). This implies major restructuring or even abolition of the DWSS. ii 2. Urban Areas:International experience indicates that urban water and sanitation operations should be assigned to independent nongovernment bodies. Within that general definition, there is a wide range of private, cooperative and public entities which may work well (different arrangements may even be followed in different cities within the same country). Two basic initial steps are recommended: a. a clear HMG decision to adopt such a policy (including providing more independence to NWSC); and b. following (a), HMG should engage a competent consultancy team to advise on implementation details. The consultancy should be qualified to apply international experience in translating policy ideas into action in specific circumstances. 3. Rural Areas: In rural areas, the challenge is to establish an institutional framework in which a variety of institutions, including local governments, NGOs, and communities themselves, can provide efficient services. Unlike the case of urban areas, international experience provides no firm guidance on the most successful approach. Hence, the framework must encourage experiment, include the capability to monitor and evaluate experience, and allow reorientation of policies to achieve results. The Rural Water Supply Fund will have a significant role to play in developing new mechanisms and so deserves priority. v. Resource Mobilization: Nepal's WSS authorities have not mobilized enough financial resources to enable them to operate and maintain their systems properly, much less contribute to investment. Significant improvements in urban water and sanitation in particular will require both substantially higher charges to consumers and efficiency improvements. The recent HMG decision to allow higher NWSC tariffs is a positive first step. The challenge now is to establish institutions which ensure more predicable future finances while safeguarding the public against effects of public or private monopolies. Creation of a utilities commission with authority to set tariffs, possibly for all utilities, deserves early attention. vi. Investment Strategy: the Eighth Plan coverage targets are overambitious, given the institutional capacity of agencies responsible for iii investment and operation of facilities. Specifically, consideration is needed to: 1. scaling back anticipated investments in facilities while focusing on building up institutions to provide the basis for a larger level of viable investments in the next plan period; and 2. given the complexities and size of the investments which may be required for the Kathmandu Valley, establishing a special high level body to define Valley growth strategies and oversee preparation of a consistent intersectoral Valley investment program. vii. IDA's Future Role: The conclusions and recommendations within this report will form the basis for IDA's future involvement in the sector through both its sector work and lending activities. IDA will assist the Government of Nepal to establish a more efficient institutional framework for the delivery of rural water supply services by testing a number of service delivery options with greater private sector involvement through its proposed Rural Water Supply and Sanitation Project. The main objective of a possible further IDA-financed Urban Water Supply Project would be to assist the Government of Nepal in redefining the -role of the Central Government in the sector and in identifying the most appropriate institutional framework for service delivery. Summary Background viii. Nepal is a landlocked, mountainous nation of some 19 million people. It is a country of significant human diversity, which has been maintained in part by very difficult access among different regions. From 1981 to 1991, the population grew at around 2.1 to 2.6% per annum, and the urban population at 5 to 7.5%. It is one of the least well-off countries in the world, with a per capita income of US$170, very unequally distributed: the top decile of families (ranked in order of per capita incomes) receives about 40% of incomes, and the lowest decile about 2%. Over the period 1965-1990, real per capita growth of GNP was only 0.5% per annum (World Development Report definition). ix. While there have been reductions in recent decades in Nepalese infant and total mortality, water related diseases remain at the head of reported causes of mortality and morbidity. The situation is worse than in most other Asian countries. HMG and donors have given priority to the WSS sector, with rising investments over time. Two thirds of the urban population are said to be covered with safe water, and one third of the rural population. In fact, few urban or rural water supplies are safe. Intrusion of sewage into water supplies is a major problem. One third of urban residents and around 3% of the rural inhabitants are said to be covered by satisfactory sanitation, mostly private latrines (less than one percent of the population is on sewers). Whatever the statistics, and they are unreliable, the situation is serious, and increasingly so, as populations rise relative to water sources, and environmental pollution begins to affect water quality. Partial iv information indicates that less advantaged social groups are less well served in both rural and urban areas. x. Water and sanitation targets during the last decade have been overambitious. Implementation difficulties have occurred due to a variety of causes including: (a) of works, leading to excessive implementation periods; (b) poor or inappropriate design; and (c) poor construction quality, sometimes related to lack of technical skills, but also inadequate construction supervision. These have contributed to failure of a majority of rural piped water schemes and many urban ones to provide an acceptable standard of service. xi. Adequate service delivery has also been impeded by totally inadequate resources (of materials, skilled manpower, funds and managerial energy) for operations and maintenance (O&M). xii. The Eighth Plan (1992-1997) recognizes the above weaknesses in general and states a number of policies which, if implemented, would result in improvements. These include: (a) more involvement of local governments in urban water supplies; (b) increased community participation in all aspects of rural water supplies; (c) cost recovery for O&M and more structured approaches to capital subsidy to rural water supplies and latrine programs; and (d) more use of the private sector, including NGOs. Unfortunately, there remain considerable ambiguities in these policies and uncertainties about HMG's commitment to refine and implement them. Many of the Eighth Plan policies repeat unimplemented decisions of the HMG Water Decade Task Force (1979) and Seventh Plan (1985-1990) policies. Despite the decentralization strategy which in principle assigns a larger role to local governments, the 1992/93 development expenditures on water and sanitation go almost entirely to the DWSS and NWSC. A review of all World Bank WSS sector lending over the period 1967-1989 highlighted Nepal (with Ghana) as countries where progress was hindered by an "unwillingness at the political levels to address uncomfortable issues." xiii. The work of policy definition is not simple and cannot be completed overnight. But it must commence. This paper attempts to highlight some critical issues and actions which would enable substantive progress to be made. A "policy matrix" of main objectives and actions follows this summary. V Institutional Issues xiv. General Objectives: The fundamental objective of developing institutions which provide more effective services requires, in general, more decentralization of responsibility to local governments, NGOs, private sector and communities themselves, and more accountability to consumers. This requires changes in the role of central as well as local bodies. xv. Two basic requirements pervade all aspects of the institutional recommendations: (a) effective institutional reform requires that each institution have a well-defined and limited set of objectives so that it can organize its activities, its performance can be monitored, and changes made in the case of shortfalls; and (b) more attention is needed to the quality and nature of personnel required for different tasks and to true personnel costs. Low Government salaries currently induce a variety of practices (absenteeism, moonlighting by professionals, payments by contractors to those who are supposed to supervise them) which result in poor or non-performance of assigned functions. Full costs need to be paid for stated functions if efficiency is to improve. This may lead to discontinuing some functions if they prove unaffordable. It is also likely to create a larger role for non-governmental agencies to supply services which were hitherto largely monopolized by government., even in the policy field (e.g., making more systematic and continuous use of think tanks, university research institutes, consulting firms). xvi. Central Level Issues: Under a decentralized system, the central authorities retain major responsibility for setting overall objectives (income growth, health improvements, income distribution, etc.), for monitoring whether those objectives are being achieved, for allocating responsibilities and budgets among public institutions, for regulatory and fiscal measures to induce independent organizations to perform in accord with overall objectives, and for supporting or carrying out some functions which cannot be left to the private sector (e.g., overall statistics, research and development, human resource development, and donor coordination). Among the specific points requiring early attention are: (a) more continuous supra-sectoral leadership on sector policy issues (e.g., by the NPC). Past interministerial coordination efforts led by MHPP have been ineffective for the structural reason that one interested party cannot resolve tradeoffs among competitive agencies; (b) improving and strengthening unambiguously public -- and central -- functions such as M&E of overall welfare and health objectives, R&D, and Human Resource Development (HRD); vi (c) institutional separation of policy-making from implementation if either is to be effectively handled. This implies that Ministries should be charged with policy and departments with central implementation functions (e.g., HRD, R&D). The present situation in which a Secretary is Chairman of NWSC and in which DWSS is responsible both for policy and implementation leads to poor policy, monitoring and implementation; (d) eliminating direct service provision by central agencies as soon as possible, since WSS are local functions par excellence. With the elimination of its main function (implementing local WSS investments), the role and staffing of DWSS need to be thoroughly reviewed and the institution consolidated with other agencies, abolished or downsized and restructured; and (e) engaging technical assistance to help refine strategies. HMG should as a matter of priority explore extending the scope of proposed studies for DWSS (UNDP Planning Capacity Study, ADB 7-year DWSS programming study) and possibly seek additional funds to assist with refining options and actions on the above fundamental issues. xvii. Urban Water Supplies: HMG should aim to have in place -- within, say, ten years -- appropriately staffed and financially self-sustaining public or private entities equipped with the full range of technical, financial and managerial capacities to provide all urban populations with adequate water and sanitation services. Experience in other countries indicates that there are many institutional alternatives which may serve this overall aim effectively. In Nepal, they may include, for specific towns, municipal corporations or departments, branches of NWSC or new public sector utilities, or utilities owned by users' groups or even private businesses working on a concession or lease basis. This list excludes management by a central line department because the hierarchical departmental structure precludes undertaking efficient utility operations responsive to consumer demands. Central provision is especially inappropriate in Nepal, with its enormous geographical and social diversity and large effective distances from the center. xviii. The most important immediate actions are for HMG to: (a) make a firm commitment to develop more self-sustaining and autonomous urban water and sanitation utility operations: and (b) once that commitment is taken, to engage urban utility consultants (UUC) with relevant international experience in assisting implementation of general policy ideas in a variety of environments. xix. Among the detailed steps for consideration (with elaboration to depend partly on UUC recommendations) will be: (a) the establishment of a Utilities Commission to regulate utility tariffs and policy service standards. This would depoliticize the vii tariff setting function and make financial viability possible, which is a necessary condition for effective service provision. The commission would need to consider utility efficiency in setting tariffs, to ensure incentives for low-cost management. A multisectoral commission should be considered since the standing and qualifications of most commissioners and staff would not be limited to one sector. Sectoral expertise would require only a few staff (or use of specialized consultants); (b) formulation of water supply regulations to clarify the ground rules for enterprises (public or private) in this field, (c) improvements in the institutional framework governing the NWSC, including (i) appointment of a board representative of consumer interests and with financial and technical competence, an independent chairman, and an independent general manager, (ii) negotiation of a Performance Contract with NWSC covering undertakings regarding service objectives, financial performance and investment program, and (iii) appropriate revisions in the NWSC Act to codify the responsibilities and authorities of the NWSC and to reduce the scope for arbitrary interventions in its operations; and (d) as regards towns now under responsibility of DWSS, to (i) review the situation of each town and formulate plans for the devolution of responsibility to other bodies (a strengthened NWSC, municipal departments or independent municipal, private or public corporations), and (ii) restrict any additional investments in those town to emergency measures only, pending satisfactory institutional arrangements. xx. NWSC itself also needs to: (a) decentralize its operations to individual towns, initially by making them profit centers and establishing local representative committees to advise on programs for each town: (b) divest some towns to successor organizations, over time, to ensure maximum accountability to consumers consistent with economies of scale in technical and financial functions; (c) undertake a variety of internal management improvements, following advice of past and ongoing consultancies; (d) examine means for improving efficiency through making use of private contracting arrangements; and (e) codify operating procedures, as they are defined, in the form of bylaws. xxi. Rural Water Supply; Viable systems for providing rural WSS on a decentralized basis need to be defined. This will depend partly upon general viii arrangements for decentralization and funds flow. Specifically as regards RWSS, however, the following points are worth emphasizing: (a) more attention is needed to viable procedures for local entities to plan properly for WSS functions. It is far from clear that the proposed comprehensive District Plans are fully consistent with a community-based approach. Attention needs to be paid to the experience of the FINNIDA-financed project in Lumbini zone in refining planning procedures and design criteria; (b) ensuring adequate staffing for decentralized institutions is a key issue. If professional services are adequately funded, local bodies may be able to secure more efficient provision from the private sector than central bodies designated to assist them; (c) whereas utilities will be the core institution in urban areas, communities themselves will be the basic organizations in the rural areas, taking responsibility for all project steps from identification to operations and maintenance. The policy problem is to devise efficient methods to motivate and assist communities to organize themselves, to improve their health practices, and to carry out construction and O&M tasks. Most communities will need the assistance of outsiders (local governments, NGOs, private firms). Substantial efforts are needed by HMG, donors, and NGOs to test different methods and to monitor and evaluate performance with a view to replicating successful approaches; and (d) means are needed to channel funding for WSS to communities on an efficient and equitable basis. xxii. The proposed Rural Water Supplv Fund deserves strong support as a possible mechanism to stimulate a "bottom up" as contrasted with "top down" approach to rural WSS. Private Sector Provision xxiii. More attention is needed to restructuring government programs and subsidies which impede private provision of WSS services. In addition, there may be scope for building up local capacities to provide higher quality goods and services (including professional services) through technical assistance and revised procurement procedures. Resource Mobilization xxiv. Improvine resource mobilization and pricing of water is urgent for four major reasons: (a) adequate funding of O&M is a necessary condition for adequate water (and sanitation) services, whatever the investments made; (b) water pricing is an efficient demand management tool; ix (c) the current system of subsidies is inequitable (with taxpayers in general subsidizing operation of.uiban water supplies and outside- the-Valley consumers subsidizing inside the Valley consumers); and (d) given resource scarcities, there is simply not enough funding for all desirable (and economic) schemes unless beneficiaries themselves contribute more of the cost. xxv. HMG's acceptance of the principle of resource mobilization in urban areas has been honored largely in the breach. The reasons are political: fear by HMG of urban residents' opposition to paying more for services and those residents' understandable unwillingness to pay more on the basis of promises of service improvements. This vicious circle must be broken through improving service delivery within existing constraints, public education, and increasing NWSC and DWSS tariffs. The January 1993 NWSC tariff revision marks a significant improvement. Details of subsequent increases need to be worked out to be consistent with the financial covenants of Credit 2239-NEP and sector needs. Several points are already clear: substantial additional increases are needed in most DWSS towns and in Kathmandu Valley, the increases should differ among towns and consumers receiving different classes of service, and there should be a program to eliminate subsidies in the briefest possible time. xxvi. Economies of scale and transactions costs justify continued subsidies for part of the investment cost of rural water supply (all O&M should be financed by consumers). There needs to be more attention to estimating the economic returns from rural water projects, however, to ensure that they are indeed justified, and to refine the criteria for project selection and design. Drainage and Sanitation ixvii. International experience indicates that sanitation improvements are more important than water supply in securing health improvements. This may change as the biotechnology revolution extends the range of illnesses which can be economically prevented through immunization campaigns. But sanitation will deserve important attention on health grounds for at least the medium term. xxviii. The technical and institutional issues involved in improving sanitation are more difficult than those for water supply. Not only is there a need to deal with supply inefficiencies, as with water, but also to promote demand. Sanitation is not so well-suited to utility supply as water. The range of institutions which must be involved for a satisfactory outcome is also larger -than for water. Recruiting suitable staff may*require overcoming cultural constraints not present in other sectors. Sanitation may even cost more than water supply. xxix. Past efforts to generate consensus on sanitation issues have been largely ineffective. Dealing with the sanitation issues is important, however, if health objectives are to be met, especially in the urban areas. Considerable time and effort will be required to make major inroads into such x an ostensibly intractable problem. A supra-sectoral agency, such as NPC, rather than one of the sectoral-agencies, needs to take the lead in the interministerial and HMG-donor studies and discussion needed to refine relevant policies and programs in advance of major investment. Water Rights xxx. Increased demand pressures on a limited and deteriorating water resource require improved mechanisms for allocating that resource if needs are to be met and excessive investments in water supply are to be avoided. Recent legislation goes some way towards dealing with the issue, but more attention is needed to (a) allow reallocation of water among uses with appropriate compensation, (b) deal effectively with water use conflicts among communities, and (c) minimize reliance on administrative enforcement powers. Proposals to study improved water resource management should be supported. Such studies must pay adequate attention to traditional systems of water rights and management to ensure the social feasibility and thence sustainability of improved systems. Donor Coordination xxxi. Continuation of donor supply-driven approaches attached to specific HMG agencies will not be productive in addressing the basic problems. HMG should attempt to get the donors to cooperate more fully with each other and with HMG in defining appropriate policies, finding areas in which donors can support (rather than compete with) each other and HMG. The costs of such interactions are not trivial and should be defrayed by donors. xxxii. Donors also have a responsibility, once certain policy lines are clarified and agreed, to take all actions necessary to ensure that these directions are followed. The past practice of embarking on major investments and hoping that policy and institutional improvements could be secured in parallel has not worked and should be discontinued. Past poor performance by HMG in meeting financial objectives is to a substantial degree due to donors' willingness to continue funding activities despite defaults. Given increasing competition for limited aid funds from old and new countries, many of them engaged in fundamental reforms, it is unlikely that Nepal can expect increased investment assistance without substantial policy improvements. Investment Program xxxiii. The development plan coverage targets are overambitious. They overstate the amount of coverage which can be secured for planned investments. The real coverage increases are less than paper coverage (the design populations ostensibly served by offici.- schemes). And existing institutions in the public and private sectors lack the capacity to achieve the plan targets. xxxiv. The challenge during this plan period is to establish a more decentralized, responsive and capable set of institutions, to develop indicators which relate more closely to desired health and welfare outcomes and to advance beyond the "coverage-budget numbers game". xi xxxv. Among the specific investment policy recommendations in this regard for HMG and donors are: (a) high priority should be given to strengthening institutions required for decentralization, including institutionalizing a program for human resource development during this plan period as a basis for later sector expansion; (b) work beyond feasibility study stage should not be undertaken for any urban water scheme without credible satisfactory prior actions in that town to,improve resource mobilization, ensure institutional capacity, and measure and reduce unaccounted for water; (c) there should be no additional contracts issued for new central-HMG department-managed rural water supply schemes, whether donor or HMG funded. Future schemes should be organized on a more decentralized basis and fully reflect the need for full community participation in all stages of their design, construction and operation and maintenance; and (d) consideration should be given to appointing a high level HMG/private task force to oversee plans for Kathmandu Valley. Valley investments under study for WSS and environment are a large part of total sectoral requirements and are unaffordable without substantial increases in resource mobilization from Valley residents. Arriving at more realistic and less piecemeal proposals requires a comprehensive review.of Valley growth, including coordination of proposals for urban development, agriculture and industry. Sector Policy Katrix Area Obiective/Target Strategy/Measures TLmLna & SeQuence A. Overall Improve welfare, health, while Give initial priority to improving -imediate (see Sector alleviating poverty and institutions, planning, financing, over more details Development improving the environment investment planning, and financing, over below) hardware investments. B. Institutional 1. General (a) Improve allocation of -study roles central, local entities, -short-term institutional revise role DWSS, using consultants responsibilities, strengthen -combine and revise scope of proposed -short-term relevant bodies UNDP and ADB TA on DWSS planning and programs, (hereafter U-ASTUDY) to recommend changes. (b) Revise central and local -implement Administrative Reform -short-term institutions for decentralized Implementation Committee (ARIC) service delivery (e.g., recommendations (Only specific WSS mechanisms for oversight of LG issues highlighted here.) performance, funds flow, etc.) (c) Clarify the required -U-ASTUDY to make recommendations -short-term staff, qualifications, and -implement ARIC recommendations -short-term staff-related costs for all RNSS institutions and programas make appropriate changes in programs to reflect realistic costing and resources available 2. Central/ (a) Ensure better coordination -Supra-sectoral agency (e.g.NPC) should -imediate Sectoral of sector policy among assum more central and active role in Institutions ministries/ agena es/donors sector planning and MLE (U-ASTUDY to assist refining details) -NPC to engage staff, including outside -short-term thinktank/Lnatitutes to assist with central planning, MLE functions. (b) Build up capacities for -NPC responsible for ensuring work done -continuous public functions (RD, R&D, -assign admin. responsibilities to -following U- ME) entities. ASTUDY, ARIC decisions (c) Ensure donor commitment -engage major bilateral and multilateral -short-term, and support for policies, donors in joint policy discussions and continuous improve donor coordination seek HNG donor consensus on actions -seek more complementarily among donors -short-term for specific projects -donors to condition support on -short-term fulfillment of policy agreements 3. Urban Institu- (a) Establish Self-sustaining 1. END to make commitment to establish -immediate tions competent utilities to deliver independent utility entities (public, urban water supply services private, as appropriate) 2. Engage international and local -following consultants (hereafter UUC) to make commitment (B3al) recommendations on details. (Funding could come from Credit 2239-NEP). Some specifics: Many details to arise from study of UUC and further MG review. a. establish utilities commission to -short-term 1. Improve the institutional regulate tariffs, utility service framework for utilities in provision general b. formulate water supply regulations -short-term - 2 - 2. Improve the Legal/Policy -appoint independent chairman (no longer -short-term Framework for NWSC Secretary) -appoint independent GM -short-term -Make NWSC board representative of -short/medium term consumer interests and professional competence -BNM (MDF?) to negotiate Performance -short/medium term Agreement with NWSC (incl. operational targets, financing and investment plans) for which NWSC to be accountable -Revise NWSC Act to reflect -medium term independence, commercial orientation. 3. Improve Effectiveness of -implement a variety of managerial and -imediate, short- NWSC staff improvements (taking account of term advice by ongoing consultancies) -decentralize operations to individual -short-term towns, making them profit centers, establish town advisory coMMittees. 4. Decide on town by town -EM to review status all DWSS towns -short-term basis what agency will be -explore options for each town -short-term responsible for water supply -implement change-over -medium-term 5. Establish mechanisms as -details to be recommended by UUC & -short-term required to provide TA to ongoing NSC consultancies independent utilities -implementation -medium term 4. Rural a. Define role of central -separate roles of policy formulation, -short-term Water agencies in RWSS MLE technical support, from Supply implementation of USS facilities. -ensure that all future RWSS projects -imediate are implemented by local governments, NGOs, communities, not central departments -moratorium on contractor schemes -Lamediate pending review of experience with community-based approach b. Develop appropriate local- -review experience of FINNIDA-Lumbini -short-term level RWSS planning project procedures, design standards -U-ASTUDY to clarify program -short-term -preparation activities for RWSF also to -imediate contribute recomiendations on scheme criteria. c. Promotc community-based -encourage experimentation by different -short-term approaches donors, agencies, NGOs -monitor performance, identify successes -short/medium term for replication d. Implement Rural Water -review preparation reports implement -imediate Supply Fund (RUSF) Japanese-grant fund pilot preparationa -start project -short-term 5. Encourage the a. Eliminate impediments to -sector-planning entity to review -short-term Private private supply of goods and existing procedures which impede private Sector services, including supply (e.g. materials subsidy, ICB professional services procurement, 5MC production of inputs) -review tradeoffs between using EMG or -short-term private staffing for professional services (ARIC, U-ASTUDY) b. Facilitate Private Provision. - 3 - -review cost-effectiveness different -short/medium term technologies (e.g RWSG-SA study on handpumps) -identify means to build private -short/medium term capacity to perform adequately, including private consulting capabilities -establish funding mechanisms for -medium term professional services which allow private sector to compete with government C. Sector Resource Ensure finance for economic Mobilization investments and OEM of appropriate and sustainable WSS services a. Unambiguous EMG decision to allow -iamediate 1. Urban Areas. urban utilities adequate finances, largely from consumer charges b. Donors to assist MG through -continuous withholding support for new investments pending adoption and concrete implementation of policy c. Establish utility commission with -short-term authority to control tariffs d. Carry out tariff review study with -following (a) consultants a. Public education on resource -continuous mobilization and tariffs f. Eliminate cross subsidization among -medium-term towns, minimize subsidies, ensure remaining subsidies are targeted and transparent in budget 2. Rural Areas a. ENM to refine mode and level of -short-term capital subsidy to ensure incentives to design cost-effective schemes b. monitor economic benefits of rural -continuous schemes systematically to ensure subsidies are justified (a. and b. to be reviewed during RWSF preparation) D. Sanitation and Improve sanitation in urban a. Supra-sectoral agency (e.g NPC) to -short-term Drainag and rural areas, through lead intermLnisterial/donor task force improving institutions, to clarify issues and strategies strengthening finances b. develop action plan to strengthen -short-term (Sanitation is more complex capacities and finances of and difficult than water municipalities (municipalities have supply and more initial policy major role in this sector) work is therefore needed to c. consider establishment special -short-term define a viable strategy environmental agency in Kathmandu Valley before engaging in heavy investments.) E. Water Resources Improve the a. undertake study to Revise Water -short-term and Water legal/administrative framework Resources Act 1992 (WRA) to allow water Rights to facilitate allocation of reallocation (requires registering water to highest valued uses existing use, charging for additional use, & compensation for loss of use) b. study and define procedures which -short-term maximize use of existing and traditional mechanisms to avoid unrealistic reliance on administrative enforcement authority. c. revise WRA following a. and b. -following a. and b. d. revise the draft Drinking Water -short-term Regulations (under WRA) to reflect above issues and changed DWSS status. F. Investment 1. Ensure sector investments Program and contribute efficiently to a. increase attention to investment and -short-term Development overall welfare and health operating needs of sector planning, M&E, plan objectives through appropriate R&D, and BRD functions (U-ASTUDY, other targets and programs. studies to be determined, NPC) b. revise planning system to be more -short/medium term results oriented and less target oriented. 2. Avoid wasteful investments a. in urban areas, no work beyond -immediate, and promote productive ones feasibility study,vithout credible continuous actions for that town on institutional capacity, resource mobilization and reduction of unaccounted for water b. no additional contracts for central -immediate department WSS projects (only decentralized projects) c. moratorium on any new contractor -L mediate projects in rural areas (see rural B4a above) d. no DWSS urban investments except for -imediate emergency repairs 3. Develop viable program for a. establish special task force to -short-term Kathmandu Valley (KV WSS review and make recommendations on KV investments are a large development, including on alternative percentage of the sector levels and patterns of development, total; they are also future institutional arrangements, costs complementary with other of programs (link to Environmental programs in urban development, Protection Council?) transport, industrial b. seek donor assistance for studies -short-term location, etc. vhich need (Lnd. revising and coordinating clarification) planned/ongoLng studies) c. secure donor cooperation in review of -short-term work to ensure consensus on ultimate plans A. BACKGROUND 1. Objectives of the Water and Sanitation Sector Issues Paper (WSSIP) 1. The purpose of the WSSIP is to provide an agenda for discussion between HMG and IDA and possibly other donors on future sectoral strategy. The time for such an overview is appropriate for several reasons. Firstly, in its Eighth Plan 1992-1997 Summary (HMG NPC 1992, p.85), Government assigns high priority "to providing drinking water facilities to the entire population within the next 10 years." The meaning and feasibility of this goal needs to be discussed and elaborated in the light of basic objectives for health and development and of resource and institutional constraints. Secondly, past efforts by Government and donors have fallen short of expectations. The Eighth Plan recommends significant changes to avoid repetition of past shortfalls (greater emphasis on decentralization, more use of the private sector, including NGOs, greater role for community participation, and need for lower cost solutions). It should be noted, however, that the previous plan (Seventh Plan 1985 to 1990) contained similar recommendations. Concrete steps need to be defined to avoid being trapped by the inertia of past practices and existing institutions. Thirdly, development in this sector, as others, is becoming more challenging as rising population presses ever harder on limited resources, as the size of individual proposed interventions rises (implying larger penalties for failures), and as the environmental implications of action -- and non-action -- become more acute. 2. The key concepts underlying the paper are the public finance and organizational principles which underpin current Bank work on public enterprise reform and sector organization. These are summarized, as regards water and sanitation, in the World Development Report 1992 (World Bank. 1992, Chapter 5). In general, these principles are that Governments should perform only those functions for which they have a comparative advantage. Necessary functions include establishing a framework of policies and institutions to induce optimal performance by all sector actors. An effective WSS sector strategy must inevitably include activities and processes to change the knowledge, attitudes and practices (KAP) of different sector actors, from high level politicians as regards, for example, conceptualization of problems, to individual households as regards, for example, hygiene habits. Clarifying existing performance and future options also requires reviewing the implications of incentives now in effect. This inevitably involves posing some fundamental queries and questioning traditional assumptions. While it is, in the end, Government's responsibility to define its strategy, this paper is written on the assumption that outsiders -- IDA in this instance -- can help highlight some basic issues and suggest approaches to dealing with at least some of them. Moreover, outsiders have a major responsibility since they finance almost half of sector investments. Their decisions, both whether to invest, and on what, therefore have a major influence on the content of reform efforts. 3. This issues paper has been based upon a review of literature (see Bibliography), performance under past Bank intervention in this sector and 1 current project preparation tasks, and upon findings of missions in December, 1991 and in June-July, 1992. 2. Sector Background and Government Sector Strategy 4. Institutions: The principal agencies related to water supply and sanitation (WSS) comprise the Department of Water Supply and Sewerage (DWSS) and Nepal Water Supply Corporation (NWSC), both under Ministry of Housing and Physical Planning (MHPP) which has lead responsibility for formulating WSS sector policies, strategies and planning. The DWSS has from 1988 to 1992 been responsible for most government rural water supply and sanitation schemes (RWSS). The Ministry of Local Development (MLD) and its predecessor (Ministry of Panchayat and Local Development) was until 1988 responsible for *community water supply' schemes, and oversaw the District Technical offices (DTOs) which carried out local works under local governments. It continues to have oversight of the Integrated Rural Development Projects, most of which have rural water supply and sanitation components. Responsibility for urban water supplies in Nepal's 36 municipalities, which accounted in 1991 for 1.7 million of the 18.5 million population, are split between the DWSS, with de facto responsibility for 23 of the smaller towns (only 5 of which have populations over 25,000) and NWSC, which is responsible for the 13 larger municipalities, including those in Kathmandu Valley with 0.6 million inhabitants (the NWSC's Kathmandu Valley service area has a population of about 0.75 million). Local Governments, operating under the overall supervision of the MLD are responsible for drainage and sanitation and can also undertake water supplies. With the new policy of decentralization, block grants to District Development Committees (DDCs) and to Village Development Committees (VDCs) can be used for a variety of local works, including WSS. Public health, hygiene education and some promotion of on site sanitation (latrine subsidies) are under the Ministry of Health (MOH) which includes an Environmental Health Section and a Health Education Section. The Ministry of Education and Culture (MEC) includes health education in school curricula. The Social Services National Coordinating Council (SSNCC) is the Governmental agency which is responsible for registering and monitoring the activities of international NGOs and local NGOs (which operate in more than one district). NGOs have played a major role in testing approaches to WSS, especially in the rural areas. The Ministry of Water Resources is responsible for monitoring overall water use. The National Planning Commission (NPC) coordinates overall national and sectoral planning, and approves annual development estimates; the Ministry of Finance (MOF) is responsible for allocation of budget resources. 5. Sectoral Policies: While health benefits are often adduced to support the priority to the water and sanitation sector, it is clear that the political pressure is to secure water in the face of deteriorating traditional supplies, competition from other uses, and the rapid population increase (over 2% nationally, over 4% .in the urban areas). The high and rising priority given by HMG to water supplies is indicated by the percentage of development expenditures going to water. The low interest in sanitation is reflected by the fact that only around 5% of water and sanitation expenditures in the 1980's were for sanitation (Table 1). 2 Table 1. Development Expenditures on Water and Sanitation Development Expenditure W & S Sanita- Donors as % tion as (a) of Total % of Dev. W & S Exp. Exp. TOTAL & S_& S Nrs.M NRs.M % % NRs.M Third Plan (1965-70) 2101 31 1.50% Fourth Plan (1970-75) 5048 92 1.80% Fifth Plan (1975-80) 10985 437 4.00% Sixth Plan (1980-85) 29529 1126 3.50% 6.80% 438 38.9 Seventh Plan (1985-90) 53410 2302 4.30% 3.30% 892 38.7 Budget 1990/91 13279 681 5.10% 1.40% 305 44.8 Budget 1991/2 16297 1012 6.20% 0.70% 360 35.6 Budget 1992/3 21595 1212 5.60% 1.80% 651 53..7 Eighth Plan 113479 6273 5.50% 12.50% NS - (1992/3-1996/7) (a) Excludes WHO contribution. Sources: SRDP, Budgets for 1991-1993, Eight Plan. See Annex 2, Tables 3, 4, 5 and 7 3. Donor Intervention in the Sector 6. About 40% of water and,sanitation expenditures were financed by donors during the 1980's (Table 1). Support has come from international organizations (ADB, IDA, UNCHS-HABITAT, UNDP, UNICEF, WHO), several bilateral agencies (especially Austria, Finland, Germany, Japan, Netherlands, Switzerland, UK) and many international NGOs (including Red Cross, Water Aid, CARE, Save the Children, Gurkha Welfare Trust, Helvetas and various religious organizations). Donors have also sponsored many studies, including, notably, the IDA-executed Water Supply and Sanitation Sector Study (Procter and Redfern. 1986). The largest four donors during the 1980s in order of finances provided were IDA, UNICEF, ADB and ODA. IDA's main WSS sector lending has been in the urban water sector (see also paras 29 to 33 below).' Japan and ODA also have provided considerable support to urban supplies, mainly to towns serviced by the DWSS. Other donors have concentrated on the rural areas. HMG is currently preparing a Rural Water Supply and Sanitation Project for IDA 1 IDA's Rural contributions to WSS have been through integrated rural development projects. 3 consideration. This project would support initiatives for decentralized approaches through emphasizing community participation in all stages of scheme planning, implementation and operation, and through involving NGOs as well as Government agencies. B. SECTOR OBJECTIVES 7. The prime initial requirement for defining a policy is to define its objectives. In the case of the WSS sector, the typical list of basic objectives would be to: (a) increase consumer welfare and productivity through efficient provision of water and sanitation services; (b) improve the health and welfare of the population, through reducing the incidence of water borne and water washed diseases. This will in turn reduce mortality and morbidity, and so contribute to the first objective; and (c) implement the above objectives in a fashion which will, inter alia, contribute to a variety of overall objectives, including (i) poverty alleviation, and (ii) environmental improvements in and near settlements, including mitigating past environmental degradation due to the progression of urbanization and industrialization. 8. There is no doubt that the primary de facto HMG objective has been the first with respect to water alone, and within that, extending supplies to new areas rather than improving the quality of existing supplies. This reflects popular pressure and the perception of substantial timesaving from more convenient water supplies. It is estimated that gravity water supply schemes in the hill and mountain areas may generate time savings (from carrying water shorter distances) from one to 5 hours per household per day. Even in the Terai, tubewells increase the percentage of households which can fetch a jar of water in less than ten minutes from 84% to 100% (SETA 1990. p, 96). The donor community, on the other hand, is more concerned with the second, health, objective. A major incentive for donor contributions to the WSS sector is an appreciation that some outside pressures are needed to get health issues addressed. The heavy input and outstanding leadership by UNICEF arises from an even narrower initial focus -- child and maternal health -- and an assessment that WSS interventions were an efficient path to that end. To a considerable extent, also, the poverty alleviation and environmental objectives are more compelling to donors than to Government at this time. 9. Before reviewing Government policies, it is worth listing the general underlying justifications for Government intervention in any sector. These are to: 4 (a) correct market imperfections which lead to inappropriate behavior by private sector and individuals. In the case of the WSS sector, the major potential imperfections concern: (i) economies of scale and "niatural" monopoly in some water and sanitation operations. Such considerations may increase in importance in rural and urban areas due to rising population density. This may in certain circumstances either justify government intervention to regulate adverse impacts of monopoly, or to subsidize production; (ii) external economies may justify government intervention. If individuals do not realize all the benefits of expenditures they make (e.g., on sanitation), they may underinvest in them. Special incentives may be needed to stimulate investments in such activities, and vice versa in cases in which individuals do not bear the full costs of services they consume (e.g., drawing water from an aquifer whose level is declining); (iii) inadequate definition of property rights. In this sector, the main issue concerns water rights. (Section G below). (b) secure a different distribution of benefits/costs than would occur without intervention; and (c) change knowledge, attitudes and practices (KAP, especially regarding health and hygiene). 10. Specific policies and programs need to be tested on the basis of whether they fall under one or more of the above cases. In addition, several. qualifying remarks need to be made at the outset: (a) the above justifications are necessary conditions for Government intervention, but not sufficient. There must also be some expectation that Government invervention will result in an improvement. This depends on costs, administrative capacities, and the complexity of the task itself. Government failure can be quite as thorough as market failure, with even deeper and longer lasting consequences since government failures may discourage private initiatives (examples will be given below). (b) government provision or subsidy of water or sanitation in the rural or urban areas cannot be justified on the simple ground that water or health are 'basic needs." There are many basic needs. The policy problem is to attempt to allocate scarce resources so as to maximize returns, taking account of quantified benefits where possible, local preferences, and carefully reviewing cost-effectiveness. (c) while market imperfections characterize both water and sanitation, the major constraints as regards water concern inefficiencies of 5 supply, whereas in the case of sanitation, the highest priority needs to be given to affecting demand (changing KAP). 11. Health Impacts and Efficient Interventions. Before discussing future institutional arrangement and programs, it is desirable to review briefly the relationship between health and WSS. This is important since this field is rife with external economies and also the need to change KAP. There are severe practical difficulties in defining measurable health impacts, measuring the relationships between the health objectives and feasible interventions, optimizing among interventions, e.g., between water supply and sanitation, and between hardware and 'software* interventions, and, finally, determining the institutions to be involved. An extensive review of 144 studies of health impacts of water and sanitation projects on incidence of 6 health indicators (Esrey et. al)2 concluded that (a) interventions which ensured safe excreta disposal were more important than improved water supplies, (b) the next most important intervention was increase in quantity of water combined with changes in personal hygiene behavior (washing, bathing) and domestic hygiene behavior (house cleaning, food preparation, clothes washing), i.e., related to changes in KAP, (c) improving water quality came third in importance (partly because this was often difficult to achieve on a year round basis), although quality improvements may have had more effect on reducing the severity than the incidence of diseases'. The WDR 1992 also emphasizes the importance of water quantity over water quality in achieving health objectives. 12. Effective actions to achieve results are less clear. There is, however, a consensus that the supply driven approach to sanitation -- provide subsidized hardware in latrines and people will use them -- is ineffective. East Consult 1992. and New Era 1990a conclude from case studies that effective change in sanitation habits requires first changing demand. The critical questions then become (a) what interventions are cost effective, and what combinations of activities promise the most effective results? Does it make sense to pursue water schemes independently of sanitation? What is the optimal mix of software versus hardware? (b) Given identification of the cost effective package(s), are the benefits larger than the costs? There are no hard data which can be used to answer these questions. There is an emerging consensus by many donor agencies on the need for.comprehensive approaches within specific WSS projects, making maximum use of community participatory techniques to educate and motivate the population, and particularly women. 2 The diseases covered were diarrheal diseases, ascariasis, trachoma, hookworm, schistosomiasis and Guinea worm, and the medium reduction in incidence were respectively 22%, 28%, 76%, 4% (insignificant), 73% and 50%. Six better studies also showed an average 55% reduction in child mortality. 3 Experience in Bangladesh (which has similar conditions to much of the Terai) has, however, found that incidence ck diarrhea and ascariasis are often significantly less in households which make exclusive use of handpumps for domestic water purposes (see Minnatullah et al 1991, and Skeda et al 1979). 6 But this consensus is based more on failures of past top-down approaches, and pilot-project level experiences, than sector-wide experience in Nepal or elsewhere. As for benefits, remarkably little work has been done in Nepal to investigate results on health, let alone productivity, which result from those improvements. Finally, it should be noted that advances in technology are rapidly extending the range of diseases which can be controlled by low cost immunization. This may result in a significant shift in emphasis over the next decade between immunization and sanitation to secure health improvements, especially in rural areas. C. SECTOR PERFORMANCE 1. Performance in Achieving Overall Objectives 13. At the outset, it needs to be emphasized that little is known about the performance of the sector in achieving fundamental goals of increased productivity or health. Information on timesaving (and use of time saved) from more convenient water supplies is fragmentary. In the case of health, the fundamental statistical difficulties alluded to above are compounded by the poor state of Nepalese statistics. For what it is worth, however, water borne diseases head the list of causes of morbidity and mortality in Nepal hospital statistics, and these are more prevalent there than elsewhere in South and East Asia." While life expectancy and infant mortality have improved over recent decades, the extent to which this has arisen from improvements in water and sanitation is unknown. Diarrhoea is said to account for almost half the child mortality (16% death rate, out of a total of 35% according to SETA 1990. p 10). The quality of health statistics is extremely poor and does not provide a sound basis for analysis. In Kathmandu a substantial part of the drinking water distribution network is infiltrated by raw sewage. This is caused by the extreme state of disrepair of the drinking water distribution network, in turn related to inferior design and quality of initial facilities as well as lack of maintenance. Although there are no reliable data available to quantify the impact of this situation it clearly poses a health threat and should be of serious concern. 14. As regards the poverty alleviation and distributional objectives, as many as one half the population of Nepal are classified as poor. Data are not available on actual beneficiaries of schemes at community level, although there is plentiful anecdotal evidence that disadvantaged social classes and castes are denied full access to public schemes. Therefore, it cannot be assumed that an investment strategy to encourage rural infrastructure, without additional design criteria built in, will necessarily alleviate rural poverty as is sometimes implied (HMG 1992). As will be noted later, urban water supply efforts may be regressive in distributional impacts. In addition, 4 This description is drawn largely from The Drinking Water Suply and Sanitation Sector Review and Development Plan (1991-2000) (HMG. MHPP 1991) hereafter referred to as the'SRDP. The SRDP provides an excellent description of sector institutions, past objectives and performance and deficiencies in past approaches. Its Executive Summary is presented in Annex 1. 7 efforts to improve health through in-home water treatment have been affordable only to the best off households (Annex 2). 15. There is no doubt that the environmental situation in Nepal is deteriorating under the pressure of increasing population density, chemical effluent, and lack of effective measures to control channel and treat effluent. 2. Adequacy of Water Supplies A. Coverage 16. Even the statistics available on service provided (as contrasted with statistics on fundamental objectives dealt with above) are sparse, conceptually dubious, and inaccurate. Annex 2, Table 12, summarizes all information available (as of May, 1992) in NWSC and DWSS on urban services for all towns according to a fairly standard list of indicators. The Annex is notable both for the incomplete coverage of towns, as well as the incompleteness of data for specific towns. 17. The basic indicator used in sector discussions is 'coverage" with safe water or sanitation. The coverage statistics are weak for a number of reasons. Firstly, information on actual service levels (safety, flows, distance, etc.) is lacking. Few urban water supplies are "safe." A strict interpretation of safety would show minimal coverage, and most of that probably from private wells in unpolluted areas. In some urban areas the extension of distribution (more coverage) without corresponding increases in water available is associated with declines in service quality. Coverage also does not reflect whether completed schemes are actually producing the planned amount of water. Secondly, official design standards (see box) may be inappropriate. There has been no effort to determine how these criteria are related to benefits as perceived by households, and it seems likely that they are deficient for some areas, and overly generous for others. Thirdly, the figures refer only to the population affected by official and NGO schemes: data on numbers of people served by traditional methods are not given. This clearly results in an excess service "gap". Fourth, covered populations are design populations, which exceed existing populations. Fifth, few data are available on sanitation. Casual observation does indicate however, that the situation is grossly unsatisfactory from the health point of view. Finally, the figures themselves are only very rough estimates, mostly by DWSOs, whose interest is in planning and implementing projects rather than service delivery. Despite the weaknesses of the data, however, it is worthwhile summarizing the situation for the urban and rural areas. B. Urban Water 18. Official coverage figures indicate that about two thirds of the urban population is covered by safe water supplies. The figures on coverage by safe water supply give a very optimistic view of actual service as in all but two urban areas, water systems are characterized by intermittent supplies. 8 Box 1: Water Supply Demand Design Standards DWSS and its predecessor organizations have had design standards since at least 1982. New standards are now in draft (Nepal Consult, 1992). These standards cover a variety of technical issues. For present purposes, the most essential ones concern the design demand assumptions. The main per capita demand features of these standards, which are similar to those previously (except as noted below) are: Rural Gravity Schemes - 45 1/c/d (65 in bazaar areas) Different amounts for institutions - 20% additional for livestock, where relevant - planning horizon: 15-20 years - peak demand 3 times average - all households within 50 vertical meters of a tapstand, and 150-250 horizontal meters Tubewells - <150 persons per well (previously 200) Urban (1982 guideline) - yardtaps - 65 l/c/d; plumbed households - 112 1/c/d, standposts - 45 1/c/d In Kathmandu alone supplies are available for a few hours a day during the monsoon and sometimes not available at all for part of the town during the dry season. The uncertainties of public supply provide an incentive for consumers to sink their own wells (a recent study identified 334 private wells in Kathmandu). In many situations, this may be an economic solution, but in the case of Kathmandu Valley, the water table is now declining every year. The respective performances in NWSC and DWSS towns are discussed below. 19. - Within NWSC, hard data on production and consumption are unreliable, but it would appear that over 40% of urban production is unaccounted for. By comparison, a network with 20% losses is considered acceptable internationally, while a network with over 30% losses is considered unsatisfactory. Unaccounted for water in Singapore, for example, comes to under 8%. NWSC is over staffed with one staff member per 49 connections. By comparison, each staff member in the worst performing utilities in Africa serves about 40 connections, while the best'serve 300. Singapore is about 400, while the number rises to 1,000 in some industrialized countries. Until the January 1993 tariff increase, it was estimated that NWSC's revenues from operation (based upon its then current tariff structure) for fiscal year 1992/1993 would amount to NRs 85 million while its operating expenses (including depreciation but excluding interest) would amount to NRs 151 million, implying a very high operating ratio of 1.77. Personnel costs represent 67.5% of total expenses. While the latest tariff increase should reduce the operating ratio to one on existing expenditure levels, lack of- 9 funds remains a severe constraint on efficient service. Most important of all, it is one cause of a complete lack of preventive maintenance and grossly inadequate regular maintenance (as an indication maintenance should be at least 0.5% of the revalued value of the fixed assets for civil works and pipes and 5% for the electrical and mechanical equipment. On this basis NWSC should spend around NRs 47 million per year which is seven times the actual amount spent.) For this reason existing assets are deteriorating rapidly. A fortiori, cash flows are not covering debt service or depreciation, so that there is no mobilization of revenues even for replacement of existing assets. For DWSS towns, the situation is worse, particularly concerning cost recovery and maintenance. As noted in Annex 2, Table 12, the data on DWSS performance is even more sparse than for NWSC. C. Rural Water 20. Official coverage figures indicate that about 40% of the rural population is covered by safe water supplies. In fact, there is little reliable information on the availability of "safe" water even in specific rural areas, let alone over the country as a whole, and no systematically collected information. Substantial external investments in a Management Information System in DWSS have not resulted in sustained flow of reliable data on service coverage or reliability. The coverage figures also give a very optimistic view of actual service as, according -to the SRDP and RTI 1990, 282 (92%) of the 306 piped water supply schemes completed by DWSS as of mid 1990 were in need of some degree of rehabilitation. Twenty-five percent of DWSS-installed tubewells were said to be inoperative at the same time (SETA. 1990, p.19). Many of the DWSS-implemented rural water schemes require rehabilitation shortly after completion. To a considerable extent, this arises from the DWSS approach to water supply, which is to focus on the hardware facilities, with minimal attention to the technical, financial or organizational arrangements for later O&M. It also arises from defects in design (also partly due to inadequate planning to take account of local demands and physical constraints) and workmanship. (See also para 28). 21. It should be noted that some investments (on a small but growing scale) have been made by NGOs as well as some bilateral donors to test a new approach to service delivery through greater community participation to the decision making process. This approach is demand driven and puts greater emphasis on software aspects. Preliminary results indicate that this approach leads to better sustainability (as schemes operation and maintenance are the beneficiaries' responsibility), greater efficiency through lower per capita investment costs, shorter construction periods and a lower financing requirement through greater community contribution to capital costs (East Consult, 1992). On the other hand, private and NGO schemes may have been concentrated in the more accessible areas. (HMG offices in remote areas are also said to be characterized by absenteeism (IIDS 1992(b)). 3. Environmental Improvements and Sanitation 22. The main environmental issues within the WSS sector concern sanitation, including wastewater collection, treatment, and disposal 10 (collectively comprised the term "sewerage"); stormwater drainage; and public and household latrines, and also the collection and disposal of solid wastes. Environmental improvements in the sector are thus often related to cleaning up water that has been polluted by domestic or industrial wastes, or simply by draining through urban areas. Solid wastes are included because in the absence of proper collection and disposal, they frequently clog the drainage ways. Another environmentally-relevant aspect of sector activities concerns the protection or rehabilitation of catchment areas for local water sources, a topic which has not yet received sufficient attention in the light of deteriorating environment and rising rural populations. 23. An accelerated degradation of the water, air and land resources of the Kathmandu Valley has been a high profile issue in recent years, and there have been a large number of (mostly donor-funded) reports designed to deal with it. The pollution of water and air resources by urban waste products is already believed to be causing serious health problems among the population and among visitors, with potential adverse consequences for Nepal's major tourism industry. If unchecked, this could cause a levelling of growth in the Valley economy, if not an outright decline. Dealing with this issue soundly requires more than sectoral inputs (see Box 2: Planning Kathmandu Valley Water Supply). Elsewhere in the country, the prolonged dry season means that municipal and industrial pollution discharges often have a significant impact on the quality of area streams. This is a serious concern in the Terai, as almost all factories discharge raw effluent to area streams without treatment. 24. As with water, sanitation coverage figures are subject to uncertainty. About 25% of the populations of Kathmandu, Lalitpur and Bhaktapur, accounting for about 9% of the total urban population in 1991, are served by a sewerage system, another 25% of the total urban population are believed to have private on-site sanitary facilities (pit latrines or septic tanks). The majority are unserved and resort to open air defecation on stream banks or on vacant land near their dwellings. (On the other hand, MSUD 1990 estimated that sanitation facilities were available to 47 percent of urban dwellers.) HMG estimates that 3 percent of rural residents are served (Table 2). Where sewerage facilities exist, treatment works are often found to be in disrepair, sometimes going under-utilized simply because of insufficient operating funds (for electricity, etc.) and the limited maintenance which they receive. Households have often been reluctant to connect to the sewerage system because of high connection charges. Treatment has also been affected by farmers tapping sewage lines to fertilize their fields. (Further details are provided in Section F on sanitation and drainage.) * 25. Drainage in most towns is totally inadequate, and plans and. appropriate works have commenced only in recent years. It is estimated that only 18 percent of solid waste is collected by volume, which reflects the inadequate resources mobilized for this purpose within the municipalities (MSUD. 1990). Only within major Kathmandu Valley towns has a solid waste collection system been implemented widely (with significant external support from a bilateral donor). Proper disposal sites have not been set aside. 11 4. Government Performance 26. Government started the water decade (1980) with very ambitious coverage targets (Table 2.) These were successively scaled down as performance lagged expectations as shown in Table 2. The Eighth Plan assumes somewhat more ambitious targets than the SRDP for the end of the decade of the 1990's. TABLE 2: Water and Sanitation Coverage: Targeted and Actual (%) Year 1990 1995 1997 2000 Urban Rural Urban Rural Urban Rural Urban Rural A. &TE Taract Water Decade 94% 67% no no (1980)(e) target target Mid-Decade 69% 52% 100(d) 90(d) (1985) SRDP 75% 50% 90% 75% Eighth Plan 72% 71% 100% 100% within within a Actual (b) -- 1990 66% 34% a decade decade (2002) (2002) Actual (c) -- 1992 62% 392 B. SANITATION Tarxet Water Decade 21% 13% no no (1980) target target Mid-Decade 20% 10% 100(d) 34.8(d) (1985) StDP 50% 12% 75% 25% Eighth Plan 46% 9% no no target target Actual (b)--1990 34% 3% Actual (c)--1992 34% 3% (a) Includes 252 of Kathmandu, Lalitpur and Bhaktapur households connected to severs. (b) Source: SRDP (c) Source: SRDP, Eighth Development Plan Sumnary. HMG/WHO 1988. See also Annex 2, Table 8 (d) Source: HMG{WHO 1988. (e) Source: Procter and Redfern 1986. This source also indicates that water coverage in 1985 was 84% in urban areas and 19% in rural ares. 27. The SRDP indicates that shortfalls in achieving targets have had as much to do with ineffectiveness of means as over-optimistic targets and inadequate resources. (Annex I, pp 4-6 lists the main sources of failure.) The Eighth Plan highlights four principal causes of shortfalls: (a) overambitious targets, (b) lack of institutions for service delivery, especially in the rural areas, (c) overly costly project designs, and (d) excessive costs due to delays in funding, inflation and central procurement. Particularly troublesome was the failure of investments to result in sustained delivery of services, with a majority of Government schemes requiring major rehabilitation within a brief period of their completion. This applies to urban as well as rural schemes. The two major immediate causes were: poor quality of construction (and sometimes engineering design), and inadequate 12 operation and maintenance. SRDP (Annex I, pp. 6-7) and Eighth Plan recommendations both stress that solutions are to be found primarily through institutional improvements, which should then make technical improvements possible.' 28. Above all, these sources underline the need for increasing user responsibility and sense of ownership, to be achieved largely through more decentralized planning and implementation including substantive beneficiary participation in all phases of schemes. Thus, for example, failures of construction quality have been related to inadequate oversight of contractors (or community groups) by appropriately experienced and motivated staff, and lack of serious follow up by executing agencies. In the rural areas, supervision of remote areas is also impeded by lack of funds for transport and subsistence. Quality of supervision is also unquestionably compromised by the de facto system of contractor payments to supervisors (SETA. 1990). This system gives minimal incentives to design schemes to meet demands cost- effectively, nor to ensure high construction quality. In brief, the problems are institutional. The Eighth Plan approach goes further than the SRDP in promoting governmental decentralization,6 and the need to involve the private sector, including NGOs and private firms. The view of this report is that the HMG diagnosis -- that the critical issues are institutional -- is basically sound. Moreover, the basic HMG recommendation for decentralization and consumer participation is also sound. What is now required, however, is to take planning for these objectives somewhat deeper than has been the case to date. 5 "It would appear that the primary constraint on rapid expansion of Nepal's WSSS sector development program will not be financial resources. It is more likely that institutional capacity issues will drive the pace of sector development. Government commitment to restructuring and retrenching for more efficient program decentralization will determine the rate of program implementation, and also donor interest in the sector. Also, it should be kept in mind that community-based projects will require longer planning and implementation periods, but will increase the likelihood of systems remaining functional in the longer term". (SRDP page 95) 6 The decentralization framework has been elaborated in the Village Development Committee Act, the District Development Committee Act and the Municipality Act, all of 1992. 13 5. IDA Performance 29. To date IDA has concentrated its investment operations in the urban water supply and sanitation sector with its approval of four credits: a credit of US$7.8 million (No. 470-NEP) in 1974; a second credit of US$8.0 million (No. 704-NEP) in 1977; a third credit of US$27.0 million (No. 1059-NEP) in 1980; and the fourth (and largest) project (the Urban Water Supply and Sanitation Rehabilitation Project, or UWSSRP, Credit No. 2239-NEP) of SDR 45.5 million (equivalent to about US$65.0 million) in 1991. In addition, the fourth project benefits from UNDP grant financing of US$ 3.36. IDA also administers a grant from the Kingdom of Norway for about US$2.5 million to carry out a leak detection program and an on site sanitation program. The fourth project is implemented by NWSC. 30. The Project Performance Audit Reports (World Bank 1986 and 1990) for the three IDA projects completed to date conclude that none achieved its stated objectives and that their poor performance was due to: (i) the extensive and tight Government controls including appointment of senior staff and consequent lack of autonomy. (ii) the total lack of a realistic financial base mainly due to totally inadequate tariff increases (in non compliance with the projects' cost recovery covenants). (iii) lack of provision of sufficient early institutional assistance to prepare the water utility for the work load and expected planning, operational and financial improvements resulting from these projects. 31. Partly in the light of this adverse experience, the main objectives of the fourth project are to (a) strengthen NWSC's technical, managerial, financial and operations/maintenance capability; (b) increase utilization of existing systems through rehabilitation and extensions; and (c) improve public health through (i) consumer education programs and (ii) improved quality and increased quantity of water to consumers. 32. At the base of the past failures has been a strategy to make investments in increasing water supply in parallel with financial and institutional improvements. Specific conditionalities have led to some temporary actions in the form of specific actions (e.g., occasional tariff increases, legislation on the NWSC and its predecessor organizations). But the results have been short term in the absence of strong HMG commitment to sustained improvements in institutional integrity, finances or technical quality. A basic question for the future is whether HMG will make adequate commitments, and whether donors will be willing to assist HMG in its resolve to implement them, through insisting on fulfillment o.F those commitments. 33. Nepal is not unique in falling short on institutional and financial agreements with the World Bank. A review of World Bank sector lending for the period 1967-1989 found that financial and institutional performance was 14 inadequate in a majority of the 52 countries covered. This study also singled out Nepal for particular weakness in this regard (World Bank 1992(b) page 39). The study also takes the Bank to task for devoting more attention to maintaining lending targets and disbursements than to ensuring adequate institutional, financial, and service quality performance by borrowers. Only one Bank operation over this twenty years was suspended for non-compliance with financial (and other) covenants. It is unlikely that Bank performance will be equally relaxed in coming years. There is currently heavy competition for limited development resources from many countries which are embarked on fundamental reforms. D. INSTITUTIONAL ISSUES 1. General 34. The principal overall institutional issue, as indicated in the 8th Plan Framework Paper, is to shift the main focus of HMG from direct service provision to facilitating the provision of services by a variety of private and local government entities in an efficient and equitable fashion. This requires reorienting governmental entities fornew roles and improving coordination among them. The Commission on Administrative Reform also proposed significant measures to devolve central government functions to.the private sector and local governments, to reduce staff, and to streamline government and public enterprise functions. The Implementation Committee was recently appointed to assist with formulating action plans for implementation. This issues paper cannot pretend to be comprehensive on institutional questions. It does aim, however, to highlight the institutional priorities in the WSS sector. 35. In addition to the general socio-economic criteria listed earlier for HMG intervention (paras 9,10) three managerial considerations must be borne in mind in designing actual interventions. These are the need to : (a) minimize the number of objectives served by each entity, (b) ensure that actual incentives, positive and negative, maximize the chances that all actors, private and public, will realize objectives sought by policy and avoid perverse effects, and (c), as part of (a) and (b) ensure that there are robust institutions which hold actors to account for fulfilling their obligations. 36. One pervasive factor underlying the analysis of the scope of public versus private sector activities concerns the need to remunerate government personnel adequately to perform their official functions. If there are administrative or political constraints on remuneration, it must be recognized that there will be equally strong -- if indirect -- constraints on what can be expected in the way of performance. In particular, if direct remuneration is insufficient, performance will suffer. There will either be insufficient (appropriately qualified) staff to accomplish the mission, or there will be excessive absenteeism or"diffusion of effort through moonlighting or outright corruption (staff motivated to stay on the job through payments from suppliers). In either case, outcomes will not be as expected and there will be a "government failure". The approach recommended here is to make a realistic appreciation of true staff costs. This may result in a need to raise wages, reduce staff numbers and to restructure programs. It is beyond 15 the scope of this issues paper to make detailed recommendations on staff remuneration, or staffing levels or on the detailed program changes required. Those areas where this consideration is likely to be most critical in the medium term are noted, however. 2. Central Functions 37. Notwithstanding the desire to decentralize, indeed, because of it, there is a need to scrutinize and improve performance of a number of central functions which cannot be delegated to lower levels of Government or to the private sector. These include: (a) establishment of policies and sector planning, together with monitoring and evaluation of performance in achieving ultimate objectives (e.g., health improvements); (b) establishing the sector institutional framework, including definition of government and private roles, and defining the legal framework; (c) oversight and control of Government agencies (including monitoring and evaluation of their performance); and (d) coordination of donor inputs. 38. Planning and Policy Formulation: Government has an irreducible responsibility to define policies, including defining overall objectives and targets in the light of available knowledge on relationships between goals, interventions and means. There is a need for a stronger central, supra- sectoral, planning and policy formulation capacity than has been the case hitherto, for several reasons. 39. Firstly, WSS activities involve many different Government agencies (MHPP, DWSS, MLD, MOH, MEC, as well as NPC and MOF local governments, in the first instance, but also Ministries of Agriculture and Water Resources). Efficient policies require interministerial co-ordination and trade-offs. The National Water Supply and Sanitation Committee, established in 1989, under the chairmanship of the MHPP with the purpose of refining sector policies, has not led to incisive improvements in policy formulation. In this, experience has not been much different from that of the Interministerial National Group established in 1979 to coordinate policy of the International Water Decade. Of course, this has coincided with a period of major political change. Nevertheless,.given the status of the MHPP as one sectoral ministry competing for resources, its chairmanship cannot provide the right perspective and context for defining fundamental policies and strategies which need equally to affect MLD, MOH, MEC etc. In brief, some supra-sectoral agency, such as NPC, needs to take a more active role in policy formulation. 40. Secondly, there needs to be more attention to sectoral planning in the context of ensuring that plans fit within an appropriate context, and then ensuring more consistent follow up. Just as defining appropriate "sectoral" policies may require oversight from a supra-sectoral level, the same applies 16 to at least some projects with important inter-sectoral implications. Box 2 discusses this point in the context of the Kathmandu Valley Water Supply, where an excessively narrow "sector" approach to defining issues may have resulted in excessive attention to overly costly investment proposals. BOX 2: Plannins Kathmandu Valley Water Suply The need for higher than 'sectorall level planning in the case of some important projects can be illustrated by the case of the Kathmandu Valley Water Supply. According to the Greater Kathmandu Water Supply Study (SMEC 1992), it will be necessary to supply water to around 4 million urban inhabitants in the Valley within 40 years (in a service area with 750,000 inhabitants at present). This assumption is based upon conventional procedures for forecasting population, not dissimilar to those used also in Halcrov 1991. Since previous studies had shown that existing within-Valley sources were largely committed, the study proposed bringing water from other valleys through a series of tunnels. The cost of water supply alone (including source works, major distribution mains, and treatment works, but not secondary and tertiary distribution or sewerage) is estimated on the order of US$ 190 million up to 2000/1 in 1992 prices. For several years during the peak construction period, the project would require more than 5% of the total development budget (i.e., more than the total sectoral expenditure on water and sanitation for all rural and urban areas). The report found this would be economic, provided that the NWSC was able to mobilize sufficient revenues to enable it to contribute to the investment. and to operate and maintain the facilities. What was not done by SMEC, as outside the ambit of their sectoral TORa, was to ask what would happen to future population if either water were not supplied or what would happen to population if users were faced with the marginal economic cost of water and associated sanitation, which normally doubles water cost. But addressing these questions, together with their other implications (e.g., what would be the other consequences, favorable or non favorable, of this level of Valley development? where else might growth be encouraged if not in the Valley? at what cost? administrative difficulty?) would require serious attention from a more comprehensive viewpoint than the sectoral perspective alone. The same applies to the failure to ask whether future water supplies might be more economically secured by transfers from Valley agriculture, with appropriate compensation to Valley farmers. Given the effects of urban sprawl, it is likely that some demand would be met by transfer automatically. The planning concern here is that consultants, donors and HMG have spent so much time and resources on studying the Valley WSS situation without these issues being addressed at an appropriate multi-sectoral level. Unless there is some attempt to secure appropriate intersectoral analysis of issues, many plans which are optimal from the sectoral point of view (assuming all the other sectors' problems are taken care of) may end up being non-optimal taken as a whole. The issue would be less urgent if Valley consumers were paying the full costs of investment and O&M of water and sanitation facilities they use. This would indicate that they valued the facilities at least at cost. It would also avoid their draining capital and recurrent resources from other regions and sectors. (see Section E on Resource Mobilization below). 41. Thirdly, some Monitoring and Evaluation tasks are supra-sectoral. Monitoring and evaluation of performance in achieving basic health and economic objectives is essential if programs are to be judged on the basis of results. It is necessary to distinguish monitoring of changes in basic indicators (e.g., health status, income) from monitoring the performance of specific entities or programs in achieving their output targets. The Eighth Plan indicates that the Planning Commission and sectoral ministries will be 17 strengthened to perform the latter, which is a normal function for oversight agencies. While a management information system was established in the late 1980's in DWSS to monitor sector performance, its activities have related mainly to tracking government project implementation, not level of service delivery, or health impacts. This is entirely understandable, given the DWSS mission to implement investments. Efforts are needed to develop more satisfactory indicators than the "coverage" figures used to date. 42. Monitoring and evaluation of performance of different schemes' effectiveness in securing health impacts is particularly important, especially in rural WSS, since so much investment is justified on health grounds. There is very little sound information for Nepal or elsewhere on the outcomes of alternative project packages on health in the long term, let alone their relative cost effectiveness. With one outstanding exception (HMG MOH 1987) there has been little research in Nepal on levels of morbidity or responsiveness of health to WSS interventions.7 While heavy short-term WSS project health education activities may secure improvements in health status in project communities, are these effects achieved more cost effectively and more permanently than changes in KAP through improvements in the regular health extension system and,health education in the schools? More attention is needed to the role which households themselves should play in ensuring better health and sanitation, either complementarily with public provision, or as a replacement. In the medium term, it is likely that immunization will play a more important role (Annex 3) and this may have implications for the nature of health-related interventions, especially in the rural areas. One specific example which requires follow up concerns defining more cost-effective measures for in-house water treatment (para. 100). Disentangling such issues requires adequate methodology, some inputs from highly qualified staff (at least initially including from outside Nepal), continuity of monitoring over an extended period, and comparable data collection from different schemes. 43. Appropriate staffing is critical for planning and M&E functions. It is unlikely that HMG can attract and retain staff with the required qualifications and experience to execute many aspects of this work. The widespread international interest in this range of issues may provide the opportunity to tap into international studies. Given the importance to Nepal alone of establishing more efficient interventions, however, action on this matter should not be made dependent on joining international efforts. It is 7 HMG MOH 1987 reports reductions in the incidence of diarrhea, roundworm and hookworm associated with increased use of water and sanitation in two study areas where water and sanitation schemes- were introduced; incidence also declined in the control area, however. That study supports the above-noted consensus that improvements in water supplies and sanitation will have significant health impacts only if they are associated with significant changes in KAP. It also suggests that some of the improvements came from Hawthorn effects, i.e., the very presence of.health and study staff may have affected local behaviors over and above what might be expected from hardware or regular training interventions. 18 essential to examine the possibility of longer term associations with local consultancies/think tanks for M & E and policy work. It is also recommended that the proposed UNDP DWSS Planning Support Project be re-formulated to review options and actions on the sector policy and planning issues, as well as more narrow functions for DWSS alone. 44. Establishing the sectoral institutional framework, including defining roles of different governmental organizations, reviewing roles of private sector organizations and ensuring appropriate legislation and regulations which encourage constructive activities while avoiding deleterious consequences, are unambiguously central Government functions. Among the more important potential functions to be dealt with (several of them are discussed further in other parts of this paper) are arrangements for ensuring an efficient and equitable allocation of water among different uses (Section G), arrangements for facilitating efficient programs by local governments and NGOs, utility oversight (regulation) and financial support (Section E), monitoring water quality, and undertaking such public functions as research and training which are unattractive to the private sector. 45. The institutional arrangements need to provide a clear separation in responsibility between policy making and monitoring, on the one hand, and execution on the other. Specifically, if ministries attempt to engage in detailed implementation instead of policy and performance oversight, or if operating departments are made responsible for policy, these separate functions become inextricable muddled, and neither can be competently performed. The current situation, in which DWSS is apparently responsible for sector policy, is untenable for this reason as well as the fact, alluded to earlier, that some important policy decisions must be taken at a supra- sectoral level. 46. One specific item which requires concentrated immediate attention is the appropriate role of central line agencies in the context of policies for decentralization to local governments. There is a need to phase out central implementation responsibilities in favor of local governments, parastatals, NGOs or community groups. Central agencies (existing or new) may have some advisory functions. In any event, it seems clear that existing staff and functions of DWSS are mismatched to the new needs, and very major restructuring, downsizing and perhaps even abolition need to be considered. 47. On the other hand, there needs to be a strengthening of central capacities for planning. R&D. M&E (as noted above) and human resource development. Thus, for example, the Central Human Resources Development Unit, established with UNDP/WHO assistance in 1983, still has not been institutionalized and is completely dependent on donor support. This may be fortunate, since the scope and nature of training need to be reviewed in the light of changing arrangements for implementation. SRDP recommended, however, a need to train about 8000 staff to achieve its limited coverage targets, and the total would be higher if full account were taken of attrition. While actual training services should be provided by a variety of public and private sector entities, HMG has an important responsibility to ensure that appropriate HRD entities are in place and that they are efficiently used through minimizing duplication, ensuring appropriate payment mechanisms, etc. 19 48. Oversight and control of Governmental Agencies is an obvious Government function. Areas best controlled by "functional" versus "sectoral" agencies need to be distinguished. This is required both to enhance efficiency through appropriate application of specialized skills and to avoid the inefficiencies which arise from having officials make tradeoffs aiong competing basic objectives at too low a level. Thus, setting and monitoring financial performance targets for Government-owned utilities would be better done by a "functional" unit of a general ministry or Board (e.g., MOF, or a public enterprise board or utility commission) than a 'sectoral" ministry such as MHPP which lacks the relevant specialized skilled and experienced staff. Similarly, responsibility for checking water quality might be better placed in an agency concerned with promoting health rather than supplying water. (This would not relieve individual water and sanitation entities of the need to monitor the quality of their product as part of their normal management procedures.) 49. Coordination of donor inputs: This function is delicate and difficult. Donors are expected to finance a large fraction of future sector expenditures. It is important that these expenditures contribute effectively to sound development patterns. This must be done in such a way that donors are able to fulfill their own objectives within their specific constraints. Defining sound programs is at best extremely difficult, given the substantive unknowns in this field. More effort is needed by HMG and donors to develop common lines of policy approach especially in those areas where diverse approaches prejudice effective operations. The objective would not be served by imposition of arbitrary rules regarding procurement, or resource mobilization or design standards. Instead, the objective requires clarifying basic objectives and approaches, and converging on best practices. There does need to be firm implementation of points which are agreed. The leadership for arriving at consensus on these issues should ideally come from HMG, but the practical arrangements should depend upon where resources are available, even if this means donor initiative. The most essential requirements in the early period at least are that focussed, regular discussions be held which include all WSS agencies. 50. Past policy failures are partly the responsibility of donors. The donor tendency to link institutional reform to major physical interventions can be counterproductive, since the engineering and technical issues become paramount (in order to ensure disbursements, etc.) and reform becomes a subsidiary objective. More mutual reinforcement of policy views and expectations among donors and HMG could serve to improve implementation. One area which deserves early attention is resource mobilization for urban WSS (para 123). Another concerns supporting institutional means for "wholesaling" external funding while stimulating genuine bottom-up participatory approaches in rural areas (para 95). 51. Concerted attention by donors and HMG to the larger issues might also help to improve complementarily among agencies, rather than the competitiveness which now exists. The opportunities for bilaterals to leverage grant funds for software with hardware funds from multilateral lenders need to be explored more fully. Large amounts of hardware finance, without adequate software (professional services, supervision), can corrode local participation 20 and project quality. Development of the working,relationships which make such cooperation possible takes time, but the investment should repay donor and HMG effort put into it. Donors should also be encouraged to share the results of their monitoring and evaluation with others in an effort to advance knowledge of the sector. 52. The challenge of coordinating with international NGOs also needs to be met. NGOs cannot afford extensive and unproductive contacts with the bureaucracy. To the extent possible, however, they should be consulted and encouraged to collaborate in the above types of discussions, not least since they often have relevant local experience which is outside the purview of local and foreign official bodies. 53. Summary on Central Functions: The following institutional issues and conclusions arise from the above discussion. (a) a stronger policy and monitoring capacity is needed at the central (supra-sectoral, NPC) level, both to coordinate water and sanitation sector policy among different entities, and to monitor performance in achieving results. (b) the nature, content and administrative responsibility for required policy, M&E, R&D and human resource development functions needs to be clarified. For too long, these activities have taken the back seat to direct service provision. An essential input to this review should be an effort to match functional requirements with existing capacities. (c) the ambiguities which arise when one department, such as DWSS, has both policy making and implementation functions need to be. eliminated through clearly separating administrative' responsibilities, preferable assigning policy making and monitoring functions to ministries, and their implementation to departments. (d) responsibility for direct service provision needs to be divested to local governments and private sector as soon as possible (more on this below). (e) the future role, if any, of the DWSS is uncertain since its capacities are designed for an obsolete HMG activity (direct service provision). (f) one essential input into all future sector planning is to clarify what staff are required for potential tasks and the true cost of securing adequately qualified staff. It will then be necessary to define transparent mechanisms for those costs to be paid. Taking account of true costs may result in a redefinition of some programs. It is also likely to result in more attention to engaging private consultants, think tanks, or university institutes for central and decentralized functions, while streamlining full time HMG staff. 21 (g) while the shortcomings of the past are fairly clear, and also the large policy directions for the future, much work is required on the details. There is substantial donor funding potentially available for assisting sector planning. The scopes of the proposed UNDP and ADB funded studies to strengthen DWSS planning capacity and to prepare a 7-year DWSS program need to be reworked, extended and co-ordinated to include a review of the above issues and to assist establishing a more viable HMG institutional framework for this sector. (h) HMG should engage the donors in discussions on the fundamental policy and institutional issues with a view to arriving at a consensus. This may take time. But there would be major gains in terms of making more effective use of donor and domestic resources. 3. Urban Sector 54. Background: As noted above, urban water supply utilities have not been managed to mobilize resources or to deliver services efficiently. Coverage is higher in the NWSC than DWSS-supplied towns (Annex 2,Table 12). Municipalities are currently too weak technically or financially to undertake water supply tasks, especially when DWSS or NWSC promises to provide service. In one case, however, Dhulikhel, the Municipality (formerly panchayat) and a local users committee have taken the lead in developing a new supply system with donor assistance (and temporary assistance from the DWSS). 55. Deficiencies in urban service delivery are due fundamentally to a range of institutioial weaknesses which affect DWSS and NWSC. Primary among these are insufficient finances, and an authoritarian administrative culture which is not attuned to service delivery to consumers. These problems are more acute in the case of the DWSS than NWSC: (a) at a Government Department under MHPP, it has no right to retain any revenues it collects (these go to the Treasury), (b) its District Water Supply Officers (DWSOs) are responsible to their superiors in Kathmandu for spending centrally-determined budgets rather than to local municipalities or customers, (c) DWSOs are responsible for all operations within their Districts, not only urban water supplies, which are typically only a small element in the total, and (d) the main DWSS mission is development rather than delivery of services or operations and maintenance. What monitoring exists is concerned with progress of projects and development expenditures. 56. The NWSC has evolved over 18 years from a Department to a Corporation with its own legislation (NWSC Act 1989). Following the most recent (1992) revision to the NWSC Act, the NWSC Board comprises representatives of the MHPP, MOH and MOF, the mayor of Kathmandu and six other Government appointees including one municipal official from outside the valley, the Chairman, the General Manager, a water quality specialist, a consumer representative, and an NGO representative. By convention, the Chairman is the Secretary of MHPP, and the General Manager is appointed by the MHPP. NWSC, a revenue-earning entity concerned exclusively with water supplies (and sewerage in the Kathmandu Valley) in only 13 towns, has a more suitable constitution to deliver services than DWSS. Nevertheless, a series 22 of reports over the years (CDM 1986, HMG Water Study Committee 1987, World Bank 1986 and 1990, Binnie and Partners 1990, Vermersch 1992) has highlighted significant operational shortfalls and problems which persist to the present. The crux of the problems is institutional, both internally, within NWSC, and external, in the relationship between NWSC and HMG. 57. Within the NWSC, the problems include a person-centered rather than job-centered organization and culture, lack of written documents, absence of monitoring and poor record keeping, excessive centralization (top-down decision making), reluctance of staff to take decisions, high turnover in key personnel, lack of contact and consultation with customers and municipalities, operation of branch offices as if they were Government district offices, and over staffing accompanied by insufficient experienced technical and managerial staff. Current NWSC management is nevertheless seeking to make improvements. Recent decentralization of operation, billing and revenue collection to NWSC branches at municipal level should facilitate more efficient future operations if NWSC sets and monitors appropriate performance targets. An MIS is in the process of development. Three technical assistance projects, associated with the IDA-financed UWSSRP, should shortly provide technical skills to assist NWSC management with improving internal management and relations with customers.8 58. It is the external issues which are most critical, however, as they are at the root of the internal ones. Specifically, NWSC's basic problem is HMG's failure to (a) establish clear performance targets (including requiring and approving a investment plan) for which NWSC can be held accountable, (b) refrain from detailed interventions in day-to-day operations, (c) allow NWSC to exercise control over such basic issues as staffing, (d) allow NWSC to charge tariffs which would provide a financial base to support operations; until recently, revenues covered only about three quarters of operating costs excluding depreciation or interest (see Annex 2, Table 9), (e) to appoint as Board Members or general manager persons with relevant business, utility or professional experience, or (f) to appoint an outside Chairman. So long as a Secretary is Chairman of NWSC, there will be an insuperable conflict of roles between policy making and monitoring on the one hand, and execution on the other, making major improvement in service delivery almost impossible. The recent decision to appoint,more non-Government Board members may lead to some improvement, but this is only a very small first step. 59. The above diagnosis for NWSC is consistent with the Eighth Plan diagnosis for all sectors. This highlights inefficient public administration, excessive central control and regulation, inefficient public enterprises, and top-down planning as issues requiring change. The Plan also adopts a far reaching approach to these problems, including decentralization, a shift from intervention and control to facilitation, Government divestment of activities a Reduction in Unaccounted for Water (contracted in August 1992), Consumer Eduction and Community Participation (underway), and Management Support (Chief Technical Adviser now appointed, but main consultants still to be selected). 23 which the private sector can perform more efficiently without compromising social interests, together with creating a policy and implementation environment which is conducive to private, including NGO, activities. The Plan does not discuss approaches to the urban water sector extensively, and indeed, a comparison of iiifferent versions of the Plan indicates HMG uncertainty about what direction to take. Thus, the Eighth Plan Framework Paper (HMG NPC 1992(a) p 45) stated that 'local communities will be given the responsibility of planning, implementing and managing their drinking water and sanitation systems in their areas. The responsibility of managing existing drinking water and sewerage systems in urban areas will be gradually transferred to the municipalities. The Eighth Plan Summary"(HMG. NPC 1992(b) p. 84) had softened this to read 'Municipalities and District Development Committees will be involved in urban area drinking water programmes." It is relevant that the Seventh Plan also called for setting clearer targets for utilities and for decentralization, and that these proposals were not follwed up. The Municipalities Act 2048(1992)) states that water, drainage, sewerage and solid waste are to be carried out with assistance from HMG-district level line agencies (Section 15(3). Under its policy framework paper for 1992/93- 1994/95, HMG has undertaken to consider establishment of a utilities commission to advise, inter alia, on utility tariffs. But it does not go so far as to consider delegating authority for tariff setting, although this will probably be required to depoliticize this issue sufficiently to enable orderly sector management. In short, it would appear that HMG is well apprised on the general issues and possible approaches, but has yet to clarify and take the difficult decisions which will be necessary if substantial improvements are to be secured. 60. The gap between the present unsatisfactory situation and an acceptable one is too large at this time to allow detailed definition of the ideal future institutional arrangements for the urban WSS sector. What can be done at this time, however, is to identify a general approach, a range of possible options, and some critical actions to build up capacities in the near and medium term, and to refine ultimate outcomes more clearly. 61. Obiectives and Options for Urban WSS: At a very general level, the institutional objective is to have in place appropriately staffed entities to carry out the full range of technical, financial, and managerial activities required to provide urban populations with adequate water and sanitation services while minimizing the need for financial or managerial intervention by HMG. It also needs to be noted that a major conclusion of the above-cited review of Bank lending experience in this sector (World Bank 1992(b)) was that success depends on substantial de facto autonomy for utility entities from day-to-day politics. Such entities must, of course, operate within a policy and incentive framework which leads them to provide services in an efficient and equitable fashion. The legal form may be as a public board or a corporation, or a private enterprise, with the most suitable arrangement depending on the characteristics of the specific country or city. What is critical, however, is a Government commitment to an efficient independent entity. This was a common feature in such diverse situations as Singapore, Botswana and Korea. The same study highlighted Nepal as an example of lack of success (Ibid., p. 39). 24 62. In the longer term, say 10 years, the above institutional objective might be served by one or more of the following institutional arrangements, allowing for different solutions in different individual towns: (a) municipal departmental operation; (b) municipal corporation; (c) utility owned and managed by users committees (as in the case of Dhulikel) or on a cooperative basis (e.g. Santa Cruz in Bolivia); (d) local branch of NWSC or a similar public-sector Corporation. To the extent the Government Corporation route is followed, NWSC should probably eventually be divided into several corporations to enable more responsiveness to local situations, especially if and when the number of towns for which it is responsible increases; or (e) concession to a private contractor to invest in and operate the facility. This option may be particularly interesting in the case of new and growing agglomerations in the Terai without public supplies. There may be places where private entities could take advantage of economies of scale and make a profit by providing a higher standard of service at lower cost than could households or businesses using their own wells. Competition from own-supply would provide a competitive check on monopoly profits. 63. The above list excludes a long term role for DWSS in service delivery (as contrasted, possibly, with some advisory, R&D or human resource development functions). This is because a government departmental structure (with its rigid budgeting, top down organization, and noncommercial approach) cannot satisfactoiily deliver urban water supply services in general, and certainly not in so many diverse and widely separated centers as exist in Nepal. The possibility of municipal departments is retained on this list of options for the present, however. While municipal departments suffer many governmental problems (difficulty of raising tariffs, a tendency to use funds for investments instead of system operation and maintenance, and interference in operations by municipal officials), they may.be effective in some centers with technically undemanding systems and with small enough populations that accountability by departments to elected officials and by both to voters is reinforced by personal contacts and traditional social ties. Experience in Malaysia, however, is that water utilities run as municipal departments are less efficient than those run by more independent authorities. 64. Within each of the above options, there would be scope for making use of the private sector, including, in increasing order of completeness, (a) service contracts to undertake some utility functions (e.g., meter repair, billing and collection, treatment plants or p umping station operations, etc.). It is anticipated that virtually all design and supervision tasks can be most efficiently performed by consulting firms; 25 (b) management contract (management of the whole utility on a fee and profit sharing basis); or (c) lease contract (contractor leases and manages the utility and provides working capital). This pattern has met substantial success in Ivory Coast. 65. At the national level, all of these options would require appropriate Governmental institutions to: (a) avoid adverse consequences of monopoly on tariffs and service levels; (b) monitor conformity of performance with urban water supply regulations which define the rights and obligations of water utilities and their consumers; and (c) negotiate and monitor performance contracts with, and to take appropriate actions to improve performance of, public sector corporations, 66. Strategies and Actions: The general thrust of the actions required to start moving towards the objectives are: (a) more decentralization, and associated with that (b) more accountability by utilities to their owners (government or municipalities) and their customers, which in turn implies (c) clearer definition of objectives and monitoring of performance both within organizations, and by oversight bodies, and (d) a more continuous approach by HMG to defining and refining policy. 67. The most important single action required in the immediate term is a firm commitment by HMG to develop more self-sustaining autonomous urban water and sanitation utility operations.' Absent such commitment, action on the detailed points listed below is unlikely to be effective: present such commitment, even partial action on many details can be expected to lead to a favorable results. 68. One essential component will be immediate commitment.and action to allow improvement in the financial status of water utilities through charging realistic tariffs to their customers. The financial issues are discussed separately in Section E. 69. Once the major commitment for-greater autonomy is made, there will be several immediate subactions. These are listed under four subheadings: 9 Sanitation is more complicated than water, and is discussed further in Section F. 26 (a) urban sectoral HMG actions, (b) HMG actions regarding NWSC and NWSC towns, (c) actions for DWSS and DWSS towns, and (d) internal NWSC actions. 70. At the urban sectoral level, HMG needs to: (a) appoint an appropriately qualified firm to assist with defining the institutional options in detail, together with action plans (hereafter urban utility consultants or UUC). Nepali professionals are fully aware of the general issues, problems and general approach. The extent and complexity of the reform required, and the desirability of taking full account of international experience is translating broad policies into detailed actions, probably imply that this firm should be foreign, however. It should make use, as appropriate and available, of local staff. HMG rather than donor execution is recommended, since HMG needs to take full responsibility for this task, and assign staff of the requisite standing to manage it. A firm is recommended (rather than engagement of individual consultants) to facilitate the work and to enable HMG to focus on the findings and recommendations, rather than the minutiae of study management. Appointment by HMG of appropriately qualified consultants with satisfactory TORs would be an initial and essential indicator of HMG commitment to reform. Given the importance of this task, IDA would have no objection to UWSSRP funds being used for this purpose. HMG may also wish to explore other funding sources, although the search for funds should not become an excuse for delay. (The present consultancies under the UWSSRP deal with strengthening aspects of NWSC management and operations, but do not extend to the more fundamental institutional issues now under discussion.) (b) study and make substantial improvements in the legal and regulatory framework, specifically, through: (i) establishing a National Utilities Commission (possibly on lines recommended by the Pokhrel Commission) which would be responsible for regulating tariffs of all utilities, not only water, with a constitution and representation which depoliticizes this function to the extent possible. (See Section E6 below). (ii) formulation of urban water supply regulations which would clarify the rights and obligations of water supply entities. The draft Drinking Water Regulations under the Water Resources Act 1992 allow private operations according to agreements with the Drinking Water Authority, but this needs to be elaborated and codified to facilitate decentralization through clarifying the rules of the game for existing and prospective public and private operators; and (iii) establishing an appropriate HMG entity to negotiate and monitor performance of HMG-owned utilities in terms of their Performance Agreements. (See below para 7(b)). Monitoring is 27 likely to be more efficient if it is carried out by a specialized entity with a small staff highly qualified in management and financial analysis, rather than by a sectoral ministry. Sectoral ministries may be called on for technical inputs as required. The extent to which the utilities commission could perform this role, or whether it requires a specialized unit of, say, the Ministry of Finance, deserves attention by UUC. 71. As regards the NSWC, HMG needs to: (a) restructure the NWSC Board initially in two significant respects: (i) appoint as soon as possible a non-Government person with strong managerial and policy background as Chairman of the NWSC. Termination of a Secretary as NWSC Chairman will be a significant indication of commitment to reform since it will eliminate one source of the current structural confusion between policy and implementation. Eventually, it may be desirable for Board members to elect the Chairman from their number. Once NWSC becomes more responsible and the Board is strengthened, it would also be desirable for it, rather than HMG, to appoint the General Manager. (ii) appoint to the Board a majority of members representative of users (e.g., Chamber of Commerce and Industry, consumers groups, etc.) and with relevant financial, managerial or technical competence. The representative members should be selected by the users, and not be Government-selected appointees to represent such interests. (Initially, this could be done through agreement by the Minister to appoint persons nominated by the relevant bodies. Eventually the principle of representation should be incorporated in the Act.) (b) to negotiate a Performance Agreement with NWSC, which sets out clear undertakings by NWSC and HMG regarding service delivery (quantified targets in terms of connections, supply, quality parameters), financial performance, the investment program for the NWSC, monitoring arrangements, and the procedures for periodically updating the Agreement. This would need to be associated with a suitable replacement of Articles 23 and 25 of the NWSC Act 1989.10 10 These are the only parts of the Act which define NWSC accountability to the Government. Article 23 states that "HMG may issue directions to the Corporation to comply with such directions." Article 25 states "The Corporation shall maintain contact with HMG through the Ministry of House and Physical Planning". Efficient operation obviously requires that these be deleted and more satisfactory arrangements substituted. 28 (c) to examine means for the provision, through public or private enterprise, of technical assistance in all aspects of utility management and operation to decentralized utilities. While in other countries, associations of local utilities have come to play such a role, this may be some years off for Nepal, and this may become an NWSC function; (d) to allocate responsibility for more towns to NWSC as NWSC management and technical capacity increase 72. As regards the DWSS Towns, the following actions are recommended: (a) review, with the assistance of the UUC, the status of each town supply system with a view to adjusting budgets as required to secure more satisfactory operations in the short term, and also to develop a strategy for the longer term; (b) actively explore whether other entities may be interested in taking on management responsibilities (municipalities, users committees, private organizations, as well as NWSC), and develop a timetable for divestiture of DWSS towns to other entities. It is important that these towns not be handed to NWSC before it has been strengthened, however; (c) minimize any investments in repair of DWSS town systems (except to avoid imminent disaster) pending transfer of responsibility to more appropriate agencies; and (d) No new supplies should be started in existing or new towns by DWSS, since this would increase the probability of more unsatisfactory systems and create subsequent transition problems of which there are already enough. Any new town supplies should start under authority of the municipality, NWSC or a private contractor, possibly with technical assistance, if desired. They should not receive any HMG or donor funding without a credible plan for technical, managerial and financial viability and sustainability. 73. Carrying out the above activities will require inputs from at least DWSS, MHPP, NWSC, NPC and MLD (as regards local government aspects). How best to organize the work requires attention. 74. The main immediate.actions by NWSC are to: (a) make substantial internal efforts to improve basic technical management and skills to make the NWSC a more consumer-oriented and commerpially viable entity. Special emphasis is required on improving financial management, customer relations, reducing unaccounted for water (a series of technical and customer related activities), improvements in metering, improving internal management including better accounting, MIS, staff development, and a concerted approach to improving internal capacity to deal with planning and development, as well as project implementation and 29 O&M."t Strengthening these various functions will involve some structural changes, as well as management improvements and training. Assistance for many of these items will be provided by ongoing or soon to commence technical assistance under the UWSSRP.12 Therefore, while these items are important, they are not elaborated here; (b) decentralize its operations more thoroughly by making each service area a profit center defining performance targets and following up on performance. Strengthen the capacity of central management staff to carry out these planning and monitoring functions; (c) establish committees for each town with representatives of users and the municipality. The committee functions will be to advise on developments proposed for the municipal system, to review performance, and to communicate utility concerns to the public. These committees may generate relevant experience to facilitate later formation of municipal utility Boards; (d) codify its operating guidelines, as these evolve, into by-laws under the NWSC Act. (e) actively explore service areas/localities in which private operations/contracts may be more cost-effective than direct NWSC operations. This will also involve drawing up basic terms and conditions (pro forma contracts) for different types of intervention (service contracts, management contract, leasing contracts). 4. Rural Sector 75. Background: Past RWSS has been driven, with the exception of some NGO programs, by ambitious coverage targets, executed by DWSS either alone, or supported by major donors, especially UNICEF and ADB. Programming systems included, in principle, local needs assessments and clearance at District level, review at regional level, and approval at the center (by DWSS, MHPP and NPC/MOF). In practice, there was gross overprogramming due to pressures at local and central levels for more projects than could be constructed under the budget. As a result project completion periods stretched up to a decade, and there was enormous waste in the form of investment tied up in partially completed non-functioning schemes. Vagaries in selection and design of projects were facilitated by the absence of reliable data on existing supplies, deficiencies or options for specific areas. Programs supported by UNICEF avoided some of the consequences of overprogramming by insisting on 11 An initial listing of organizational and technical items from Vermersch 1992 appears in Annex VI. 12 See footnote 8 above. 30 implementation of specific schemes in specific areas, and using the leverage of counterpart contributions of staff and materials to secure timely release and use of HMG resources. 76. Even after completion, however, with the partial exception of some UNICEF and NGO schemes, most rural water schemes failed to provide the water expected, and some any water at all. This was partly due to inferior initial construction, but also due to inadequate arrangements for operations and maintenance of schemes once completed. Following evaluation of this situation (especially by UNICEF, see also SETA. 1990) it became clear that sustainability would require more community involvement in O&M, and that this would require a greater sense of community ownership in schemes. 77. Following these findings, MHPP issued RWSS Directives (the first issued in 1990, and updated since) which required that user committees be established, request schemes, and undertake most O&M costs 1 as a condition for proceeding with schemes of up to 1,500 population. To the extent that the Directives have been observed at all, implementation has tended to be proforma and user groups exist more on paper than as effective agencies in service delivery (East Consult 1992, IIDS 1992(b) p.14). 78. The Eighth Plan proposals mark a considerable advance over the Directives, although there remain considerable uncertainties and inconsistencies about the details. The Plan states that (a) only NGOs, private firms and community organizations will be responsible for construction, repair and improvement programs of shallow and deepset tubewells, wells in the Terai and schemes which benefit fewer than 500 persons, (b) District Development Committees (DDCs) will be responsible for preparing district plans, giving priority to schemes with lowest per capita cost. This same criterion will apply to deciding whether to complete ongoing high cost projects or to rehabilitate large schemes, (c) all schemes, including Government ones, are to involve community participation at all stages from planning to 0&M, with the details, in the case of Government schemes, to be worked out over time. On the other hand, the Plan also states that MHPP or DDCs will select private or public entities to undertake specific schemes, and these will adhere to designs prepared by the MHPP or DDCs. The Village Development Committee Act 2048(1992) also appears to require VDC approval of NGO projects (sections 23(3) and 26(3) in particular). Care is required to ensure these rules are not implemented so as to stifle the energy, voluntarism and initiative which constitute the comparative advantage of private organizations in service provision. Indeed, there is a need to continue to allow a variety of approaches, to monitor which are successful, and then to encourage diffusion of successful innovations. 79. Despite HMG's decentralization objectives, the DWSS remains responsible in 1992/3 for a budget of NRs. 1054 million (out of a sectoral 14 The exceptions concern pumping charges and repairs. These exceptions need review in the light of implications for design and sustainability. 31 total for urban and rural WSS together of NRs. 1210.7 million). In the interest of decentralization, MHPP has delegated authority to DWSOs to approve estimates of up to NRs. 5 million, and tenders up to NRs. 20 million. Initial experience indicates that there has been no reduction in over programming. since many new projects have been started while there remain large numbers which are incomplete. While the 500 person criterion is perhaps useful as a first attempt to define activities not suitable for DWSS implementation, it does not go nearly far enough (see below). The latest budget has introduced a small grant (NRs 15,000 per VDC) for VDCs to spend on WSS schemes in their areas. 80. RWSS Institutional Objectives: The major institutional objectives concern definition of the decentralization process, and ensuring adequate community participation. Substantial and concentrated work is needed to develop a decentralized system if the past situation is not to reassert itself. According to the Eighth Plan chapter on decentralization, details will be worked out over the next two years. The major decentralization issues include: mechanisms and criteria for allocating the sectoral budget to local bodies, means for monitoring performance of those bodies, providing incentives for improved performance, assisting local bodies (DDCs, VDCs) to develop . competence in planning and implementation, finding efficient means to ensure accountability to local users and the long term role for central line agencies in RWSS. Several of these issues, such as funds flow and oversight of local government performance, are generic to the decentralization process, and receive little attention here. This paper focuses on points of specific relevance to RWSS. 81. RWSS Planning: Arriving at a satisfactory decentralized RWSS planning system requires clarification of several issues. Firstly, there appears to be a substantial difference,.at least in principle, between the comprehensive area-wide planning approach recommended by the Eighth Plan and the voluntaristic, bottom-up, community demand-driven approach. (This should not be confused with the traditional political demands for projects by local politicians which are part of a centralized system.) If projects are based on strong community demands, will the result'be a patchwork of coverage, possibly with the most favored areas being served and many of the least advantaged being left out? Will such a patchwork approach be economic (as compared with a more systematic approach to cover whole areas in a systematic fashion)? Secondly, there is the issue of just what service standards should be planned for or considered adequate. Since public funding will be involved in this, there must be review and decision on procedures and criteria. 82. Making firm judgements on the cost-effectiveness of comprehensive plans, or desirable design standards, is currently-impossible, due to a lack of basic data. Comprehensive district-wide inventories and plans are now being drawn up for the first time under the FINNIDA-supported project in Lumbini Zone. The FINNIDA project surveys are showing large variations in rural service levels. What is still unknown is how the levels of satisfaction/dissatisfaction with these systems are correlated with service standards, economic benefits, or costs. Thus, for example, the existing design standards call for providing 45 1/c/d (Box 1 above). But ex-post analysis of EEC-supported, UNDP/DWSS-implemented community water supply schemes found 32 usage of only 85 1/hh/d, or about 15 1/c/d (SETA 1990., p 72). Over-provision of capacity is expensive and wasteful. There is no evidence for significant economies of scale in RWS (Procter and Redfern. 1986, p. 14), but DWSS schemes nevertheless tend to be larger than those implemented by NGOs and UNICEF community-based schemes. It may be that the community-based schemes are able to achieve more intra-community compromises regarding use of local water sources, whereas DWSS tends to avoid such controversies in favor of finding and bringing water from further, less contested, sources. The DWSS contract system also provides strong incentives for larger schemes, whereas the community-based approach, with the need for up-front community contributions and involvement, motivates a focus on smaller, more manageable ones. For neither type of scheme is there good evidence on whether the less advantaged social classes or castes are indeed served. It is also unclear whether a community-based demand driven approach would, in the end, provide comprehensive district coverage. 83. Once the FINNIDA experience is available, it will be essential to review appropriate design standards for all schemes which attract public funding. This will include definition of criteria, such as the desirability of setting maximum per capita subsidy levels which result in optimal local contributions and avoidance of uneconomic projects. Given the availability of rural water sources, and the limitations of community management of operation and maintenance, defining criteria for determining maximum scheme size may be appropriate. The Eighth Plan emphasis on giving priority to low (per capita) cost schemes and source improvement works will be potentially helpful. Its effective application would, however, require that low cost as well as high-cost alternatives be identified in the first place, which presupposes comprehensive District inventories and plans. Following the FINNIDA project experience, it will also be possible to assess the costs of comprehensive District planning, the staff necessary, and the potential utility of such an exercise. 84. Central Department Roles in RWSS: There are no economic or policy reasons for a central line agency to have a continued independent role in planning and implementing water and sanitation projects. RWSS is very much a local function, without significant interactions across district lines. The Eighth Plan, however, appears to foresee a continued role for sectoral projects funded and overseen by central-line agencies as well as decentralized projects funded by block grants to local governments. Given the past inadequate performance of the centralized approach in RWWS, however, the justification for delaying or compromising decentralization is unclear. While it is administratively convenient to bilateral and multilateral donors to support projects through a single central line agency, they need to fashion, with HMG, alternative mechanisms which better meet quality and decentralization objectives. 85. There is an issue of the central role in providing qualified staff (especially engineers and overseers but also software personnel in community development, health education etc.) at the District and Village level to assist local government, NGO and private initiatives. Whether there is a role for a central technical department to provide technical assistance or to second staff to DDCs/VDCs or communities needs-attention. If so, the 33 composition of such a department needs to be decided. One recent study (IIDS 1992(b)), for example, recommends on grounds of economy that district offices of DWSS, Irrigation, and Roads department be consolidated by end-1994, after which their main function would be to assist DDCs and VDCs. It might be noted however, that the District Technical Offices, provided by the MPLD before 1988 to assist panchayats with technical aspects of their projects, were often of low quality (Procter and Redfern, p.52). Certainly, departmental hierarchial structures and incentives are not well attuned to provision of advisory services to decentralized entities. 86. One fundamental issue in ensuring a critical mass of relevant skills at local level is not so much that of organization or mechanism, but incentives, including staff remuneration and level of subsistence and travel allowances. Government offices are perennially short of subsistence and travel funds, which is a major cause for poor field supervision. Government salaries are also too low to attract and retain technical staff with the required qualifications and experience. Many successful NGO and externally- aided projects include substantial funds for ensuring adequate travel, and often engage local technical staff at salaries much higher than HMG rates. These schemes also benefit from varying degrees of oversight by outside staff, which tends to ensure that performance is judged at least in part in terms of fulfillment of explicit project objectives (sustainable water or sanitation, cost effective schemes, etc.). NGO staff are also usually motivated to meet community needs, independent of remuneration. In the case of HMG departments, the de facto system of contractor payments to engineering staff may allow retention of qualified field staff; but it militates against the design and implementation of satisfactory sustainable schemes. Some knowledgeable sector participants go so far as to recommend the elimination of all contractor executed schemes in order to eliminate these perverse incentives. It is recommended here that there should be a complete moratorium on all new contractor schemes until this issue can be systematically reviewed. 87. It is beyond the scope of this paper to make detailed recommendations on wage or staffing levels. It can, however be recommended that the true costs of service delivery under various modes, including overhead costs, need to be studied. Such a review will result in an appreciation that the ratio of software costs to hardware must be much higher than now assumed. This may result in an appreciation that the rate of progress in achieving "coverage" on past definitions will need to be reduced from plan targets. It should also help to clarify options on how best to make use of the funding available for software and hardware from different donor sources. So long as true costs are understated, there will be no incentive for private provision of relevant services, and this should have a larger role in many areas (e.g. design of schemes, supervision). In brief, sound planning requires that HMG, NGOs, bilateral donors and multilateral lenders take a clearer and more realistic view of the real costs of software, design and supervision costs, and ensure that these are more adequately and transparently funded in ways which motivate performance to achieve clear and explicit objectives. 88. Community-Based Approaches: The main medium-term institutional objective in the rural water supply sector should be to find means to increase 34 the capacity and role of the users in planning, implementing, and operating and maintaining their water systems to ensure greater sustainability than in the past. Indeed, one way of expressing the ultimate objective is to transform the users from beneficiaries into customers and managers who take full responsibility for their water supplies with the assistance of outsiders -- government or private -- as required. So far as can be judged by successful instances of schemes developed in cooperation with NGOs, schemes designed with (rather than for) communities tend to be smaller than typical DWSS schemes, make more use of community resources -- water, manpower and funds - and to result in more sustained outputs.15 Similar conclusions have emerged from experience in the irrigation and forestry sectors. 89. To be meaningful, participation needs to include decision-making on the issues of service levels, technology choices and siting, modes of service delivery operations and maintenance at the lowest appropriate level. Non- formal educational approaches, such as those already used by NGOs and some HMG agencies have an essential role in community-organizing and decision-making. There is already a high level of demand for rural water supply and local initiatives by Nepalese to provide their own services. Strategies to improve water supply must take stock of such existing human and material resources, and enable users to build simple and sustainable management systems. 90. Community oversight could play a larger role even in such technical areas as improving construction quality. Community committees could be shown pictures of similar works elsewhere so that they have a model on which to judge the progress of their own works. Nevertheless, villagers will not normally be in a position to judge the quality of a polythene pipe, or to judge whether it has been laid with sufficient protection. Therefore, there is a need for appropriately trained technical personnel with adequate mobility and incentives to ensure the application of carefully conceived technical standards to complement community participation. 91. It is doubtful whether Government institutions, whether at local or central level, by virtue of the way in which they are organized, can be motivated to follow a community-based approach. The opposition is between Government "top down" programs proceeding according to macro coverage targets and standard designs and procedures with fairly tight timetables, versus participatory "bottom up" approaches which move at a pace, in directions, and according to patterns reflecting private and community concerns and desires. The very essence of "participation" involves voluntarism by the participants (Picciotto., 1992), and it is rare that this can be brought about within bureaucratic criteria and budgetary timetables such as those set out in the WSS Directives. 92. Concrete actions by outsiders (outsiders to communities) will be needed to stimulate community actions. Many (most) communities lack experience in cooperative action, are used to dependency on Government, and lack relevant knowledge (e.g., on health issues, technical options available). 1 Annex 4 describes the role of Community Participation in the RWSS Sector at present. 35 Their capacity to act must be increased before they can participate meaningfully in many programs. But community weakness does not imply that existing government agencies should continue wasteful programs; nor does it follow that existing service delivery entities could or should transform themselves into efficient community development agencies. The SRDP proposes that DWSS should do so through modifying administrative directives and engaging appropriate staff (women mobilizers, etc.). This idea is further pursued by a DWSS/WHO study on improving cost recovery (SASCON. 1992, p 92-6). While there are some DWSOs who have the interest and ability to take on this new role, these may be exceptions. Past experience of community participation under MPLD CWSS schemes, which included development of users' committees, leaves substantial room for skepticism about the ability of HMG agencies to organize communities unless some new ingredients are included (see for example, Procter and Redfern, 1986. and WHO 1988(a) p. 21). Specific projects (e.g., UNICEF, FINNIDA) can confidently move in this direction, but as noted above, these projects include special oversight arrangements and supplementary staff and field allowances. The extent to which this approach could be generalized to the sector as a whole by HMG agencies, without strong external technical oversight and additional finance for software, is doubtful. 93. In the urban areas, user organization and participation is also essential. There are important international precedents, such as the Organi Pilot Project in Pakistan and urban solid waste management projects in the Philippines, where community participation was successful in extending provision of a variety of services, as well as introducing major cost- efficiencies and stronger sustainability. There are precedents for collective action in Nepal in community sewers in greater Kathmandu, although the technical quality leaves much to be desired. The scope for organizing stand- post user groups to maintain facilities and to pay for the water consumed should be explored, as well as for securing community input into utility management activities (e.g,. identifying leaks). Public oversight of construction in urban areas might also be useful (e.g., in ensuring that pipes are laid and standposts are installed at agreed locations). 94. In both urban and rural contexts, there needs to be a systematic review and experimentation with (a) institutional means for securing enhanced participation, (b) effective education approaches to securing participation and changing knowledge and practices, and (c) measures to improve the managerial and technical effectiveness of community user groups. CP components of projects will require funding, and probably substantially more than the frequently cited 1 to 5 percent of past projects (WASH, page 88). As community contributions are increased as a percentage of project cost, the proportion of CP activities will become a substantially larger fraction of budget costs and donor contributions. 95. Rural Water Supply Fund: There is a need for developing new mechanisms which provide active encouragement to "bottom up" approaches to rural WSS delivery which meet the test ,of economy and sustainability. The proposed RWSS Fund, now under preparation for possible external financing, would be one such mechanism. It would finance schemes for specific communities which meet economic and sustainability criteria, whether prepared by communities themselves, or with the assistance of private or public 36 agencies. Project preparation activities have still to resolve basic issues such as the Fund's constitution, its administrative location, criteria for selection of schemes, administrative means for carrying out its tasks, including appraising adequacy of individual projects proposals and monitoring performance of specific projects. 96. Summary of Actions for RWSS: In summary, on the rural sector, the following actions are recommended: (a) more concentrated efforts to define a viable decentralization strategy for delivery of rural WSS services. In addition to the general issues of funds flows from central government to local governments and the nature of central oversight of local functions which, because they are general, are not discussed in detail in this paper, the actions of most concern for RWSS include the need to: (i) refine the approach to local level planning and programming, including review of design standards (taking special account of the results of the FINNIDA-supported project in Lumbini Zone); (ii) eliminate central department responsibilities for RWSS service provision in the rural areas in favor of building up local government, NGO and community capacities; (iii) develop a viable strategy to ensure availability at the local level of required technical staff for community development, education and technical functions. This may be through one or more central service departments, local government staff, NGOs, or the private sector; (b) study and confront clearly the required costs of staffing desired local functions, and then review the feasibility of desired programs in the light of their likely true costs. Existing HMG rates of pay and allowances are inadequate to secure good performance, as judged by the fact that successful INGO and donor projects have to pay substantially more in pay and allowances, and as can be inferred from high absenteeism and poor performance in HMG programs; (c) an immediate moratorium on any new contract-built schemes to avoid the harmful effects of the perverse incentive system under which contractors pay staff charged with supervising them. Following review of the planning system, design standards and staff remuneration mentioned above, review whether there is any role for contract-executed schemes (as contrasted with community-executed schemes) in RWSS; (d) community-based approaches to RWSS must be promoted-through assisting and empowering communities to play a larger role in all aspects of projects, from identification through operation and maintenance. It is unlikely that existing HMG agencies can be 37 restructured sufficiently to promote CP to the degree required without drastic changes in organization and incentives; (e) Substantial efforts by HMG, donors and NGOs are needed to try different methods and techniques which meet basic requirements of economy and effectiveness, rather than to straight-jacket all programs into a single rigid model. HMG and donors then need to monitor and evaluate performance with a view to replicating successful approaches; and (f) the proposed Rural Water Supply and Sanitation Fund deserves strong support by HMG and donors as a possible mechanism to stimulate a "bottom up" as contrasted with "top down" approach to RWSS. 5. Private Sector 97. The Plan statement that efforts are needed to increase the role of the private sector needs to be followed up. Impediments to private provision, often arising from well intentioned but misguided efforts, need to be eliminated. Specifically, the system for supplying subsidized pump spares., makes it more difficult for communities to secure spares and keep their schemes running. It also stops private traders from supplying this item. Similarly, production of latrine parts by DWSS precludes private producers developing a capacity. Efforts to ensure "high quality" parts (pumps, pipes) through international procurement may also have perverse effects by not facilitating local supply and reducing availability through market channels of spares for maintenance. 98. One school of thought is that minimum standards must be adhered to regardless of whether the item is available locally, and if necessary, be purchased abroad under international competitive bidding. This leads to centralized approaches. The other school considers that only items available on the local market should be installed, since repairs and replacements will be more feasible for community groups. If actions are also taken to increase the demand for quality, it is argued that the quality of goods locally supplied will increase. 99. There is a clear need to evaluate how communities now maintain facilities. RWSG-SA has proposed a study and evaluation of the operation and maintenance of shallow tubewells in the Terai, which should, among other things, examine the cost-effectivene-ss of different qualities of material in terms of service actually rendered. There may be a need to increase the ability of the local market to supply equipment and spares for rural water supply schemes. Measures might include assisting manufacturers to improve the quality of their existing products and to introduce new products, and adjusting designs to suit local requirements (e.g. design for lower pressures at tap stands on gravity s*stems so that locally manufactured taps can be used). 100. Given the limitations of public supply of water and sanitation services, identifying and promoting household level solutions will be an important element in achieving health objectives, in particular. One 38 important example concerns reviewing existing advice on household level water treatment in favor of more cost-effective approaches, which may also provide to be of interest to the market. Current HMG advice to boil water implies -cost,-mostly for energy, about thirty times higher than in-home chemical treatment and is unaffordable to all but the best-off households (Annex V). Another example is the promotion of on-site latrines in place of sewers (section F below). 101. In the longer term, as noted above, the private sector should provide more professional services to local utility, community and local Government entities. This requires that those entities demand such services, understand their costs, command the resources to engage them and not be required to make use of subsidized Government staff. There may also be scope for actions to develop fully professional local consultancy capacities, although this extends beyond WSS Sector concerns (Kirmani 1992). 102. It is important to streamline the regulatory arrangements concerning NGOs and private participation, including permit systems, so that private initiatives are not strangled in red tape. This does not preclude appropriate controls being exercised when NGOs are implementing publicly- funded projects, of course. The danger that NGOs will take on many of the less desirable characteristics of Government departments if they are induced to expand too rapidly without adequate monitoring of results must be avoided. 103. As noted earlier, with an appropriate legal and institutional framework, the private sector may have a larger role to play in urban utility operations as well as in rural water supplies. E. FINANCIAL AND RESOURCE MOBILIZATION ISSUES 6. General 104. HMG's longstanding stated acceptance of the principle of cost recovery in urban water supply has until very recently been observed mainly in the breach. Since under present arrangements tariff decisions must be taken at the highest political level, and there is a fear of urban unrest if tariffs are raised, tariff changes are rare, delayed, and are insufficient to provide all resources required.16 Donors bear a significant share of blame in this 16 From 1966, increases in urban water tariffs were made in 1975 (for a revenue increase of about 60%), 1981 (50%), 1990 (about 95%) and 1993 (about 100%) for the NWSC and its predecessor organizations. In the case of tariffs in the 23 towns where DWSS, faute de mieux. operates water supply, tariffs have not officially changed since 1976, although the rates were informally increased in 1981 at the same rate as the increase for the predecessor of the NWSC. This could be done because the change was "small". The approximate doubling of NWSC tariffs in December 1990 was far too large to be emulated by DWSS on an "informal" basis, however, and proposals by MHPP to follow the NWSC increase have been under consideration by HMG since early 1992. A thorough 1979 tariff study recommended rates of Nrs 0.94 to NRs. 7.28 39 regard, since they have been willing to ignore failures by HMG to implement agreed conditionalities in order to maintain disbursements on ongoing operations or to process new ones. 105. On a point of terminology, the issue concerns resource mobilization from users, rather than cost recovery. The cost recovery terminology focusses attention away from the ultimate objective of resource mobilization - - better service -- towards the need to repay lenders. Hence, cost recovery is often incorrectly and unfortunately construed to be more for the benefit of lenders (donors) than borrowers (HMG, utilities, consumers). 106. The past dichotomy between HMG words and HMG actions as regards resource mobilization arises from a judgement that consumers will not accept- tariff increases without prior improvements in service. Given past performance by government and utilities, people understandably do not believe promises of future improvements. But service improvements are impossible without resources to finance them. To compound the difficulty, experience indicates that explicit HMG subsidies to meet operating and maintenance requirements are impossible to arrange with the degree of certainty which would be required to allow efficient utility management. So long as this vicious cycle lasts, urban water supply defects can not be substantially removed. The January 1993 tariff increase to meet the financial covenants of Credit 2239-NEP is particularly welcome, even if belated. It is now essential that every effort be made by NWSC to improve efficiency of its operations as to attempt to reverse the vicious cycle. 107. The nub of the financial difficulty is political. It is nevertheless worth recapitulating here the basic rationale for giving priority to resource mobilization from customers. This may, at a minimum, suggest points which, properly exploited, can assist resolution of the political per M3, depending on the town, and an average of Nrs 4.07. A briefer exercise in 1988 estimated costs (including maintenance and depreciation each at 5% of revalued assets, and allowing a return on capital of 6%) at NRs. 5.6 per M3 of water sold, compared with an average rate at that time of around NRs. 1 per M3. It was felt that a fivefold increase would be unacceptable, and so.an average rate of NRs 2.56 per M3 was recommended to cover operating costs. The increase was not made until the end of 1990, and then to a marginal rate of NRs. 2.5 per M3 (the average was less). By that time, costs had escalated again and revenues still fell short of covering operating costs. In Kathmandu Valley, it has been estimated (SMEC 1992, p. 19.10) that NWSC would have to charge a tariff of Nrs. 5.16/M3 in order to cover operating expenses and increases in working capital (as agreed by HMG as a condition for the UWSSRP). The January 14, 1993 tariff increase approximately doubled tariffs (depending on quantity of consumption and size of connection), so this condition may be met during CY 1993, but it will not, even with 5% annual escalation, allow coverage, by 1996/7, of the greater of depreciation or debt service, when the in-Valley tariff would need to come to Nrs. 14.26/M3. Costs in most out&ide the Valley towns are less than those in the Valley, so that the financial situation there may not be so serious. 40 problem, and thereafter provide guidance on characteristics of a more viable system. The rationale is summarized below under the headings of sustainability, efficiency, and equity. 2. Sustainability 108. Sustainability of systems and services depends upon availability of adequate funding for operation and maintenance. In neither the rural nor urban sectors have satisfactory resource arrangements been made for O&M. Thus, in the case of Kathmandu, it is estimated that the current expenses of O&M (excluding debt service or depreciation) come to about NRs. 4.2 per M3 of water consumed. If there were proper preventive maintenance, the cost would be higher. Average revenues (including connection and sewerage charges) are about NRs. 2.9 per M3 (Annex 2, Table 9). 109. The fact that donors' funds are available for investment, but not O&M, has tended to reinforce the disparity in the attention given to the institutional, technical and financial implications of investment versus O&M. Thus, for example, DWSS and NWSC focus on schemes to increase supply through investments in new sources rather than to..increase water available by reducing unaccounted for water. It also encourages donors to transform O&M into 'investment' in the form of rehabilitation or special programs to initiate maintenance activities such as leak detection and repair. If such programs are in fact accompanied by long run institutionalization of improved practice, they are indeed investments. But if not, they are a short run palliative. This is particularly unsustainable when donor loans are used, since this mortgages future national income to pay for present services, further exacerbating HMG's overall budget resource constraint. 110. The principle of ensuring mobilization from users of all resources needed for O&M was stated in the Eighth Plan Framework, but the subject unaccountably disappeared from the Eighth Plan Summary. HMG needs to make a clear statement on its policy on this issue. Ensuring implementation of even the limited principle of consumer payment of O&M costs would involve some changes from past practice. Thus, the MHPP RWSS Directive's provision for HMG subsidy of fuel costs for pumped schemes would need to be eliminated. Similarly, neither donors nor HMG should in future accept HMG subsidy of operating deficits in utility enterprises or specific town supplies, with minor exceptions (para 120.) 3.* Efficiency of Design and Use 111. The efficiency argument for prices which reflect the economic cost of services is that consumers (businesses as well as households) will be induced voluntarily to avoid waste (i.e. not to use water for purposes which are less valuable than its cost). Three issues need to be handled in establishing pricing policies.' The first is whether the prices that people are willing to pay for water reflect its economic value. The second is whether water demand is price responsive enough to justify making tariffs a centerpiece of sector policy and demand management. The third concerns establishing practical procedures for relating tariffs to economic costs. 41 112. Price and Value: it should be noted that there is no evidence that the "true" value of water is significantly higher than the prices which consumers are willing to pay for water, especially when account is taken of the various hidden costs incurred (time costs of fetching, investments in extra storage tanks and private wells, etc.). Even if the willingness to pay for water increased with a clearer appreciation of its health benefits, the efficient public policy approach would be to educate the public on water use (together with other health-related water and sanitation behaviors) rather than to subsidize water in hopes that extra consumption would improve health. In any event, the constraint on water consumption is less demand or willingness to pay than supply. Far from requiring subsidy, it is possible that many urban households would save money if they could depend on safe public supplies available to them at cost.17 113. Responsiveness of Demand to Price: the responsiveness of demand for water to price is well established. Elasticities of -0.2 to -0.711 are common (OECF 1987, p.51) and somewhat higher elasticities for industrial production even in the short term (-0.2 to -2.2 for the US (Ibid.,p.73)." Despite the very low tariffs obtaining, GTZ-supported leak detection work in Bhaktapur found that nonmetered households consumed 77% more water than metered households, implying an elasticity of -0.28. Similar results were implied by the Kathmandu Leak Detection and Repair Study (ICD-SEBA Consortium, 1988(e) pp 38 ff). With realistic tariffs, there may be very substantial opportunities 17 SMEC 1990 estimates that households in Kathmandu Valley support water costs, including storage, pumping charges, tanker fees etc. as well as the regular water tariff, on the order of NRs 15/M3. Payment of a tariff at that level would go a long way towards financing efficient operation and expansion of an efficient public water supply system. 1 The price elasticity of demand is the ratio of the percentage difference in quantity demanded associated with a different price, divided by the percentage change in price, other factors (income, tastes, etc.) held the same. An elasticity of -0.4 means that if the price were higher by 10%, 4% less water would be consumed on the margin, other things equal. Even allowing for the fact that the base demand is declining as price rises, so that the percentage change calculated on initial quantity is less than on the margin, price effects on quantities can be significant. Thus, if the effective NWSC marginal water tariff were doubled from the present NRs. 2.5 per M3 (to cover all out-of-pocket operating costs, depreciation and some debt service), and elasticity were -0.4, demand would be lower on the order of 17%. Applying this to Kathmandu Valley demand estimated in SMEC 1992, and ignoring possible excess demand, consumption would fall from 54 mld to 45 m1d. 19 Bhatia and Cestti 1992 have estimated elasticities for a range of industrial plants in India at -0.45. The long run elasticity for any particular location would be even higher, since particularly heavy water users, would have the opportunity to locate investments in lower cost areas. 42 for households to cut consumption through reducing waste (at least in the case of households which are not supply constrained). 114. Appropriate pricing of water can have a substantial effect not only on the amount consumed by individual users, but possibly also the number of users in specific places. Thus, if water costs (including cost of associated sanitation) became an important element in industrial location decisions, there could be a multiplied effect as jobs and population, as well as firms, located in areas with lower water costs. (See Box 3.) BOX 3: Potential Response of Population to Efficiency Pricing The average incremental cost (AIC) (see definition in footnote 20 below) for additional supply in Kathmandu Valley, if the Melamchi scheme were adopted, is estimated on the order of NRs. 38/M3. This compares vith incremental costs on the order of NRs. 2-3/M3 in those parts of the Terai where there are readily accessible sources of ground water. If comparable information were available on costs of sewerage and pollution control, the differential between water related costs in the valley and elsewhere could be even more impressive. Even the financial cost differentials could be significant. The tariff to secure a 6% return on investment in Kathmandu Valley could be on the order of NRs. 15 per M3 (SMEC 1992). The carpet industry is a significant water user in Kathmandu Valley (albeit largely from its own wells) and is said to be a major polluter due to chemical effluent. Requiring this industry to bear the marginal economic costs of the water it consumes (and effluent treatment), could easily result in its relocation, or at least reduced growth in the Valley. The effect on Valley population and hence water requirements could be significant. Carpet industry employment in Kathmandu Valley is now said to be over 150,000. If each carpet industry job supported two people, this industry would account for up to 300,000 people in the valley -- or about 40% of the 750,000 people in the NWSC service area. (The figures on employees and population in the service area are from SMEC 1992. Appendix Table A-8). Pricing water and effluent would enable market forces to help implement the statement in the WSS chapter of the Eighth Plan that industries in Kathmandu Valley "will be induced to migrate elsewhere" for environmental reasons. 115. Efficiency Pricing Criteria: Nepal already uses metered rising block tariffs differentiated by type of use, which provides a sound basis on which to build. While much must be done to improve the management of billing and collection and metering systems, the concern here is with principles underlying the level of charges to be set. It should be noted that charging economic efficiency prices might result in financial losses or profits for utility enterprises. The ratio of revenues to costs chosen depends upon sustainability and equity as well as efficiency considerations. Certain efficiency points need to be borne in mind, however: (a) Since demand elasticities for water are low compared with those of many consumer goods, economic efficiency may be better served by utilities making profits rather than losses, other things equal, especially in a country where a large part of revenue comes from indirect taxes; 43 (b) to avoid waste, service users should be confronted with the marginal costs associated with their marginal consumption in the short and the long term. This implies, among other things, different tariff schedules for (i) different towns, and for (ii) users who place different qualitative demands on the system;20 (c) the relevant economic costs which should be reflected in tariffs designed to affect resource allocation are future costs. Setting tariffs which only recouped past costs would, in a situation of rising costs, tend to lead to over estimates of future demand and investment and then, if fully implemented, result in under utilization of plant. Experience in Nepal indicates, moreover, that setting tariffs to meet current and past costs only is also politically difficult, especially when this is perceived as being done only to repay lenders. In brief, tariffs should finance a part of current investment expenditures (and HMG "equity" should be discarded as soon as possible); (d) In addition to improved efficiency effects, setting tariffs to mobilize resources for investments would make sectoral development more affordable than if all resources had to be drawn from HMG/donors; (e) costs21 of sewerage associated with water consumption should be included in the relevant water tariffs. Arrangements can be made to pay transfers from water utilities to sanitation entities if these are separate. High connection charges should be eschewed in favor of higher monthly rates so as to minimize disincentives to connect; (f) practical means must be found to charge the opportunity costs of scarce resources which are as yet unpriced so as to encourage efficient resource use. This applies both to charging for ground water extracted by firms and households (where the water table is falling) and use of surface water diverted from other uses. Implementation of this would require clarification and modification of water rights and.mechanisms for their exchange (see also 20 Given the need for stability and transparency in pricing systems, it is impractical to price at short run marginal cost or to provide clear definitions of long run marginal cost. A practical compromise is that tariffs on marginal consumption should reflect average incremental cost, i.e., the price which would have to be charged, for each incremental cubic meter, to recover operating and investment costs associated with producing and distributing it, including the opportunity cost of capital. The latter is assumAd by IDA at 10% in Nepal. 21To the extent that sewerage services yield external economies, and pricing reduces connections, there may be a case for financing some charges from property or other local taxes. There is no clear case, however, for HMG to subsidize urban sewerage which will benefit mainly (high income) urban populations. 44 Section G); (g) the argument that consumers should not be asked to pay for. inefficiencies in utility operations may have merit to the extent that utilities lack any managerial autonomy. Even in this case, however, there is a strong political argument reflecting costs of inefficiency in tariffs. Water consumers are more likely to complain of inefficient service if they pay its costs, and hence stimulate official attention to improvements, than are taxpayers in general. This does not imply that excessive costs should be condoned if they can be financed by tariffs. Utilities need to be provided with incentives to operate efficiently; (h) existence of "free" water from standposts is sometimes felt to be a major cause of waste, poor utility.financial performance, and even to make it more difficult to charge appropriate tariffs to people with connections. Two points need to be made. Firstly, standpost consumption is often a minor part of the total (only 4% in the Kathmandu NWSC operation, according to SMEC 1992, Appendix 0, Table 1.8). Hence, the technical and financial implications of standpost policy are probably less important than the political ones. Secondly, opportunities do need to be explored to reduce waste and improve standpost service. One option deserving attention (and experimented with in other countries) would be leasing or allocating standposts to community groups or individuals who would be responsible for paying for metered consumption and upkeep of the area surrounding the standpost. 116. Efficiency considerations are also important in the rural sector. The Eighth Plan proposes that consumers should furnish 5% (remote areas) to 20% (ground water) of capital costs, with the remainder being grant. These proposals need to be reviewed on two major grounds. Firstly, local communities are usually willing to contribute all (unskilled) labor and local materials to new schemes, and these amount to more than 5% to 20% of costs of most types of schemes. Secondly, a requirement to contribute a (perhaps very small, say 0.5% to 2%) proportion of project cost in cash would provide an important incentive for communities to seek low cost solutions. Rural communities in particular can be expected to focus much more carefully on appropriate designs if they must make a cash contribution, due to the scarcity of cash in many rural areas. Precedents exist for such cash contributions in some Nepal NGO programs. The Plan elsewhere states that HMG will make fixed amounts of grant per beneficiary for each type of scheme. This would have better incentive effects than government contributing a percentage share of total or contributing all money costs. 117. There is an efficiency as well as equity case for some subsidy of capital cost of rural water supplies, over and above the health issues which were discussed above. This is the heavy transaction cost of a system to recover capital charges from rural communities over time for lumpy investments. The economic case for subsidy would be more convincing, however, if more were known about the economic benefits of specific schemes in the hills or the Terai. There needs to be more effort to understand and quantify 45 the benefits from schemes -- as seen by the communities themselves in terms of the sacrifices they are prepared to make for them, as well as economic benefits -- as a guide to future resource allocations. 4. Equity 118. Equity concerns in the case of water supply (and sanitation) are often said to justify a single national tariff, and hence implicit cross subsidization of supplies by water enterprises (lower cost area consumers to subsidize higher cost area consumers). Not only is cross subsidy in conflict with efficiency and management considerations, but also equity in the case of Nepal. The management considerations are that (a) the need for cross subsidy would be an argument to delay decentralization of utility operations, and (b) requiring utility boards to make judgements about equity both complicates their deliberations and encourages more political intervention in those deliberations. In the case of Nepal, cross-subsidy in NWSC is from outside the Valley to inside the Valley users on the average (Annex 2, Table 9), whereas Valley incomes are higher than incomes elsewhere. Another element of inequitable cross subsidy occurs when customers are charged the same prices for different levels,,of service. This appears to be the case in Kathmandu, where a few customers with 24 hour supply pay the same rates as many more customers with uncertain, intermittent (and sometimes no) supplies. Charging substantially more to customers with better service would simultaneously improve sustainability, efficiency, equity and probably also improve the political acceptability of financially sound tariffs. The January 1993 tariff takes a substantial positive step, by reducing charges in areas with poorer service. 119. The straight equity objections to water subsidies in general are also important. Subsidization of water supplies has been reduced in the OECD countries in recent decades (0ECD, page 120) both on grounds of equity as well as efficiency, since it often turns out that subsidy does not flow from rich to poor. In Nepal, subsidies probably flow from poor to rich, since a large fraction of urban water supply costs are borne by the general taxpayer, while benefits accrue to the urban population and, within the urban population, disproportionately to the best-off residents who have household connections. Given the very unequal income distribution in Nepal, there is probably an equity case (as well as the efficiency case mentioned in para 114 (a) above) for urban water utilities to earn profits. 120. Affordability of urban water supplies does not appear to be a serious problem at present in most areas. In 1990/1, monthly revenues per connection came to about NRs. 50.22 This is equivalent to about 2% of 22 Rates rose in the middle of that year, however. The approximate rate for 1991 (with the new rates) came to about NRs 64 in the Valley, and about NRs 73 outside the Valley towns. It should be noted that these are collections, so that rates for those you pay their bills are higher (see Annex 2, Table 9). Data are not yet available to calculate the implications of the latest increases. Household income data are reported in Annex 2, Tables 10 and 11. 46 estimated median monthly urban household income (households ranked in order of per capita income). Since households with connections tend to be better off, the actual ratio is lower. Revenues in DWSS towns were probably on the order of NRs 10 per connection. 121.- The exception to the recommendations of no urban subsidy is in the case of Tanzen and Dharan, where, as a result of spectacularly inappropriate past investment and design decisions, electricity charges alone exceed water revenues by an order of magnitude. Even in those cases, however, there is no case for the rest of the country to subsidize expansion of the systems. There is a residual HMG responsibility to assist these communities to adjust to a more sustainable situation, however. The first step should be a substantial increase in tariffs. This would provide an immediate and sharp incentive for residents to put pressure on the authorities to reduce system leakages. In addition, urgent attention is needed to find means to ensure that newcomers to these towns bear, to the extent possible, the full cost of water, since it would not be sensible to encourage additional consumption at such heavily subsidized rates. In other cases where local inhabitants are unwilling to pay costs of existing operations and these costs are affordable on reasonable assumptions (or cheap alternative sources are available), the program to turn supplies over to the local municipality should be accelerated. 122. In the case of the rural areas, affordability does not appear to be a major problem for non-pumped schemes. Per capita investment costs of schemes are estimated by SRDP at NRs. 100 for shallow tubewells, NRs. 150 for spring protection works, NRs. 600 for Deep tubewells, NRs. 1,000 for gravity schemes, and NRs. 2,200 to 4,500 for pumped/piped schemes. Assuming an up front community contribution of 30% of scheme cost (somewhat higher than proposed in the Plan) per capita contributions would amount to NRs 30 to NRs 300 for the non-pumped schemes. These figures compare with monthly per capita rural incomes of NRs. 60-140 at the 10th decile, and NRs. 200-290 at the median.23 Since most of the contribution can be made in kind, local contributions should be manageable. The exception concerns pumped schemes, which are much less affordable -- and which also have much higher cash O&M costs than the others. For these, which are basically for Terai towns, a utility approach would be necessary. 5. Subsidies 123. Where it has been determined on efficiency or equity grounds that continued subsidies are needed, it is essential that they should be targeted, and their assessment and payment should be managed so as to enable and require 23 The income data are drawn from Culpin 1992 and are repeated in Tables 10 and 11 of Annex 2. The lower figure is from the national Housing Survey carried out in 1991. The higher one results from inflating the 1985-85 Rastra Bank survey results to 1991 values. 47 open review of their size and effectiveness. This implies the desirability of including each subsidy in the budget, and explicit justification being secured from utilities by the MOF for each subsidy on agreed criteria before inclusion in the budget. Subsidies to cover deficits from inefficient management or inadequate tariffs should be eliminated as soon as possible. Well-intentioned efforts started by donors to subsidize maintenance (e.g., through making subsidized pump spares available through cooperative channels) need to be eliminated. They are inefficient on two grounds: the bureaucratic procedures intended to ensure that the subsidies go only to intended beneficiaries impede access by many communities to the spares, and such schemes reduce the incentive to the private sector to get involved in maintenance. 6. Tariff Commission A major practical issue in resource mobilization is to establish mechanisms which enable tariffs to be regulated within some set of principles such as those outlined above in a predictable fashion. Predictability is particularly important to afford a stable basis for efficient utility management of investment and operating decisions. HMG's January 1993 tariff decision goes some way towards this objective, by allowing escalation of 5% per year. But it does not permit adjustments sufficient to enable the NWSC to meet its agreed resource mobilization covenants under Credit 2239-NEP without additional high-level HMG decisions. Nor does it necessarily provide appropriate increases to reflect future inflation.24 HMG's retention of direct responsibility for tariffs is clearly unsatisfactory, since narrowly political considerations will inevitably continue to determine level and timing of tariff changes, and the uncertainties which undermine effective utility management will persist. On the other hand, utility entities themselves should not be granted complete control over their tariffs, since there is no reason for them to exercise their monopoly powers so as to ensure efficiency and equity objectives. For this, they must be subject to appropriate regulation. Under its Policy Framework (HMG 1992), HMG intends to consider establishment of utilities commissions to set tariffs. The Tariff Fixation Commission being established under the Electricity Act 1992 may provide a useful model, provided that it is granted the authority to fix tariffs rather than only to advise. If the tariff commission is to have the de facto public standing to allow plausible deniability by HMG of responsibility for specific tariff increases, however, the commissioners must be widely respected persons with strong qualifications and experience. Given the scarcity of such personnel, this may argue in favor of appointing one commission to be responsible for regulating tariffs of all utilities, including water, electricity and telecommunications. The commission would, of course, need to appoint specialized staff and/or consultants to assist it to review submissions from different utilities. 24 Allowing increases less than inflation for many years may be one element in providing incentives for utilities to improve efficiency (as in the case of privatized utilities in the U.K.). The appropriate escalation factor should, however, be stated in terms of a difference from a stated inflation index, rather than in absolute terms. 48 Action Steps for Resource Mobilization 124. The following steps are required to improve resource mobilization: (a) The initial and most critical step to securing improved resource mobilization is a commitment by HMG to allow sustainable finances for water sector entities from their users. While this principle now seems to be largely accepted as regards O&M and a share of capital costs for rural areas, clarification is still required for the urban areas; (b) Donors should assist this process by spending the necessary time to reach consensus with HMG on appropriate resource mobilization targets, and conditioning their financial support on HMG making the needed commitments and fully implementating their agreements; (c) Secure public understanding and support for the policy, including through making use of the facilities of the UNDP-funded NWSC Consumer Education and Community Participation Project. Improved public dialogue may also require some form of Royal Commission with public hearings, and establishment and use of representative public fora to develop detailed approaches to mobilization; (d) Change legislation to devolve responsibility for price regulation to a more appropriate body than the Cabinet. Serious consideration should be given to the Pohkrel Commission recommendation of a tariff commission which would have representatives of different groups rather than simply Government appointees, and possibly also to a multi-sector commission to ensure appointment of commissioners with the requisite qualifications and public standing to make decisions; (e) Once the decision has been taken to reform utility price regulation, there need to be thorough studies on tariff systems which fulfil the various objectives, including practicability and maximizing chances of public acceptance. Past experience in Nepal demonstrates the wastefulnesss of undertaking analytical exercises in advance of political commitment to change; and (f) Establish criteria and mechanisms for defining and paying targeted subsidies. In the rural areas, policy needs to evolve on the basis of monitoring of experience of actual projects in meeting local demands, trade-offs between service levels and costs, and the effects of different cost recovery policies in different areas. While HMG needs to establish minimum criteria for use of its resources, it should be sufficiently flexible to allow experimentation with options. In the case of urban centers, there needs to be a city-by-city review to assess what operating subsidies may be required in the short term and to define a feasible timetable for reducing and eliminating these as management improves. 49 F. SANITATION AND DRAINAGE 1. General - 125. The positive relationship between health and separating people from excreta (sanitation) are well established. Improved sanitation is particularly important for children under five who have yet to develop immunities. Moreover, given the nature of the agents involved, sanitation is the only practical measure for combatting many diseases (Annex III). Information is lacking on which to estimate economic benefits from reduced morbidity (less time and money spent on seeking cures, more energy available for productive effort) associated with sanitation. 126. Provision of improved sanitation facilities has to date been primarily supply driven, both in the urban and rural areas, with a heavy emphasis on sewer or latrine construction with varying levels of subsidy. The Eighth Plan continues to include a program for subsidized latrines (50% of cost). The extremely low level of measured sanitation coverage is probably as much a reflection of misdirected effort (towards supply rather than demand factors) as a reflection of low government effort. Low demand for sanitation reflects widespread ignorance about the relationships between sanitation and disease, together with an apparent absence in Nepal of attitudes towards excretory functions which have in other places provided the major incentive for sanitation measures. Improvements will require efforts to educate people about desirable changes, and then to motivate and empower them to make those changes. Extensive efforts over several decades in many countries to develop technological improvements and install facilities using extensive subsidies25 have in no way substituted for cultural acceptability in securing adoption in such tradition-bound societies as Nepal (Simpson-Hebert. 1984). Latrine slabs in Nepal and elsewhere have served as relics of past projects, to be displayed to occasional visitors (WHO, SEARO, 1985. p. 2). The evaluation of the EEC- UNICEF program found that under one half of latrines distributed were in sanitary use (SETA 1990, p 78). Case studies in Nepal, Sri Lanka, Thailand, Maldives, and India indicate that participatory techniques used to involve village groups, particularly women, in the design and construction of facilities, contribute to the demand for sanitary facilities and their success and sustainability (HMG MOH 1987; WHO SFARO,1985 a-e; Pfohl. 1983, as well as the SRDP.). Even in urbanized areas, a neighborhood-based approach can have significant impact. 127. The fact remains that there are many approaches to changing demands. The options notably include: (a) focussed efforts to educate women and change their behaviors through health visitor and volunteer systems, combined with PHC systems, (b) efforts to motivate community groups, with special emphasis on women, in connection with specific programs of water and sanitation improvement, (c) longer term efforts towards general improvement in 25 For a small sampling, see Wagner and Lanoix, 1958; Pacey. 1978; Winblad and Kilama, 1978; World Bank, 1980. 50 educational standards (particularly of women) through health education and adult literacy classes, (d) reliance on improved hygiene education in the school system, (e) the use of "social marketing" to sell particular interventions of proven acceptability, using whatever motivational factors are available, such as desire for privacy as well as improved health. The costs of each intervention are probably substantial (see box) although data are lacking at present to permit any assessment of relative cost-effectiveness. This issue requires early attention by sector authorities. The extent to which change can be most efficiently secured through general MOH programs, or focussed multi-purpose programs in particular areas by official or private agencies needs to be carefully reviewed. As noted earlier, there is a need, for experimentation and for orderly monitoring and evaluation of experiences. Box 4: Cost Effectiveness of Hygiene Interventions One fairly careful Nepalese study indicated that 2 woman health workers* over a period of two years managed to induce 30% of the families in a Terai area of 2000 population to accept free latrine slaps and build latrines, and another 26% of families to accept the slabs. On conclusion of the project, only 70% of the latrines were actually in use (HMG MOB 1987). Efficiency could undoubtedly have been improved through appropriate motivation and training of staff, plus adapting messages and approaches to the specific cultural backgrounds of the local populations. Typical of such experiences, however, the study came to an end and no data are available on long term results. The report did not Itemize costs. However, assuming final adoption was as high as 200 families (1200 people out of the 2000 population), and assuming a cost of NRs. 2000 per worker per month over two years, the software cost alone would come to NRs 480 per family, a not inconsiderable sum. *The health workers delivered other than sanitation messages, but their efforts were reinforced by 2. Urban Sanitation 128. Because of its high costs, and also the potential for epidemic and economic loss, urban sanitation deserves concentrated attention. 129. In the Kathmandu Valley, the municipalities have combined stormwater and sanitary sewerage systems. The NWSC manages a sanitary sewerage system in the core areas of the three municipalities. The confusion in the public mind between combined and sanitary sewers, and the failure to proceed with an integrated plan for improving the situation, suggest reopening the question of whether sanitary sewers should replace the existing combined systems which are more acceptable to local residents, although costs would imply that any network expansion should be of separate systems.26 26 The evaluation of the First and Second Water Supply and Sewerage Projects noted "the decision to provide separately for storm water and sewage (with only sanitary sewers to be constructed initially), was probably not a wise decision from the sociocultural point of view. For one thing, the beneficiaries did not understand the difference between storm sewers and sanitary sewers. Operational difficulties have developed in the sewered core areas because residents reportedly have dumped street sweepings and other refuse in the manholes. Community resistance has been seen in some areas to laying of new sewers because residents view the small pipes (designed only to carry sanitary sewage) to be too small to handle their needs for both 51 130. The three NWSC sewage treatment facilities (one in each municipality) are virtually inoperative for reasons institutional than technical. The state of the treatment works at Dhobighat can best be described as abandoned since the failure for many years to repair the pumping main at the river crossing stopped flows to the treatment plant and the unused plant was vandalized. The condition of the pumping station at Kirtipur reflects a lack of maintenance, probably partly due to low flows. These are in turn due to fewer than anticipated house connections (about 2,100 legal and perhaps 5,000 illegal connections compared with a design capacity of 17,000), the failure to divert dry weather flows from combined sewers to the treatment works as envisaged by the second IDA-financed project, and dumping of solid waste into sewers causing blockages and consequent overflow to water courses. In Bahaktapur, sewers have been cut by farmers to irrigate crops. 131. The main concerns in considering future options have been on technical issues. The UWSSRP will address priority technical issues through rehabilitation, a sewer survey, sewer extension, a subsidized sewer connection program promoted by the NWSC consumer relations unit, and training for management and operators and artisans. In the longer term, a range of options has been identified. The Greater Kathmandu Drainage Masterplan Study (GKDMPS)(SMEC 1990) recommended a comprehensive sanitary sewage collection and treatment system which included six conventional sewage treatment plants for Greater Kathmandu, at a total cost, including storm water drainage, of US$ 320 million at 1990 prices. This was found to be uneconomic, and the study therefore reviewed a series of other options, including a low cost sanitary and drainage alternative of about US$ 90 million. Minimum per household costs would be on the order of 4% of household income. The GKDMPS was criticized by the Kathmandu Valley Urban Development Plans and Programs (Halcrow Fox 1991) on grounds that (a) a separate system might be appropriate for new areas but replacement of combined sewers in the core areas would be overly disruptive, difficult and expensive and (b) six conventional treatment plants would involve excessive costs (including land) and construction of trunk interceptors combined with upgrading existing treatment plants and construction of one new one (stabilization ponds) might be more feasible. In the case both of UWSSRP and the proposals for the future, however, insufficient attention has been given to measures to secure the institutional reform which must occur if sustainable sanitation is to be.secured. The reforms would include improvement in building controls (since settlement patterns exacerbate sanitation problems) as well as better organization and financing of sanitation services themselves. 132. The high costs and user dissatisfaction in the Kathmandu Valley may provide an object lesson for other major towns to seek alternative solutions. storm drainage and sanitary sewage. At the minimum, the project should have included a component for educating the community about the purposes of the sewer system, and to enlist their support and help in using the system properly. A better solution, however, might have been to select a combined sewer system". (World Bank 1986: see also HMG, Water Study Committee 1987, which repeated this conclusion). The situation has not changed much since the time of the OED review. 52 In Kathmandu Valley and elsewhere, cost and sustainability considerations imply that major reliance should be placed upon private sanitation. 133. Storm Water Drainage and Solid Waste: As of 1987, no urban area in Nepal had area-wide stormwater drainage works specifically designed for that purpose. The roadside drainage channels that do exist are primarily for protection of the roads themselves, but often do not connect with primary drainage channels, and are often blocked with solid waste and construction materials. The relatively .flat terrain in the Terai dictates that stormwater drainage infrastructure must be carefully designed with close attention to culvert invert elevations and backwater effects in order to avoid flooding low-lying areas during the monsoon season. Drainage ways in many Terai municipalities have been blocked through encroachment by haphazard and unregulated residential and commercial development, creating unnecessary flooding problems which are not easily remedied. The concept of area-wide storm water drainage in Nepal was introduced in 1984 for ten outside Valley towns (Procter and Redfern 1984) and plans were prepared by WSSC in the following year for Nepalganj and Birganj and master plans and detailed designs were prepared after 1987 under the Management Support for Urban Development' Project (UNDP/IBRD/NEP/88/046) for several additional towns. The plans for Birganj, Janakpur and Biratnatgar are now being carried out as funds permit, with partial funding from the Town Development Fund Board. 134. Public Participation in Sewerage and Drainage. In the Kathmandu Valley, both NWSC and the municipalities have programs in which community groups can initiate the construction of combined sewers and contribute towards the cost. In residential areas where drainage problems are serious, people are often motivated to contribute to the cost of collection and conveyance away from their property. Without coordinated efforts for collection and treatment, however, this may only transfer the problem from one area to another. In fact, some of the sewers that have been constructed have not been connected to primary drainageways. Others discharge raw sewage directly into the nearest river. Public authorities themselves seem to be unclear about their role, while the public are left with the continuing problems of poor drainage and sewerage. 135. Institutional Responsibility. Public responsibility for sanitation in Nepal is fragmented among several institutions: municipalities (under the Municipalities Act 2048, drainage, sanitation, solid waste), DWSS (drainage and sewerage, although DWSS does not in fact have any sewerage operations), NWSC (sanitary sewers), and Department of Roads (roadside drains). The GTZ-supported Solid Waste management and Resource Mobilization Center (SWMRMC) was also established as an autonomous body under the Corporations Act under MHPP to operate in urban Greater Kathmandu. The fragmentation of responsibilities extends both to planning and to day to day operations. The draft National Policy on Sanitation, published in the proceedings of the September 1991-National Consultation on Sanitation, endorses existing institutional arrangements, but stresses improved coordination should be achieved through the National Water Supply and Sanitation Committee. This was to be supported by a "Sanitation Subcommittee" and a "Sanitation Policy Formulation and Coordination Unit" within MHPP. There was an attempt to identify components of a national strategy but the components (environmental 53 sanitation and health education, human resources, resource mobilization, women's involvement and legislation followed by sections on "Institutions and Responsible Agencies for Sanitation" and "Coordination Mechanism") give the impression of a "wish list" more than a carefully considered first step towards a coherent strategic plan. There is no apparent prioritization, little separation of urban and rural issues, and no mention of municipalities; this together with the omissions is indicative that HMG has not reached the point at which the issues and options are clearly in focus. 136. In addition to institutional uncertainties, there are many technical options. More clearly defined policies are needed on such issues as use of combined or separate sewers, on-site sanitation facilities (septic tanks, pour flush and dry latrines), small-bore sewers, discharge of untreated waste to water course, reuse of wastewater by irrigators, phasing of treatment facilities, etc. together with an appropriate regulatory framework to prevent abuse of the systems. In this context, the consultations could usefully include elements of the "demand oriented planning approach" to sanitation services.27 137. The main candidate entities to which responsibilities might be assigned are: the water utility, the municipalities, special purpose agencies (for sewerage, solid waste) at national or local level (e.g., the Tunisian national sewerage authority). Given the acute nature of the environmental problems in the Kathmandu Valley, and the close proximity of the different towns there, it is for consideration whether a special entity, possibly with responsibility for sewerage, sewage treatment, and solid waste, may be required. 138. Arriving at appropriate institutional conclusions is even more difficult in sanitation than in the case of water supply for three major reasons. Firstly, there are at least three general subsectors -- sewerage, drainage, and solid waste collection and disposal -- and possibly more (other pollution control activities) which are technically closely related and which need to be coordinated both at planning level (e.g., to resolve the issue of combined versus sanitary sewers, and to avoid overlapping) and implementation level. Secondly, the arrangements for mobilizing resources from beneficiaries 27 This approach involves four basic steps: (a) mapping the full set of available technological options (screened on the basis of technical, social and economic criteria); (b) assessing demand by existing consumer groups (by examining existing use of services and identifying their preferences and willingness to pay for improved services); (c) matching supply and demand into a potentially sustainable set of choices (minimizing the gap between system costs and revenues from consumers); and (d) defining financial and institutional systems for planning, implementation and operation and maintenance. While this approach needs to be adopted for specific areas, many of the potential solutions and problems are common enough among groups of towns (e.g., Terai towns, hill towns, of different sizes) that application of the approach applied to a sample of towns should be useful in defining overall strategies. 54 to support these activities is more difficult than for water supply. This is because specific households secure only part of the benefit of their own facilities (but they do benefit from their neighbors' expenditures). Some form of taxation is required to defray expenses. The problem may be more acute in Nepal than elsewhere due to the low value people appear to ascribe to sanitation. In brief, the model of the autonomous utility charging for services provided to willing demanders is not as appropriate as for water supply. It can safely be stated that no agency, with the partial exception of the SWMRMC, currently possesses the technical capacity to plan, implement and operate these services satisfactorily, and so availability of existing capacity is not a major consideration in considering medium term institutional options. Given the variety of urban situations, there is no reason for the same institutional arrangements to be followed in every town. Thirdly, sanitation activities are traditionally considered "unclean." This may be one reason for the word "sewerage" to drop from the title of the NWSC when it was formed from its predecessor "Water Supply and Sewerage Corporation." It may well be that effective sanitation will require very special efforts to recruit, train, and motivate staff for this function. Evaluation of what is required requires anthropological as well as technical and management inputs. 139. The considerations which need to be taken into account in reviewing different institutional options include (but are not limited to) the following. Requiring the NWSC to handle sewerage may diminish its efficiency in 'water supply due to the rather different requirements of the two activities. Enabling municipalities to undertake and maintain significant drainage works requires enhancement of the municipal revenue base, particularly direct taxation based on a valuation system for urban land and property, possibly combined with betterment levies. Rapid change in this is unlikely, but requires concentrated attention from the present if any results are to be forthcoming. The GKDMPS, for example, recommended a Kathmandu Valley Development Authority with powers to advise other agencies and to raise property taxes. More attention is needed to appropriate municipal/local government grant systems, both on development and recurrent account. In the case of sewerage, some costs can and should be.recovered through charges levied on water consumption. All agencies lack relevant technical skills in this area. Over time, the TDFB could become a de facto source of assistance to municipalities or other entities in the course of appraising projects put to it for financing. Finally, experience in Pakistan (Orangi) and Brazil indicates that effective services will need to rely more heavily upon local community participation for reticulation of services, while utilities or local Governments implement trunk facilities. 140. There is a large potential role for the private sector to supply on-site sanitation, provided that the public sector (and/or NGOs) can first stimulate demand, and assist with market testing of designs which meet health objectives and are attractive to households. Government should phase out direct official latrine production in favor of a program to promote private production through increasing demand (social marketing) and facilitating small businesses. In high density urban areas, public pay latrines need to become more common. Franchising such public latrines to individual caretakers for operation and maintenance under a contractual arrangement under the SWMRMC has shown considerable promise where it has been tried in Kathmandu and Patan. In 55 this way, full facility costs for public latrines can be recovered from users in heavily used public areas. Whether they are feasible in residential areas is unclear. 141. In summary, the technical and institutional issues surrounding sanitation are more difficult than those for water supply. Not only is there a need to deal with supply inefficiencies, as with water, but also to promote demand. The characteristics of sanitation are such that many aspects are not so well-suited to private -- or self-sustaining utility -- supply as in the case of water. The range of institutions which must be involved for a satisfactory outcome is also larger than is the case for water. Even recruiting suitable staff may require overcoming cultural constraints not present in other sectors. Sanitation may also cost more than water supply. Past efforts to generate consensus on the issues have been largely ineffective for several reasons: the general problem alluded to earlier of securing interministerial cooperation by one interested ministry, the multi-sectoral complexity of sanitation, and also the generally low priority of sanitation in Nepal. Dealing with the sanitation issues is important, however, if health objectives are to be met, especially in the urban areas. Considerable time and effort will be required to make major inroads into defining feasible strategies for such an ostensibly intractable problem. Even more than in the case of water supply, therefore, there is a need for a supra-sectoral agency, such as NPC, with access to suitable personnel, to take the lead in the interministerial and HMG-donor studies and and discussions needed to refine relevant policies and programs. Absent such clarifications, major investments are unlikely to be viable. G. WATER RESOURCES AND WATER RIGHTS 142. As noted earlier, one of the most critical areas requiring HMG attention to improve sector performance concerns improving the legal framework so as to facilitate better resource allocation in a decentralized framework. 143. The main water agencies -- Irrigation, Electricity, DWSS/NWSC and, potentially, local governments -- tend to plan in isolation from each other. The Water and Energy Commission (WEC) under the Ministry of Water Resources, which was established to develop water management plans, has understandably concentrated on power and irrigation as major water users, and on international riparian issues. It is perhaps not surprising that there is a lack of comprehensive data on water resources and water use. Due to growing water demands and, in many areas, deterioration of sources (e.g. deforestation, pollution), potential conflict between various users of water resources are becoming more acute. 144. Based on a series of field visits for a legal study on drinking water, the following problems were identified (LEGRA. n.d. page 25): (a) scarce water relative to demand, (b) the need to go to far and high cost sources, (c) unwillingness of villages to share nearby sources due to uncertainty about future needs, (d) social and political rivalry between villages obstructs project implementation and operation, (e) conflicts in use between needs and extravagance, (f) the cost and difficulty of maintaining 56 large systems covering long distances, and (g) unwillingness or inability of panchayats to settle conflicts between villages, and administrative solutions tend to be temporary. 145. Because the mechanisms for allocating water are not clearly defined, HMG agencies have attempted to avoid conflict by meeting increasing demands for water by bringing supplies from remote and ostensibly unused sources rather than by actively exploring means to reallocate existing resources from lower to higher valued use. The rapid escalation in costs to handle escalating demands (the situation of Kathmandu Valley is only the most dramatic example) indicates that this strategy is non-viable. The resources of concern include surface water, ground water, and waste water. 146. Surface Water: No system for legal registration or adjudication of water rights has been developed in Nepal. Surface water rights claims are orally argued within a traditional village-based, agriculturally-oriented framework, originally based on subsistence agriculture. In some respects this is similar to the concept of the common law riparian doctrine recognized in other countries.28 Under a riparian system landowners adjacent to a stream were given rights to take water, without charge or any permit, to use for domestic purposes, to water stock on the land, and to irrigate a household garden of limited extent, the produce of which was not commercially sold or bartered. Beyond this, such landowners had no superior rights. Practice in the Kathmandu Valley and in the Terai has gone far beyond the concept of riparian use, since landowners are irrigating no longer for subsistence agriculture, but for the cash market as well (e.g. for growing rice and vegetables for sale). Data are unavailable on riparian users. Farmers' current dry season extractions from traditional sources and NWSC pipelines are clearly not limited to amounts which would be allowed under typical riparian systems elsewhere. 147. Riparian use generally manages to avoid controversy where the climate is wet year-round and population densities are relatively low, but 28 A look at the common law riparian doctrine (from UK) on the use of water would indicate that it: -limits the use of water to land parcels in contact with the stream; -allows unlimited use only for domestic and stock purposes; -allows use for extraordinary purpose (for example, irrigation and industry) only if water is returned to the stream substantially undiminished in quantity or quality; -allows an upstream owner to acquire rights to use for extraordinary purposes or to pollute a stream by 20 years of continuous enjoyment; and -allows a downstream owner to sue to prevent any upstream use for extraordinary purposes, even if the downstream owner suffers no injury, simply the diversion might otherwise become a prescriptive right. 57 neither applies to Nepal. Where there are marked dry seasons or high population densities, some other system is required. A system of appropriative use has evolved in many countries. This requires registered permits to allocate the limited surface water resources. Within this system, water rights may be transferred through market forces and purchase arrangements, although this is still rare. 148. There is a need to develop a system of surface water rights in Nepal on an appropriative basis. According to one commentator,the key principles of this process are as follows: (a) to attempt to declare and entrench those elements of existing custom which are actually presently exercised or capable of being exercised; (b) to limit the possibility of compensation to those cases of damage or compulsory acquisition which interfere with those entrenched rights; (c) to ensure that administrative sanction for existing uses beyond those entrenched rights can be obtained simply and without cost -- unless they are irreconcilable with proper water management practices; (d) to be as flexible as possible in constructing systems of tenure, administration, and control, so that they can reflect or parallel customary systems; (e) to enlist support of local customary authorities and, wherever possible, involve them directly in water management structures; and (f) to pursue assiduously all avenues of community discussion, education and involvement. (Clark, 1990) 149. Ground Water: No restrictions or permitting systems have been developed for the extraction of the ground water resource by various users in Nepal. In the Kathmandu Valley, considerable competition now exists for the limited (and often poor quality) underground supplies. Current use of groundwater in the Valley is about 45 mld, although the combined yield of the aquifers has been variously estimated between 12.6 and 43 m1d. Meanwhile, the water level in NWSC well fields has gone down by 15-20 meters since their completion in 1984/1985 (CES, 1992). In the Terai, thousands of tubewells for agricultural and domestic use have been drilled without registration or proper regulation. Lack of attention to these trends may lead to future problems of aquifer pollution due to the lack of safeguards, or to gradual lowering of water table levels where extraction rates exceeds that of natural recharge.29 29 The system currently in use in Nepal appears to be somewhat like that used in Texas (USA), where the courts held that the overlying landowner is the owner of subjacent groundwater and can remove as much as possible. (Clark. 1990). Also in Texas, however, groundwater conservation 58 150. Wastewater: Government has yet to effectively exert its ownership and authority over wastewater and its discharge. Once it has been generated, wastewater needs to be viewed under the law as a resource which represents a value to the national economy. In the long-run, there is a need to control the allocation of raw wastewater and the use of treated wastewater with a view to secure tenure for the user and to ensure adequate and reasonable protection of public health and the environment. (WHO. Geneva 1990). 151. Legal and Administrative Framework: The SRDP (pages 11-12), noted that the existing legal and administrative framework for regulation of the water resource is not sufficiently articulated to meet the current and future situation.3 This situation is now under study. The Water Resources Act (WRA) 1992 (not yet promulgated) sets out a new framework in which some of the most critical elements are: (a) requiring licenses for new water users, but apparently not for existing ones, (b) setting out a hierarchy of uses, with drinking water at the head, and (c) charging prescribed authorities to . formulate regulations for different users (MHPP is drafting regulations for drinking water). 152. The principal weaknesses of this legislation, from the point of the drinking water sector are: (a) it does not provide an adequate basis to facilitate the reallocation of water from lower to higher valued uses. Among other things, it would need to be strengthened in the following districts have been created as voluntary associations of landowners to conserve the available groundwater resources. 30 At'the time of the SRDP, this included The Canal, Electricity and Related Water Resources Act (2024) which controlled ownership and regulation of water resources, but did not provide a satisfactory framework for regulating uses. While the Act empowered Government to establish rules for water quality and pollution control, ministerial responsibility is not allocated. This is being replaced by the Water Resources Act 1992 (discussed in the text below) and the Electricity Act 1992. Other Acts'provide additional inputs (e.g., Essential Materials Protection ACT (2012) defines drinking water as "essential materials" that must be protected by the local.administrative authorities, Nepal Water Suply Corporation Act (2046) gives it power to prosecute illegal connections to municipalities where it has jurisdiction, Kathmandu Valley Development Authority Act (2045) empowers the Authority to control use of drinking water within the .Valley, although there is jurisdictional uncertainty vis-a-vis the NWSC, the Pashupati Area Development Trust Act (2004) gives the Trust the right to manage drinking water in the Pashupati area, and the Water Tax Act 2023 and the Water Tan Charges (Realization) Regulation 2032 under the Administrative Procedures (Regularization) Act 2013 empower DWSS to charge for water from Government systems. (These would be replaced by Drinking Water Regulations under the WRA 1992. 59 respects: (i) to provide a mechanism for defining existing uses and rights. Presumably it is not the intention of exempting existing users from securing licenses that they should be able to draw additional amounts of water, but that would be the effect; (ii) there should be the power to levy charges on existing users whose increased use would impose costs on others (as is already occurring in Kathmandu Valley); indeed, there is a strong economic case to levy charges on existing use of scarce resources as well, but that is a separate point; (iii) the WRA should provide a basis for compensation for loss of use to existing users for reallocated water. The only compensation now allowed under the WRA for water works is for land, buildings or machinery taken over, which does not address the issue; (b) it does not address the question of how to resolve conflicts among neighboring communities regarding access to sources, yet as noted above this is one of the major practical difficulties in rural (and many urban, e.g., Dulkhel, Dharan)) supplies; and, finally, (c) inevitably, while the WRA sets out a large numbers of powers of the authorities, it appears to assume that enforcement can be easily imposed from above. Faith in the efficacy of simple administrative enforcement is likely to be misplaced unless it is reinforced by the interests of significant actors. There is a need to build in practical incentives for resolving the allocation issues. 153. The Draft Drinking Water Regulation 2049 (April 1992 draft) to be issued under the WRA 1992 is largely concerned to update the powers of HMG to charge for Government-provided water and to define the powers of the DWSS in planning and executing projects, including the detailed rules to be met by Water user's Organizations, and the authority to charge for services. Water charges would be treated as HMG revenues. These provisions would need to be revised if it were decided that local water projects would no longer be promoted and implemented by central line agencies. The regulation also provides the Drinking Water Officer with extensive authority to regulate the quality of sources in general, including sanctions against polluters, as well as to manage HMG systems. It does not address the issue of regulation of ground water. It does allow drinking water schemes to be launched in agreement with HMG by water users association formed under the Act or any licensee 'in which case levying of charges would be subject to the Agreement"(section 30). As noted earlier, there is a need to clarify the terms under which water utilities can be operated. But it is also important that powers to regulate utilities not be handed to agencies which are themselves providing services, as would be the case under this draft regulation. In any event, the content of the regulation would need review in the light of changes in sector policy and management if these are made. 154. The proposed UNDP-funded consultancy for "Water Resources Sector Diagnostic Assessment and Water Resources Management Programme" could provide an essential input into developing a strategy. This consultancy should incorporate adequate effort to understand existing traditional systems and to evaluate the extent to which they can be adapted to the new situation, rather 60 than freezing too early on technical solutions, definition of rules, or investment programs. One essential area will be to attempt to define opportunities to improve resource allocation within existing institutional frameworks while new legislation and institutions are considered. Another function of this study could be to highlight specific areas where there are currently significant resource use conflicts (e.g., Kathmandu Valley) which would merit priority attention. H. INVESTMENT PROGRAM 155. SRDP Forecasts: Because there is a more explicit rationale for the SRDP forecasts than for those in the Eighth Plan, it is worth summarizing them by way of background to the discussion. The main quantitative recommendations in the SRDP were: (a) coverage target for the year 2000 of 77% for water supply (compared with an HMG desire for 100%), and 31% for sanitation, and (b) to increase budget resources devoted to the sector from 4.3% in the 7th Plan to "over 5%". The SRDP forecasts are based on unit costs of different types of schemes, and assumptions about how many persons could be served with each type of scheme (Annex 2, Table 7). The unit costs are subject to uncertainty, as different agencies follow different costing procedures. The urban forecasts were, as regards the NWSC towns, drawn from the 15 Year Development Program (HMG/MHPP/WSSC 19891 agreed by IDA and HMG as a framework for the UWSSRP.31 Sanitation estimates are drawn from SMEC 1990, The breakdown of expenditures among urban and rural, and water and sanitation, is shown in Annex 2, Table 2. There it will be noted that expected expenditures for Kathmandu Valley urban water and sanitation alone came to about 46% of total water and sanitation expenditures during the 1990's (covering less than 4% of the population). In fact, the level of expenditures proposed in the SRDP would come to almost 13% of IDA's most recent forecast of development expenditures during the decade of the 1990s. This investment target would therefore be unaffordable in the absence of substantial additional resource mobilization.32 156. The Eighth Plan Framework and the Eighth Plan establish a target of complete coverage with safe water within 10 years (say by 2001/2) (but no sanitation target). The Eighth Plan coverage targets for the period ending in 1996/7 (72% water and 13% sanitation) are to be achieved at substantially lower cost than the SRDP estimates for the period 1990-1995 (Annex 2, Table 7.) In this, the Eighth Plan repeats past practice: the Seventh Plan also assumed that coverage targets could be raised while unit costs would 31 One serious weakness of the 15-Year Development Plan is that its finanical viability was based on 50% capital grants in the form of HMG "equity" contributions. 32 Latest IDA forecasts of development expenditures during the Financial Years 1991-2000 come to NRs 162,171 million in 1990 prices. Public Sector Water and Sanitation Expenditures in the SRDP would come to NRs 20,692 million or to 12.8% (See Annex 2, Table 1). 61 decline from past practice (Procter and Redfern 1986, p. 79). In that case, also, much of the reduction was from the exclusion of investments in urban drainage and sanitation. The Eighth Plan does not even refer to the 15 Year Development Program. The reduction in costs presumably arises also from greater reliance on the private sector (60% of water schemes, and 54% of sanitation schemes would be carried out by the private sector and local governments; analogous figures are not given in the SRDP) and greater emphasis on lower cost schemes. Even the "scaled down" Eighth Plan targets involve heavy expenditures. The reduced WSS spending comes to 5.53% of the Eighth Plan forecast of total development expenditures (and to 6.8% of the IDA forecast). 157. In the light of earlier analysis of the effectiveness of existing programs, and the massive increases in coverage planned over recent experience (Annex 2, Table 8), the feasibility of HMG's target for the Eighth Plan period and for total population coverage with safe water (and satisfactory sanitation?) early in the 21st century is questionable. This is all the more the case if the Plan unit cost figures are optimistic. 158. The question arises as to what should be included in the plan. Measured against "need," the 21sM targets involve a considerable shortfall. The Eighth Plan seriously underestimates the urban investments required to meet the physical challenge. But the present paper has argued repeatedly that the approach of defining an objectives in terms of needs, independently of means to pay for them or definition of institutions capable of implementing them, is unsound. Measured against the current capacity to invest in and then sustain services, the investment targets in the Plan and SRDP are both over optimistic. 159. There needs to be a firmer recognition that hardware investments cannot lead development, It is likely that expenditures on software -- services connected with community mobilization, health education, and technical design and supervision -- need to increase relative to hardware. Both before and then in parallel with investment, there must be substantially higher resource mobilization. Both the SRDP and the Plan are too unambitious in setting targets for resource mobilization from users. The Plan estimate of only 6% of sectoral expenditures to be mobilized from beneficiaries seems far too low for either urban or rural facilities. (It is also unclear how this relates to the assumption of very high private implementation percentages.) There also needs to be more attention to the pace at which capacity of decentralized institutions can be increased. It is notable that the Plan does not even refer to the proposed Rural Water Supply Fund which is designed to spearhead the effort to promote "bottom-up" community-based rural water supply schemes. Past experience indicates that it would be a serious mistake to argue for raising the level of investment in the expectation that the resource " This figure is from the August 1992 draft of the ian chapter on water and sanitation. It seems to have been excluded from the final version. 62 mobilization and managerial inputs needed to realize benefits from the investment would then be forthcoming. 160. Donors should refrain from attempting to refine sectoral investment targets in the absence of much stronger and better focussed HMG actions towards stronger policies and institutions as outlined above. Otherwise, planning will continue to be only one move in the "coverage-budget numbers game." A more decentralized approach, with clearer policies, with central agencies concerned and capable of monitoring performance in terms of fundamental health and welfare objectives, and assisting more self-sustaining sector bodies (utilities, NGOs, community organizations, local governments), should improve effectiveness of interventions. Donors should focus on this range of issues, together with providing the amounts of investment which can in fact be absorbed productively. Effort can always be scaled up on the basis of successful experience. There is a need to shift towards results oriented programs and away from targets specified in terms of investments and inputs. 161. Special attention is needed to arriving at appropriate plans for Kathmandu Valley. There are myriad studies on different aspects of this, supported by many different donor agencies. But absent some authority within HMG concerned to coordinate this work and set priorities, this work has not provided a sound basis for determining institutional or investment priorities. Given the importance of Kathmandu Valley in terms of politics, economic activity, and the costs of servicing it, together with the intersectoral complexities of options for the Valley, it is recommended that HMG establish a high level task force, under the Chairmanship of a supra-sectoral agency, and including some important members of the public, to review the plans for Valley development. This task might be assimilated into the functions of the Environmental Protection Council established in December, 1992. The review should take account of water resources, and proposals for water, sanitation, transport, agriculture, and for controlling the deterioration of the Valley environment. It should consider whether some activities would be better located outside the Valley. It should recommend institutional measures. Donors should be requested to collaborate in this activity. Revisions to planned and ongoing subsectoral studies could go a long way to filling some of the information gaps which exist to arrive at a sound framework for Valley investment programs. As noted above, (See Box 3) it is possible that a dispassionate review of these issues would result in lower growth forecasts and smaller investment programs than are now under consideration for the Valley. 162. In terms of specific investment projects and programs, the following general actions are recommended: (a) There needs to be more careful and ripid formulation of institution-building programs (including planning studie, human resource development) as a basis for future sector expansion. (b) No public funds (including official donor funds) should be invested in any scheme which does not meet minimum and robust criteria as regards community (or utility) undertakings to look after O&M. This should apply equally to schemes now under 63 construction, rehabilitation proposals, and new schemes. Developing reliable machinery to make judgements on whether the criteria are met should be a matter of priority. (c) Funds on the UWSSRP should not be disbursed in the absence of complete fulfillment of the financial covenants of Credit 2239-NEP. This is particularly important, since those covenants do not even require full cost recovery, and the project includes substantial government capital subsidy (equity). (d) Donor agreement to proceed with detailed design (beyond feasibility stage) for any investments for urban water supplies should be strictly.conditioned on (i) appropriate HMG decisions on resource mobilization, e.g.: (a) HMG decision on principles to underlie future tariff setting overall for that town or area, or approval of local utility decisions on this matter, (b) credible decision on a timetable and machinery for making those tariff adjustments, and (c) implementation in accord with the agreed timetable. (ii) provision of credible information on the level of unaccounted for water in that town, a program for reduction of UAFW, and progress in reducing it, and (iii) adoption of satisfactory institutional arrangements for management of the investment and water supply in that town. (e) No new centrally-managed RWSS schemes for which contracts are not already let should be commenced from the present. Funds should be allocated only to complete ongoing contracts in a timely fashion. (f) Allocations for the next financial year should support decentralized implementation, and the amounts determined on the basis of what is manageable from an institutional and technical point of view. (g) a high level HMG task force should be charged with preparing a development strategy for Kathmandu Valley, including thorough review of investments now proposed and institutional arrangements. 163. Implementation of the above actions would result in considerable savings from existing hardware programs in the rural areas, and possibly also some urban -schemes in the short term (next one to two years). February 18, 1993 64 Annex 1 Page 1 of 13 XCUTIVE_SUMMARY AHE THE SRDP Backaround Nepal, a landlocked, (mountainous nation of some 18.9 million people in 1990, is confronting enormous challenges to improve the health and quality of life of its inhabitants during the final decade of this century. Presently, socio-econcmic indicators for the country reveal it to be among the least well- off countries in South Asia and the world. GNP Per capita stands at about US$ 180, growing at about 0.2% each year. The economy is agriculturally based, and GNP growth, is not keeping pace with population growth, which is estimated at 2.6% per annum. The population is predominantly rural, with only about 10% living in urban areas. The small urban population resides in 33 towns ranging in size from about 500,000 people in Kathaandu to 10,000 - 30,000 residents in the fifteen smallest municipalities. Urban population growth is expected to be in the range of 5% pee annum through the end of the century. Average household incomes vary considerably between geographic regions and range from NRs. 1,116 per month In rural mountain areas to about NRs. 2,108 per month in urban areas in the Hills. Income distribution is also heavily skewed, with over 46% of income being retained by 10% of the nation's households. The health profile of the country reveals a high Incidence of illnesses related to water, sanitation, and household/personal kygie. Diarrhoea and dysentery are leading causes of morbidity (40 per 1,000 cases) and child mortality (16.5% of total deaths). Typhoid, hepatitis and parasitic infections of the intestine are very common. Inadequate access to safe and reliable water supplies and sanitation facilities, combined with unhealthy personal, household and community hygiene practices are known to be exacerbating the continued prevalence of these diseases. Sector assessment and issues Coverage During the International Drinking Water Supply and Sanitation Decade (1981- 1990), significant improvements in access to safe and reliable water supplies were achieved, but these achievements nonetheless fell short of the targets that were established for the 1980's prior to the beginning of the decade, then later revised at the mid-point of the decade (National coverage target 54%, rural 52%, urban 69%). HNGN estimates that, in 1990, water supply coverage has reached almost 34% in rural areas and 66% in urban communities, giving a national average approaching 37% coverage. These percentages represent the design populations of completed water supply systemsI the figures do not take into account the present condition of these systems, the actual population using the systems, or quality of service. A substantial proportion, probably exceeding 50%, of rural water systems are in need of repair or renovation and are not presently providing adequate service. Similarly, most urban water systems suffer from poor operation Annex 1 Page 2 of 13 and maintenane, leading to excessive water losses, intermittent and contaminated supplies, apA large expenditures of public sector funds. Major rehabilitation programs for both rural and urban water supplies have been prepared and are about to be launched in an effort to correct this situation. sanitation coverage is much more difficult to estimate, since, with the exception of a few urban areas where sewer systems have been installed, provision of sanitation facilities is viewed as a household responsibility and is not reliably monitored. There is also no consensus on what constitutes adequate sanitation in Nepal. In any case, sanitation coverage (as access to latrines or sever connections) is low, possibly in the range of 3% in rural areas and 34% in urban centers, giving a national average of 6% coverage. As one of several elements in evaluating achievements in the W88 sector, meaningful criteria for measuring water supply, and sanitation coverage need to be established. Institutional setting HN's inputs to the drinking water supply and sanitation sector are organised through several government agencies in five ministries. The Ministry of Housing and Physical Planning (NMPP) has lead responsibility for Was sector development, formulating and steering implementation of overall policies and strategies. Within NHPP, the Department of Water Supply and Sewerage (DWSS) is the lead government implementing agency for the sector. DWSS manages two sector programs - a regular program that encompasses contractor-executed projects for rural villages and 19 smaller urban areas, and a comunilty water supply program that executes community-managed water schemes for smaller rural settlements with populations of less than 1000 people. The Nepal Water Supply Corporation (WSC), also under the MHPP, is an autonomous body responsible for urban water supply and sanitation in 14 larger urban centers in Nepal. The Ministry of Local Development was the lead sector agency for rural water supply and sanitation until 1988 when these responsibilities were transferred to DWSS in the course of a re-organisation of the sector. MLD now executes a number of integrated rural development projects that include drinking water supply and sanitation components. XLD has, until recently, administered a grant-in-aid program which provided local governments with grant funds for construction of water supplies and other infrastructure. Within XLD, the Women Development Division has supported a number of small WS8 projects that have been conceived and implemented by women. Public health, hygiene education and, to some extent, promotion of on-sits sanitation are the purview of the inistry of Health. N08 comprises, among other departments, a mall Ravironmental Health Section which promotes on-site sanitation, water storage and treatment and water quality monitoring through training and demonstration. A Health Education Section is also located within MON, in the Division of Policy, Planning, Monitoring and Supervision. The Ministry of Education and Culture also plays a key role in imparting health education to school-age children through elements of the classroom syllabi that incorporate aspects of health education. Annex 1 Page 3 of 13 Soqtor Planning and coordination overall WSS sector planning is coordinated through the National Planning Comission, which ensures that development plans for all sectors harmonize with Nepal's national development plan and policies. The Ministry of Finance is responsible for mobilization and allocation of financial resources for programs and activities in the W88 and other sectors in accordance with the National Development Plan. A National Water Supply and Sanitation Committee has been established within HMGN, chaired by Secretary of MHPP, to steer 58 sector planning, strategy formulation, monitoring and evaluation, and to liaise with external support agencies. Sector investment and external assistance Multi- and bi-lateral external support agencies have been providing financial and technical assistance for WSS development. During the past decade donors invested some US$ 48 million in WSS sector projects, amounting to about 400 of total sector investment during that period. Total sector investment during Sixth (1981-1985) and Seventh- (1986-1990) Plans were NRs. 1,127 million and NRe. 2,302 million, reopectively. National development budget allocations for the WS8 sector have been in the range of 4% of the total budget since 1975. NGOs A number of local and international Non-Government Organizations (NGOs) have been active in the sector, implementing generally smaller, integrated water supply and sanitation projects, comprising about 10% of existing water coverage. The NGOs have also made more substantive efforts to effectively involve women In water supply and sanitation projects. The activities of many NOs are coordinated to an extent by the Social Services National Coordination Council, but there has been little coordination or sharing of resources between NGOs and the key HUGS agencies for the sector. Operational issues Similarly, the existing organizational framework within KN for the WSS sector, is constrained by the vertical nature. of many of the agencies* activities. There has been little exchange of information or, sharing of resources, and in some cases competition for finite EMGN financial resources and areas of responsibility. The tendency in the past has been for the main rural WSS program to be centralized, focusing on the construction of new works, with insufficient attention being paid to involvement of beneficiaries in any stage of the projects, or to operation and maintenance of completed works. Within the NWSC the approach to urban water provision has neglected financially, sustainable operation and maintenance. The skills and deployment profiles of DWSS and NWSC reflect this centralized hardware-oriented bias. Also, women are under- represented within most sector agencies, although HHON has a policy of employment without sexual discrimination, less than 1% of the professionals in DWSS are women. Annex 1 Page 4 of 13 The more successful water supply schemes, in terms of system sustainability, have been those implemented through OWS8's Community Water Supply and Sanitation Program for smaller communities. The Program incorporates a relatively high level of community participation in planning, implementation and management of water supply systems. This Program, along with those of a few NGOs, are also the only ones to have promoted sanitation improvement and provided health education in conjunction with water supply development. Comprehensive drinking water or human waste disposal legislation has yet to be drafted for Nepal; laws on drinking water must generally be inferred from legislation on the general of water, although some Acts relating to the development aspects of water use for drinking purposes have been promulgated. There is a need for a detailed and comprehensive drinking water act to clarify the priority of water use and right of access, and to facilitate the resolution of disputes concerning drinking water. Both urban and rural water programs have suffered from poorly defined and incompletely implemented cost recovery policies. I* rural areas user fees are not paid, an in urban areas tariffs that represent only a fraction of real operation and maintenance costs are under-collected. The financial as well as the institutional burden for operating and maintaining systems accordingly falls disproportionately on HN institutions and public sector budgets. Rural comimunities need to become involved in the financial aspects of managing their water supplies, and urban water tariffs need to be raised and collected. The NHPP Directive of 2046 (February, 1990) - "Construction and Management of Water Supply Projectso (revised in January 1991) - should ameliorate many of the organizational and operational drawbacks that presently constrain rural WSS sector improvement when it is fully implemented. The Directive was introduced to make operational the decentralization policy that was promulgated in 1982. It provides guidelines for DWSS to assist communities that have completed, on- going or planned water supply projects within DWSS's programs to establish Water Supply User Comittees for direct involvement of the community in planning, operation and maintenance of the systems. Presently, the directive exclusively addresses the management of water supply projects; it should be revised to incorporate policies and procedures for environmental sanitation and health education, either as integral components of water supply projects or as separate but linked activities. Decade lessons learned A great deal has been learned during the 1980's, from a global perspective. about Owhat works and what does nots to improve water supplies, sanitatioa services and hygiene practices and, thereby, the health status and quality of life of under-served populations. An outline of some key lessons learned during the decade might look like thiss 1. Inteoration - Sustained improvements to health can only occur if hygiene behaviors improve through combined improvements to water accessibility ad quality, sanitation facilities, and hygiene education. Accordingly. resource allocations for the sector should be balanced to adequat*.vr Annex 1 Page 5 of 13 support all of these elements. 2. Involve the beneficiaries - Sustainable improvements are seldom achieved through a top down approach where governments or project teams plan and implement projects and beneficiaries have no role in planning, construction and financing. If beneficiaries are expected to assume ownership and responsibility for systems, then they need to believe that it is their project from the first step, and that the system will provide services that they want and are willing to pay for. 3. Divest resoonsibility to NGOs and the orivate sector - It is becoming clear that, in many countries, the public sector cannot afford to implement programs to meet either past or revised present sector development from both institutional and financial perspective. Ultimately the most effective role of government agencies is to facilitate and support sector improvements through effective planning and resource mobilization, training, technical support and the establishment and enforcement of standards. The private sector, iocluding NOs, is most effective at implementing SS sector programs and should be relied upon to do so. 4. Sharine costs - It is becoming clear in many countries that public funds are insufficient to both construct, and then operate and maintain, water supply and sanitation systems for everyone. Also, experience indicates that systems are usually better maintained when users have a direct financial interest in them. Among other forms of participation in WSS improvement, users should be expected to pay for regular operation and maintenance of their own water supply and sanitation systems, and for incremental improvements in water supply services beyond a basic minimum standard. S. An=apriate technologies - WS systems work best and are sustained longer when users financial and managerial capabilities and service level requirements are taken into consideration for technology selection and system design. 6. Coordinate inouts - Too often, during the past decade, external support has been delayed or compromised by overlapping or competing interests of various donor agencies. Also, the institutional framework within recipient countries is often excessively complex and inappropriate for efficient planning and implementation of sector programs. Finite donor resources are most effectively used when donors and government agencies collaborate and when recipient countries present clear policies and sector development plans to steer investment. These same issues are also a feature of sector development experience in Nepal over the past decade. Other specific lessons learned in the Nepalese context includes 7. The population coveraae tarets set for the 1980s were too potimistic. Similarly, the provision of water supply and sanitation for all by the Annex 1 Page 6 of 13 year 2000 may not be achievable. Ambitious targets.can only be achieved if strag political commitment, accompanied by adequate human and financial resource allocations, is secured. 8. Many completed water supply projects have rapidly deteriorated due in part to 2oor operation and maintenance of completed schemes. It is, therefore, reasonable to expect that the actual coverage figures may be lower than what has been officially estimated. 9. Though the Decentralization policy that was established during the 1980's was a positive step in the devolution of powers to benefitting communities, mobilization of comunity oarticioation and the involvement of women in the sector oroaras have not been effectively achieved. Decentralizing the WSS program and divesting increased implementation and management responsibility to Users Groups is not a simple matter. It involves a major re-orientation of staff responsibilities, skill, and professional attitudes, It also requires development of management skills and cooperation within benefitting communities. These changes necessarily will require several years to complete, but a start should be made now. 10. Human resource develowment (RD. has .not been accorded the reauired oriority - Training for the W88 sector has continued in the form of projects and has not been institutionalized. Also, adequate attention has not been given to providing the communication or organizational skills to field staff that will be required for a decentralized program that will impart larger responsibilities on local user groups. 11. Sanitation and health education continues to be aiven low oriority in Government budgets and sector strategies, and has not been addressed in the MWPP Directive of 2047. The absence of a comprehensive sanitation policy or Implementation plan has greatly hindered the development of this sub-sector program. 12. Financial resource constraints - Availability of HNGN financial resources has continued to constrain sector development. At the same time, Government Policies regarding cost recovery for water supplies and sanitation in both rural and urban areas are not well defined, and the policies that are in place have not been effectively implemented. 13. Poor olannina and imolementation - Special interests have often driven the final forms of district development plans for water supplies, with a consequent focus on starting rather than completing projects. This has resulted in an ever-increasing number of on-going projects whose implementation periods have been much longer than the normal one to two years. This has brought about a serious credibility gap between the beneficiaries and the implementing agencies, and has led to inadequate supervision of projects by over-stretched fieldfstaff. 14. Health. education has not been effective - Health education provided La isolation from other environmental inputs and imparted by limited statt Annex 1 Page 7 of 13 using didactic methods and untested support materials has not been effective in changing hygiene behaviors or improving health status. Very little coordination between NOH, NHPP and other agencies for implementing health education programs has occurred. In particular, no linkage has been established between WSS sector programs and the primary health care program of MOH. 15. Rapid urbanization has put an added strain on WS8 facilities in towns and cities. Plans for service provision need to be adapted to keep pace with urban growth. Sector develoment strateav The development goal for the water and sanitation sector during the 1990s will be a sustained Lmprovement in health status and productivity for Nepal's population as a whole, with particular emphasis on lower income groups. The goal will be achieved through the provision of adequate, locally sustainable water supplies and sanitation facilities in association with improved personal, household and community hygiene behaviors. Based on the sector assessment and issues highlighted in the paragraphs above and described in chapters I and II of the main document and the lessons learned during the past decade, the following areas will receive high priority in the development of the water supply and sanitation sector over the next ten years$ 1. Institutional restructuring and development to establish an effective institutional framework to implement a decentralized sector program 2. Preparation and implementation of dynamic, district-based sector development plans, that are based on an inventory of all potential projects and priorities projects according to sound and objective criteria on an annual basiso 3. Human resources development to provide the required numbers and types of new and redeployed staff to implement the decentralized program; for urban areas the focus will be on strengthening the management and technical capacity of the NWSC to manage and expand water supply services in a fiscally sound mannerl 4. Implementation of integrated projects that provide concomitant improvements to water supplies, environmental sanitation and health education; 5. Maximizing community participation In all aspects of project implementation to ensure that benefitting comnunities are willing and able to operate and maintain water supply and sanitation systems on a sustained basis; 6. Enhancing the effective involvement of women, through affirmative action and other initiatives, in all aspects and at all levels of WS programs Annex 1 Page 8 of 13 where their needs and concerns are under-represented, or effective in changing hygiene behaviors or where their increased participation would facilitate the achievement of program goals and objectives; 7. initially focusing on consolidation of the WS8 program through completion of on-going schemes and rehabilitation of existing rural and urban schemes that are in need of repair/improvement in order to provide a basic level of service; 8. Giving priority within the program to under-served areas, and to the less well-off segments of communities within project areas; 9. Giving priority to linked programs for environmental sanitation and health education and developing functional linkages between SS and PRC programs 10. Enhancing the role of the private sector and NGOs in the implementation of coordination, district-based sector development plans; 11. Improving legislation and enforcement pertaining to control and protection of drinking water, water sources, and maintenance of appropriate environmental sanitation standards, including the establishment of water quality standards and a capacity for water quality monitoring; 12. Enhancing coordination between Government, donors and NOs to ensure the most equitable and efficient distribution to limited resources in accordance with a dynamic sector plan; 13. Launching a point source (spring protection) program with in-kind contributions from beneficiaries in small communities to provide safe water supplies from local traditional sources. WSS sector develogment plan The program over the next decade will be implemented in two phases. The initial phase will focus on rehabilitation of existing water supply schemes, completion of on-going projects, reorientation and re-deployment of existing staff and training of new staff, institutional restructuring, preparation of integrated district-based sector development plans and priority lists, and testing and refinement of program implementation strategies. Some new schemes will also continue to be built during this period. At the same time, a project to develop, test and establish capacity for a national sanitation and hygiene improvement program that will complement water supply projects will be implemented in specific geographic areas. This initial phase can be expected to be completed in three to five years. A second phase will overlap and then succeed the first, extending to the- end of the decade. It will encompass accelerated implementation of the district sector development plans, a focus on expanding coverage through efficient execution of new, integrated projects, and a focus on Laproving hygiene behavior and protection or improvement of water quality. Annex 1 Page 9 of 13 The seator plan will be dynamic in nature, comprising a core policy and strategy, with regular review and revision of the implementation plan and targets based on implementation experience and progress and the changing situation -and needs within the country. The focal point for integrated WSS sector planning, coordination and implementation will be at the district level. WSS sector development plans covering the decade, with annual updating, will be prepared that clearly define the areas of activity of various Government and m00 groups in the district, and coordinate the inputs of field staff from all agencies to support community organization and training, health education, sanitation improvement, and monitoring along with the construction and rehabilitation of water supply schemes. District profiles and regional master plans for water supply and sanitation will be prepared following the establishment of regional planning and monitoring units and training of concerned staff responsible for this work. A comprehensive national implementation plan will be compiled and coordinated centrally, based on the district and regional plans with consideration given to resource availability and resource distribution priorities based, inter alia, on the relative need and demand for services. For urban areas, a Fifteen-Year Development Program will be implemented with three major objectives to be achieved for twelve major urban areas by the year 2005. These objectives are to improve the financial status and managerial and operational efficiency of the NWSC, to strengthen donor coordination and, most importantly, to provide better services to the consumers on a sustained basis. Urban drainage and sewerage improvements are also planned for Greater Kathmandu and other selected urban centers outside the valley. Water sunoly coveraae The program for the first five years of the next decade envisages an extensive rehabilitation program which will ensure the validity the 1990 coverage figures (34% rural). Furthermore, the completion of on-going projects (number Ing about 1,000) by 1995 is expected to serve an additional rural population of about 3.0 million people. This work, along with the implementation of the proposed deep tube well/hand pump program serving some 0.7 million people in the Teral. would raise rural NS coverage to about 50%. On this basis, assuming that future investment will be at the present rate with an annual increase of about 20%. conservative national coverage targets for the year 2000 would be 77% with 750 rural and 90% urban. Establishing meaningful criteria for measuring coverage will be given priority at the beginning of plan implementation. Based on these projected coverage targets, the incremental population that will need to be served over the decade is-presented in the following tables Annex 1 Page 10 of 13 USter tsy: Additlonet population to be served in urban and rurel aroe by the yoar 2000 (Population figurm in thousands) Yoar 1990 1995 2000 Sector Total Population 1.811 2,288 2,921 nefittfing Population 1.196 1.716 2.629 Additfonat Poputation to Largo : 390 Large : 513 bo rved during Plan 1990-95 edim : 130 Medt : 400 96-2000 Period Period_ _Totat : 520 Total : 913 Total Population 17,129 18,90 20,375 Be^fittfng Poputation 5.753 9.450 15.250 Addttonal Population to Piped : 1,050 Piped : 1,261 bo served during Plan DTV : 697 OTN : 805 Period 1990-95 Spring : 450 Spring : 874 96-2000 STU : 1,500 : 2.860 Totat : 3.697 Total : 5.800 m~(U Total Total Population 18,940 21,188 23,256 nf itting Poputation 6.949 11.166 17.879 Additfont Population to U/Loe. U/Lg. be served during Plan 390 : 513 Period U/ffed. U/Ned. 1990-95 : 130 : 400 96-200 R/Piped : 1,050 R/Piped : 1,261 R/DT : 697 R/DT : 805 Rl/Spr. R/Spr. 450 : 874 RISTU 1.500 R/M : 2,860 Totat 4r217 Total : 6,713 Noten: U/Lge. Large urban symt~a U/ed. a Medius urban ayst R/Piped R Rural grevity-flow pipd systo R/DTN - Rural e tubie wetls R/Spr. a Ruret spring protection R/STU a RurcL shattow ti wels Annex 1 Page 11 of 13 Sanitation Coverace Projections of coverage with adequate sanitation that are likely to be achieved in the coming decade are more difficult to estimate, due in part to the paucity of present coverage data, and also to the fact that the approach that is likely to be taken for the sanitation program will rely almost exclusively on community and household motivation and user financing. While this approach see appropriate in the financial and socioeconomic context of Nepal, it provides HMGW and NGo much less control over the rate of latrine construction, particularly in rural areas, when compared to the water supply program. Some urban coverage in the larger towns will be achieved through sewerage schemes that do allow for more predictable rates of coverage enhancement. With these factors in mind, and taking into consideration sanitation program mobilization experience in other developing countries, sanitation coverage targets of 12% and 25% for rural areas in the years 1995 and 2000, respectively, might be realistic. For urban areas, the corresponding figures would be 50% and 75%. The incremental population to be covered over the decade is tabulated below: Sanitation: Additionat population to be served in urban and rural areas by the year 2000 (Population figures in thousands) Year 1990 1995 2000 Sector Total Population 1,811 2.288 2,921 BenefittIng 615 1,145 2, 189 Population Additional Latrines: 426 Latrines: 930 Population to be 1990-95 Soewrage: 104 Sewerage: 114 96-2000 served during Plan Period Total 530 Total 1,044 RML Total Population 17,129 18,900 20,375 Senefitting 514 2,269 5,089 Population Additional Population to be 1990-95 Latrines: 1,755 Latrines 2,820 96-2000 served during Plan Period Nelt Total Total Population 18,940 21,186 23,256 Benefitting 1,129 3,414 7,278 Population Additional Population to be Latrines: 2,181 Latrines: 3,750 served during Plan 1990-95 Sewerage: 104 Seerage: 114 96-2000 Period Total 2,285 Total 3 864 Annex 1 Page 12 of 13 Sector investment Clan and financina The total projected investment required for the sector during the 1990s with reduced, achievable coverage targets for water supply and sanitation would amount to Ns. 22,140.8 million (about US$ 738 million). A summary of the costs and the proposed financing plan is tabulated belows Projected capital investment costs for the water supply and sanitation sector with reduced, achievable coverage targets (1990 prices, Ms. in millions) investment components 1991-1995 1996-2000 Total for the decade Water sapply 1,945.7 2,961.1 4,906.8 construction Sanitation construction 3.063.7 2.721.7 5.785.4 Rehabilitation progrem 3,748.0 6,793.4 10,541.4 Support programs 358.2 549.0 907.2 Total investment 9,115.6 13,025.2 22,140.8 required Proposed distribution: hQG investment 4r301.3 6r065.1 10r346.4 Donor Investment 4,301.3 6,045.1 10,346.4 Beneficiary investment 513.0 935.0 1. 448.0 Totals 9,115.6 13,025.2 22,140.8 Almost all capital investment for household sanitation (with the exception of sewerage in some urban areas) , and OAM costs for water supplies, are expected to be borne directly by beneficiaries. Donor contributions to the sector have amounted to between 40% and 50% of total investment in recent years, and it is likely, that investment at this level can be maintained or increased. This will require external investment in the range of USS 30-35 million per year during the decade. Donor interest and financial capacity should be sufficient to meet this investment rate, but Government and/or local private sector will need to further develop a capability to prepare fundable proposals to allow projects to come on line at a pace in keeping with the sector plan. The proposals, government commitment and project performance must also adhere to policies that external agencies will support. These would include an emphasis on sanitation improvement and health education in conjunction with water supply development in order to achieve positive change to hygiene be;iviors, system sustainability, fiscal viability and equitable distribution of resources and services. It is not likely that the primary constraint to rapid expansion of Nepal's WSS sector development program during the 1990s will be financial Annex 1 Page 13 of 13 resources. It is probable that institutional capacity issues will drive the pace of sector development. Government commitment to restructuring and retrenching for more efficient and effective program implementation and decentralization in accordance with existing policies for the sector will determine the rate of program implementation, and also of donor interest in the sector programs. manpower reauirements It is estimated that the total staff of DWSS required to serve the 77% national population coverage target for the year 2000 would be about 7,600 and for NWSC 3,300. Action.Plan Based on the development strategy, an Action Plan identifying activities required to implement the strategy up to the year 2000 has been prepared. The activities are organized in this document under 3 headings, vis: Institutional and BERD, Support Program, and Program Implementation. The Action Plan, if implemented as described herein, will undoubtedly improve the WSS situation in Nepal a decade hence. Nepal Water ector boues Paper Annex 2:Table 1: Forecast of GNP. Govornment Budget. Delopmeit Expenditures on Water, Sanitatio and Powwr (NR million) Check Total FY90 FY9I FY92 FY3 FY94 FYM FY9 FY97 FY9 FY99 FY2000 FY91-f6 FY-0 Decade 92-96 96-2000 1 NomInal GDP mil(a) 88711 100628 123372 141804 166404 172762 19026 210347 232109 266123 282622 694700 1171826 186686 148533 234366 2 Real GDP mIl(a) 88711 92235 96186 99321 103493 107839 112261 116863 121665 120643 131836 498074 609267 1107331 101460 121861 3 4 GDPgrowth%* 3.609 3.979 3.209A 4.349A 4.209( 4.209 4.109 4.109( 4.109 4.109A 4.109 6 Inflation % 0.409A 9.109 18.809 10.009 8.009A 0.009 8.009A 6.009A 8.000 6.009A 6.009A 6 7 Aevenue(a) 9268 10413 12901 16022 18368 20979 23362 26609 29826 33836 38296 785683 152018 230801 17043 30404 8 Expenditure' 19668 21207 26021 32067 34583 37612 42652 60406 67262 84608 72601 151560 287618 439168 32686 67624 9 'Regular(a) 6672 7928 9724 11349 12408 13672 16712 18224 21180 24606 26231 64081 107963 162934 11783 21691 10 ^Development(a) 12997 13278 16297 20718 22176 24100 26940 32161 36082 40092 44370 9686M 179666 276234 20823 36933 11 Defilcit* -10381 -10794 -13120 -16145 -16216 -16693 -19300 -23796 -27436 -40762 -34306 -72967 -136600 -208667 -16643 -27120 12 FinancIng 13 'Foreign(a) 7936 8678 10614 14444 14868 16720 18300 22297 24536 27661 30806 64212 123800 186112 13884 24780 14 -Local' 2446 2118 2606 1701 1367 973 1000 1499 2600 3101 3600 8766 11700 20465 1669 2340 15 18 Normal Power Expenditure (b) 2088 1618 1916 6390 6713 4201 10376 9086 12006 13310 11723 18736 66606 76241 4305 11301 17 Available for Power (b) 2088 1616 1418 4738 6200 6661 6442 8688 10003 11121 12367 18623 48822 67146 4262 9724 18 Non-Power Expenditure* 10909 11763 14879 1680 18976 18449 20486 23492 26079 28971 32003 78048 131043 208089 16571 26209 19 20 90 Price factor' 1 0.916593 0.771636 0.701309 0.661703 0.624241 0.508910 0.656672 0.624128 0.494481 0.486471 21 Total Dev't Expe., 1990 prices 12997 12171 12674 14632 14073 16044 15866 17879 18912 19624 20697 68994 93177 162171 22 Normal Power Exps., 1990 prices 2088 1390 1477 3781 3780 22 s110 6048 S293 6684 6486 13060 29603 42664 23 Nop-Power Exps., 1990 Prices 10900 10782 11480 11208 11232 11517 12071 13062 1369 14326 14928 66219 68046 124264 24 26 Water & Sanitation Development Expe., 1990 prices (d) 6602 12000 20693 26 --of which: ^ Rural 1827 2310 4143 27 ^ Urban 6417 9226 16642 28 Overheads, etc. 368 649 907 29 30 ^Kathmandu 3681 6891 9972 31 32 Water & Sanitation as % of Total Development 12.69 13.09A 12.89A 33 Water and Sanitation as % of Non-Power Expenditures 16.39 17.89A 16.79k 34 Kathmandu as % of Water & Sanitation Expenditures 41.69A 62.99A 48.29A 36 Normal Power as & of Total Development 18.99 31.79A 26.29 ' Calculated (a) SAICIF: Government Expenditures and Financing of Power Sector Investments Addendum Appendix 2-Base Case (b) Ibid, Appendix 4. Includes Arun 3, Option F (c) Ibid, Appendix 3 (d) SRDP, pp 87-93, excludes private sector expenditures on latrines. No account of beneficiary contributions to other schemes (see also Annex 2 Table 2) dage 10：之 娥自自留細馴向•”d••總．自•勿••．P網網” 向••，t了‘細念•廖園，h呻州州中即鉤dh〝開•閱頃I唱讓．•細•．調細•為馴向•j勵•目．自州•馴由• 斗 � ё � а г � д -� ���������� f��������'����xw¢�г���v6L��� .. � _ � о i � 71 � � � ь � 1У [ о � � � 8 0 л i . � f � s т � � � �_ � � � 4 3 � • � °' � � � - � � � � � � � � � � � � � _ � � � � �S � е � .� s � ��� � . � � � 8 и �' � �.' � �' � �' 8 � $ Cj � �' � � � � � � � � ,g о �� в� iu � � � � w о о й b� о b ir м : � � � � � � � � м ��� � $�и����������°������ ��� � � о • а о Ч w о'v о о b � � � � � р Г � в 9 w Ч N и • iŭ рΡ#� t рΡ� �{ � � Ё � � �' о g' G й � й � 1� i� � � ,�L � � R � � � f � F �t� � � � я J � � ° OZ � о 8 i1 � � � � � L � � b � #ь � о w • b L М i � � � � � � � � в � . ��� � i � а + � • v � � � У О О � � � � � � � о о L v� ь s L f а i. v�о � b iu � w w 3 � - _ � � � 8 � � � � � � R � � � R r � у р � � � � � � � � � •1 ♦ �1 • О V IN 0� У • У У � о (1 • О О � _ � �pr f l � � о о о о о � р� о о �i о �i о � 8 о в �i �i � г # � # # # # "s � � # � # `� i г � # � г � # о �j УΡ н и о ryрΡ�� • • � S � о о о о М • F1 о fi о У О • � w �1 У � �i � � � � � �U _ 00 � о о о о� i д о� о� ё� i 3 R д��� �� � N � О М � N о о о о о i � � о аЭ о ai д � i1 Г w � а � Annex 2: Table:3 SECTOR BUDGET WATER SUPPLY (NR& In Thousand) SIXTH PLAN RURAL WATILR SUPPLY URBAN WATER SUPPLY GRAND SEVENTH PLAN DWSS MPLD(b) TOTAL IDWSS NWSC(a) TOTAL TOTAL 19W_81 24.412 29,989 54.401 8.352 31.472 39,824 94.225 1981-82 61,620 34.399 96.019 15,722 40,261 55.983 162.002 1982-83 115,Tn 48.968 164.745 14,116 143,519 157,634 322.379 1983-64 137,781 39,025 176.81% 2.552 85.639 88.191 264.997 1984-85 119,041 50,000 189.041 7.720 39,671 47,391 216,432 Total Sixth Plan 458.631 202.381 861.012 4a,461 340.562 389.023 1.050.035 1985-86 121,81M 57.717 179.517 11,312 144.884 156.196 335,713 1986-87 149.825 24,669 174.484 17,027 190.712 207.739 382.223 1987-88 239,523 67.266 306.789 17.711 24,730 42.441 349.230 1988-89 456.404 - 456.404 13.538 47.331 60,869 517.273 1989-90 537.964 - 537.964 76.266 26.611 102,877 840.841_ Total Seventh Plan 1,545.516 149.642 1.655.158 136.854 ikU.268 570.122 2.225.290 TOTAL 1,964.147 35ZO23 4318.170 184.315 774.830 959,145 3,M3115 1990-91 &M.351 558.351 65.411 48.150 (1) 113.561 671.912 1991-92 798,336 796.336 46.754 160.300 207.064 1,006.390 1992-93 932,531 932.531 121.700 136.SOO 258.2001 1.190.731 Total 2.289,2181 2.289.218 233.865 344.950 578.8151 2. 8 M. MOMS Grand Total Source: (1) NWSC Finance Directorate; Instead of the allocated NRs.60 million In the MoF Budget Book actual received was less. (a) after 1989, previously WS.§B and WSCC (b) MPLI) managed the UNICEF-assisted Community Water Supply and Sanitation Program up to 1988. when it was transferred to MHPP. Lj Annex 2: Table:4 SECTOR BUDGET FOR SANITATION (NRas. In Thousand) SIXTH PLAN RURAL SUPPLY URBAN SUPPLY ' GRAND SEVENTH PLAN DWSS MPLD(b) TOTAL DWSS NWSC(a) TOTAL TOTAL 1980-81 - - - 459 16,094 16,553 16,553 1981-82 - - - 1,080 17,370 18,450 18,450 1982-83 - - - 9,209 13,166 22,375 22,375 1983-84 - 1,347 1,347 6,525 2,719 9,244 10.591 1984-85 - 1,469 1,469 4.352 2,887 7,239 8.708 Total Sixth Plan 0 2,816 2,816 21.625 52,236 73.861 76,677 1985-86 - 1,390 1,390 3,500 4,972 8,472 9,862 1986-87 - 1,037 1,037 5,867 8,130 13,997 15,034 1987-88 - 518 518 4,891 11,009 15,900 16,418 1988-89 850 - 850 12,788 3,367 16,155 17,005 1989-90 - - 0 9,965 8,571 18,536 18,536 Total Seventh Plan 850 2,945 3,795 37,011 36,049 73,060 76,855 TOTAL 850 5,761 6,611 58.636 88,285 146,921 153,532 1990-91 ? - ? ? 9,250 9,250 9,250 1991-92 ?- ? ? 6,700 6,700 6,700 1992-93 1,305 - 1,305 ? 20,000 20,000 21,305 Total 1,305 1,305 35,950 35,950 37,255 Grand Total Source: Ministry of Finance - Budget Books. (a) after 1989, previously WSBB and WSCC (b) MPLD managed the UNICEF-assisted Community Water Supply and Sanitation Program up to 1988. when it was transferred to MHPP. A nn2 : Tab~e 6 EXTERNAL FUNDING IN THE SECTOR (NAB Theujndo RURAL RURAL UmAN FINANCIAL AND W UIAN ______ -- - -- - -__ YEAR UNDP` LI~E CANADA FINNIDA1 IIA UK JAPAN NMV AU~ AM~ 188 TOTAL å12 0AIJAPAN A TOTA OA. 1900-I1 - - - - -- -- - ---- 1981-2 - 25.964 3.167 - - 1,312 - 30,433 2.448 93.481 792 6M9 127,12 1962-43 863 30,661 5.181 - - 2,448 - 38.190 - 79.065 1.296 80.30 11,43 1083-84 1.396 20,778 4,60 - 3.238 - 28.184 - 48.947 1.238 47.188 77.486 1064-8- 430- 29.603 -111 - - 788 - 42.071 - _ .390 2.920 71.310 113.811 TOTAL GTH PLAN 2.89 1084ILM 24,078 - - 7,784 0 1130.66 2.440 218.43 0,248 6.534 437.881 8: 7TH PLAN 1186-m0 777 30608 10.000 - - 610 11,321 56.437 - 83,661 4.000 87.51 146.786 1980-7 816 21.983 29.604 - - - 24.156 76.642 - 8.976 7.376 97.361 173.0M 1987-8 11 33.087 15.372 - - - 54.160 103.629 16.610 80,00 3.843 80.060 184.4~9 1988-8 3.221 30.803 7,000 - - - 77.434 121.237 13.113 7.000 1.760 21,843 148.321 1988-40 6,636 42.364 6.400 26.000 943 - 100,724 181.431 17.916 9.460 1.00 53.86 241,032 TOTAL IFTH PLAN 11.160 16.763 _ _ __ 74,276 26.000 9431 8__ 10 273.794 ___640,276 28.,729 260,576 43.569 %_ 340.789 8aW.225 o Water Deoade 13.849 272,640 90,264 26.000 943 8,294 273.794 679.034 31.176 637.419 49,814 636.323 1,330,101 E. 100' Budge1 1110.41 800 22,961 4,188 60,000 7,10 2.788 123,640 211.377 4.000 40.300 48,966 80,000 93,266 305.142 1991-82 800 36.288 4,226 20,000 10.224 2.976 62.500 100,e38 226.850 8.100 64,000 10.000 132,100 369,660 1992-48 - 55,730 3,180 40.000 9.785 2.862 380,68 8,500 600,636 84 70.000 80.000 150.84 661.490 TOTAL 1.100 i114.96 11.164 110.000 i27.9181 01 0 816 62.600 0 6 04,767 S.6OC 938.8O3 12.964 1184.300, 138.966 6 0.000 1379.2191 1,310.1812 Suros:Muli y ~ an F ~-amuro Bak * Public resource development projct I Noae that UNDP contdbutione #o he Management Support to NW~C - U8$3.4 million (Total) and Coneumm Education-US0.264 million (Total) are not so In the Roource Booke. Water Component of Integrated Rural Development Pro~et. - 尸age上of4 方‘ -．一u州么C必 化‘ ■－一―-―一―_＿■＿..．…＿_＿組nexZ:Ta。上e6 一。‘& SIцNMARY �f� f1ONOR ASSISTANГ.1� Т<) Т11Е� WATF:R SUPPI.Y AN11 tiАNГГА 1 1г 1N ti1 �' � 1 11г ----- .,,.,,. i инои п ел /NOJfCT ТУУЕ О/ ООИОд 111рМ ОАГ! 01 tfATW W{ COD! MiOJECT ИАУЕ 1RO.IECT DElСд1РГрИ 11�В1ОТЧIСЕ АУ[ИСУ АрЕМСУ frMT COYREfqИ А � С О Е YLLrON д[МЧ1М� afquN01УАТЕА WNAY[УЕМ рМ lврвв NNГ� 1Мр 1 Т fТиОв ИlMW00{ IUTUIIE М1АГ[д M1P�lY ГдОУ Fив�� вУуr i1r у{�r 1n wyr hor ув�ьqу дМы УгвА lN1pNW� MW�C 1М0 1М2 � 2[0 fввв0� /11у дМвi/b Мг� OllТМОЕ ТЧ[ VN.L[У �ОП ь МдПввrW VdY1r у��♦М �и � MATHвu1MDU1ALRR/R. Ru� д нiв� д УММ tlr r.вqr ги.д-дr-.Ми в[wrвim пиоr .ь...в м[МУОО{ вИИАУGI[1(f М1fОд7МТ10М iвьE4rr{ д в оовqви�в0 �вггрвьвг{ NпьвИоn YMr Огвгс UMOM1MC DMY 1{М 1М0 ,< 0 72 АМО Т[CMNrCAI ЧNв01fТ /011 всвУг DMM 1а tlr rвr вввУоw и0 Ууо.в � ввМаlопд ' ►дОJlСТ N1[гА1ЧТ10И 1'011 иW�ьв. гвьвА' Ф«rbв и0 вввМrр qaOYr д М�АТЕ11 �'СТОд АУ[ИС1[1 вОМУ� ввМьи и0 рвrьМ д ввi iь b р�рвгвlbn rd wnrr� д rr. рауоь и0 МrОввУоn д аlвгУгу гуМв.в МЕМУ0р7 WWAYEY[1RCUMORiTO MpвrвtlondWW1/вв,ро�wи0вовlвМогвирвив, Огвrв ЧМОN�� NWCC 1{М 1М '� бИ WrC рвгуlргв rW 4вYiYip wврМ b/MicC 1тьвУгу prlвv+r и Мв гр+kввыrв вг tlr 11WrwrWu VвYr. агв д tlr Muq vw 11r гwм rw о...1�..л ►nw.r 1�rог1 и[нлвгоll тдииию Ог lииvоиr[д roд тг.ыь,{ д..т м rrмso..w и«• воьььии аг.д иwнма оиwиwвс 1д[ 1и1 о и WATlR дl1MLY - РfИМ У оавb{ ьlрг сwв Toi сомrиит rАтЕЧ w�гr�v 1му rr мо ды wr ььwмр o.rrr�. мдьrод аг.д wио owwиwвC =1вм 1и1 о ео ew{ 1.о r..r. АИо МИIТАТI0И вввУW�пв Сд 1771ИЕ► YREATERKATIYIANOU h�вгвимгдОгвУьрвl{1�ьввМги0вввvвррWвlи/rr См4 1MOrNMri OWM 1{М 1М0 . 070 одииАас 7ип[л wли а идмrпе�.м иьр+ 1wN пиоив . CR рЛ Иf� дидХ wAT[11 clM/lY /гвргвtbn д ргсjврв �n tlr Сиtrв1 и0 Wвв дr�оп М Сгд worW Mri pwN 1М0 _1М0 '.` 0 т ►га�всТ г�п[виитаи мг wв.мв iм гьrгыго UoN МlМ1р0{ 1'OUCY 11[V�W A1il М10.1ЕСТ T1i р�ргдогТ rort уг,вдr и ивувУ д Мв вiMYip Уги1 1N1oI/ Wor10 OWM 1М1 1MQ ; 0�0 fYW 1Ак4 1{�ог1 w4ьУвд дмрr О[VdO/Yp1T /AC7.RY - вwvbв rNMwy ьвWrуьвв ид Мидlев Уrевигогвl сиl ргвруbА М1� /110.1lСТ 7/ЧОJlСТ hвwввмt 1ав wвtиьСУ aowrwp 4ввW выvb Овlrиr. М1[ИИАТгОИ 10д МОГОУЕD 1о11 /1Mq[D 11tM1K WATE11 R1Mlr NiO ММ(fАГ10М �1101КТ пмтwк wАииrи roд A..r оwи ы ы.r.yo..wor q.r.r� иа /[ыrм иа ам ииогпиоге оwи 1и7 1ru - и,д., о,у.гвиеп МгАТ[д �ulrlY А1О вiqorYip ол гПв уlwrвlвь Ипl !� WМПвТрМ сlCTOR M10oqAY b � а оо � 110END (D (D :'С А v..ььrrr А в м.вr+ыг t..i О •• � Ам� м р О„-wьв ''1 к С�... F Q- � го о. it rku l >#iLýr ^ rignTn i-Mn ý.øoMparea 9~ R~ and Oewaký~ Plan ElglIffi Døv~m~ Plan iam-lm7 laý>-~ Ca= per pereffle WILIP C~ peræne Eet. &~ ~** Ué" Plan E*L fm 1~ 190111 m SMP unit C~ TOW lgw 1~ a> 1903-07 1990 1~ (a) NIRS per NR8 NR8 NR8 NRØ loa NR8 effite 1~ million million 'OW (b) million million million W~ F4~ øyeten a w9o 4600 0 0 0 0 ~ lum 2000 0 0 0 0 0 0 Gravity Mw new 1000 lom 1080 0 1027 1027 0 924.9 of~ now m~ iow i ~ i ~ 1675 1342.2 MW 800 W7 418 0 0 0 0 ~nø Prata~ 150 480 a 0 26111 40 0 n.o øm 100 1500 150 0 4067 4011 0 334.8 ~fAmpro~ te 84.3 Sub~ . Rural 3W7 lue 0 6758 2877 1975 2758.0 urban 20M 130 280 0 443 0 Urban R~ (d) 3748 0 Sub-total. Urban 130 4~ 0 443 0 1780.0 Sub_l~ Watør 3827 5~ 0 71m 3m 1675 46311.0 sann~ (6) Rural 171 1758 300 0 1159 196 0 Urban NO 426 213 0 a 34 0 Dum ~noe 40 0 20 10 12 urban 8~ 090/ 2511 0 348 ? dr~ subtata~ #~ 2181 30M 0 18n 242 12 823.6 F~aIbillty ~y Training. Røa*arch 2278 Off~ 35111 0 8a3.11 TOW Coet glis 0 Budget Coet am 0 Text , 8273 0 (o) Notea: (a) aommoe 9.4% in~ in 1 NO, and 9. 1 % in 1991, ~ing ta&or of 1. 19~. (b) The alloc~ of = ~ targ«s among wnwýg SROP c-ate~o for coat ogomatoe le m SMP (c) = Man. Extract from Cha~ on Walør & Santt~ ~ ory No.of Categorv eGneft. (d) Inclucloe Mok~i in UMP (9) No persone Inc~ prhmte latrine* Rureå 1404 Gravky On_g~ Pi~ 1027 Gravity New pi~ 26111 ~ng Pr ~ng Prote~ 4w øm, ~ k= Tube Wolle 6756 Kaffi. Valky 113 U~ 2&towno 3M U~ gub-tot-utban 443 .TOW 7190~ Amn 2. Tabe 8: Eghth Plan Orinking Water and Sanitation: Existing Situation and Plan Coverage Targets '000 people or % Rural Urban Total Water Supplies Coverage at the end of 6th Plan 2,977 866 3,843 Additional Coverage during 7th Plan 2,447 268 2,715 Additional Coverage in 1990/91 454 29 483 Estimated Additional Coverage in 1991/92 821 9 830 Total Coverage in 1991/92 6,699 1,172 7,871 % Coverage at end of 1991/92 39% 67% 42% Additional Coverage During 8th Plan' 6,756 443 7,199 Total Coverage 13,455 1,615 15,070 % Coverage at and of 1996/97 71% 73% 72% Additional Water Coverage During 9th Plan (to 100%)(b) 7,315 1,148 8,463 Sanitation Population Covered by end 1991/92 513 599 1,112 % Coverage at end of 1991/92 3% 34% 6% Additional Coverage during 8th Plan 1,159 414 1,573 Total Coverage as of 1996/97 1,672 1,013 2.685 % Coverage at end of 1996/97 9% 46% 13% Additional Sanitation Coverage During 9th Plan (to 100%)(b) 20,257 2,164 22,421 Annual Increase in Coverage -- Water Seventh Plan 489 54 543 1990/91 454 29 483 1991/92 821 9 830 Eighth Plan 1,351 89 1,440 Ninth Plan 1,463 230 1,693 Annual Increase in Coverage -- Sanitation Eighth Plan 232 83 315 Ninth Plan 4,051 433 4,484 Population Total Population at and of 1991/92 17,102 1,761 18.863 Total Population at end of 1996/97 18,863 2,206 21,069 Population at end of 2001/2 (a) 20,770 2,763 23,533 NB. Rate of Population Increase 1991/2-1996/7 2.0% 4.6% 2.2% Rate of Population Increase 1996r7-2001/02(a) 1.9% 4.6% 2.2% Source: Eighth Development Plan Chapter on Drinking Water and Sanitation (a) Assumes total and urban population growth rates same in 9th as 8th Plan. Rural growth is residual. (b) Assumes 100% coverage by 2001/2 (End of 9th Plan period) CTN Annex 2:Table 9: NWSC Operating Ratios 1989-91 Kafhmandu Valley Outside the Valley 1990/1 1989/90 1988/89 1990/1 1989/90 1988/89 Connections,'000 72 66 64 33 30 28 Production, mid 90.9 90 89 59 58 52 Daily consumption,mld 54.1 52 51.6 40 39.5 36 Annual Revenues NRs '000 43,304 28,607 27.014 20,342 11,590 10,369 Operatig Ewenditures. NR 00 Managemmt 17,147 13,740 29,631 4,859 3.258 9,944 Production 19,462 11,725 9,852 8,333 6,561 4,008 Distribution 12,654 7,135 2.206 4,533 4.119 897 Consumere a/c 7,159 4,008 2,515 2.198 Quality Control 1,309 4.780 559 609 Elecmro-mechanical 4,412 3,588 Sewerage Operation 3.452 1,863 Sub-Total, Operating Expenditures 65,595 46.839 41,689 20,799 16,745 14,349 Capital Expenditure NRx' 000 6,902 22,577 20,076 3,302 12,628 8,477 Total Expenditure NRA 000 72,497 69,416 61,765 24,101 29,373 23.326 Ratios Avg Unit Rev. NRs/M3 2.19 1.51 1.43 1.43 0.80 0.79 Effective 1991 Rev./M3 2.88 2.05 1.58 Effective Dec/90 Rev increase NRa/M3 91% 155% Revenue/coa/mooth 50.12 36.12 35.17 52.63 32.19 30.36 Rev/connmo 1991 rates 64.12 73.07 61.72 Consump(M3)/conn/mooth 22.85 23.96 24.52 36.87 40.05 39.11 Unaccounted for Water, % 40% 42% 42% 32% 32% 31% Operating Cost Nrs./ M3 3.32 2.47 2.21 1.42 1.16 1.13 Effective 1991 Op. Cost/M3 4.18 1.69 Water Op. Cost,Nrs/M3 3.15 2.37 2.21 1.42 1.16 1.13 Source: NWSC Tariff from December 1990: RIs 15/ for the first 10 M3 per month, thereafter Nre 2.5fM3. Previous rates were Nrs 7 and 1.2 respectively. Non metered rate. also increased. Expenditures exclude depreciation and interest. Revenues include connection and sewerage charge. as well as water tariffs. Effective 1991 rates calculated on assumption that consumption remained constant when price rose in mid-period. If consumption rose, the effective tariff increase would be less thai 'hown, and vie verse if it fall. Annex 2: Table 1 ANNEX 2 Table 10: Rural Income Distbution: NRB(a) and NNHS(b) Results NRB 1964-85 DISTRIBUTION OF HH MONTHLY INCOME ORDERED BY MONTHLY PERCAPITA'1NCOME - INFLATED TO MID-1991 DOcUe Av. HH Ave HH Ave PC % Share of KH Income 1 6.51 909 140 4.3 2 5.53 1230 222 5.8 3 6.81 1507 221 7.1 4 6.74 1692 251 8.0 5 6.38 1839 288 8.7 6 6.36 2050 322 9.7 7 5.80 2148 370 10.1 8 5.78 2499 432 11.8 9 5.77 3076 533 14.5 10 4.96 4221 851 19.9 All 6.16 2117 344 100 NNHS DISTRIBUTION OF HH MONTHLY INCOME ORDERED BY MONTHLY PERCAPITA INCOME Decle Av. HH Ave HH Ave PC. % ahare of HH Income 1 7.6 433 57 1.9 2 6.7 637 95 2.8 3 6.7 878 131 3.9 4 6.6 1076 163 4.8 5 6.7 1353 202 6.0 6 8.1 1513 248 6.7 7 6.2 1897 306 8.4 8 5.9 2319 393 10.3 9 6.1 3276 537 14.5 10 5.1 9185 1801 40.7 All 6.37 2256 354 100 SOURCE: CULPIN 1922, Page 38 (a) Nepal Rastra Bank (b) Nepal National Housing Survey (in Culpin 1992) (c) The 1984/5 estimates were inflated at 8% pa from 1984/5 to 198819, and thereafter at 11.5% (d) The lower growth in lower deciles may be due to undercounting of subsistence income in the later s.-. The very large increase in share of the top decile, however, may reflect an increase in inequality. Annex a: iao.Le ANNEX 2: Table 11: Utban Income Distribution: NRB(a) and NNHS(b) Results NRB 1984-85 DISTRIBUTION OF HH MONTHLY INCOME ORDERED BY MONTHLY PERCAPITA INCOME - INFLATED TO MID-1991 Decile Av. HH Ave HH Ave PC % ahare of HH Income 1 6.87 1393 203 4.4 2 6.88 1885 274 5.9 3 6.00 1897 316 6.0 4 5.84 2258 387 7.1 5 5.89 2609 443 8.2 6 5.25 2860 545 9.0 7 5.14 3372 658 10.6 8 4.96 4004 807 12.6 9 4.39 4505 1026 14.2 10 3.42 6903 2018 21.8 All 5.49 3169 577 100 1991 NNHS DISTRIBUTION OF HH MONTHLY INCOME ORDERED BY MONTHLY PERCAPITA INCOME Decile Av. HH Ave HH Ave PC % share of HH Income 1 7.1 909 128 2.1 2 6.9 1442 209 3.3 3 6.9 1932 280 4.5 4 6.8 2373 349 5.5 5 6.9 2933 425 6.8 6 6.2 3274 528 7.6 7 6.2 3974 641 9.2 8 5.3 4219 796 9.8 9 5.1 5630 1104 13.0 10 5.5 16650 3009 38.3 All 6.20 4324 697 100 SOURCE: CULPIN 1922, Page 39 (a) Nepal Rastra Bank (b) Nepal National Housing Survey (in Culpin 1992) (c) The 1984/5 estimates were inflated at 8% pa from 1984/5 to 1988/9, and thereafter at 11.5% (d) The lower growth in lower deciles may be due to undercounting of subsistence income in the later survey The very large increase in share of the top decile, however, may reflect an increase in inequality. URBAN WATER SUPPL У PERFORMANCE INOICATORS и„г:�с 1и,.гт 1 А. NWSC OU"ГS1DE THG VALLCI' TOWNS WATER sио рапкиЧn ОндсiАи вlндТидсдд �дидкриR нЕтдиод вlдсии� рокнднА вU1wAL вндlнАFlдwд нEPa.GUNJ ВАИЕРд RЕмдкFs 1 POPULATION Тои1 РариЫоп 1991 lсепеив) 68177 130129 55021 51072 66761 75711 ц213 39{56 {8656 Рориlагnп Scrvcd 61000 32000 11000 21000 3.'l000 7{000 29000 11000 15000 Саlсиlаlед 1го1 Регоого рег соппг<тп 6 7 33 6 36 Ь В{ 7 ЬВ 6 2 9.6 6 9 7А{ ве1иQ Вгвlгиве Senred by typc - Wa1cr Ouaбry Sепвынс - ноп-Wаlег Ош1ыу Sегопме !1 WA7ERAVAMBILПY TypedSrppySource SWlGW GW GW SW/GW GW SW SWlGW GW GW Оиапlыу Ргодисед m3ld У,ф 7000 � 2100 2200 6000 16900 `ЕМ 2900 2960 OrnMRySo1dm3/d 5700 {900 2160 1320 3600 1о1{0 цВ0 19/3 1Л6 СвkиЬ(д Ьаоед оп вуslет lоеысв' Оиапlггу 8ыkд (т3� ОиаМыу Collected (т3) Еаtипв(ед Syslem Lооке (%) {0 30 10 {0 {0 {0 {0 33 в0 Slongo Syslem �Турс) S1ce1, RCC RCC wertи д НСС ыегМад тввопгу RCC wегlкдд Masrory мавтry ОvегАсад впд рСС lапkв ргоипд lanks Wnkв lдпtа агд RCC tиkв W мд RCC вгд RCC дгоипд RCC мА оlсеl rcarvoiв дгоигд lапkв гекrvоFгв гекгrо"vs UnFa гевепгоцв Sloragc СаРаспуlт3) 3300 1{50 {50 12{6 1150 500 1{00 225 55(1 111 WATER OUALПY - ТигЬWыу - Cobr ргоп� Р11 Lмeb - СОИогт СииМ - TreatmeM Y!И - Туре д TrratmeM - Localpn д qи1М тдеwетсМе а rКЧМг гсдиlаг ог вроl теавигетеМ � b � SW � 5игlасе Water Sоиги � � GW � Grourd WaMr Saurce •� `ry iD (D к � г� • О •• г-h Н г W о' Н N Н г� PERFORMANCE INDICATORS Иwsсто.гм2 NWSC OUTSIDE ТНЕ VALLEY TOWNS (continued� � WАГЕН 8 Ио РвМкиУгв DHARAN 81RATNMAR JANAKPUR NETAUOA В1RОиК1 PONHARA BUTWAL BMAIMMAWA NEPALOUNJ ВАИЕРА REMAКR9 N PUBLIC WATER D13TR1BUT10N Lвп9гА д Имгогk 1ьт1 79 00 В7.10 n 2В и 00 5я 46 ае 00 29 е2 20 00 3я е4 LвnptS рвг Ррв Вhв (1ггп1 . ' - д1в� 25 lo < ВО пт 1 В 90 17 00 В 25 1� 50 S� W 21 00 1 � В2 12 00 2я 14 (Уе 100 пп) (Ус я0 пп) - д1в ВО тп to < 200 тт 59 10 5В 1 о • 21.�л1 47.00 , 10 7о 25 09 25.50 - 1я 0о В 00 1>ВП тт) - дIв >200 пт - 12 00 - ИитDвг д 9tвгФовtв 2W 24 40 S 45 173 1 ц1 22 яВ ИшпWг д СомвеlИм рвг lурв ' Арвдин.огkw.гв� s-зо е-ц е-2о o-zs я-ао s-ss 4-2s в-2о s-zs ИшпWг д Мв1пв р•г lурв д Сопмдbп - 13 тт (1/2'1 SПО1 в517 1092 29я;1 �я10 7120 2759 11я1 1579 > ВО пт (31{•) 1я 1о7 а я1 n м я 2s 01 в1дМ 11 furcibn4p 9я % % % М 97 9я 97 % вв д Dк я1. - tошв д ну�ру рвг дву 0 12 я ♦-1о 10 10 • , В 1В Ьвввд оп nwnWr д дсотрУ4Мв V ЧELIAB1LfTY No д таjы грвИ Аrвгв9в д dovnllma рвг гвраb Аvвгврв Ио д иигв вМвыад ИОТЕ. Вивlмии вгв дNlдвд lnto ыаtвг qивВу имММв rrMrв t1r иигв hrв о.п tгввlпвпl ог гвlи вркW prwutbм (гиlвшиЧ. Аоtвlв ы оыпрУИ вЕои1 ыаtвг qив111у) ОtМгв вгв поп-имNЧв. Wв вдрве111rt ргМtв иrvb М ргlтвгlу W qивУу имkИв Dивlпвии W МгММtlв. V1. f1NANCUL lпvистаМв Риt Уигв Dy: ИМО/И - Dогогв NитЬвг д Етрbуив 97 79 92 4В 59 117 61 45 42 ТвгМ1 9tгисiшв • кги.1 Оам сиlипз �ИдМпз� ,.д �,, - Емгру 025 0.17 019 01я 0.20 001 008 ООВ 020 �q г'��. - Рвгипмl о зз о.н 1 о7 о es о ю о.ю о 4s о е1 о ео �� � - Смпаr о о1 о о2 м9lрвь о.о1 п.яияы. о.о1 о о1 му>оыв о w �' г� о •• Апу FlпвгкW �вtвтвыЛ � могмм д мигв у t� W Атоига д Аггигв (иR. mWbг� 1 2о2 1 32я о W2 о 541 1.я4я 4 901 1%9 о 476 о J6t � F� (D vu lиsгпитагиl�• Nwsc Nwsc иwsc Nwsc иwес Nwsc Nwx Nwsc иwsc иwsc • Оиегb t1r wгмгвеtивl гвЫbnвl+4 Dвtыввп NW9C/DWS9 апд 1М tо.м сопсвггWр t1r двllпмbп д гиромD9МW И армtМр мtвг вирру увtвпв ~ г�� B. DWSS TOWNS DW§S-tni WATER CHANDRA13ADHW SNO PARTICULARS LAM BHADRAPUR INARUWA hAJBIRAJ LAKAN TANSEN I POPULATION I Total Population 1991 joan,w) 13150 54M ISM am U757 P-Pui.tion Served 12025 4111M 9000 490,00 31000 13000 Peteand per household 11000 Business Served by ": - Water Quality Sensitive - Non-Water Q-I*y Sensitive 11. WATER AVAILABILITY I Typo of Supply Source GW 15pring) aw aw Ow QW ow (Spring) Quantity Produced .31d 1600 111100 am 111M 4000 1300 Quardity Sold m3fd 1360 5185 5270 3400 1106 Quersity, Billed m3ld Quantity Collected m3ld Estimated system Losq,ae % 15 7 Is is 15 storage aware 1") Ground G r-nd and Elevated Ground and Ground and I Reservoir elevated tanks ok tanks elevated tanks elevated tanks Gtoundtenks - Storage CAWIty m3 Boo 1500 450 900 900 700 Ill. WATER OUALrTY - Turbidity NTU 15 c 5 5 .5 - Color; Iran Imazan; MOF4 5, 059 5; 3.45 5, a 01 - PH Leve 6.4 a 2 6.4 a 2 - CoIllolm Count - Treatment YIN Y Y Y Y Y - Type of Treatment Chlorination Chlorination Chlorination rapid sand rapid eand Chlotination filtration and chlorination 111tralk)n wW chlorination - Location of quality mageuromente and whether regular or spot measurement IV. PUBLIC WATER DISTRIBUTION I Cl Length ol Network (km) 9 2 31.065 125 - 12823 29Aa (D M Length per Poo Size x Number of Standposts 35 114 Is 82 43 1-j Number ol Connoctiona per Type (dim. 15 mm) 0 1064 234 707 259 963 Age 01 N.1wtork (Years) 13010, FIS'N 11010 Very old Number of Motors pot Type of Cor-lion (de: 15 mm) ru 361 82 3291 2241 w of arhich % functioning too M hours of supply per day '001 '001 - 9 F- SW - Surface Water Sources GW - Ground Water Sources nwss тоwиs rconгinuea� �wss-и2 снАИоRА0Аони WATEH У.АМ BMAOMPIIR 1NARUWA ААIВIНАI UHAN TAN3EN V RELUBLLfTV Ио д тарггврврв " АwгвОв д ооrпlмв рвг гврв4 АrвгвОв Мо д иигв вйвдвС И � PRIVATE WATEF D13TH1BUT10N Trw д ewPN Евt1тЧW Оивпгр Рг1м PapuFвlbo 9вrvW Ви•lпмви иnW Ьу rypr. - w.иг роПry имМ1w - Иог�ывtвг qualMy имkМв ИОТЕ ВивЬиии ив dN16W Мт w/и qивЧry иовММв вгМгв l1r иигв 1rw ип lгиtпвМ ог гвМ врвеlвl Ргмиlbпв (гввfвигиlв, Ьо1вМ ы оотрlвИ вЬоW w1a qивlМу�. 011+вn вгв гоп-игrlWв. Wв вогрвсl llrl qlwtв игvlов 1в ргмвгlу т qивиу ипЧсМв ЬивИиви впд Mwlnlдв V11. FINANCUL lтrиtтвгМв Риt fМв Уигв Ь/: - нМ0/И(Илв.пШЬп) 0.75 ОВ O.N 075 0.075 - Dогогв(NRв mdlbn) 177.7� 27�67 1В2.56 1В256 6.5 NumWr д Етрbуив В 5 1О В 6 �0 ТвгМ1 8tructurв Адив1 OlM CoвtUm7 - ЕпвгQ� (ИRв � 0% 0% 0.% 7 В - Регюпмl(NRв.) 02 0.1 011 0.1 0.1 12 - СМтkаlв (NRв.) 0 О6 0.% 0.05 1 0% О.ц Апу Flпвrc1в19tв1втвдв? ЧомМ д Мгигв АтоиМ д Arran И11. 1N3TRUT10NAL b у N в7 Dиcrb tM еоосгвеtивl гвlвlbпМр ЬвtыиП NWBClD W99 впд tM тrм согмлтlгр 1М OвflnMbn д гиромЬиkW М аргаllпр w!a нурlу вуЧвтв г� � �i 9вn1h1bo •L` N о •• Ht Ри.и а.�гиар P.n«п.по. иаwа. гоr имиип и wи оыы.у,lми..юил oov.r 1м оо�гвг.о.,1м уР. д ипм.гип, ryP. д иимии, п.уииwу ы игvа .т у eotn ооимbп.пд двривL Аврвоlв гвьЬпВ т гвУвЬWгу а«nbв а игvа fог ивn (емвпгм• вМ ovвrfbr qаЬиту W га Рг�в Огввtпвгв рlвгr до.гпtм• ид А W v' �Ь МУаОв YrklqlвУl \/N ОУМаl1 Мр1WП�. ("', � ("г г•� Annex 3 Page 1 of 2 Nepal Rural Water Supply and Sanitation Issues Paper Notes on Health and Sanitation in rural Nepal, villagers reserve the left hand for unsanitary tasks, the right for eating and other tasks requiring cleanliness. Disease is believed to be caused by evil spirits, or may occur when individuals take certain food or drink in inappropriate seasons of the year. Water which is clear and flowing is believed to be clean. In tradition, there is no concept of disease being caused by living infectious agents. In addition,the concepts of clean and dirty and purity and pollution are well developed in Hinduism, and thus have a strong effect upon personal and household hygiene in Nepal (Simpson-Herbert, 1984, p. 174). The lack of sanitation awareness in Nepal within traditional cultural practices inflicts undue hardship upon specific segments of the population, notably children less than 5 years old, and particularly those less than one year old (Listorti, 1990, p. xii). It is these groups which experience most of the morbidity and mortality of illness related to poor sanitation, because it is in the early years that children are first exposed to the prevalent diseases. By age 5, children have been exposed to the diseases prevalent in their community. If they survive, they will probably have developed considerable immunity. The spread of early childhood immunization programs for measles, mumps, pertussis (whooping cough), diphtheria, tetanus, poliomyelitis, and tuberculosis have helped to limit the spread in childhood of important diseases transmitted by direct contact or exposure from person-to-person. 1 These programs are not yet available to all children in Nepal, however, and the cost of their implementation-may further delay their dissemination. For the fecal-oral route of transmission, however, the high number of infectious agents makes it generally impractical to develop immunization programs to combat the problem, or for individual-s to develop immunity in childhood through exposure to all of the infectious agents. The preventive vaccines that are available for specific infectious agents (e.g., for cholera, for typhoid fever, for paratyphoid fever, and gamma globulin for hepatitis-a) give only short term protection and are expensive to administer. Nevertheless, with the advent of the biotechnology revolution, it is expected that new and improved vaccines will soon be developed and integrated into large-scale immunization programs in developing countries. The experience of Hepatitis-B vaccine is instructive: first licensed in the early 1980's when the price per dose was around $100, it now costs less than $0.50 per dose. It is expected to be integrated into the EPI (Expanded Program on Immunization) and to prevent one million deaths due to liver cancer. A Hepatitis-A vaccine which offers long-term immunity has now been licensed in Europe and is soon to be licensed in the U.S.A. Vaccines are currently being developed Against Shigella and rotavirus, the two agents most l/Poliomyelitis may also be spread by contaminated drinking water. Page 2 of 2 responsible for diarrhoeal disease in children. Work is also under way seeking means to immunize against parasites. Diarrhoea is only one component of the complex web of childhood ill-health, since diarrhoeal diseases and malnutrition are inextricably linked as major causal factors contributing to childhood mortality (UNICEF, 1983, p. 104). While malnutrition greatly exacerbates contraction of the diseases of childhood (Listorti, 1990, p. xii), some early childhood diseases, such as pertussis and measles, precipitate malnutrition (UNICEF, 1983, p. 123). The malnourished child is more likely to become ill when exposed, and illness resulting from infectious agents further exacerbates malnutrition. Intestinal parasites are also a leading cause of morbidity and mortality, affecting approximately 3 billion people world-wide. They aggravate malnutrition by absorbing many vital nutrients. Infection can be contracted through contaminated food or water, or through the feet when bare- footed in a damp, contaminated environment. While rarely fatal, parasites contribute to an individual's general debilitation. Intestinal worms can be substantially reduced through provision of sanitation facilities, however, combined with limited hygiene training of the people. (Listorti, 1990, p. 6) This results because disease transmission is interrupted once human feces are safely removed from the surrounding environment. Appropriate disposal of human feces can be combined with de-worming programs to achieve significant reduction of the burden of intestinal parasites in the existing human population. The above factors highlight the need for mothers and children, and families in general, to learn the precepts of sanitation: improving nutrition, improving sanitation, changing sanitary and personal hygiene behaviors, and seeking out available immunization programs. �� Wтв surei.т в� sвптвпав кssa�s т�тп С�О!!lOfI1T !�lICIPцIOI• 1�I�Ci � �II.�[.7Я1 ROC:Y1d ОсОвг Исигвl,hо/га.в ■О �вt� 1вг hoвгвв� рооог �ввlвtв/ Мfоесв h[•ви lоnвсq Irrisвtlas. рм�кс весl•[с!в• ' Oы1r-Iшp�a.PO-tЧSCr Wa• lв[иг 1яв9) W[ЧOtICS1-1IOIai-a.1••ид Lо0в-в0ов М.1сЬ/рориlвс[т рмlксв •. plвmin ид Dвв! /и ОвмгвllТ рΡо г. Lргов�вnс lbвt м�веи ьо11 ргврΡ•го/. Ув11 ргорвгод. в11 веЬввв {авв ►оо/. вавв рΡо г1 ьв iв lргв sae /авlдаи/ ►Т tвв оЬилод L•[вr ввир �W в рвгtlеlрвсв/ С►Ов рвпlеlрасо/ lо,еnввlи{11 N►tlalMtl�вt jоццевl lввдвгв /lвссlеtв ОЬи/а еврвсв� вовс С�Ов гврвW /lгвесl� w L Со�1сТ в.Мввев а►и!а npac• сЬгои� ОЬи1д соqw всв 0►о1а гqьrпв [г� ФС. ../ 0[[[•гмс аРрΡговеЬ.в O.w11 а►и/а е.�оввса [гв •11Lj• Gв•в1 t tLrои�рΡ ООС, С►Ов иlвес вги [д em�utlaa ODC � ваьсlвв wt dtS СавLЕси (ODC� /вввд plвncltal в/9DСв1 n•!wв nрвtвl СWв tцLрΡ а►илвсlт, ваtв►цА вantвat в/ГJD1 Со�. во►111ввtlаа. ►виllвв 1врlовваtlов lаоаеl lnссивв/ Ог`иlsв/ оигв eo�ltuo. «/вгtвb ►ви-1lов wлор [вас tвеЬnlевl tвв. вw wлвТ. ви/в ввиввwt иоt tвив [ог рвпlе!рΡаtlов 1а идвгtаb 11дtв/ w/в СlО� /олв ОС1 wt в/1оев1 вррl 1aj /![[onac иеЬnlевl wr•вр, во в tw /1всгlесв. ввиввввnt. 000� аоо/иес 01L рго/гввl рп�е[patorT врргаве►вв оаввltТ !а•о1•овввс [ог твk111в/ wcLц• 1а•о1•в оtЬвг С�О, Lbc ввигlвlв 1а веЬввв иLetlm nвртвllцlсlввl вввs С�О !в•о1•о/. •еЬввв lлевtlаа Dоов в�ос 1а•о1•в СОО CW ►в•в ►ow Ia•о1•о С►0 L вовL евив С10 1п•о1•в/ 1а веЬв iвгliвг рмJвеtо роог (Lоевсlоа о[ рь�в. tувси/, иlвеtв/ ►Т иеЬлlе[ввв 1де1и/д /а вовв вавв го�кtв вt[11 /аlавсв/ иlвесlаn. 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(�on.er�� еаив а+►вевntlвl ' в1и [ог jп•!t веЬввв. в1и ввав�ввввt irгljвtim. иаlиеiоаl l,ораtв [ог сiмцв. �-!ц w11в С. 0_рогвеlао во/ Мвlаиовоев Ми всЕ+вв 190-9/i) /[иг /lгве[lи 1►wt �0-�S[ о[ веЬвввв ввв/ Мв�огlе� вn ввгtlаt Мь/ trslula� ol арвгвtо[в, ( в-еоnв ле - w[�ве [гав /lвсврвlг. вwв рго/гввв !а го►в►111иtlав егвlдlоs в[ рм►lввв 1а а•вllв►i�1q о[ вовв ровlеlл аqвгlовев (Ововгвl hr[олвsевl laek о[ r.lаеиисв� [w веив оргвtогв вц11 аsв/в/ рвпв [ог IMiOв в� рогиl гврогtМ ввjогlt� о[ авгоtоkви го кtв� Lek о[ bc►o/eo1 оввА tгвсаlо/ �гв�аlд/ 'д � 00 � (D fD k F-� О п� W ?age 2 of 3 rX-. jJ Ble .9 å* til i -I I. Em 4-d 9 le mk JBI- 242 lo 3 il &age 3 of3 …………………‘………‘…一…（！舟 Page I of PRIVATE WATER TREATMENT I T 1. Under standards required in developed countries, no urban water supply in Nepal could be considered "safe". This is because disinfection, while practiced by authorities, is haphazard and irregular in most treatment facilities and monitoring standards are less than adequate throughout the process. 'While individual household connections to safe 24-hour piped water supplies may, at some point, promise maximum health benefits, this will not be possible for many years in most urban areas. In the meantime, consumers are Z: taced with intermittent and uncertain quality supplies, since few sources are safe, disinfection of public supplies is erratic, and infiltration of polluted groundwater may take place in distribution systems at times when supply mains are unpressurized. 2. In these circumstances, policy makers should not lose sight of cases in which it will be optimal to encourage private solutions. Some private solutions may incur social costs which required regulation. Thus, where urban water supplies are less than adequate to meet consumers' demands, private pumping to capture extra water from low pressure systems involves inequity (since tank and pump systems are not affordable to the poor) and compromises system integrity (requiring additional maintenance) and increases infiltration. Unr * egulated and unpriced private extraction of groundwater -4-n situations of falling water tables is also inefficient. On the other hand, where groundwater is present in sufficient quantity and adequate quality, private wells may be viable options to public supplies in terms of regular--':,7 and safety of supply and even cost. 3. Private measures may also play an important role in ensuring adequate bacteriological quality of water. Even when the quality of the wa:er received at the source is adequate (whether it be a spring source, standpost, or supply from the in-home tap in urban areas), treatment and storage options are often advisable in individual homes to ensure safety due to demonstrated recontamination after collection, but before consumption (ENPHO/DISVI. 199. .(a) & (b): NARSS/DISVI. 1990). For in-home water quality improvement, boiling and filtering water from the public supply is often practices year- round, together with storage of the potable water in a small kitchen tank. Chemical d is infaction has also been practiced within small kitchen holding tanks (of 20- ,O liters). Depending on the contact time used for iodi-e C_- chlorine ccmpounds, dosages of 1.0 - 0.5 mg/l are generally needed w-'--h storage times of 1-8 hours, respectively, to kill the most resistant agents in clear water (IRC, 1972; IRC. 1973). Other in-home methods used elsewhere (and by some individuals in Nepal) include ron r m.o%,al (through aeration and settling on the iron flock in -a storage container), flocculation of turbid water (through pH adjustment and _-ae addition of alum, followed by settling), and/or filtration through a sand carbon ifilter (for removal of bacteria and taste/odor, respectively). Commercial products are available-locally to carry out some of these tasks: Page 2 of 4 Table 1 Monthly Household Cost of Treating Drinking Water (NRs/hDusehold/month) All estimates are based on treating 2 litres per capita per day for 6 persons per household, or 10 liters per household per day of 300 liters per household per month. -- Iodine Drops: Rs 6 one drop required per litre (treatment period of 8 hours), 1 bottle containing 600 drops costs Rs 10; (2*6*30*10/600) -- Boiling with: - Firewood 1: Rs 180 1 kg of wood to boil one litre (WHO IRC 1973), cost of bulk wood in urban areas = Rs 0.5/kg; (2*6*30*0.5) - Firewood II (a): Rs 154 - Kerosene (a): Rs 98 - LPG (a): Rs 128 - Electricity: ( i) Nepali Clay Heater(a): Rs 430 (ii) Imported Cooker(a): Rs 218 (a) (Source: See Table at end of this annex) 4. Educated consumers can be expected and should be encouraged to continue to seek private solutions as long as public supplies provide intermittent service, inadequate in terms of quantity and quality when compared to consumer demands. major programs of public education may be needed to enable most people to follow desirable private solutions, however. There needs to be a systematic review of possible cost-effectiveness of different interventions. There are precedent for public authorities to .:ecommend 7'rivate precautions, as when Kathmandu consumers have been advised boil -.ater during the monsoon for health reasons. Also, the public health materials in use in rural areas refer to boiling water. But as noted in Ecx, this ils about thirty times as expensive as iodine treatment, and would affordable only to the wealthy. The cost of boiling water alone would be 10: of median rural household income. 5. Action research projects should be undertaken to provide further insight to the operative linkages between ill health and private actions to interrupt the cycle, particularly in-home storage and treatment of water aft- it is received-from the source (Bilgis, 1992). A small study in India in 1981-1982 was able to show a dramatic reduction in the incidence of childho.,: diarrhoeal disease through a program to disinfect water stored in household storage containers in a very disadvantaged rural community (ICH, 1982). In addition, pilot projects could concentrate on improving the quality of water Page 3 of 4 in restaurants and hospitals, two places where water has been shown to be extremely contaminated (ENPHR/DISVI, 1191 (b)), with obvious wide-ranging impacts. 6. One potentially attractive feature of the private chemical interventions is that the costs are divisible, making them more affordable than big ticket hardware items such as latrines and pumps. With development of a substantial and steady market for such materials, it is even possible that normal commercial channels would eventually undertake the main costs of promotion. Annex 5: Table 2 Page L of 6 MEPAL WATER SECTOR ISSUES PROGRAM COMPARISON OF THE COST OF BOILING WATER BY ENERGY SOURCE A. ANNUAL CAPITAL COST BY SOURCE Discount Rate 1/: 18.0% # Cap. Unit Mainten. CapitaL Appliance Life Effic. 2/ kW Cost Annuity per Year Cost/y y 2/ 2/ (n) 2/ NRs 2/ NRs/y NRs/y 2/ NRs/y Fuetwood traditional chuLa 10.0% 1 0.00 Kerosene pressure stove 5 75.0% 2 350 223.8 100.0 323.84 LPG stove/cyLinder/accessories 10 90.0% 1 4100 912.3 100.0 1012.31 Electricity Nep.Clay Heater+coiLs 1 45.0% 2 1.0 75 177.0 177.00 Electricity imported cooker 10 90.0% 1 2.0 3500 778.8 778.80 B. ANNUAL COST OF OPERATION BY SOURCE Consumption Fuel FueL Capital h/y per per Unit Cost Cost/y Total Total 2/ year Unit month Cost NRs/y NRs/y Cast/y Cost/h (t) 2/ 2/ 2/ NRs 3/ (f) (c) NRs/y NRs/h Fuetwood open stove 1100 3827 kg 0.85 3253 0 3253 2.96 Kerosene 800 358 L 9.25 3312 324 3635 4.54 LPG 730 209 kg 16.00 3344 1012 4356 5.97 Electricity Nepali Clay Heater 847 3764 kWh 314 2.54 9555 177 9732 11.49 Electricity imported cooker 730 1622 kWh 135 2.12 3443 779 4222 5.78 C. COST TO OIL 10 LITRES OF WATER BY SOURCE Needed FueL Fuel Fuel Time CaoitaL Total Effic. to boil Unit Cost Cost required Cost/h Cost kcaL/U 10 Lit. Cost NRs/10L NRs/h h/101 NRs/h /101 kcal 4/ NRs (a) (b.=f/t) (a/b) (c/nt) NRs FueLwood open stove 3593 10.0% 1800 0.85 4.26 2.96 1.44 0.00 4.26 Kerosene 8560 75.0% 1800 9.25 2.59 4.14 0.63 0.20 2.72 LPG 11745 90.0% 1800 16.00 2.72 4.58 0.59 1.39 3.55 Electricity Nepali Clay Heater 860 45.0% 1800 2.54 11.61 11.28 1.05 0.10 11.92 Electricity imported cooker 860 90.0% 1800 2.12 4.94 4.72 1.05 1.07 6.05 1/ SOURCES: Agriculture Development Bank of Nepal, Nepal Indosuez Bank, Nabit Bank; August 1991. 2/ SOURCES: EdF Load forecast and Tariff study. 1990. 3/ SOURCES: Fuetwood market price in Kathmandu, Aug. 92. SKO Latest price (Aug. 10, 92). LPG Latest price, Aug. 92. Electricity current tariff enforced Nov. 91. 4/ Calories per gram of water: from 20* to 100* & transformation: 130 caL; plus 50 caL for boiling duration equal 180 cal/g. Annex VI Page 1 of 3 ORGANIzATIONAL AND TECHNICAL IMPROVEMENTS REOQUIRED IN NWSC This annex summarizes the suggested improvements in NWSC -internal management and organization in the Vermersch 1992. The overall institutional proposals are incorporated in the main text. 1. The basic objective is to shift the corporate culture of NWSC towards a service delivery and consumer orientation, while taking more responsibility for performance. This involves both internal changes, and also adopting a different approach to communities and consumers. 2. By-Lawes Improve operating procedures and codify them in by-laws regarding services, technical standards, etc. 3. Promote More Accountability to Customers and Communities. a. form municipal sub-committees chaired by Mayors and including representation of local organizations to make recommendations on investment, community participation, definition of objectives, etc. b. establish an effective Customer Directorate or Customer Department under the Finance Directorate c. promote, organize and strengthen ward committees, users' committees and other NGOs to participate in community education, and to be represented on municipal subcommittees 4. Internal Decentralization: a. Branch issuess i. make each city an independent profit center, and delegate more responsibility and authority to Branch Officers to draw up plans for the branch, and to mange the Branch. ii. formalize the delegation of authority iii. develop agreed plans in terms of quantified performance indicators iv. improve the Management Information System (MIS) v. relate incentives to Branch managers to performance b. Improve managerial and monitoring capabilities of the HQ staff with assistance of the Management Support Team c. Introduce a cost-centered accounting system by activity and by branch (to implement the decentralization policy) Annex VI Page 2 of 3 5. Oraanization issues a. Reallocate functions in existing departments onto more functional lines, with special emphasis on reducing the mix of functions in the existing Planning and Research Directorate b. Establish a single Development Department to handle planning and development activities 6. Saff a. Formulate a human resources development plan b. Standardize terms of service (probably reducing the number of existing categories, which include permanent, temporary, monthly, daily, and contract staff) c. Reduce numbers of staff (the current ratio of 46 meters/staff member is very low by comparison with most other developing countries). Reduce headquarters staff d. Develop a regular training policy and program, including action- planning, on-the-job training, etc. in-house, in-country, and abroad 7. Maintenances develop and implement a preventive maintenance system (when budgets available) 8. Private Sector: Implement pilot service contracts (e.g., in billing and revenue collection, maintenance) 9. Unaccounted for Water (UFWI Reduction: a. Develop program priorities on basis of Internal Rate of Return (IRR) of interventions. b. Technical issues (leak detection, repair) i. priority to visible leaks ii. initiate wastage reduction with participation of users' committee c. Commercial Issues i. comprehensive customer censuses and surveys to locate unregistered connections and illegal direct pumping from pipes ii. update customer.files iii. cross check meter readings iv. gradually introduce more suitable computerized system (including some outside assistance to local software developers) Annex VI Page 3 of 3 d. Meteriig Policy i. supply meters to all customers ii. give priority to installing meters in areas where service quality is better (and IRR is higher) iii. develop meter maintenance policy (existing workshops and meter testing benches are not properly used) iv. install water production meters 10. Stand2oets a. examine means for improving utilization through charging for water and clarifying responsibility for standpost operation. e.g., i. sale by NWSC employee at standpost ii. allocate standposts to private contractors iii. allocate standposts to users committees b. ensure HIS includes UFW indicators Page 1 of 7 Bibliography Acharya 1992. Harihar Acharya, "Rural Service Delivery Review: Phase I, A Summary Report (First Draft) , World Bank, Kathmandu April 1992 (typescript, 34 pages). Bhatia & Cestti, 1992. Bhatia, Ramesh and Cestti, Rita. 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