Willingness to charge and willingness to pay : China Rural Water Supply and Sanitation Program

Feature Stories Water 46227 ISSUE 10 | March 2006 Willingness to Charge and Willingness to Pay: China Rural Water Supply and Sanitation Program I n 1985, the World Bank started its assistance to ing of rural water supply. Instead, there was greater the Rural Water Supply and Sanitation (RWS) in emphasis on cost sharing by provincial and county China, which was a high priority for the Govern- governments and communities. This proved to be ment. The RWS program consisted of four successive the ideal context for the World Bank to develop a projects that lasted over the last 17 years. The total significant cost recovery model in its RWSS lending World Bank investment in these four projects was US$ program, where the IDA credit/IBRD loan was to be 628 million. The program succeeded at serving about repaid by the end-user, the rural beneficiary. 25 million people in 18 provinces and developed a very effective cost recovery policy where the users fi- nance up to 75% of the capital investment as well as Financing arrangement the full operation and maintenance (O&M) cost. The World Bank financed about half of the capital cost of piped water supply systems installed through rural Water SuPPlY and the project. For the remaining upfront costs, the Sanitation Program provincial and county governments jointly financed 25% and the users contribute 25%, usually in the With the World Bank assistance, the RWS programs form of cash and labor contributions. Since the us- were designed to increase rural access to safe ers also serviced the debt through payment of water drinking water and improved sanitation. The first tariffs, they effectively financed 75% of the overall project was not specifically targeted at the poor investment cost. or based completely in rural areas, but both these As for consumers of the non-piped water supply policies changed in succeeding projects. schemes, debt servicing was not passed on to them. Within the selected counties, denser areas were However, they contributed to the full cost of labor chosen to make the cost of supplying piped water and were responsible for operating and maintaining economically viable, and within the selected vil- the schemes. lages, the network aimed to cover all economic sections of the community. For the more remote and less densely populated areas of the project prov- tariFF Setting and collection inces, the approach was to provide hand pumps, rainwater collection systems and small tube wells. Water tariffs were set by the plant management/ County Price Bureaus and, where possible, were raised to cover increased operating costs. The tariff a SuPPortive context For calculation was comprehensive and included the cost coSt recoverY of electricity, salaries, water source fee, depreciation, debt servicing, interest on debt, overheads and tax. China differs significantly from most developing At the township water plant level, collection of countries in that there is little history of the central tariffs was taken very seriously. A strong incentive government providing large subsidies for the financ- system existed by which the salaries of the plant RUSSIAN FEDERATION China at a glanCe Below the basic needs poverty line: More inforMation KAZAKHSTAN 4.6% (UN, 1998) MONGOLIA Population: 1296.5 million (World Bank, 2004)