Sri Lanka - Water supply and sanitation sector study

Report No. 4190-CE Sri Lanka Water Supply and Sanitation Sector Study June 15,1984 Urban and VVater Supply Division South Asia Projects Department FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients on1v in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  SRI LANKA WATER SUPPLY AND SANITATION SECTOR STUDY CURRENCY EQUIVALENTS US$1.00 = Rs 24.80 Rs 1.00 = US$ 0.0403 MEASURES AND EQUIVALENTS mm - milimeter (0.04 inches) cm - centimeter (0.39 inches) m - meter (39.37 inches or 3.28 ft) km - kilometer (0.62 miles) ha - hectare (10,000 square meters or 2.47 acres) sq. k - square kilometer (0.386 square miles) 1 - liter (0.22 Imperial gallons or 0.264 US gallons) lcd - liters per capita per day cu. m - cubic meter (220 Imperial gallons or 264.2 US gallons) ml - million liters or 1,000 cubic meters mld - million liters per day (0.220 million Imperial gallons per day or 0.264 million US gallons per day) ABBREVIATIONS AND ACRONYMS DDC District Development Councils GSL - Government of Sri Lanka JEDB - Janatha Estates Development Board LDC - Least Developed Countries MDB - Mahaweli Development Board MLG - Ministry of Local Government, Housing and Construction SLSPC - Sri Lanka State Plantation Corporation UNDP - United Nations Development Programme UNICEF - United Nations Childrens Fund WDB - National Water Supply and Drainage Board, Sri Lanka WRC - Water Resources Council FISCAL YEAR January 1 - December 31 This report is based on the findings of IDA missions consisting of Messrs. J. Sopher and D. B. Clement who visited Sri Lanka in August, 1982, and further updated by Messrs. G. Sengupta and T. Hall (Consultant) during October, 1983 and April 1984.  FOR OFFICIAL USE ONLY SRI LANKA WATER SUPPLY AND SANITATION SECTOR STUDY Table of Contents Page No. EXECUTIVE SUMMARY ............................ 0...... i-vi I. COUNTRY AND SECTOR BACKGROUND .. . ............. .. .... 1 Geography and Climate .. ........ . ................... 0......... 1 Water Resources................ *............ 0. . .. .0 . . . . ... 1 Population o., .... .... o.... oo--o....... ..oo-o .... o-....., 2 Public Health ....... o......o. . o..6...o.o. 2 Morbidity and Mortality . ... .... .... - ... . 2 Sector Institutions . .. . ....o..oo..oo.o...oo 3 National Water Supply and Drainage Board .......o ................. 3 0 Department of Local Government ..............0.. -.. .......... 4 District Development Councils (DDC) ..... ..... . .... .... 4 Departmenit of Buildings; Division of Public Health Engineering .. 4 Local Loans and Development Fund ... .-......- ... ..- 4 Common Amenities Board ... .. . . ........ ... ...... ............... 5 Department of Public Health Services; Office of Environmenrtal and Occupational Health ........ o 5 Water Resources Board ....... ....... . . .......... e. 5 Sri Lanka State Plantation Corporation (SLSPC) - ..... 5 Janatha Estates Development Board (JEDB) ..-.00 ...... ..0.0.0 5 Mahaweli Devel.opment Board (MDB) ......................... .- . 5 Greater Colombo Economic Commission ...... .....-........ ....o 6 Water Resources Council (WRC) ... ..... . ...o.. ........ ........ .. 6 II. SECTOR DEVELOPMENT . ...... .... ......... ............ ...... . . .. 6 Present Service Levels .... ........... .. -o- .... -- .... e.. 6 Water Supply ...............-..... ...... ........ .. . 0- . 6 Sanitation ... --o...oo...ooo#*. ..oo.... oo 8 Service Levels for the Urban Poor .. .......-........,. 9 Decade Goals ...... o.... o. . . o6..odo. .. o.. .. 9 Perspective of Sector Capital Program .. o .. .... . . 11 WDB's Investment Program . 14 Water Quality ...... 0....0.00.0. ..*.0...00..0.0 .. 0 16 Operation and Maintenance ... ... . .......... . ........ . .......... 18 Manlpower and Training... 18 Rehabilitation of Existing Assets.. ....... 20 Distribution System Deficiencies ..... ..........4-0 ... 0.O.... 21 Institutional Coordination . .... .0.0... ...... .. -. . ... .. ... 0. 21 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.  -ii- III. NATIONAL WATER SUPPLY AND DRAINAGE BOARD ........................ 23 Organization..... 23 Institutional Stability ...................................... *. 24 WDB's Reorganization ...... 25 Management Information Systems... ... 26 IV. SECTOR FINANCIAL ISSUES . . .. .... .. ...27 Present and Future Financial Considerations . . .27 Financial Recovery Program. . ... . .. .. 29 Scheme Analysis ....30 Recent Developments .. . ........................ 30 Local Authorities Finances ................. .................... 31 Tariff and Affordability ........................................ 32 ANNEXES 1. Census Population and Projections ...................... 34-36 2. Three-Year Moving Average Morbidity Rates for Infectious Diseases Treated at Government Hospitals ...................... 37-41 3. Institutions Involved in the Sector ........................... 42 4. Existing Management Structure . . ................................. 43 5. Occupied Housing Units by Type and Main Source of Drinking Water ................... .............. 44-45 6. Persons in Occupied Housing Units by Type and Toilet Facilities ......... 46-47 7. Relationship of Power Costs to Overall Costs . . . 48 8. Projects with Foreign Assistance ..... ........................... 49-51 9. Consolidated Capital Expansion Requirements and Related Financing ................................... 52 10. Drinking Water Quality Surveillance Data ..... ................... 53 11. Proposed Management Structure ............................ 54 IMAP IBRD 14818 - Second Water Supply and Sewerage Project  SRI LKNKA WATER SUPPLY AND SANITATION SECTOR STUDY EXECUTIVE SUMMARY 1. During August 1982, an Association Mission visited Sri Lanka to conduct an overall review of the Water Supply and Sanitation Sector, and to assist the Government of Sri Lanka (GSL) and the National Water Supply and Drainage Board (WDB) in the development of future Sector policy. The follow- ing report is not intended to provide an in-depth survey of the Sector; rather it is meant to highlight the most important issues. As such, it is hoped this report will also serve as a basis for future Bank lending strategy in the Sector. The main findings and supporting information have been updated based on discussions with GSL and WDB during November 1983 and April 1984. 2. Sri Lanka has had an exemplary record in terms of measurable social welfare indicators. A 1980 detailed study of basic needs concluded that Sri Lanka had the best social indicators, compared to its income, of any country for which data are available. Between 1980 and 1981 life expectancy at birth increased from 62 to 69 years, the infant mortality rate per thousand declined from 71 to 43 and adult literacy increased from 75% to 85%. 1/ These indicators would place Sri Lanka above the average performance of upper-middle income economies. However, this outstanding performance has not been maintained in the provision of domestic water supply and sanitation services. Of the 1981 population, only some 9% received piped water through house connections and a further 10% used public taps. The remainder drew water from surface water sources or wells. In respect of waste disposal, only Colombo has waterborne sewerage and this currently serves barely 45% of its housing units. Of the total 1981 population of Sri Lanka, some 5% had flush toilets, 61% had some other form of latrine, and some 34% of the total population were without any toilet facilities whatsoever. 2/ 3. Although GSL supports the goals set by the 1976 Habitat Conference and reaffirmed in the 1977 United Nations (UN) Conference, 3/ to supply all communities with piped water and sanitation by 1990, the Decade Plan (para 1/ The average figures for low income economies over the same period are: life expectancy, 41 and 50; infant mortality rate, 163 and 124; adult literacy, 23% and 40%. 2/ Source: Sri Lanka, Census of Population and Housing, 1981. 3/ Report on Community Water Supplies, United Nations Water Conference, Mar del Plata, Argentina, 14-25 March, 1977.  -ii- 2.10) as currently proposed by GSL has limited these broad objectives to the provision by 1990 of adequate water supplies to 100% of urban and estates populations and 50% of the rural population. The remaining 50% of the rural population would be provided with water during 1991-1995. In addition, it is proposed that approved sanitation facilities would be made available to 100% of the national population by 1990. 4. The major factors which will determine the degree of achievement of Decade goals are the implementation capability of WDB, the capacity of the local construction industry, the available capital financing from local and foreign sources, and the availability of recurrent revenues to properly operate and maintain the existing and new investments. The use of appropriate technology may be the only means of making these goals a practi- cal reality. The extensive use of handpumps in rural areas, and more modest service levels in the urban areas (para 2.11) would be a practical approach for water supply, while low cost systems as developed by the UNDP Global project would be an appropriate means for meeting sanitation needs by the end of the Decade. Not only does this approach involve low capital cost, but it also involves very low recurrent costs for operation and maintenance. 5. Since 1978, there has been an impressive response from foreign donors to assist GSL in its endeavors to improve Sector service levels. The total estimated cost of the major foreign aided water supply projects under various stages of implementation (Annex 8) is US$240 million (almost the whole of the WDB investment program, Annex 9) of which US$155 million is external aid. There are indications, however, that GSL has sometimes embarked on foreign aided projects vwithout adequate consideration of priorities, availability of local counterpart ftunding, and the operation and maintenance costs which these entail. There are instances where projects have been overdesigned while in other cases supervision of construction by foreign techhnical staff has been inadequate. GSL and WDB must maintain stricter control over its projects irrespective of the source of funding. 6. Many piped water supply systems, as well as non-piped schemes based on drilled or dulg wells, are providing inadequate service because of a lack of proper maintenance. The existing disrepair in some of the water treatment facilities is such that unless immediate steps are taken to correct it, the health of the public at large will be in danger. The much needed rehabilita- tion of Colombo sewerage system is being undertaken under IDA Credit 1041-CE. For any maior Sectorwide program for rehabilitation of existing installations to be effective, it would need to be extensive and will require the par- ticipation of foreign donors. WDB should make an assessment of the extent of the rehabilitation needed and the likely cost of this work. GSL should actively consider, on a high priority basis, initiating a program for rehabilitation and upgrading of treatment plant installations.  -lll- 7. The mission believes that, together with rehabilitation, the Sector's highest priority is the establishment at WDB of a properly staffed main- tenance organization to implement a thorough and appropriate program of preventive maintenance. Over recent years, GSL and WDB have emphasized design and construction of new works with the result that WDB's best staff has been concentrated on these aspects. To prevent further deterioration of existing assets, WDB needs to change this emphasis immediately. As soon as possible, WDB should revitalize its maintenance function with a redeployment of some of its more qualified personnel. l/ To support this policy, more training should be provided, especially at the operator level. The estab- lishment of workshops in the several regions of WDB and the decentralization of the operation and maintenance functions from headquarters to the regions will also help to improve the situation. 8. An anomalous situation exists in certain water systems in Sri Lanka where water supply production facilities have been designed and built with generous capacity while distribution networks fall short of this capacity. As a consequence, productive facilities invariably operate on an intermittent basis, a practice which is both wasteful and detrimental to good plant per- formance. By increasing distribution capacity to match production output, WDB would improve operational performance and, as importantly, would enhance its revenue generating potential. Accordingly, a high priority should be placed on upgrading distribution facilities to levels compatible with produc- tion capacity (para 2.51). 9. There is a real need for improved coordination between the various institutions associated with the water supply and sanitation Sector. The existing organization is a complex network of overlapping, yet isolated, institutions. The following illustrate some major problems currently encountered (para 2.53): (a) No institution is willing to accept overall responsibility for water quality monitoring and enforcement in the Sector; (b) The Ministry of Health is responsible for sanitation, but is unable to coordinate the work of Public Health Inspectors in the urban areas; 1/ Following the civil disturbances in July 1983, WDB lost and some of its key middle management professionals. Although WDB is making its best effort to either retain such personnel or to find suitable replacements, it is likely that it will take sometime before WDB's staffing situation returns to normal.  -iv- (c) Although WDB is responsible for water supply throughout the Sector, a more clearly defined policy for rural areas is urgently needed; (d) Although lacking in technical expertise, authorities responsible for plantations and estates, do not effectively utilize the technical knowledge of WDB in planning and designing water supply systems; and (e) WDB does not have well developed project selection criteria to guide systematic allocation of project priorities. Often, selection of projects reflect political priorities or attempts to satisfy requests from other governmental oganizations, without due consideration towards a rational investment program. There is an urgent need for exploring a practical and permanent solution for coordinating the numerous institutions which manage Sri Lanka's Water and Sanitation Sector. The proper institutional arrangement could be instrumen- tal in bringing much needed cohesion to the organization of the Sector, and issues such as the ones listed above could begin to be addressed on a priority basis (para 2.55); 10. The Sector is experiencing a rapidly growing gap between income and expenditures. The large amount of new capital works coming into operation are adding dramatically to the Sector's recurrent costs, both for operation and maintenance and for debt service. Consequently, there has been a rapid increase in subsidy requirements for WDB. In 1979, WDB required subsidies of Rs 24 million to cover 100% of its expenditures. By 1983, the subsidy requirement had escalated to about Rs 200 million, covering about 95% of expenditures. In absence of any significant effort to improve cost recovery in the Sector, current estimates suggest that WDB will require subsidies 1/ of about Rs 120 million in 1984, Rs 150 million in 1985 and Rs 350 million in 1986. In 1986, this subsidy would account for about 0.9% of GSL's recurrent budget, up from 0.2% in 1979 (para 4.01). 11. To arrest this rapidly deteriorating trend in Sector finances, GSL has taken several positive steps from January 1, 1984. A flat monthly rate has now been introduced for unmetered consumers, metered tariffs have been increased on an average by 60% and all metered consumers are now being billed. These actions form a part of a broader Financial Recovery Program which GSL and WDB is now implementing in order to address the short and medium term financial policies in the Sector (para 4.08). It is unlikely that WDB's operating deficits can be eliminated in the short term; the best that 1/ Based on W1B estimates, April 1984.  _v 12. GSL and WDB have so far substantially implemented steps (a) through (e) above. However, the ultimate proof of these efforts must be reflected by improved collection performance and cash flow. GSL and WDB must closely monitor and take all necessary measures to sustain and improve collection efficiency of the WDB. Complementary to the above effort, WDB has also completed a detailed analysis of the operational and financial profile of all of its major schemes. For the first time a data base now exists to permit WDB to identify, design and implement a specific operational (e.g. waste control, better capacity utilization, etc.) and financial (appropriate cost structure, improved tariff and collection rates, etc.) action program on a scheme by scheme basis and make intervention on a priority basis to improve its financial position. WDB must pursue the line of action aggressively. 13. To better reflect manpower and other constraints in the national economy, GSL should also urgently review the Sector's investment program and formulate a macro-investment plan for future investments in the Sector (para 2.29). Such a plan should also carefully analyse the propriety and effec- tiveness of the outputs of existing and ongoing investments in the sector. In recent years, WDB's fixed assets base has grown from about Rs 360 million in 1979 (including Works in Progress) to an estimated Rs 3,900 million by the end of 1983. Currently, WDB plans on completing new construction averaging about Rs 1,200 million in each of the next three years, based largely on existing commitments. Unless contained and carefully redirected, this rapid escalation of the investment program will undermine any other effort for achieving long term and sustainable financial recovery in the Sector. In determining the appropriate reduction of the investment program, more atten- tion also must be given to the impact of future investments on the recurrent subsidy requirements discussed above, particularly through operation and maintenance and debt service requirements. In determining the appropriate structure and content of the investment program, future investments in the Sector must focus on, in order of importance: (a) Rehabilitation of existing assets, particularly production facilities; (b) Improvement of Operation and Maintenance facilities with emphasis on training at the Operator level; (c) Upgrading of distribution works in selected areas; (d) Projects involving low-cost appropriate technology; and (e) Projects which have good revenue generating potential. 14. While future financial viability of the WDB will partly depend on its ability to charge and collect appropriate tariffs, it is important that the concept of affordability of the consumers must be given due consideration  -vi2- while setting tariff levels. In recent years, many subsidies previously approved by GSL have now been eliminated. There have also been regular and often large increases in the price of other goods and services (e.g. elec- tricity) which have generally outpaced increase in income levels, par- ticularly for the lower end of the income distribution range. Consequently, the impact of these increases on the average household budget must be con- sidered in determining how much a household can afford to pay for water and sanitation, particularly in a society where water has been traditionally considered a free good.  SRI LANKA WATER SUPPLY AND SANITATION SECTOR STUDY I. COUNTRY AND SECTOR BACKGROUND Geography and Climate 1.1 Sri Lanka is an island lying in the Indian Ocean between coordinates of latitude 6 degrees and 10 degrees North, and longitude 80 degrees and 81 degrees East. The land area of some 65,000 square kilometers is pear-shaped, with a South-Central mountainous region, ranging in elevation from 900 to 2,100 meters, surrounded on all sides by coastal plains. Geologically, beneath the superficial deposits, the bed-rock over 90% of the island is composed of Precambrian crystalline rocks. Over the remaining 10%, mainly along the North-West coastal belt, sedimentary rocks of the Jurassic and Miocene age are encountered. 1.2 The climate is tropical with little seasonal variation. Mean monthly temperatures in most of the island range from 26 degrees C to 28 degrees C in the plains. The elevated areas are cooler with a greater range. The island can be roughly divided into a Wet Zone, covering about a quarter of the island in the South-West, with an average annual rainfall of about 2400 mm, and a Dry Zone over the rest of the island with approximately 1400 mm of average annual rainfall (See Map IBRD 3839R2). Four rainfall seasons can be discerned: (a) the South-West monsoon from May to September, mostly confined to the South-Western parts of the island; (b) the inter-monsoon period, October to November, characterized by local thunder showers over wide areas due to cyclonic activity; (c) the North-East monsoon period from December to February, with rainfall confined to the North-Eastern parts; and (d) the inter-monsoon period, March to May. Water Resources 1.3 The rivers of Sri Lanka flow in a radial pattern from the central mountains to the sea. The mean annual precipitation on the island has been estimated as 110 cubic kilometers, and the mean annual stream flow run-off of the 103 river basins as 51 cubic kilometers, or 47% of the total precipitation. Some 40% of this flows through the Dry Zone, where irrigation has been important for more than 2,000 years. An extensive system of canals  -2- and storage tanks, some dating from ancient times, distributes surface water to scattered areas of the country, largely in the North-Central plains. 14 No comprehensive inventory of the groundwater resources of the island has yet been carried out, but some high potential yield aquifers have been located in the North-Western coastal areas at depths of 60 to 240 meters. In some areas in the North, where groundwater abstraction has not been con- trolled, increasing salinity has resulted. In parts of the Southern coastal belt groundwater is saline also. In the crystalline regions, there is evidence of limited groundwater in quantities adequate for rural water supplies, but because of problems of drilling it is only recently that exploitation has been attempted on a significant scale in the hard rock formations. Population 1.5 The latest population census held in Sri Lanka in 1981 gave a total population of 14.85 million of which 21.5% (3.2 million) lived in urban areas and 78.5% (11.65 million) in rural areas. There are 12 Municipal Council areas, 40 Urban Councils, and 24 District Development Councils as well as some 24,000 rural communities. Urban population is considered to be that in the Municipal, Urban and Town areas. The overall annual growth rate since the previous census in 1971 had been 1.75% with urban areas growing at 1.5% and the rural areas at 1.8%. The present average growth rate is estimated to be 1.7% per annum with urban areas growing slightly less than rural ones. Details of population distribution between rural and urban categories, and population projections are given in Annex 1. 1.6 By virtue of its extensive sea-board, fishing has been a traditional industry of Sri Lanka. Partly due to this, and further in recent years to the expansion of the tourist industry, a large population is concentrated in the coastal strip. The rapid growth of this population through tourism has led in some coastal regions, particularly those to the North and South of Colombo, to the incidence of unplanned ribbon development along the peripheral coastal roads. The provision of the infrastructure needed to support this haphazard development is becoming increasingly complicated and this is reflected in the abnormally high per capita cost for essential services. Public Health 1.7 Morbidity and mortality. In Sri Lanka, as in many less industrial- ized tropical countries, there is a high incidence of disease resulting from poor environmental conditions. However, heart disease is the leading reported cause of death, a mortality statistic which is more typical of industrial countries. This inconsistency may be due to a relatively effec- tive health care system which emphasizes curative medicine and which is somewhat less concerned with preventive medicine. In 1977, 66% of the total health budget was spent for patient care services, but only 24 percent for preventive services. The results of this imbalance are shown clearly in Annexes 2-1 and 2-2; the diarrhoeal disease morbidity rate (according to hospital statistics) remained practically constant from 1952 to 1976, while the mortality rate declined dramatically. In 1980, diarrhoeal diseases and  -3- helminthiasis were the third highest causes of hospital morbidity (see Annex 2-3 and the fifth highest cause of morbidity in hospitals that year. 1.8 In spite of certain advances in the last decade in the improvement of the health situation, there has been a recent increase in the incidence of infectious and parasitic diseases. Approximately 40% of all hospital admis- sions are due to preventible communicable diseases, most of which are associated with inadequate drinking water supply and insanitary environmental conditions. Gastroenteritis remains the main cause of high infant mortality (51 per 1,000 live births in 1974). This situation is, however, improving and despite the high incidence of water borne diseases, the infant mortality rates are on the decline. 1.9 Health statistics are based mainly on government hospital statistics, the completeness of which varies. In spite of serious under-reporting (for typhoid estimated up to 50%), cholera morbidity and mortality rates can be taken as fairly reliable health indices for assessing health and environ- mental conditions in different areas of the country (See Annexes 2-4 and 2-5). i/ As indicated in Annex 2-4, Greater Colombo has been and continues to be a focus of high incidence of cholera and other diseases related to inadequate water supply and sanitation services. Based on the distribution of cholera in the country by health divisions for 1981, the areas outside Colombo that can be identified as critical with regard to unsafe and inade- quate drinking water and sanitation are Anuradhapura (including Trincomalee), Vavuniya, Jaffna, Badulla and Puttalam. Despite the recognized under- reporting, typhoid and bacillary dysentry statistics can also be used for evaluating the health situation (Annex 2-4). On the basis of these data, the critical areas outside Colombo are: Kandy, Anuradhapura (including Trin- comalee), Jaffna, Ratnapura and Badulla. Sector Institutions 1.10 ]Responsibilities for water supply and sanitation rest with a number of Governiment ministries, departments, corporations, and boards. This has resulted in a dispersal of authority, partial overlapping of responsibilities and difficulties in achieving uniform standards for water supply and sanita- tion services. The two most important organizations for the development and maintenance of these services, especially in the urban areas, are the National Water Supply and Drainage Board (WDB) and the local authorities. In the ruraL areas, the Ministry of Health and WDB are the key organizations, while in the estates sector, the Sri Lanka State Plantation Corporation and the Janatha Estates Development Board are the leading institutions. A brief description of each of the organizations having significant water supply and sanitation responsibilities is given below. Annex 3 illustrates the inter- relation of the various organizations within the Sector. National Water Supplv and Drainage Board (WDB) 1.11 WDB is an autonomous body under the Ministry of Local Government, Housing and Construction (MLG). It was formed in 1975 out of the Department 1/ Source: UNICEF Country Programming Exercise (1984-1988).  -4- of Water Supply and Drainage. WDB is the leading institution in the develop- ment of all urban and rural piped water supply schemes, urban sewerage schemes, and rural non-piped-water supplies based on drilled wells. The distribution and operation aspects of a large proportion of schemes have been the responsibility of the local authorities, although WDB has been assuming increasing operational responsibilities in recent years. As shown in Annex 4, WDB has separate units for planning and designs, groundwater development, and training. Operationally, however, until recently it was divided into three geographic ranges, each comprising two to three regions (see Map No. IBRD 16720). The ranges are administered at the WDB headquarters at Ratmalana, near Colombo; the eight regions are administered by Regional Managers whose offices are located in the field. Because the regional offices have only minimal capabilities for field investigations, project design, and logistical supply, almost all functional support and decision making are centralized at headquarters. The Board is headed by a chairman and executive responsibilities are held by a General Manager. An Organiza- tion Chart of WDB is given in Annex 4. Chapter III provides much more detailed information regarding WDB. Department of Local Government 1.12 Local authorities receive administrative and technical assistance from the Department of Local Government. Headed by a Commissioner who reports to MLG, the Department provides the administrative channel through which technical and financial aid is made available to Municipal, Urban, and District Councils for water supply and sewetage development. In the rural areas, the Assistant Commissioner for Local Government, who is located at the district headquarters, is the direct link between the staff to assist with minor water supply and sanitation efforts. District Development Councils (DDC) 1.13 In general, DDCs are responsible for establishing and maintaining water supplies and sanitation facilities. The DDCs usually obtain 50% (or more) grant funding for water schemes from the Local Loans and Development Fund. WDB designs and constructs piped schemes and depending on circumstan- ces, either WDB or the DDC handles operation and maintenance. The respon- sibility for collecting water rates to pay for production and operating costs will generally rest with whichever authority is responsible for the distribu- tion of the water to the consumer. Non-piped community water supplies are free, and the DDC retains full responsibility for any necessary maintenance. DDCs sometimes will contract with WDB for maintenance and repair services which they themselves cannot provide. Department of Buildings; Division of Public Health Engineering 1.14 This organization designs and constructs water supply and sewerage schemes for hospitals and other Government Offices. It is located at MLG. Local Loans and Develo ent Fund 1.15 Also located within the MLG, the Local Loans and Development Fund provides loans of 50% to 100% of capital costs to local authorities for water supply schemes.  -5-- Common Amenities Board 1.16 The Common Amenities Board is headed by a Chairman who reports to the Minister of Local Government. This Board is responsible for the provision of water supply and sanitation facilities to "vested" gardens as well as to slums and shanties in urban areas. Department of Public Health Services; Office of Environmental and Occupational Health 1.17 The Office of Environmental and Occupational Health is within the Ministry of Health. It is responsible for the promotion of urban and rural sanitation programs and for various health education activities. It also monitors some piped and non-piped water supplies. National Programs for bucket latrine conversions and water seal latrine construction are carried out under grants to individuals and with technical advice from Public Health Inspectors. Water Resources Board 1.18 The Water Resources Board was originally intended to provide advice on all matters concerning the country's water resources, but in 1977 its powers were redefined to include responsibilities for investigation and exploitation of groundwater and watershed managements Now located within the Ministry of Lands and Land Development, the Board functions solely as a groundwater investigation and data collection unit0 In this capacity, and in collaboration with foreign aid agencies, it has becomte inicreasingly involvedl in integrated rural development projects and groundwater resources studies. Together with information gained from the WDB groundwater programs, these will eventually provide basic information for the comapilation of regional hydro-geological maps. Sri Lanka State Plantation Corporation (SI.SPC) 1.19 Headed by a Chairman who reports to the Minister for State Planta- tions, SLSPC is responsible for the development, operation, and control of all water supply and sanitation facilities on the plantations under its jurisdiction. SLSPC recently decentralized control to four regional boards which determine their own development and operational programs. WDB has a supervisory responsibility for water supply development on SLSPC plantations. Janatha Estates Development Board (JEDB) 1.20 JEDB is headed by a Chairman who reports to the Minister for Janatha Estates Development. The structure and operation of JEDB are similar to the structure and operation of SLSPC. As in the case of SLSPC, JEDB has four autonomous regional boards, and independent estate superintendents. WDB has a supervisory responsibility for water supply development on Janatha estates. Mahaweli Development Board (MDB) 1.21 MDB is headed by a Chairman who reports to the Minister for Mahaweli Development. MDB is responsible for a multi-faceted program of agricultural  -6- development and resettlement in the Dry Zone. Under this program 900,000 acres will be developed and 220,000 farming families resettled. Very little water supply and sanitation work has been undertaken by MDB to date. The main efforts in the Mahaweli area have been undertaken by UNICEF, WDB, and the Ministry of Health. Greater Colombo Economic Commission 1.22 This is an autonomous body which, with the assistance of WDB, provides water supply and sewerage services to the Free Trade Zone north of Colombo. Water Resources Council (WRC) 1.23 The formation of this body is currently under active consideration by GSL. It will comprise secretaries from the various Ministries and will have as its objective the priority allocation of water resources within the water supply and sanitation sector. II. SECTOR DEVELOPMENT Present Service Levels Water Supply 2.1 Levels of service in terms of quantity, quality, reliability and accessibility are widely variable in Sri Lanka, and consequently statistical averages relating to the type of facility enjoyed by various sections of the community may be misleading if used to illustrate the standard and adequacy of the service provided. However, the figures on service coverage provided by the 1981 housing census when compared with these available from the 1971 census serve to indicate in broad outline the present accessibility to water supply and the development of service over the last decade. Table 2.1: PERCENTAGE DISTRIBUTION OF OCCUPIED HOUSING UNITS BY SOURCE OF WATER SUPPLY BY SECTORS - 1971 AND 1981 /a All Sectors Urban Sector Rural Sector Estate Sector Source 1971 1981 1971 1981 1971 1981 1971 1981 Piped water on tap 20.1 17.3 45.3 46.5 4.8 5.1 74.7 65.6 Well 68.8 73.1 50.5 48.7 81.9 84.5 15.4 20.4 River, Tank or Other source 8.9 7.0 2.0 1.1 11.0 8.5 7.3 5.8 Not Stated 2.3 2.7 2.1 3.7 2.3 1.9 2.1 8.1 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 La 1981 Housing Census.  -7- 2.2 From the above table, it may be seen that in urban and rural areas the percentage of units having access to piped water of any sort has risen slightly between 1971 and 1981. Due to population increases in these areas during the last decade, service coverage based on population served would obviously show a more marked improvement; furthermore, the diminution of growth in the estate areas may also tend to distort to some extent the global pattern of service levels as illustrated by this statistical data. The vast majority of housing units still obtain their water from wells and the propor- tion of the populace deriving water from this source has risen between 1971 and 1981. Whereas in rural areas, the principal source of drinking water is the well, in the urban areas piped water is slowly replacing well water as a source of supply. As the following table indicates, of those in the urban areas who have access to piped water only half have water supply installation within the premises. However, the impact of potable water on improved health standards cannot be clearly determined. Table 2.2: PERCENTAGE DISTRIBUTION OF HOUSING UNITS BY MAIN SOURCE OF DRINKING WATER BY TYPE AND LOCATION - 1981 All Urban Rural Estate Source Sectors Sector Sector Sector Piped Water on Tap Within premises 8.0 24.4 1.8 28.8 Outside premises 9.3 22.1 3.3 36.8 Protected Well Within premises 25.8 27.7 26.7 12.6 Outside premises 26.5 16.1 31.4 3.4 Unprotected Well 20.8 4.9 26.4 4.1 River, Tank or Other Source 7.0 1.1 8.5 5.8 Not stated 2.7 3.7 1.9 8.1 Total 100.0 100.0 100.0 100.0 Colombc district is comparatively well off with respect to water supply coverage with 31.1% of housing units having piped water within their premises and another 19.4% having access to piped water outside their premises. 2.3 It is difficult to establish with any degree of accuracy the current per capita supply figures for the various categories of consumer. Metering of house connections has been introduced only recently in Greater Colombo area, while production meters where they exist are invariably out of working order. WDB designs small to medium-sized urban water systems on the basis of 30 to 40 gpcd for house connections, while for urban populations exceeding 20,000, water demands are based on individual requirements. Standpost sup- plies are designed in all systems on the basis of 10 gpcd. Of the 66 urban water slupply systems currently in existence, there is data to indicate that  -8- less than 20% enjoy a supply of 40 gpcd or over, while on the lower end of the scale some 20% receive an average supply of less than 5 gpcd. 2.4 In rural areas, data made available in 1977 indicates that of 107 piped water schemes almost one-half produced less than 5 gpcd, another 40% produced between 5 and 20 gpcd, with the remainder producing from 40 to 60 gpcd. The water consumption rates for populations served on estates are unknown. Sanitation 2.5 In the sanitation field, only one city, Colombo, has a sewerage system with approximately 45% of its housing units connected. Its sewerage system is old and severely overloaded and currently no treatment is provided. 2.6 As indicated in the following table taken from the 1981 Housing Census report, of the total population some 53.0% have toilets for exclusive use compared with 45.5% in 1971. The urban and rural sectors also show improvements in this regard while the estate sector shows a slight decline in this category. The percentage of the total population without any toilet facilities whatsoever shows a slight decline from 1971, as do the percentages relating to urban and rural communities, but in the estate sector there is almost a doubling of those without these facilities. Table 2.3: PERCENTAGE DISTRIBUTION OF HOUSING UNITS BY TOILET FACILITIES BY SECTORS - 1971 AND 1981 Toilet for Shared No Toilet Exclusive Use Toilet (Including Not Stated) Sector Total 1971 1981 1971 1981 1971 1981 All Sectors 100.0 45.5 53.0 19.0 13.6 35.5 33.4 Urban Sector 100.0 48.9 56.8 30.7 23.5 20.4 19.8 Rural Sector 100.0 48.5 55.5 9.0 7.9 42.5 36.5 Estate Sector 100.0 20.5 18.4 63.9 45.1 15.6 36.6 2.7 Table 2.4 also taken from the 1981 census, shows the distribution of the type of toilet available in the various sections of the community. It can be seen that the water seal type predominates in urban areas while the pit type is more common in the rural and estate areas.  -9- Table 2.4: PERCENTAGE DISTRIBUTION OF OCCUPIED HOUSING UNITS BY TYPE OF TOILET BY SECTORS - 1971 AND 1981 All Sectors Urban Sector Rural Sector Estate Sector Tipe of Toilet 1971 1981 1971 1981 1971 1981 1971 1981 Flush toilet 6.7 4.3 22.8 15.6 2.2 2.1 8.2 4.9 Water seal 14.3 21.9 19.2 38.9 9.9 17.5 33.9 24.22 Pit type 38.8 37.9 18.3 17.0 44.4 43.5 38.2 32.3 Bucket type 4.8 2.0 19.4 8.8 1.0 0.3 4.1 2.1 None 34.3 30.9 19.1 16.4 41.5 34.8 13.4 28.1 Unspecified 1.2 2.5 11.3 3.4 1.0 1.7 2.2 8.5 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Service Levels for the Urban Poor 2.8 Of the total number of housing units included in the 1981 housing censuls, some 58% were classified as improvised (temporary) and as semi- permanent. Some 30% of the urban population, 63% of the rural population, and 75% of the estate population are estimated to live in such premises which form the slum areas or shanty towns. In certain of the more populous cen- ters, the percentages of the urban poor are even higher than those indicated by the national averages. Annexes 5-1 and 5-2 show the main sources of drinking water for the various types of housing units, and it is significant that while on the average 24% of permanent units are provided with piped water, only about 12% of slum premises enjoy this service. Furthermore, more than 70% of the latter group are served by facilities outside their premises. This, however, does show some improvement over the situation which existed in 1971 when virtually no individual connections were provided in the shanty towns. Water supplies to the low income groups are particularly deficient in Trincomalee, Batticaloa and Jaffna which receive on average less than 3 gpcd over the total population. It is significant that in the 1973-75 period Cholera was rampant in these areas. 2.9 Annexes 6-1 and 6-2 indicate the coverage and type of sanitary facilities enjoyed by various sections of the community. With regard to sanitation, private access to facilities is even more restricted. Only 2% of slum dwellers as a whole have exclusive use of any type of toilet, while 73% of the remainder of the community enjoy these facilities. Approximately 50% of slum dwellers have no toilet facilities of any kind. Decade Goals 2.10 In recognition of the inadequate levels of water supply and sanita- tion service which exist throughout the country, GSL prepared and approved in 1980, a "Plan for the Drinking Water Supply and Sanitation Sector in Sri Lanka for the Decade (1981-1990)," commonly referred to as the Decade Plan. Although GSL supports the goals set by the 1976 Habitat Conference, 1/ and  -10- reaffirmed in the 1977 United Nations (UN) Conference 2/ to supply all com- munities with piped water and sanitation by 1990, the Decade Plan has limited these broad objectives to the provision by 1990 of adequate water supplies to 100% of urban and estates populations and 50% of the rural population. The remaining 50% of the rural population would be provided with water during 1991-1995. In addition, approved sanitation facilities would be made avail- able to 100% of the national population by 1990. GSL has furthermore linked the water supply and sanitation need to its housing programs, which originally aimed at providing 100,000 new housing units by 1984, more than half of which are in the Greater Colombo area, and 75% of which were intended for low income families. There has recently been a change in emphasis in this housing program from urban to rural, and the inclusion of extensive upgrading of housing in urban areas combined with low-cost techniques in construction will tend to increase the coverage of population served even more than originally intended. 2.11 Achieving these goals by using traditional water supply and sanita- tion techniques will involve massive investment far exceeding the means of the economy. In urban communities, public health considerations preclude a significant departure from the traditional piped water approach; the reduc- tion of service levels to those approaching the minimum for basic Public Health (40 lcd for standposts and 80 lcd for house connections) is the only practical way of lowering the per capita cost of assets sufficiently to permit meeting some Decade targets. In rural communities, high service levels can be achieved by appropriate low cost techniques. The hand pump program which UNICEF is sponsoring and WDB is implementing could enable fulfillment of rural water supply targets for the decade. Efforts are also in process to use Japanese and Swedish financial assistance to acquire suffi- cient additional drilling equipment to substantially increase this program's capacity. The use of water borne sewerage outside of Colombo is not finan- cially viable in view of the high per capita costs involved. Improvement of sanitation service in outside areas should be based on low-cost techniques utilizing pour flush, leaching pit facilities for new construction, coupled with an extensive program of conversion of existing pit latrines to this form of disposal. 2.12 The major factors which will determine the degree of achievement of Decade goals are the implementation capability of WDB, the capacity of the local construction industry, and the available financing from local and foreign sources. The use of appropriate technology and the adoption of more modest service levels (see para 2.11) may be the means of making these goals a practical reality. Not only does this approach involve low capital cost, but it also involves very low recurrent costs for operation and maintenance. 2.13 Although the availability of water resources cannot be considered as a major constraint in the achieving of drinking water objectives, the 1/ World Health Organization, Community Water Supply and Waste Water Disposal, Mid-Decade Progress Report, May 1976. 2/ Report on Community Water Supplies, United Nations Water Conference, Mar del Plata, Argentina, 14-25 March, 1977.  -11- priority of drinking water over all competing uses must be recognised at an early date. Drinking water represents only a minor proportion of the country's overall water needs; yet the organizations which manage other water facilities guard their resources jealously. There is apparently no legisla- tion currently in existence to prevent unauthorized sinking of boreholes or to control the abstraction of water from any acquifer. GSL should give early consideration to legally regulate the use of groundwater, especially where there is a risk of saline intrusion. Such legislation might usefully estab- lish the principle of priority of water use for human domestic needs in preference to agricultural use. Perspective of Sector Capital Program 2.14 Since 1978, GSL has undertaken a large program to build new assets in the Sector. Foreign donors have provided assistance for a large number of projects designed to upgrade service levels nationwide, 2.15 At the outset of this program, WDB had not yet acquired the financial planning expertise to fully evaluate these impact of these investments and, in particular, to anticipate the high recurrent costs which such a program implied. This was understandable; previous operation and maintenance of the Sector's assets had not been expensive and GSL lacked a basis for evaluating the scale of recurrent costs being added by the current surge of investments in the Sector. 2.16 By January 1980, based on information compiled by WDB, GSL had com- mitted itself to a Rs 7,400 million capital expansion program for the Sector for the five year period 1980 - 1984. At that time, WDB owned only Rs 118 million in gross plant and equipment and had only an additional Rs 267 million in works in process; furthermore, WDB also faced financial difficul- ties in completing Rs 217 million in construction in 1979. In the face of this massive expansion program, MlG initiated a review of the capital expan- sion program to rationalize it with WDB's capabilities. 2.17 Before this rationalization process started, GSL had decided to support the basic objectives of the goals of the International Water Supply Decade. In order to demonstrate its support of the Decade's goals, WDB's medium and long term investment programs were revised upward, without adequate consideration for the financial commitment this would involve. Furthermore, it coincided at a time when Sri Lanka was beginning to experience difficulties with its economy. 2.18 Separately, during the spring and summer of 1980, the impact of large and rapidly growing investment program in almost all sectors, began to manifest. Construction schedules were slipping drastically as local contrac- tors were stretching themselves beyond their levels of capability. Inflation was spiraling as more and more new money was competing for a finite pool of goods and services. In short, aggressive donors and investors were injecting money much more rapidly than the economy could absorb it. 2.19 In June 1980, the International Development Association (IDA) approved a Credit of US$30 million to finance the Second Sri Lanka Water  -12- Supply and Sewerage Project (Credit 1041-CE). 1/ Under Credit 1041-CE, WDB was required to meet its recurrent costs by using a combination of increasing consumer charges and acceptable GSL subsidies. During the intermediate term, the subsidies would cover most operating and maintenance costs; in the long term, consumer charges would comfortably cover the Project Area's operation and maintenance while subsidies would cover most debt service and Non Project Area direct expenses and contribute to capital cost recovery. In addition to agreeing to subsidies for water provided to the poor through public taps, GSL agreed to guarantee the timely payment of bills remitted to local authorities, to pay for sewerage services in combination with the Project Area's local authorities, and to defray otherwise uncovered Non-Project Area operating and maintenance expenses. 2.20 In January 1981, faced with a seriously constrained capital budget and a growing requirement to subsidize recurrent costs, GSL decided to reduce to manageable proportions the Water Supply and Sanitation Sector's Medium Term Investment Program. After a substantial review of all of its ongoing projects, WDB evolved a Minimum Works Program (MWP) under which it would take responsibility for completing Rs 655 million of new construction in 1981, Rs 930 million in 1982, Rs 913 million in 1983 and Rs 574 million in 1984. 2/ This reduction was accomplished by eliminating many projects, which were not yet begun and which provided dubious marginal benefits to prospective recipients, and by stretching the construction period for all other projects. GSL agreed to adhere to the to MWP to the extent that its combined priorities would permit. Since then, WDB has revised MWP quarterly to reflect up to date information about projects under construction and changes in its priorities for development of the Sector; and with some modification, the MWP has remained substantially consistent with the objectives evolved during the original MWP exercise, although actual construction value was often less than anticipated due to capacity constraints. 2.21 As of December 1983, WDB had undertaken nearly 28 foreign assisted projects (Annex 8). It had completed its obligations under five of theip - all small scale efforts either to procure equipment or install systems for rural development projects. About seven major ones represent nearly 90% of WDB's investment program for the foreseeable future; these include: 1/ The US$9 million Credit 709-CE, which financed the First Sri Lanka Water Supply Project was approved in May 1977, legally closed in June 1983 and works are expected to be fully commissioned by July 1984. 2/ On the basis of estimates valid at that time.  -13- Table 2.5: MAJOR FOREIGN AIDED PROJECTS Estimated Equiv. Cost /a Expected (Rupees Name Donor Completion Millions) 1. First Sri Lanka Water Supply Project IDA, CIDA & EEC 1984 865 2. Second Sri Lanka Water Supply & Sewerage Project IDA & Saudi Fund 1986 1,630 3. Trincomalee Water Supply Project France 1984 610 4. Matara Group of Towns Water Supply United Kingdom 1984 260 5. Jaffna Peninsula Market Towns Water Supply Project United States 1984 244 6. Harispattuwa Water Supply Project Finland 1985 135 7. Negombo Water Supply Project France 1985 350 4,094 /b /a Latest estimates of costs to complete. Lb Compared to recent average annual expenditure of about Rs 1,600 million in the sector. 2.22 WDB has actively sought foreign technical assistance and support services in the implementation of its major foreign aided projects. The underlying objective has been to utilize this expertise to strengthen WDB's own institutional capabilities, particularly in the areas of project appraisal, design and implementation. While, generally WDB has benefited from the assistance provided by foreign consultants, there have been several instances where projects designed and implemented with such consultants assistance have not provided maximum economic benefits. 2.23 Problems such as overdesign, lack of complementary investment (e.g. adequate distribution systems to match production capacity) and insufficient supervision of physical construction have further strained WDB's already poor financial position. Therefore, WDB must establish clearly defined design criteria, proper appraisal standards and appropriate technology and sound construction management practices for all of its investments, and must insist on adherence to these criteria irrespective of the source of funding. 2.24 In Sri Lanka, many projects within the Sector must rely heavily on electric pumping; so too the Colombo Sewerage System and its proposed exten- sions. Since 1980, the average price of electricity has increased fourfold (Annex 8) and power, which represented only 31% of WDB's cost structure in  -14- 1980, absorbed about 55% of all of WDB s Cdirect costs in 1983. In the Project Area more than 70% of WDB's recurrent cash outlays are now spent on power. 2.25 While WDB can try to minimize power requirements in designing future projects, it cannot significantly reduce the power consumption of existing assets or the reliance of systems currently under construction on pumping. Thus, systems which might have been financially viable when designed are not so any longer and the consumers cannot afford to continue to absorb rapid increase in this cost element. Because of the high cost of electricity, WDB will have difficulty covering even the direct cost of operating its existing assets through consumer charges alone, at least in the short term. WDB's Investment Program 2.26 The total estimated cost of the external-assisted projects (which include IDA projects 709-CE and 1041-CE) currently in the implementation stage (Annex 8) is US$240 million (representing almost the whole of the investment program for the period). The number of people who will benefit either from new or improved service from these projects is estimated to be approximately 6.9 million. 1/ This is a substantial portion of the national population and when complete the projects will represent a major contribution towards the achievement of Decade objEctives. 2.27 During the 1980-83 period, WDP