Revision of water tariff will not affect the poor

"I have heard it often been said that the recent revision of water rates is adversely affecting the poor. This complaint is baseless and I wish to explain why" S.L. Seneviratne, Chairman, Water Supply and Drainage Board said.

Before 01 March 2005, water tariffs were charged from domestic consumers based on five consumption categories. This is explained below:

Previous System of Water Tariffs

	The Range of Units of 	Rate per unit	Percentage of 
	Water Consumption	(Rs.)		Consumers

1		01-10		1.25		30%
2 		11-15		2.50		23.%
3		16-20		6.50		17%
4		21-25		20.00		13%
5	More than 25		40.00		17%

One unit is 1000 litres and this is equal to one metric tonne, he said.

New tariff

Water rates were revised with effect from 01 March 2005. The objectives of this revision were: (a) Introduce a minimum increase for consumption up to 20 units, the volume of water generally expected to be adequate for an average house (b) Limit the water consumption of consumers using more than 20 units per month by the new method of pricing (c) Use the water thus saved to meet the water requirements of other groups in need of water (d) prevent the wastage of water. New water rates for domestic consumers are based on three slabs. This is explained below:

Monthly Water	Method of	Price per Unit	Percentage of 	
Consumption	Calculating Rates	(Rs.)	Consumers

1	01-10		01-10		1.25		30%
2	11-15		11-15		2.50		23%
3	16-20		16-20		8.50		17%
	21-25		16-25		30.00		13%
	26-30		16-30		50.00		7%
	31-40		16-40		60.00		6%
	41-50		16-50		70.00		2%
	More          	Above 51	75.00		2%
than 51

These figures reveal that water rates of nearly 53% of the households consuming 1-15 units of water per month have not increased over the last 2 1/2 years even by one cent.

Similarly, water rates of 17% households consuming 16-20 units per month have been subjected to an increase of not more then Rs. 10 per month. That is Rs. 2 per unit. In other words, after the revision of tariff after 2 1/2 years, the households consuming less than 20 units per month, comprising nearly 70% of all consumers, will have to pay only an increased tariff of not more than Rs. 10 per month.

Out of our total output of water, nearly 60% is consumed in households. This increase of Rs. 10 will apply only to 17% of the households.

Under the revised rates, for 40 units the monthly water bill will be Rs. 1,575. The monthly bill for 41 units is Rs. 1,895. Is it fair to levy an extra charge of Rs. 320 for an increase of consumption by one unit? This question has been posed in some of the articles in newspapers. The reason is that when consumption is increased beyond 20 units per month, for consumption beyond 16 units one price per unit is applied depending on the consumption, as shown in the above table. This has been done to keep the consumption below 20 units per month as far as possible.

The real increase in water rates apply to those who consume large amount of water. For example if a household consumes 41 metric tons or 41,000 litres, such heavy consumers can save Rs. 320 by saving one unit of water per month.

The revision of water tariff by the Water Supply and Drainage Board is intended to reduce this excessive consumption of water. The Board envisages the use of saved water for the benefit of others in need of water. At present only 29% of our population is supplied with pipe borne water. Our target is to provide pipe borne water to the balance 79% of the population. We have to emphasize the need to use water with care, specially clean water.

Even under the present revised rates, the government and the Water Supply and Drainage Board has to bear a heavy loss because of the concessionary policy adopted in favour of the consumers in low income groups. See table below.

Monthly water	Income for the	Expenses incurred	Loss per
consumption by one	Board (Rs.)	by the Board	consumer
consumer. (Units)		Rs.	Rs.

10		62.50		200.00		137.50
15		75.00		300.00		225.00
20		117.50		400.00		282.50

One unit is 1,000 litres. The table indicates that, on behalf of consumers (households) using less than 20 units per month, which comprise nearly 70% of the total consumers, the Government and the Board are bearing a heavy loss.

Above facts also reveal that, consumers (households) using more than 20 units per month, which comprise about 30% of the total number of consumers, can reduce the volume of water they consume and reduce the heavy payment for water.

Thereby, they can also be partners in the laudable national endeavour to provide pipe borne water to several thousands of people now in need of this essential service. The main objective of revising water tariff is to encourage consumers to save water.

The Board spends colossal amounts of money to purify water taken from rivers and lakes, construction of purification plants and laying of networks of pipes for distribution of water, where electricity is used to pump the water.

To meet these heavy expenses, the Treasury allocates nearly Rs. 12 billion annually to the Board from foreign aid and counterpart funds. The annual income of the Board from the entire island is Rs. 6 billion.

The Board is using this income for the payment of salaries, meet the expenses on electricity used to pump water, purchase of chemicals for the purification of water and to meet other direct operational costs to the Board.

The cost to purify and deliver a unit of water is around Rs. 20. For the first 10,000 litres of water, the Board charges at the rate of Rs. 1.25, for the next 11,000 to 15,000 litres the Board charges at the rate of Rs. 2.50 for 1,000 litres and from 16,000 to 20,000 litres the Board charges at the rate of Rs. 8.50 for 1,000 litres. Isn't this a fair system of water rates? (While loosing heavily for major part of water consumption)

Pricing of water

Although the above facts reveal that there is heavy cost to supply water, pricing for water cannot be done in the same way that is adopted in pricing other goods and services.

A product or service may be sold at different prices indifferent market conditions in the same market, depending on the behaviour patterns and income levels of the prospective consumers. As water cannot be differentiated and sold, different prices to meet different market situations cannot be adopted.

Therefore, in respect of all consumers of water supplied by the Board, which comprise nearly 28.6% of the total population of the country,the same pricing policy is adopted because we supply water of same quality to all consumers, on a national tariff.

When water is priced, consumers are divided into two main categories: domestic and non-domestic. The domestic consumer use water for their basic needs and therefore the Board is bound to supply water to them at a price they can afford.

A higher price is levied from the industrial and commercial sector. Income from this category comprise 65% of the income of the Board and it is the industrial and commercial sector that is bearing the major proportion of the expenditure of the Board. Households contribute only about 35% of the income of the Board, due to low pricing up to 20 units.

There is considerable income disparity between high and low-income earners in developing countries like Sri Lanka. It is therefore necessary to ensure that water is supplied to low-income earners at an affordable price.

If all households receive water at a very low price, consumers will not make an effort to save water and it will affect the Board in several ways. The Board will not be able to bear the increased demand for water resulting from pricing. It will also adversely affect the financial position of the Board. To avoid unwanted demand due to low pricing, prices charged from consumers is made to vary depending on the amount of water consumed.

It is therefore necessary to decide the volume of water that has to be supplied to each household for a month at a low price. According to the records of the Board and the consumption pattern in other Asian countries, the volume of water that is essential to meet domestic needs of one household per month is around 20,000 litres or 20 units.

According to the experience of the Board, the reason for consuming more than 20 units by one household per month can be due to the following: 1. leaks in the network of water pipes within the consumer's premises. These may not be visible. Often, underground slumps happen to be leaking, 2. Consumption of water beyond ordinary limits. May be that purified clean water is used to anyone of the following activities (a) Using pipe borne water to water gardens, (b) Washing more than one vehicle, (c) Maintenance of swimming pools, 3. Irresponsible use of water.

Due to the low price of water, no attention is paid by consumers to wastage of water and they continue to use water at levels beyond ordinary requirements. We have to arrest this situation.

Using more than ordinary requirement of water by some consumers prevents others in need from getting water. Therefore, prevention of using water indiscriminately is a national requirement. The number of persons expecting clean pipe borne water and the persons inconvenienced by not getting an adequate volume of water despite having water connections is very high indeed. Meanwhile we should pay attention to misuse of water from stand pipe and the leakage of water from old pipes in some areas has to be attended to.

Basic requirements of water for domestic needs will continued to be supplied at concessionary rates. We have to prevent heavy new investment on water supply because the country will not be in a position to afford it. Excessive use has to be arrested and it is very necessary that water, a common resource, has to be made available to all.

We have to get used to water saving habits. We have to get across the message that only the essential volume of water has to be used. Saved water has to be made available to 71% of the population not having pipe borne water at present. It should also be mentioned that household water rates in Sri Lanka are lower than that of many Asian countries.