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Charging for sewerage
–perspective
Prof. Ir. Mohd. Haniffa Abdul HamidIr Dorai Narayana
Indah Water Konsortium Kuala Lumpur
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People think
mobile phonesprovide bettervalue than toilets !
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When nature called ………..
……. they just did it!
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Septic tank
Surface water
pollution
Sludge
management
Piped
sewerage
The drivers..
Opendefecation
Diseases
Privacy
Dignity
Bucket
latrinePour flush
latrine
Pit latrine
Aesthetics
Nuisance
Ground water
pollution
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SANITATION SEWERAGE
LatrinesSeptic
Pipedsewerage
Centralisedsystems
Open
defaecatin
tanks
The user’sperspective of value
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SEP!" AN#S
All owner wants if for the sludge to $eemptied and taken away% Safety&
spills& safe treatment ' disposal are
not his concern%
Owner is happy as long as he can use
his toilet% (e may $e unaware of the
septic tank% Effluent could very well$e polluting the drains ' rivers%
)hen owner faces pro$lems of
overflow or other symptoms& he
re*uests emptying%
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SE)E+ED S,SE-
They are generallynot interested what
Raw sewage outfall
Users justwant a toilet
that works
And aneighbourhood free
of sewage overflows
.
Centralised sewage treatment
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Users do not want thishappening in their homes ….
They also do not wantthis near their homes
– they are willing topay to avoid this
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En!irnmental "enefitBenefits
DIRECTDIRECTDIRECTDIRECT
BENEFIT TOBENEFIT TOBENEFIT TOBENEFIT TO
USERUSERUSERUSER
BENEFIT TOBENEFIT TOBENEFIT TOBENEFIT TO
ENVIRONMENTENVIRONMENTENVIRONMENTENVIRONMENT
Sanitation: AddressPublic Health
Piped off-sitesystems: Address
Pollution, communityconcerns
Centralised & Advanced systems:
AddressEnvironment
On sitesystems
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In Malaysia:1994: Federalisation & Privatisation
• Formed in 1995 , as a National Sewerage Concessionaire inMalaysia
• Operate sewerage services over most of Peninsular Malaysia
• Operation Maintenance of sewage treatment plants !S"Ps# andsewer networ$
•Septic tan$ desludging and sludge management
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Malaysian conte%t• Sanitation & sewerage 'y local aut(orities)
– no direct c(arging for sewerage in most areas
– *ocal +overnment ct allowed Sewerage Surc(arge as part of property
c(arges -frontage. c(arges to cover part of CP/0
– Some local aut(orities c(arged -C c(arge.
– 2esludging c(arges were minimal !estimated less t(at 13 desludged#
• Privatisation Concession
– idespread resistance to direct c(arges – 4r 666 ) 78 acuired 'y +overnment
– CP/0 responsi'ility assumed 'y +overnment
– :ig( percentage of refusal for desludging services !up to ;63#
– <nwillingness to pay
– Stagnant tariff
– Customers perceive -no service.
= Current costs> "rue costs may 'e up to dou'le t(e revenue1.60 XCost *
0.8 XCollections
XRevenue
RMItem
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2emand vs SupplyS#pply side$
• 7nvestments are wasted 'ecause intended consumers simply ignore t(e resulting systems>
– ccra, +(ana, after 6 years, only 1?6 connections to a sewerage system designed for
,666 connections@
– :owra(, 7ndia, no one was connected to a sewerage system 'uilt for wor$ers@
– MaAan, Bordan, t(ere (ave 'een only 96 connections to a system designed for ,666connections@
– ddis 'a'a, /t(iopia, after 16 years, only 16 percent connections made to t(e new
sewerage system>
– 7n Mala sia D centralised sewera e ro ects in a num'er of areas (ave low connection
rates%emand side$
• Middleincome (ouse(olds in Manila !P(ilippines# and Ba$arta !7ndonesia#, facing an
inadeuate supply of pu'lic sewers, put in t(eir own septic tan$s>
• Overflows from septic tan$s (ave polluted t(e waterways in 'ot( cities> 7n Ba$arta, w(ere
many industries rely on groundwater supply, t(ere is an increasing ris$ of groundwaterpollution>
• (ile selfprovision (as addressed private sanitation needs, it (as also created costly
environmental pollution>
Sources:The World Bank, “Manila Second Sewerage Project,” Draft Staff Araisal !eort "Washington, D#$%
&ija' (agannathan, World Bank, )**+% and -.-&- Do/lo, Managing Director, 0hana Water and Sewerage #ororation
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GEORGETOWN&
PENANG ISLAN%
Sewage s'ste1 2uilt in the )*34s
co/ered 1ost of cit'
!aw sewage discharged to sea
causing 1assi/e ollution and
e'esore
5ew STP 2uilt at cost of 6 !M+44 1ill
7erating costs ju1ed
!esidents in 0eorgetown
generall' ercei/ed no change
(elutong coastline transfor1ed
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SEWERAGEI'PRO(E'ENT
)ENE*IT
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• "iEuana Giver Halley is on t(e
'order of Me%ico, sout( of San
2iego, <S>
• "iEuana Giver polluted 'y
sewage flows from "iEuana,
Me%ico>
• Pollution affected San 2ie o in
TI+,ANA - SAN %IEGO&
'E.ICO- ,SA
t(e <nited States>• <S Congress aut(oriIed funds
to construct treatment facility in
t(e valley, to treat sewage from
"iEuana
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Wastewater Service as a Public vs. Private
Goods
• Private goods: benefits mainly to individuals and not to the public atlarge.
• Public goods: benefits to the public at large;• Wastewater collection and treatment, has components of both publicand private good. Most countries recognize that wastewater treatmentprovides a substantial public good, and national budget funds subsidizea eas a par o oca was ewa er rea men .
Lack of Demand for Wastewater Services
Users are reluctant to pay because they often differentiate between
waste collection and waste treatment, with waste collection seen asdirectly benefiting the system users. Treatment of the waste tends to beseen as benefiting downstream users and is often treated as a widerpublic good.
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POLLUTERS PAY VS BENEFICIARIES PAY- SOME THOUGHTS ON SEWERAGE COSTS RECOVERY
• Sanitation (addressing basic public health) evolving to Seweragemanagement (providing a better neighbourhood, safeguarding waterresources and preserving the environment)• Sewerage management deals with community goods. There has
always been reluctance among people to pay for such services.• While these were Government services, costs were fully orsubstantially covered from general tax, with minimal direct charges on
.
• As private sector got involved, tendency is to look at “full costrecovery”, usually from the user.•The individual user is interested for the wastes to be removed out ofsight.
•Sophisticated treatment of the wastewater to produce high qualityeffluent is necessary to protect the water resources and preserve theenvironment.•This benefits to the Nation – increased availability of water resources
for drinking, irrigation, aquaculture, tourism related activities and abetter environment contributing to the quality of life of the people.
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FULL COST RECOVERY : FROM BENEFICIARIES
- HOW DO THEY BENEFIT?
J astes removed from premises
J Clean neig('or(ood<ser
J /n(anced property value
J Pleasant living environmentCommunity
J <npolluted water for drin$ing andeconomic useater resources
J "ourismJ /n(anced wor$force productivity/conomy
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Wrld )ank/s Strategic Sanitatin Apprac0$(i) preferences of users(ii) unbundling sanitation services
Households pay the bulk of the cost incurred in providingon-site facilities, including on-site sewer connections
Residents of a city collectively pay theadditional cost incurred in conveying ,
treating & disposing the sewage.
es en s o a oca y co ec ve y pay e
additional cost incurred in collecting wastesfrom individual houses and transportingthese to the boundary of the neighbourhood
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19;6As <S+ovt
Construction
+rantsProgram tostates for
wastewatertreatment
19K1@Su'seuenlty
19K; ) Cleanater ct!C# L1K
'illionrevolving fund
,NITE% STATES
p ant
construction>
19;5) "(efederal s(are
of proEectcosts was
initially ;53
re uce to
553
<pto 19K5total amount
of <S L1'illion
allocated>
oans to
States>
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4,878
4,000
5,000
6,000
n
Trend in finance of sewerage construction
general account budget :82,909 billion yen
expenditure for public works : 6,947 billion yen
national expenses for sewerage : 696 billion yen
+APAN
2,44 2
3,065, ,
2,921
2,4332,152 2,11 0
833 1,129 1,099 1,246 1,781 1,262 1,067 890 735 696
3,149
0
1,000
2,000
3,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
B
i l l i o n
y e
National expenses for sewerage ≒ Subsidized expenses ×50%
Total expenses for
sewerage constructionSubsidized
expenses
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+APAN
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Setting of ppropriate Sustaina'le Sewerage C(arges
Present 8W. Model
• Present tariff model poses a pro'lem in relation to t(e
'enefits to customers as against community
• s investment sop(istication of sewerage assets
increases, t(e community 'enefits more t(an t(e direct
customers
• :ence increasing tariff to cover t(e cost of
infrastructure improvements is seen as -not fair. to t(e
direct customers
C,STO'ER (IA
TARI**
GO(ERN'ENT
(IA S,)SI%1-
GRANT2
F<N27N+
enefits
7nvestment
)enefits t C#stmers
)enefits t Cmm#nity&
En!irnment
P u ' l i c
: e a l t (
C u m m u n
i t y
c o n c e r n s
/ n v i r o n m e n t
,SER CO'',NIT1 EN(IRON'ENT
SEWERAGE *ACILTIES
3 SER(ICES
O M &
CP/0
Possi'ility of (ig(ercost recovery from
tariff alone
"ariff "a% for
sustaina'ility
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S,GGESTE% APPROAC4 *OR CAPE. AN% OPE. APPORTION'ENT
CAPEX items havingdirect impact oncustomers to be directly
• OPEX recovery from tariff/ tax initially• Gradually increasing tariff portion with increased
awareness and willingness to pay• Eventually resource recovery (water reuse, energy,
nutrients ma contribute si nificant ortion of
CP/0
PPOG"7ONM/N"
OP/0
PPOG"7ONM/N"
56
recovere roug ar .
Balance to be fundedfrom Govt. tax revenue.
revenue
;63
?63
563 563
+eneral ta% "ariff Gesource recovery revenue
63 63
563
?6363
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*E%ERAL GO(ERN'ENTGeneral ta7
T#rism ta7
En!irnment ta7
STATE GO(ERN'ENTSLand ta7
Raw Water ta7
LOCAL GO(ERN'ENTSPrperty ta7
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EQUITABLE CHA!I"! F# $E%EA!E• Consider er'eived val(e to (ser ) *astes to +e
re,oved -ro, re,ises. and o(t o- si/0t
• Bene-i'iaries -ro, so0isti'ated se*era/e syste,sare t0e 'o,,(nity. lo'al environ,ent and'o,,er'ial and ind(strial enterrises in'l(din/to(ris,
• Aroriate t0at t0e (ser is only '0ar/ed -or t0e+ene-it 0e derives. *0ile t0e ot0er +ene-i'iariesay to ,ae ( t0e re,ainin/ 'osts t0ro(/0di--erent ta2 ,e'0anis,s
• #ver ti,e. as environ,ental a*areness /ro*s. alar/er er'enta/e o- t0e 'osts ,ay +e +orne +yt0e (ser
• eso(r'e re'overy is a otential reven(e so(r'e
*0i'0 ,ay event(ally enter t0e e3(ation
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Note: the views expressed in this paper are those of the authors and not necessarily of
IWK. It is hoped that these considerations can form the basis of sanitation / sewerage tariffsetting through policies in countries where appropriate.
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