1

Impact from Management and Lease/Affermage Contracts

in Water Supply

1818 Society Water Chapter September 8, 2006

Klas Ringskog, World Bank consultantMary-Ellen Hammond, Jr. Professional Associate

Alain Locussol, Lead Water and Sanitation Specialist

2

Outline of Presentation

What triggered the study: the Delhi WSS project sagaThe political economy of PSP in water supplyCase studies in the PPIAF studyService coverage/quality before and after PSPEfficiency of service before and after PSPSustainability of service before and after PSPLessons learnt

31

What triggered the study

Delhi Water Supply and Sanitation15 million people; 1.5 million customers; 240 lpcdWater supplied few hours per dayNo metering; NRW: 50% NRW; collection: 80% Cash collection covers less 70% of O&M costs90% of O&M costs spent on energy and staff (17

staff/1,000 connections)

41

What triggered the study

DJB financial situationDJB Opex: US$120 million/year

Customers US$80 million/yearGovernment US$40 million/year

DJB Capex: US$170 million/yearGovernment US$170 million/year

DJB Debt US$1,500 millionHousehold WSS budget

DJB Opex US$ 80 million/yearCoping costs US$120 million/year

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What triggered the study

Project to improve WSS service in pilot areas through Management contracts

Strongly attacked Despite extensive consultation process with affected

stakeholdersBy vocal group claiming that it would lead to

Privatization and asset sell-off to foreignersMassive tariff increaseMassive staff lay-outExclusion of the poor and thatPSP in WSS has never worked elsewhere anyway

61

What triggered the study

Government Did little to defend a project it had earlier claimed

strong commitment to, butAsked the Bank to provide evidence that

Management contracts in WSS do workNo such report was available to document how

Service has improved Tariff has involvedStaff has been affectedThe poor have been affected

7

Political economy of water supply PSP

Stakeholders:Politicians Public utility staff and government officialsNon Government Organizations (NGOs)Private operators Consumers

8

Case studies of PPIAF study

Amman Management contract 2000-2005

Gaza Management contract 1995-2005

Zambia Management contract 2000-2004

Antalya Affermage 1996-2001

Gdansk Affermage 1992-2005

Senegal Affermage 1996-2005

Barranquilla Lease/affermage 1990-2005

Cartagena Lease/affermage 1995-2005

9

Case studies of PPIAF study

Data collected (year before PSP and latest year):Coverage (water supply and sewerage)Quality (service hours /bacteriological quality)Efficiency (non-revenue water/metering/staff productivity)Sustainability (financial working ratio)

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Service coverage & quality, before and after private operator contract

Case Water coverage before/after Hours of supply before/after

Amman 90% 100% 4 9

Antalya 93% 95% 19 23

Barranquilla 60% 89% 19 23

Cartagena 74% 95% 17 24

Gaza 58% 56% ... 8

Gdansk 100% 100% 24 24

Senegal 59% 73% 16 22

Zambia 100% 100% 13 18

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Efficiency of service before and after private operator contract

Non Revenue Water

0

10

20

30

40

50

60

70

80

Amman Antalya Barranquilla Cartagena Gaza Gdansk Senegal Zambia

Before After

200

0

200

5

199

6

200

1

199

0 200

5

199

5

200

5

199

5

200

5

199

2

200

5

199

6

200

5 200

0

200

4

0

10

20

30

40

50

60

70

80

Amman Antalya Barranquilla Cartagena Gaza Gdansk Senegal Zambia

Before After

200

0

200

5

199

6

200

1

199

0 200

5

199

5

200

5

199

5

200

5

199

2

200

5

199

6

200

5 200

0

200

4

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Sustainability before and after private operator contract

Financial working ratio

Financial working ratio

0

0.5

1

1.5

2

Amman (6 yrs) Antalya (6 yrs) Barranquilla (15 yrs) Cartagena (10 yrs) Senegal (10yrs) Zambia (5 yrs)

Before After

13

Sustainability -Productivity and tariff changes in Cartagena

0

50

100

150

200

250

1995 2000 2005

Index

Average tariff Working ratio

Efficiency gains

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Lessons learnt

Access, quality, efficiency and sustainability have all improved Another PPIAF study is planned to widen and deepen scope of studyManaging PSP expectations crucial Adequate investment funding is critical for success of MCs and leases