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B1.7 Strengthening public sector water utilities

Characteristics

Most water services - including regulation and ecosystem protection, as well as water supply and sanitation and irrigation infrastructure - are provided by public utilities. Improved efficiency of operation in public sector service providers is an important means of improving the effectiveness of financial resources, and indeed, many public water service and irrigation agencies are inefficient and need reform. Reform can yield efficiency gains of the sort normally associated with the private sector (see B1.8).

There are several types of public utility, with varying levels of autonomy. This affects the way in which they can operate. In ascending order of autonomy the main types are:

  • Government department (within ministry or separate ministry);
  • Special water unit, reporting to a minister or mayor;
  • Fully autonomous, commercial water utility with financing capacity;
  • Company wholly or majority-owned by the public sector.

Water supply and sanitation are provided by all of the above in different places. However, irrigation agencies are usually highly centralised, and reform here is often impeded by strong vested interests.

Because each public water organisation is different, it requires a unique and tailored package of solutions. A clear definition of the respective responsibilities of service providers and regulatory bodies is essential. There are some common elements for reform (improved efficiency) for service providers which include:

  • A clear and effective regulatory framework (both financial and service delivery (C6.3));
  • Greater autonomy from government and day-to-day interference;
  • Commitment to effectively monitored performance targets (e.g. new connections, leakage reduction, reliability, bill collection rates, financial break-even, etc.);
  • Tariff reform to improve cost recovery (C7.1);
  • Motivation and training of staff, oriented to customer needs;
  • Sub-contracting services to the private sector, where this is feasible and efficient;
  • Restructuring the organisation to reflect new goals and orientation.

"Benchmarking" has been successfully used (e.g. by the Asian Development Bank and through the WUP) to set performance targets using comparative data drawn from other relevant systems, or in "yardstick competition" by regulators, to compare the performance of both private and public service delivery organisations relative to domestic or international equivalents.

Lessons learned

  • Drastic reform is easier to contemplate when the water situation is desperate and public discontent with service levels is high.
  • Consultation with water users is vital in order to ensure the provision of services that people really want and are willing to pay for. Note that users should be identified: women may be the main users of domestic water, but consultation often takes place only with (male) community leaders.
  • Immediate and early improvements in the standard of service (e.g. water quality, reliability, pressure) will help offset the unpopularity of tariff increases or layoffs.
  • Correcting inefficiencies (e.g. high levels of leakage, unpaid bills) can reduce the need for unpopular tariff increases (C3).
  • Government needs to ensure that the poor are served and users are protected from excessive costs.



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