Transcript NON REVENUE WATER REDUCTION

ADB – Workshop on PPP in Water
Water Management Contracts
Key Principles
Anand K Jalakam
+91-99720-01819
[email protected]
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Presentation Structure
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Water utility operational functions
Policy issues for sustainable O&M
Management Structures for O&M
Key issues for delegation
Key principles of contracting
Water Utility Service Regime
PUMP
SOURCE
TREATMENT
STORAGE
MEASUREMENT
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CUSTOMER
Strategic Business Units
PUMP
TREATMENT
SOURCE
CUSTOMER
STORAGE
MEASUREMENT
Bulk
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Retail
Key Operational Functions
PLANNING,WATER SAFETY, ENGINEERING, ASSET MANAGEMENT, PROCUREMENT, IT
PRODUCTION
VALVING
LABORATORY
FACILITY MGMT
SOURCE
DEMAND MGMT
VALVING
REPAIRS
PUMP
WRU CORD’N
PROTECTION
MANAGEMENT
MONITORING
DISTRIBUTION
MAINTENANCE
REPAIRS
METER
WTW
MECH & ELEC
CHLORINATION
QUALITY& SAFETY
OHT
CUSTOMER SERVICE
METER READING
BILLING & COLLECTION
DEBT MANAGEMENT
ACCOUNTS, FINANCIAL CONTROL, HUMAN RESOURCES, SAFETY, AUDIT, LEGAL
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Policy issues for sustainable O&M
Governance
 Operational autonomy
 Ability to manage staff
 Flexibility in decision making
 Transparent subsidies
Management
 Responsiveness to consumers
 Efficiency
 Commercial viability
 Capacity to grow and transform
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Possible options for reform
A.
B.
C.
D.
E.
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Integrated Municipal Management (IMM)
Dedicated Municipal Management (DMM)
Municipal Water Company (MWC)
Regional Water Corporation (RWC)
Delegated/Outsourced Management
(DOM)
A - Integrated Municipal Management
Policy, Subsidy,
Regulation
Urban Development Department
(UDD)
User Charges
Water Services
Shahdol Municipal Council
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Consumers
A – Integrated Municipal Management
Advantages
 Simple to administer
 Managerial control with Municipal Commissioner
 Customers can deal with one agency for all
services
 Democratisation at the grass-root level
Weaknesses
 Low accountability
 Key staff does not belong to ULB
 Difficult to link tariffs to service delivery
 Less focus on water
 Councilor and operator conflicts leads to
controversies
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B - Dedicated Municipal Management
Policy, Subsidy,
Regulation
Urban Development Department
(UDD)
Ujjain Municipal Corporation
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User Charges
Mumbai, Pune
Nagpur, Surat
Water Services
Municipal Water Department
Consumers
B – Dedicated Municipal Management
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Advantages
 All the strengths of Option A holds good
 Ring-fencing of water account leads to improved
financial control and discipline
 Tariffs can be linked to service levels
 Transparent subsidies to poor can be ensured
 Possibility of performance incentives to staff
Weaknesses
 Limited career opportunities to staff
 Un-economical for small towns
 Councilor and operator conflicts leads to
controversies
Policy, Subsidy,
Regulation
Urban Development Department
(UDD)
Water Services
User Charges
Consumers
Assets, Bulk
supply
Bhopal City Corporation
Municipal Water Company
ULB and PHEO Staff
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Grant support
C - Municipal Water Board/Company
Bangalore, Chennai
Hyderabad, Delhi
C – Municipal Water Board/Company
Advantages
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Protected from daily interference from policy makers
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Civil society can be included in management
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Functional autonomy but ownership with ULB
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Tariffs and service delivery can be linked
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Better financial planning and management
Weaknesses
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Require detailed initial planning and preparation
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Staff who are deputed may be unwanted by the parent
agency
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Not economical as each ULB requires a separate agency
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Require elaborate training to induce corporate culture
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Councilors involvement low hence they may resist
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D - Water Corporatisation
Capital, subsidies
Contract
Urban Local Bodies
(ULB1, ULB2,….ULBn)
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User Charges
Water Services
Fee
Regional Water Corporation
Policy, Subsidy,
Regulation
Regulation
Urban Development Department
Independent Regulator
Electricity Cos’
Orissa, AP, Karnataka
Consumers
D – Regional Water Corporation
Advantages
 Facility to regulate by comparison
 Payments and performance can be lined
 ULBs can choose any utility
 Electricity unbundling experience in the state
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Weaknesses
 Initial preparation and legislative support required
for sound organisational structure
 Regulatory regime required for ensuring
competition
 Low competition as there can be max 2/3 regional
utilities
E - Delegated Management (PPP)
Grant support
Policy, Subsidy,
Regulation
Urban Development Department/
Independent Regulator
Fee
Contract
User Charges
Indore City Corporaiton
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Tariffs
Services
Private Water Operator
Customers
Belgaum, Hubli, Mysore
Nagpur
E - Delegated Management
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Advantages
 Suitable for medium to large size ULBs
 Performance based incentive linked contracts
feasible
 Contractual Regulation possible
 ULB would gain value time for policy
 Contract management skills sufficient for ULBs
Disadvantages
 Low information availability can hinder business
planning
 Large companies can exploit small municipal
authorities
 Some initial legal preparation required
Management Options
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Management Service
Providers
Full Service
Providers
Technical Service
Providers
Bulk Supply
Providers
Level of Private Participation
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Planning
Design
Detail Engineering
Funding
Procurement
Supervision
Construction
Plant Operations
Leak repair
Connections
Valve Operations
Meter reading
Billing
Cash collection
Contract Payments
Consultants
Consultants
Consultants
Multilaterals
Consultants
Consultants
Contractors
Contractors
Contractors
Lic. Plumbers
Staff
Staff
Staff
Banks
Staff
Private
Private
Private
Private
Private
Private
Private
Private
Private
Private
Public
Public
Public
Private
Public
Key Contractual Issues - 1
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Imperfect Baseline Data
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Scoping of Work
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Either a Baseline study (with consultants) or
Include as contractual obligation as a
preparatory period + Contract rebasing or
readjustment
Bulk supply vs Distribution services
Service improvement planning
Business Planning
Billing and Collection
Procurement
Key Contractual Issues - 2
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Contract management capability
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Payment to Operator
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ULB being the Obligator for service
SLA can support contract administration
Technical Auditor
Availability of funding stream
Payment security
Incentives
Key Contractual Principles
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Selection methodology – Transparent bidding
Parties to Agreement
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Contract Phasing
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Preparatory Phase
Service Improvement Phase
Operating Phase
Obligations of parties
Risk Allocation
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ULB as obligator
Operator as service provider
SLA as contract administrator
Operating, Market, Collection
Performance Deliverables
Preparatory Phase
– Service improvement plan
– Annual Operating Plan
– Information Management System
Service Improvement Phase
– Incremental increase in cash collected per unit
volume of water sourced
– Metering, increased coverage of HSCs
– Response times
– Service Interruptions
Operating Phase
– Incremental performance improvements
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Operator Remuneration
Preparatory Phase
– One off Set up costs
– Annual Operating Costs
– Fixed Fee
Service Improvement Phase
– Rehabilitation costs
– Annual Operating Costs
– Fixed Fee + Performance Fee
– Share of positive cash accrual
Operating Phase
– Annual Operating Costs
– Fixed Fee + Performance Fee
– Share of positive cash accrual
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Other Key Contract Principles
Dispute Resolution
– Amicable Settlement
– Adjudication - local
– Courts
Indemnity
– Historical defects
– Negligence
Termination
– Continuous default by either Party
– Fraud
– Insolvent
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Experience in Karnataka
Parameter
Supply Frequency
Number of connections
Volume of water supplied
Volume of water consumed
Non Revenue Water
Revenue billed in the Zone
Maintenance Cost
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Unit
Total
Before
Hours
2hr in 3-10days
Number
16,399
Cum/month
664,350
Cum/Conn/month
NA
%
>45%
Rupees/month
1,383,243
Rupees/month
NA
After
% change
24 hour
Standard
24,145
47%
554,847
-16%
20
6%
-39%
2,880,826
108%
129,697
Acknowledgements
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KUIDFC
BWSSB
KUWSDB
KRWSSA
USAID FIRE Project
WSP-SA, World Bank
“Thank you”
[email protected]
+91-99720-01819
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