Transcript Slide 1

Seminar - February 7, 2009
Our Water Systems:
Public, Private, or Both?
by
K. William Easter
Professor of Applied Economics
University of Minnesota
The Gadag Rural Water Project (India) will replace the need for getting water
from a traditional scrape in the river bed with piped supplies
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1. Introduction
• 97.5% of world’s water is salt water and
another 2% is frozen or not accessible
• Four to five fold increase in water use since 1940s (2
to 4% growth rate)
• Over a billion people lack clean water and about two
billion have poor sanitation
– Women or children may have to walk 5 to 10 miles
for water (15% of women’s time)
• One billion people become ill annually from unclean
water
• Bottled water costs $30 to $300 per barrel (oil is now
only $40 to $50 per barrel)
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1. Introduction - - contd.
• Eight gallons of water to produce a gallon of
milk
• Four gallons of water to produce a gallon of
ethanol
• Consumptive water use in LDCs (distribution)
• Agriculture (irrigation), 70-80%
• Commercial and industrial uses, 10-22%
• Domestic uses, 8-10%
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1. Introduction - - contd.
• Supply of water and demand are variable within a year
and between years (scarcity can occur anytime)
– Rainfall and Storage (supply)
– Temperature and humidity (demand)
– Is the frequency of scarcity and variability increasing?
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2. Water Services and Dis-services
a. Consumptive uses
– Domestic and industrial water supply
– Irrigation – big user
– Non-crop agricultural uses (water for
livestock, etc.)
– Dry land agriculture and forestry
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2. Water Services and Dis-services, cont’d
b. Non-consumptive uses
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–
–
–
–
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Hydropower
Fish culture
Recreation
Navigation
Dilution of waste materials
Aquatic habitat
Bathing and washing clothes
Cooling for buildings and power plants
(biggest use in Minnesota)
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2. Water Services and Dis-services, cont’d
c. Dis-service
– Flooding
• For example in India flooding covered 25 million
hectares in 1960, 40 million in 1978, and 58 million in
the mid-1980s. (The problem seems to be getting
worse.)
– Disease vector
• 5,000 to 10,000 persons die from malaria annually in
Cambodia
– Soil erosion
• Lost productivity that fills rivers and reservoirs
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3. Why have we failed to provide clean drinking
water to over one billion people?
• Related questions:
– Who should provide this clean drinking water –
the public or private sector?
– Should everyone be provided the same level of
service?
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4.Human rights to water and the private sector
a. Basic right to water for domestic use
• Access to village well or public water tap?
• Should this be right to “safe water”?
• Low price for basic human water needs?
• Allocate a greater share of water to domestic
use?
• How does this compare to basic right to food
or housing?
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4. Human rights to water and the private sector - - contd.
b. Agricultural and commercial use (90% of consumptive
uses)
• Isn’t this water better treated as an economic good?
• Do we need to reduce demand and reallocate more
to domestic and environmental uses?
• If we do, then we need to price water at its scarcity
value
c. How much to allocate for environmental uses?
• 30% of stream flow in dry season to 50% in wet
season
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5. How water was developed in the 20th century
• In early stages of settlement, people located
near water sources (rivers and lakes)
• As populations, cities, and demands for food all
increased, access to water became more
difficult
• First approach in LDC was to develop large
multipurpose irrigation projects with foreign
assistance – TVA model
• Some private irrigation was also developed,
such as the Gezira Scheme in Sudan, with
farmers as tenants
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5.
How water was developed in the 20th century,
cont’d
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•
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In 1980s large expansion of private irrigation
well development in Asia and U.S. Great Plains
About one-third of the world’s food comes from
irrigated land
Cost of new irrigation is now quite high and
easily irrigated areas have been done
This makes it more difficult to transfer water out
of agriculture for urban uses
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6. How urban water supply and demand has developed
a. Growth in LDC cities took off in 1960s and 1970s
• In 1960, only one LDC city over 10 million
• In 2000, seventeen LDC cities over 10 million
• Now in LDCs, 50% live in urban areas
b. Large cities in LDCs under-invest and poorly manage
water supply and sewage systems
• 50% of water is unaccounted for in Cairo, Lagos,
Mexico City, Jakarta, Manila, and Lima
• Cost of new supplies may be 2 to 3 times cost of
existing supplies
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6. How urban water supply and demand has developed -contd.
• Poor quality water service continues particularly for the urban
poor in LDCs
• Still 50% of the people, including the poor, live in rural areas
where many have unsafe water supplies
• 1980 - first UN water decade; 2005-2015 is UN “water for life”
decade
• During the first water decade, we just kept up with population
growth. The number of those without safe water stayed constant.
• Many times, LDC consumers in urban areas must pay private
vendors 3 to 4 times the public rate for water.
• In some cases this is a high percentage of low income families’
income (as much as half).
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7. Given this situation, will private management and/or
ownership help?
a. What about the private management options in
urban areas? (Table 1) Design and build is most
common U.S. private activity.
b. Irrigation and private water development have also
helped meet rural domestic water needs
c. Some locally developed systems using groundwater
and springs
• Punjab, India, southeastern Brazil, and
Bangladesh: wells and hand pumps
• Oman, Spain and Brazil: examples of locally
developed water markets
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Table 1 - Alternative Roles for the Private Sector
Types of
Agreements or
Concessions
Description of Functions and Services Provided
Acquisition – private
ownership
Public utility sells facility to private entity resulting in private ownership and
operation.
Joint venture
Private entity owns and operates facility in conjunction with public utility.
Design, build, own,
operate and transfer
ownership to public
Private entity builds, owns, and operates facility. At end of specified period,
such as 30 years, ownership of facility is transferred to public utility.
Design, build and
operate
Private entity designs, constructs, and operates facility. Public utility retains
ownership and financing risk, while private entity assumes performance
risk for service and/or compliance.
Operate and
maintain
Public utility contracts with private entity for a fee to operate and maintain
facility. Public utility owns the facility.
Design
and /or build
Private entity designs and/or constructs facility and turns it over to public
utility to operate and maintain.
Provide specific
services
Private entity contracts to provide public utility with specific services such
as meter reading or billing and collection.
Management
Private entity manages and supervises public utility personnel.
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7. Given this situation, will private management and/or
ownership help? – cont’d
d. Might use markets to reallocate water to domestic
uses both permanently and temporarily
• California did in 1990s – temporary reallocation
• Chile and Australia have done a little –
permanent reallocation
• Mexico had the chance to do it, but decided to
just take farmers’ irrigation water and give it to
urban areas during a drought period
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8. Reservations about private management and
ownership
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•
•
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Concerns about possible private water monopolies
People’s values concerning private rights to water
Concerns about overuse of ground water stocks
Third party impacts through water diversion and
pollution
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9. Villages not adequately served, public sector should not treat
them equally (WTP and public health concerns)
a.
Will they maintain the water system once it is in place?
b.
There are at least four different types of villages that require
different approaches.
• Type I villages – high willingness to pay (WTP) for private
connections but not for public taps.
-
Provide subsidies to install some public taps for those
with low WTP
-
Provide technical assistance
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• Type II villages: low WTP for private connections but
majority will pay for public taps.
– Provide with technical assistance for building system with
public taps.
– System should allow families to pay extra to get private
connections.
• Type III villages: WTP for improved service but too costly for
them to cover costs.
– Provide subsidy and technical assistance so that they can
cover the cost of installing a water system with public taps
• Type IV villages: low WTP for improved service.
– Wait until village’s demand for better water increases
– Provide educational material regarding the importance of clean
water (many don’t understand germ theory)
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10. Conclusions
• Technology for obtaining clean water is much improved.
• No one model fits all.
• Community must be involved in water investment
decisions.
• Subsidies and technical assistance for smaller
communities should be designed, based on a
community’s ability and willingness to pay for different
levels of service.
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10. Conclusions -- contd.
• Use private sector where it can help, but public sector
will still need to play an important governance role.
• We will need to improve water use in agriculture and
industry so that there is more for domestic and
environmental uses.
• World Bank estimates we need to invest $600 to $700
billion in water improvement and development.
• LDC must invest more in their urban water and sewer
systems. Hyderabad, India is building seven water
treatment plants.
• This is a key area for development aid, particularly in
Africa.
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DSM Industries Trichy - Deep Well Hand Pump
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Malawi is a landlocked, sub-Saharan country that is fighting chronic water shortages
and the effects of a severe food crisis in 2006.
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Sosal, Honduras: Girl washing clothes at her new pila. Photo credit: WaterPartners International26
Women getting water from the Ak-ela well in March 2004.
The Senai Foundation is a non-profit support organization for the people of Eritrea.
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Indian woman getting water from a truck
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URL to access presentation
http://www.apec.umn.edu/faculty/weaster/
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