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MANAGING
KATHMANDU WATER SUPPLY
Authored By: Madan Shankar Shrestha
Date: Aug. 4, 2002
Kathmandu water supply has a history
of more than 100 years. Pani Goswara (water office) used to
manage the water supply in the recent past. In 1974 His Majesty's
Government formed Water Supply and Sewerage Board (WSSB),
an autonomous organization to manage water supply and sanitation
facilities in Kathmandu Valley towns (Kathmandu, Patan, Bhakatpur)
and Pokhara. Although the Board had full autonomy, all the
Board members were government officials appointed by the government.
With the setting up of WSSB in 1973 began the commercial operation
of water supply and sewerage system and the World Bank's assistance
to expand the water supply facilities in these towns. The
first WB/IDA project was executed by WSSB in 1974-1980. After
the completion of the first IDA project, the water supply
and sewerage system of Kathmandu, Patan and the water supply
system of Pokhara expanded considerably.
Meanwhile water supply and sewerage
system of Bhaktapur core areas were extended under the Bhaktapur
Development Project supported by the German government. As
the World Bank agreed to provide their assistance to some
of the other outside the valley towns, HMG formed Water Supply
and Sewerage Corporation (WSSC) under the Corporation Act
in 1984 expanding the jurisdiction of WSSB to other municipal
towns. Although the Board members were nominated by HMG, they
were from both government and non-governemnt sector. The government
handed over the water supply system of Birgunj, Janakpur,
Hetauda, Biratnagar, Dharan, Butwal, Bhairahawa and Nepalganj
to WSSC which were previously being run by the Chief District
Office or the municipal office. The second and third WB/IDA
project completed in 1987, were executed by WSSC to extend
the water supply facilities in these towns. In the same year,
HMG formed the Pokhrel Commission to diagnose the management
weaknesses of WSSC and recommend measures to improve it. One
of the recommendations made by the Commission was to form
an autonomous Board in each municipality, however the recommendations
of the Commission were never implemented, although some of
the Mayors were eager to have the water supply and sanitation
facilities under their wing.
Institutional weakness of WSSC was
identified by the World Bank in the late 80's. The facilities
constructed during the three earlier IDA projects required
rehabilitation and differed maintenance. The Urban Water Supply
and Sanitation Rehabilitation Project (UWSSRP) was designed
with assistance from the WB to strengthen the technical, managerial,
financial and operations/maintenance capability of WSSC and
to increase utilization of existing water supply and sanitation
systems through rehabilitation and extension. The WB also
advised HMG to replace WSSC by Nepal Water Supply Corporation
(NWSC) to provide greater autonomy and authority compared
to those of its predecessor agencies (WSSB,WSSC). NWSC would
also have the ability to revise and implement tariffs and
charges with HMG approval, and also to prosecute defaulters
and terminate services, if necessary. Eventually Nepal Water
Supply Corporation was formed in 1989 under the NWSC Act.
As per the Act the NWSC has authority to operate water supply
and sanitation facilities in all the municipal areas of Nepal
if so desired by HMG.
At present NWSC's jurisdiction are
limited to 28 out of the 58 municipal areas in the country.
The Chairman and Board members of NWSC are nominated by HMG
from both public and private sector. Formation of NWSC and
passing NWSC Act was one of the condition to finalise the
WB's funding of the UWSSRP. A Management Support Team (a group
of water utility experts) and consulting firms were appointed
to improve the management capability of NWSC and to assist
NWSC to implement the UWSSRP respectively. During the mid
term review of the UWSSRP, it was noted that the institutional
component of the UWSSRP had largely failed. Hence the UWSSRP
objectives was revised to assist to prepare a Management Contract
in order to transfer the responsibility for managing NWSC's
operations in Kathmandu Valley to a qualified and experienced
private sector firm through a management contract and thereby
increase the efficiency and service delivery of NWSC.
In 1997 HMG formed the High Level Private
Sector Participation Committee (PSPC) in order to assist the
HMG in selecting a qualified international private operator
as a management lease contractor to operate and maintain the
Kathmandu Valley water supply and sanitation facilities by
April 1999, this date to match the project completion date
of the UWSSRP. The UWSSRP closed in March 1999 with most of
its objective unaccomplished including the completion of the
physical components. The target date of bringing in the private
operator soon after the closing of the UWSSRP was linked to
the WB's assurance to HMG of its assistance in a larger project
to be implemented through the private operator (the project
to be funded using savings form the UWSSRP with some additional
funding). Unfortunately the private operator could not be
appointed by that time, one of the reasons for delays being
the passing of various Acts and formation of a regulatory
body to monitor/regulate the private operator. The other major
reason for delay was in the shortlisting of the private operators.
The World Bank insisted that the private operator be an internationally
recognized company with experiences in operating facilities
similar in scale to NWSC Kathmandu both in a developing country
and in a developed country, which seriously restricted the
number of potetntial bidders. As a result, among the several
applicants only two firms qualified in this respect, one of
them withdrew at the time of submission of request for proposal.
After inviting the interested private
operators to a workshop in Kathmandu, another attempt was
made to short list the operators once again. The result of
this exercise, which concluded recently was no different from
the earlier one, with only one firm passing the qualifying
criteria. As competitive bidding was not possible in the presence
of only one pre-qualified bidder, the second attempt had also
to be abandoned.
Meanwhile the HMG established the Melamchi
Water Supply Development Board in 1998 to implement the Melamchi
Water Supply Project (MWSP) to solve the water supply problem
of the Kathmandu Valley residents on a longer term. The MWSP
would be implemented in three phases. In the first phase,
now scheduled to be completed in 2008, water would be tapped
from Melamchi khola in Sindhupalchowk district through a 27
km long tunnel, treated at a water treatment plant to be constructed
at Sundarijal and the treated water distributed to the consumers
through a network of pipeline and reservoirs. At later stages,
water from Yangri and Larke Khola close to the Melamchi khola
would be tapped to supplement Melamchi water. At the completion
of the MWSP, the water demand of the valley population would
be fully satisfied upto 2030.
Several donors led by the Asian Development
Bank have agreed to fund the first phase of the MWSP. HMG
have signed grant/loan agreement with the Asian Development
Bank, Norwegian Government, the Japan Bank for International
Cooperation, Swedish Government, the OPEC Fund and the Nordic
Development Fund for financing the MWSP. Appointment of the
private operator is one of the conditions agreed between the
HMG and the donors to implement the MWSP. Although most of
the design and preparation of bid documents have been substantially
completed, it has been agreed with the donors that the construction
of tunnel could begin only after the private operator is in
place.
Recently at the request of HMG, the
WB has agreed to divert its financing of MWSP to other priority
areas (other than the MWSP). Unfortunately the 5 year long
joint exercise of the HMG and the WB to appoint the private
operator has ended unsuccessfully. As the ADB is one of the
lead donors and is coordinating other donors for the MWSP,
HMG has requested the ADB to assist in recruiting the private
operator. The HMG is waiting for a positive response from
the ADB towards this end.
Authored By: Madan Shankar Shrestha Date: Aug. 4, 2002
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