1. Day 2. Session 20

Report
International Symposium on Sustainable Cities:
Empowering Local Governments through Capacity Building
and Knowledge Sharing
26-28 September 2013, Incheon, Republic of Korea
Meeting Urban Sanitation
Targets : Political Commitments
and Infrastructure Investments
Dr. Kulwant Singh
Regional Advisor
Urban Basic Services Branch, UN-Habitat
1
www.unhabitat.org
Sources of Funds for water
• Water Users: Households, Farmers & Businesses
Householders invest their cash, labour and materials in wells,
pipes, basic sanitation and other facilities. Farmers invest large
sums in tubewells, pumps and surface irrigation systems,
either on their own or as members of associations and user
groups. Industrial and commercial firms often develop their
own water supplies and effluent treatment facilities. Some
large firms even supply the general population. Users also
cross-subsidise each other through paying different tariffs.
• Informal suppliers. In cities where growth has outstripped
the public network, local entrepreneurs, often acting outside
the law, fill the vacuum by selling water in bulk from tankers—
or in containers and bottles.
2
Sources of Funds for Water
• Public water authorities and utilities fund recurrent
spending and some new investment from revenues provided by
user charges (gross operating cash flow), loans and sometimes
public subsidies.
• Private companies, either local or foreign, providing funds
from sources similar to public utilities, plus equity injection.
• Non-governmental organisations and local communities,
raising funds from voluntary private contributions or grants
from international agencies.
• Local banks and other financial institutions offer shortterm or medium-term loans at market rates.
• International banks and export credit agencies, providing
larger volumes of finance than local sources, against corporate
guarantees or project cash flow
3
Sources of Funds for water
• International aid from multilateral and bilateral sources,
available as loans on concessional terms or grants
• Multilateral financial institutions: Loans on near-market
terms
• Environmental and Water and Sanitation Trust Funds
• National Central and Local governments, providing
subsidies, guarantees of loans, and proceeds of bond issues
4
The sanitation “value chain”
Environmental focus
MDG focus
Value chain
5
Demand
creation
Collection
Transport
Treatment
Disposal /
Re-use
Types of services
Main actors
Promote sanitation ,
create demand,
community organisation
On-site
with
reuse
• Local governments
• CBOs, NGOs
Sewer
connecti
ons
On-site
w/o
reuse
• Households
(investors)
• Masons
• Utilities
• Pit-latrine emptiers
(manual emptying,
trucks, etc)
• Utilities (sewers)
Partial
on-site
treatment
Treatm
ent
Plants
Decentralised
treatment
facilities
Re-use
(energy,
agriculture)
Environment
•Local governments
• Utilities
• SSIPs
•Local governments
• Local farmers,
etc..
Financing Sanitation - Main challenges
• Unrealistic plans and inadequate finance; “political
considerations” given higher priority; No monitoring of Plans
or implementation
• Fragmented financing channels
• Difficult to charge for an “immaterial” service, with low
or unexpressed demand
• Lack of clarity on what funds should be used for
• Evidence of “wasted” hardware subsidies
• Mis-allocation of funds across the value chain: “too
much” for wastewater treatment rather than basic sanitation
• On-site sanitation:
• Households are supposed to be main investors in
sanitation but get limited support
• Insufficient focus on environmental impacts of poor
sanitation and associated economic losses
6
Need for Leveraging local resources
• For countries to achieve economically feasible
levels: Sector Expenditure to be around 2 to 3
percent of GDP.
• To enable different levels of service – Public funds
should focus on basic access
• To enable rehabilitation/ augmentation in existing
projects
• To contribute for the development of the financial
sector through new business lines in water projects
for micro-finance and domestic finance institutions
7
Mobilizing Domestic and Private Resources
Public-private partnership
International debt financing
Domestic capital markets
Domestic tax revenue and user fees
8
Financing Sanitation Services
• Directing domestic
resources and donor
support to areas of
greatest need and
greatest impact
• Revenue transfers from
central government to
local authorities
• Direct access to capital
markets by local
authorities
9
Financing Sanitation Services
• Mobilization of
financial support to
bankable project
and programme
proposals
• Cost recovery policy
• Micro credit
schemes
10
The sanitation financing “equation”
e.g.: Financing on-site sanitation
Maintenance
and
operating
costs
Capital
costs
COSTS
Maintenance
and
operating
costs
Household
Household
recurrent
Recurrent
payments
payments
FUNDING
FUNDING
PUBLIC
GAP
SUBSIDIES
GAP
LOWER COST
TECHNOLOGY
Capital
costs
COSTS
REPAYABLE
FINANCING
Household
Household
capital
capital
investment
investment
SOURCE OF
FUNDS
Sources of funding:
Government own resources
Development Bank concessionary funding
Commercial financing, microfinance
11
USD
Cost of on-site sanitation: alternative
standards
12
800
700
600
500
400
300
200
100
0
Software support / solution
Hardware subsidy / solution
Household investment / solution
Different public financing effectiveness
Leverage
Increased access/public funding
$ private money invested/
$ public funds spent
25
20
15
10
5
0
13
Number of facilities /
USD 1000 public funds invested
160
140
120
100
80
60
40
20
0
Mobilising repayable financing
Constraints
Potential solutions

Micro-finance, Output-based aid, blending grants
and loans

Micro-finance, Output-based aid and innovative
contracts

Guarantees, insurance, devaluation backstopping
facility

Local-currency financing, revenue agreements

Municipal bonds, pooled funds, revolving funds,
bond banks

Instruments to increase sub-sovereign lending

Guarantees and equity contributions

Raising equity to strengthen the balance sheet,
convertible loans, debt-equity swaps
Lack of understanding by
external lenders and investors

Blending of public and private finance, credit ratings
Lack of “bankable” projects

Project preparation facilities
Affordability constraints
Limited availability of funds for
domestic operators and
SSWSPs
Risk profile and difficulties in
managing certain risks (e.g.
political risk, foreign exchange
risk)
Lack of funds at decentralised
level
Short tenor of available
financing
Under-capitalized balance
sheets
14
Need for Adequate Sustainable Access
• Shelter and human settlements are central to the pursuit of
the water and sanitation targets of the MDGs
• Strategies for service delivery need to be differentiated to
match the different types of human settlements
• Future design of human settlements should aim at mixed
income settlements rather than differentiated income
settlement types
• Most of the world’s people without adequate access to
sustainable water and sanitation services are the poor or
people who live in rural areas and small urban settlements
• Poor women and children in all types of human settlements
face specific challenges in accessing clean water and
adequate sanitation, and these challenges need to be better
understood and appropriate remedies designed for them
15
Need for Bridging the Financial Gaps
• External finance/ ODA should be grant-based, especially for
delivery of service in urban centers in low-income countries.
• Operating costs in all low-income countries need to be covered
through grants or other instruments like output-based aid.
• Small urban centers below the poverty line located in middle
income countries may need a variety of instruments, including:
o lifeline tariffs (such as those used in South Africa),
o output-based loans buttressed by appropriate forms of
external guarantees.
• Domestic resource mobilization should be maximized ensuring
that capital and operating costs are adequately funded.
• Ensure that considerations of affordability are reconciled with
the need to generate revenues from those that can afford to
pay for service.
• Wherever feasible, make trunk infrastructure publicly financed
16
Closing the Gap: Two Cardinal Sets of
Principles
• While ensuring the delivery of water and sanitation
services is squarely the responsibility of each
national government. But to be successful they will
need, above all, determined leadership and the
political will that is absolutely necessary to
maintain the commitment that will be needed.
• Given the record of delayed projects or initiatives
that have been reversed, short duration projects,
using fast track mechanisms, which begin to deliver
safe and affordable water and sanitation, within the
span of a political cycle can protect the interests
of poor communities from the effects of political
changes, which can result from a competitive
political environment.
17
Need for Monitoring
• Monitor trends and progress within the water
supply and sanitation sector
• Build national capacity for monitoring, and
• Inform policy makers and civil society of the
status of the sector.
18
What do we need to know…
Understanding sanitation costs
• Software costs: including all the costs, evaluating the
comparative effectiveness of software support
• Estimating lifecycle costs to guide appropriate investment
(incorporating opex and maintenance costs)
• Improve and redesign M&E frameworks so as to keep track of
critical financing information
Sources of financing
• Assess drivers and constraints for investment at household level
• Explore the potential for using “innovative” financing
mechanisms, such as micro-finance
• Identify how public finance can be better targeted
• Leverage other financing sources (“social investors”)
• Evaluate potential for “payments for environmental services”
19
What do we need to know…
Understanding the potential for microfinance
• Micro-finance schemes have potential to leverage substantial
private (hh) investments BUT limited and mixed experiences in
sanitation;
• Need to understand why and how they can work to mobilize
financing for MDGs with limited public funds: for households and
for small-scale entrepreneurs;
Allocating financing at the right “level” based on benefits
• Where coverage is low, channeling financing to the utility may
miss a large component of the “sanitation market”: financing
households and small-scale entrepreneurs also to be considered
• Where coverage is high, need to better understand the potential
benefits from increasing treatment levels (at the extreme,
evidence of some declining returns to further tightening
standards)
20
Revolving Fund - Background and Context
• UN-HABITAT established Revolving funds, as an
Instrument of the Poor, for the construction of individual
household toilets and community-managed water supply
scheme in Madhya Pradesh;
• In Lao PDR, another revolving fund for water connection
and latrine construction set up
• Revolving funds enable poor to avail credit for accessing
WATSAN services.
• Revolving funds also create
demand for services and
strengthen CBOs to actively
participate to avail services and
make them affordable.
21
Revolving
Funds
Operational Revolving Fund for Community
Managed Water Supply Scheme (CMWSS) in India
• Demonstrate ways that how a community can be empowered/
enabled to execute and manage adequate safe drinking water as
per their needs and affordability.
• Small network of Community Water and Sanitation Committees
(CWASCs) ensure water supply to the poor immediately and
operates the system for a certain time
• Capital cost investment under CMWSS of Rs. 3.0 million (US$
68000)
• Providing water connection to 1200 to 1500 households
• The rapid connection (3-6 months vs. 3-6 years) of people to
piped water as a means of attaining the Millennium
Development Goals
• Pay back recovery of distribution/connection costs in 3-5 years
22
Institutional Responsibilities of the Partners to
Implement CMWSS Projects
UN-HABITAT
•
Conceptualisation of CMWSS Projects; Social mobilisation, capacity development,
communication and project management
•
Coordination between Municipal Corporation (MC)/ District Urban Developmental Agency
(DUDA) and CWASC
•
Monitoring and evaluation of physical and financial performance and management of the
water supply projects
Municipal Corporations/ DUDA
•
Project feasibility study and survey of community mobilization activities and formulation
of CMWSS Projects
•
Entering into cooperation agreement with UN-HABITAT for creating revolving fund
•
Guiding the CWASC in designing and supervising the physical implementation and Scale
up CMWSS in other slums of the city
UN-HABITAT
•
Execute safe drinking water scheme for the area; Carry out billing and collection systems
•
Manage operation and maintenance of water supply system
•
Paying loan amount to MC/ DUDA in installments
23
CMWSS FLOW CHART
UN-HABITAT
Cooperation Agreement
MC/DUDA
Revolving Fund Disbursement
Bulk water charges
Repayment of RF in installments
Community
Water
& Sanitation
Committee
O & M Charges
Households
Pay Connection and
Monthly user charges
24
Service Provider
/ Supplier
CMWSS, Jabalpur
Location
Bagra Dafai
Households
800
Partners
CA with Jabalpur Municipal Corporation (JMC)
Capital Cost
USD 53,000
UN-HABITAT’s
Contribution
USD 50,000
JMC’s Contribution
USD 3.000 for installation of Bulk Meter
Type of Construction
• Supply water from the Polypathor tank @ 70
lpcd.
• A distribution network.
Connection Charges
 As against normal connection charges of USD
34.5 and only USD 1.5 per month is taken
as user charges.
Monthly user charges
(Pro- poor approach)  USD 2.5 per month.
25
Payback period
36 months
Achievement
The system is in operation.
CMWSS, Gwalior
Location
Ramaji ka Pura, Islampura, Subhash Nagar
Households
1200
Partner
CA with Gwalior Municipal Corporation (GMC)
Capital Cost
USD 68,000
UN-HABITAT’s Contribution
USD 45,000
GMC’s Contribution
USD 23,000 for laying of pipelines and
installation of bulk meters
Type of Construction
A ground level and elevated reservoir of 420
Kilolitres @ 70 litres per capita per day (lpcd)
at the highest level and laying of pipelines
Connection Charges
 USD 2.5 per household/ month for 8 months
Monthly user charges
(Pro- poor approach)
 USD 2 per month
Payback period
32 months
Expenditures such as Electricity
bills, telephone, conveyance to
the staff, stationary etc.
USD 62.5 per month
26
CMWSS, Indore
Location
27
Shiv Nagar, Sahin Nagar, Kamal Nagar,
Pawan Putra Nagar, Chowdhary Park colony
Households
1200
Partner
CA with District Urban Development
Authority (DUDA), Indore
UN-HABITAT’s Contribution
USD 45,000
DUDA Indore’s
Contribution
USD 22,500 for laying of pipelines and
installation of bulk meters
Capital Cost
USD 65,000
Type of Construction
An elevated reservoir of 420 Kl @ 70 lpcd
and laying of pipelines
Connection Charges
And
Monthly user charges
(Pro- poor approach)
 Against normal connection charges of
USD 62.5, USD 25 is being charged per
household in installments of USD 5 for 5
months per household
 USD 1.5 per month would be collected.
Payback period
46 Months
Achievement
The system is in operation
Operational Revolving Fund for Slums
Environmental Sanitation Initiative (SESI) in India
• Integrated approach to environmental sanitation
• Focus on community-led and people centred initiatives.
• Piloting Community-based projects on Urban Environmental
Sanitation in 63 slums covering 20,000 households (100,000
Population) in Bhopal, Gwalior, Indore and Jabalpur
• Partnership with Water Aid India and four Municipal Corporations
at a total cost of US$ 1.1 million
• Revolving Sanitation Fund for the Construction of Individual
Household Toilet in Urban Slums established
• Capital Cost investment under SESI Revolving Fund is Rs. 2.0
million (US$ 45000)
• Revolving funds for Individual Sanitary Toilets @ Rs. 2000 (US$
45) for 1000 units
28
Table 1: Sanitation Facilities developed and the beneficiaries in 4
cities of Madhya Pradesh
Component
Units
Demo toilet
Household toilet (Direct)
Household toilet (Levered)
Community toilet (Direct)
Community toilet (Levered)
– Municipal Corporation
Total
400
3,700
1000
15
5
Beneficiaries
(No. of People)
2,200
20,350
5,500
9,830*
2,500
40,380
Table 2: Common facilities provided in community toilets and the
beneficiaries
City
Gwalior
Bhopal
Jabalpur
Indore
Total
29
Community
Toilets
8
2
3
2
Seats
Male
30
11
16
10
Female
30
11
16
10
Bathing
Facility
Child
Friendly
seats
16
6
7
3
38
14
18
2
Beneficiaries
(No. of People)
4,300
2,400
1,380
1,750
9,830
UN-HABITAT Partnership with NHB
India on Micro-financing
• UN-HABITAT signed an cooperation agreement with
National Housing Bank of India for developing Revolving
Fund to Microfinance Water and Sanitation Services to the
Poorer Sections of Society in India
• Initiative commenced to leverage funds - UN-HABITAT’s
contribution of US$ 375,000 will leverage US$2.5 million
of NHB’s financial assistance towards micro-financing
water and sanitation.
• Focus on the provision of water
and sanitation facilities in the
housing and habitat projects
undertaken by NHB for low
income households.
30
UN-Habitat and NHB Project objectives
• Develop a Revolving Fund to microfinance water and
sanitation services to the poor in India.
• Demonstrate the approach of revolving fund for microfinancing the water and sanitation services through pilot
demonstration projects for the poor in India.
• Undertake research studies on various habitat related
issues including in microfinance and its role in addressing
the issues relating to habitat development for the
unserved and the underserved building sustainable
financing systems, etc.
• Organize workshops/seminars and other capacity building
activities at city/ state/ national levels in India for
promoting revolving fund for water and sanitation.
31
Financing Mechanism – Revolving Fund for
WATSAN Services
• Ensure end use of these revolving funds for water and sanitation
purposes for poor households
• Utilization of funds to provide concessional loans for NHB's housing
projects at national level
• Repayments received from projects will be credited back to the
Revolving Fund except for 10% of the amount for Technical Assistance
by NHB
• About 9500 households are expected to be benefitted under this project
• The approximate Water Supply and Sanitation Cost per Household
would be:
Cost of construction of toilet
Cost of drainage infrastructure
Cost of water supply connection
Fee to Municipal Corporation
Total
32
INR
4000
4000
3000
1000
12,000
USD
100
100
75
25
300
Governance Structure
• Projects to be implemented through MFIs/NGOs.
• A Steering Committee with officials from UN-Habitat and
NHB for project implementation and monitoring.
• NHB to receive project proposals from MFIs/NGOs.
• Project appraisal by NHB as per it's existing appraisal
standards under the guidance of the Steering Committee.
• NHB to disburse funds as per it's existing disbursement
procedures.
• A Revolving Fund at NHB to credit the repayments
received from various borrowers and on-lend the proceeds
for fresh projects
33
Way Forward......
• Few projects already under identification for 3000
toilets.
• 500,000 households expected to be covered for water
and sanitation in the first 5 years.
• Programme to provide water access to 2.5 million
poor people during the first five years.
• Emphasis on sustainable water and sanitation
programme for the poor.
• Programme to strengthen the UN-HABITAT - NHB
partnership by information through community based
organisations
34
Guidelines Revolving Sanitation Fund
for the Construction of Individual
Household Toilet in Urban Slums
• Prepared jointly by UWSEI Project and the UNHabitat.
• Aim at facilitating provision of individual toilet
facilities for creating open defecation free cities;
• The Government of Madhya Pradesh has issued
directives to all the ULBs of Madhya Pradesh to set
up Revolving Sanitation Funds.
35
Revolving Funds for CMWSS & SESI in
Madhya Pradesh
• Capital cost investment under CMWSS of Rs.
3.0 million (US$ 68000)
• Providing water connection to 1200 to 1500
households
• Total Payback period is 32 months
• Capital Cost investment under SESI of Rs. 2.0
million (US$ 45000)
• Revolving funds for Individual Sanitary Toilets
@ Rs. 2000 (US$ 45) for 1000 units
36
Issuance of Corporate Bonds in Nanjing,
PR China
• UN-Habitat conducted diagnostic study in the city of
Nanjing
• In support of WAC Programme, ADB provided
technical assistance to Nanjing Water Utility
• Long Term Capital Finance in Commercial Markets for
the issue of Corporation Bonds of RMB 2 billion (US$
25.9 million) for water and environmental projects of
Nanjing
37
Ratio of treated to untreated wastewater
discharged into water bodies (March 2010)
Source: UNEP/GRID-Arendal (http://maps.grida.no/go/graphic/ratio-of-wastewater-treatment1, a map by
38
H. Ahlenius, adapted from a map by H. Ahlenius [http://maps.grida.no/go/graphic/ratio -of-wastewater-
Managing Wastewater in Asia
• Around 80% of wastewater is discharged without treatment;
• For region’s health and environmental sustainability goals, following
four drivers are needed:
(1) Knowledge Drive
(2) Technology Drive
Developing a compendium of
solution options
Developing information briefs
on different technology options
Four drivers for promoting
Asia-Pacific Wastewater
Management
(3) Financing and
Incentives Drive
Preparation of Knowledge products
on innovative business lines for
sanitation
(4) Awareness and Advocacy
Drive
Conducting regional and in-country
sanitation dialogues
Bottom line is to market wastewater management and reuse as
an economically and financially viable business to substantially
39 accelerate both public and private investments
Wastewater as a Business
• Wastewater must be seen as a resource with potential financial returns
and opportunities for green employment;
• It is critical to move away from the high energy solutions—or no
treatment at all—toward something affordable and doable;
• Turn towards decentralized wastewater treatment systems, especially
in peri-urban and coastal communities and public markets;
• Organic fertilizer from ecosan toilets has turned farmers into
entrepreneurs; whereas Biogas digesters connected to sanitation
facilities produced cheap energy source in the region;
• Innovative financing mechanisms provide incentives for households to
invest in on-site sanitation systems and cities to invest in wastewater
management systems;
• Involve public-private partnership (PPP) for enabling
environment and economic regulatory framework to
reduce risks to the investment.
40
Partnerships for Managing Wastewater
• Household toilets only one component of the whole gamut of Sanitation ;
• Sanitation also includes wastewater conveyance, treatment, and disposal
or reuse, as well as maintenance of the assets and quality of service
delivery;
• Managing wastewater does need provision of technical or engineering
solutions besides understanding social, political and environmental
complexities attached to it;
• Business of sanitation requires a collaborative approach among the
government, private sector, civil society and communities, and within the
different levels of government from central to local administrations;
• Partnerships essential for pooling the efforts and resources of the
different partners to implement solution options;
• Forging effective and lasting partnerships for
achieving Goals of Wastewater Management.
41
41
www.unhabitat.org
Thanks for your
Attention. . . .
42

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