Financial Management of Tamil Nadu Water Supply Program

Financial Management of Tamil. Nadu Water Supply Program – A Contrarian Experience Vibhu Nayar. I. A. S Project Director World Bank Assisted TNRWSP & IAMWARM Projects Tamil. Nadu Visit : www. cmgtn. com

TAMILNADU STATE PROFILE Total Area : 130, 059 sq. km Administrative units : 31 Districts Population : 62. 406 million Rural : 36. 180 million Urban : 26. 226 million TWAD BOARD – Exclusive mandate to provide drinking water and drainage across the state.

Rural Water Supply Coverage - Marginal Cost of Supply Figure 2. 4. 2. 1 (b)Projected Cost (2002 -03 Prices) 15 Rs. Lakh/habitation 10 prices) 0 2003 -04 Cost in constant prices in 1993 -94 Cost 5 2004 - 2005 - 2006 - 2007 - 2008 2009 --10 Projected Cost in 2002 - 03 prices The cost of covering a habitation has increased sharply from Rs. 1. 45 lakhs in 1991 -92 to Rs. 8. 51 lakhs in 2002 -03. The increase in cost is due to use of more expensive technologies such as power pumps and CWSS.

Change Management Initiatives in Water In 2004 TWAD Board began a self critical and open process of exploring shifts in – Roles and functions Relationships Values Aiming at - • Attitudinal transformation • Perspective change at Individual Organization Institutional levels

Change Management Project in 145 Village Panchayats covering 455 habitations across the state was taken up by the CMG-TWAD during the year 2005 as the experimental workspace within which to test and implement the concepts learnt through the consultative process of the change management initiative. Main focus of the pilot were: • Community involvement in planning& implementation • Targeting of poor villages • Sustainable and cost-effective investment solutions • Conservation and recharge of water

External Evaluation A research was undertaken on the impact of user charges on water management practices. Randomized Trial designed by Poverty Action Lab, Department of Economics, M. I. T. , Cambridge & Study done by Pragmatix, India and UNICEF-India.

Choice of Technology & Cost effective solutions Cost range per household (in $) < 25 • In 69% of Projects, low cost solutions was the preferred option. • Rehabilitation of old schemes was as high as 30%, extension of pipelines to serve new areas 7% and source augmentation 10%. Percentage 41 26 -50 34 51 -75 15 76 -100 5 > 100 5 Total 100 • The most significant impact is the reduction in the capital cost per household by 40% in the project villages. The cost per household is less than Rs. 1000 ($ 22) in 41% of schemes. • In the regular budget schemes the average cost per household was about Rs. 4436 (on habitation basis) ($ 100) whereas in the project the average cost is only Rs. 1555 (on village basis) ($ 35).

Total Community Water Management (TCWM) Achievements Community Involvement: A cash contribution of 14. 20 million by 50, 896 HHs Conservation and Sustainability Construction of 45 recharge structures; Revival of 109 traditional water bodies; More than 12000 tree saplings planted; Reaching the Unreached Dalit (SC) & Women Groups had 72% & 75% higher satisfaction & ownership with the interventions by the Engineer. Last Mile Targeting 65% of the Schemes taken up are in SC/ST and BPL Villages. 42% of these Villages had the SC/ST or Women Presidents.

Community Participation Village Water Committee Perspective Committee Functioning: Meets regularly, dalit and women members attended, one or more decision implemented Decision – Making: Democratic; All members able to discuss and decide on most issues 72% 12% 76% 12% Involvement in Dalit areas : Choice of Solutions discussed with Dalits 60% 9% Implementing Decision: Water Committee has implemented one or more of the decisions. 82% 12% CMG Settlements Control Settlements

Conventional wisdom The conventional wisdom that (higher) user charges leads to greater efficiency of service delivery, hence better collection, overall greater conservation & user satisfaction This was tested through a randomized experiment, where 105 VPs were randomly divided into three groups and assigned a collection target based on the portion of O&M costs to be covered- viz. , 0%, 25% & 100%.

Reduction in O & M Expenditure Adoption of appropriate technology options, ensuring timely maintenance & thereby reducing potentially expensive replacements in the future, regulating hours of pumping & distribution, maintaining both adequate quality & quantity, all had an effect in the nature and functioning of water systems at each village. This had a major impact in reducing O&M Expenditure

Improved Revenue Irrespective of the target, the VPs have achieved reduction of over 21% in their O&M costs through better system management and as well as more than 57% higher collection on tariff which was the result of over all improved system management and higher satisfaction level. VP User Charge Collection Targets (% of O&M Exp. ) % Change in O&M revenue 0% + 57% 25% + 60% 100% +73%

Voluntary Imposition Of User Charges While the Government of Tamil Nadu have not imposed mandatory user charges for supply Number of VPs Imposing PF user charges voluntarily % of VPs imposing PF user charges voluntarily 0% 12 35% 25% 10 29% 100% 8 24% VP User Charge Collection Targets (% of O&M costs) through public fountains (PFs), several of the 105 VPs in the pilot TNRWSP areas imposed PF tariffs on their own. The largest proportion of VPs (12 out of 34 or 35% ) that imposed user charges are those without a collection target, followed by VPs with a 25% target (10 out of 35 or 29%), and those with a 100% target (8 out of 33 or 24%).

Water Conservation VP User Charge Collection Targets (% of O&M Exp. ) Action taken to reduce use of piped water Conserve Water Type of actions taken by households in % Report / Use other Store Use waste fix leaky water less water for taps sources water gardens / cattle 0% 48% 17% 18% 20% 25% 54% 15% 17% 20% 100% 48% 12% 15% 22% Invariable of the treatment, the VPs have achieved conservation of water in different forms over 48% which has ultimately reflects in the O&M cost reduction as a indicator of higher awareness generated and followed.

Consumption level VP user charges Targets (% of O&M costs) % Increase or decrease in consumption (in lpcd) between Nov 05 & Feb 06 % 0% 25% 100% - 9. 54 +7. 63 + 9. 91 Reduction of water consumption was seen in the VPs under 0% of the treatment, more than 75% of the households reported that even in case of problems faced in water supply was attended the next day or within a week showing a better maintenance of systems.

Better Management VP User Charge Collection Targets (% of O&M Exp. ) No proble ms faced 0% Problems with Water Supply distribution Timings Leaks & Frequent breakdo wn Supply hours too short unsuitab le 90% 2% 1% 2% 5% 25% 85% 2% 1% 10% 2% 100% 84% 4% 2% 8% 2% Low pressure • Invariable of the treatment, more than 84% of the households reported that they do not face any problems in water supply daily such as breakdown, shorter & unsuitable timings and leaks & low pressure, and the system management is better. • Invariable of the treatment, more than 75% of the households reported that even in case of problems faced in water supply was attended the next day or within a week showing a better maintenance of systems.

Satisfaction with Water Supply Delivery Invariable of the treatment, the households in VPs have recorded a higher satisfaction level in terms of adequate water supply that resulted through better implemented community decisions and management VP User Charge Collection Targets (% of O&M costs) 0% Satisfaction with functioning of Water supply More satisfied 76% Less satisfied No response 6% 18% 25% 79% 4% 16% 100% 78% 5% 15%

The myth exposed: User opinion on WS management

Conclusion • The study indicates that there is hardly any relationship between higher user charges and better • Service delivery • Conservation • Water Governance On the contrary When the community understands importance of water as a resource and Participates in conservation & management-. performance and service delivery improves. • The study conclusively and factually exposes the fallacy underlying the conventional wisdom in relating to user charge Therefore • Policy makers and professionals need to rethink the premise for prescribing unbridled Technology, Investment and User charges in water supply projects

THANK YOU Vibhu Nayar I. A. S On behalf of Change Management Group, TWAD Board, Chennai, INDIA

POLICY IMPLICATIONS Three major policy implications of the findings of this study • Focus on community management for better service delivery • Fixed versus flexible O&M collection targets • Non-prescriptive policy