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Support for the Implementation of Environmental Policies and Neaps

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Support for the Implementation of Environmental Policies and Neaps OECD OCDE European Commission in cooperation with the OECD EAP Task Force Secretariat Project: SCRE/111232/C/SV/WW Support for the Implementation of Environmental Policies and NEAPs in the NIS Financing Strategy for Urban Water Supply and Sanitation Services in Rostov Oblast Final Report May, 2003 Published May 2003 Copyright 2003 by Europeaid, European Commission Enquiries concerning reproduction should be sent to the Tacis Information Office, European Commission, 170 Rue de la Loi, B-1049 Brussels This report has been prepared by the BCEOM-HALCROW GROUP LTD.-COWI Consortium. The findings, conclusions and interpretations expressed in this document are those of the Consortium alone and should in no way be taken to reflect the policies or opinions of the European Commission. Table of Contents Executive Summary vi 1 Introduction 3 1.1 Financial Strategy Concept 3 2 Existing Situation – WSSS sector 8 2.1 Method of data collection 8 2.2 Analysis of the current situation in the WSSS-sector 8 2.2.1 Existing situation – Water supply 8 2.2.1 Existing situation – collection and treatment of wastewater 16 3 Macro-economic and financial overview 21 3.1 Background 21 3.2 Macro-economic indicators 21 3.3 Public Finance of Rostov Oblast 22 3.3.1 Consolidated Oblast Budget 22 3.3.2 Housing and Municipal Services 23 3.3.3 Tariffs and affordability 24 4 EFS and Baseline scenario assumptions 27 4.1 FEASIBLE as a tool of supporting strategic solutions 27 4.2 Definition of the baseline scenario 28 4.3 Macroeconomic and financial assumptions 29 4.3.1. Population number of Rostov Oblast 29 4.3.2. Growth of the Gross Regional Product of RO 30 4.4 Assumptions related to the WSSS sources of financing 31 4.4.1 Budget financing of the Public Utilities and WSSS sectors 31 4.4.2 Payments of the consumers 31 4.5 Baseline scenario modelling results 32 4.5.1 Demand of financing of the WSSS sector 32 4.5.2 Analysis of the financing Gap 33 5 Development scenario 37 5.1 Definition of a technical development scenario 37 5.2 Assumptions of the Development scenario 38 5.3 Modelling results of the development scenario 40 6 Conclusions and recommendations 43 6.1 Financing gap 43 6.2 Strategy targets and implementation 44 6.3 Financial issues 45 6.4 Implementation of the recommendations 45 ANNEXES Annex I Macro-economic and public finance overview 47 Annex II Existing situation in the HMS sector 60 Annex III Environmental management in Rostov Oblast 79 Annex IV Map of Rostov Oblast 88 BCEOM HALCROW GROUP LTD.-COWI CONSORTIUM iii List of Tables Table 2.1. Main indices of water intake and consumption in RO (1996-2000, mln.m3 ).. 10 Table 2.2. Centralized water supply in the towns of Rostov Oblast (2000)..................... 11 Table 2.3 Reagents used for the water mains of the oblast:.......................................... 12 Table 2.4. Quality of drinking water in RO (micro-biological; 1997–2001) ...................... 13 Table 2.5. The quality of drinking water in RO (chemical; 1997-2001) ........................... 14 Table 2.6. Quality of surface water in recreation areas during the period of 2000-2001 14 Table 2.7. Irregular water supply and sanitation in the settlements of the RO................ 16 Table 2.8. Main indices of the wastewater flow in RO (1996-2001, mln. m3).................. 17 Table 2.9. Structure of WW discharge by economic sector (1995-1999; mln. m3/year).. 17 Table 2.10. Main indices of the pollutants in Rostov Oblast ............................................. 18 Table 2.11. Main parameters of the sewage networks of the HCS sector in RO.............. 18 Table 2.12. Share of industry in the wastewater flow to the WWTPs of RO (2001).......... 19 Table 2.13. Collection and treatment of wastewater in RO (2001) ................................... 20 Table 3.1 Consolidated Oblast Budget, 1997-2001, million RUR ..................................... 22 Table 3.2 Budget financing of HMS, 2001 ........................................................................ 23 Table 3.3 Financial results of HMS enterprises (2001)..................................................... 24 Table 3.4 Calculated and actual paid tariffs by the population (2001; RUR/p/m) ............. 25 Table 3.5 Average monthly tariff for HMS for RO population, December 2001 ................ 25 Table 4.1 Population growth forecast to the year 2015..................................................... 30 Table 4.2 Change in GRP growth of RO, 1999 - 2000, and forecast up to 2015.............. 30 Table 4.3 Expenditures of the consolidated budget of RO, 1999 - 2000,and 2015 .......... 30 Table 4.4 Budget financing of the sector of WSSS, 2001................................................. 31 Table 4.5 Revenues of the WSSS enterprises (including VAT), RO, 2001....................... 32 Table 5.1 Coverage of the population with centralised water supply by 2015............. 38 Table 5.2 Coverage of the population with centralised sewage system by 2015 ........ 39 Table 5.3 Required expenditures, 2001 - 2015, Scenario 2 (billion RUR)................... 41 Diagram 3.1 Household Expenditures by income level ................................................ 26 Diagram 4.1 Financing gap of the WSSS sector in the RO, 2001-2015 ........................... 32 Diagram 4.2 Total Accumulated Financing shortfall in the WSSS sector in the RO ......... 33 Diagram 4.3 Reduction of the Financing gap WSSS sector, 2001-2015 .......................... 35 Diagram 4.4 Accumulated Financing gap, 2001-2015...................................................... 36 Diagram 5.1 Financing gap in Development scenario for WSWW of RO, 2001-2015 ...... 41 BCEOM HALCROW GROUP LTD.-COWI CONSORTIUM iv List of Acronyms and Abbreviations BWWTP Biological wastewater treatment plant BOD Biological oxygen demand DANCEE Danish co-operation for environmental protection in the countries of Central and Eastern Europe DSW Domestic Solid Waste GDP Gross domestic product GRP Gross regional product HMS Housing and Municipal Services WS&S Water supply and sanitation WSWW Water supply and wastewater SS Sanitation services EBRD European Bank for Reconstruction and Development M&HU Municipal and Housing utilities MS Municipal services MSW(M) Municipal Solid Waste (Management) COB Consolidated Oblast Budget LTP Local Treatment Plants Lcd Litres per consumer per day IBRD International Bank for Reconstruction and Development, including World Bank VAT Value Added Tax N (R)EAP National (Regional) Environmental Action Plan EIA Environmental impact assessment WWTP Wastewater treatment plant OECD Organisation for Economic Co-operation and Development MAC Maximum allowed concentrations PCE Project Cost Estimate RO Rostov Oblast NIS New Independent States FeS Feasibility Study FS Financing strategy FEASIBLE Model for calculation of costs and financing CEE Central and Eastern Europe BCEOM HALCROW GROUP LTD.-COWI CONSORTIUM v Executive Summary A BCEOM-HALCROW GROUP LTD. COWI Consortium in co-operation with the Ministry of the Economic Development of the Russian Federation, Ministry of Natural Resources of the RF and Oblast Administrations is implementing the TACIS project “Support for the implementation of Environmental Policies and NEAPs in the NIS”. Within the framework of the Russian component of the project, it has been agreed with the Government of Rostov Oblast that a Financing Strategy (FS) for the Water Supply and Sanitation Services (WSSS) sector of the municipal economy of Rostov oblast will be developed. In addition, the project team will support Rostov Oblast in developing a EFS on municipal solid waste. A special Project Advisory Committee was formed in order to define the targets used in the scenarios for strategy development. During the development of the Financing Strategy a methodology was used that allowed developing a long-term (5-20 years) financing strategy for the running and capital costs of the sector, including a programme for priority capital investments. The programme should be realistic and take into account the necessary and available financing sources. A computerised model FEASIBLE was used when preparing the FS allowing quantitative estimates of operation and maintenance costs as well as for the capital costs, required for normal operations within the sector. Two scenarios are developed: 1) the Baseline scenario (no-change) and 2) the Development scenario, which includes policy packages for sector development. Analysis of the scenarios point in the direction, which set of policy measures leads to attracting additional funds in order to close or decrease the financing deficit. Existing Situation The sector of water supply and sanitation services in Russia has been suffering from insufficient financing for a long time. As a result the quality of the service is decreasing and this process will continue if the situation with financing will not improve. The main problems are the following. ⇒ Water losses are 20% or higher, often caused by frequent breakdowns in the distribution networks. The general technical condition of the networks is poor. A big part varying between 40 and 60% needs (urgent) replacement. ⇒ Deteriorating drinking water quality. The existing state of potable water supply for the population of Rostov Oblast does not comply with federal sanitary and epidemiological norms due to overloading and absence of modern methods of water preparation and disinfection at the treatment facilities of the water mains. ⇒ The unsatisfactory sanitary and technical condition of the water distribution and sewage networks
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