Municipal Infrastructure Support Programme An EU funded project

●●● Building together for the future Municipal Infrastructure Requirements and Priorities in the Municipal Water Services

OVERVIEW ANALYSIS

15th February 2011 Draft CRIS 223 – 292 (08/SER01/13/21)

A Project implemented by

Municipal Infrastructure Support Programme An EU funded project

●●● Building together for the future

A Project implemented by

Municipal Infrastructure Support Programme An EU funded project

●●● Building together for the future

Koste Glavinica 2/3 11000 Belgrade +381 11 369 09 87 Telephone +381 11 369 09 95 +381 11 265 03 85 Fax [email protected] E-mail www.misp-serbia.rs Internet

Municipal Infrastructure Requirements and

Document title Priorities in the Municipal Water Services Overview Analysis Document short title Municipal Water Services Priorities Status Draft Date 15th February 2011 Project name MISP Programme Project number CRIS 223 – 292 (08/SER01/13/21) Client Reference number

Drafted by Miroslav Cvjetkovic

Checked by Date/initials check …………………. …………………. Approved by Date/initials …………………. ………………….

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Contents

1. INTRODUCTION 5

2. STATE OF THE WATER SECTOR IN SERBIA 7

3. NATIONAL SUSTAINABLE DEVELOPMENT STRATEGY 16

4. WATER LAW 19

5. WATER RESOURCES DEVELOPMENT MASTER PLAN 20

6. ALINGNMENT WITH THE EU REGULATOTY FRAMEWORK 23

7. BASIC STRATEGY AND REQUIRED INVESTMENT 26

8. SOURCES AND METHODS OF WATER SECTOR FINANCING 31

9. WASTE WATER TREATMENT PLANTS IN SERBIA 40

10. CONCLUSIONS AND RECOMENDATIONS 45

Annexes

ANNEX 1 FUNDING OF WATER MANAGEMENT

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●●● Building together for the future List of Figures

Figure 2.1 Public water supply priorities Figure 2.2 Waste water treatment plants Figure 2.3 WWTP priorities Figure 8.1 Water Supply Regional Systems; Existing status Figure 8.2 Water Supply Regional Systems; Future status Figure 8.3 WWTP in Serbia – Existing status Figure 8.4 WWTP in Serbia – Future status, priorities

List of Tables

Table 2.1 Operational costs in municipal water supply and wastewater disposal operations Table 2.2 Estimated value of the water infrastructure (M €) Table 7.1 Capital investment for the next 15 years (M €) Table 7.2 Annual projections (M €) Table 7.3 Total funding needed for operations and development Table 8.1 Sources and levels of funding for water supply and water protection development Table 8.2 Investment projection (M €) Table 8.3 Program of construction, reconstruction and maintenance of water management facilities Table 8.4 Complex regional water supply systems Table 8.5 Regional water supply systems Table 9.1 WWTP in serbia – water directorate priorities Table 9.2 WWTP in serbia – to be constructed by local governaments Table 9.3 WWTP – slap scoring Table 9.4 WWTP – WRDMP priorities

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Municipal Infrastructure Support Programme An EU funded project

●●● Building together for the future

4 15th February 2011 Municipal Water Services Priorities Draft A Project implemented by

Municipal Infrastructure Support Programme An EU funded project

●●● Building together for the future

1. INTRODUCTION

MISP’s Terms of Reference (ToR) calls for an “Analysis of Municipal Infrastructure Requirements and Priorities, including alignment with regional strategies and sector Operational Programmes” (Activity 2.1.1 in the ToR). The task includes a review of the regional strategies and master-plans and assess the status of the Operational Programme Environment. As the ToR notes, although Serbia is not yet a candidate for EU accession the Government “is developing a number of Operational Programmes as a framework under EC rules for access to future EU funding.’’ The Republic of Serbia is currently developing OP’s for the mentioned sectors:  Transport;  Environment;  Regional competitiveness (a.o. Industrial Zones);  Human Resources Development.

The Republic of Serbia has developed and partly adopted a series of national strategies and master plans for the development of the country  solid waste,  water supply,  industrial zones and  tourism.

This report addresses infrastructure requirement and priorities in the municipal water services.

The Terms of Reference calls for comments and recommendations regarding  Missing strategies that would need to be developed swiftly to enable municipalities to better frame their infrastructure needs;  Adequacy of these national plans in the perspective of an accession of Serbia to the EU;  Alignment of the recommendation of these plans with the EU regulatory framework (EC regulations and directives);  Opportunity for regionalisation of services that could allow an optimisation of service quality (especially in the water, wastewater and solid waste sectors);  Opportunity for grouping in “investment heavy” infrastructure that may need to be addressed in first priority as soon as Serbia becomes a EU candidate country; and  Possibility of enabling the bundling of smaller projects into larger schemes.

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●●● Building together for the future This Report reviews the state of municipal water services in Serbia and address the above issues.

On 9th November of 2010 European Commission published the “SERBIA 2010 PROGRESS REPORT” (Commission Staff Working Document). In that document, in chapter 4.2.3. Environment, there is a paragraf on water quqlity, relating to the topic:

... There has been progress on water quality. A new law on water was adopted. Water management is to be financed by the national and the Vojvodina provincial budget, as well as by water fees, concession fees and other funds. Dissuasive water pollution fees are to be paid to the Environmental Protection Fund and to be used for the construction of waste water treatment plants. However, there is still no system to monitor nitrate concentrations in and contamination of groundwater. The wastewater treatment infrastructure throughout the country needs upgrading. The Water Directorate within the Ministry of Agriculture, Forestry and Water Management remains to be strengthened. The administrative capacity of the water directorate was reduced. ...

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●●● Building together for the future 2. STATE OF THE WATER SECTOR IN SERBIA

2.1. Water supply

Municipal water supply includes the provision of high-quality water for households and other users as well as industries which require high-quality water for production processes. Water supply is the highest-priority task of the water sector, and consequently capital investment was the highest in this area. The quality of water supply achieved is assessed by means of numerous indicators which, in addition to water quality, include: the number of inhabitants, the nature of the water supply (full or partial - minimum one tap per household), specific water consumption (liters per capita per day), the methods by which water supply is provided to the population which has no access to contemporary water supply systems, the industries which rely on the municipal water supply, and the total and specific high-quality water consumption by large communities and villages. Close to 80% of the population has access to water supply systems. However, 10% of the population does not source water from an organized water supply system. Water supply status differs by region, with regard to both available infrastructure and water supply reliability (over time and in terms of quantity and quality). This is the result of varying population density, level of economic activity, available water source capacity, network leakage losses, and so on. Both groundwater and surface water are used for municipal water supply. Surface water is abstracted from main streams and river reservoirs (approximately 4.5 m3/s and 1.5 m3/s, respectively). The overall capacity of groundwater sources is about 714 million m3/year, most of which is provided by alluvial sources. The overall rate of groundwater abstraction for municipal and industrial water supply is roughly 500 million m3/year. The annual rate of combined groundwater and surface water abstraction is 700 million m3. The average specific water consumption in Serbia totals approximately 350 liters per capita per day (400 liters in urban areas and 250 liters in rural areas), of which 45% is used by the general population and 25% by industry and public institutions. The remaining 30% constitutes water treatment and network leakage losses. Water supply is under the jurisdiction of local governments, which entrust this task to public utilities charged with providing high-quality water supply for the general population and other users. Significant funds, as shown in Table 1.1, are required to perform the task using existing water supply systems.

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●●● Building together for the future Table 2.1. Operational costs in municipal water supply and wastewater disposal operations Operation and Depreciation Total annual Segment maintenance (M€/year) (M€/year) (M€/year) Water supply 145 138 283 Wastewater disposal 65 59 124 Regional systems (dams and reservoirs) 17 7 24 TOTAL 227 204 431 Source: Instruments for Water Sector Development, J. Cerni, Economics Inst, 2006

Typical water use issues include the following:  Even though coverage is not complete, municipal water supply systems perform quite well in most cities. 77% of the Serbian population have access to public water supply systems, and another 15% have partial access to water supply; they use 22 m3/s. Water quality in some regions is not up to standard and several Serbian cities experience water shortages during the summer months;  High-quality water is misused to a significant extent (e.g. for watering gardens);  In some industries, obsolete technologies and processes frequently use more water than would otherwise be required;  Maintenance of infrastructure for the use of water has been rather unsatisfactory in the past, resulting in higher water losses and lower quality of service.

2.2. Waste water collection and treatment

Development of wastewater systems lags far behind that of water supply systems. Approximately 46% of Serbia's population has access to sewerage. There is a sewerage network slightly longer than 7,000 km and it includes about 1100 km of main sewers. Roughly 450 million cubic meters of wastewater are collected every year. The level of wastewater treatment is very low. Some twenty cities have municipal wastewater treatment plans, and their installed capacity is about 1,000,000 EP. Wastewater treatment plants are also available in parts of cities, tourist facilities and vacation home areas, but for most of these, reliable performance and efficiency data are not available. There are more than 150 municipal and industrial wastewater treatment plants in Serbia, but less than 20% are in operation. The contribution of these plants to water quality protection is also very low, especially since most treatment processes used can be classified as pre- treatment of industrial wastewater. A major problem faced by these plants is a lack of adequate maintenance, even when the plants are relatively new. Based on Table 1.1 indicators, operation and maintenance of municipal wastewater collection systems and treatment plants requires an annual outlay of some 124 million €, a level which cannot be met by current water tariffs and service charges.

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●●● Building together for the future Wastewater treatment, which is an important component of water quality protection, is probably the most neglected segment of the water sector. Inadequate investment, which has led to the current unfavourable conditions is primarily a consequence of this country's economic situation. Inadequate fees for wastewater discharge into recipients, as well as non-compliance with regulations which mandate construction of treatment facilities, have led to neglect of the entire water protection segment. Construction of wastewater treatment plants should be encouraged by assessing wastewater discharge fees which are higher than wastewater treatment costs. Law enforcement mechanisms must also be provided.

2.3. Investments in the water sector

The value of the existing water infrastructure in Serbia, based on construction value, is estimated at 15.5 billion €.

Table 2.2. Estimated value of the water infrastructure (M €)

Segment Total % Water supply 5,850 37.9 Wastewater disposal 2,570 16.6 Dams and reservoirs 1,200 7.8 Irrigation 370 2.4 Drainage 580 3.8 Flood control 2.640 17.1 DTD WS 1,245 8.1 Erosion and torrents 975 6.3 TOTAL 15,430 100.0 Source: Instruments for Water Sector Development, J. Cerni, Economics Inst, 2006

Most of the investments were made in water supply and wastewater disposal, and their share of the total estimated value of the infrastructure is roughly 55%. However, this percentage is actually higher since dams and reservoirs also service water supply systems. The water sector enjoyed the highest level of investment while it was being financed by various funds. In addition to water contributions, these funds were replenished from personal income contributions, additional retail sales tax, and state budget grants, which constituted permanent and reliable sources of revenue.

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●●● Building together for the future 2.4. Legislation

Laws which directly address water issues or define parameters which affect the field of water, include:  The Water Law, Off. Gazette, No 30/2010  A group of environmental laws  The Law on Assets Owned by the Republic of Serbia, Off. Gazette, No 44/1999  The Concession Law, No 25/1997  The Planning and Construction Law, No 72/2009  The Law on Public Companies and Public Interest Activities, No 25/2002  The Local Self-Governance Law, No 9/2002  The Public Utility Law, No 42/1998  The Water Master Plan, 2001 Following are comments on several laws which are especially relevant to the water sector.

The Water Law

The Water Law is the most important law which governs the field of water. It addresses water protection, protection against the adverse effects of water, water use, management of waters as goods of general interest, conditions and procedures for the performance of water services, organization and funding of water services, and monitoring of Law enforcement.

The Environmental laws

Four laws currently govern the environmental area: the Environmental Protection Law, the Strategic Environmental Impact Assessment Law, the Environmental Impact Assessment Law, and the Law on Integrated Environmental Pollution Prevention and Control. The Environmental Protection Law defines the water protection segment as follows:  Water may be used and wastewaters may be discharged into waters following appropriate treatment, in a manner and to the level which will not constitute a threat to natural processes or to the renewal of water quality and quantity, and which will not lessen its potential for multi-purpose use;  Water protection and water use are implemented within the framework of integrated water management, through measures aimed at: conserving surface waters and ground waters, and their reserves; and conserving their qualities and quantities, and protecting their channels, shores, banks and catchment areas pursuant to a separate law;  Water protection measures must prevent or restrict the introduction of hazardous, waste and other harmful substances into waters, and ensure surface water and groundwater quality monitoring and testing, as well as wastewater quality and treatment efficiency monitoring and testing.

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●●● Building together for the future This Law stipulates that zoning, urban and other plans must provide for measures and conditions which will be conducive to the enhancement of natural resources and goods, and of the environment as a whole. It requires water services and utilities to prepare environmental impact assessments, and the water protection segment to additionally prepare action plans. The Environmental Impact Assessment Law defines which projects are subject to an environmental impact assessment. The Strategic Environmental Impact Assessment Law stipulates that water management plans and programs are subject to strategic environmental impact assessments. The Law on Integrated Environmental Pollution Prevention and Control defines the conditions which must be met and the procedures which must be followed in issuing integrated permits for existing and new facilities and activities which might have a negative impact on human health, the environment, or material goods.

National Programme of Environmental Protection

The National Programme for Environmental Protection of the Republic of Serbia 2010- 2019 (NPEP), was adopted in January 2010 and will be implemented through an Action Plan adopted by the Government for the period of five years. In addition, the Government is to submit every two years the NPEP progress report to the Parliament. The National Programme of Environmental Protection lays down a set of objectives for Government policy over 2010-2019 at three levels: short-term, continuous and medium-term.

The NPEP identifies the Government’s goals for water management including:  To ensure that drinking water in settlements meets quality standards of the Drinking Water Directive 98/83/EC, and to extend the decentralised water supply to selected rural areas with the most unsatisfactory water quality;  To improve water quality in water courses by reducing discharges of untreated industrial and municipal wastewater;  To provide wastewater treatment in agglomerations with organized sewerage system that have significant impact on the recipient waters, especially in sensitive areas;  To upgrade or renew operation of the existing municipal wastewater treatment plants;  To extend sewerage system to cover 65% of population by 2019 - priority should be given to agglomerations with more than 100,000 inhabitants, except for agglomerations that discharge wastewaters directly into large watercourses (the Danube, the Sava), where WWTP will be finished after 2016 and cities in sensitive zones (proximity to water supply sources).

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●●● Building together for the future 2.5 Water Directorate

Allocation and use of funds from Budget of Serbia (Water Fund) showing the strategic goals of Integrated Water Management and it is based on the following criteria:  water quality and water protection;  the level of service in water supply sector;  the level of savings and benefits (water, resources, etc..)  the degree of protection from the harmful effects of water;  the completion of water management facility and works;  the participation of more investors in financing of the water facilities and works;  the completeness of functional and technological system;  cost effectives of construction, operation and maintenance of water management system

Source: The Rule Book on the Conditions and Criteria for Award and Use of Funds and Method of Funding of the Water Management Affairs ("Off. Gazette, no. 27/2005 and 31/2005)

This ordinance specifies the conditions and criteria for allocation and utilization of funds provided by the law for financing the water management activities of general interest. The funds are allocated by the Ministry of Agriculture, Forestry and Water Management - Directorate of Water at the request of investors. The requests are submitted after the publishing of the “Program of construction, reconstruction and maintenance of the water management facilities” in the Official Gazette every year.

The presentation „Overview of Water Management in Serbia“, delivered by Mr. Aleksandar Prodanović, director of Water Directorate in the Ministry of Agriculture, Forestry and Water Management in June 2010 describes the situation in the municipal infrastructure requirements and priorities in two main aspects:  public water supply and  urban wastewater collection and protection of water from pollution

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Current status:  Generally good in most cities.  Certain areas do not have adequate access to water supply.  Drinking water quality issues: a large portion of Vojvodina, the Morava River Valley, parts of Central Serbia, and several small municipalities.  Groundwater is over-exploited in Vojvodina.  Unbilled water/distribution network losses exceed acceptable levels.

Required activities:  Construction of a number of regional water supply systems (Banat, West Bačka, Rzav, Selova, etc.).  Upgrading of maintenance of existing groundwater sources.  Reduction in water supply system losses.

Required funds:  1.5 to 2 billion €

Problems:

1. Water supply for Banat 2. Water supply for West Bačka 3. Central Serbia - Rzav Regional System (extension) 4. Water supply for the Morava River Valley 5. Selova Regional System (pipeline) 6. Prvonek Regional System (extensions to Bujanovac and Preševo)

Source: Overview of Water Management in Serbia, 2010 Figure 2.1 Public water supply priorities

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Current status:  Worst segment of the water sector.  Low percentage of polluters with wastewater treatment plants (WWTPs).  Low percentage of existing WWTPs which are operational.  Insufficiently developed public sewerage systems (50% of the population connected).  Solid waste dominantly disposed of at undeveloped dumpsites.

Required activities:  Extension of sewer networks.  Prioritized construction of WWTPs for all communities larger than 2000 PE.

Required funds:  4.5 to 5 billion €.

Source: Overview of Water Management in Serbia, 2010 Figure 2.2 Waste water treatment plants

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Source: Overview of Water Management in Serbia, 2010 Figure2.3 WWTP priorities

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●●● Building together for the future 3. NATIONAL SUSTAINABLE DEVELOPMENT STRATEGY

On May of the year 2008 Government of Serbia adopted The National Sustainable Development Strategy. The objective of the Strategy is to establish a balance between the three key factors of sustainable development: economic growth and technological progress, social development and environmental protection with reasonable use of natural resources, putting them in one adequate institutional framework.

The Strategy in fifth chapter, related to environment and natural resources, describes the priorities and objectives in management sector:

V. ENVIRONMENT AND NATURAL RESOURCES 1. Natural Resources 1.2. Water

Republic of Serbia has sufficient water for meet their needs, but only if they are rationally used and protected from accidental or intentional contamination. The complex geological structure and favorable hydro-geological relations made the territory of the Republic of Serbia rich in mineral and thermal waters. Density of water and diversity in their physical and chemical characteristics of the Republic of Serbia are the richest on the continent. Nearly 1,200 occurrences of water are registered, predominantly wells in Vojvodina, and springs south of the Sava and Danube rivers. ... Water supply is a priority in the water sector. The investments in this area was the highest. Today in the Republic Serbia, excluding Kosovo, 63% of population is connected to the public water supply system, which is not enough, while the 14% of the population is covered by local water supply systens. Further development of public water supply systems is priority. Public water supply systems use about 500 million m3 per year from the groundwater sources, and about 200 million m3 per year from the surface water sources, out of which the population uses about 45%, industry and public consumption about 25%, while the remaining 30% is the internal consumption and network losses. Average specific water consumption per capita in the Republic of Serbia is about 350 litres per day (around 400 in cities and around 80 litres per capita per day in villages). The industry is supplied mainly by their own system for withdrawal and transport of water, developed by the users and owners. Development of sewerage systems is lagging behind the development of water supply. The 46% of the population is covered with sewerage. Urban waste water treatment plants, with a total capacity of about 1,000,000 equivalent inhabitants, were built in 28 settlements, but in the year 2006 there were only five of them in operation. Only 5.3% of the municipal waste water is discharged into recipients with adequate treatment. Over 50% of the total water pollution is the diffuse sources of pollution.

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75% without WWTP 13% biological treatment 6% biological treatment, under construction 5% mechanical treatment 1% mechanical treatment, under construction

Source: Agency for Environmental Protection, 2007. Figure 18 Municipalities with a wastewater treatment plant (WWTP). ... The key problems in the water sector are as follows:  transition regulation is still dominant in relation to standardized regulations, which aggravate the investment cycle in the economy, and water sector,  the legislation is not fully harmonized with the modern European trends and standards, lack of institutional and other capacities,  the funding for water management is not adequate, the prices of water and services are low and thy are not economic incentive,  the connectivity to public water supply systems is not sufficient,  the water consumption is irrational and the water quality in some areas poor,  the water quality in some streams is bad, the water protection and protection of water is not sufficient.

Sustainable development implies the optimal water management, conservation and improving of water quality and their rational use.

Sectoral objectives of sustainable use of water resources include: 1) harmonization of the national water related regulations with EU legislation, particularly the implementation of the Water Framework Directive; 2) increasing the availability of quality water by increment of the connectivity of the population to public water supply systems; 3) water losses reducing in the water supply systems; 4) protection and improvement of the water quality in the reservoirs used for water supply; 5) water quality improvement in rivers, primarily by construction of waste water treatment plants, by efficient operation of existing ones and controlled use of fertilizers and pesticides; 6) rehabilitation and remediation of polluted water streams;

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●●● Building together for the future 7) establishment of the economic valuation of water and services, using of the "polluter pays" and "user pays" principles; 8) appropriate institutional and territorial organization water sector; 9) determination of the legal status and ownership transformation of the water management companies; 10) solving the problem of municipal water utilities by a public-private partnership for larger cities and by national investment activities for small towns; 11) introduction of the regulatory functions; 12) ensuring of the public participation and involvement of users in all phases water management.

The priority task is adoption of the new Water Law, other laws and appropriate sub laws, which ensure compliance with the EU Framework Water Directive and other, water related directives, as well as creating economic preconditions for its implementation. The greatest need for the introduction of regulatory functions in the water sector exists in the field of public water supply and sewerage services, and it can be realized by: setting of the standards and tariffs in public services, measurement and control of enterprise performances and application of penalties, primarily by network losses reduction control and investing of water tariffs increments in the infrastructure reconstruction. It is necessary to develop special plan for water protection, with special part of the plan related to the waste water treatment plants construction after the completion of polluters cadastre (register), the regulations and the standards.

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●●● Building together for the future 4. WATER LAW

Water law (Zakon o vodama Republike Srbije, 2010) regulates the legal status of waters, integrated water management, the management of water constructions and water land, the method and sources of funding of water sector activities and other matters of importance to water management. The strategies and programs delivered in the areas of spatial development, sustainable development, sustainable use of natural resources and assets, and environmental protection, as well as other strategic documents, shall be mutually harmonized. One of the most important water management planning documents is The Water Management Strategy for the territory of the Republic of Serbia. It is a planning document which establishes long-term directions for water management. The Strategy shall contain:  An assessment of the present state of water management; o The status of water resources and the water regime; o The current status of water constructions and systems; o Current legal and institutional solutions.  Water management objectives and guidelines; o Water management and sustainable development objectives; o Water regime maintenance and enhancement guidelines; o Priorities consistent with sustainable development; o Guidelines for water use and water protection; o Guidelines for the implementation of international agreements pertaining to water management; o Basic monitoring and information system guidelines.  Measures for the achievement of set water management objectives; o Planning and implementation of plans; o The funding method; o Preparation of capital projects and investing; o Maintenance; o Oversight.  A projection of the development of water management. o The water demand for different uses; o A framework water balance; o Activities, funds, and deadlines for the objectives and priorities; o Funding for the erection or reconstruction of water systems and other activities; o Economic policy measures, sources of funding, and the rate of investment to achieve the water management objectives; The Strategy shall be delivered by the Government for a period of at least ten years, when the identified solutions shall be reviewed and revised.

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●●● Building together for the future 5. WATER RESOURCES DEVELOPMENT MASTER PLAN

The Republic of Serbia Water Resources Development Master Plan – WRDMP (Vodoprivredna osnova Republike Srbije, 2001) is a strategic document that establishes basic strategy for water use, water protection and protection from water on territory of Republic of Serbia. In order to meet the growing demand and to provide a higher coverage by water supply systems, the document recommends the continuation of development of the water supply systems, which was initiated during the 1980s, in those regions where the capacities of local sources are exceeded. It recommends to finalize construction of all accumulation lakes where construction started (for instance, Stubo Rovni, Prvonek, Selova). It also recommends comprehensive activities regarding the protection, melioration and renewal of ground water sources, induction of artificial filling and use of modern treatment technologies where necessary. The strategy plans that by 2012 the sewer network covers 82 % of the population. Revenues from water supply services at present do not cover the operative costs. A price reform needs to be implemented and the collection rate increased in order to resolve financial issues. In this respect, it is very important to protect poor categories of population and provide adequate subsidies for those categories which will not be able to take such a burden. The main strategic objective of the Water Resource Development Master Plan is: Maintenance and development of the water regime that ensures the most favourable and the most complete technical, financial and ecological solutions for unique management of water, protection from adverse water activity, water protection and water use. Taking into account natural characteristic of Serbia region, spatial and timely distribution of water resources and its users, as well as interaction among water use, water protection and protection from water, there is a must for integrated, unique, complex and rational management of the water resources on entire territory of Serbia, from the point of view of all mentioned aspects, and as a component of integrated regulation, use and protection of all resources and potentials on Serbia territory Some of the objectives as components of the main strategic objectives are:  integrated, complex, rational and unique use of water resources the territory of Republic of Serbia in all areas - from water supply for inhabitants, to fulfilling needs of other consumers, i.e. determination of optimal configuration and parameters for future systems for integrated use, regulation and water protection in certain regions as well as in Serbia as a whole.  insurance of protection and improvement of water quality to a level for undisturbed water use for anticipated purposes, as well as protection and improvement of environment and improvement of quality of human living, everything in a complex of integrated water use, water protection and protection from water.

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●●● Building together for the future Starting points for development of the WRDMP

The starting points in a domain of water use Due to a need for high provision of quality and quantity of waters for water supply of inhabitants, waters used as sources for water supply are selected from the entire water cycle. Those waters constitute, aside from the regional (larger) sources, all local water supply sources with high quality waters that could be utilized to a rational extent. In this way, favourable utilization of overall water quantities and higher degree of provision for water users are achieved. Due to these reasons, high quality waters are especially protected, aside from general water protection. Unfortunately, there are public waters that could not be successfully used for any purpose and that are dangerous for living world. Those waters must be urgently converted to usable and harmless waters. During water utilization regulated water regimes must not be endangered (quality and quantity), human health must not be endangered, animal and vegetable world must not be endangered, as well as natural and cultural values and assets (aesthetic values of water and environment, archaeological, historical, biological and geological resources, etc.) and rational needs of downstream users and interested for waters. Water supply for inhabitants has priority in water use; however environment must not be endangered nor basic human needs.

The starting points in a domain of water protection Long-term task in a domain of water protection is complete protection of surface and ground waters quality, meaning protection and improvement of water quality to the level when waters could be used for needs of consumers with the highest qualitative requirements. This task is achieved through complex, rational and unique water management in a framework of integrated complex unique water resource management system of Serbia. Components of this integrated and complex system, that has interaction in entire territory of Serbia, are as follows: rational capture of water quantities, measures inside the technological- production units, rational technical-technological measures on waste waters and other waste materials, measures for improvement of water recipients regimes (other technical measures for water disposal in the recipients), technical measures in water courses, control of diffused and indirect, as well as potential sources for water pollution, control of circulation and use of hazardous substances as well as other non-investment measures. All the above is achieved in the framework of integrated complex unique water regime management in compliance with rational use of other resources (particularly land), taking into account socio-economic constraints. Alongside with development of water supply for inhabitants, it is necessary to construct systems for drainage of used (waste) and rain waters, i.e. sewerage. The same as with water supply, there is an increasing requirement for construction of regional sewerage systems, and all in a context of integrated, complex and unique water resources management system.

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●●● Building together for the future Circumstances in our areas give advantage to construction of separated systems (separate system for drainage of waste waters, and separate system for drainage of atmospheric waters). Whereby all these waters (waste and atmospheric) need to be controlled disposed, after the treatment, in the water recipients. First systems to be realized should be storm water sewerage systems that have possibility of discharging of the first flush (the most polluted water) into the wastewater sewerage and convey it to the wastewater treatment plant and after the treatment dispose it to the receiving waters. Industries that dispose wastewaters in the municipal sewage systems must provide pre- treatment of its wastewaters to a level which does not endanger human health, sewage systems and does not obstruct processes in central municipal wastewater treatment plants, as well as to remove substances from those waters that imperil receiving waters and which cannot be removed in the central wastewater treatment plants for urban waters. Certain reduction and replacement (replacement of technology, raw materials, materials, relocation and other) need to be done for industries that unreasonably produce substantial pollution. Speaking of treatment of industrial wastewaters, including cooling water in the thermal power plants, good (for conventional pollution sources) and the best (for toxic waste substances and particularly hazardous substances) technological practices need to be applied with regard to water protection. Treatment of municipal wastewaters needs to include biological treatment (secondary treatment). If the municipal wastewaters are in a protection zone of water supply sources, aside from the biological treatment with nitrification and denitrification, treatment must includes removal of nutritive substances. Degree of treatment of municipal and other wastewaters need to be increased if it is required by regulation for category of water courses or nearby downstream water intake, namely improvement of receiving waters regimes need to be done, reduction of pollution sources or undertaking of other technical measures in order to comply with regulations, which means that areas of water courses used as water supply sources need to be protected (restored) in the first water quality class, and others in the second quality class.

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●●● Building together for the future 6. ALINGNMENT WITH THE EU REGULATOTY FRAMEWORK

6.1 Introduction

The Republic of Serbia demonstrated its commitment to the fulfilment of obligations under the Sofia Convention back in 2003, when it joined the ICPDR and long before it signed the EU Stabilization and Accession Agreement. There is a need and readiness in Serbia to improve the water sector, particularly in its water supply and water protection segments. An important part of this effort is the fulfilment of obligations set forth in the EU Water Framework Directive in respect of the development of a singular Danube River Basin Management Plan and Program of Measures. One of the most important activities in the EU approximation process is the harmonization of national legislation with EU legislation and with practices of EU member states. Environmental protection legislation and water utilization and protection legislation constitute a significant segment within this framework. With this in mind, the new Environmental Protection Law (EPL) enacted in 2004 reflects up-to-date principles in this area. With respect to water, which is a key component of the environment, the EPL defines only general water protection principles, while water protection and utilization, within the scope of integrated water management, are regulated by the Water Law (WL). The new Water Law has been adopted in May 2010. It encompasses virtually all WFD recommendations. Following enactment of the new WL, existing secondary legislation will need to be revised accordingly, and new secondary legislation enacted, to create an up-to-date legal framework for the implementation of integrated water management in the Republic of Serbia. In view of the above, the document “Contribution of the Republic of Serbia to the Danube river basin management plan and program of measures”, issued by Ministry of Agriculture, Forestry and Water Management, Water Directorate in 2010, contains proposed measures which are expected to be Serbia’s potential contribution to the Danube River Basin Management Plan and Program of Measures. An attempt was made here to assess as realistically as possible, although somewhat optimistically, Serbia’s potential for the implementation of measures in the field of water, which would contribute to an overall status improvement at the Danube Basin level. It should be noted that the rate of water sector improvement will also depend on social and material circumstances in the country, which will, no doubt, be influenced by the international community (pre-accession funds, etc.), the global economic situation, etc.

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●●● Building together for the future 6.2 Measures related to basic water management problems

Urban Wastewater Treatment The Urban Wastewater Treatment Directive has been transposed into Serbia’s national law. The new Water Law (WL) and accompanying secondary legislation call for the protection of water from pollution; they do not expressly require the construction of urban wastewater treatment plants and do not specify the measures to be taken in order to achieve the declared goals. Consequently, the basic measure aimed at preventing the discharge of organic pollutants into streams is the enactment of the new WL, which calls for the Urban Wastewater Treatment Directive to be transposed into national law. In addition to the new WL it is necessary to enact voluminous secondary legislation that will set priorities and define the timeframe for achieving EU standards in this area. One of the major problems causing a lack of investment in the water sector is a very low price of water. For example, the price of drinking water charged to the public is about 0.35 €/m3; this rate is not adequate to cover O&M costs alone. One of basic measures that must be implemented is a gradual increase in water tariffs to a level which will ensure that part of the needed investments can be funded from water tariffs.

Industrial facilities With the goal of harmonizing national environmental legislation with EU legislation, a number of laws and instruments of secondary legislation were enacted between 2004 and 2007 (including the Law on Environmental Protection, the Law on Strategic Environmental Assessment, the Law on Environmental Impact Assessment, and the Law on Integrated Prevention and Pollution Control). Responsibility for their implementation falls within the scope of the Ministry of Environment and Spatial Planning (MESP). Monitoring of industrial pollution emissions in 2007 began with the establishment of an Integrated Register of Polluters (Official Gazette of the Republic of Serbia 94/2007). The ministerial administrative body responsible for the implementation of the Registry is the Serbian Environmental Protection Agency (SEPA). The Register is based on the principles of the PRTR Protocol and is consistent with the ePRTR Directive (EC 166/2006). As of 20 June 2008, 387 completed questionnaires, which address point and diffuse sources of air, water and soil pollution, have been collected. Based on a preliminary survey 242 facilities need to obtain an integrated permit. However, the list is currently being revised because economic transition and ownership transformation processes have led to the liquidation or re-organization of a significant number of large industrial enterprises. Existing legislation requires all companies subject to the IPPC Directive to obtain integrated permits by the year 2015. However, secondary legislation, which is required for the implementation of the primary legislation, is still pending.

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●●● Building together for the future The concept of best available techniques (BAT) applicable to industrial production is still in the early stages of implementation; the major reasons given for the delay include lack of funding for instituting changes. According to available data 20-30 companies (or 0.03% of all active companies) have established environmental protection systems consistent with JUS ISO 14001 and ISO 14001 standards. Preventative measures aimed at achieving the objectives of the IPPC Directive, which are defined by law, include efficient management of resources and impingement on pollution sources so as to reduce emissions and comply with set limit values. Other measures include the enactment of executive regulations and decrees which will allow for a more comprehensive enforcement of environmental protection and IPPC laws; the enactment of a secondary legislative instrument to define pollutant emission limit values based on BAT; the setting of priorities and definition of short-term/long-term measures; and institutional and organizational capacity-building.

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●●● Building together for the future 7. BASIC STRATEGY AND REQUIRED INVESTMENT

7.1. Basic strategy

Water is a resource which is increasingly difficult to obtain and which requires increasing capital investment, so the water valuation must be appropriate. Water tariffs must be set based on economic principles and must reflect all cost items, including water supply source protection costs and water resource fees which would be used for development projects. The water sector development strategy relating to water use and water protection must be outlined in the Water Master Plan. It is a basic planning document, which defines the strategy and criteria for maintaining and improving the water regime, aimed at encouraging singular and harmonized development of water services in the entire territory of the Republic of Serbia. Implementation of the development strategy must ensure that a satisfactory status in all segments of the water sector are achieved, and must strive to attain relevant EU standards. Based on current socio-political conditions, a period of at least 20 years will likely be required to achieve this status. This period must witness the use of new technologies, a higher level of capital and labor efficiency, greater utilization of knowledge, and a higher level of interaction between domestic and international economies. The achievement of a satisfactory status of the water sector requires capital investments in the order of 6–7 billion €. This water sector development projection reflects a 15-year period, during which time several priority infrastructure projects are expected to be completed:  Appropriate legal, economic, financial, and institutional framework;  Operation and maintenance of the water infrastructure, as well as revitalization of existing structures and systems to preserve their current capacities;  Implementation of water-saving measures, to improve the quality of services provided using existing capacities and to accommodate new connections.

7.2. Development strategy and funding by segment

The satisfactory water sector status can be achieved in about twenty years, and an acceptable status in fifteen years. During the latter period, priority facilities and structures should be built to enhance the production and distribution capacity for drinking water and water for other uses, to increase the level of access to public sewage and the level of wastewater treatment, and to upgrade protection against the adverse effects of water.

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●●● Building together for the future Development of water supply systems

Municipal water supply has priority in water use. During the forthcoming period it should be based on the following strategic guidelines:  Municipal water supply should be provided from:  local sources of high-quality groundwater;  local sources of surface water, and large regional systems  Regional systems should rely on river reservoirs and large groundwater sources;  River reservoirs, as a major components of regional systems, should operate at a 97% water supply reliability level;  Water source safeguard zones, should be defined to protect high-quality sources from contamination and pollution; and  Regional systems should deliver water only to households and industries whose production require drinking water. Industrial water should be abstracted from rivers.

The need to construct regional systems is identified in two basic strategic documents of the water sector: The Spatial Development Strategy of the Republic of Serbia (2010) and the Water Master Plan of the Republic of Serbia (2001). Construction of most of the regional systems which were under consideration has already begun. Some of these will begin to take shape during the current decade, will continue to expand with the addition of new structures and links, and will gradually grow into more complex, comprehensive and reliable systems of Serbia's municipal water supply. Specific goals for improving the existing water supply systems over the forthcoming period include:  Reducing the proportion of unaccounted for water (UFW), from the current level of 32–35% to no more than 25%. At present, UFW is usually referred to as „leakage losses“;  Introduction of economic water tariffs in a gradual manner. Projections call for a gradual increase in current sub-economic („welfare“) water tariffs, averaging at around 0.3 €/m3, to economic water tariffs averaging at around 1.1 €/m3. This measure will streamline household consumption to some 150 liters per user per day;  Increase in the number of households which have access to public water supply. This will include increasing the number of connections in communities which already have access to public water supply, and providing access to public water supply to communities that do not, especially through the development of regional systems.  Eliminating water supply restrictions, or reducing them to an acceptable level. Many water supply systems currently experience water deficits and cannot meet the demand of all connected users during the summer months.  Securing additional amounts of water for public water supply. This goal will require the abstraction of an additional 6 m3/s of water over the next fifteen years;  Ensuring the delivery of high-quality drinking water by public water supply systems. The goal is to ensure that all public water supply systems deliver drinking water

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●●● Building together for the future whose physicochemical and bacteriological parameters meet prescribed standards;  Developing additional water distribution systems. Appropriate distribution systems, both local and regional, should be developed to ensure water delivery to all users.

Significant funding will be needed to increase water output through the construction of new water supply systems and improvements to existing systems. Approximately 1.6 billion €, or 107 million € per year, will need to be invested in water supply systems (both local and regional).

A breakdown by territorial unit is shown in the tables according to the paper: Instruments for Water Sector Development in Republic of Serbia (prepared by Institute J. Černi and Economics Institute from Belgrade in 2006).

Table 7.1 Capital investment for the next 15 years (M of €) Water Wastewater Regional Region Total supply disposal systems Central Serbia 450 950 350 1,750 Vojvodina 200 850 250 1,300 City of Belgrade 250 700 100 1,050 Total, Serbia 900 2,500 700 4,100

Source: Instruments for Water Sector Development, J. Cerni, Economics Inst, 2006

Table 7.2 Annual projections (M of €) Water Wastewater Regional Region Total supply disposal systems Central Serbia 30 63 23 116 Vojvodina 13 57 17 87 City of Belgrade 17 46 7 70 Total, Serbia 60 166 47 273

Source: Instruments for Water Sector Development, J. Cerni, Economics Inst, 2006

The water supply development funding shown in table (including funding of regional water supply systems) will allow for the formation of new surface water and groundwater sources, construction/upgrading of water treatment plants, construction of water mains and water reservoirs, as well as construction/upgrading of municipal water distribution networks. Some 65% of the water supply system funding will be invested in the distribution network and the remaining 35% in other components of the water supply systems. Development of distribution networks will primarily be the responsibility of utilities, while the state will contribute to the funding of other system components.

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●●● Building together for the future Development of water protection systems

Water protection is an important segment of environmental protection and its goal is to ensure a water quality level which allows for the efficient use of water for various purposes, especially for municipal water supply. Water quality protection is a complex activity and future development of the water infrastructure must be based on the following fundamental strategic guidelines:  Protection measures should be implemented at sub-basin/basin level;  Water protection priorities should be identified in a special Water Pollution Management Plan, in which protection of water supply sources will be given the highest priority;  Wastewater collection, evacuation and treatment solutions should be integrated with municipal water supply schemes;  Following mandatory pretreatment, and wherever possible, industrial wastewater should be delivered to municipal wastewater treatment plants to achieve a higher level of cost-effectiveness;  Measures aimed at reducing pollutant production should be implemented at the source;  Cost-effective engineering measures should be introduced for the disposal of wastewater and other types of waste;  Adequate measures should be implemented to improve water recipient regimes (increase in low-flow water levels);  Urban waste dumps should be managed and hazardous waste dumps should be developed;  Diffuse, indirect and potential sources of water pollution should be; and  Other non-capital measures should be implemented, to ensure the protection of water quality.

Since water quality protection is currently the most neglected segment of the water sector, capital investment programs for the immediate future, in line with current global efforts, should address collection, disposal and treatment of wastewater. The following needs to be accomplished during the period under consideration:  Existing wastewater treatment plants (municipal and industrial) have to be revitalized and should resume normal operation on a priority basis;  New systems for wastewater collection, disposal and treatment should first be built in communities which have access to public water supply systems, or where plans exist;  Activities and measures aimed at protecting existing and future water supply sources should be implemented; and  Procedures for the monitoring and implementation of protection measures should be instituted.

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●●● Building together for the future Extensive funding is needed to achieve a higher level of public wastewater disposal coverage through the construction of new systems and upgrading of existing systems. As shown in Table 2.2, the funding needed over the course of the next 15 years is in the neighborhood of 2.5 billion € (or 166 million € per year). A 1:1 ratio is projected for the wastewater evacuation network and wastewater treatment plants.

7.3. Water Sector Funding Needs

The level of funding by segment required to achieve the planned level of development of the water sector over the next fifteen years is shown below. Current macroeconomic conditions might change the projected period. A summary of annual funding by segment for operations and for further development of the water sector is shown in the table:

Table 7.3 Total funding needed for operations and development O & M Capex Total Segment % (M€/year) (M€/year) (M€/year) Water supply 283 60 343 48.7 Wastewater disposal 124 166 290 41.2 Regional water supply systems 24 47 71 10.1 TOTAL 431 273 704 100

Source: Instruments for Water Sector Development, J. Cerni, Economics Inst, 2006

These figures are based on the following assumptions:  The costs of day-to-day operations reflect only existing capacities;  Development funding projections include the water sector’s own sources, as well as Budget funds;  Funding needed for development is identified on an average annual basis during the period under consideration.

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●●● Building together for the future 8. SOURCES AND METHODS OF WATER SECTOR FINANCING

8.1. Sources

Adequate funding is essential for efficient performance and development of the water sector. The sources of funding include:  The Budget (taxes) and local government budgets;  Water tariffs;  Water use fees, including  Concession fees; and  Other sources.

Taxes (the Budget) constitute the basic financial instrument of the Government for the collection of funds (fiscal revenues) to cover public expenditures to satisfy public needs. Budget allocations to the water sector are used as subsidies, to fund infrastructure projects and similar development projects which increase water sector capacity. Local government budgets are replenished with source revenues and ceded public revenues. Source revenues include:  fees for the use of building land,  fees for building land development;  earnings from leasing urban land or ceding the right to use urban land; and  local special-purpose voluntary taxes. Local government budget revenues originating from fees for the use of building land, fees for building land development, earnings from leasing urban land, and earnings from ceding the right to use urban land, are used to fund water sector operations of direct, shared and general interest to the local population. Citizens who reside within the territory of a local government may decide to introduce a voluntary tax for a clearly-identified purpose. Water tariffs include the costs of organized municipal water supply (abstraction, treatment and distribution), and costs of collection, evacuation and treatment of wastewater. Water tariffs, therefore, primarily cover utility services. They vary by region, depending on natural circumstances. Fees for the use of a water good and fees for water pollution are specific charges payable by individuals or groups that use a public good (either a resource or recipient) and are spent to conserve the public good. The use fee is deemed to be an equitable method of revenue collection since those who enjoy the greatest benefits from using a good of general interest should pay the most. This fee is payable for the use of water, hydropower and water land, including extraction of river deposits (sand and gravel) from water land sites. The water pollution fee is payable for direct or indirect discharge of wastewater which pollutes the recipient and degrades its water quality.

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●●● Building together for the future Concession fees are payable for the use of natural resources (i.e. water, water land and river deposits), or for the performance of business activities and other activities on water and water land. Other potential sources of water sector funding include contributions by legal entities and individuals, prevention fees charged as part of insurance premiums, special-purpose loans, public loans, grants, and the like. The extent and purpose of funding via these sources depend on investor objectives. Fee levels should be based on principles which encourage users to use water resources judiciously and efficiently, and on economic water pricing. Water tariffs, resource fees and service charges directly influence the ability to satisfy needs in various segments of the water sector.

Methods of funding of municipal water supply and wastewater disposal

Water supply is the primary segment of the water sector and has priority in local water allocation. Water supply projects are costly and, in addition to construction (water supply source, pumping stations, treatment plant, water reservoirs, distribution network and appurtenances), include: preliminary activities, research, investigations, and land development. Capital project costs vary depending on the size and type of system. Funding should be available from the following sources:  Budget grants,  special-purpose Budget allocations, using revenues from fees,  available water supply utility funds (from water tariffs and self-funding,  self-funding by investors/direct users,  local government budget allocations,  urban and rural voluntary taxes,  donations, and  domestic and international capital contributions (concessions, joint-ventures, loans). Funding for capital projects involving regional systems intended for water supply is attributable solely to this segment and should be available from the following sources:  Budget grants,  special-purpose Budget allocations, using revenues from fees,  allocations from local government budgets,  self-funding by investors/direct users, and  domestic and international capital contributions (concessions, joint-ventures, loans).

Wastewater disposal is an important component of sustainable development of the water sector. Municipal wastewater disposal can be funded from the following sources:  portion of water tariffs billed by water and wastewater utilities;  allocations from local government budgets,  urban and rural voluntary taxes,  self-funding by investors/direct users, and  bank loans.

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●●● Building together for the future Potential sources of funding for primary water protection (treatment of municipal wastewater) should include:  Budget grants,  special-purpose Budget allocations from water pollution fees;  available utility funds—portion of water tariffs,  allocations from local government budgets,  self-funding by investors in industrial wastewater treatment facilities,  urban and rural voluntary taxes,  donations, and  domestic and international capital contributions (concessions, joint-ventures, loans).

Potential sources and levels of water supply development funding, including regional water supply systems, are shown in Table 8.1. Utilities should fund operating costs using revenues from water tariffs and service charges.

Table 8.1 Sources and levels of funding for water supply and water protection development Regional Water Wastewater water Origin of funding supply disposal supply systems Budget    Fees for the use of the water good   Level 1: Gov. Water pollution fee  Concessions, grants, loans    Level 2: Utilities Water tariffs and service charges    Local government budget    Voluntary water tax    Level 3: Other Self-funding    Loans    Grants, etc.    Source: Instruments for Water Sector Development, J. Cerni, Economics Inst, 2006

8.2. Projection of economic water and service pricing

A financial outlay analysis has identified the volume of funding required during the 15-year period, which would cover all operating costs incurred by water supply and wastewater disposal systems, including water resource fees, investment commitments, and credit annuities for investments in priority-development programs.

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●●● Building together for the future A total of 9,176 million € will be needed over the next 15 years to cover:  operating costs (3,309 million € or 36%);  resource fees (1,209 million € or 13%);  self-funded investments (3,078 million € or 34%); and  credit annuities and interest (1,580 million € or 17%). Therefore, 612 million € per year on average will need to be provided to finance the above payables by their respective maturity dates. Financial outlay continues to grow and ranges from 264 million € for the first year to 874 million € for the final year. Relative to billing units, the total financial outlay ranges from 0.52 €/m3 during the first year to 1.35 €/m3 during the final year, or 1.08 €/m3 on average. Development of water supply and wastewater disposal A total of 4,100 million €, or 273.3 million € per year, will be needed to develop this segment. However, because of the conditions under which funds must be procured, construction of the water infrastructure cannot proceed at an even pace throughout the 15-year period. Table hows a projection of the investment required over the next 15 years.

Table 8.2 Investment projection (M €) Total 5-year periods

Years 1–15 1–5 5–10 10–15 Total investment 6,360 1,021 2,526 2,813 Percent 100% 16% 40% 44% Investment by purpose – Replacement and reconstruction 2,260 406 886 968 – Development 4,100 615 1,640 1,845 Investment by system – Water supply 2,364 396 936 1,032 – Wastewater disposal 3,156 492 1,258 1,406 – Regional systems 840 133 332 375 Source: Instruments for Water Sector Development, J. Cerni, Economics Inst, 2006

The overall investment is divided into: investment in replacement and reconstruction of worn out equipment and structures which have fallen into disrepair, and investment in new systems to increase production capacity. 2,260 million €, or about two-thirds of the existing assets’ depreciation costs (36% of the total investment), will need to be allocated to repair and reconstruction. 4,100 million €, or 64% of the total investment, will need to be allocated to development, including:  construction of structures and procurement of new equipment,  reconstruction of existing structures, and  upgrading and automation of existing systems, resulting in higher output.

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●●● Building together for the future During the upcoming 15-year period, roughly equal amounts are projected to be invested in water supply systems (including regional water supply systems), and in capacity increases for the wastewater infrastructure. This translates to 3,204 million € (840 million € for regional systems), and 3,156 million €, respectively. The rate of investment is expected to vary, and to be significantly lower during the first few years than during the subsequent years, even though, in view of the need, it should be the opposite. However, this is a realistic assumption since the conditions needed to realize the projected investments in a relatively short period of time are currently not present, and since the companies operating within the water sector are not financially stable. The plan, therefore, calls for only 16% of the total investment to be made within the first five years. The New Water Law (Article 185) empowers the Ministry of Agriculture, Forestry and Water Management with the calculation of fees for water usage, which go to the Budgetary water fund of the Republic of Serbia. The Water fund receives tax revenue and fees from water users, retains 50% of the fees collected and returns 50% to the municipality in which the fee had been collected, for water activities projects. The fund is used pursuant to the Government’s Annual Programme for Construction, Re- construction and Maintenance of Water Management Facilities. The next table shows the structure of the mentioned program in previous period.

Table 8.3 Program of construction, reconstruction and maintenance of water managenent facilities Facilities and Works Mil RSD 2004 2005 2006 2007 2008 2009 2010 Multipurpose dams and reservoirs 750 820 1,064 993 1,329 9751,110 Water supply 388 640 601 400 550 938 1,059 Water protection 85 217.5 272 259 253 350 467 Protection from water 1,199 1,173 2,402 1,198 1,278 1,073 1,525 Studies, designs and investment prep. 150 264.5 373 264 340 350 629 International cooperation 80 82.0 80.5 102 150 120 150 Implementation of inspection orders 1 1 0.5 TOTAL 2,653 3,198 4,793 3,216 3,900 3,806 4,940 Source: Programs of Water Directorate Next two tables and pictures describe the regional water supply systems in Serbia: existing status and complex united water supply system in the future, as described in parts II and III (respectively) of Water Resources Development Mastetr Plan of Serbia

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●●● Building together for the future Source: Water Resources Development Master Plan of Serbia Part II Existing status Chapter 4. Complex water management systems 4.3. Complex regional systems

Table 8.4 Complex regional water supply systems System Municipality Water source l/s Inhabitants Beograd Makiš 8 000 1 400 000 Banovo brdo Bele vode Bežanija Novi Sad Novi Sad Sr. Karlovci Štrand 300 250 000 Petrovaradinska 600 ada 600 Ratno ostrvo Niš Mediana 600 240 000 Studena 340 Ljuberađa… 1 450 Sr. Mitrovica Gruža Kragujevac Knić Batočina Gruža 1 200 Đetinja Užice Sevojno Vrutci 400 Rzav Arilje Požega Lučani Čačak Rzav 1 200 G.Milanovac Rasina Kruševac Aleksandrovac Ćelije Ćićevac Varvarin Stalać Kolubara Valjevo Ub Ljig Mionica Rovni Lazarevac Morava Slederevska Palanka Velika Plana

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Source: Water Resources Development Master Plan of Serbia Figure 8.1 Water Supply Regional Systems; Existing status

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●●● Building together for the future Source: Water Resources Development Master Plan of Serbia Part III Future status Chapret 4. Integrated, complex, united water management system of Serbia 4.2. Complex united water supply system Table 8.5 Regional water supply systems Regional system Subsystem Municipality Source Gornje Pčinjski Bujanovac Preševo Trgovište Vranje Pčinja južnomoravski Vlasinsko j. Bosilegrad Lisina Donje Vlasinski Vlasotince Babušnica Crna Trava južnomoravski Jablanički Leskovac Bojnik Lebane Medveđa Barje, Brestovac Toplički Kuršumlija Blace Prokuplje Žitorađa Merošina Selova Doljevac Niš Nišavski Dimitrovgrad Pirot B.Palanka G.Han Niš Merošina Zavoj, Selova Moravički Sokobanja Ražanj Bovan Zapadno Uvac N. Varoš Priboj Prijepolje Sjenica Sjenica, K.brod moravsko Vrutci Užice Čajetina B. Bašta Vrutci rzavski Rzav Arilje Požega Lučani Čačak G. Milanovac Arilje Ibarsko Kraljevo V.Banja Trstenik Studenica šumadijski Kragujevac Knić Batočina Rača Topola Lopatnica Aranđelovac, Raška N.Pazar Tutin Gruža Rasinsko Kruševac Aleksandrovac Ćićevac Varvarin Ražanj Ćelije pomoravski Jagodina Ćuprija Paraćin Despotovac Svilajnac Rekovac Brus Timočki Bor Zaječar Boljevac Negotin Knjaževac Grlište Kladovo Mlavsko Petrovac M.Crniće Požarevac Žabari V.Plana moravski S.Palanka Smederevo Grocka V.Gradište Golubac Kučevo Majdanpek, Žagubica D.Milanovac Kolubarski Valjevo Mionica Lajkovac Lazarevac Ub Ljig Rovni Beogradski Sava Grad Beograd (17 municipalities) Mačvanski Šabac Bogatić Loznica M.Zvornik Osečina Mačva Posavina Ljubovija Vladimirci Koceljeva Sremski Ruma Bogatić S.Mitrovica, Irig Pećinci Inđija S.Pazova Novosadski S.Mitrovica Šid B.Palanka B.Petrovac Beočin Novi Sad S.Karlovci Žabalj Zemerin Zrenjanin (Sečanj Žitište Titel) Bački Apatin Sombor Odžaci Bač Kula M.Iđoš B.Topola Vrbas Srbobran Bečej N.Bečej (Subotica) Gornja Tisa Subotica Kanjiža N.Kneževac Senta Čoka Ada Kikinda N.Crnja Južnobanatski Kovin Pančevo Opovo Kovačica Alibunar Vršac Plandište B.Crkva (Zrenjanin Sečanj)

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Source: Water Resources Development Master Plan of Serbia Figure 8.2 Water Supply Regional Systems; Future status

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●●● Building together for the future 9. WASTE WATER TREATMENT PLANTS IN SERBIA

Based on Serbia’s current planning documents which address water and environmental issues, and keeping in mind the need to resolve significant water quality protection problems (particularly in areas that constitute protected zones of water supply sources, and especially in vulnerable areas), a list of priority projects related to urban wastewater collection and treatment, which could be implemented by the year 2015, has been compiled and is shown below, as it is stated in the paper: “Contribution of the Republic of Serbia to the Danube River Basin Management Plan and Program of Measures”, issued by Ministry of Agriculture, Forestry and Water Management, Water Directorate in 2010

Table 9.1 WWTP in Serbia – Water Directorate priorities Extension of Type of City/town Recipient PE WWTP sewage treatment system Brus Rasina 12,000 Tertiary + + Blace Rasina 19,000 Tertiary + + Kula DTD 42,000 Tertiary + + Vrbas DTD 50,000 Tertiary + + Crvenka DTD 25,000 Tertiary + + Subotica (ext) Lake Palić 230,000 Tertiary + + Šabac Sava 185,000 Secondary + + Vranje Južna Morava 131,000Secondary + +

Source: Contribution of RS to the Danube river basin management plan..., 2010

The aggregate cost of the above projects would be roughly 200 M€ and they can be funded from national sources. Any extension of the list will largely depend on the enactment of adequate national legislation, but also on the procurement of external funds. If favorable conditions are secured, the following communities are expected to be able to resolve their wastewater treatment issues:

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●●● Building together for the future Table 9.2 WWTP in Serbia – to be constructed by local governaments Extension of Type of City/town Recipient PE WWTP sewage treatment system Leskovac Jablanica 115,000 Secondary + + Niš Nišava 500,000 Secondary+ + Loznica Drina 42,000 Secondary + + Prokuplje Toplica 52,000 Secondary + + Užice Đetinja 90,000 Secondary + + Bor Borska 45,000 Secondary + + Mladenovac Lug 45,000 Secondary + + Source: The Contribution of RS to the Danube river basin management plan..., 2010

Additionally, during the period under consideration, the construction of the main sewer of Belgrade’s sewage system is expected to be completed (this will be an investment in the system of some 100 M€).

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●●● Building together for the future The next two tables show the scoring of SLAP and priorities of Water Resources Development Master Plan of Serbia.

Table 9.3 WWTP – SLAP scoring Table 9.4 WWTP – WRDMP priorities SLAP WRDMP Priorities Priorities Project VALUE Slap Project

location MEuro Score location Šabac 16.50 87.75 Bač Raška 12.50 67.50 Bečej Novi Pazar 21.00 61.50 Bor Novi Kneževac 12.41 60.50 Brus Apatin 10.96 55.00 Bujanovac Nova Varoš 2.56 54.00 Ivanjica Raška 32.50 49.00 Kovačica Žagubica 3.24 46.50 Kovin Leskovac 22.80 42.25 Kuršumlija Petrovac 1.70 35.75 Leskovac Majdanpek 1.90 30.50 Loznica Požarevac 11.00 30.50 Niš-Grad Golubac 1.63 25.75 Nova Crnja Vranje 18.07 24.75 Novi Bečej Bosilegrad 0.60 24.00 Novi Kneževac D. Milanovac 1.10 24.00 Novi Sad-Grad Ćuprija 5.04 22.75 Pančevo Bačka Palanka 8.51 20.50 Pirot Crna trava 0.37 20.50 Preševo Veliko Gradište 19.90 16.50 Senta Priboj 18.88 14.00 Sjenica Surdulica 1.50 14.00 Smederevo Vladičin Han 10.60 14.00 Sombor Aleksandrovac 4.00 13.50 Sr. Mitrovica Preševo 5.50 12.00 Užice Bojnik 3.12 11.00 Vladičin Han Irig 0.08 10.00 Vranje Source: SLAP databese Žabalj Zaječar Source: Water Resources Development Master Plan

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Source: Contribution of RS to the Danube river basin management plan..., 2010 Figure 9.1 WWTP in Serbia – Existing status

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Source: SLAP databese, Water Resources Development Master Plan Figure 9.2 WWTP in Serbia – Future status, priorities

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●●● Building together for the future 10. CONCLUSIONS AND RECOMENDATIONS

In order to enable municipalities in the Republic of Serbia to frame their infrastructure needs in a better way, alongside the existing documents, the Strategy for Restructuring the Local Public Utility Companies in Serbia and the Water Management Strategy will need to be developed.

The Government of Serbia, in cooperation with the EU and other donors is working on the preparation of the Strategy for Restructuring the Local Public Utility Companies The draft of the Strategy has been prepared by a working group, led by the Ministry of Economy and Regional Development, and is expected to be adopted by the Government. The Strategy for Transformation of PUCs has been prepared with the goal to transform the local PUCs step by step into financially sustainable, commercially oriented enterprises that provide high quality services to their customers. The private sector can be an important source of investment and transfer of technical and operational know-how. Private sector participation in providing communal services can therefore include both management of operations and capital investment as well. As the Water Law stipulated, the Water Management Strategy is a planning document which establishes long-term directions for water management. The strategi and programs delivered in the areas of spatial development, sustainable development, sustainable use of natural resources and assets, and environmental protection, as well as other strategic documents, should be mutually harmonized.

All official documents declare that they are in compliance with EU regulatory framework (EC regulations and directives). Nevertheless, achieving compliance with the EU Drinking Water Directive will be a long and costly task. Waste water treatment has not been a priority for Serbia for many years. The coverage of wastewater treatment is small. Most waste water is discharged without treatment, which has an impact on water supply. This is a reason that water management must be seen as a whole process, which is the princples of Water Law. The Urban Wastewater Treatment Directive has not yet been transposed into Serbia’s national law. Even though the current WL calls for the protection of water from pollution, it does not expressly require the construction of urban wastewater treatment plants and does not specify the measures to be taken in order to achieve the declared goals. The municipalities have lacked the incentives to invest in wastewater treatment due to low water tariffs. Water tariffs may now be increased to cover the OM costs of the WWTP. However, due to affordability, these tariffs will remain insufficient to cover the investment costs required to modernise WW treatment and ensure implementation of the EC regulations.

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As it is described in the Water Resources Development Mastetr Plan of Serbia, ten existing regional water supply systems, which are the part of the Complex water management systems, going to be transformed into Integrated, complex, united water management system of Serbia, consisting of twenty two Complex united water supply systems. This kind of regionalisation of services will allow an optimisation of service quality in the water sector. The situation in waste water sector, unfortunarely is not the same. Strategic development procedures can be good oportunity to introduce regionalization aproach in WWTP planning (similar to bulk supplayer in water sector and regional lendfills, in solid waste secror). According to the Water Law provision, the entity which performs water supply or wastewater collection, drainage, and treatment, is required to hold a license. The license will be issued by Water Directorate to companies which fulfil conditions pertaining to technical, technological, organizational, and human resources. With appropriate definition of conditions the licensing procedure can boost the grouping and regionalization of water services.

The projects for IPA support have to be prepared in accordance with measures as follows:  Project maturity and readiness;  Compliance with relevant EU legislation;  Consistency with environmental priorities, plans and sectoral strategies;  An integrated approach (project is part of a plan / strategy);  Major impact on the population;  Financial sustainability (compliance with ‘polluter pays’ principle);  Availability of national co-financing;  Affordability;  Cost-effectiveness of investment and operation. It is obvious that grouping of projects in “investment heavy” infrastructure and bundling of smaller projects into larger schemes may be addressed in first priority as soon as Serbia becomes a EU candidate country.

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●●● Building together for the future According to the Water law the water management planning documents are the Water Management Strategy, the water management plans, the annual water management programs and plans which address protection against the water and water protection. The adoption of described plans, in accordance to timing in Water Law, should be supported by implementation of SLAP. This information system has been in use for couple of years to identify projects which should be recognized in the described planning procedures. The SLAP information system could be improved to become more flexible and useful, which will increase its usage and efficiency in municipal water infrastructure sector. It should cover a large range of projects It will be accepted more widely if become general database with information on majority of infrastructure projects regardless the beneficiary and possible investor. In this very moment the biggest projects are not in the SLAP (WWTP in Belgrade). Inter municipal and regional projects should be welcomed as well. The more user friendly interface will increase usage and efficiency. The scoring or ranking system, which can be less attractive for some users, should be adjustable by user by means of application of the measurable criteria. This is to reduce possible hostility of the SLAP The more user friendly reporting system will increase the SLAP usage. Storing not only the data on the project preparation but on the execution and construction as well will make SLAP information system useful through a whole project cycle.

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Annexes

ANNEX 1 FUNDING OF WATER MANAGEMENT

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●●● Building together for the future FUNDING OF WATER MANAGEMENT

WATER LAW May 2010

Activities of general interest funded pursuant to Law shall include: 1) watercourse development and protection against the adverse effects of water; 2) water development and water use; 3) water protection from pollution; 4) the construction, maintenance, and management of reclamation systems; 5) the construction, maintenance, and management of regional and multipurpose water systems; 6) other activities of general interest.

Funding for the Activities of general interest shall be provided from: 1) the budget of the Republic of Serbia; 2) the budget of the autonomous province; 3) water fees; 4) concession fees; 5) other sources.

Water fees include the following: 1) Water asset fee; 2) Water discharge fee; 3) Water pollution fee; 4) Drainage fee; 5) Water facilities and systems fee; 6) Water basin fee.

Water asset fee

The water asset fee shall be payable for the use of a water asset, including: 1) water; 2) water land.

The payer of the water asset fee shall be any entity who: 1) uses water extracted from surface water or groundwater for drinking, irrigation, process, municipal, and/or other purposes; 2) abstracts and/or distributes water by means of a regional or multipurpose water system; 3) uses water for fish farming at a fishery; 4) provides drinking water supply by means of a public water supply system;

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●●● Building together for the future 5) uses water for bottling or in any final product; 6) uses water to generate electricity to sell or use for their own needs or to operate a plant; 7) uses water to operate a heating plant; 8) extracts river deposits from water land or an area threatened by erosion; 9) uses water land for economic activity (landfill, loading site, etc.); 10) uses water land to install a temporary facility for economic activity; 11) uses a surface water body to reside or sojourn and water land to moor a vessel, including any vessel-mounted hospitality or catering facility; 12) uses water land for sports, recreation, or tourism.

The water asset fee shall be payable for: 1) the use of water for the purposes referred to in Article 155, Paragraph 1, Items 1 through 4 of this Law - based on the quantity (m3), where a water quantity measurement device is available, and the quality of abstracted water; 2) water bottling - based on the quantity (l) of bottled water sold, and for the use of water in a final product - based on the quantity (l) of water in such product; 3) thermal waters - based on the quantity (m3) of abstracted water; 4) the use of water for irrigation of agricultural land, where it is not possible to measure the quantities of delivered water - based on the surface area (ha) of the irrigated agricultural land; 5) commercial fish farming, where it is not possible to measure the quantities of delivered water – based on the surface area (ha) and the type of fishery (coldwater or warm water); 6) the generation of electricity – based on the amount of electricity (kWh) generated at the threshold of the hydro or thermal power plant; 7) the operation of other plants – based on the power of the plant (kW); 8) the borrowing of river deposits – based on the type of the borrow site (river channel, sandbar within the river channel, floodplain, abandoned channel, area threatened by erosion, etc.), and based on the quantity (m3) of withdrawn material, regardless of the quality thereof; 9) economic activity on water land – based on the surface area (m2) of the land used and the type of activity; 10) installation of a temporary facility for economic activity – based on the surface area (m2) and purpose of the temporary facility; 11) residing, sojourn and mooring of a vessel – based on the type of vessel, category of surface water, and surface area (m2) of the surface water body and bank used; 12) the use of water land for sports, recreation, or tourism – based on the surface area (m2) of the water land used, the category of the user (legal entity or individual), and the purpose for which the facility is used.

Reference price of water shall be established based on the operating costs of drinking water supply by means of a public water supply system, the operating costs of wastewater collection, evacuation, and treatment by means of a public sewerage system, and the costs of maintenance and depreciation of the water facility.

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The Government shall: 1) establish a methodology for the calculation of the price charged for the supply of drinking water by means of a public water supply system, and the price charged for wastewater collection, evacuation, and treatment by means of a public sewerage system; 2) stipulate criteria for the determination of the reference price of water per Paragraph 1 of this article; 3) set the reference price of water.

Proceeds from water asset fees shall be used to finance of folloving activities: 1) watercourse development and protection against the adverse effects of water; 2) water development and water use; 3) the construction, maintenance, and management of regional and multipurpose water systems;

Water discharge fee

A water discharge fee shall be payable for any direct or indirect discharge of water into a recipient or public sewerage system.

The payer of the water discharge fee shall be any entity who: 1) discharges wastewater into their own sewerage system, a watercourse, a canal, a lake, a reservoir, or the like; 2) collects, evacuates and/or treats wastewater and/or atmospheric water by means of a public sewerage system; 3) generates electricity at a thermal power plant equipped with an open (flow-through) cooling system.

The party shall pay the water discharge fee based on the quantity (m3) and type of discharged wastewater or on the amount of generated electricity (kWh).

Proceeds from water discharge fees shall be used to finance activities: 1) watercourse development and protection against the adverse effects of water; 2) water development and water use; 3) water protection from pollution; 4) other activities of general interest.

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●●● Building together for the future Water pollution fee

A water pollution fee shall be payable for direct or indirect water pollution.

The payer of the water pollution fee shall be any legal entity, entrepreneur, or individual who: 1) discharges wastewater into their own sewerage system, a watercourse, a canal, a lake, a reservoir, or the like; 2) collects, evacuates and/or treats wastewater and/or atmospheric water by means of a public sewerage system; 3) discharges any pollutant(s) onto agricultural, building, or forest land, which directly or indirectly pollute water; 4) produces or imports any fertilizers, chemical agents for the protection of plants or eradication of weeds, or phosphate-based detergents.

The water pollution fee shall be payable as follows: 1) For wastewater – based on the quantity (m3), type, and characteristic of emission from the pollution source; 2) For diffuse polluters – based on the produced or imported amount of fertilizer, chemical agent for plant protection or weed eradication, or phosphate-based detergent (kg).

The water pollution fee shall be reduced if wastewater is treated, based on the effectiveness of such treatment. Proceeds from water pollution fees shall constitute budget revenues of the Republic of Serbia, which shall be ear-marked and used via the Environmental Protection Fund to finance the water protection activities. Any party that discharges wastewater into their own sewerage system or a watercourse, canal, lake, reservoir, or the like, shall pay a water discharge fee and a water pollution fee whose sum shall not be less than the cost of wastewater treatment to a level which complies with emission limit values. The Government shall determine the pace at which the amount of the water discharge fee and water pollution fee shall be reached by the payers. Until emission limit values are set, the party shall pay the water discharge fee based on the amount (m3) and type of discharged wastewater.

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●●● Building together for the future Drainage fee

A drainage fee shall be payable for the development of the water regime of the land in a reclamation area or part thereof through the evacuation of excess water by means of drainage systems managed by the Public water management enterprise.

The payer of the drainage fee shall be the owner or user of: 1) agricultural, forest, or building land; 2) any facility or space used for any economic or other activity, except where water removal is provided by a storm water evacuation system; 3) a residence, except where water removal is provided by a storm water evacuation system; 4) transportation infrastructure (road, railroad, harbor, port, airport, etc.), except where water removal is provided by a storm water evacuation system or other means; 5) any asset in general use (park, square, street, etc.), except where water removal is provided by a storm water evacuation system or other means.

The drainage fee shall be payable for the drainage of: 1) agricultural land – based on the surface area (ha), soil class, type of crop, etc.; 2) forest land, building land, any component of the transportation infrastructure, or other asset in general use, except for land under buildings – based on the surface area (ha) of the forest land, building land, or other asset in general use; 3) building land under a residential or business construction – based on the surface area (m2) of such land.

Any payer of the drainage fee shall be assessed 50% of such fee if the secondary canal network was self-funded. The basis for assessment of the drainage fee shall be the annual accounts of drainage system operating and maintenance costs. Proceeds from drainage fees shall be used in the reclamation area in which they were realized, to finance of the construction, maintenance, and management of reclamation systems

No drainage fee shall be payable for: 1) building land under a business or residential construction, if a drainage fee is payable for such business or residential construction; 2) agricultural land for which an irrigation fee is payable.

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●●● Building together for the future Water facilities and systems fee

A water facilities and systems fee shall be payable for the use of publicly-owned water facilities and systems for: 1) irrigation or the provision of water supply to any industry, fishery, or other user; 2) receiving and evacuating of wastewater from any industry, fishery or other user; 3) navigation on canals or other purposes.

The payer of the water facilities and systems fee shall be: 1) the owner or user of any agricultural land or forest land, or industrial or other facility, who uses any water construction or system for irrigation, industry or other needs; 2) any legal entity, entrepreneur, or individual who uses a water construction or system for wastewater evacuation from an industrial or other facility, or for navigation on canals or other purposes.

The water facilities and systems fee shall be payable for publicly-owned facilities used for: 1) irrigation or the provision of water supply to any industry, fishery, or other user; (1) based on the installed capacity of the payer, for each l/s of installed industrial capacity, or based on the surface area (ha) for irrigation and fisheries, (2) based on employed capacity, or based on the received amount (m3) of water where a device for the measurement of delivered water quantity is available, (3) based on employed capacity, or based on the maximum annual amount of water that can be abstracted by the installed capacity, in the case of industry and other users, where a device for the measurement of delivered water quantity is unavailable, (4) based on employed capacity, or based on irrigated surface area, if water is used for irrigation, where a device for the measurement of delivered water quantity is unavailable; 2) the evacuation of wastewater from any industrial or other facility where a device for the measurement of wastewater quantity is available, based on wastewater quantity (m3), quality, and the evacuation method used; 3) the evacuation of wastewater from any industrial or other facility where a device for the measurement of wastewater quantity is unavailable: (1) based on the amount of abstracted water (m3), (2) based on maximum installed water-abstraction capacity, where a device for the measurement of abstracted water quantity is unavailable; 4) navigation on canals, based on the capacity (t) and power (kW) of the vessel.

The basis for assessment of water facilities and systems fees shall be the annual accounts of the operating and maintenance costs of such facilities and systems.

Proceeds from water facilities and systems fees shall be used in the area in which they were realized, to finance the construction, maintenance, and management of the reclamation systems and the regional and multipurpose water systems.

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A water basin fee shall be payable for watercourse development, protection against the adverse effects of water, and development of the water regime of the land in any portion of a sub-basin devoid of drainage systems.

The payer of the water basin fee shall be the owner or user of: 1) agricultural, forest, or building land; 2) any facility or space used for economic or other activities, unless water drainage is provided by a storm water evacuation system; 3) any residence or residential building, unless water drainage is provided by a storm water evacuation system; 4) transportation infrastructure (road, railroad, harbor, port, airport, etc.), unless water drainage is provided by a storm water evacuation system; 5) any asset in general use (park, square, street, etc.), unless water drainage is provided by a storm water evacuation system.

The water basin fee shall be payable as follows: 1) For agricultural, forest, or building land, or component of the transportation infrastructure, excluding land under a residential or business construction – based on the surface area (ha) of such agricultural, forest, or building land, or component of the transportation infrastructure; 2) For building land under a residential or business construction – based on the surface area (m2) of such land.

No water basin fee shall be payable by: 1) the owner or user of any land or construction for which a drainage fee is payable; 2) the owner or user of any land or construction used for national defense (barracks, military range, etc.) or national security purposes; 3) the owner or user of any building land under a residential or business construction, if a water basin fee is payable for such residential or business construction; 4) the warden of a protected area designated pursuant to the regulation which addresses the protection of nature, for agricultural and forest land (forest, pasture, field), where other owner(s) and/or user(s) of the agricultural or forest land hold property rights or usage rights, who manages the area such that environmental conditions are ensured; 5) the owner or user of any land or construction located within a sanitary protection zone.

Proceeds from water basin fees shall be used within the river sub-basin in which they were realized, to finance watercourse development and protection against the adverse effects of water pertaining to 2nd order waters, and the construction, maintenance, and management of reclamation systems pertaining to drainage systems.

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●●● Building together for the future Concession fee

The concession fee payment obligation, amount, deadlines, and conditions, the method of payment, and the use of proceeds from concession fees shall be as stipulated in the law which regulates concessions.

Other sources of funding

Other sources of funding for activities of general interest shall include: 1) funds of legal entities and individuals; 2) prevention funds deducted from insurance premiums; 3) special-purpose loans; 4) public lending; 5) donations, grants, etc.

Budgetary water fund of the Republic of Serbia

A budgetary water fund of the Republic of Serbia is established to ear-mark funds for activities of general interest.

The National Fund shall be financed from: 1) current-year appropriations from the budget of the Republic of Serbia; 2) proceeds from water fees, except the water pollution fee; 3) income from the financial operation activities.

Fifty percent (50%) of the water basin fee proceeds shall constitute revenues of the budget of the respective local self-governing.

The moneys of the National Fund shall be used to finance activities of general interest and pursuant to the annual water management program

Determination of amount

The Government shall determine 1) the amounts to be charged for water fees 2) water discharge fee and water pollution fee increments where the recipient is a protected area 3) water pollution fee deductions where wastewater is treated, based on the effectiveness of such treatment, and the amount of compensation for accounting and invoicing costs.

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Assessment and charging

The Ministry (MAFWM) shall assess the water fees and charge payers of the water asset fee and the water discharge fee.

The ministry responsible for environmental protection (MESP) shall assess and charge payers of the water pollution fee.

Tax Administration shall asses and charge individual payers of the drainage fee and the water basin fee.

The public water management enterprise shall be entrusted to assess and charge payers for the water asset fee and the water facilities and systems fee if it is used for:  uses water land for economic activity (landfill, loading site, etc.);  uses water land to install a temporary facility for economic activity;  uses a surface water body to reside or sojourn and water land to moor a vessel, including any vessel-mounted hospitality or catering facility;  uses water land for sports, recreation, or tourism. as well as to assess and charge of the drainage fee and the water basin fee.

The next two tables show how the proceeds from the water fees (described in The Water Law) are used and who is responsible for water fees definition, calculation and collection.

Table 1 Use of the proceeds from water fees

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OLD WATER LAW 1991

The funds for water management financing are provided from:

Fees for water use Recorded on a separate account of the Water Protection Fee Ministry responsible for water Fee for material extracted from rivers management Drainage fee Revenue of Public water management Irrigation fee companies Fee for water facilities use and other services Budget funds for financing the activities of general interest Budget

The amounts to be charged are determined by the Government (Decree on the fees for ...).

The funds collected from fees and other funds provided in the Budget of the RS are used as participation in financing of activities of general interest in accordance to the annual program of work brought by Government (Decree on the program of construction, reconstruction and maintenance of water facilities ...).

The program determined the facilities, type and scope of the works to be financed, estimation of the construction costs and dynamics of execution as well as the investments, the amount of shares and other related to construction, reconstruction and maintenance of water facilities.

Detailed requirements and criteria for utilization of funds and allocation procedures is determined by the Ministry (The ordinance…).

Fees for water use: user pays for the use of surface, ground and mineral water in proportion to the quantity and quality and depending on the purpose for which water is used. Water protection fee: payable by legal entities and citizens in proportion to the quantity, degree of pollution and the type of wastewater, which is directly or indirectly discharged into surface or groundwater. The fee for the extracted sand and gravel: payable according to the amount of excavated material. The part of the fee (40%) belongs to the municipal budget and 60% to the Public water management company.

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●●● Building together for the future The revenue of Public water management companies

Drainage fee: paid by the users of land on the drainage area, with draining system. Payable according to the drainage costs and the construction, operation and maintenance costs of the drainage facilities on the drained area. Irrigation fee: paid by users of land for which the irrigation water is provided. The amount depends on the operation and maintenance costs of the irrigation facilities as well as on the amount of extracted water per surface of irrigated area (m3/ha). Fee for water facilities use and performance of other services (navigation, energy production...): established by the Public water management company with approval of the Ministry (Decision on fees for drainage, irrigation and water facilities use…).

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