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Review of Key Reforms in Urban Water Supply and Sanitation Sector

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Review of Key Reforms in Urban Water Supply and Sanitation Sector Review of Key Reforms in Urban Water Supply and Sanitation Sector Draft Report Version 2 November 2004 Prepared by Vodokanal-Invest- Consulting, Moscow Contents GLOSSARY .................................................................................................................................................. 3 1. INTRODUCTION............................................................................................................................... 4 2. LEGAL AND INSTITUTIONAL REFORMS ................................................................................. 6 2.1. OVERVIEW OF LEGAL SETUP........................................................................................................... 6 2.1.1. Management of, and Ownership in, Communal Water Supply and Sanitation Systems ............ 6 2.1.2. Public Relations. Accounting for Water Consumption. Billing and Payment Procedures ............ 7 2.1.3. Service Quality. Standards and Norms ...................................................................................... 7 2.2. PRIVATE SECTOR PARTICIPATION IN URBAN WATER SUPPLY AND SANITATION ............................ 8 2.1.1. Legal Framework for Private Sector Participation ................................................................... 8 2.1.2. Incentives for, and Main Trends in, Private Sector Involvement............................................... 8 3. ECONOMIC STANDING OF URBAN WATER SUPPLY AND SANITATION SECTOR....... 9 3.1. REVIEW OF CURRENT SITUATION.................................................................................................... 9 3.1.1. Tariff Regulation Practices........................................................................................................ 9 3.1.2. Taxation of Water Utilities......................................................................................................... 9 3.1.3. Assessment of Tariff Adequacy and Cost-Recovery Level........................................................ 10 3.1.4. Share of Water and Sanitation Bill in Household Expenses .................................................... 10 3.1.5. Political Aspects of Tariff Regulation...................................................................................... 11 3.1.6. Tariff Increase and Reduction Potential.................................................................................. 11 3.1.7. Form of Payment for Water and Sanitation Services. Accounts Receivable Pattern and Their Influence on Financial Standing of Water Utilities........................................................................................ 11 3.2. CAPITAL INVESTMENT AND INVESTMENT REQUIREMENTS ........................................................... 12 3.2.1. Condition of Fixed Assets ........................................................................................................ 12 3.2.2. Investment Requirements .........................................................................................................12 3.2.3. Investment Sources and Lending Market ................................................................................. 13 3.2.4. Problems of, and Barriers to, Attracting Investment ............................................................... 13 4. SOCIAL PROTECTION OF THE POPULATION AND ENVIRONMENTAL PROTECTION 14 4.1. SOCIAL PROTECTION OF THE POPULATION.................................................................................... 14 4.1.1. Households’ Ability to Pay for Water Supply and Sanitation Services.................................... 14 4.1.2. Social Protection Mechanisms................................................................................................. 14 4.2. KEY TRENDS IN ENVIRONMENTAL PROTECTION........................................................................... 14 5. LOCAL SPECIALISTS’ OPINION ABOUT THE STATE OF WATER SUPPLY AND SANITATION SECTOR IN KAZAKHSTAN .................................................................................................16 REFERENCES ........................................................................................................................................... 17 ATTACHMENTS....................................................................................................................................... 18 Attachment 1. Key Provisions of Sectoral Drinking Water Program for 2002-2010 ...................................... 19 Attachment 2. Key Functions of National Executive Authorities Governing Communal Water Supply and Sanitation Services ................................................................................................................................................... 21 Attachment 3. List of Regulations Governing Quality of Water Utility Services ........................................... 22 Attachment 4. List of Tariff Regulations......................................................................................................... 23 Attachment 5. Water and Sanitation Tariffs. Cost of WSS Services. Water Loss Requirements.................... 24 3 GLOSSARY Akim Head of administrative territorial unit Akimat Local public executive body АО Joint-stock company NMRA Natural Monopoly and Competition Protection Regulatory Agency Association Association of Water Supply and Sanitation Utilities of the Republic of Kazakhstan “Kazakhstan Su Arnasy” WRC Water Resources Committee of the Ministry of Agriculture WTP Wastewater treatment plant EPC Environmental Protection Committee Maslikhat Oblast public executive body Minselkhoz Ministry of Agriculture of the Republic of Kazakhstan LSG Local self-governance VAT Value-added tax LSG authorities Local self-governance authorities Sectoral Program Sectoral Drinking Water Program for 2002-2010 MAC Maximum allowable concentration User Rules User Rules for Water Supply and Sanitation in the Localities of the Republic of Kazakhstan RK Republic of Kazakhstan Guiding Principles Guiding Principles for the Reform of the Urban Water Supply and Sanitation Sector in the NIS SanPiN Sanitary rules and standards CIS Community of Independent State USSR Union of Soviet Socialist Republics tenge national currency of the Republic of Kazakhstan 4 1. INTRODUCTION The Republic of Kazakhstan is situated to the south of the Russian Federation, has an area of 2,717 thousand km2 (ninth in the world), and borders on Russia, China, Kyrgyz Republic, Uzbekistan, and Turkmenistan. Total length of its borders is 12,187 km. The population of the Republic of Kazakhstan is about 15 mln people. Its capital city is Astana with the population of about 500,000 people (official data). There are nineteen cities with population above 100,000 people in the country. The country’s urban population accounts for approximately 56 percent. Average population density is 20 persons/km2. It is comprised of fourteen oblasts, City of Astana and City of Almaty. Significant portion of Kazakhstan’s population is in the downstream reach of key trans-boundary water basins, which has a major impact on the degree of water supply to those areas. Conventionally, the hydrographic territory of the country comprises eight water basins: Aral-Syrdarya, Shu-Talas, Balkhash-Alakol, Irtysh, Ishim, Nura-Sarysus, Tobol-Torgay, and Ural-Caspian. Main rivers of the country – Irtysh, Ili, Syrdarya, Ural, Chu, and Talas – are trans-boundary ones. Total water resources in average year amount to 100.5 km2, of which just 56.5 km2 is formed in the territory of Kazakhstan and the rest of 44.0 km2 comes from neighboring countries (China, Kyrgyz Republic, Russia, and Uzbekistan). Climate and anthropogenic activities have considerable influence on the water resources, leading to sustainable downward trend in surface waters in the country. Kazakhstan ranks last among the CIS countries in terms of the water supply. Water supply averages 20,000 m3 per km2, which is one of the lowest indicators among Eurasian countries. Underground water is available practically in all the regions of the country, but its distribution is extremely uneven and it varies by quality and stock. Average water consumption for household and drinking needs is approximately 170 liters per capita a day in urban areas and about 70 liters per capita a day in rural areas. Total water consumption by households for household and drinking needs accounts for about 5 percent of the water consumed by all the sectors of the country’s economy. Underground water makes up 65.2 percent of the total water consumed for household and drinking needs, and surface water, 34.8 percent. In Aktyubinsk, Zhambyl, and Southern Kazakhstan Oblasts, underground water accounts for almost 90 percent. In Kostanay, Mangistaus, Akmolin, and Pavlodar Oblasts, mostly surface water is used (55-70 percent). Surface water is supplied fully or partially to cities such as Astana, Atyrau, Uralsk, Almaty, Petropavlovsk, and other. Coverage of urban population with centralized water supply does not exceed 80 percent (Astana – 100 percent; Almaty – 95 percent; oblast centers – 80 percent; regional centers and towns – 70 percent). Centralized water supply systems serve more than 100 water supply and sanitation utilities. Main problems faced by the urban water supply and sanitation sector are: • Inadequate use of underground water deposits explored specifically for water supply for household and drinking needs • Technogenic pollution of water sources, especially surface water, with industrial, agricultural, and municipal effluents • High deterioration
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