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Why don’t we just privatise KWSB and Karachi’s water?

Can anyone say the price of Karachi water is realistic?

SAMAA | - Posted: Apr 22, 2019 | Last Updated: 2 years ago
Posted: Apr 22, 2019 | Last Updated: 2 years ago

The man who runs Karachi’s water supply likes to ask people a simple question—that he knows they can’t answer.

Question: If you want to get a cable connection for the internet at your apartment you have to pay around Rs600, which is roughly the going rate these days. So why is it that you don’t like paying more for the water you use?

In Karachi, houses pay Rs142 per 1,000 gallons of water they get from the KWSB pipe network. Take a minute and think about that number 142 rupees. Clearly, it gives the message that we can live without water but not Netflix.

Of course, the new MD of KWSB, engineer Asadullah Khan, doesn’t want to shame people for the choices they make in life. By making the comparison between what we are willing to pay for the internet versus what we are willing to pay for water, he just wants to highlight the water board’s predicament. How can it be an effective organisation if people don’t like paying for their product? Incidentally, factories only pay Rs241 for 1,000 gallons of water.

Every year the MD wants to raise the price of water in Karachi by 9%, something which the government has approved since 2015. But he is not given permission to do it because it would be political suicide. And yet, can anyone say that the price of water in Karachi is realistic? Should water have a fixed price? If you leave the tap open you’ll still get a Rs1,500 bill and the person next door who drinks water just once should pay the same bill? But somehow water meters are not popular.

It is understandable if no one really feels much sympathy for the MD of the water board. KWSB has an astoundingly bad reputation with the public. And so, it came as no surprise that during a discussion on Friday with the Hisaar Foundation, MD Asadullah Khan first listened patiently to what the room had to say and then prefaced his responses with these apologetic self-lacerating words: “Kyunke me mujrim theraya gaya hun, me accused hun…” Because I have been deemed the culprit, and am the accused in this case…

The Hisaar Foundation had asked him to come to talk about Karachi’s water governance and how the KWSB could be transformed. Once the introductions were over and first critical remarks on the water crisis were passed, everyone turned to him: “
Aap ne dukhte hue taron ko cher dia,” he said. You’ve touched a nerve.

The fact of the matter is that you touch a nerve with everyone when you bring up the water supply in the city. The good news is that non-profits such as the Hisaar Foundation, the chief minister, the local government minister, the MD and the World Bank are saying that they are trying to find a solution.

One option being discussed is privatisation—but not like you think of it traditionally.

Data: Hisaar Foundation

The Hisaar Foundation’s think tank has proposed one type of ‘soft privatisation’ to fix the KWSB, explained its chairman Zohair Ashir. Remember the days when getting a PTCL phone landline was a cause for celebration, he said. With the introduction of cell phones that difficulty ended. Telephone connections were not just provided by the government. The sector was deregulated and private companies entered to provide the service. Take the example of K-Electric, he added. And while there is a lot of debate on it as a utility, one of the general perceptions is that its efficiency improved upon privatisation. Hisaar is proposing KWSB be deregulated so its efficiency is improved.

The word “privatisation” upsets people nevertheless and the experts in the room were aware of it. “Privatisation of water is a dangerous word,” said Rabel Akhund, a privatisation lawyer. “You cannot privatise the asset. The biggest asset is the water. That cannot be privatised.”

When we think about privatisation we imagine organisations being 100% owned by the government, or 100% owned by the private sector.
The proposal here is something in the middle of this scale. The government owns the assets but contracts out the work, said Zohair Ashir. This way the government is the owner and regulator and enters into agreements. Hisaar’s recommendation is that these agreements must be pro-poor because the worry is that if you give water to the private sector, the poor won’t be able to pay for it.

“If the principle is that everyone has to pay for water, then somebody has to subsidise the poor,” said Hisaar’s Simi Kamal who was moderating the discussion. “If the poor cannot pay then there is a cost associated with delivering the water. So the State must pay and let the State do it.”

Ironically, the poor people in Karachi are already paying much more than the rich, according to water expert NED Dean Prof. Dr Noman Ahmed. The poor pay 17 times more for water but the KWSB doesn’t get a single penny of that. It all goes to the middleman.

Karachi’s water rates are already low, but the problem also is the devaluation of the rupee. “When the rupee devalues the water price stays the same,” pointed out Hisaar’s Jamal Ansari. “The water tariff (price) is still linked to when the dollar-rupee parity was 1:4. That was about 25 paisas per gallon. It became so frivolous that even metering stopped working.”

If something is free or subsidised, you can rest assured there will be a high chance of abuse, he argued and went on to give the example of another commodity. “When we used to subsidise diesel you’d see a lot of black smoke on the roads,” he said. That was when diesel was cheap and fuel filters were expensive. The truck drivers saved by not changing the filter. But when diesel was sold at market value and fuel filters became cheap the smoke disappeared.

Data: Hisaar Foundation

KWSB is thus stuck between a rock and a hard place. People don’t pay their bills and the price of water is already low. But if it tries to raise the price, it risks riots in the city. And everyone is already angry with the utility because there are water shortages. (Just to be fair, the KWSB was quite honest about its own deep failings at the discussion).

And while everyone may want the MD to give their water connection preference, he has to maintain a balance between rich and poor. “If I want to increase my revenue,” said MD Asadullah Khan, “the public would die of thirst.”

SITE’s factories, for example, need 40mgd a day but KWSB supplies them only 1.5mgd. “If I gave them the 40mgd they wanted, my income would go up,” the MD explained. There are meters in SITE and he could charge them and receive the revenue. It is the same problem with DHA which wants 15mgd but gets only 4.5mgd. There are two bulk meters that measure how much water is sent to DHA. If the MD wanted, he could give DHA exactly the amount of water it wanted, because the rich neighbourhoods would pay. “On the 30th of every month, like clockwork I would get my money,” he said. “But I have to see to the poor. The poorest first.” He has to spread the water around. In fact, he has only 500mgd for a city of roughly 17 million people that needs double that much water, 1,100mgd.

K-Electric can do load shedding in areas which don’t pay their bills. It has a proper billing system. But the KWSB can’t even think of doing this as rioting would break out.

The water board’s main challenge is Karachi’s off-the-charts growth. When the utility was formed in 1983, everyone got water when they turned on the tap. But now, it is said that Karachi is a city of 25 million people of which an estimated half live in informal settlements. The city’s expansion has far out-stripped its ability to provide everyone water.  

The MD then gave the example of Khalid bin Waleed road. It has buildings which are no less than 28 stories on 2,000 square yard plots. Before the high-rises were built, you had perhaps 20 plots which would house 15 people each on them. In those days, the KWSB’s four-inch water pipeline and eight- to 12-inch sewage line were sufficient. But suddenly high-rises were built and 1,000 people came to live on those same plots. This is why the old pipelines don’t work and the sewers can’t handle the flood of sewage. “How can I provide them water and how can I give them that infrastructure?” asked the MD. “It is a concrete jungle.”

There was a way that the KWSB could have earned money from all this concrete expansion. The SBCA charges people an infrastructure fee in the name of betterment charges, which was supposed to go to the water board for new pipelines for new buildings. But KWSB does not get paid this money, the MD said. In 2016, the SBCA raised betterment charges over 1,000% for builders. On a 2,000 sq yard commercial plot it would be Rs20 million. The association of builders has obviously opposed this and the KWSB is fighting its case. Imagine how many new pipelines the KWSB could lay with 20 million rupees per high-rise.

This raises the question of how much water each person needs in Karachi if KWSB is at all to ensure it supplies what the city needs. Simi Kamal pointed out that the per capita or per person figure must be fixed. The global figures have changed given that water supplies are finite and
populations have grown.

“If cities are getting bigger, as in the case of Karachi, we have to see where does this water come from?” she said. In Pakistan there is a divisible pool of surface water. Some people say that whatever Sindh gets, more should go to Karachi, which has people coming from all over Pakistan. “So if we fixed a per capita figure then anyone who moves to Karachi from anywhere brings their water entitlement with them and that water needs to be supplied to the city,” she argued. This should apply to other cities as well. Otherwise you keep on having more and more people moving to the cities but their water supplies remaining the same.

Karachi is the only city in Pakistan which is located 150km away from its source—the distance from Keenjhar to Keamari—and needs pipelines and pumping stations to get that water into homes. Lahore, Faisalabad, Multan are all near their water sources. The latest project in Karachi is the K-IV lifeline, which is the city’s third source of water. K-IV was designed for 260mgd but mercifully they thought that it might be best to build it for a future 650mgd. The K-IV will add on to Karachi supply from the reliable Indus River and Hub dam, which depends on rains in Khuzdar. The MD quipped how he joined his post on February 13 and it rained six days later on February 19, which meant that Hub dam received enough water for a year. There had been no rains for the last four years. And so, perhaps it is a sign.

How long that sign will last is anyone’s guess. As Mohammad Shakeel Qureshi, put it, “If you have six changes of commissioner, and MDs then the chief engineers [of KWSB] will always have a sword hanging over their heads. There is no stability.” Qureshi is working as the director of investment with the Karachi Water and Sewerage Services Improvement Project that is bringing the Sindh government and World Bank together to reform the water board. “If the MD believed no one could remove him for five years then even he would not give in to political pressure.” Since the KWSB was formed in 1983 it has had at least 20 MDs.

And then there is the example of the Singapore utility which kept people on for 10 to 12 years after it was privatised, said Simi Kamal. That kind of tenure is needed if experts are to run the show. Hisaar gives this example of a utility that is fully owned by the government but fully run by the private sector. And the other example is of Manila. In 2012, the Asian Development Bank did a study, “Good Practices in Urban Water Management” which compared cities in South Asia. Manila was a good comparison with Karachi as it had a population of 11m and less than 2hrs of water supply. As the city expanded, the Metropolitan Waterworks and Sewerage System began to struggle. In 1997, President Fidel V. Ramos decided to undertake what would become known as the largest privatisation of a utility. The east of Manila was awarded to Ayala Corporation and its international partners—United Utilities (UK) and Bechtel Corporation (US). This new company took on the name Manila Water. The West was awarded to Benpres Holdings of the Lopez Group together with its international partner, Lyonnaise des Eaux (France) to become Maynilad Water Services. It was considered a major success story.

Something similar might work for Karachi. The Japanese International Cooperation Agency did a study in 2008 and recommended KWSB’s bulk supplies should be retained by the towns should get a privatised supply. Ironically, the water that we drink from mineral water companies is already privatised. And to pile on even more irony, mineral water companies are sucking that water out of the groundwater table and not properly paying for it. As Rafey Siddiqui, the CEO of HydroCon that is doing the K-IV project said, the government needs laws on groundwater. “I am surprised that a country like Pakistan that relies on [groundwater] so much, doesn’t have any laws on it. I can put a tubewell in my house [and no one would know].”  

Another solution that was proposed at the discussion was for KWSB to make money off effluent. “Globally the practice is that cleaning sewage is four times more expensive than charging for water,” said Simi Kamal. “And that is what funds a lot of water and sewage organisations.”

Jamal Ansari explained that Karachi’s water board could announce a tariff of one rupee per gallon for effluent treatment. It could charge factories for the effluent they dump and give them water for free. People steal water, not effluent. And that effluent could go to private contractors to treat and recycle. KWSB would start to make money which could be used to subsidise its supply to the poor of the city.

For anyone who attended the discussion on KWSB’s governance, no matter what their position on privatisation or the sincerity and competence of the KWSB team, this much was clear: it will take a long time and a lot of hard work to try and get the utility in some working shape. There is hope, perhaps, with the World Bank project that will be made public in June or so. Perhaps this time the chief minister is serious about accomplishing the task. The law-enforcement agencies certainly are paying attention for they fear water riots this summer as the temperatures rise. And that is reason enough for everyone in this city to start thinking of solutions and becoming willing to pay a price.  

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