Expensive water, inefficient utility

The recent increase in potable water prices have ignited a serious debate about the flaws in the water utility system as a whole, reports Sherine Nasr

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Despite the increase in price, water remains inaccessible to many

The small item on the front-page of Al-Ahram belied the magnitude of the news: water prices were being nearly doubled in Cairo and Giza, from 12 to 23 piastres per cubic metre.

Once the bills started arriving, the angry reactions intensified.

In Matariya, more than 500 people demonstrated in front of the district headquarters, refusing to pay their bills. One family was shocked at the LE100 they were being asked to cough up.

In Al-Wayli and Al-Zawya Al-Hamra, angry residents chased bill collectors down the streets.

In Shubra Al-Kheima, complaints were filed to local MPs, who told residents not to pay their bills.

Much of the anger stems from the fact that the government's decision to raise diesel fuel prices -- thus catalysing immediate increases in the prices of public transport and almost every substantial household commodity -- was only just being digested.

Various MPs have submitted interpellations (questions that must be answered) to the housing minister, whose jurisdiction includes both water and sanitary utilities. They have been demanding to know whether the price increase was constitutional.

"If water prices don't increase, Egypt's entire water utility will collapse," Housing Minister Mohamed Ibrahim Soliman told a recent meeting of the People's Assembly's housing committee. It turned out that the decision to increase water prices was actually taken back in 1996; the price rise was immediately implemented everywhere around the country except in Greater Cairo. It remained unclear why.

Experts said the decision to raise prices was taken immediately after the formation of the Holding Company for Potable Water and Sanitary Drainage last June. The company has now become the umbrella under which the country's 14 water and drainage companies and authorities exist.

Soliman said the holding company was formed to improve water services, work on reducing waste in the national network, and replace older networks with new ones. He also underlined, at the time, that just because the service had been restructured, no price rises were on the way.

Water experts, however, had taken that promise with a grain of salt. "Although the company is 100 per cent state-owned, as a holding company, it will be required to make profits, not losses. This will entail raising water prices," said one, who preferred anonymity. Since there are no other companies providing the same service, consumers can expect monopolistic practices to rule.

To make matters worse, the expert said, the price rise would not necessarily translate into "better quality water, nor does it mean that potable water will eventually reach deprived areas, many of which fall within Greater Cairo."

The gist of the matter is that the government is taking its first step towards removing water altogether from the list of subsidised commodities.

Greater Cairo Water Authority Chairman Amr Wahsh defended the price increases, saying it was the only way service could be extended to different areas in Greater Cairo. "Although the latest increase will contribute some LE48 million to the authority annually, we still won't be able to cover our expenses," he said.

According to Wahsh, the authority loses LE3 million everyday, "the difference between the actual production cost and the current price".

Authority data indicates that actual production costs for a cubic metre of water are estimated at 64 piastres, more than five times the previous price of 12 piastres, and still significantly more than the current 23 piastres.

Wahsh blamed years of improper maintenance of water stations for the eight to 10 per cent waste in clean potable water inside the stations themselves. As the water is distributed along the Greater Cairo network, the waste rate goes up. "If we know that almost six million cubic metres of water are produced in Cairo on a daily basis, we can imagine the volume of waste," he said.

Another burden has been the rising costs of the chemical substances used to clean the water, pumps and other equipment.

Wahsh estimated the overall debts of Egypt's water sector over the years at LE11.7 billion. "In the meantime," he said, "other government entities owe the water authority some LE340 million."

Again, the expert took Wahsh's arguments with more than a grain of salt.

"The water utility suffers from a total state of mismanagement," he said. "This should be underlined as the number one reason for the huge losses."

A former senior official at the authority said that only one of the country's water companies -- Al-Beheira Holding Company for Potable Water -- has a proper cost accounting system. "Most of the companies talk about expenditures, which is totally different from production costs."

The absence of a proper and accurate cost accounting system means that the authority lacks the appropriate means to measure the present volume of production, the actual cost of production, and the bulk of wastes. As such, it can hardly keep a record of total consumption. "It is almost impossible to decide how much a cubic metre of water should cost in order to charge people on an accurate basis," the former official -- an expert at water pricing based on consumption and production -- said.

As such, the charges are usually calculated in a relatively random manner. A scarcity of metres to measure actual consumption and a dearth in bill collectors compound an already troublesome situation. The former official said it was "ridiculous that the newly established holding company had not yet adopted these substantial technical basics."

To calm an angry public, meanwhile, a decision was made that Cairo residents would only have to pay 50 per cent of the increase at present. The remainder would be applied next year.

The new rates are tiered based on consumption levels. Because water is subsidised, those who use more pay more as well. Those who use up to 10 metres per month pay the basic 23 piastres rate. Consumption ranging from 11 to 30 cubic metres is charged at 25 piastres, anything above that costs 30 piastres. Sanitary drainage fees add another 30 per cent to the bill.

Corporate customers -- including factories, religious establishments, coffee shops, restaurants and hotels -- are being charged between 48 piastres and 125 piastres per cubic metre, plus an additional 70 per cent in drainage fees.

The authority should have worked on installing a "metre in every house to keep an accurate record of consumption," before raising prices, the former official said.