• Cost-reflective pricing in the works: Rambukwella

 The National Water Supply and Drainage Board (NWSDB) is preparing to increase water tariffs soon after the electricity tariff hike percentage is officially decided and announced by the Ceylon Electricity Board (CEB) next month, The Sunday Morning learns.

It is learnt that discussions are ongoing regarding the tariff percentage increase and the process of providing subsidies for those living under the poverty line.

New flat rate, special subsidy mechanism in the works

Speaking to The Sunday Morning, Water Supply Minister Keheliya Rambukwella said the Ministry was yet to officially decide on water tariffs, but that it was currently discussing the matter to introduce cost-reflective tariffs for water.

According to Rambukwella, a flat rate will be introduced for water and a process of providing a special subsidy mechanism will come into effect to provide relief for those under the poverty line.

“We haven’t decided yet, but discussions are ongoing that it must be cost-reflective. Such realities must be taken into consideration. Families under the poverty line will also be given water at the same rate but we will double their Samurdhi allowance. Although we are yet to decide on the percentage, roughly 30% out of the Samurdhi allowance will be allocated for power and water supply,” the Minister said, adding that when water was provided at a flat rate people would be more careful of water usage and attempt to save water.   

“When we provide water at a very nominal sum, there is no limit to the wastage – some are using purified water for gardening. They will pay more attention when they have to pay. Since we are doubling the benefits given under Samurdhi, around 30% will be set aside for power and water supply,” Rambukwella explained.   

Previously, in addition to Samurdhi recipients, low-income earners too benefited from a subsidised water supply connection fee of Rs. 5,000 (which can be paid in instalments), instead of the regular one-time connection charge of Rs. 17,000. 

Prior to the tariff revision, Samurdhi recipients who consumed up to 15 cubic metres of water per month were provided a subsidised tariff. However, water consumption of over 15 cubic metres is subject to normal domestic tariff rates as 500 litres a day is considered an adequate supply for the average low-income household’s daily safe water requirement.

The monthly water bill for average households is 2.7% of the average monthly income and 5.5% for Samurdhi recipients, assuming their monthly Samurdhi allocation is Rs. 3,600. Apart from this, Samurdhi recipients receive financial assistance of over Rs. 500 per month.

Recent tariff revision inadequate?

However, the last tariff revision was introduced with effect from 1 September 2022 via a special gazette notification issued by Minister Rambukwella, in terms of Section 84 of the NWSDB Law No.2 of 1974, after a lapse of nearly a decade since the last tariff revision in 2012. 

The tariffs were revised for all consumers supplied with water from the water supply schemes of the NWSDB and it includes monthly service charges, other charges, and applicable taxes in addition to the water charges, as per the gazette. 

Even after the recent tariff revision, new tariffs were suggested by the NWSDB, claiming that the previous tariff revision did not reflect the costs borne by the board during production and distribution. The process has now been halted due to the ongoing discussions on another electricity tariff revision. 

The NWSDB stated that it still incurred a loss of around 10 cents per litre, since although the price of a litre of water had increased from two cents to five cents after the price revision, the actual production cost was around 15 cents. 

As per the NWSDB statistics, the current cost of water production alone is Rs. 54.63 per cubic metre. In addition, when calculating the unit cost, it includes costs relating to personnel, electricity and pumping costs, chemical costs, and repair and maintenance costs along with other costs which reflect 44.67%, 16.68%, 4.17%, and 34.48% respectively of the total unit cost. 

The board earns an income of Rs. 79.53 per cubic metre as per the current tariffs. However, under the previous tariffs, this was Rs. 43.42 per cubic metre. The board produces a total of 2,299,017.91 cubic metres per day.   

According to statistics, 16.68% of the total unit cost of water is decided by the electricity tariffs and therefore, the changes made to electricity tariffs have a direct and major impact on water tariffs. 

According to the Central Bank of Sri Lanka’s (CBSL) Annual Report, in 2021, the water board recorded an operating loss of Rs. 3.1 billion compared to the loss of Rs. 370.5 million recorded in the previous year, owing to increases in operation and maintenance costs during the period under review.

Further, the NWSDB experienced losses in 2018 and 2019, primarily due to the drop in the gross profit margin and the increase in administrative cost – particularly cost of staff and capital depreciation. However, in 2020, the NWSDB returned to profitability with improved revenue performance. The gradual decline in non-revenue water supply is an indication of improved revenue efficiency of the board. 

Meanwhile, when contacted, NWSDB Additional General Manager (Policy and Planning) Eng. Wasantha Illangasinghe said the board was monitoring the developments in the electricity sector and water tariffs would be increased based on the percentage by which electricity tariffs would be increased. 

According to the NWSDB, only 65% of the Sri Lankan population is served with some type of  safe drinking water, out of which only 43.5% receives pipe-borne water. The remaining 35% of the population has alternative forms of water supply, which are either extremely costly or unsafe for consumption.