Water tariff revision in line with project funded by ADB

Ministry Secy. contradicts PM’s Office over denial of Cabinet approval

By Shamindra Ferdinando

The recent water tariff increase has been in line with an agreement between the Wickremesinghe-Rajapaksa government and the Asian Development Bank (ADB).

According to the Water Supply and Estate Infrastructure Development Ministry, the USD 200 mn loan has been announced, following a meeting at the Presidential Secretariat, attended by President’s Chief of Staff Sagala Ratnayake, on 05 July. The ADB was meant to carry out a water reforms programme, the Ministry said.

Subsequently, Water Supply and State Infrastructure Development Minister Jeevan Thondaman (SLPP Nuwara Eliya District), who had jointly chaired the meeting at the Presidential Secretariat, with former Minister Sagala Ratnayaka, issued an Extraordinary Gazette notification pertaining to the new rates, effective from 03 August.

General Secretary of the CWC Thondaman received the relevant Cabinet portfolio in January this year from President Ranil Wickremesinghe.

The Ministry declared that the reforms undertaken were the most ambitious since the establishment of the National Water Supply and Drainage Board (NWSDB), nearly 50 years ago. These comprehensive reforms were aimed at transforming the water sector and ensure sustainable water management for future generations, it said.

The seven-point reforms agenda comprised a) a new water resources policy to effectively manage the country’s water resources; b) the establishment of a corporate strategy for the Water Board; c) a climate resilience roadmap; d) a new tariff policy; e) modern water safety standards; f) the creation of an environmental and social unit within the Water Board; and g) the introduction of public-private partnerships in the water supply sector.

The Ministry has assured regular updates to the public to ensure transparency and accountability throughout the implementation process. However, a statement issued by the Ministry, following the 05 July meeting, hasn’t referred to financial difficulties experienced by the NWSDB.

Minister Thondaman, on 18 July, told Parliament that the government had no option but to increase water rates due to the increase of electricity tariffs by 66 percent. The Minister said that the increase of electricity rates has resulted in water management cost rising to Rs 435 mn. In addition to that, the NWSDB had to settle a Rs 2.4 bn loan, the Minister said, reminding that he informed Parliament last February of the urgent need to increase water rates.

The Minister said so responding to SJB lawmaker Ishak Rahuman. Thondaman revealed that he made available the new water tariffs formula to the Office of the Opposition Leader.

On the same day, Minister Thondaman strongly justified the water rates increase at a media briefing conducted at the Presidential Media Division. The youngest member of the Cabinet explained how an additional monthly expenditure of Rs 500 mn, in addition to substantial monthly losses of nearly Rs. 2.8 billion, and a projected annual loss of Rs. 34 billion, hindered the NWSDB’s ability to meet operational expenses, service debts, and maintain the quality of water supply services.

The increase was driven by several factors, including the surge in electricity tariffs, which contribute significantly to the cost of water production. Additionally, the burden of debt (due to past capital expenditure to expand water infrastructure), compounded by currency depreciation and interest rate hikes, together with the exponential increase in the cost of raw materials required to treat water, added to the financial strain on the NWSDB, the Minister added.

Close on the heels of Minister Thondaman declaring his intention to go ahead with a new tariffs formula, Prime Minister Dinesh Gunawardena’s Office announced the Premier thwarted the move. According to the Premier’s Office, Gunawardena told the Cabinet of Ministers, on 17 July, he couldn’t accept increased water tariffs in a way the poor couldn’t afford.

Revealing that Premier Gunawardena, on three occasions, submitted his recommendations, in respect of Cabinet papers, in this regard, his Office said, on 21 July, that the Cabinet paper, on the new tariff structure, was put off for the third time, due to the MEP leader’s intervention.

Meanwhile, R.M.W.S. Saramadiwakara, Secretary to Water Supply and Estate Infrastructure Development Ministry, in a statement issued on 03 August, contradicted the Premier’s Office, pertaining to its claim that a decision on the new pricing formula was not taken on 17 July.

Samaradiwakera said that the new formula received the approval of the Cabinet of Ministers on 17 July. Having explained the circumstances leading to the latest price revision, the Ministry Secretary said that in terms of the agreement with the ADB, a new pricing formula would be introduced.