World Bank Government of Punjab Final Report Urban …waterinfo.net.pk/sites/default/files/knowledge/Urban Water Supply... · World Bank Government of Punjab Final Report Urban

Final ReportDecember 2006

World Bank Government of Punjab

Final Report

Urban Water Supply and SewerageReform Strategy

Sarweystraße 370191 Stuttgart • GermanyPhone: + 49 - 7 11 - 89 95 - 0Fax: + 49 - 7 11 - 89 95 - 459

Please contact: Jeffrey JohnsonExtension: 659e-mail: [email protected]

I306.001\Final Report Dec 2006

The findings, interpretations, and conclusions expressed in this report are entirely those ofthe authors and should not be attributed in any manner to PPIAF or to the World Bank, toits affiliated organizations, or to members of its Board of Executive Directors or thecountries they represent. Neither PPIAF nor the World Bank guarantees the accuracy of thedata included in this publication or accepts responsibility for any consequence of their use.The boundaries, colors, denominations, and other information shown on any map in thisreport do not imply on the part of PPIAF or the World Bank Group any judgement on thelegal status of any territory or the endorsement or acceptance of such boundaries.

The Public-Private Infrastructure Advisory Facility (PPIAF) is a multi-donor technicalassistance facility aimed at helping developing countries improve the quality of theirinfrastructure through private sector involvement. For more information on the facility seethe website: www.ppiaf.org

This document has been prepared for the titled project and should not be relied upon orused for any other purpose without an independent check being carried out as to itssuitability and prior written approval of Fichtner GmbH & Co. KG, which accepts noresponsibility or liability for the consequences of this document being used for any purposeother than the purposes for which it was commissioned. Any person using or relying on thedocument for such other purpose agrees, and will by such use or reliance be taken toconfirm his agreement to indemnify Fichtner GmbH & Co. KG for all loss or damageresulting therefrom. Fichtner GmbH & Co. KG accepts no responsibility or liability for thisdocument to any party other than the person by whom it was commissioned.

II306.001\Final Report Dec 2006

Table of Contents

1. Introduction 1-7

2. Existing Situation 2-1

2.1 Service Quality 2-1

2.2 WSS Assets 2-2

2.2.1 Ownership and Valuations 2-2

2.2.2 Characteristics 2-3

2.3 Water Resources and Environmental Sustainability 2-5

2.4 Institutional Situation 2-6

2.4.1 Current Institutional Structure 2-6

2.4.2 WSS Service Provision 2-7

2.4.3 Alternate (informal) Service Providers 2-8

2.4.4 Cantonments and other Formal Service Arrangements 2-8

2.5 Human Resources 2-9

2.5.1 Skills/Resource Assessment 2-9

2.5.2 Skills Gaps 2-11

2.5.3 Capacity building Opportunities/Programs 2-12

2.6 Financial Situation 2-13

2.7 Law and Regulation 2-16

2.8 Planning and Investment 2-17

2.8.1 Existing plans 2-17

2.8.2 On-going investment programmes 2-18

2.8.3 Assessment of Key Investment Needs 2-19

2.8.4 Existing Sources of Finance and Appraisal Procedures 2-21

2.9 Assessment of Stakeholder Issues 2-21

2.10 Summary of Key Issues 2-23

3. Options for Improvement 3-1

3.1 Minimum Customer Service Standards 3-1

3.2 Minimum Business Performance Standards 3-1

3.3 Reduce Costs and Improve Cost Recovery 3-2

3.3.1 Define Short-term Options 3-2

3.3.2 Reduce O&M Costs (OPEX) 3-3

III306.001\Final Report Dec 2006

3.3.3 Improve Collection 3-4

3.3.4 Raise Tariffs 3-5

3.3.5 Accountability and Incentive Framework 3-5

3.3.6 Contractual Incentives-Public Sector Options 3-6

3.3.7 Contractual Incentives-Possible roles for the private sector 3-8

3.3.8 Financial and Regulatory Incentives 3-11

3.4 Sector Institutional Framework 3-16

3.4.1 Roles and Responsibilities 3-16

3.4.2 Performance MOU 3-17

3.4.3 Funding Sources 3-18

3.5 Building Human Resources 3-20

3.6 Communication Needs 3-20

3.6.1 Stakeholder communication options 3-20

3.6.2 Issues to be targeted 3-20

4. Recommended Reform Agenda 4-1

4.1 Overview of the Strategy 4-1

4.2 Establish WSS Service Providers as Autonomous Entities 4-2

4.2.1 Corporatisation of Service Providers 4-2

4.2.2 Data Collection 4-4

4.2.3 Prepare Asset Inventories and Valuations 4-4

4.2.4 Short-term Performance Improvement Plan 4-5

4.2.5 Consider Possible Private Sector Participation 4-5

4.3 Financing Investments for Service Improvements 4-6

4.3.1 Develop Clear Links and Procedures for Financial Assistance 4-6

4.3.2 Short Term Assistance to the Cities 4-6

4.4 Sector Institutions 4-7

4.4.1 Institutional Arrangements 4-8

4.4.2 Establish the TMA WSS Management Department 4-10

4.4.3 Capacity Building 4-10

4.4.4 Longer Term Development Plan 4-10

5. Next Steps 5-1

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Annexes

Annex 1 Outline of Performance MOU 2Annex 2: Preliminary Benchmarks for 8 Cities 3Annex 3: Draft Tasks for Co-ordinator 5Annex 4: Domestic Water and Sewerage Tariff Structure of the WSS Providers 6Annex 5 Indicative Investment Plans for 8 Cities 15Annex 6:Financial Model Faisalabad 31Annex 7: Financial Model Gujranwala 32Annex 8: Financial Model Multan 33Annex 9: Financial Model Rawalpindi 34Annex 10: Financial Model Bahawalpur 35Annex 11: Financial Model DG Khan 36Annex 12: Financial Model Sargodha 37Annex 13: Financial Model Sialkot 38Annex 14: Proposed Volumetric Tariffs Year 1 to 10 39Annex 15: Proposed Tariffs per Connection Year 1 to 10 40Annex 16: Proposed Sewerage Tariffs per Connection Year 1 to 10 41Annex 17 List of Project Final Reports 42Annex 18 References and Sources of Information 43

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List of Tables

Table 1: Characteristics of the 8 Cities 1-8Table 2: Some Performance Indicators – Existing Situation and Possible Targets 2-1Table 3: Summary of Staffing Arrangements 2-10Table 4: Domestic Water Tariffs 2-13Table 5: Domestic Sewerage Tariffs 2-14Table 6: Financial Indicators 2004/2005 2-15Table 7: Current and Planned Funding for Capital Expenditure in the 8 Cities 2-18Table 8: Summary Table of Proposed Investment 2-21Table 9: Summary of Financing Deficits of WSS Service Providers 3-12Table 10: Milestones or Indicators for progress monitoring in the Second Phase 3-14Table 11: Benchmarks for performance monitoring in the Third Phase 3-15

List of Figures

Figure 1: Current Institutional Structure 2-7Figure 2: Comparison of Tariffs and Costs, WTP 2-14Figure 3: The Corporatised WSS utility 3-7Figure 4: Proposed Institutional Set-up 3-16Figure 5: General Scheme of the Reform Strategy 4-1Figure 6: Transformation to Corporatised Utility 4-3Figure 7: Transitional Arrangement 4-9Figure 8: Final Institutional Arrangement 4-9

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Abbreviations, Acronyms and Local Units

ADB Asian Development BankADP Annual Development PlanBOOT Build, Own, Operate, TransferCAPEX Capital costsCCB Citizen’s Community BoardsCDG City District GovernmentCO Chief OfficerDBO Design, Build, OperateD.O.H Department of HealthEPC Engineer, Procure, ConstructGoPunjab Government of the PunjabGoP Government of PakistanGPOBA Global Partnership on Output-Based AidH& UD Housing and Urban Development Departmenthrs hour(s)IFI International Financial Institutionsl literLGO Local Government Ordinanceslpcd liter per capita per dayJV joint venturekm kilometers = 1000 metersm meterMGD 1 million (UK) gallons per dayMOE Ministry of Environmentn.a. not availableNCCWS National Coordinating Council for Water and SanitationNGO Non Governmental OrganizationOHR overhead reservoirO&M operation and maintenancep.a. per yearPCRWR Pakistan Council of Research in Water ResourcesPHED Public Health Engineering DepartmentPKR, R Pakistani RupeesPLGO Punjab Local Government Ordinance, 2001PPIAF Public-Private Infrastructure Advisory FacilityPPP Public Private PartnershipsPSP Private Sector ParticipationR, PKR Pakistani RupeesSPBUSP Southern Punjab Basic Urban Services Project (ADB financed)TA Technical AssistanceTMA Tehsil Municipal AdministrationTMO Tehsil Municipal OfficerTOR Terms of ReferenceTO (I&S) Tehsil Officer (Infrastructure & Services)UfW Unaccounted for WaterUS$ US Dollars

306.001\Final Report Dec 2006 1-7

1. IntroductionThe Government of Punjab (GoPunjab) wishes to improve the provisionof water supply and sewerage (WSS) services in eight of the largest citiesof the province. PPIAF, GPOBA and WSP have agreed to support theGoPunjab in achieving this objective by financing the Punjab UrbanWater Supply and Sewerage Reform Strategy of which this is the finalreport.

The Public-Private Infrastructure Advisory Facility (PPIAF) is a multi-donor technical assistance facility aimed at helping developing countriesimprove the quality of their infrastructure through private sectorinvolvement.

FICHTNER GmbH & Co. KG was awarded a contract by The WorldBank to prepare the Punjab Urban Water Supply and Sewerage ReformStrategy on July 26, 2005.

With the exception of Lahore, the study covers the 8 largest cities of theprovince, i.e. Faisalabad, Gujranwala, Multan, Rawalpindi, Bahawalpur,Dera Ghazi Khan, Sargodha and Sialkot. In four cities (Faisalabad,Gujranwala, Multan, Rawalpindi), the water supply and sewerageservices are provided by a Water and Sanitation Agency (WASA), whichis an “autonomous agency” and part of the Development Authority. Inthe remaining four cities (Bahawalpur, Dera Ghazi Khan, Sargodha,Sialkot) the services are provided directly by the Tehsil MunicipalAdministration (TMA).

The service providers are horizontally and vertically integratedorganisations meaning that they are responsible for water supply,drainage and sanitation services (horizontally integrated) from source toconsumer and from consumer to final point of disposal of wastewater(vertically integrated). In TMA the same department responsible forproviding WSS also provides other municipal services e.g. solid wastemanagement, road maintenance, street lighting, parks and green areas etc.

Table 1 shows some basic information about the water supply andsewerage in the eight cities.


Table 1: Characteristics of the 8 CitiesTotal

Populationof theUrbanareas

Populationof service

area

City(Urban)area inhectare

ServiceArea

covered inhectares

WaterSupply

coveragein %

Seweragesupply

coveragein %

WASAFaisalabad 2,569,693 1,500,000 n.a. 7500 60% 65%Gujranwala 1,469,367 1,403,000 4667 n.a. 25% 55%Multan 1,465,640 1,465,640 n.a. n.a. 50%-60% 55%Rawalpindi 1,785,144 1,050,000 6080 75% 66%TMABahawalpur 571,976 350,000 9620 n.a. 10%-30% 50%D. G. Khan 1,300,000 357,000 n.a. n.a. 30% 50%Sargodha 552,428 312,000 1792 n.a. 45% 45%Sialkot 500,000 483,841 1866 n.a. 80% 20%

Source: Information received from TMA / WASA, official statistics and own estimates

Notes: Sewerage coverage includes coverage with open drains. Total population (includescantonment areas in some cases) are extrapolated figures from 1998 census. D.G. Khanpopulation is total population of the Tehsil, which includes approx. 1 million rural inhabitants.Coverage figures are not based on recorded connections alone, but include other means of serviceprovision, such as standpipes, tanker services etc.

In several cities1 a proportion of the city area has WSS services providedindependently from the WASAs and TMAs by, for example, CantonmentBoards and/or private housing developments. Furthermore, theboundaries of responsibility of the WASAs do not exactly coincide withthe city boundaries and in some cases the TMAs also provide WSSservices outside the urban areas. There are no reliable maps showing theprecise areas of responsibility for service provision of the WASAs andTMAs.

This report concentrates on the above named cities for which surveyshave been carried out to collect on the spot data, which is reported on inthe various project reports2. However, the study has aimed to provide astrategy for reform of the WSS sector which could be of widerapplication in the Punjab, including many of the medium sized towns andcities, but in general it cannot be considered directly applicable to ruralareas. Lahore is considered a separate case too.

It is the policy of the provincial government to support the devolution ofWSS services under the terms of the Punjab Local GovernmentOrdinance (PLGO), while recognising that GoPunjab still has a majorrole to play in setting policy for the sector and supporting investmentuntil such time as the service providers are self-financing. The FederalGovernment has given guidance to the future direction of the sectorthrough the preparation of draft strategies for drinking water supply andfor sanitation but these are still to be finalised and then formally adoptedat the Punjab level. The same situation broadly applies to matters of 1 Rawalpindi, Multan, Sargodha, Sialkot. In Gujranwala the cantonment is outside thecity area.2 A list of project reports is given in Annex 17


environmental protection and the conservation and use of waterresources, which at this time is not adequately regulated. There are noformal standards for the quality of drinking water in Pakistan, so theguidance levels of the World Health Organisation (WHO) - for a limitednumber of parameters only - are sometimes reported though derogationsmay be applied, for example, in situations where the raw water has a highlevel of arsenic and the infrastructure for its removal does not exist.

The Federal Government is investing heavily in the construction ofdrinking water stations throughout Pakistan. It has three programmesrunning and aims to have installed stations in every union council by2007. On completion of this measure it could in theory claim to havemet the millennium development goal (MDG) of halving the number ofpersons not in receipt of safe drinking water by 2015. There is noequivalent programme on the sanitation side (in the 8 Punjab cities atleast) related to the sanitation MDG of halving the number of persons notin receipt of safe sanitation by 2015.

There are no laws (and hence no enforcement) controlling the abstractionof water from ground or surface water sources or the discharge ofwastewater (both domestic and industrial) back to the environment eitherto water courses of even direct to groundwater. Water is abstractedwithout charge and returned to the environment without chargeregardless of its quality.

There is a dearth of reliable data, which makes assessment of the currentsituation in the sector and future planning difficult and uncertain.References and sources of information used are given in Annex 18. Wehave based our report on documents, which we have considered, in ourdiscretion, to be of relevance and which have been made available to us.We have also relied on our discussions with service providers (TMA andWASA) and government agencies as a means of confirming informationprovided to us. Unless stated otherwise, statements in this report arebased upon such discussions without independent verification.

While we have undertaken extensive efforts to ensure that we haveobtained all material information, the document received and reviewedmay not comprise all the documents that ought to have been provided tous for the purpose of our study and/or may not contain all theinformation, which may be relevant to any decision to be made based onthis report.


2. Existing Situation

2.1 Service Quality

There are no formal standards for the quality of services to be providedby the WSS service providers in the Punjab. Although there aresignificant variations from city to city, standards are generally poor whencompared with internationally accepted benchmarks.

Table 2 compares typical service quality and performance data for thecities with targets for reasonable expectations, and indicates thesignificant gap that needs to be addressed.

Table 2: Some Performance Indicators – Existing Situation andPossible Targets

Indicator Existing Situation Possible Target

Employees/thousand customers >7 2 to 3Coverage of water supply services (%) 20-80 100Hours of service per day Usually 2-3 times per

day for 2 hours24

Actual domestic consumption(l/person/day)

Not measured 100 to 130

Leakage/production >0.60 (estimated) 0.15 to 0.20Commercial losses/production Not known 0.05 to 0.10Payments/bills issued 0.18 to 0.86 >0.95Water quality failures/compliantsamples

Not measured <0.01

Water mains burst/km estimated >10 <5Sewer collapses/km estimated >5 <2Operating ratio (ops costs/income) Significantly >1 <1.1Physical asset renewal rate/year (%) Almost zero >1

Source: Information received from TMA / WASA, FICHTNER Database and own estimates

In summary, the reliability of services is poor with water being suppliedon an intermittent basis and at variable pressure and the services are notbeing provided in an efficient and sustainable way.

The quality of water supplied at any point in the distribution systems isnot known since there is no regular sampling and analysis. Given theintermittent supply regime and the poor condition of the distributionnetworks, the assumption has to be that the water supplied to customersis contaminated, even though in most cases the water abstracted at sourceis wholesome. This is backed up by the findings of periodicinvestigations made by the Pakistan Council for Research in Waterresources (PCRWR). The consultants were informed that the quality ofdrinking water at the federally funded drinking water stations inRawalpindi was frequently suffering from microbiological contaminationand so unfit for consumption. It is likely that this situation could exist inthe other cities too.


The coverage of water supply services varies considerably from city tocity and typically is low where there is plentiful availability of groundwater at shallow levels, even though such water is generallycontaminated (mainly through infiltration of sewage through faultypipes). The coverage of some form of communal sanitation is moreevenly provided though this is often in the form of open drains, which areconsidered to be unsatisfactory. Generally, industrial units have theirown sources of water and means of disposal of wastewater.

The sewerage service generally suffers from:• Poor planning and failure to keep up with the development of the

cities or because of piecemeal extensions. The result is that capacityis inadequate in many places and leading to overflowing on to thesurface and thence drainage to low lying (ponded) areas withresultant contamination of near surface groundwater

• Poor maintenance of pumping stations again leading to overflows andponding (only Rawalpindi’s sewerage system can function withoutpumping)

• Combined systems of sewerage and stormwater, which can’t copewith heavy rainfall, which leads to surface flooding and ponding.

• Absence of any sewage treatment.

Consequently the wastewater systems are major health hazards.

The willingness to pay (WTP) and social surveys conducted by theconsultants have shown that people are generally dissatisfied with thequality of WSS services. Consequently they are reluctant to pay theirbills and there is a very low level of collection of user charges. However,the surveys have also shown that customers would be prepared to paymore than the present level of charges for better service quality. Inaddition, analysis of the financial information provided by the serviceproviders shows that with a high level of collection efficiency the incomegenerated would in some cases nearly cover current costs of providingthe services and in other cases still not even cover a fraction of operatingcosts. Therefore, it is concluded that not only must the collection rates beimproved but also significant increases in tariff levels are required.

2.2 WSS Assets

2.2.1 Ownership and Valuations

As confirmed by the P&D Department, the WSS assets are owned by thelocal governments, although the responsible department of LocalGovernment and Regional Development (LG & RD) apparentlyconsiders itself to have some caretaker function for the assets. The assetsare not registered in any way and are not formally assigned to theindividual cities as stated in PLGO (2001) Chapter XIII on LocalGovernment Property.


There are no asset registers and generally information on the assets issparse such that there are no comprehensive maps showing their location,date of construction, materials or current condition and serviceability.There are no financial valuations of the assets and they are not amortisedin accordance with any recognised practice.

Due to their age and limitations on operation and maintenance (O&M)expenditure in the past many of the assets are in poor condition andfrequently fully depreciated or operating at a fraction of their designcapability.

2.2.2 Characteristics

The water supply assets typically comprise deep cased and screenedtubewells fitted with turbine driven or submersible electrically drivenpumps. Tubewells are often located within the urban areas3. Theseabstract ground water and deliver it directly into distribution pipenetworks with customer connections. There is no measurement of thevolume of water abstracted and no charge is levied for its abstraction.The pumps run on an intermittent basis and consequently the distributionnetworks are not constantly pressurised to provide continuous service.The condition of the tubewells and borehole pumps is not generallyrecorded, but is known to some extent by the operatives. Tubewellssometimes have to be abandoned or deepened for reasons such as adeclining groundwater table or clogged screens. Because the pumpsdeliver water directly to the open distribution network it is inevitable thatfor much of the time they will not run at their optimum efficiency dutypoint. Furthermore over time their impellers must inevitably deteriorateand this further reduces the pumping efficiency. There is no regularmonitoring of efficiency, which inevitably is difficult to do withoutinstalled equipment for flow and pressure monitoring. The result is thatpumping water into distribution is relatively inefficient and thereforemore costly than need be the case.

The original design and construction of the water distribution systemsincluded elevated reservoirs that in most cases have been abandoned.This is because of a desire to reduce electricity consumption throughreduced pump operation, and hence O&M costs, as well as in some casesa perceived threat from terrorist action (potential for adding pollutants tothe water in the reservoirs). The abandonment of the use of overheadreservoirs achieves the opposite effect, namely the reduction of overallefficiency. Elevated reservoirs provide a means for efficient pumpingsince the pump delivery head (pressure) is more or less uniform and canbe matched to the pump’s characteristics.

3 This is the case in Rawalpindi, Multan, Sialkot, Bahawalpur. For example, in Sialkotall tubewells are within the city. In Rawalpindi around 2/3 of the tubewells are insidethe city.


With the exception of Rawalpindi, which treats highly polluted surfacewater, there are no facilities regularly used for disinfecting water prior todelivery to consumers.

The piped distribution networks have often evolved as localised networksbased on a single tubewell and elevated reservoir, so there are no fullyintegrated systems. There are (no regularly used) hydraulic models ofthe networks4, which generally consist of small diameter pipelines. Theearliest systems used cast iron (CI) pipes and these have often functionedwell though with a tendency to internal corrosion leading to dirty waterproblems. The most common material is asbestos cement (AC) datingfrom the 1950s onwards though progressively supplanted as the dominantmaterial by polyvinyl chloride (PVC) from the 1970s onwards and stillthe most commonly used material in the Punjab. Other materials includegalvanised steel (GS or GI) particularly for the small bore connections tocustomers’ properties, and recently some ductile iron (DI) on largerdiameter pipelines in Faisalabad and medium density polyethylene(MDPE) pipes have been installed.

Leakage from the networks is assessed to be very high (probably greaterthan 60% of the water put in) though there are no measured data to backthis up. There are no systematic programmes of leak detection andreduction and no formal records are kept of failures of the distributionnetwork or the numbers and nature of interventions that have to be made.

Consumer connections are not metered and payments are made on avariety of scales related for example to the area of property served andthe size of the pipe connection to the property. There are reported to bemany illegal connections to the networks but the service providers havelimited powers and money to seriously tackle the problem.

Consumers frequently install small “donkey” pumps on their connectionsto take more water when the pressure is low. This seriously affects thequality of service of other consumers and although it may be consideredillegal, little effort is made to reduce the practice.

Consumers discharge wastewater either to open drains or piped sewers orto some form of septic tank or soakaway. There are no specific chargeslevied for disposal of wastewater though the volume of wastewater mayconsiderably exceed the volume of water supplied because people uselocally abstracted groundwater. Industries almost exclusively have ownwater sources but may discharge polluted wastewater to the publicsewerage network.

Comprehensive plans of the sewer networks do not exist andcomprehensive planning for their upgrading or extension is generally notdone. Locally made reinforced concrete (RC) pipes are most commonlyused for sewers. Manholes providing access to the sewers may not be 4 The existing Masterplan Studies from 1996 contain some hydraulic calculations, but itis not known whether the models used for these calculations were turned over to theservice providers.


located at the optimum distances and covers are often missing ordamaged allowing high flows to discharge onto the surface or garbage toenter the system causing blockages. There are few sewerage cleaningvehicles available in the cities.

Sewage generally has to be pumped (except in Rawalpindi) to transfer itbeyond the limits of the cities and to the final point of disposal which istypically directly into a river or taken by farmers without treatment. Thepumping stations are often in a poor state of repair and suffer frominsufficient expenditure on O&M.

No formal records are kept of failures or collapses of the seweragenetwork or the numbers and nature of interventions that have to be made.

2.3 Water Resources and Environmental Sustainability

Water resources in terms of quantity are generally adequate for the 8Punjab cities with the exception of Rawalpindi5. Both groundwater andsurface water may be available, though in general ground water tables areshowing progressive declines year on year. Ground water recharge isfrom the Indus River and canal system but comprehensive hydro-geological studies, which might determine safe yields are lacking.

Rawalpindi relies on a combination of surface water sources and localgroundwater. Groundwater is quite limited though again no studies havebeen conducted to determine the long-term safe yield. Surface sourcestoo are under serious threat and in the medium term it is planned toconstruct new dams and reservoirs to secure the supply.

Raw water quality is variable from source to source. As a general ruledeep ground water is described as “sweet” and may be of potable qualitywithout any treatment. In some situations there is a high concentration ofarsenic but no facilities exist for reducing it to acceptable levels.Generally other parameters of raw water quality are within acceptablelimits with the exception of salinity (as measured by conductivity) insome localities. Where ground water resources are of poor quality,reliance is placed on canal water abstracted via shallow infiltration wellslocated parallel to the canal at some distance from the banks. InSargodha, the original system was to take canal water direct and treat itin slow sand filters. The filters still exist but are in a poor state of repair.

5 In Rawalpindi studies are currently underway to assess the feasibility of constructingsurface water storage. In D. G. Khan, the closure of the canals for maintenance seriouslyreduces the availability of water from seepage wells near the canal, which are amainstay of the water supply.


2.4 Institutional Situation

2.4.1 Current Institutional Structure

The current institutions with responsibilities for the WSS sector areshown on Figure 1. The Local Government & Regional DevelopmentDepartment is the lead department for the local governments (LG). Thedistrict governments (also considered LG) are directly associated with thePunjab Government. The WASA, therefore, can therefore are not directlyunder LG&RD. The drinking water and environmental regulations arestill in their infancy. In the figure, the planned responsibilities areindicated. The entire WSS sector is heavily dependent upon subsidiesfrom the Punjab Government both for operations (through the allocationsto LG from the PFC) and investment (through project or schemeallocations approved by P&D Department). Allocations for rural areasand some large projects are directly given to PHED, which is theplanning and executing agency for most WSS investments, even in urbanareas. With devolution the activities of the PHED in urban areas were tobe curtailed, however, this has not happened.

Different sections of the TMA are responsible for different aspects of theWSS provision. WSS with all required functions is not concentrated inone organisational unit. The WASA are part of the DevelopmentAuthority, but all functions of WSS services are unified in the WASA, atleast. Local councils are responsible for approving tariff amendments.


Development Auth.

P&D Deptt

CDWP

Finance Deptt

PDWP

MOE

EPDPFC

NCCWSNFC EPAFED

ER

AL

PU

NJA

BL

G

TMA

Sanitationand drinking water

surveillance

Min of Health

Drinking WaterStandards

Financing

Environmental Policy and Sanitation

Standards

Ownership, tariff approval,operation

WAPDAWater Wing

Drinking WaterPolicy

WASA

Planned tasks

Hydro-geol Studies

LG & RD PHED

Figure 1: Current Institutional Structure

2.4.2 WSS Service Provision

Under the PLGO responsibility for provision of WSS services is with theTMA in each city. However in some of the larger cities thisresponsibility has previously been assigned to city district developmentauthorities who have established Water and Sewerage Agencies (WASA)to provide the services. The legality of WASA under the PLGO ishowever unsatisfactory, since they effectively put WSS under the citydistrict and not under the TMA as foreseen in the PLGO. PLGO haspriority over other laws affecting local government6. During the lastmonths, some attempt has been made to remedy this situation by makingthe Tehsil Nazims the heads of the WASA (instead of the Zila or DistrictNazim). This corrects the legal situation de facto, by making placing theWSS services under the Tehsil leadership.

In TMA, responsibility for WSS services falls under the Tehsil MunicipalOfficer (TMO) and several Tehsil Officers (TO) including thoseresponsible for planning, Infrastructure & Services, Regulation andfinance, which also have responsibility for other municipal services7.This lack of coherence is considered to be inefficient and there is a casefor all WSS functions to be reorganised in a single unit with its ownaccounts, assets and staff, as is the case in the WASA.

6 The PHED has prepared draft legislation to amend the Development of Cities Act1976 to make it comply with the later PLGO 2001.7 The organisational structure of the TMAs is roughly given by the PLGO 2001 and istherefore with some minor modifications uniform for all TMA.


2.4.3 Alternate (informal) Service Providers

In most cities water vendors operate, selling water on a volumetric basisin containers of known capacity. The WTP Survey showed that around11% of households used water vendors as one source of water. Thepurchase cost is generally a lot higher than the cost of water deliveredthrough a piped connection and the water is of unknown quality since notests are performed on it. A variety of water sources may be exploited butin all cases the water is abstracted without charge. Water vendors are notlicensed and operate effectively without control. There are also vendorsof bottled drinking water in different forms, which cater mainly to themore affluent customers. There have also been problems with the qualityof bottled water8.

The Federal Government sponsored water filter stations can be classed asalternate service provision until they are formally taken over by theTMAs or WASAs with responsibility for O&M. According to the plans,these units are to operated and maintained by the TMA even in citieswith a WASA.

There are no obvious alternative sewerage providers, though in theorywell-constructed septic tanks would require regular emptying of theaccumulated solids by contractors, thus giving scope for alternativesewerage service providers. Only a small percentage of the householdsof the WTP-Survey said they had septic tanks. However, it seems thatmany such tanks are not constructed as water and solids retainingstructures so that much of the wastewater simply permeates into theground and potentially contaminates ground water. Any tankering ofwastewater is likely to result in the contents being dumped withoutconsideration for environmental impacts.

2.4.4 Cantonments and other Formal Service Arrangements

Cantonments are federally administered areas typically located on theedges of cities. In the case of Sargodha, the cantonments border the cityon three sides. The Punjab Government has no jurisdiction over theseareas and WSS services are independently provided. There may be somecross boundary connections such as the supply of a substantial amount ofdrinking quality water to the Rawalpindi cantonment from RawalpindiWASA under a bulk supply agreement. Wastewater collectors may alsocross boundaries prior to discharge to a watercourse.

Although this study has not investigated the situation in cantonment areasit is generally recognised that the service quality is much better than inneighbouring city areas, though there may still be cases of intermittentwater supply. Bill collection should also be good, thereby ensuring thatthe services can be operated on a financially sound basis.

8 According to newspaper articles.


Some private housing developments such as the Defence HousingAuthority (DHA) on the outskirts of Lahore also operate and manageindependent WSS systems and again these deliver a better quality ofservice.

These arrangements of independent service provision in some areasfragment the service areas of the WASAs and TMAs making the physicalwater and sewerage networks less than ideal and thereby adding costs.Furthermore private developments attract more wealthy customersthereby reducing the chances of cross subsidisation with poorer customergroups located in the WASA/TMA areas. Ideally, WSS services wouldbe provided by a single utility to all areas of a city, but this is consideredimpractical particularly regarding the cantonment areas. Nevertheless, itis recommended that the Government in the long term considerconsolidation of the service areas in the interest of making the serviceprovision more efficient.

2.5 Human Resources

2.5.1 Skills/Resource Assessment

There are a number of problems associated with the human resources andthe availability of skills that are shared equally by all WSS providers:• Management staff is only appointed (sometimes for a limited period)

to positions in the WASA from a “home” department and turnover israpid. This type of secondment to WASA tends to create incentivesfor higher-level staff more related to their employment in thedepartment rather than based on performance of their duties atWASA. In general, performance does not have much influence onadvancement of career officers.

• Ban on recruitment of personnel in force for several years leading tovacancies

• Staff planning is generic and inflexible, does not meet the needs.Staffing plans are old and do not contain such skills are IT specialists

• Management staff is not well trained in operation and maintenance• In-house training is rarely carried out. There is only one training

center in Punjab for WSS (in Lahore WASA) and this is also onlyrarely used

• The lack of written and enforced procedures means that on-the-jobtraining is ineffectual even if it is carried out

• There is a lack of incentives and sanctions to encourage good workdue to the rules of public service employment. Good or poorperformance has little or no influence on advancement

• There is no evidence of any commercial skills being imparted toWASA managers.


• Absenteeism: Lower level staff is hired involving nepotism andcorruption. People hired in such circumstances are not at their postsbut have second jobs.9

• TMA were not given enough staff when the services were taken overfrom the PHED in some cases

• Public sector salaries are not competitive in general

Table 3: Summary of Staffing Arrangements

Service Staff actual 2005 Staff/1000 waterconnection

Bahawalpur TMA 44 6.57D. G. Khan TMA 112 8.19Faisalabad WASA 1018 10.27Gujranwala WASA 383 12.88Multan WASA 685 18.50Rawalpindi WASA 1055 13.92Sargodha TMA 156 9.90Sialkot TMA 186 5.09

Source: Information received from TMA / WASA

WASA management staff is made up of provincial officials. Staff areemployed as public servants under a government salaries and hierarchicalregime (Basis Salaries BS level 1-20). Their assignments (BS 17-20known as “gazetted officers”) are decided in Lahore. Most of the higherBS-grades in WSS are engineers. The Managing Director position of aWASA must be filled with a person from a technical background. Mostofficials are transferred from the Public Health Engineering Department(PHED) of the Punjab government, but some officials are from otherprovincial departments as well (including the military). The employees ofa TMA may originate from a number of different governmentdepartments or local government bodies. This means that the servicerules may differ depending upon which “home” department the employeehas come from10.

The main source of management level officers is the group ofengineering and technical universities such as the Lahore University ofEngineering and Technology (UET). The engineering training is said tobe more theoretical than practical11.

9 A supplier mentioned the case of tubewell operators, who are supposed to regularlyinspect the tubewells, but who after starting up the pumps go off to drive taxis etc. As aresult tubewells run dry and are ruined. Local staff confirm that the practice iscommonplace and that hiring is not done on merits or qualifications.10 Refer to the submissions of TMA Sialkot in which not less than 5 differentdepartments with different rules are mentioned and the problem of differing servicerules brought to attention. Some of the departments are now defunct entities such as theMunicipal Corporation, but the service rules continue to apply.11 DfID confirms that engineers had to be retrained to do basic engineering tasks(surveying and leveling trenches for pipe laying) since they did not master these skills.


The engineering training of the PHED officers is basically in design andconstruction. All WASA are said to have sufficient capacities in designand planning except Gujranwala. TMA do not have any skills in the areaof planning and construction and are dependent upon PHED under thecircumstances.

2.5.2 Skills Gaps

There is no emphasis on commercial skills in any of the organisations.The situation of the TMA is much worse, since at the time ofimplementation of devolution not enough qualified staff were transferredfrom PHED to the TMA so that the TMA also suffer from a lack oftechnical know-how. All organisations suffer from the long-standingrecruitment stop. Posts are vacant and can only be filled by tricks. On theother hand, the approved employment schedules (staffing plans)themselves are not adequate for the services. There are serious deficits inmanagement skills, commercial skills, technical skills and overall in allmatters regarding O&M, which enjoys a very low priority and low levelof recognition. Any improvement of the services will require thefollowing measures with regard to staffing and human resourcesdevelopment:• Freedom from the public service rules including salary restrictions in

order to compete with private companies for highly qualifiedpersonnel

• Freedom for management to hire (and fire) staff and re-structure thestaffing plans according to the needs

• Technical skills in planning and construction need to be available ineach service provider organisation. This could mean recruitingcurrent PHED staff (which now does a large part of the planning) foreach service provider

• Combating corruption and nepotism in the services at all levels• Re-structuring of the organisations along commercial lines with

creation of job descriptions adequate to the tasks to be performed• Development of efficient procedures and practices and systems to

ensure their application• Training or re-training of staff (and regular refresher training) based

on the new organisation and procedures. Each service provider in 8cities should have a HR department and some training facilities forrecurring training (for example, safety)

• Monitoring and supervision of staff performance according to agreedprinciples and objectives defined for each post

It should be recognised that the poor reputation of the WSS providers,which is manifest almost daily in the media, will make it very difficult toattract good staff even if salaries can be increased.


2.5.3 Capacity building Opportunities/Programs

ManagementCurrently there is no systematic training being carried out in any of thenecessary skills required for the efficient operation of a WSS provider.Training courses for higher level (BS 17-20) officers carried out at theLahore Engineering Academy are administrative courses required forpromotion to the next grade, but cannot be seriously considered to bemanagement training. These are the only mandatory training required ofthe officers. Some training courses are offered by NIPA and PakistanInstitute of Management (PIM)12 and occasionally foreign aid agenciesoffer courses (for example, WSP provided study tours to India andworkshops to some of the WASA management, e.g.WASA Rawalpindi,on the topic of continuous water supply last year; the head of training atWASA Lahore took part in JICA-funded 4-month training course onwastewater treatment in Japan).

Lahore University of Management Science (LUMS) has a range ofbusiness courses for executives. These could theoretically be used fortraining management staff of WASA and TMA. However, safeguardsshould be in place to retain such trained staff, since graduates of qualifieduniversities will have good employment chances on the market.

TechniciansPrivate technical training institutes are often mentioned as potentialtraining sources. It should be noted however that these private institutesoften provide only a kind of certification for workers who have beentrained on the job in shops. The certificates are required by workers whowant to seek employment abroad (usually gulf countries).

While the TEVTA technical and vocational training academies providebasic vocations training in a number of areas, graduates from theseinstitutions are seldom hired by the WSS providers. First, these levels ofworkers are often hired for “other” reasons and second, persons with thistype of qualified training prefer to work in the private sector. The publicsector will have difficulty competing with the private sector for well-qualified employees. It is noteworthy that the government has pledged totrain 100,000 additional technicians within the next 5 years to deal withthe current lack of trained technicians on the market due to the boomingeconomy of Pakistan and the demand for trained technicians fromabroad.

The Provincial Government Institute in Lalamusa is basically confined totraining for rural areas and for administrative skills. The training beinggiven by the ADB Decentralisation Support Program is to improveadministrative skills of TMA and district government officials andtherefore less relevant to services, which need to be re-oriented towards amore commercial approach.

12 An example of training offered by PIM to WASA staff is a Management Course forJunior Executive Engineers (2-weeks).


Conclusions on capacity building opportunities and programmesIn general there are training capacities available in Pakistan, but withregard to the water supply and sewerage there are no existing institutionswith experience in this area. The existing facility at WASA Lahore doesnot appear to be regularly used. Private institutes and also the publicinstitutes expressed their willingness and availability, in principle, toprovide tailor-made training. Several of these institutions were visited. Itseems therefore plausible to assume that for the service providers suchtraining courses could be designed and put to tender for offers frominstitutes from the public and private sector with a good chance ofreceiving good results.

There is scope in such large service providers for some employees to betrained in foreign countries (for example in Delft, the Netherlands). Alsofull advantage should be taken of relevant training being offered bydonor agencies.

2.6 Financial Situation

There are virtually no metered connections in the eight cities. With theexception of Sialkot, the existing domestic tariff structure is based onproperty size, with progressively increasing monthly flat rate tariffs forlarger property sizes in most cities. An excessive number (5-7) ofdifferent tariff groups are differentiated. In Bahawalpur and D.G. Khanthere is an equal flat rate for all connections. In Sialkot tariffs aredifferentiated by pipe size and some areas of the city receiving betterservice (20 hours/day instead of 10) pay a higher monthly flat rate. Mostdomestic customers are in the first and second tariff categories (byproperty size in Marla13). The higher charged customer groups contributelittle to total revenue. Commercial and industrial tariffs are also flat ratemonthly charges and there is generally a excessive number of differenttariff groups based on the type of commercial activity.

Table 4: Domestic Water TariffsCategory

(PKR/month) 1 2 3 4 5 6 7

Faisalabad 72 108 126 210 280 560 840Gujranwala 70 80 100 120 200 250 500Multan 36 60 - 100 175 250 250Rawalpindi 62 - 102 141 209 356 509Bahawalpur 45DG Khan 25Sargodha 25 37 58


Note: Tariff categories are based on property size. The size of each category variedfrom city to city. Category 1 is usually 0-3 Marla and category 2 = >3 – 5 Marla. InSialkot the tariff is based on pipe size.

13 One Marla is about 25 m³.


Sewerage is only billed by WASA. The highest sewerage tariffs arefound in Faisalabad and in Multan the lowest. In the case of seweragetariff, the range between the tariff of the highest and the lowest categoryis even slightly wider than for water.

Table 5: Domestic Sewerage TariffsCategory

(PKR/month) 1 2 3 4 5 6 7

Faisalabad 48 72 84 140 210 350 560Gujranwala 20 20 25 30 50 75 100Multan 21 34 - 56 100 170 170Rawalpindi 40 - 60 80 100 125 150


Bills are not collected on a monthly basis in all cases. In Bahawalpur/D.G. Khan, collection is only once per year. In other cities bills are dueon a bi-monthly basis. In several cities bills are now being paid at localbanks for which the banks charge a fee. Collection rates vary between86% (Sialkot) and 18% (Multan), with the average of all cities beingaround 40%. Rawalpindi WASA (74%) and Sialkot (TMA) performbetter than the others. Disregarding the best of class, the WASA as agroup would have an average collection rate of around 30% and theTMA around 23%.

Figure 2: Comparison of Tariffs and Costs, WTPFigure 2 shows the relation between current tariffs, some willingness-to-pay measures from the WTP-Survey, coping costs incurred byhouseholds, WSS average O&M costs per connection and affordability


for vulnerable households (2.5% of the Pakistan poverty line of 750PKR/day). Full figures are only available for the 5 cities in which theWTP Survey was carried out. The diagram shows that while O&M costcovering tariffs are generally below the coping costs, they are not belowthe willingness-to-pay measures defined. Also the average O&M costsper connection are higher than the defined affordability level in mostcases, which supports the introduction of a lifeline tariff for the poorest25% of the population. This part of the population is roughly equivalentto the population with properties of less than 3 Marla in size. Theevaluation of the survey indicates that households are reluctant to paydue to the perceived past poor performance of the WSS providers. Thedifferences between willingness-to-pay and the O&M cost covering tarifflevel can be overcome by first improving the service quality and by theuse of awareness campaigns. Awareness campaigns need to increasecustomer understanding regarding their current expenditures forprocuring water, the costs of providing clean water and the value of cleanwater for health and well-being.

Both WASA and TMA are today not able to cover their (reduced andunsustainable) operating expenses with tariff revenues and their share ofthe UIP Tax. There are, however, significant differences between thedifferent cities. Faisalabad recovers (with UIP Tax) nearly 90% of O&Mcosts, but Sargodha and D.G. Khan, for example, do not even collect10% of the required revenues. Table 6 below summarises the financialposition of the service providers in a few financial indicators.

Table 6: Financial Indicators 2004/2005

City Service OPEX(millPKR)

TariffRevenues

(mill PKR)

TotalIncome

(mill. PKR)

CollectionRate

Bahawalpur TMA 9 0.7 10.7 19%D. G. Khan TMA 31 1.41 1.41 31%Faisalabad WASA 275 144 197.5 45%Gujranwala WASA 133 22 27.5 32%Multan WASA 217 15 54.6 18%Rawalpindi WASA 228 66 128 74%Sargodha TMA 54 1.37 1.37 20%Sialkot TMA 114 32 54.7 86%

Source: Information received from TMA / WASANotes:The difference between total Income and tariff revenues is UIP Tax receipts. Incomefigures for D G Khan and Sargodha are improbable since UIP Tax is chargeduniversally and a percentage belongs to the WSS. Presumably WAPDA bills have beendeducted from the UIP Tax share. Collection rates are recovery/potential income (notbillings)

UIP Tax covers less than 5% of the overall financial inflows of theservice providers.14

14 “In Punjab an amount of Rs.88 billion is transferred annually to local governmentswhereas the total collection of UIPT, the major own source revenue (OSR) for TMAs, is


By improving the collection ratio, significant steps can be made towardO&M cost coverage in most cities. This can be achieved with a strategyof up-front improvements of service quality, more customer orientationand awareness campaigns. It is recommended that except for inflationadjustments, the necessary tariff increases be introduced only after thecollection rates have improved. The strategy assumes that cost coveragecan be attained within a five-year period.

2.7 Law and Regulation

The form of regulation of WSS in Pakistan is through self-provision ofthe services as is the case in many countries. The PLGO 2001 placed theresponsibility for the provision of water supply and sewerage services inthe hands of the Tehsil Municipal Administrations. The Development ofCities Act 1976, which created the possibility of city districts and thedevelopment authorities of which the WASA are a part, is slightly out ofline with the PLGO 2001 and needs to be amended (draft amendmentshave been circulated within the Punjab Government by PHED15). Inurban areas, this task was previously assigned to Municipal Corporationsin some cases and in some cases later to the PHED, a Punjab governmentdepartment. This explains the dearth of formal regulatory mechanismsand institutions for economic regulation. Tariffs are to be approved atthe local level (Tehsil Council) according to the PLGO 2001. The currentmechanism foresees, however, a review process at the Punjabgovernment level. The legal basis for this re-approval of tariffs is notclear. This is presumably due either to the oversight role of the “leaddepartment” (LG&RD Department) or to the indebtedness of the localgovernments to the GoPb. There are no rules or guidelines for thedetermination of tariffs except for the rough guideline in the PLGO 2001,which states that fees should cover costs of operation and maintenanceand necessary renewal and extension. Neither is this guideline enforcednor are there instructions defining exactly how these costs are to bedetermined in detail.

Performance of the WSS services is not specifically monitored as such.The complete lack of metering and pertinent technical data indicates thatthere has hitherto never been any intention to monitor performance ofthese services. There are mechanisms for review of the activities of theTMA (regular audits), but these are very limited in scope and notadequate to be considered performance monitoring of WSS. The only Rs4.00 billion.” DSP, Report: Consultative Workshops for Sharing Proposed PFCGrant Design Dec. 8 and Dec 12, 2005.15 The 1976 Act puts the water supply and sanitation under the District (City)government where cities have been proclaimed. This is contrary to the PLGO 2001, inwhich it is clearly stated that these services are under the Tehsils. A first remedy hasbeen introduced, which involved putting the Tehsil Nazim of the main Tehsil at thehead of each WASA instead of the Zila (or District) Nazim as was the case earlier. TheLegal Advisor of this Project comes to the conclusion that the proposed amendment tothe 1976 Act is only partially successful in solving all the ensuing problems. However,if all affected parties are basically comfortable with the arrangements, these maycontinue without fallout for some time as is often the case in Pakistan.


Monitoring Committees foreseen in the PLGO 2001 are also notperforming their function overall (see DSP Reports) and are not likelyever to assume a serious performance monitoring role with regard toWSS due to the lack of resources and know-how. WASA are moreclosely related to the GoPb, since they are district level bodies. There arecloser ties to the PHED due to the staffing practices. Although notformally involved in urban WSS anymore, PHED also assists LG&RDDepartment on technical issues since LG&RD is the lead department, butlacks technical capacity.

Although the law seems to be clear on ownership of WSS assets, thesituation remains effectively uncertain, since there has been no formaltransfer of assets from the previously responsible departments to theTMA and WASA in any case.

The environmental regulation and standards for effluent discharges anddrinking water have only recently been addressed. However, there arenow initiatives to introduce the most important standards (drinking waterstandards, sanitation standards), means of enforcement and clarificationof the institutional roles. The issue of water resource protection is,however, still in need of attention.

Key gaps in the legal system for WSS are:• Lack of drinking water quality standards, monitoring and

enforcement procedures• Lack of tariff making rules and guidelines• Unclear allocation of responsibilities and establishment of capacities• Need for final clarification of the role of PHED for urban WSS• Lack of effective performance monitoring mechanisms and sanctions• Unclear asset ownership and lack of asset registration• Lack of effluent standards and enforcement• Lack of water resource protection, abstraction permitting and

charges.

2.8 Planning and Investment

2.8.1 Existing plans

There are no up-to-date long-term plans in any of the cities. A few of thecities have old master plans but none have been updated in the lastdecade16. Planning is restricted to the IFI supported programmes, butthese have a narrow remit related to the specific investments chosen forfunding. ADB has financed investments in Rawalpindi and hasapparently been able to identify priority investments also for a second

16 These master plans were prepared for 10 Punjab cities and financed by the WorldBank. The reports are dated 1996 and cover Bahawalpur, Gujranwala, Sialkot,Sargodha.


phase beginning 2006. Bahawalpur, Multan and D.G. Khan are includedin the SPBUSP, for which interim studies have been carried out todetermine priority investments in poor and non-served areas. The WASAgenerally have a reasonable idea of what measures are most urgent intheir service area and propose investment projects (schemes) on a regularbasis to be financed through the Annual Development Plan (ADP)mechanisms from allocations from the Punjab Government for capitalinvestment.

The WASAs and TMAs work on an annual budgetary cycle substantiallyunrelated to long-term objectives and dependent heavily on provision offunds from the local government general allocated budget or theprovincial budget. Budgets are constrained by state edicts such as theban on recruitment, which has been in place for several years and appearsto be unrelated to any considerations of the optimum level of staffingneeded to provide the services effectively. The WASAs and TMAs donot prepare business plans in any recognisable format.

2.8.2 On-going investment programmes

Almost all investment in the WSS assets is funded by the provincialgovernment using its own sources (taxation and - most importantly -from funds allocated from the Federal Government) and loans from IFIs.Minor local investments are made by the TMAs on an ad hoc and mostlypiecemeal basis. Ad hoc investments in WSS are often made with thefunds available to MNA and MPA as their personal allocation. Thehistorical level of investment in WSS assets has been far below thatneeded for adequate maintenance and timely rehabilitation orreplacement so that progressive deterioration is inevitably the result,leading to problems of delivering sustainable services in all the cities.An approximate summary of the funding available to each city is given inTable 7.

Table 7: Current and Planned Funding for Capital Expenditure inthe 8 Cities

City Service ADP 2000-2005

(mill PKR)

Donor WaterSupplyAmount

(mill PKR)

SewerageAmount

(mill. PKR)Bahawalpur TMA ADB, SPBUSP 510 308D. G. Khan TMA ADB, SPBUSP 235 288Faisalabad WASA JICA 2,810Gujranwala WASA Nil NilMultan WASA 250 ADB, SPBUSP 420 1,078Rawalpindi WASA ADB, UEP 417 2,973Sargodha TMA Nil NilSialkot TMA Nil Nil

Source: Information received from TMA / WASA and information from donors reports, websites.Note: ADP funding for last years. ADB, JICA are already approved


There are currently few substantial on-going WSS investment projects inthe 8 cities except for the following, which are supported by IFI loans:

• the Asian Development Bank (ADB) supported Rawalpindi UrbanWater Supply and Sanitation Project which started in 1994 butfollowing serious delays only reached conclusion of phase 1 in 2004.A second phase of the project (UEP in Table 7) has now started and athird phase is planned. The primary objective of the project is toimprove water and sanitation services in the city, but there areimportant secondary objectives of assisting the government toimplement selected policy reforms to achieve long term sustainabilityof services at the local level and to provide the necessary institutionaland financial support to enable the WASA to operate efficiently andmaintain financially viable WSS services in Rawalpindi

• the Japanese (JICA) supported project to improve water andsanitation services in Faisalabad. The emphasis of this project is oninvestment in new water source developments and bulk waterconveyance, though some improvements to networks are also

• the ADB supported Southern Punjab Basic Urban Services Project(SPBUSP) which was initiated in 2003 but is still at the planningstage. This project will provide wastewater collectors and sewagetreatment plants for the cities of Multan, DG Khan and Bahawalpurwithin the ambit of this 8-cities project. Investments are beingplanned and will be implemented via project management units(PMUs) detached from the WASA and TMA service providers.Other cities and other services (e.g. solid waste) are also componentsof the SPBUSP project.

2.8.3 Assessment of Key Investment Needs

WASA and TMA were able to identify urgent investment needs (mainlyfor rehabilitation) in their service areas. WASA and TMA are also wellaware of the new areas of growth (Kacha Abadies) in which there are noor only rudimentary services (expansion areas). The processes leading tothese assessments by the WASA and TMA are not transparent andsystematic. They are based on local knowledge and experience not onengineering optimisation or economics. There is virtually nomeasurement, so planning of quantities is speculative. What documentsexist (such as blue prints, which may most reliably be found at PHED)are presumably not up-to-date and simple methods are used fordocumentation. As-built documents from earlier investments have notbeen handed over and are generally not available. As was mentionedabove, no network modelling is carried out (except possibly in donorfinanced projects).

Nevertheless, it is assumed that the identified measures are necessary andreasonable investments and that they are at least a good starting point forthe identification of a future investment plan based on well- specifiedgoals and priorities. There may be need for some discussion of standards


applied in planning and materials used (for example, the continued use ofAC pipes or the use of some types of PVC pipes for some applications.

The amount of these investments is around 9 billion PKR (US $ 150million) for all 8 cities. Due to the lack of meters and other basicequipment for data acquisition, monitoring of performance and networkcontrol, there is also a readily identifiable need for these types ofinvestments. Due to the poor state of the drains and sewerage and thelack of maintenance equipment, there are also readily identifiablerequirements for sewerage cleanup and equipment for regularmaintenance. The amount for these investments including planningstudies, awareness campaigns etc. varies from city to city. The total forall 8 cities is estimated to be between US$40 – US$50 million.


Table 8: Summary Table of Proposed Investment

InvestmentWater

(other; millPKR)

InvestmentSewerage(other; mill

PKR)

ImmediateMeasures(mill PKR)

InvestmentWater (mill

PKR)

InvestmentSewerage(mill PKR)

Faisalabad (JICA) 2,810 333 1,395 2,600Gujranwala (rqd) 453 1,629 1,000Multan (ADB, rqd) 420 1,078 252 506 600Rawalpindi (ADB, rqd) 417 2,973 237 636 825Bahawalpur (ADB, rqd) 510 308 222 170 255D.G.Khan (ADB, rqd) 235 288 222 218 130Sargodha (rqd) 333 1,434 1,119Sialkot (rqd) 483 1,344 568Source: Information received from TMA / WASA. Rqd means funding required, source not yetdetermined.

In the medium to long term, the need for investment is much greater. Apreliminary rough estimate based mainly on assessment of the situationgiven by the service providers themselves indicates a total of around 240million US$ or PKR 1.9 billion.

2.8.4 Existing Sources of Finance and Appraisal Procedures

Such investment as takes place is funded at the Provincial level.Proposals are developed in the Housing and Urban Development(H&UD) department’s Public Health Engineering Department (PHED)for TMA projects or in the various WASA. Schemes are submitted to andapproved by the Punjab Planning and Development (P&D) Dept., wherethere is a separate section for “technical” projects.

Such funding requests are submitted to P&D Dept. based on the standardpro-formas already existing (PC 1 Form). These pro-formas are basicallysound, but there is room for improvements both in form and appraisal ofthe proposals. The quality of the prepared PC-I documents differs. IfConsultants have prepared the PC-I in the framework of donor-financedprojects, the quality is generally good. If the PC-I has been prepared bythe WASA or PHED, the quality is generally poorer.

WASA and PHED engineers are versed in the use of the procurementrules of the Punjab Government, which are all encompassing. There aredifferent methods of cost assessment using either market rates orstandard rates.

2.9 Assessment of Stakeholder Issues

Various meetings were held with stakeholders during the project.Although the meetings were not representative in the statistical sense,they did show a degree of uniformity regarding the experiences, attitudesand expectations of the different stakeholder groups.


The most important stakeholders are: GoPb (LG&RD Dept. and P&DDept.), Development Authorities, TMA, WASA and TMA staff asgovernment employees, elected local government officials (TehsilNazims, Union Nazims, council member, household customers, non-served households, PHED, commercial and industrial customers(although the share of industrial enterprises being served by public watersupply is small), Financing Agencies, Consumer groups, Unions.

Some significant findings regarding the stakeholders’ opinions, whichneed to be verified in further stakeholder meetings, can be summarised asfollows:• Water and sewerage services are public topics and political issues• Sewerage can be seen as the more important of the two services in the

opinion of the public. There is an emphasis on the sewerage problemsamong stakeholders, since the sewerage problems tend to thrustthemselves into the cognisance of the people.

• It is in fact a widely accepted opinion that people would be willing topay more for water and sewerage if they perceived that the serviceswere being provided properly

• The public perceives an almost total lack of planning and organisedsystematic approach

• The consumers are deeply mistrustful of the WSS providers, theyassume corruption, favouritism, collusion with theft andmismanagement

• There is not as much opposition to private sector participation asmight have been expected so long the tariffs are not adverselyaffected

• Employees are unhappy with the poor financing of the WSS and thelack of capabilities to perform properly

On the street, the WSS seem to be caught up in the general mistrust anddisillusionment with the administration and the government. People donot feel that their needs are being fulfilled, i.e. that the state is notperforming and that this is due to inefficient and criminal behaviour inpublic office and administration. These attitudes were recently made veryapparent in the reactions of the public and media to several deaths inFaisalabad, which were due to contaminated water and also to the deathsof 3 sewermen at WASA Lahore, who died due to neglect of WASAsupervisors with regard to safety. Under these circumstances the peopleare not willing to contribute more than is unavoidable.

In the WASA and TMA, the situation is seen from the inside and thereare different opinions. The WASA tend to assume that they would beable to manage the WSS if only they received the means to do so. TheTMA on the other hand do recognise that devolution has left them poorlyequipped to deal with the situation both materially and with regard toknow-how and skills. Overall there is acknowledgement of the fact thattraining and capacity building are urgently needed.

Household customers are concerned about service quality especiallywater quality and sewerage problems, health issues. Households express


their deep discontent with the services provided and base their poorpayment behaviour on the long experience of poor services received.Households are also concerned about possible tariff increases, which theyperceive as more likely in case of private sector participation.

GoPb is concerned about providing adequate services to the population,but at the same time also about the financing of WSS out of thegovernment budget. PHED as an institution is concerned about its futurerole in urban areas.

Nazims and other elected officials are basically interested in providingadequate services to their constituents, but concerned also about furtherfinancial burden on consumers (voters) and the possibility of drain on thelimited local government budget to pay for WSS.

Employees and Unions are generally concerned about maintainingemployment in the service providers and possibly about maintained theprotected employment of the public sector. Union leaders have told theConsultants that they are not against any changes as long as their positionis improved. Employees and Unions are aware that compared to theprivate sector the salaries are low. At the same time they are aware thatthe jobs are protected in the public sector.

Anyone granting favours or benefiting from corrupt practices will opposeany form of change. Otherwise, the concerns articulated are generallymotivated by the fear of “privatisation”. Any change in organisation,including the proposed corporatisation, can be construed to bepreparation for privatisation. As is well known, there are internationalgroups feeding the fears of privatisation in any country with a collectionof horror stories of failed privatisation in other countries. There arealready groups in Pakistan disseminating negative propaganda againstprivatisation in water supply and sewerage17.

2.10 Summary of Key Issues

In summary, the key issues concerning the provision of WSS services inthe 8 cities addressed by the proposed strategy are:

Poor Service Quality: Intermittent water supplies of poor quality (oftennon-potable). Poor sanitation leading to health hazards. There is a totallack of customer focus. Customers are not satisfied with the presentservices and concerned about the health impacts caused by poor drinkingwater and sanitation. They would be prepared to pay more for betterservices.

Poor state of the Assets: Poorly maintained and inadequate to meet therequirements of expanding populations. Lack of planning and lack of

17 Reference is made to the many articles in the English language press in Pakistanduring the last months.


investment in renewal and rehabilitation. High levels of leakage can beassumed, although lack of metering prohibits firm estimates. Operationalefficiency is poor due to old and worn-out equipment such as pumpingplant and overhead reservoirs. Lack of equipment for maintenance. Nometering or monitoring of the network.

Water Resources and Environmental Management: Lack of regulationand enforcement of water abstractions and effluent/wastewater returnflows to the environment. Lack of hydrological and hydro-geologicalstudies to determine reliable yields of water sources. Lack of chargingfor abstractions through private wells etc.

Institutional: Service standards and performance of service providers arenot set and regulated. Drinking water and sanitation policies have notbeen formally adopted. Lack of autonomy of service providers. Directgovernment and political involvement is commonplace in the day-to-dayrunning of the service providers. Responsibility for WSS services withinTMAs is split between several departments and they do not maintainseparate accounts for WSS services.

Lack of Accountability: WSS are both operated and regulated by thegovernment in a conglomeration of functions, which are in need of beingextricated. In TMA, there is no separate accounting for WSS, which isthe necessary basis for accountability. WASA are “autonomousagencies” but essential functions are not in the hands of the WASAmanagement. There is frequent and detailed interference by politicalofficials in the day-to-day operation of the services. Managing officialsare not accountable for their performance and in deed due to themultitude of restrictions on their decision-making cannot justly be maderesponsible for outcomes. Financing of investment needs to be put on asufficient, predictable and reliable basis.


Human Resources: There is a complete lack of commercial orientation inthe WSS providers. Service providers do not avail of the necessaryprofessional expertise required for provision of the services in anefficient manner and cannot decide on their own staffing and training.This is basically due to rigid public sector rules that can’t be changed andwhich have been aggravated by government interventions such as therecruitment stop.

Financial: Tariff revenues of WASA and TMA do not even cover currentoperating costs due to poor collection rates and low tariff levels. Serviceproviders respond to financial shocks by reducing service quality (e.g.reducing hours of service to reduce electricity costs). Poor maintenanceand poor operating efficiency leads to existing resources being poorlyemployed, thus contributing to the vicious circle of poor performance,poor service, poor collection rates, insufficient funding. The generalreluctance of local governments to raise tariffs and to enforce collectionalso contributes to the deteriorating situation.

Legal: The existing inconsistency of the status of WASA with the PLGOneeds to be alleviated. It is recommended to do so in a manner, whichenhances the independence and the accountability of the WASA. Theownership of WSS assets, while nominally in the hands of the localgovernment bodies, needs to be firmed up by accounting for andregistering all assets with the TMA or service providers. This wouldalleviate the current unclear condition, whereby LG&RD Departmentprofess to be caretaker or owner of the assets (as lead department over alllocal governments) and per PLGO WSS is vested in the localgovernments. Ultimately, all WSS providers need to be corporatised aslegal entities fully independent from government except with regard toownership and government regulation.

Regulatory: The current system of self-provision of WSS putssupervision of performance and performance of the services in the samehands. Decentralisation under the PLGO has placed a heavyresponsibility on weak organisations. This system needs to be substitutedby a system of economic regulation in line with the PLGO, but withclearly separated and delineated functions assigned to empoweredgovernment bodies and professional service providers. Someresponsibilities, for example, service standards setting and tariff setting,might be better provided at the state level and progressively devolved aslocal capacity develops.

Environmental and water resource protection regulations need to beenacted and enforced. Suggestions prepared by the GoPakistan arecurrently already on the table. Lack of control over (and charges for)water abstraction seriously limits the customer base because alternativesources of water are conveniently available.


Planning: This is rarely carried out at present but it is crucial toimproving performance in the sector. Responsibility needs to be held atthe local level though with support from the province, given theprovince’s existing and on-going responsibility for investment in theservices. Lack of reliable data seriously inhibits not only planning butalso any form of performance benchmarking.


3. Options for Improvement

3.1 Minimum Customer Service Standards

Improvements need to be determined in relation to the achievement ofgoals, so it is important to start by setting down minimum standards ofcustomer service and business performance and then assessing the gapthat needs to be dealt with.

With regard to the water supply services the following minimumstandards are proposed:• 24/7 continuously pressurised water supply pipelines at min 1.5 bar• Min 20 litres/cap/day quality assured drinking water for all (WHO

guideline levels)• Checking and licensing of all water suppliers (WASAs, TMAs,

vendors, bottlers etc)• Routine sampling and analysis of drinking water at point of use• Water quality conforming with WHO guideline limits for E-Coli,

total coliforms, turbidity, nitrates and arsenic (or enforced Pakistanstandards)

Additional service standards should also be considered for reliability ofsupply (plant maintenance) and metering of sources and supply

For the wastewater service the minimum standards proposed are:• Safe system of wastewater collection and disposal – avoidance of

surface flooding/ponding• Internal flooding of sewer connected properties prevented by

adequate hydraulic capacity including storm water drains. Propertiesshould not be flooded as a result of storms of return period less thanonce in 10 years

• All industrial customers licensed to discharge wastewater at specificlocations within defined quantity and quality limits

The present WSS service providers almost universally fail to meet theseproposed standards of service.

3.2 Minimum Business Performance Standards

These are proposed for each WSS service provider and can be dividedinto planning standards and performance measurement standards.Planning standards include:

• Master Plan with a 10 to 15 year horizon for the services throughoutthe city based on city development plans and expected changes(increases) in population and demand for water


• Business Plan for the service provider with a 1 to 3-year planninghorizon. This would be based (ideally) on the requirements of theeconomic regulator and explain how interim targets for businessperformance improvement are intended to be met based on demandand supply side considerations

Additional plans should also be prepared including a human resourcesplan, a non revenue water reduction plan, an operation and maintenanceplan, an asset management plan and a customer relations plan.

Performance measurement standards proposed are:• Income from all sources exceeding expenditure year on year by 110%

(within 5 years income exceeding O&M expenditure)• Collection rate of bills greater than 95% and prosecution of non-

payers• Reduction of 20% or more in energy consumption per unit of

delivered water• Elimination (or legalisation as customers ) of all illegal connections• Technical losses of water (basically leakage) reduced to 20% or less

of water put into supply

Additional standards should also be established in conjunction with theeconomic regulator for computerised management information systems(MIS), computerised customer data bases and billing systems, customercomplaints, capital investment efficiency etc.

3.3 Reduce Costs and Improve Cost Recovery

A basic tenet of the reform strategy is that cost recovery will only bepossible by winning back the confidence of customers and this can onlybe achieved by first improving the quality of services. Therefore short-term service improvements are considered to be essential.

3.3.1 Define Short-term Options

There is an urgent need to provide water of assured quality in drinkingwater quantities. This can be achieved by the WASAs and TMAs takingover full responsibility for O&M of the federally funded drinking waterstations or by supplying water directly at the tubewell sites intocontainers. Essential to the success of this proposal is the routineanalysis and publication of results of the quality of water at each site sothat the consumers can gain trust in the water and appreciate its value tothem thus engendering trust and willingness to pay.

This work could be put in hand immediately, but it must be supported bya public awareness campaign.


On the sewerage side, TMAs could tackle some of the most seriousproblems by responding more quickly to the blocking of drains and byavoiding surface flooding. Non availability of labour due to an enforcedban on recruitment is often cited as the reason that drains and sewers arenot routinely cleaned. This should not be a major hurdle given thehuman resources available on the market and prepared to do this kind ofwork.

3.3.2 Reduce O&M Costs (OPEX)

The two largest categories of OPEX are the costs of staff and employees,and energy costs. Staff costs currently restricted by the imposition ofbans on recruitment18. While these bans tend to cap staff costs they alsolead to adverse effects on quality of the staff and the types of skillsavailable. Therefore, it is necessary to remove these bans and to place theemployment and staffing decisions in the hands of the service providermanagement. Another recommendation is to take the service providersout of the realm of public service employment. The effectiveness ofemployees and their qualifications and numbers should be part of thehuman resources plan mentioned above. The correction of the currentlow salaries (in relation to the private sector) and the need to attractqualified professionals may override any reduction of staffing coststhrough the reduction of the number of employees.

Energy consumption is potentially amenable to reduction by reducing thequantity of water pumped (by reductions in leakage or service hours) andby higher efficiency of the pumping plant. Reducing the quantity ofwater pumped should be tackled primarily by reducing leakage from thedistribution system rather than reducing the number of hours of service tocustomers. Reduction of leakage requires a sustained programme ofinvestigation and repairs and may not yield acceptable results withoutwholesale replacement of network pipelines. It also requires sustainedaction; quick fixes” are not realistically possible.

Improved efficiency of energy use is more likely to achieve earlyreductions in OPEX costs, though the current level of efficiency issimply not known because it is not measured and therefore cannot bereliably estimated. Inefficiencies in energy usage arise from the variablepumping heads under which the fixed speed well pumps have to operate,and from wear. Energy audits should be carried out at the main tubewellsites to determine the scope for reduction and then plans should beprepared to improve the situation. Systematic studies must be carried outto determine the effects of using the existing (and in need ofrehabilitation) overhead reservoirs (OHR) or building additional OHR.There are companies in Pakistan with the capabilities to do this type ofstudies. One means of increasing energy efficiency would be to outsourcepump operations (tubewell pumping plant and disposal stations) to

18 Salaries for public officials are determined by the Federal Government. Adjustmentsfor inflation are made regularly but not necessarily annually.


private companies for O&M. Private companies in Pakistan haveeffectively carried out similar tasks for public sector clients.

3.3.3 Improve Collection

The key variable to improvement of collection rates is that customersrecognise the service providers’ efforts to improve services. This was amajor result of the WTP and Customer Preferences Survey. Thecustomers’ main emphasis is on the quality of water supplied, which theyperceive as being often of poor quality, and improvement of the seweragesituation, which was rated as poor or very poor by a large majority ofhouseholds in the survey. For this reason, the service qualityimprovement programme, combined with customer dialogue and publicawareness campaigns is of fundamental importance for improving thecollection rates. It cannot be assumed that the collection rates will changeuntil these measures are carried out and the effects become evident.Water quality must be proven by independent verification and posting ofresults of water quality testing at the taps (in newspapers, on billboards atthe taps).

It is recommended that special community dialogue teams are set up ineach service provider as part of the Customer Services Department. Theteams should be organised on a zone-by-zone basis. The entire cityshould be divided up into different zones according to the characteristicsof the services provided. The teams would analyse the service qualityprovided (if necessary on a block by block basis), i.e. quality of waterprovided, continuity of supply, ease of access to the clean water stations,drainage and sewerage characteristics. Also the billing and recoveryrecords of each zone should be analysed to see the non-paymentbehaviour. The zones should be visited and illegal connections should beidentified. Meetings would be held with the consumers of the zones withthe intention of identifying the actual service quality and agreeing uponits description, identifying means of rapidly improving the serviceprovision and upon the price that the services should cost to thecustomers. If possible, tariffs should be defined by zone based on theanalysis of the service quality. The customers should be given a chanceto voice their expectations about the services and at the end of thisprocess a clear and realistic proposal for the future development of thezone should be framed. Both the service provider and the customersshould subscribe to this plan and document their acceptance bysignatures. In some cities the service providers have had great success byinvolving the local union council members and Union Nazims.

The current complaint centres and inadequately used and ineffective forsignalling to the customers that improvements are forthcoming. Thecurrent complaint cells or centres should be transformed into customerservice centres where a number of activities are carried out: complaintmanagement, information services for customers, new connections deskand collection of bills. Staff of these customer centres must be properlytrained and motivated.


To back up the efforts to improve collection rates service providers andlocal governments must demonstrate their determination to enforce tariffcollections. This should only be done on the basis of the dialogueprocesses with the customers described above and after some period ofimproved service provision. The lack of trust created by years of poorservice cannot be reversed in a few days.

Debt forgiveness is a visible sign to customers that the service provider iscommitted to dealing with the question of service quality and collections.Generally speaking, arrears beyond a certain age are not recoverable. Thedifficulties arising with regard to proving old debts and taking a largenumber of customers to court to collect these debts are hardly worth theadditional efforts required (for household and small customers). Inaddition, often enough the services were not provided properly.Therefore, debt forgiveness in connection with re-framing the rules of thegame with customers can be a useful tool toward significantly increasingthe collection rate.

3.3.4 Raise Tariffs

Tariff increases have been granted very rarely during the past years.Tariff increases, however necessary, must be made plausible to thepopulation in connection with the improved services. Inflation should notbe allowed to further undermine the cost coverage of the serviceproviders. Public awareness and dialogue are necessary to successfullyincrease tariffs without endangering the (improved) collection rates,however. A lifeline tariff for the poorest households is recommended tocushion the effect of tariff increases. Debt relief for past arrears should beconsidered to signal a change in service provider customer relations.

3.3.5 Accountability and Incentive Framework

The present arrangements of providing WSS services through TMAs andWASAs are unsatisfactory having failed to provide adequate services.The TMAs are not structured as single WSS business entities and maylack specific skills, and the WASAs lack serious accountability. Thefunding of the service providers (for operations and capital expenditures)is not based on adequate tariff revenues and is also not sufficiently stablefrom provincial sources. Fundamental changes are needed, in whichdistinct areas of responsibility are defined and allocated thus:1. Policy for the sector (including water quality and environmental

standard setting) should remain with the Punjab Government or thefederal institutions

2. Service standards monitoring and financing of the service providerswith the Punjab Government

3. tariff determination and approval with local government according toPLGO 2001 but according to reliable rules and procedures


4. Service provision carried out by professionals separate from thebusiness of governing and politics.

This requires the State and the TMAs to relinquish control over directprovision of services and to establish a process of independentmonitoring of performance19. The financing of the sector must beperformance-oriented and to some extent output-based. Service provisioncan then be carried out as a commercial business at arms-length fromGovernment.

3.3.6 Contractual Incentives-Public Sector Options

The WSS service providers need to be appropriately structured andincentivised to provide WSS services of acceptable quality and tobecome progressively independent from continuous subsidisation. Toachieve this they should be re-established and run as commercialbusinesses operating under an independent and transparent system ofperformance monitoring, which fairly balances the differing interests ofthe state, the service provider and its customers. This can be achievedthrough the process of corporatisation combined with governmentfunding based on clearly defined performance standards and reliabletariff policy.

Some preliminary rearrangement of the existing TMAs and WASAs isneeded, however, prior to corporatisation. In the case of the TMAs allWSS services (staff, equipment, budgets etc.) need to be brought togetherunder one roof or department, then, when the new company (corporatisedutility) has been established under statutes, the services can be transferredto it (using the option of delegation foreseen in PLGO 2001, 54 (2). Inthe case of WASAs they would first need to be re-established asinstitutions in compliance with the PLGO under TMA control and thendelegated using PLGO 2001, 54 (2).

The TMA would establish a (utility) company under public or private lawwith a structure as shown on Figure 3. 19 One model of utility regulation foresees a separation in policy, independent economicregulation and service provision. In this model the funding function is ignored, as it isgenerally assumed that the commercially operated service providers can finance theiractivities through tariff revenues and their long-term investments through commercialbanking methods. In Pakistan we find circumstances that are slightly different requiringa different approach. First, the sector is utterly dependent upon government financingfor operations and investment and will remain so for some time. Second, the PLGO2001, a basic law affecting water supply and sewerage services, explicitly foresees thelocal governments as the approver of tariffs. Thirdly, there is an almost absolute lack ofreliable data for performance monitoring. Finally, the re-structuring process required inthe WSS sector is so all-encompassing that it is difficult to imagine how theestablishment of an independent economic regulator would be effectively achievedwhile the other change processes are going on. For this reason, a modified andunorthodox sector structure is proposed which takes the above mentioned conditionsinto account and ties the financing function to the performance monitoring function toprovide incentives for the service providers to develop as commercial utilities. The tariffapproval function is left with the local governments.


Figure 3: The Corporatised WSS utility

Ownership and control of the utility would be exercised by the TMA inaccordance with the statutes, and for this purpose a WSS managementdepartment would be established within the TMA. This departmentwould be the guardian of service standards and reviewer of proposedtariffs to be levied by the utility. The approval of tariffs would be theauthority of the Tehsil Council as foreseen in the PLGO.

The TMA would have direct representation (one or possibly twopositions) on the Supervisory Board of the utility, but in order to ensure abalance of interests and independence from political influences, theSupervisory Board would comprise a majority of other (non-political)members including, for example, representatives of customer groups,chambers of commerce (private businesses) and other relevant civilsociety representatives and professionals.

The Board would appoint a general manager and possibly other membersof a senior management team such as the chief engineer and chieffinancial officer, under a performance contract possibly for a fixed termbut thereafter potentially renewable at the discretion of the Board. TheBoard would have no involvement in the development of the internalstructure of the organisation or in the appointment of staff, the salariespaid to them and any performance related bonuses. Existing WSS staffand employees would have to apply for positions in the new company.Those unsuccessful or unwilling to transfer would have to be givenappropriate compensation or revert back to their original departments.

TMA

WSS

SupervisoryBoard

Statutes

General Manager

ownership

PerformanceContract

Cor

pora

tised

Util

ity

Consumers


The WSS assets and responsibility for capital investment would transferto the corporatised utility (owned by the TMA)20. Provincial support tocapital investment is likely to be needed over a more extended period oftime and this financial support would continue to be processed throughthe local government as in the other Tehsils.

3.3.7 Contractual Incentives-Possible roles for the private sector

Commercialisation and liberalisation of municipal services has beentaking place globally for many years and frequently nowadays the privatesector is becoming involved in the industry undertaking roles that wereformally provided directly by the public sector. Internal issues such aschanging culture, improving efficiency and reducing costs, have had tobe faced as well as some external factors such as financial marketperception and brand image. Private Sector Participation (PSP) can assistin driving up efficiency and enhancing productivity.

Inquiries to international water companies indicate little interest inproviding water services in Pakistan at the present time as the countryrisk is perceived to be high and the potential profitability of services ispoor. International water companies might be prepared to be indirectlyinvolved by providing support services to Pakistani companies undercontract or through franchising.

Whilst there is a thriving private sector in Pakistan, there is virtually noexperience in area of WSS service provision. The few examples ofoutsourcing (mainly of bill collection) have all failed at an early stage forreasons of poor contract design and lack of transferred authority andsupport to the contractors21. However the private sector in the form oftechnical and management consultants is well developed and can beusefully tapped to assist with the proposed sector reform strategy throughstudies, programmes of change management and capacity building. Withthe development of more robust contracts and fair allocations of risk andreward, it should be possible to establish medium-term contracts withprivate parties for activities such as bill collection, water qualitysampling and testing, operation and management of facilities, etc. 20 In the TMA cities, the existing capabilities would have to be strengthened so that thecorporatised utilities can cover the full range of activities required for providing theservices. This refers especially to the planning and construction or constructionsupervision functions, which are now widely performed by PHED for the Tehsils. Thisdependence on PHED would be eliminated. If needed, staff from PHED having therequisite know-how could seek employment in the newly organised corporatisedutilities. Essentially, PHED as an institution would not be active in the cities included inthis reform. The mandate of the PHED would – as originally planned – be limited to therural areas.21 There have been some examples of outsourcing of O&M services in related businessareas or regions. For example, under a World Bank project, the Capital DevelopmentAuthority in Islamabad outsourced O&M services after rehabilitation of tubewells to aprivate company. In Sindh under an ADB project tubewell operation for drainage wasalso outsourced to a private company. However, in both cases there were significantproblems in dealing with the public sector institution involved and the contracts wereallowed to terminate as soon as pressure from the donor agency ceased.


Enquires to local consultants, contractors and equipment suppliersindicate a certain level of possible interest but constrained at this timeinevitably by a lack of realistically prepared proposals.

The poor financial situation of all the WASA and TMA service providersmeans inevitably that the private sector could only be introduced if thedirect costs involved are funded in the early stages from external grantsor subsidies.

The main risks detracting from significant PSP involvement in the sectorare:

• Poor Regulatory Framework. The engagement of independentconsultants to audit utility plans and performance can provideopenness and reduce perceived private sector risks

• Undue Political Involvement. This is a pervasive threat that can bemitigated to some extent by assignment of service and regulation tobodies not under direct government control i.e. corporatised utilities.External stakeholders such as international financial institutions(IFIs) could also assist at least in the early years by havingrepresentation on the proposed stakeholders’ forum (SF), discussedlater in this report.

• Lack of Capacity. The envisaged sector reform requires thereassignment of responsibilities and new tasks for new or restructuredinstitutions. It is important to empower these institutions and to staffthem with experienced and skilled staff assisted through programmesof focussed technical assistance

• Lack of Planning and Investment. This can be countered by therestructured utilities developing appropriate business plans and long-term master plans allied to city plans. In order for this to be doneeffectively capacities will have to be developed. A co-ordinator underthe Planning and Development (P&D) Department could usefullytake on the role of sector-wide co-ordination for a transition period aslong as the IFI are involved.

Additionally, the following problems or risks in dealing with publicinstitutions as customers need to be mitigated if outsourcing of services isconsidered:• Public sector bodies do not honour contracts properly, even within a

WASA, for example, there may be discussions of whether theManaging Director is authorised to sign a contract (after the servicesare provided). Final payments after completion are often refused withreference to possible future audits.

• Suppliers or contractors have difficulty getting the actual decision-maker to the negotiating table, actual decision-makers may be insome government department

• Corruption attempts by public officials are commonplace


• Staff of public bodies often do not have the technical know-how todeal with or understand private suppliers or contractors

• Procurement rules are often short-sighted, emphasising only short-term price minimisation and not taking the life-cycle costs intoconsideration

• Procurement rules sometimes specify equipment, which is obsolete ornot available any more on the market.

• Completion risks, project delays: a significant part of ADP funds arenot spent according to schedule. There is always a backlog ofschemes, which are not being implemented on time. Donor-fundedprojects such as the ADB project in Rawalpindi were carried out onlywith serious delays.

• Payment risks: administrative procedures in government(bureaucracy) lead to major delays in payments to contractors

• Theft of equipment is commonplace• Damage to WSS assets as a result of road construction work, gas

company etc. lack of co-ordination and lack of responsibilities fordamage. Etc.

• Power outages are common and can lead to difficulties for theevaluation of performance

• Civil unrest is relatively common (Faisalabad: torching of stocks andWASA plant)

• Loss of trained staff to the private sector or due to staff going abroador being transferred to other departments once trained.

• Risk of continuity: in the past when services were outsourced toprivate companies, this was done only under pressure from donors.As soon as the projects were finished, the funds were cut and theservices were performed by the public institution again.

Possible options for involving the private sector have been assessed indetail in the contractual incentives report and its appendices, and the listboils down to short term possibilities of:• Technical Assistance (TA) contracts using local and international

consultants, and• Operation and Maintenance (O&M) contracts for outsourcing of

specific services.

In the medium term, once the corporatised utilities have been establishedand certain roles have been assigned to new and restructured institutions,it could be appropriate to further improve performance of thecorporatised utilities by involving the private sector in either:• Management contracts based on a fixed fee (possibly with incentives

too if the data then exists to effectively manage them), or• Local lease contracts.

For ongoing and future major investment projects the option exists toprocure these under Design Build and Operate (DBO) contracts with anextended operational component, thereby retaining a significant role forthe private sector in facilities operation and maintenance.


3.3.8 Financial and Regulatory Incentives

The WSS assets and responsibility for capital investment would transferto the corporatised utility (owned by the TMA). As mentioned above,support to capital investment is likely to be needed over an extendedperiod of time and this financial support would continue to be processedthrough the local government (as in all Tehsils). This involves allocationsfor operations (until full O&M cost coverage is achieved) and additionalallocations for capital expenditures, both from GoPb sources and possiblefunds lent from donors.


Table 9: Summary of Financing Deficits of WSS Service Providers

City Service O&M Cost Deficits(mill. PKR)

CAPEX Deficits(mill PKR)

Bahawalpur TMA 31 216D. G. Khan TMA 37 100Faisalabad WASA 67 1400Gujranwala WASA 191 349Multan WASA 260 347Rawalpindi WASA 199 565Sargodha TMA 75 315Sialkot TMA 78 262Source: Information received from TMA / WASA, own model calculations

Note: financial model calculations. O&M cost deficits are the sum of the deficits in the first 5years. After year 5, no further O&M support is required from GoPb. CAPEX deficits are theinvestment costs not covered by own revenues during 10 years and are calculated to be “0” in thetenth year.

In order to overcome the difficulties mentioned above (cf. especiallyfootnote in section 3.3.5), it is recommended to combine performancemonitoring (normally a function of economic regulation together withtariff approval) with the financing function by making release of fundsdepend upon agreed performance. Availability of investment funds isprobably the single greatest incentive to both the local government andthe service provider.

Right now, due to the fact that the PFC allocation to the LGs is on aformula basis (population and poverty), any improvement of collection offees (including WSS tariffs) is already incentivised as it leaves morefunds for the other services of the TMA. Assuming coverage of O&Mcosts by tariff revenues within 5 years, the allocation of operationalsubsidies (from GoPb for WSS) from the annual allocation would tend todecline as collections increase - if not counterbalanced by additionalexpenses for O&M such as electricity costs due to increased servicehours22.

The government has attempted to incentivise the service providers toincrease collection by offering partial debt relief for increases incollection of own sources 23. This however has not been successful,because it was not combined with the means to enable the serviceproviders to make an impact on the collection rates. For the case ofimplementation of the reform strategy this type of incentive can be madeeffective, since the service providers will be given the means to achievethe goals. On the other hand, the incentive is targeted at the TMA and notthe service provider, since the relief of debt is for the TMA. Therefore anadditional financial incentive could be added which grants the service

22 In reality the model shows varying influences leading to increases and decreases inoverall O&M costs over the first 7-8 years.23 Refers to debt of the local government to the Punjab Government.


provider a share of the additional collections for free disposal by themanagement.

Due to lack of data and the necessity to start-up the reform processgradually, financial incentives will have to be awarded in differentmanners during different phases of implementation.

During the initial stage basing transfers on actual performance indicatorswould be difficult due to the lack of data. During this phase output wouldtherefore have to be measured as fulfilment of agreed milestones. Certainfinancial indicators (such as collection rates) may already be available foruse, although the current accounting systems are not very informative orreliable. The initial stage of funding would have to begin withoutperformance indicators in order to start up the turnaround process. Thisphase would begin contingent upon completion of such milestones as:• Agreement (from each TMA) to participate in the programme and

commitment to the principles of the reform strategy (willingness toset up a company as corporatised utility and to delegate the powersand authorities necessary for the company to run independently)

• Allocation of funds from GoPb to cover operational deficits in thefirst years through budgetary means

• Establishment of the sector co-ordinator• Preparation of project evaluation guidelines acceptable to the donors• Proclamation by the GoPb of specific objectives of the reform

strategy in such detail that they can be used as guidelines for planningpurposes.

• Endorsement of a Drinking Water Policy and a Sanitation Policy andestablishment of the mechanisms for enforcement and monitoring,strengthening of the institutions to fulfil the new tasks assigned tothem

It should be noted that the pre-requisite for the effective use of anyincentive is that the person or institution to be incentivised has thecontrol (decision-making power and authority) over all (or most) mattersessential to achievement of the performance indicator. Before a sufficienttime series of reliable data has been acquired, performance monitoringwill need to be based mainly on progress indicators. Some financialindicators may already be used with caution (such as collection rates).

Suggested milestones for the second phase are given in the Table 10.


Table 10: Milestones or Indicators for progress monitoring in theSecond Phase

Incentivisedentity24

rationale

Progress of installing bulk, zonemetering and preparing surveys ofconsumption; later regular provision ofdata

Service Provider

Progress in documentation ofinfrastructure, assets

Service Provider

Progress in training staff Service ProviderCorporatised utilities established TMAAppointment of independent technicalauditor, appointment of a financialauditor

TMA

Establishment of clear and detailedrules for tariff determination

GoPb

Tariff adjustments (as agreed) TMACollection rate improvements (asagreed)

Service provider Through operating costallocations from GoPb

Comprehensive water qualitymonitoring at tap for all sources“providing safe drinking water”implemented

GoPb

(later) % of water quality samplesmeeting standards

Service provider

Submission of performanceImprovement Plan

Service Provider

Submission of approved Business Plan TMA, ServiceProvider

Submission of InfrastructureDevelopment Plan

Service Provider

Establishment of a project managementunit in each service provider

TMA

Initiation of TA to define the structure,organisation and procedures of thecorporatised utilities andimplementation of therecommendations

TMA

These milestones would be used to release a second tranche of funding toa service provider for the funding of the next phase of investments.

The speedy introduction of drinking water quality standards andmonitoring of fulfilment is absolutely essential in any case and therequisite regulation can be effective towards guiding serviceimprovements. Tested drinking water quality at the tap should definitely

24 What entity has the authority to effect the success of attaining this milestone andwhich entity will benefit from the “reward” for achieving this milestone or fulfilling theindicator target value


be a priority performance indicator. Incentives for achieving a highpercentage of non-contaminated samples should be agreed for bothresponsible WSS provider management (to be passed on in some form tolower level staff) and to the TMA.

When data becomes available, further financial assistance for capitalexpenditures can be made contingent upon agreed improvements ofbenchmarks, which would be a gradual transition to regulation bycomparative benchmarks.

Table 11: Benchmarks for performance monitoring in the ThirdPhase

% of water quality samples meeting standardsUFW, NRWWater CoverageSewerage coverageWater production per capitaWater consumption per capitaMetered consumptionConnections meteredPipe breaks/km/yearBlockages/km/yearUnit operational costs/m³Continuity of service (hours per day)Wastewater treatmentComplaint resolutionPower costs/ total costsWorking ratioCollection periodSelf financing ratioCollection rate

The basic benchmarks used by WSP are a good starting point forcomparing performance, but there are other much more detailedbenchmarks, which can be included as data becomes available.

The target is for all service providers to cover O&M costs within 5 years.After this period, tariff revenues and efficiency should be increased toenable full cost coverage within a foreseeable amount of time(presumably another 5-10 years will be required). As long as the GoPbremains heavily involved in financing the capital expenditure of theservice providers, the connection between financing and performancemonitoring can be the most powerful incentive to improve servicequality. Under the present decentralised structure foreseen by the PLGO,in the long run, performance monitoring and tariff approval could be re-united into a local WSS economic regulator function, in which tariffs arebased not only on costs but on performance.

Incentives can be provided by the economic regulator once establishedby the use of comparative benchmarks between service providers. Once


data availability has advanced to the stage of allowing comprehensivebenchmarking of technical and commercial aspects of service provision,the regulator can provide incentives for efficiency improvements bycapping tariff development based on inflation and the realisation ofefficiency gains. Submission of reports would then not be a performancecriterion, but rather a requirement.

3.4 Sector Institutional Framework

3.4.1 Roles and Responsibilities

Under the reform plan, roles and responsibilities will be reassigned asoutlined in principle in paragraph 4.3. The proposed structure of thereformed institutions is shown on Figure 4, which shows only the moreimportant institutions.

Figure 4: Proposed Institutional Set-up

As long as it provides the major share of investment funds for the sector,the Punjab Government would retain its oversight responsibilitiesthrough the P&D department and the finance department would continueto lend money to the sector based on state income and loans from theFederal Government and IFIs.

Instead of establishing new regulatory agencies, economic regulation ofperformance and tariffs will be split. New institutions would take someyears to establish and become fully functional. Tariff approval will becarried out according to established rules as foreseen in the PLGO 2001at the local government level. Capacity building will be required in the

P&D Deptt

Water ResourceProtection

Corporatised WSS Provider

Finance Deptt

MOE

EPDPFC

NCCWS EPA

FED

ERAL

PUN

JAB

L G TMA

Sanitationand drinking water

surveillance

Min of Health

Drinking WaterStandards

Financing

Licensing Groundwaterabstraction

and protection

Environmental Policy and Sanitation

Standards

Drinking WaterPolicy

Operation

Coordinator

Technical and Financial Auditors

Performancemonitoring Connected to CAPEX financing

Tehsil CouncilOwnership

Tariff approval


early years. Performance monitoring will be coupled to financing ofinvestment and an independent technical auditor will assist in thedefinition of performance standards and will monitor achievements.Financial auditors will be required for each service provider to auditannual statements.

Responsibility for planning and implementing major investments will betransferred immediately to the service providers. Since capacity for thesetasks does not yet generally exist at the local level, significant efforts forcapacity building will be required to implement this approach, which fitsin the decentralisation philosophy.

A co-ordinator under P&D Department will be mainly responsible forassisting P&D in execution of the overall reform strategy and investmentprogramme (co-ordinating proposals from different cities). Draft Tasksfor the Co-ordinator are proposed in Annex 3.

At the Tehsil level responsibility for management and provision of WSSservices will be transferred to corporatised utilities as discussed inparagraph 4.3.1 with some oversight functions retained in a newdepartment in the TMA itself.

3.4.2 Performance MOU

The reform strategy assumes that the corporatisation of the serviceproviders is essential to implement the service improvement plans. Oncethe service providers are corporatised, incentives can be effectivelyprovided for in the performance-based employment contracts of themanagers. There is, however, likely to be a period before corporatisationin which parts of the management are still employed under the presentsystem of public service contracts. Basically this will make theapplication of incentives very difficult, but some success can be achievedwith the use of performance memoranda of understanding between theGoPunjab and the Managers.

Performance MOU must specify the obligations of the government toprovide funding for the service provider and to provide the incentives.The performance MOU must specify the performance indicators, thetargets and the incentives for achievement.

Complementary to the performance MoU for management of the WSSproviders, there should also be performance MoU for the participatinglocal governments. Until such time as the WSS providers are fullycorporatised and therefore truly autonomous, the local governments willcontinue to have far-reaching powers of intervention. There needs to besome safeguard that management of the WSS providers is given thedecision-making authorities they need to achieve the performance agreedupon.


Draft contents of a proposed Performance MOU (key headings for aPMOU and the key criteria) are given in the Annex 1.

3.4.3 Funding Sources

The only realistic source of financing for the WSS is governmentfinancing on grant terms. This will remain valid for some time, due to thefollowing circumstances:• the poor financial position of the WSS providers and the Local

Governments• legal restrictions on borrowing by Local Government in the PLGO

2001• existing debt of the Local Government to the Provincial Government• lack of revenue streams or assets, on which loans could be based• lack of expertise in the Local Governments to manage financial

transactions.• Lack of qualified financial information for local government and

local government institutions.

For this reason, the performance monitoring can be coupled withfinancing to generate incentives for the achievement of agreedperformance criteria.

3.4.3.1 Assessment of Viability of Municipal / Utility Bonds

According to the PLGO 2001, local governments are prohibited fromacquiring debt. Since the PLGO 2001 is effectively excluded fromrevision for 6 years without presidential approval, it is unlikely that thislegal aspect will change in the near future.

At the same time, the local government finances are very weak and thereis little expectation that local government could effectively issue bonds inany form in the near future. Local governments rely to 90% on transfersfrom the Provincial Government. For these reasons, financing ofinfrastructure investment in WSS through issue of municipal bonds isconsidered out of the question for the time horizon relevant here.

There is no experience with municipal or utility bond financing inPakistan at this time. ADB has organised workshops on this topic in thepast, but that is the extent of the occupation with this type of financing.Of course, once the local governments were allowed to borrow moneyfor infrastructure both the WSS providers and the local governmentswould have to improve their financial standing. Local banks expressedthe opinion that municipal bonds would need tax exemptions to beattractive.


Even the national government has a poor rating on the internationalmarkets, although Pakistan does succeed to place bonds. The currentratings of Pakistan sovereign foreign currency debt are:Moody’s B2Standard and Poor’s B+

Moody’s rating is 5 rungs below investment grade and S and P’s is the 4th

non-investment grade. However, the Pakistan rating has been improvedto positive by Moody’s and raised from stable to positive by Standardand Poor’s.25

Municipal bonds may be an option for financing municipal WSSproviders sometime in the distant future, but it cannot be considered anoption now or in the coming years.

3.4.3.2 Guarantees and other sources of finance

Local government is heavily in debt to the provincial government and theprovincial government is saddled with a significant burden of guarantees,which have been given for IFI lending in the past. Granting of guaranteesassumes that the guarantor is financially healthy and has notoverextended itself already with previous commitments for loans.

Under the current circumstances it does not appear that there is muchroom for further commitments by the GoPunjab. In such cases it is alsoquestionable whether World Bank guarantees are a solution, sincewithout a solidly financed first resort, the guarantor would be assuming avery large risk. Ultimately there would be need for sovereign guarantees.

The financing strategy for the coming years must rely first on transfersfrom the provincial government on a grant basis. With the increase incollection rates and a gradual rise in tariff levels, it is envisioned thatO&M costs can be covered within 5 years. During this time both O&Mand capital expenditure will have to be financed by grants from theProvincial Government. After coverage of O&M costs be tariff revenues,the revenues must continue to be increased until such time as full costcoverage is achieved. This may take another 5 to 10 years in whichgrants for infrastructure development will be required albeit on adeclining basis. The model calculations indicate that tariff levels toachieve these goals will continue to be close to the affordability level forsome time. It should be noted that even if the WSS achieves financialautonomy within 10 to 15 years, it is not guaranteed that the LocalGovernments finances will be solved. Each and every municipal serviceis under-financed right now and in need of improvement, whether it bemunicipal solid waste management, education, health, roads etc.

Therefore, there should be no illusions about the possibilities of quick-fixsolutions to the local government financing problems. Other sources of

25 Herald Tribune website, March 15, 2006


finance for local government are not in sight. The fundamental rights oflenders must be in place and backed up by solid financial positions,before any other financing option is viable. Caution is appropriate withrespect to any form of financing which pretends to get around theproblems of weak financial positions of the lenders or which promises topresent a quick-fix for financing without attending to the fundamentalrequirement of sound financial management.

3.5 Building Human Resources

Due to the lack of regular training opportunities, deficits exist in nearlyall areas of operation of the service providers. The TMA did not receivethe full contingent of employees at the time of devolution with all thenecessary skills. The lack of commercial orientation means thatmanagement and commercial skills are widely missing. Know-how inoperation and maintenance, both management and technical O&M, is notevident at all. There is a lack of technicians and skilled labourers. Allareas of Information Technology are under-represented.

Training programmes should be developed as far as possible with theparticipation of private local training institutions. Also some Punjabuniversities have capabilities for management training or can developsuch programmes professionally.

3.6 Communication Needs

3.6.1 Stakeholder communication options

General awareness campaigns will have little effect if the serviceproviders do not start talking to their customers. The customer dialogueis the most important part of the communication strategy, since the mainhurdle to be overcome is the hurdle of lost trust. Complaint cells alreadyexisting should be upgraded into customer service centres. After thesetwo options of direct customer contacts, a large variety of media optionsare open to the WSS providers which can be prepared to some extentcentrally to enhance efficiency.

3.6.2 Issues to be targeted

The main issues to be targeting the communications strategy are:• Water quality testing results• Information about the service improvement programmes• The customer part in improvement programmes, for example, in

avoiding discharging waste to the sewerage system that can lead toblockages.


• What can customers expect from the service providers in future?• Maintaining clean water (maintaining household plumbing and own

wells, disinfecting drinking water, avoiding contamination in thecustomers storage and house systems)

• Costs of providing the services• Health aspects of water and sanitation• Introduction of the new tariff structure (lifeline tariffs)• Introduction of new rules such as ban on donkey pumps.

If a dept relief (cancellation of water bill arrears) is to be implemented asrecommended, this measure must be communicated to the customerstogether with the expectation that forthwith the bills will be collectedcompletely and without delay.

The zone-by-zone improvement programmes must be accompanied bylocal meetings leading to agreements with the population on the types ofservices which can be provided and about the costs. These consultationswould culminate in some form of agreement between customers in eachzone and the WSS provider in which the service quality, the rates thatcustomers will pay for services and possibly also any communityprovided contributions are confirmed.


4. Recommended Reform Agenda

4.1 Overview of the Strategy

The proposed reform strategy involves implementation of measures inseveral different fields. Overall success of the reforms depends upon thesuccessful implementation of the measures in the different fields, whichare grouped for simplicity’s sake in three general headings in Figure 5.The contractual and financial incentives are placed in the middle of thefigure to indicate that the incentives are practically the motor of thereform process and work in the interaction of the measures in the threefields. For example, through the combination of performance monitoringby the independent technical auditors (sector institutions) with thefinancing of investments (investments for service improvements). Someof the measures of the reform strategy are interdependent and must becarried out in sequence. Others are to be carried out simultaneously.Roughly speaking, measures grouped together in the three fieldsmentioned in the figure will be basically sequential and the developmentof the three fields will need to be driven forward simultaneously.

Figure 5: General Scheme of the Reform Strategy

Establish WSS Service Providers as autonomous entities1. Put interim arrangements in place as necessary2. Corporatise the WSS service providers3. Provide capacity building support to all institutions4. Prepare asset inventories, value the assets and prepare asset

management plans (AMPs)

Establish WSS Service

providers

Sector Institutions

Contractual and Financial

Incentives Investments for Service

Improvements


5. Prepare short-term performance improvement plan (PIP) within theBusiness Plan, CAPEX support linked to longer term master plan orinfrastructure development plan (IDP)

6. Consider PSP options7. Collect data to enable the effective management of services and for

economic and environmental regulation activities.

Financing Investments for Service Improvements8. Develop clear links and procedures for financial assistance to the new

structures – OPEX support linked to short-term performanceimprovement plan (PIP), CAPEX support linked to longer termmaster plan or infrastructure development plan (IDP)

9. Provide capacity building support for evaluation of investmentfinancing proposals from the service providers.

Sector Institutions10. Establish new institutions, strengthen existing ones – Co-ordinator

and Tehsil Tariff authorities.11. Provide capacity building assistance to these institutions over a

sustained period of 3 to 5 years12. Implement changes in the roles of state institutions and TMAs13. Hire independent technical auditor and financial auditor.14. Provide capacity building support to all institutions15. Co-ordinate and consolidate long-term sector development plan

(based on longer-term master plan or IDP for each WSS provider).

4.2 Establish WSS Service Providers as Autonomous Entities

4.2.1 Corporatisation of Service Providers

4.2.1.1 Preliminary Activities

First, there is a need to clarify GoPb principle acceptance of the usingPLGO 2001, 54 (2) to delegate all WSS activities to either statutory orcommercial law companies established and owned by the Tehsils.Further consensus building will also be required to convince the localgovernment involved and other stakeholders of the advantages of thestrategy. If acceptable, the reform can proceed as recommended. If not,an alternative (ring-fencing) solution, which fulfils the followingrequirements must be found26:• Entities performing WSS must have all the necessary capacities to

provide full services 26 Such an arrangement may require legally binding notification by the Tehsils involved(regarding bundling of functions within the TMA to form a “virtual company”) and achange in law regarding the employment questions. This course is not recommended. Inthe case of the WASAs their status must be regularised if PLGO 2001, 54 (2) is notutilised.


• WSS must be completely removed from the public service rulesregarding employment

• WSS management must be fully autonomous to make decisions basedon specified objectives and performance agreements.

GoPb must clarify which cities – whether all 8 cities or only some of thecities – shall participate in the reform process. This must be done withLocal Governments acceptance and sanctioned by Punjab Government.In fact, this is essentially a local government decision.

The responsibilities for providing WSS services can then be delegate tocorporatised utilities as described in paragraph 3.3.6 above.

Figure 6: Transformation to Corporatised Utility

4.2.1.2 Corporatisation of the WSS service Providers

The process of corporatisation is intended to transfer all necessarypowers to the WSS utility to perform its tasks and to be empowered toachieve the targets set for it (and agreed upon) and given appropriatecapacity building support. The changes to be achieved by corporatisationare:• Full responsibility for planning and investment• Non-intervention of public officials in day-to-day operating decisions• Competitive recruitment of managers from the public or private

sectors• Reform of employment policy and liberation from public service

rules• Actions based on business planning with service performance targets

and the potential to earn bonuses.

These changes to the service providers can be characterised as theadoption of private sector culture. Separation of Ownership of the assetsby the local government and operation will tend to ease any future PSP.

TMA TO Planning

TO Finance

TO I&S

delegationCorporatised

WSS Provider

Functional analysis

Body Corporate


4.2.2 Data Collection

The collection of data is important for the effective management of theWSS sector, both for the internal management of the WSS utilitycompanies and for their regulation. Utility regulators need good data toenable them to:• Set targets for service improvements and to monitor performance• Obtain benchmark data for comparative regulation• Set fair tariffs• Provide incentives for good performance.

The following classes of data are appropriate to the WSS sector:• Technical data• Commercial/business efficiency data• Customer data• Financial data.

To enable appropriate technical data to be collected, significantpreliminary effort and works will be needed such as, the installation ofbulk, zonal and some customer water meters, pressure monitors, andmeasuring flumes on sewers; the provision of equipment and trainedpersonnel for water sampling and analysis and the establishment of datarecording systems for principal O&M activities plus recording of allinterventions to repair broken or leaking pipelines and sewers. Finallythere is a need to assemble and elaborate as appropriate, maps of theservice areas and networks showing the location of all facilities andideally information on their condition. A GIS based approach is themodern way of assembling much of this data but requires significant upfront investment in cost and time to be in a ready and useable state.

4.2.3 Prepare Asset Inventories and Valuations

Currently there are no comprehensive registers of WSS assets for thecities. Under the reform plan it is proposed that the assets shouldtransferred to the cities and managed at the local level. The assets couldeither be in the ownership of the TMAs or the corporatised utilities. Inthe former case the assets would be operated by the utilities undercontractual arrangements such as leases for which a charge could belevied. In the latter case the assets would form the major part of thecapital of the company.

In order to effect the transfer, it will be necessary to prepare detailedasset registers or inventories and to assign monitory values to them. Thisis a substantial piece of work most of which will need to be undertakenby consultants. Once the inventories and valuations have been completedand the transfers have taken place, the new owners should prepare assetmanagement plans (AMPs) for their long-term use. The AMPs wouldalso be a sound basis for future investment plans.


4.2.4 Short-term Performance Improvement Plan

For each of the participating WSS service providers, a short-termperformance improvement plan is required to map out the serviceimprovements and means of achieving full cost recovery of O&M costswithin the targeted 5-year period. The improvement of the financialposition of the service providers can only be expected after noticeableimprovements in service provision, mainly good water quality andimproved sanitation, have been implemented. Furthermore, theseimprovements must be communicated to the customers. These changescannot be implemented without some up-front financial assistance to theservice providers. Therefore, the next step is to prepare individual(medium-term) Performance Improvement Plans (PIP) based on:• Full recovery of O&M costs from user charges after a maximum of 5

years• Decreasing financial assistance to WASA/TMA in support to O&M

costs linked to actual collection of user charges• Immediate rehabilitation program to achieve visible initial service

improvement.

The immediate programme should also include the necessaryarrangements (TA) and investments in metering and monitoringequipment in order to start up the data collection process as soon aspossible.

Another important pre-requisite for the monitoring of the financialperformance (and therefore determination of the fulfilment of the O&Mcost coverage covenant) is the preparation of individual corporatefinancial statements, which would need to be independently audited aftera maximum of 2 to 3 years.

Furthermore, the issue of WSS assets ownership needs to be clarified,which will require technical assistance (TA) for asset evaluation anddocumentation.

4.2.5 Consider Possible Private Sector Participation

4.2.5.1 Trial the Outsourcing of Activities

Once the corporatised utilities are up and running reasonably well, effortsshould be made to trial outsourcing specific functions to the local privatesector under O&M service contracts (prepared with TA support). A rangeof services have been mentioned above for possible outsourcing, but anearly candidate would be to outsource O&M of water pumping plant andsewerage disposal pumping stations.


4.2.5.2 Consider Management or Local Lease Contracts with thePrivate Sector

Following re-structuring of the utilities it may be appropriate to engage aprivate operator to further develop the capacity, improve efficiency andmake the company more attractive to potential lenders. A PSP optionsstudy should first be carried out to fully assess the options and enquirefurther into the appetite of the private sector for different forms ofcontract and the risks and responsibilities they would be prepared to takeon.

A simple fee based management contract of 3 to 5 years duration may beappropriate in the first instance to put in place the basic elements of acommercial business such as management information systems (MISs),customer accounts and billing systems and asset management plans(AMPs). Later this type of contract could be extended to include bonuspayments based on the achievement of performance targets or beconverted to a lease type contract where the utility and its private partnerwould take on commercial risk too.

4.3 Financing Investments for Service Improvements

4.3.1 Develop Clear Links and Procedures for Financial Assistance

Clearer procedures are required for provincial financial assistance linkingfunding and operational subsidies to:• short-term Performance Improvement Plan (PIP) focusing on selected

indicators for operating subsidies as required (up to the 5th year)• longer-term Infrastructure Development Plan (IDP) and realistic

financing plan (cash generation, grants, loans) for CAPEX until theservice providers are completely self-financing.

Standard formats for financing applications by WASA and TMA and forindependent appraisal by provincial government authorities need to bemodified and restructured so as to reflect rational planning practicesmodelled on those of a commercial operations.

4.3.2 Short Term Assistance to the Cities

All the cities will need considerable technical assistance to be providedby private sector consultants during the transition to corporatised statusand the acceptance of full responsibility for future planning andmanagement of the services and investments. This assistance can beprovided by a combination of local and international consultants(working in joint venture):• Legal assistance to establish service provider companies• Public awareness campaign design and implementation


• Organisational development of the WSS providers• Improving billing and collection• Establishing procedures and practices for O&M departments,

developing job descriptions for the new organisations• Developing the customer dialogue teams• Identification of the immediate rehabilitation measures (according to

performance improvement plan)• Design of bulk and zone metering and monitoring programme,

procurement of meters• Design of asset documentation and evaluation programme• Design of MIS• Pumping optimisation studies for rehabilitation or re-commissioning

of overhead reservoirs• Energy audits for electricity consumption (including contract design

with WAPDA, metering issues etc.• Business Plan development• Masterplan for long-term development (Infrastructure Development

Plan).

The experience of Rawalpindi’s programme of institutional developmentand capacity building under the ADB-funded programme is a usefulguide to the rate at which change can be wrought and indicatesreasonable expectations of achievements and pitfalls along the way. Thisproposed reform agenda is going further, however, in corporatisation andthe introduction of independent management and private sector culture,so it can be expected to be an order of magnitude more difficult than theRawalpindi example and require more time to achieve the desired results.TA support is likely to be needed for several years.

Technical assistance to the co-ordinator or to Government Bodies:• Rules for tariff determination• Draft service contracts• Project evaluation and appraisal procedures• Develop TOR for the Independent Technical Auditors• Develop TOR for the financial auditor.

4.4 Sector Institutions

Within the reformed sector structure, the Punjab Government will:• Define sector objectives, goals and targets in such detail to be used as

the basis for planning WSS• Legislate drinking water quality standards and monitoring

responsibilities and set up or appoint surveillance institutions tomonitor water quality

• Appoint independent technical auditors to monitor performance27

27 Appointment of independent technical auditors and financial auditors couldalternatively be the task of the service providers.


• Facilitate transfer of WSS assets and responsibility for investment tolocal governments

• Appoint financial auditors• Establish the co-ordinator• Define detailed rules for tariff determination and make their

implementation mandatory• Revise and clarify the appraisal criteria for investment funding and

performance standards• Develop draft service agreements to be used by service providers to

outsource O&M and other services• Withdraw entirely from the appointment of managers and staff to the

WSS service providers, and avoid any day to day managerial mattersso far as the WSS utilities are concerned.

• Set up a commission to study the development of the proposed WaterResources Protection Agency with responsibility for environmentaland water quality regulation and sustainability.

TA will be required for these activities.

4.4.1 Institutional Arrangements

Given the time needed to establish new institutions and build theircapacity, it is necessary to consider transitional arrangements,particularly to deal with economic regulation matters and the planningand management of new investments in WSS assets. In Figure 7 allessential WSS functions are decentralised to the corporatised utilitiesthemselves as soon as they have established a capability for handlingcapital works programmes.


Figure 7: Transitional Arrangement

The final organisational arrangement following transition is shown onFigure 8. The final organisational arrangement refers to a futurecondition in which the WSS providers are no longer mainly dependentupon Provincial government grants for infrastructure development (> 10years in the future). At this point the Local Government authoritieswould have to take over the function of performance monitoring inconnection with tariff approvals.

Figure 8: Final Institutional ArrangementNote: ownership refers to ownership of the corporatised utility not the assets

Finance Deptt. / P&D Dept.

Water Quality and

Environmental Standards

Customers

WSS ProviderCorporatised

TehsilTMA

WSS Management Dept.

Customer contracts

Operationcontract

Uphold Standards

Procurement of new assetson behalf of

TMA WSS management Dept.

Tehsil Council

Tariff Approvals

Private Partner

ShareholderAgreement

Possible private participation

coordination

ServiceProvider Ownership

Financial Flows

P&D DeptFinance Dept.

Technical Assistance

Customers

WSS ProviderCorporatised

Contractors

Lenders

Coordinator

Financial grants

Operation contract

Procurementon behalf ofTMA WSS

Management Dept.

QA

Capacity building

Capacity building

Independent TechnicalAuditor

Tehsil Council

Tariff Approvals

WSS Mgmt Dept.

TMA

PerformanceMoU

ShareholderAgreement

PrivatePartner

PerformanceMonitoring


4.4.2 Establish the TMA WSS Management Department

Each TMA will establish a new WSS management department with thefollowing functions:• To have representation on the Supervisory Board of the WSS

corporatised utility and thus be involved in all governance issues• To prepare the statutes for the corporatised WSS utility• To recruit and engage the General Manager (GM) of the corporatised

utility (paying at market rates)• To establish the GM’s performance contract• To review business plans• To provide support to Master Planning (co-ordination with urban

planning)• To engage staff not transferring to the corporatised utility• To review tariff change proposals prior to approval by the RA (In the

early years before full operational capability of the RA is established,the TMA may be the final approver of tariffs)

• To lobby for investment support to state institutions on behalf of thecorporatised utility.

4.4.3 Capacity Building

The reform process cannot lead to an improvement of services withoutthe creation of training programs available to WSS practitioners to focuson:• Technical, commercial, financial management issues• Customer relations• Stakeholder consultation and communication• Appraisal and evaluation of investment projects• Tariff review and approval (involves the WSS Department of the

TMA to be established in each participating city and the TehsilCouncillors who must approve tariffs).

Individual human resources development plans can only be made whenthe organisational structures of the corporatised utilities are determined(which was not the case when this report was finalised). Areas in whichcapacity-building components can be readily defined are for:• Staff in the unit responsible for appraisal of investment projects• Tariff review and approval (involves the WSS Department of the


4.4.4 Longer Term Development Plan

Strategic long-term development plans should be prepared by allcommercial business, taking a 5 to 10 year planning horizon. This is thefinal stage of the reform process and need not be described in detail atthis stage.


Financial support by GoPunjab for investments should only be grantedon the basis of fully documented financial applications including:• 5-year investment plan (master planning)• 5-year and annual Business Plans.

After coverage of O&M costs (5 years), revenues must be increased andprocesses optimised to achieve coverage of financial CAPEX after areasonable period of adjustment.

Actions required to prepare the long-term development are:• TA for business plan and investment plan• modification of PC1 format to be based on planning procedures• modification of standard appraisal procedures.


5. Next Steps

Necessary Government of Punjab activities to initiate the reforms are:• achieve agreement on the overall strategy• mobilise external financing sources• Co-ordinate donors in WSS (agree on strategy and define

mechanisms)• Consultations in cities leading to local decisions about participation

(needs TA for consultations) and corporatisation• Organise TA grants to identify and prepare immediate projects• Finalisation of drinking water quality standards, creation of

mechanisms to reliably monitor standards and effective enforcementwater quality standards.

• Preparation of detailed implementation arrangements (procurementand financial management)

• Develop rules for tariff determination• Prepare draft service contracts• Prepare draft standard statutes for corporatised utilities, standard

board composition• Implement revised procedures for preparing financing application and

appraising them.• Develop revised and improved project appraisal procedures• Develop TOR for the Independent Technical Auditors• Develop TOR for the financial auditors• Establish monitoring and evaluation (M&E) arrangements (set up co-

ordinator)• Preparation and implementation of the communications campaign,

including GoPunjab website, targeted media campaign, and furtherconsultation workshops.

In each service provider, the task of improving cost recovery needs to beinitiated with highest priority. The goal must be to achieve significantservice improvements along with customer dialogue, debt forgiveness,enhanced enforcement and public awareness so that within 2 years thecollection rate increases rapidly. In each service provider, the task ofimproving cost recovery is based on the following principles andprocedures, which need to be elaborated:• The strategy of first providing service improvements combined with

awareness campaigns and customer dialogue to improve collection• Customer dialogue teams to be set up in each service provider and

systematically engaged in presenting and discussing with customersin each zone what the needs are and what is to be expected

• Co-ordination mechanism established for local stakeholder forums• Individual Performance Improvement Plan (PIP) based on reasonable

sequences for (i) increase of collection ratio; (ii) efficiency gains; (iii)tariff adjustment prepared and (iv) immediate WSS serviceimprovement prepared with TA input (as required).


• Signed individual Performance Memorandum of Understanding(MOU) between WASA/TMA and GoPunjab specifying the sequenceof declining subsidies and disbursement conditions.

• Independent monitoring and evaluation (M&E) arrangement of thePerformance MOU established.

• Prepared Individual financial forecast, identifying OPEX andCAPEX supports by GoPunjab.

The Government of Punjab needs to take the lead to prepare to improveservice provider accountability through corporatisation, by providingassistance to the tehsils based on:• Approved “corporatisation” of WASAs and TMA WSS, including

standard draft statutes, revised board composition, audited openingfinancial statements and agreed criteria for selecting and contractingmanagement teams (Both WASA and TMA can use basic mechanismforeseen in PLGO 2001, 54 (2)).

• Set up of WSS unit in each TMA to supervise services and evaluatetariff adjustment (TA for capacity building will be required).

• Agreed action plan for generating technical, commercial and financialdata and benchmarking performance.

• Generation of initial baseline data together with service providers(TA will be required)

Individual human resources development plans can be made when theorganisational structures of the corporatised utilities are determined.Human resources development plans are possible for:• Staff in unit responsible for appraisal of investment projects• Tariff review and approval (involves the WSS Department of the


In order to ensure the success of the reform programme, the Governmentof Punjab will need to co-operate with the local government bodies andthe service providers to prepare short-term WSS projects for each cityparticipating. GoPunjab and service providers must prepare and agree onspecific short-term WSS projects with activities focusing on:• Defining individual short-term PIP and rehabilitation plans• Developing individual medium-term IDP and financing strategies• Developing individual environmental and social assessments and

mitigation plans• Preparing detailed designs and bidding documents for urgent

infrastructure projects.

In order to define the short-term WSS project, the measures mentionedunder immediate measures (see also for each city the indicativeinvestment plan) will need to be implemented:• Legal assistance to establish service provider companies• Public awareness campaign design and implementation• Organisational development of the WSS providers• Capacity building plan


• Improving billing and collection• Establishing procedures and practices for O&M departments,

developing job descriptions for the new organisations• Developing the customer dialogue teams• Identification of the immediate rehabilitation measures (performance

improvement plan)• Design of bulk and zone metering and monitoring programme,

procurement of meters• Design of asset documentation and evaluation programme• Design of MIS• Pumping optimisation studies for rehabilitation or re-commissioning

of overhead reservoirs• Energy audits for electricity consumption (including contract design

with WAPDA, metering issues etc.)• Business Plan development• Master plan for long-term development (Infrastructure Development

Plan)• TA for creating standard documents and procedures for outsourcing

services.

The list of activities, which need to be implemented simultaneously andin a co-ordinated manner, is long. This is due to the revealed deficits ofthe existing system and the need to radically revamp the water andsanitation sector from bottom to top.

306.001\Final Report Dec 2006 1

Annexes


Annex 1 Outline of Performance MOU

Key Headings of a Performance MoU1. Overall Objectives2. Definitions3. Baseline4. Authorities and Responsibilities of the Manager5. Obligations of the government6. Criteria / Performance Indicators7. Targets8. Weighting of criteria9. Determination of the degree of fulfilment (role of the independent

Technical Auditor)10. Incentives for fulfilment11. Arbitration and Final Authority12. Duration and Renewal

Key Criteria for PMOU

Billing and Collection• Billing ratio• Collection ratio• Reduction of illegal connections• New connections

Service quality• Water quality - % of satisfactory samples• Hours of service• Events of flooding and ponding

Efficiency of operation• Electricity efficiency (kWh/m³ produced or similar)• Staff/connection

Customer service• Time for dealing with Complaint• Customer satisfaction ratings derived from representative surveys

Reporting.Preparation and quality of regular reports


Annex 2: Preliminary Benchmarks for 8 Cities

Faisalabad Gujranwala Multan RawalpindiA Coverage Unit1 Water coverage % 60% 25% 50-60% 74%

(only connections) 48% 15% 19% 48%2 Sewerage coverage % 65% 55% 55% 66%

(only connections) % 88% 28% 70% 38%B Water consumption and Production3 Water production lpcd 129 lpcd 317 lpcd 225 lpcd 274 lpcd4 Water consumption lpcd 114 lpcd 135 lpcd 180 lpcd 135 lpcd5 Metered cons. lpcd n.a. 0 0 < 1%C Unaccounted for Water6 UfW % 35% 30-35% 30-40% 38%D Metering Practices8 Metered Con. % n.a. 0 0 n.a.9 Functional meters % n.a. 0 0 n.a.10 Water metered % 3% 0 0 n.a.E Pipe Network Performance11 Pipe breaks (water) Br/km/y 2.5 15 n.a. n.a.12 Sewerage blocks Bl/km/y 14.5 22 n.a. n.a.F Cost and Staffing13 Unit operating cost PKR/1,000

gal31 31 54 27

14 Staff/1000 water connections Pers/1,000con.

10 13 19 14

Staff/1000 water and sewerage con. Pers/1,000con.

8 4 6 n.a.

15 Salary costs of operating costs % 36% 37% 41% 24%16 Power costs of operating costs % 36% 57% 60% 36%17 Contract-out cost of operating costs % 0% 0% 0% 0%G Quality of Service18 Continuity of service Hrs/day 8 14 8 2-3 to 819 Complaints about W&S services %of W&S

con./y12.5 10% 6.4 15%

20 Wastewater treatment % 10% None None noneH Billings and Collections21 Average tariff PKR/m³ 2-5 2.5-4 1-3 1-322 Residential fixed charge PKR/con/y 864-2,520 1080-1,800 400-1,200 600-1,20023 Ratio of industrial to residential charges % 2,400% 2,000% 2,100% 3,000%24 Connection Charge- WSS PKR 420-2800 350-500 2,800 500-1,000I Financial Performance26 Working ratio % 142% 117% 118% 91%


Annex 2 – cont.Bahawalpur DG Khan Sarghoda Sialkot

A Coverage Unit1 Water coverage % 10-30% 30% 45% 80%

(only connections) % 14% 29% 20% 55%2 Sewerage coverage % 50% 50% 45% 20%

(only connections) % n.a. 40% 16% 44%B Water consumption and Production

3 Water production lpcd 136 lpcd 425 lpcd 225 lpcd 297 lpcd4 Water consumption lpcd 112-135 lpcd 135 lpcd 135 lpcd 225 lpcd5 Metered cons. lpcd 0 0 0 0C Unaccounted for Water6 UfW % 40% 40% 40% 5%7 NRW % n.a. 10% n.a. n.a.D Metering Practices8 Connections metered % 0 0 0 09 functional meters % 0 0 0 010 water sold metered % 0 0 0 0E Pipe Network Performance11 Pipe breaks (water) Br/km/y n.a. n.a.12 Sewerage blocks Bl/km/y n.a. 20F Cost and Staffing13 Unit operational cost PKR/1,000

gal23 9 41 23

14 Staff/1000 waterconnections

Pers/1,000con.

7 8 10 5

Staff/1000 water andsewerage con.

Pers/1,000con.

1.8 2.8 9 n.a.

15 Salary costs ofoperating costs

% 60% 34% 30% 17%

16 Power costs ofoperating costs

% 35% 62% 70% 79% (incl.Street lights)

17 Contract-out cost ofoperating costs

% 0% 0% 0% 0

G Quality of Service18 Continuity of service Hrs/day 2-3 hrs 8 hrs 2-3 hrs 10 hrs19 Complaints about W&S

services%of W&S

con./yn.a. About 12% 31%

20 Wastewater treatment % none None none noneH Billings and Collections

21 Average tariff PKR/m³ 1.2 0.7 0.7-1.5 2-5.922 Residential fixed charge PKR/con/y 540 300 300-600 900-2,70023 Ratio of industrial to

residential charges% 1,300 800 625 4,300

24 Connection Charge-WSS

PKR n.a. 110 300-6,000 2,000 oractual cost

25 Collection period A/R/ rev. n.a. 3 years 6 ½ years n.a.I Financial Performance26 Working ratio ratio 1,028% 834% 3,500% 196%

(WASA / TMA figures are for 2004/2005 Based on WSP Benchmarks. Refer to definitions provided byWSP). The benchmarks in this table are generally the values given by the WSS provider, unless therewere contradictions or implausibilities between data given, then Consultant’s estimates were entered.The table should be read in conjunction with the Benchmark Annex of the Status Quo reports, wherecomments are included.


Annex 3: Draft Tasks for Co-ordinator

• Overall co-ordination of activities in all cities• Assist GoPunjab in all aspects to define sector objectives, goals and

targets in such detail to be used as the basis for planning WSS• Support the timely legislation of drinking water quality standards and

monitoring responsibilities and set up or appoint surveillance institutionsto monitor water quality

• Appoint independent technical auditors to monitor performance28

• Appoint financial auditors• Facilitate transfer of WSS assets and responsibility for investment to

local governments• Tariff setting rules and procedures. Assist GoPb to define detailed rules

for tariff determination and make their implementation mandatory• Appraisal procedures and forms. Assist P&D Department to revise and

clarify the evaluation criteria for investment funding and performancestandards in agreement with donor agencies

• Develop Monitoring criteria• Draft contract documents for forms of PPP. Develop draft service

agreements to be used by service providers to outsource O&M and otherservices

• Withdraw entirely from the appointment of managers and staff to theWSS service providers, and avoid any day to day managerial matters sofar as the WSS utilities are concerned.

• Set up a commission to study the development of the proposed WaterResources Protection Agency with responsibility for environmental andwater quality regulation and sustainability

• Supervision of Report and Plan submissions• Preparation of decisions on fulfillment of performance criteria upon

submission of independent auditors reports• Co-ordination of TA for Awareness Building (centralised part)

It is assumed that P&D Department is to continue to appraise projectproposals.

TA will be required for these activities.

28 Appointment of independent technical auditors and financial auditors could alternativelybe the task of the service providers.


Annex 4: Domestic Water and Sewerage Tariff Structure of the WSSProviders

Category(Marla) 1 2 3 4 5 6 7

Faisalabad 0-2.5 >2.5-3.5 >3.5-5 >5-10 >10-20 >20-40 >40Gujranwala 0-3 >3-5 >5-7 >7-10 >10-20 >20-30 >30Multan 0-3 >3-5 >5-10 >10-20 >20-30 >30Rawalpindi 0-5 >5-7 >7-10 >10-20 >20-40 >40Bahawalpura

DG Khana

Sargodha 0-2 >2-5 >5a Bahawalpur and DG Khan have a uniform domestic tariff

Water Tariff Structure and Level of Sialkot

Category Tariff (Water,PKR/month)

City Area Domestic (3/8") 76City Area Domestic (1/2") 126Model Town Domestic (3/8") 105Factory Area Domestic (3/8") 183

Domestic Water Tariffs

Category(PKR/month) 1 2 3 4 5 6 7

Faisalabad 72 108 126 210 280 560 840Gujranwala 70 80 100 120 200 250 500Multan 36 60 - 100 175 250 250Rawalpindi 62 - 102 141 209 356 509Bahawalpur 45DG Khan 25Sargodha 25 37 58

Domestic Sewerage Tariffs

Category(PKR/month) 1 2 3 4 5 6 7

Faisalabad 48 72 84 140 210 350 560Gujranwala 20 20 25 30 50 75 100Multan 21 34 - 56 100 170 170Rawalpindi 40 - 60 80 100 125 150


Current Monthly Water Tariff Recalculated per m³

Category(PKR/m³) 1 2 3 4 5 6 7

Faisalabad 2.3 3.5 4.0 6.7 9.0 17.9 26.9Gujranwala 2.2 2.5 3.1 3.7 6.2 7.7 15.4Multan 1.1 1.9 - 3.1 5.5 7.9 7.9Rawalpindi 2.2 - 3.6 5.0 7.4 12.6 18.0Bahawalpur 1.4 1.4 1.4 1.4 1.4 1.4 1.4DG Khan 0.8 0.8 0.8 0.8 0.8 0.8 0.8Sargodha 0.8 1.3 2.0

Own calculations

Current Monthly Water Tariff Recalculated per m³ for Sialkot

Category(PKR/m³)

City Area Dom(3/8")

City Area Dom(1/2")

Model TownDom (3/8")

Factory AreaDom (3/8")

Sialkot 2.4 4.0 4.0 7.2

Connection Charges

Residential IndustrialFaisalabad 420 2,800Gujranwala 350 500Multan 150 500Rawalpindi 500 1,000Bahawalpur n.a. n.a.DG Khan 110 n.a.Sarghoda 300 6,000Sialkot 2,000 2,000

Connection Ratios

Households Water HHConnections

% ConnectedPopulation

Water

Sewerage HHConnections

%ConnectedPopulationSewerage

Faisalabad 204,638 99,120 48% 181,000 88%Gujranwala 192,830 29,730 15% 53,550 28%Multan 196,203 37,026 19% 137,789 70%Rawalpindi 158,133 75,812 48% 60,650 38%Bahawalpur 47,619 6,700 14% n.a.DG Khan 47,410 13,676 29% 18,964 40%Sarghoda 79,715 15,760 20% 12,608 16%Sialkot 65,918 36,555 55% 29,244 44%


Non Residential Connections

Number ofConnections

Water

Water tariffs(PKR/month)

Number ofConnections

Sewerage

Sewerage tariffs(PKR/month)

Faisalabad 20 2,100 - -Gujranwala 395 125-625 5,331 50-250Multan - 130-150 - 175-420Rawalpindia - 100-5,000 - -Bahawalpur - 362-1,650 - -D.G.Khan 180 200-500 - -Sargodha 742 650 - -Sialkot 2,389 650 - -a in Rawalpindi there are 129 non-domestic tariff categories

Total Revenue from UIP Tax in the Punjab

(mill PKR) 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03Yield 776 171 201 190 476 17 994

Cost of Units Sold

Connections Sales per year (millm³)

OpEx (millPKR)

Unit Cost(PKR/m³)

Faisalabad 99,120 36 275 7.6Gujranwala 30,125 11 133 11.8Multan 37,026 18 217 11.8Rawalpindi 83,574 33 228 6.8Bahawalpur 6,700 1 9 7.7DG Khan 13,856 7 31 4.5Sarghoda 16,502 7 54 7.4Sialkot 38,944 22 114 5.1Own calculations

Actual and Potential Income (2004/05)

CollectionRatio

Actually Received (millPKR)

Potential Income at 100 %collection rate (mill PKR)

Faisalabad 45% 144 320Gujranwala 32% 22 69Multan 18% 15 83Rawalpindi 74% 66 89Bahawalpur 19% 0.7 3.6DG Khan 31% 1.41 4.5Sargodha 20% 1.37 7.0Sialkot 86% 32 37


Operating Ratios (2004/05)

OpE

x (m

illPK

R)

Act

ual

Inco

me

(mill

PK

R)

UIP

Tax

shar

e (m

illPK

R)

Ope

ratin

gR

atio

(inc

l.U

IP T

ax)

Ope

ratin

gR

atio

s(w

.o. U

IPTa

x)

Ope

ratin

gR

atio

s (at

100%

colle

ctio

n)

Faisalabad 275 197.4 53 140% 191% 74%Gujranwala 133 27.5 5 485% 593% 179%Multan 217 54.6 40 397% 1489% 177%Rawalpindi 228 128.0 62 178% 345% 151%Bahawalpur 9 10.7 10 87% 1348% 69%DG Khan 31 1.41 0 2182% 2182% 677%Sargodha 54 1.37 0 3914% 3914% 766%Sialkot 114 54.7 22.5 208% 354% 190%

Coverage of Cost per Unit Sold (at 140 lpcd)

Category 1 2 3 Unit CostPKR/m³ PKR/m³ PKR/m³ PKR/m³

Faisalabad 2.3 3.5 4.0 7.6Gujranwala 2.2 2.5 3.1 11.8Multan 1.1 1.9 - 11.8Rawalpindi 2.2 - 3.6 6.8Bahawalpur 1.4 1.4 1.4 7.7DG Khan 0.8 0.8 0.8 4.5Sargodha 0.8 1.3 2.0 7.4Sialkot 2.4 4.0 4.0 5.1Own calculations

Coverage of Cost per Unit Sold (at 90 lpcd)

Category 1 2 3 Unit CostPKR/m³ PKR/m³ PKR/m³ PKR/m³

Faisalabad 3.6 5.4 6.3 11.8Gujranwala 3.4 3.8 4.8 18.4Multan 1.8 2.9 - 18.4Rawalpindi 3.4 - 5.6 10.6Bahawalpur 2.2 2.2 2.2 12.0DG Khan 1.2 1.2 1.2 7.0Sargodha 1.3 2.0 3.1 11.5Sialkot 3.8 6.3 6.3 8.0Own calculations


Staff per 1,000 ConnectionsActual number Staff per 1,000

WaterStaff per 1,000 Water and

SewerageFaisalabad 1,018 10 3.6Gujranwala 383 13 4.6Multan 685 19 3.9Rawalpindi 1,055 14 7.7Bahawalpur 44 7 n.a.DG Khan 112 8 3.4Sargodha 156 10 5.5Sialkot 186 5 2.8

Labor Cost per Connection

Total Cost(mill PKR)

Connections Cost per Connection(PKR/con)

Faisalabada 69 99,120 700Gujranwala 30 29,730 1,021Multana 60 37,026 1,625Rawalpindia 69 75,812 914Bahawalpur 4 6,700 639DG Khan 5 13,676 364Sarghodaa 14 15,760 910Sialkot 12 36,555 319a including sewerage

Power Cost Shares

Total Cost (mill PKR)

Percent of total O&M

Faisalabad 107 39%Gujranwala 68 51%Multan 90 41%Rawalpindi 105 46%Bahawalpur 2.4 26%DG Khan 14 46%Sarghoda 27 51%Sialkota 74 65%a includes cost for municipal street lighting

Power Cost per m³ Produced

Total (millPKR)

Production(mill m³/year)

Unit cost(PKR/m³)

Faisalabad 107 48 2.2Gujranwala 68 35 1.9Multan 90 39 2.3Rawalpindi 105 110 1.0Bahawalpura 2.4a 4 0.7DG Khana 14 a 16 0.9Sarghoda 27 24 1.1Sialkot 74 52 1.4a these values are questionable


Population Growth and Household Size

Population growth(1991-1998)

Average HH Size(Persons/HH)

Faisalabad 3.6% 7.3Gujranwala 3.8% 7.6Multan 2.9% 7.5Rawalpindi 3.4% 6.6Bahawalpur 4.9% 7.4D.G.Khan 3.7% 7.5Sargodha 2.7% 6.9Sialkot 2.0% 7.3

Based on census data 1998Forecast of Supplied Connections

Year(1,000 Con) 1 2 3 4 5 6 7 8 9 10

Faisalabad 114 128 143 157 172 186 200 215 229 244Gujranwala 35 40 46 51 56 62 67 72 78 83Multan 44 51 58 65 72 79 86 92 99 106Rawalpindi 86 96 105 115 125 135 145 155 165 175Bahawalpur 10 13 17 20 23 26 30 33 36 39D.G.Khan 16 18 20 23 25 27 30 32 34 36Sargodha 20 23 27 31 35 39 43 47 51 54Sialkot 39 41 44 46 48 51 53 55 58 60

Own calculations

Annual Increase of Service Coverage

IncreaseFaisalabad 2.5%Gujranwala 4.5%Multan 2.5%Rawalpindi 2.5%Bahawalpur 4.0%DG Khan 2.0%Sarghoda 5.5%Sialkot 1.0%

Own calculations

Demand Forecast

(mill m³) 1 2 3 4 5 6 7 8 9 10Faisalabad 41.6 46.1 50.6 55.1 59.7 64.2 68.9 73.5 78.2 82.8Gujranwala 13.3 15.1 16.9 18.7 20.5 22.4 24.3 26.3 28.2 30.2Multan 16.3 18.4 20.6 22.8 25.0 27.2 29.4 31.6 33.8 36.1Rawalpindi 28.5 31.3 34.1 36.9 39.8 42.6 45.5 48.4 51.3 54.3Bahawalpur 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10.5 11.5 12.6DG Khan 6.0 6.7 7.4 8.1 8.8 9.6 10.3 11.0 11.7 12.5Sargodha 6.7 7.9 9.1 10.3 11.5 12.7 14.0 15.2 16.5 17.9Sialkot 14.4 15.2 15.9 16.6 17.4 18.1 18.8 19.6 20.3 21.0

Own model calculations


Average Volumetric Tariffs (at 110 lpcd metered and 140 lpcd for unmeteredconsumption)

PKR/m³ Levelized unitcost

Average tariff 1st

yearAverage tariff 10th

yearFaisalabad 4.0 2.5 6.4Gujranwala 4.4 1.9 6.2Multan 3.9 1.9 5.3Rawalpindi 2.5 1.6 3.5Bahawalpur 4.2 1.3 6.5DG Khan 2.4 1.0 3.5Sargodha 4.1 1.1 7.1Sialkot 3.4 2.3 4.9


Average Volumetric Tariffs (at 90 lpcd metered and 110 lpcd unmetered consumption)

PKR/m³ Levelized unitcost

Average tariff 1st


yearFaisalabad 4.8 2.9 7.8Gujranwala 5.2 2.2 7.5Multan 4.5 2.1 6.3Rawalpindi 3.0 1.8 4.2Bahawalpur 5.2 1.6 8.0DG Khan 2.9 1.2 4.2Sargodha 5.0 1.3 8.7Sialkot 4.0 2.6 5.9


Average Water Tariff per Connection

PKR/con/m Levelized unitcost

Average tariff 1st


yearFaisalabad 124 77 200Gujranwala 143 61 202Multan 125 61 170Rawalpindi 72 45 100Bahawalpur 132 41 204DG Khan 76 34 111Sargodha 122 33 210Sialkot 105 71 154



Average Sewerage Tariff per Connection

PKR/con/m Levelized unitcost

Average tariff 1st

yearAverage tariff

10th yearFaisalabad 48 36 69Gujranwala 61 25 82Multan 45 19 63Rawalpindi 81 41 101Bahawalpur 53 39 53DG Khan 37 19 43Sargodha 71 21 104Sialkot 61 40 79


Proposed Volumetric Tariffs

PKR/m³

"Lowincome"

water tariff1st year

"Mediumincome"


"Highincome"


"Lowincome"

water tariff10th year

"Mediumincome"


"Highincome"


Faisalabad 2.5 2.5 2.5 4.1 6.4 10.0Gujranwala 1.9 1.9 1.9 3.9 6.2 8.5Multan 1.9 1.9 1.9 4.0 5.3 6.8Rawalpindi 1.6 1.6 1.6 3.5 3.5 3.5Bahawalpur 1.3 1.3 1.3 4.1 6.5 9.8DG Khan 1.0 1.0 1.0 3.5 3.5 3.5Sargodha 1.1 1.1 1.1 4.3 7.1 9.9Sialkot 2.3 2.3 2.3 4.1 4.9 5.7


Proposed Water Tariff per Connection29

PKR/con/m

"Lowincome"


"Mediumincome"


"Highincome"


"Lowincome"


"Mediumincome"


"Highincome"


Faisalabad 77 77 77 100 200 354Gujranwala 61 61 61 100 202 305Multan 61 61 61 100 170 245Rawalpindi 45 45 45 100 100 100Bahawalpur 41 41 41 100 204 346DG Khan 34 34 34 100 111 122Sargodha 33 33 33 100 210 321Sialkot 71 71 71 100 154 202


29 It is possible that unmetered tariffs reach the affordability threshold for "low income"household, leading to different tariffs for the different categories, whereas volumetric tariffsare equal. This is due to different assumptions about consumption (110 lpcd / 140 lpcd,metered / unmetered connection).


Proposed Sewerage Tariffs per Connection

PKR/con/m

"Lowincome"seweragetariff 1st

year

"Mediumincome"seweragetariff 1st

year

"Highincome"seweragetariff 1st

year

"Lowincome"seweragetariff 10th

year

"Mediumincome"seweragetariff 10th

year

"Highincome"seweragetariff 10th

yearFaisalabad 36 36 36 69 69 69Gujranwala 25 25 25 82 82 82Multan 19 19 19 63 63 63Rawalpindi 41 41 41 100 101 102Bahawalpur 39 39 39 53 53 53DG Khan 19 19 19 43 43 43Sargodha 21 21 21 100 104 107Sialkot 40 40 40 79 79 79


Operating Cost Subsidies in Year 1 to 5

Year(mill PKR) 1 2 3 4 5

Faisalabad 24 20 15 8 0Gujranwala 69 58 42 22 0Multan 96 78 56 30 0Rawalpindi 72 59 44 24 0Bahawalpur 9 9 8 5 0DG Khan 13 11 8 5 0Sargodha 25 22 18 10 0Sialkot 31 23 16 8 0

Total 338 280 206 113 0


Capital Cost Subsidies in Year 1 to 10

Year(mill PKR) 1 2 3 4 5 6 7 8 9 10

Faisalabad 58 114 165 220 246 219 180 130 68 0Gujranwala 19 35 43 51 58 52 43 31 17 0Multan 14 29 42 53 60 53 45 33 18 0Rawalpindi 23 47 70 91 99 87 71 51 26 0Bahawalpur 8 18 27 36 39 34 27 18 9 0DG Khan 4 9 13 17 18 15 12 8 4 0Sargodha 14 26 36 46 55 50 42 30 16 0Sialkot 16 28 34 40 44 38 30 21 11 0

Total 157 305 430 555 621 548 449 322 170 0



Annex 5 Indicative Investment Plans for 8 Cities

5- 1: Faisalabad Planned Investments and Performance Improvement Plan

The installation of 25 tube wells at the Jhang Branch Canal by the JICAproject and additional 25 tube wells at the Rakh branch canal there willincrease production by 91,000 m³ per day. This will increase coverage toabove 80% and permit an increase of service delivery in many parts of thecity from 8 to 24 hour supply.

In order to decrease pumping cost additional rehabilitation of the distributionsystem is planned, which currently loses an estimated 50% and more of thequantity.

The 24 hours service level in pilot zones, where this level of supply isguaranteed, will make it possible to install metered connections in thesezones. It is expected that 30 metered connections can be installed per day, soa total of 60,000 meters will be installed.

Currently the sewerage connection rate is about 80% (181,000 Connections),but a major share of these households is connected only to simple opendrains. An improvement and extension of the system of main and lateralsewers as already proposed in the master plan (1993-2018) is necessary andforeseen in the investment plans.

Currently wastewater treatment includes only sedimentation and aerationand is limited to only 25% of the total wastewater quantity. So a newtreatment plant with sufficient capacity is foreseen in the investment plan.

The cost of the JICA part are estimated to be 2,810 million PKR (46.83 millUS$). 0.33 million PKR (5.55 mill US$) will be spent on immediatemeasures. The cost of the additional as yet unfunded water component willbe 1395 million PKR (23.25 mill US$) and its sewerage part 2,600 millionPKR (43.33 mill US$). The overall cost of the additional part will amount to4,328 million PKR (72.13 mill US$). Details on the investment plan can befound in the following table.

306.001Final Report Dec 2006 16

English


5- 2: Gujranwala Planned Investments and Performance Improvement Plan

The high level of losses, which the consultant estimates at 55 to 60% makesit necessary to replace old cast iron and galvanized iron pipes. In addition itis foreseen to rehabilitate the existing tube wells and to install 50 new onesin order to increase the service level from the current 14 to 15 hours per dayto an uninterrupted supply of 24 hours in a stepwise approach.

Only 15% of the population are currently connected to the distributionsystem, so an extension of the distribution system is foreseen. New meteredconnections will be installed. It is expected that it will be possible to install20 meters per day during the project time, so a total of 40,000 meters will beinstalled.

Only 28% of the population are connected to the sewer system. The capacityof the existing sewerage system is by far below the required level. This leadsto current overflowing of the sewers and disposal stations at many places.Wastewater from the city's districts is discharged without treatment intocanals from where it is used for irrigation. This situation is unsustainablefrom the hygienic point of view, so the system has to be rehabilitated andexpanded to a capacity, which meets the requirements of the city. Atreatment plant will be built.

The cost of the investments are expected to be 453 million PKR forimmediate measures (7.55 mill US$), 1,629 million PKR (27.15 mill US$)for the water component and 1,000 million PKR (16.66 mill US$) for thesewerage component. The overall project costs would amount to 3,082million PKR (51.38 mill US$). Details of the investment plan can be foundin the following table.



5- 3: Multan Planned Investments and Performance Improvement Plan

A main problem in Multan is the contamination of shallow private wellswith arsenic, viruses and bacteria and the infiltration of contaminated waterinto the distribution lines. So consumers shall be encouraged to connect tothe public system by improving service quality. Currently, only 19% of thepopulation own connections to the public system.

Some of Multans 80 tube wells are out of order and even the remaining areworking only 8 hours per day. The tubewells will be rehabilitated and newones will be installed.

At the same time the distribution system will be rehabilitated and expanded,so that 24-hour service delivery can be guaranteed for some zones. In thesezones metered connections will be installed at a rate of 30 per day, leading to60,000 new-metered connection during the project period.

The current service coverage for sewerage is 70%. It will be raised, when thenew water connections will be connected to the sewerage system. Currentlywastewater is only screened before being used for irrigation or disposed of incanals. The sewers are surcharged due to silting in parts of the network and ageneral under capacity, so they have to be rehabilitated and extended. A newtreatment plant will be built.

The ADB water component is expected to cost about 420 million PKR (7mill US$). Its sewerage component will cost about 1,078 million PKR(17.97 mill US$). The proposed new investments (additional) are expectedto cost 352 million PKR (4.2 mill US$) for immediate measures, 506 millionPKR (8,43 mill US$) for the new water component and 600 million PKR (10mill US$) for sewerage. The overall costs of the additional as yet unfundedpart are expected to amount to 1,358 million PKR (22.63 mill US$). Detailson the investment plan can be found in the following table.



5- 4: Rawalpindi Planned Investments and Performance Improvement Plan

If neighborhood supply, standposts and tanker supply are taken into account,Rawalpindi has a coverage of 75%. This is the highest among the citiesunder the study.

Water in Rawalpindi is contaminated in the distribution system by theinfiltration of wastewater into the distribution pipes during low/no flowtimes. This problem shall be mitigated by new filters and chlorinators at theintakes.

The second focus of the water component of the investment plan lies on theincrease of the service level, e.g. hours of supply. This will be done by arehabilitation of the existing distribution lines and an increase of pumpingfor certain zones of the city. If 24 hour supply can be guaranteed for acertain zone, metered connections will be introduced.

In Rawalpindi it is foreseen to invest in the rehabilitation of existing and theconstruction of new tubewells. In addition parts of the distribution systemshall be rehabilitated and it shall be extended to still unconnected zones. Inthese zones metered connections shall be introduced at a rate of 25 per day,leading to a total of consumption meters of 50,000 at the end of the project.

Under the sewerage component the network shall be rehabilitated andexpanded and a treatment plant shall be built.

The cost of the ADB water component in Rawalpindi are estimated toamount to 417 million PKR (6.95 mill US$) and to 2,973million PKR (49.55mill US$). The new investments will consist of 236 million PKR (3.95 millUS$) for immediate measures, 636 million PKR (10.6 mill US$) for waterand 825 million PKR (13.75 mill US$) for sewerage. The overall costs forthe additional investments required are estimated to be 1,698 million PKR(28.3 mill US$). An overview of the planned investments can be seen in thefollowing table.



5- 5: Bahawalpur Planned Investments and Performance Improvement Plan

The water supply system of Bahawalpur consists of 13 schemes in differentlocalities of the city. Only four of them currently provide water to thepopulation and even this supply is only intermittent. The majority of thepopulation is not connected to the supply system. The connection rate isassumed to be below 15%.

The water component of the project will provide the rehabilitation ofexisting and construction of new tube wells. These will be equipped withchlorinators and bulk meters. The tube wells will be connected with newground water tanks.

Metering will be introduced, when 24-hour service delivery can beguaranteed for the respective zone of the city. This will be reached byphased rehabilitation and extension of the distribution system. It is assumedthat 5 meters can be installed per day, leading to a total after 10 years of10,000.

Only a small part of the population is currently connected to the seweragesystem, so considerable extension is required.

The cost of the water component will be 510 million PKR (8.5 mill US$) forwater and 308 million PKR (5.13 mill US$) for the sewerage component.The cost for the new investments (as yet without funding) in immediatemeasures will be 222 million PKR (3.7 mill US$), 170 million PKR (2.83mill US$) for water and 255 million PKR (4.25 mill US$) for sewerage. Theoverall project costs of the additional portion to be financed will be 647million PKR (10.78 mill US$). An overview of the planned investments canbe seen in the following table.



5- 6: DG Khan Planned Investments and Performance Improvement Plan

Preliminary investment plans cover the well fields of Gider Wala, AmirShah, Samina Chowk DG Khan Canal and Shoria Canal. The tube wellsinstalled on these locations are partially out of order, either due to sandblowing or to a lowering of the water table. So a rehabilitation of existingones and installation of new ones will be necessary. The tube wells have tobe equipped with chlorinators and with flow meters.

The distribution network is currently in poor condition and does not cover allparts of the service area. Losses are assumed to be above 50%. The networkwill have to be rehabilitated and additional zones of the city have to beconnected, to allow a 24 hour service delivery in these parts of the scheme.

This level of service delivery is the precondition for the introduction ofmetering in these zones of the service area. So meters will also only beinstalled zone-wise at a rate of 10 per day, leading to a total after 10 years of20,000.

To prevent infiltration of sewerage into the ground, large parts of theexisting sewerage network and of the disposal stations have to berehabilitated.

In addition zones connected under the water component have to beconnected to the sewerage system too, so also investment into new sewerswill be necessary. The current practice of uncontrolled discharge ofsewerage into low areas or irrigation canals is not hygienic and has to bestopped, so a treatment plant is required.

The cost of the water supply component from ADB will be 235 million PKR(3.92 mill US$) and 288 million PKR (4.8 mill US$) for the seweragecomponent. The additional investment part will cost 222 mill PKR (3.7 millUS$), 218 million PKR (3.63 mill US$) for water and 130 million PKR(2.16 mill US$) for the sewerage component. So the overall cost for theadditional investments will be 570 million PKR (9.5 mill US$). Details onthe planned investments in DG Khan can be seen in the table.



5- 7: Sargodha Planned Investments and Performance Improvement Plan

In Sargodha the water supply system reaches only 20% of the populationthrough around 16,000 connections. Even these connections receive onlyintermittent supply during 12 to 16 hours per day.

Old tube wells have to be rehabilitated and new ones have to be drilled. Thehave to be equipped with chlorinators, to prevent bacteriologicalcontamination during the flow through the distribution pipes and with bulkmeters to permit a monitoring of performance.

The new tube wells will be connected to the network by transmission lines,which will feed the new overhead reservoirs. These investments will becarried out zone wise during the project until 2016 in order to reach 24 hoursupply in a step-wise approach.

Additional investments will be required for the extension of the distributionnet to zones of the city, which were formerly unsupplied. In these zonesmetering will be introduced, when 24 hour service delivery is guaranteed.Meters will be installed at a rate of 5 per day leading to a total of 10,000after 10 years.

The sewerage system currently covers only 45% of the population. Itscapacity is even insufficient for the quantities produced by the currentlyconnected population. It suffers from many breaks and overflows into thestreets. It will be extended and partially rehabilitated. In addition a treatmentplant is required so that the current practice of uncontrolled disposal can bestopped.

The cost of the immediate measures in Sargodha will be 333 mill PKR (5.55mill US$), for the water component of the project they are estimated to be1,434 million PKR (23.9 mill US$) and 1,119 million PKR (18.65 millUS$). The overall project costs are estimated to be 2,553 million PKR (42.55mill US$). Details can be seen in the following table.



5- 8: Sialkot Planned Investments and Performance Improvement Plan

Losses in Sialkot are estimated to be about 40%, because the network is oldand damaged. There are 84 tube wells, some of which are out dated,inefficient or even abandoned. So 40 of them have to be rehabilitated orreplaced. The new ones shall be equipped with bulk meters to monitorperformance and with chlorinators, to avoid bacteriological contamination.

In addition 24 hour supply has to be established for those zones of the city,which also foreseen for the introduction of metering. The first of these willbe most likely the existing model towns, which already have up to 20 hoursof supply per day.

The pilot / model zones for metering will also have to be connected to thesewerage system, so it has to be expanded. Compared with the other citiesunder the project the existing sewerage system is relatively good state, soonly minor portion will have to be rehabilitated. However, currently thesewerage is not treated, so a new treatment plant is required.

An especially urgent problem is the current practice of the residents of thecantonment, to dispose their sewerage into the groundwater. The seweragesystem should be expanded to the cantonment area to permit a properdisposal of the wastewater from the cantonment. This investment wouldrequire an agreement between TMA and cantonment because the latter doesnot belong to the service area of the TMA.

The cost of the immediate measures in Sialkot will be 483 million PKR(8.05 mill US$), for the water component they are estimated to be 1,344million PKR (22.4 mill US$) and 568 million PKR (9.47 mill US$). Theoverall investments cost for Sialkot are 2,395 million PKR (33.92 mill US$).Details on investment costs can be found in the following Table Annex 8Sialkot.



Annex 6:Financial Model Faisalabad


Annex 7: Financial Model Gujranwala


Annex 8: Financial Model Multan


Annex 9: Financial Model Rawalpindi


Annex 10: Financial Model Bahawalpur


Annex 11: Financial Model DG Khan


Annex 12: Financial Model Sargodha


Annex 13: Financial Model Sialkot


Annex 14: Proposed Volumetric Tariffs Year 1 to 10


Annex 15: Proposed Tariffs per Connection Year 1 to 10


Annex 16: Proposed Sewerage Tariffs per Connection Year 1 to 10


Annex 17 List of Project Final Reports

Summary Report – Financial IncentivesSummary Report – Economic RegulationSummary Report – Contractual IncentivesCommunication StrategyTariff ReportConsumer Preferences for Improved Water Supply and Sewerage Services in urban PunjabPakistan: Final Report

Staus Quo Reports for each cityStatus Quo Report – BahawalpurStatus Quo Report – Dera Ghazi KhanStatus Quo Report – FaisalabadStatus Quo Report – GujranwalaStatus Quo Report – MultanStatus Quo Report – RawalpindiStatus Quo Report – SialkotStatus Quo Report – Sargaodha

Short Status Reports for each City (with Benchmarks)Bahawalpur – Brief Summary Report of Water Supply and SewerageDera Ghazi Khan – Short Summary of Water Supply and SewerageFaisalabad – Short Summary of Water Supply and SewerageGujranwala – Short Summary of Water Supply and SewerageMultan – Short Summary of Water Supply and SewerageRawalpindi – Short Summary of Water Supply and SewerageSargodha – Short Summary of Water Supply and SewerageSialkot – Short Summary of Water Supply and Sewerage


Annex 18 References and Sources of Information

Title Author Year EditorFlexibility of Design: Lessons fromMulti-Sector Partnerships in Waterand Sanitation Projects

Ken Caplan,Simon Heap etc.

2001 BPD Water andSanitation Cluster

Developing Best Practices for promoting privatesector investment in infrastructure

2000 Asian DevelopmentBank

WASA community infrastructure unit S.M. KhatibAlam,Gul HafeezKhokhar

2002

Performance Report 2004-2005

District GovernmentFaisalabad

Devolution of power programme inPakistan: Case study of FaisalabadDistrict

S.M. KhatibAlam,Nadir Ehsan

2002

Monitoring and Evaluation: a casestudy of Faisalabad Area UpgradingProject

Nadir EhsanRana MahmoodAkthar

2002

Appropriate Design Standards anConstruction: Specifications forTertiary Sewerage Systems

S.M. KhatibAlam,JonathanParkinson

2002

Communities take Charge of localSanitation Facilities

S.M. KhatibAlam,Ejaz Ahmad

2001

Citizen Community Boards andFaisalabad District

2005 District GovernmentFaisalabad

Strengthening local GovernmentProcurement Processes and Systems


Improving Planning in Water Supply,Sanitation andDrainage Services



Capacity Development for DistrictBudget PlanningProcesses


Water and Sanitation (Final) 2004-2005

Faisalabad LocalGovernment

Pakistan Water Sector Strategy(Executive Summary Volume 1)

2002 Ministry of Water andPowerOffice of the ChiefEngineeringAdvisor/ChairmanFederal FloodCommission

Pakistan Water Sector Strategy(National Water Sector StrategyVolume 2)


Pakistan Water Sector Strategy(Medium Term Investment Volume 3)


Pakistan Water Sector Strategy(Detailed Strategy FormulationVolume 4)


Pakistan Water Sector Strategy(National Water Sector ProfileVolume 5)

2002 Ministry of Water andPowerOffice of the ChiefEngineeringAdvisor/Chairman FederalFloodCommission


Private sector (Regulating WaterCompanies)

Michael KleinTimothy Irwin

1996 The World Bank Group

Private sector (The Private Sector inWater and Sanitation - How to getstarted)

Penelope J.Brook Cowen


Private sector (Financing Water andSanitation Projects - the UniqueRisks)

DavidHaarmeyerAshoka Mody


Private sector (Pooling Water tomove beyond Project Finance)

DavidHaarmeyerAshoka Mody


Private sector (Competition in Waterand Sanitation)

Tova Maria Solo 1998 The World Bank Group

Private sector (ManagementContracts in Water and Sanitation -Gaza´s Experience)

Jamal SaghirElisabethSherwood


Private sector (Improving WaterServices through Competition)

Michael WebbDavid Ehrhardt


Private sector (Recent Trends inPrivate Participationin Infrastructure)

Neil Roger 1999 The World Bank Group

Private sector (Designing DirectSubsidies for the Poor - A Water andSanitation Case Study)

Vivien FosterJonathanHalpern


Private sector (Better HouseholdSurveys for Better Design ofInfrastructure Subsidies)

Vvien FosterJonathanHalpern


Private sector (Water Concessions) Caroline vanden Berg


Managing Water as an EconomicGood

Mike Garn The World Bank

Viewpoint (Testing Waters - APhased Approach to a WaterConcession in Trinidad and Tobago)

Helen Nankani 1997 The World Bank Group


Do Cross-Subsidies Help the Poor toBenefit from Water and WastewaterServices?

Guillermo Yepes 1999 UNDP-World Bank

Willing to Pay but Unwilling to Charge UNDP-World Bank

Designing Pro-Poor Water and SewerConcessions

Kritin Komives 1999 The World Bank

Legal aspects of regulation in SouthAsia

2002 S K SarkarVivek Sharma

Output-Based Aid: PossibleApplications in theDesign of Water Concessions(Presentation)

Philippe Marin 2002 The World Bank

Joint Monitoring Programme for Water Supply andSanitation - Improved Sanitation - Pakistan

2004 WHO / UNICEF

Output-Based aid in Cambodia -Private operators and localcommunities help deliver water to thepoor

Yogita Mumssen 2004 OBApproaches

Output-Based aid - Supporting infra-tructure delivery through explicit andperformance-based subsidies

2005 OBApproaches

Output-Based aid in Water - Lessonsin Implementation from a pilot inParaguay

Franz Drees-GrossJordan Schwartz

2005 OBApproaches

Pakistan - Private SectorParticipation in Urban EnvironmentalServices

1997 The World Bank

Challenges in the Water Sector -PakistanDevelopment Forum

M. Ali Shah 2004

Länderbericht Pakistan 2005 LBBW

Topicsheet - ecosan - recycling-oriented wastewatermanagement and sanitation systems

2005


Devolution in Pakistan The World Bank

Output-based aid: precedents,promises and challenges

Penelope J.BrookMurray Petrie

OBA Book Homepage

Making Water affordable Andres Gomez-Lobo

OBA Book Homepage

Easing tariff increases Penelope J. BrookAlain Locussol

OBA Book Homepage

Project Summary (No.F.2(12)/2002-PEPC

2002 Government of Pakistan,Ministryof Environment, LocalGovernment& Rural Development

Induction of Private Generation PublicHearing on December 13, 2005 on IPP tariff

2005 NEPRA

The Political Economy of WaterPricing Reforms

Ariel Dinar 2000

Private sector (Price Structures,Cross-Subsidies, and Competition inInfrastructure)

Timothy Irwin 1997 The World Bank Group

Rawalpindi Water & SanitationAgency (RWAS)

2003 Saeed Methani Mushtaq& co.

Regulation of Water Supply andSanitation Services- A Review of Experience in SelectedCountries in Latin America

Guillermo Yepes

Directions in Development - Water,Electricity and the Poor

Kristin KomivesVivien Foster

The World Bank

Approaches to Private Participation inWater Services

The World Bank, PPIAF

Tools for assessing the O&M statusof the water supply and Sanitationin developing Countries

2000 World HealthOrganizationGeneva, Switzerland


Project Completion Report on theUrban Water Supply and SanitationProject in the Islamic Republic ofPakistan

2004 Asian DevelopmentBank

Performance Report (Water andSanitation - Final)

2004-2005

Faisalabad localGovernment

Pakistan´s Water Economy: RunningDry

John Briscoe etal.

2005 The World Bank

The blue pages - Losses from Water SupplySystems: Standard Terminology and RecommendedPerformance Measures

2000 International WaterAssociation

Private sector (Utility Regulators -Roles and Responsibilities)

Warrick Smith 1997 The World Bank Group

Alternative Concepts of MarginalCost for PublicUtility Pricing: Problems ofApplication in the WaterSupply Sector (SWP-259)

Robert J.SaundersJeremy J.Warford

1977 The World Bank

Private sector (Utility Regulators -Decisionmaking Structures,Resources and Start-up Strategy)


Private sector (Utility Regulators -The IndependenceDebate)


National Water Quality MonitoringProgramme

2005 PCRWR Website

National Water Quality MonitoringProgramme - WATER QUALITYSTANDARDS

2005 PCRWR Website

How to start water benchmarking 2007 IBNET toolkit

Field Appraisal Report - TMA Jhelum The Punjab MunicipalDevelopment FundCompany(PMDFC)


Pakistan Water and Power Develop-ment Authority (A-mendment)Ordinance, 1998Ordinance XX of 1998An ordinance further to amend thePakistan Water and PowerDevelopment Authority Act, 1958

1998

Punjab-Poverty Reduction StrategyPaper (P-PRSP)

MuhammadHumayunFarshori

2003 Planning andDevelopment BoardGovernment of thePunjab

Field appraisal Report – TMA TobaTek Singh

The Punjab MunicipalDevelopment FundCompany(PMDFC)


Additional Web - Linkshttp://www.nrb.gov.pk/publications/Punjab_Local_Government_Ordinance_2001.pdf

http://www.paksearch.com/Government/CORPORATE/COMPANY/COMORD/COMPANY.html

http://www.pakistanlawyer.com/corporate/c-ordinance/Index.htm

http://www.finance.gov.pk/law/home.htm

http://www.nrb.gov.pk/local_government/default.asp

http://www.vakilno1.com/saarclaw/pakistan/part1.htm

http://www.nrb.gov.pk/

http://www.ey.com/GLOBAL/download.nsf/Pakistan/Key_Regulations/$file/Key-banking.pdf

http://www.ey.com/GLOBAL/download.nsf/Pakistan/home

http://www.paksearch.com/

http://www.paksearch.com/Government/SBP/BPRD/1997/BP7.html

http://www.paksearch.com/TOC/Prudential.html

http://www.softax.com.pk/services/sbp/sbpord1.html

http://punjablaws.gov.pk/laws/323.html

http://www.lda.gop.pk/lda_wasa.html

Documents

World Bank Government of Punjab Final Report Urban …waterinfo.net.pk/sites/default/files/knowledge/Urban Water Supply... · World Bank Government of Punjab Final Report Urban