Sant

Document Sample
Sant Powered By Docstoc
					 Ensuring Sustainability of
 Access to Utilities for All
           Girish Sant
Prayas Energy Group, Pune – India
• Summary of Discussion Paper
• Additional Issues
• Suggestion for Consultations




    FES-UN meeting               2
                      Introduction
• In 1990s’ arguments of economic efficiency used
  to reduce subsidies
   – Result was increases in prices, poor hurt the most
   – Yet, tariffs still well below costs. For developing
     countries – in 39% cases water tariffs do not even cover
     O&M, 30% do not cover capital costs. In electricity, it
     is 50% and 44%
• Data highlights the challenge of making basic
  services accessible and affordable for all

     FES-UN meeting                                         3
             Reasons for Subsidies
• Equity considerations
• Cost structure of basic utilities
   – High common costs difficult to allocate
   – High capital costs
   – Mismatch between Marginal Cost and Average
     Cost




     FES-UN meeting                               4
          Lessons about Subsidies
 Increased acceptance that subsidies may remain
 Question is how to limit / target them and make
  them efficient?
 Keep tariffs simple but maintain economic
  incentives
 Tune to local context
 Explore output/performance based subsidies
Only a section of population pays for subsidies
  (through tariff, taxes, or reduced services)
     FES-UN meeting                                 5
                   Subsidy tools …1
• Cross-subsidy: Usually from urban/industrial to
  rural/residential
    Need to be contained within a band
        Tariff of High paying consumers need to be below alternate
         sources, or
        Limit set by allocation of low cost resources (such as old dam)
• Direct subsidy by government (central/state/local)
    Can have large welfare impact (through budget
     allocations). Indian case – 1.5% of GNP



      FES-UN meeting                                                       6
                   Subsidy tools …2
• Consumption v/s connection subsidy:
    Consumption subsidy can be regressive (poor may not
     be connected) [ agri subsidy in India]
    Connection subsidies can help increase access (thus
     reach poor). However, benefits can be constrained by
     cost of expansion & obstacles such as poor not having
     property title
• Incentive based subsidy: Linked to performance (can
  be targeted to poor, better allow private participation)
    Similar to output based aid. Problems are:
        Difficult to design – bad design can lead to perverse incentives
        Requires administrative strengthening [Delhi e.g.]
      FES-UN meeting                                                    7
          Invoicing and Collection
• Getting people to pay is a challenge due to:
  – History of non-payment
  – Inconvenient payment locations
  – Organizational/administrative problems
• Strategies
  – Prepaid meters
  – Payment only for properly functioning utilities
  – Franchisee/Village/Community Committee
    responsible for collection
     FES-UN meeting                                   8
 Interlinkages – Example from India
• Flat tariff to agriculture since late 1980s
  – Resulted in utility hiding its inefficiency ($ 2-3
    Billion / yr misallocated)
  – A small fraction of consumers benefited – it set
    up a economy that is difficult to disturb
  – Government subsidies increased – as cross-
    subsidy is reduced by regulators
  – Issues of utility efficiency and cost reduction
    through good planning yet to be addressed …
     FES-UN meeting                                      9
   Tax Revenue as security for debt
• Since government financing is the most important
  aspect – need for increased discussion on
   – Ways to increase government resources
   – Efficient use and proper allocation government budget
• Special allowances / concessions need to be
  classified as subsidies – rationalization can be a
  gold mine!
• Need for cautious forecasts – errors can be costly,
  result in unsustainable decisions by governments
  in desperation
     FES-UN meeting                                          10
        PART II:
 Additional Critical Issues



FES-UN meeting                11
 Impact of other issues on affordability

• Inappropriate schemes
  – Low cost options or alternate scheme design
    can be ignored
  – Scheme for services that are a not priority of
    the majority
• Inefficiency in delivery
• Inefficiency in utilization


     FES-UN meeting                                  12
Examples Inappropriate Schemes…1
Urban Dev & Costal Environment Management Project
  of ADB (Karwar, Karnataka, India)
75% (of $ 24 Mn) spent on piped water, but:
   – Local body had a revenue of $ 0.6 Mn/yr !
   – Only 15-20% (of 20,000) families needed water
   – Critical problem of sanitation, sewage (potentially
     polluting water source for 80%) was not addressed!
   – Alternative low cost option of water from close-by river
     not explored (public barrier of potential radiation leak
     in river not addressed)
• Result = incomplete scheme with heavy financial burden!

      FES-UN meeting                                       13
Examples Inappropriate Schemes…2
• Several local bodies refusing to take over water supply
  schemes (under Water-self governance scheme of WB) in
  Maharashtra (India), despite 90% capital subsidy! Even
  O&M costs are perceived as unaffordable by local bodies
• Rural electrification in India – under pressure for quick
  results – system optimization ignored, no level playing
  field for distributed generation, no effort to help poor use
  efficient lamps. If this is done:
   – Supply cost ($/kWh) can be reduced,
   – Consumption (kWh / month) can be reduced,
    Gap in ‘cost’ & ‘willingness to pay’ can be reduced

      FES-UN meeting                                             14
 Implications of such shortcomings
• People do not get what they want
• People are expected to pay high cost

  – Priority services not delivered  barrier to
    development
  – Lack of ownership of projects,
  – Large gap in revenue & costs


    FES-UN meeting                                 15
          Genesis of the problem
• Top down design, implementation – without
  real involvement of users
• Large dependence on urban / external
  consultants
• At times vested interests, including local
  elites support high cost schemes (kick-
  backs, fascination for grandeur, etc.)
• Lack of space / process for marginalized
  groups to voice their opinion, priorities.
    FES-UN meeting                         16
          Part III:
Suggestion for Consultations
 Proposed agenda for consultations…1

• Communicate menu of options (for tariff
  design, subsidy targeting, etc.) to policy
  makers and civil society
  – Real life examples may help
• Help them move towards consensus on
  appropriate options
• Bring focus on increase and appropriate use
  of government funding
     FES-UN meeting                            18
 Proposed agenda for consultations…2

• Explore ways to ensure that least-cost
  systems, for priority service are taken up.
  –   Identify priority needs (esp. of poor)
  –   Identify menu of options to meet the needs
  –   Identify paying capacity / willingness
  –   Give voice to ‘under-privileged’ as they should
      be the focus of development efforts


      FES-UN meeting                                19
                     Conclusion
Meeting MDGs requires that
• Process and institutions come up with
  schemes that are desired by people & are
  affordable
• Such institutions and process should be
  implementable under present political
  milieu


    FES-UN meeting                           20
           Girish Sant
Prayas Energy Group – Pune, India
     girish@prayaspune.org




  FES-UN meeting                    21
                              T&D Losses,Theft hidden under Agri use
                                                                                  (e.g. Maharashtra)
                        60%


                        50%
% of Energy Available




                        40%


                        30%


                        20%


                        10%


                        0%
                          1975           1980      1985            1990           1995      2000
                                                T&D loss   Agri.          Unmetered Share

                              FES-UN meeting                                                       22
Rapid reduction in cross-subsidy in
    Maharashtra power sector




   FES-UN meeting                     23
Large Increase in Government Subsidy
                1750    Grown to a quarter of expenses on
                        Grown to a quarter of expenses on
                        All social services (that includes
                        All social services (that includes
                1500
                        Revenue & Capital expenses on
                         Revenue & Capital expenses on
                1250    Education, Medical, Water-supply //
                         Education, Medical, Water-supply
                        sanitation, Housing, Urban development,
                         sanitation, Housing, Urban development,
Million Euros




                1000    Labor welfare, Social security, etc.)
                         Labor welfare, Social security, etc.)
                750

                500

                250

                  0
                        1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02

                  AP            Gujarat      Karnataka        MP         Rajasthan
                       FES-UN meeting                                                24
   Problems of Monitoring and Control
                                                           900
                  900
                  800                                      800
                                                           700
                                                                  BYPL
                  700
                  600                                      600
                         NDPL
            MUs

                  500




                                                     MUs
                                                           500
                  400                                      400
                  300                                      300
                  200
                                                           200
                  100
                                                           100
                    0
                         02-03An     03-04   04-05           0
                                                                  02-03An    03-04      04-05


                        0-200      201-400   > 400         1200

                                                           1000

                                                           800
Random changes in consumption

                                                     MUs
                                                           600
pattern in domestic consumption –                          400

case of Delhi !                                            200
                                                                  BRPL
                                                             0
Little action by RC.                                              02-03An   03-04    04-05


         FES-UN meeting                                                                         25
                                  High energy
                                demand forecasts

                                                         Search for finance
                                                          (from Govt and
   High energy                                            Private Sources)
     intensity


                                                                        To expand centralised
                                                                             generation


Wastage, Financial
     Losses                                                          Ignore cheaper options of
                                                                      DSM and De-centralised
                                                                            generation



                 Need for subsidy,                 High cost
                 No accountability                 of power

              FES-UN meeting                                                            26

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:13
posted:11/8/2011
language:English
pages:26