The Kathmandu Upatyaka Khanepani Limited (KUKL), a company recently created to distribute drinking water to the residents of the Kathmandu Valley, is reported all set to hike the water rates under donors’ pressure. Steep increases were to take effect earlier, but the sharp controversy over whether to award the management contract for water distribution in the Valley to a foreign firm under the Melamchi loan conditionality had delayed the decision. One of the Melamchi conditions was the formation of a separate company for serving the Valley, and handover of the management to a foreign company called Seven Trent International Water Limited (the opposition of a Maoist minister in charge of drinking water had caused the exit of this company). The conditionality required sharp tariff hikes even before the consumers

received the Melamchi water.

The upcoming hike forms part of the conditionality of the Asian Development Bank (ADB), the chief financier for the project, stipulating a price hike before Nepal receives further instalments of money. Indeed, for the past four years, water tariff has not been revised, but then, besides the hike, an additional charge for sewage disposal system at half the water bill had been quite steep. The cost of almost everything has gone up in recent times, and that of operating a water service too. A reasonable increase might be in order. But there are important points to bear in mind at the same time. While the company has been unable to improve the supply (dry taps and erratic nature of the available supply are not uncommon), any decision, particularly when the increase is sharp, may well be subject to question. There have been frequent complaints, not without justification, that even the available water has not been properly distributed, leading to aggravation of the problem.

Any improvement requires boosting management performance, minimising waste and inefficiency. As it is not even three months since KUKl came into operation, it may be too early to make a judgement on its scorecard. In order to make the water service better in the Valley, its management has been branched off from the original entity, the Nepal Drinking Water Supply Corporation, which now looks after the distribution in urban centres outside capital. Though the corporation is a bloated bureaucracy calling for urgent manpower cuts, whether KUKL, which has got its staff from the existing pool of the water corporation’s human resource, can keep an effective check on excess or inefficient manpower, remains to be seen. The tariff in the Valley, it is estimated, will be raised by 27 per cent annually. What logic will justify this calculation? Most multilateral donors, including ADB, almost always prescribe price hikes in the goods and services whenever they agree to provide a big loan. This is a wrong policy with several undesirable implications. The donors’ concern should be limited to proper utilisation of the loan and its timely repayments. Besides, the consumers must not be made to pay a high rate for the Melamchi investment since years before its water is brought into the capital’s taps.