Our Water Systems: Public, Private, or Both?

1
Seminar - February 7, 2009

• Our Water SystemsPublic, Private, or Both?
• by
• K. William Easter
• Professor of Applied EconomicsUniversity of
  Minnesota

2
The Gadag Rural Water Project (India) will
replace the need for getting water from a
traditional scrape in the river bed with piped
supplies
3

• Introduction
• 97.5 of worlds water is salt water and another
  2 is frozen or not accessible
• Four to five fold increase in water use since
  1940s (2 to 4 growth rate)
• Over a billion people lack clean water and about
  two billion have poor sanitation
• Women or children may have to walk 5 to 10 miles
  for water (15 of womens time)
• One billion people become ill annually from
  unclean water
• Bottled water costs 30 to 300 per barrel (oil
  is now only 40 to 50 per barrel)

4

• Introduction - - contd.
• Eight gallons of water to produce a gallon of
  milk
• Four gallons of water to produce a gallon of
  ethanol
• Consumptive water use in LDCs (distribution)
• Agriculture (irrigation), 70-80
• Commercial and industrial uses, 10-22
• Domestic uses, 8-10

5
1. Introduction - - contd.

• Supply of water and demand are variable within a
  year and between years (scarcity can occur
  anytime)
• Rainfall and Storage (supply)
• Temperature and humidity (demand)
• Is the frequency of scarcity and variability
  increasing?

6
2. Water Services and Dis-services

• a. Consumptive uses
• Domestic and industrial water supply
• Irrigation big user
• Non-crop agricultural uses (water for livestock,
  etc.)
• Dry land agriculture and forestry

7
2. Water Services and Dis-services, contd

• b. Non-consumptive uses
• Hydropower
• Fish culture
• Recreation
• Navigation
• Dilution of waste materials
• Aquatic habitat
• Bathing and washing clothes
• Cooling for buildings and power plants
• (biggest use in Minnesota)

8
2. Water Services and Dis-services, contd

• c. Dis-service
• Flooding
• For example in India flooding covered 25 million
  hectares in 1960, 40 million in 1978, and 58
  million in the mid-1980s. (The problem seems to
  be getting worse.)
• Disease vector
• 5,000 to 10,000 persons die from malaria annually
  in Cambodia
• Soil erosion
• Lost productivity that fills rivers and
  reservoirs

9
3. Why have we failed to provide clean drinking
water to over one billion people?

• Related questions
• Who should provide this clean drinking water
  the public or private sector?
• Should everyone be provided the same level of
  service?

10

• 4.Human rights to water and the private sector
• a. Basic right to water for domestic use
• Access to village well or public water tap?
• Should this be right to safe water?
• Low price for basic human water needs?
• Allocate a greater share of water to domestic
  use?
• How does this compare to basic right to food or
  housing?

11

• 4. Human rights to water and the private sector -
  - contd.
• b. Agricultural and commercial use (90 of
  consumptive uses)
• Isnt this water better treated as an economic
  good?
• Do we need to reduce demand and reallocate more
  to domestic and environmental uses?
• If we do, then we need to price water at its
  scarcity value
• c. How much to allocate for environmental uses?
• 30 of stream flow in dry season to 50 in wet
  season

12

• 5. How water was developed in the 20th century
• In early stages of settlement, people located
  near water sources (rivers and lakes)
• As populations, cities, and demands for food all
  increased, access to water became more difficult
• First approach in LDC was to develop large
  multipurpose irrigation projects with foreign
  assistance TVA model
• Some private irrigation was also developed, such
  as the Gezira Scheme in Sudan, with farmers as
  tenants

13

• How water was developed in the 20th century,
  contd
• In 1980s large expansion of private irrigation
  well development in Asia and U.S. Great Plains
• About one-third of the worlds food comes from
  irrigated land
• Cost of new irrigation is now quite high and
  easily irrigated areas have been done
• This makes it more difficult to transfer water
  out of agriculture for urban uses

14

• 6. How urban water supply and demand has
  developed
• a. Growth in LDC cities took off in 1960s and
  1970s
• In 1960, only one LDC city over 10 million
• In 2000, seventeen LDC cities over 10 million
• Now in LDCs, 50 live in urban areas
• b. Large cities in LDCs under-invest and poorly
  manage water supply and sewage systems
• 50 of water is unaccounted for in Cairo,
  Lagos,Mexico City, Jakarta, Manila, and Lima
• Cost of new supplies may be 2 to 3 times cost of
  existing supplies

15

• 6. How urban water supply and demand has
  developed -- contd.
• Poor quality water service continues particularly
  for the urban poor in LDCs
• Still 50 of the people, including the poor, live
  in rural areas where many have unsafe water
  supplies
• 1980 - first UN water decade 2005-2015 is UN
  water for life decade
• During the first water decade, we just kept up
  with population growth. The number of those
  without safe water stayed constant.
• Many times, LDC consumers in urban areas must pay
  private vendors 3 to 4 times the public rate for
  water.
• In some cases this is a high percentage of low
  income families income (as much as half).

16

• 7. Given this situation, will private management
  and/or ownership help?
• a. What about the private management options in
  urban areas? (Table 1) Design and build is most
  common U.S. private activity.
• b. Irrigation and private water development have
  also helped meet rural domestic water needs
• c. Some locally developed systems using
  groundwater and springs
• Punjab, India, southeastern Brazil, and
  Bangladesh wells and hand pumps
• Oman, Spain and Brazil examples of locally
  developed water markets

17
Table 1 - Alternative Roles for the Private Sector
18

• 7. Given this situation, will private management
  and/or ownership help? contd
• d. Might use markets to reallocate water to
  domestic uses both permanently and temporarily
• California did in 1990s temporary reallocation
• Chile and Australia have done a little
  permanent reallocation
• Mexico had the chance to do it, but decided to
  just take farmers irrigation water and give it
  to urban areas during a drought period

19
8. Reservations about private management and
ownership

• Concerns about possible private water monopolies
• Peoples values concerning private rights to
  water
• Concerns about overuse of ground water stocks
• Third party impacts through water diversion and
  pollution

20

• Villages not adequately served, public sector
  should not treat them equally (WTP and public
  health concerns)
• a. Will they maintain the water system once it
  is in place?
• b. There are at least four different types of
  villages that require different approaches.
• Type I villages high willingness to pay (WTP)
  for private connections but not for public taps.
• - Provide subsidies to install some public taps
  for those with low WTP
• - Provide technical assistance

21

• Type II villages low WTP for private
  connections but majority will pay for public
  taps.
• Provide with technical assistance for building
  system with public taps.
• System should allow families to pay extra to get
  private connections.
• Type III villages WTP for improved service but
  too costly for them to cover costs.
• Provide subsidy and technical assistance so that
  they can cover the cost of installing a water
  system with public taps
• Type IV villages low WTP for improved service.
• Wait until villages demand for better water
  increases
• Provide educational material regarding the
  importance of clean water (many dont understand
  germ theory)

22

• 10. Conclusions
• Technology for obtaining clean water is much
  improved.
• No one model fits all.
• Community must be involved in water investment
  decisions.
• Subsidies and technical assistance for smaller
  communities should be designed, based on a
  communitys ability and willingness to pay for
  different levels of service.

23

• 10. Conclusions -- contd.
• Use private sector where it can help, but public
  sector will still need to play an important
  governance role.
• We will need to improve water use in agriculture
  and industry so that there is more for domestic
  and environmental uses.
• World Bank estimates we need to invest 600 to
  700 billion in water improvement and
  development.
• LDC must invest more in their urban water and
  sewer systems. Hyderabad, India is building seven
  water treatment plants.
• This is a key area for development aid,
  particularly in Africa.

24
DSM Industries Trichy - Deep Well Hand Pump
25
Malawi is a landlocked, sub-Saharan country that
is fighting chronic water shortages and the
effects of a severe food crisis in 2006.
26
Sosal, Honduras Girl washing clothes at her new
pila. Photo credit WaterPartners International
27
Women getting water from the Ak-ela well in March
2004. The Senai Foundation is a non-profit
support organization for the people of Eritrea.
28
Indian woman getting water from a truck
29
URL to access presentation

• http//www.apec.umn.edu/faculty/weaster/