Economic and Corporate Powers Call for Hike in Global Water Price

Major economies are pushing for substantial increases in the price of water around the world as concern mounts about dwindling supplies and rising population.

With
official UN figures showing that 1 billion people lack access to clean
drinking water and more than double that number do not have proper
sanitation, increases in prices will be - and in some countries are
already proving to be - hugely controversial.

However experts
argue that as long as most countries provide huge subsidies for water
it will not be possible to change the wasteful habits of consumers,
farmers and industry, nor to raise the investment needed to repair old
supply systems and build new ones. And price rises can be managed so
that they do not penalise the poorest.

Last Friday, the World
Bank held a high-level private meeting about water in New York, at
which higher prices were discussed. Days before that the OECD, which
represents the world's major economies, issued three water reports
calling for prices to rise. "Putting a price on water will make us
aware of the scarcity and make us take better care of it," said Angel
Gurria, the OECD secretary-general. It has also been a key theme at
this week's meeting of industry leaders in Paris, hosted by Global Water Intelligence.

The discussion at the World Bank was raised by Lars Thunell, chief executive officer of the International Finance Corporation.
"Everyone said water must be somehow valued: whether you call it cost,
or price, or cost recover," said Usha Rao-Monari, senior manager of the
IFC's infrastructure department. "It's not an infinite resource, and
anything that's not an infinite resource must be valued."

Concern
about dwindling water supplies has been rising with growing populations
and economies. And with climate change altering rainfall patterns,
experts warn that unless changes are made, up to half the world's
population could live in areas without sustainable clean water to meet
their daily needs.

Global Water Intelligence's 2010 market report
estimated the industry needs to spend $571bn (PS373bn) a year to
maintain and improve its networks and treatment plants to meet rising
demand - more than three times this year's projected spending.

At the same time, a major report last year by consultants McKinsey,
paid for by a group of water-dependent global brands including
SABMiller and Nestle, said that most of the estimated "gap" in water in
2030 could be met from efficiency savings such as better irrigation and
new showerheads.

However, highly subsidised prices are hampering
both investment and efficiency, because private and public companies
cannot collect enough water, nor persuade farmers, homeowners and
businesses to make - and sometimes pay for - changes to reduce their
water use, say the experts.

"We were in a vicious cycle," says
Virgilio Rivera, a director of Manila Water, which took over water and
sewage services in the city when the Philippines government passed a
National Water Crisis Act in 1997. "Lack of investment; poor service;
government can't increase the water rates because customers are
dissatisfied; they are not paying, so low cash flows; so the government
can't improve the service."

Huge opposition to price rises is expected however, especially as so many prices are set by elected politicians.

Even
in Washington DC there has been an outcry over calls for prices to
double over the next five years to help the city raise money to spend
on its 76-year-old network of leaking lead pipes.

Obstacles
include a long term "legitimacy" from providing free or very cheap
water; and vested interests, says Rao-Monari, who cites the example of
water vendors in India making big profits from desperate households.

The
biggest concern though is the impact on the poorest households. There
is evidence that they suffer most from the bad services of poorly
funded water companies, because often they are not connected at all or
have such bad services they are forced to rely on even more expensive
water vendors.

In Manila, Manila Water increased bills from 4.5
to 30 pesos per cubic metre. At first there was resistance but by 2003
the company doubled connections from 3m to 6m, including 1.6m of the
poorest squatters, leakage had been cut drastically, and pressure and
quality had improved, said Rivera, one of the company's directors
visiting Paris. Bills for the poorest households are now less than
one-tenth of when they relied on vendors, and payment in the slum areas
is 100%, said Rivera.

Some say step pricing can be used to
protect a basic water allowance for drinking, cooking and washing -
either for very low prices or for free, as it is in South Africa.

"I
fully agree the water we need of hydration and minimal hygiene are part
of the Human Rights declaration, but this is 25 litres of water [a
day], which is the smallest part," said Peter Brabeck-Letmathe,
chairman of food giant Nestle and one of the most prominent global
business leaders campaigning on water. More than 95% of water is used
to grow food, for other household needs and for industry, he added.

Food
prices should not have to rise as higher water bills could be offset by
efficiency improvements, from irrigation, to new seeds, or even a
changing pattern of what is eaten to favour less water-intensive
ingredients, said Brabeck-Letmathe.

Others favour separating
water supply from government's duty to take care of the most
vulnerable. "Ideally utilities should not make any distinction between
rich and poor," said Prof Asit Biswas, president of the Third World Centre for Water Management. "The moment you subsidise [someone's bill] people don't use water prudently."