a report on analysis of nepal water supply corporation

Drinking Water in Nepal

Issues for Nepal Water Supply Corporation

Submitted in partial fulfillment of the requirements for

Masters of Business Administration (MBA)

By

ARJUN NIROULA

Register No 1011301006

Batch of 2011-2013

SONA COLLEGE OF TECHNOLOGY

Affiliated to Anna University of Technology, Coimbatore

SALEM – 636 005

JULY 2012

1

SONA COLLEGE OF TECHNOLOGY

SALEM – 636 005

PROJECT WORK

JULY 2012

This is to certify that the project entitled

Drinking Water in Nepal; Issues for Nepal Water Supply

Corporation

is the bonafide record of project work done by

ARJUN NIROULA

Register No: 1011301006

Of MBA during the year 2011-2013.

………………….. …………………………

Project Guide Head of the Department

Submitted for the Project Viva-Voce examination held on ……………………….

................................. ……………………..

Internal Examiner External Examiner

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ACKNOWLEDGEMENT

This paper has grown and has been enriched with the contributions of many, and I am

grateful to them all. I express my hearth felt gratitude to our beloved Principal, Dr. C.V.

Koushik, M.Sc, Ph.D Sona College of Technology, and the management for providing us

an opportunity to undertake the project work. Especially, to Dr. M. Selvaraj, Professor

and Joint Director, my project guide for guiding me through this entire process. His

encouragement, knowledge and inputs have been always valuable. I have been motivated

and challenged and hopefully, as a result, become a better researcher through this

experience.

I would also like to express my gratitude to our director, Dr. Latha Krishnan, M.Com.,

Ph.D., Post Doctoral Fellowship (IIT-M) whose comments have always been detailed and

insightful, highlighting areas which I have often overlooked.

I am also thankful to Mr. Shankar Guragain, Assistant Manager Nepal Water Supply

Corporation (NWSC) for his valued suggestions, proper guidelines and personal interest

during the course of my project work period.

I am thankful to all the staff members of NWSC for their cooperation, support and

willingness to share information and their experiences.

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DECLARATION

I, Arjun Niroula, Register No, 1011301006, of 2011-2013, a full-time bonafide student of

first year of Master of Business Administration (MBA) Program of Sona college of

Technology (An Autonomous Institution). I hereby certify that this project work carried

out by me at Nepal Water Supply Corporation, the report submitted in partial fulfillment

of the requirements of the program is an original work of mine under the guidance of the

faculty, Dr.M Selvaraj and is not based or reproduced from any existing work of any

other person or on any earlier work undertaken at any other time or for any other purpose,

and has not been submitted anywhere else at any time.

(Student’s Signature)

Date:

(Faculty Signature)

Date:

4

Executive summary

Climate change impacts are observed in several sectors of Nepal among which water

resources is one of the hardest hit sectors. Evaluating the impacts in water resources is

challenging because water availability, quality and stream flow are sensitive to changes in

temperature and precipitation. Increased demand for water caused by population growth,

changes in the economy, development of new technologies, changes in watershed

characteristics and water management decisions are some of the other factors to be taken

into consideration. Nepal is rich in water resources. There are about 6000 rivers in Nepal

having drainage area of 191000 sq. km, 74 % of which lies in Nepal alone. There are 33

rivers having their drainage areas exceeding 1000 sq. km. Only about 72% of the

country’s population has access to basic water supply and only 25% of the whole

population has sanitation facility.

In this regard, Nepal Water Supply Corporation is a government based corporation

involved in delivering safe drinking water in urban areas of Nepal. So, the issues of

drinking water, its challenges and opportunities in the context of Nepal Water Supply

Corporation (NWSC), specifying on its Mahendranagar branch are the subject matter of

this report.

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TABLE OF CONTENTS

Title Page

Acknowledgement

Declaration

Company Certificate

Executive summary

Abbreviations

Table of Content

List of tables

List of figures

Bibliography

CHAPTER 1

INTRODUCTION

1.1 Introduction of the study …………………………… 11.2 Industry Analysis (Nepal Background) …………………………… 31.3 Need and Scope of the Study ……………………………. 51.4 Objectives ……………………………. 51.5 Limitations ……………………………. 5

CHAPTER 2

ORGANIZATION ANALYSIS

2.1 Introduction to the organization ............................................. 72.2 Establishment ............................................. 92.2.1 Statutory Provision ............................................. 92.2.2 Provision regarding Capital city ............................................. 112.3 NWSC Service Areas ……………………………. 142.4 Technical Status ……………………………. 152.4.1 Water Supply ……………………………. 152.4.2 Comparative Chart of last three years ……………………………. 162.4.3 Completed Projects in the Fiscal Year ……………………………. 182.5 General Assessment of the service system of NWSC…………………………. 192.6 Water Quality Unit …………………………….. 202.6.1 Sources of Water Supply ……………………………. 212.7 Human Resources ……………………………. 212.8 Analysis of Financial Performance ……………………………. 222.9 Summary of Mahendranagar Drinking Water Supply system ………………. 282.9.1 Description of the WSS intervention ……………………………. 292.9.2 Organizational and Institutional Aspects ……………………………. 312.9.3 Financial Aspects ……………………………. 34

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2.9.4 Sustainability of the Water Supply System ……………………………. 36

CHAPTER 3

FINDINGS SUGGESTIONS AND CONCLUSION

3.1 Suggestions ……………………………. 413.2 Findings or Lessons Learnt ……………………………. 423.3 Conclusion ……………………………. 45

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CHAPTER: 1

INTRODUCTION

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1.1. Introduction of the Study

This study is about one of the burning issues regarding drinking water supply in Nepal.

Water is indispensible for life. But, 97.5% of all the water on Earth is saltwater, leaving

only the remaining 2.5% as freshwater. Approximately 70% of the freshwater available

on the planet is frozen in the icecaps of Antarctica and Greenland. This leaves only the

remaining 0.7% of the total water resources worldwide accessible for direct human uses.

This is the water found in lakes, rivers, reservoirs and those underground sources that are

shallow enough to be tapped at an affordable cost. This also is the only amount that is

regularly renewed by rain and snowfall and therefore available on a sustainable basis.

Freshwater is mainly utilized for household use, water supply, agriculture and in

industries. About 67% of the water is used in irrigation for the production of food grains

worldwide. The per capita use of water also reflects the living standard and economic

activities of the people.

In this regard, this paper tries to analyze one of the state based corporation- the Nepal

Water Supply Corporation (NWSC)- which was established with the main objective to

provide safe drinking water supply mainly in urban areas. Since its establishment in 1989,

this corporation has been focused on achieving the government’s objective of providing

access to safe drinking water to all Nepalese citizens by the year 2017.

However, this objective seems too far to achieve in the present context whereby water

supply in the capital city is being provided less than 50 percentages in relation to the

demand. Water has become a serious problem for the people of the valley both in terms of

quantity and quality. The Central Bureau of Statistics study carried out in Kathmandu

shows that 59% of the surveyed households do not have adequate water supply from the

piped water line and on average, water is available only four days a week. Similarly in the

case of wastewater treatment system in Kathmandu valley, most of the wastewater plants

and equipment are either out of operation or are only partially operational. Big demand of

good services in water and sanitation is found everywhere in the valley. Demand driven

management seems attainable than supply driven. The state based enterprise is facing

difficulty to provide adequate water supply as per the level of demand. Similar is the

condition of other urban sector of the country. Viewing this situation, NWSC in

collaboration with ADB, has gone through the phase of restructuring its corporate identity

in the capital city by privatizing its presence in the capital.

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So, this project report work is mainly concerned with finding the difficulties that the state

owned corporation is facing along with identifying the way outs it can take to supply

drinking water as per the level of demand.

Mainly, this paper tries to focus on the functioning of NWSC in Mahendranagar

municipality of the country which is one of the less developed areas of the nation. Along

with this, focus on overall position of NWSC has also been tried to analyze.

2

1.2 Industry Analysis (Nepal Background):

Nepal is predominantly a mountainous country formed due to the uplift of the Indian

tectonic plate following a collision with the Asian plate. The country can be divided into

five physiographic regions, viz. High Himalayas, Lesser Himalayas (High Mountains),

Middle Mountains (the Mahabharata Range), Siwaliks (the Churia Range) and the terai

plains. Due to topographic features, Nepal experiences a wide range of climates varying

from the sub-tropical to the Alpine type as the elevation varies from 64 meters (m) above

sea level to 8,850 m (world's highest mountain peak, Mt Everest) within a span of less

than 200 km. The country also experiences heavy rains during June to September due to

the south-westerly monsoon, which accounts for 80% of the total rainfall, and winter

rains, during November to January, accounting for the rest of the rainfall.

Water is Nepal's largest known natural resources. The major sources of water are rainfall,

glaciers, rivers, and groundwater. Over times, the country's requirements for water for

drinking and personal hygiene, agriculture, religious activities, industrial production,

hydropower generation, and recreational activities such as navigating, rafting, swimming,

and fishing have increased. Yet, the rivers are also the main repositories for the nation's

untreated sewage, solid waste, and industrial effluent.

Nepal is rich in water resources. There are about 6000 rivers in Nepal having drainage

area of 191000 sq. km, 74 % of which lies in Nepal alone. There are 33 rivers having

their drainage areas exceeding 1000 sq. km. Drainage density expressing the closeness of

spacing of channels is about 0.3 km/sq. km. If this natural resource is properly harnessed,

it could generate hydropower; provide water for irrigation, industrial uses and supply

water for domestic purposes.

Concerning about water includes both quantity and quality of the resources and relates to

human health standards. Normally, a person requires 2.5 liters of water per day for their

basic physiological processes. In addition, water is also required for domestic hygiene

such as washing, bathing, cleaning, and so on. An adequate supply of drinking water

alone does not fulfill human health needs, as its quality refers to the suitability of the

water to sustain living organism and other uses such as drinking, bathing, washing,

irrigation, and industry. Anthropogenic activities are considered as major factors for

bringing our qualitative and quantitative water quality changes.

3

The surface water available in the country is estimated to be about 225 billion m3 (BCM)

per annum or equivalent to an average flow of 7,125 m3/s, out of which only 15 BCM per

annum is in use. Around 95.9% of 15 BCM has been used for agriculture, 3.8% for

domestic purpose and only about 0.3% for industry. It is observed that around 78% of the

average flow of the country is available in the first category river basins, 9 % in the

second category basins and 13 % in the numerous small southern rivers of the Terai.

Studies have shown that the first Category Rivers have surplus flow but the second

category rivers have deficit flow in the dry season by glaciers. There are 3,252 glaciers

covering an area of 5,323 sq.km with an estimated ice reserve of 481 km3. There are

2323 glacier lakes in Nepal covering an area of 75 sq.km.

Nepal’s economy is largely based on agriculture; it contributes about 40% to GDP and

provides employment to two-thirds of the population. However, Nepalese agriculture is

mainly rain fed and agriculture production in both rain fed as well as irrigated areas are

being badly affected due to droughts, flooding, erratic rainfall, and other extreme weather

events. Nepal was self-sufficient in food grain production until 1990. Due to drought

condition in 2005/06, production fell short by 21553 metric tons and by 179910 metric

tons in 2006/07 due to drought and natural calamities.

In addition to surface water, a large volume of water is available in the shallow and deep

aquifers which are estimated to be 8.8 BCM annually which can be used for irrigation and

domestic water supplies.

Only about 72% of the country’s population has access to basic water supply and only

25% of the whole population has sanitation facility.

Apart from management of services by private sector in Kathmandu valley, two major

governmental agencies involved in provision of drinking water and sanitation are

Department of Water Supply and Sewerage (DWSS) and NWSC. While NWSC works in

22 larger municipalities, DWSS takes care of in rest of municipalities and rural parts of

the country. The government adopted user group approach to involve community in

drinking water and sanitation. Apart from government, there are several International and

National Government Organizations (I/NGOs) working in the sector. The responsibility

for managing water supply in Kathmandu valley has recently been given to Kathmandu

Upatyaka Khanepani Limited (KUKL), hence limiting service area of Nepal Water

Supply Corporation (NWSC) to 22 major towns outside Kathmandu valley.

4

1.7 Need and Scope of the study

The need to study about Nepal Water Supply Corporation emerges from its inherent

identity of being the sole organization to provide drinking water supply in the nation,

Kathmandu valley being an exception due to privatization.

The scope of this report extends from overall view of NWSC along with the analysis of

functionalities and overall performance of its Mahendranagar Branch of the Nation. So,

the analysis of the relevance of NWSC’s performance in the context of present days’

scarcity of drinking water is the subject matter of this project work.

1.8 Objectives

The primary objective of this project report is to analyze the overall performance of

NWSC in the context of overall nation along with analysis of its Mahendranagar Branch.

The other major objectives of this project report are outlined as follows:

To explore the drinking water situation of Nepal and its relevance to Nepal Water

Supply Corporation.

To study the working procedure and different operational aspects followed in

NWSC.

To explore the issues of privatization of state owned enterprise.

To understand how NWSC is performing in sub urban areas like Mahendranagar.

To identify the opportunities for NWSC in present day’s globalized and

technological world.

To point out the weak points and suggest strategic moves that NWSC should

make in providing its public services.

1.9 Limitations

While doing the summer project work in a government based corporation, there were

some limiting factors which are mentioned as under:

Internship for a limited period of time itself posed restricting factor to go deep into

all the activities of the corporation.

Willingness to share information is of low level in government based organization

along with low level of publications made on their performance.

Interns are supposed to be assigned to only limited activities.

5

CHAPTER: 2

ORGANIZATION ANALYSIS

6

2.1 Introduction to the organization

The credit of starting the drinking water services in Nepal goes to Rana Prime Minister

Bir Sumsher JBR. Around 100 years ago, the work of distributing water pipes was carried

out in Kathmandu. Later, water Goswara water supply development committee and water

supply and Sewage Corporation were formed respectively to work in the field of water

supply.

In 1989 the issue of Nepal Water Supply Corporation Act led to the establishment of

NWSC which has been performing the task of supplying drinking water to public and

maintaining sanitation services across the nation. It is working towards achieving the

sector objective of Government of Nepal which is to achieve sustained improvement in

health status and productivity for Nepalese people as a whole with particular emphasis on

lower income group through the provision of adequate, locally sustainable water supply

and sanitation facilities in association with improved personal, household and community

hygiene behavior.

In line with achieving the above sector objective, Government of Nepal has set the goal of

providing all the Nepalese people access to drinking water supply and sanitation facilities

by the year 2017.

Talking about its area of operation, NWSC is mainly focused on delivering drinking

water services since the past few decades in urban areas (i.e. Metropolitan city, Sub-

Metropolitan city, Municipality and Village Development Committees. Till this day,

NWSC has been satisfactorily delivering water supply services many customers through

twenty three towns. It has been able to deliver its services as per Nepal Drinking Water

Quality Standard (NDWQS) with sufficient quantity of potable water that is about 125

liters per capita per day.

The corporation is currently providing services to 28 Municipalities and neighboring

villages form its 42 offices at municipal, zonal, regional and central level. 250000 water

taps are serving people in different locations. It is also working in the field of sewage

system management. Currently, 1650 permanent, 602 contract based and 200 wage based

employees (total 2452) are working in the corporation. From the service, the corporation

generates yearly revenue of around $10 million. The revenue is spent on salary of

7

employees, maintenance of water pipelines, electricity bill and further extension of the

services. The main problem of the corporation is financial crisis. As no strong financial

support is provided by the government; the corporation has to manage and mobilize its

own resources to meet the running cost. The corporation is getting worse due to lack of

government investment and political interventions which hinders the autonomous

performance of the corporation.

The government of Nepal viewing this entire situation has adopted a new policy with the

changing scenario of globalization context. The government wants to satisfy consumer's

demand by delivering potable drinking water with easily assessable to all group of people

under the PPP (Public Private Partnership) concept. According to this policy, the

Kathmandu Valley Water Supply system was handed to the Kathmandu Upatyaka

Khanepani Management Board in the year 2008.

Whereas majority of the current figures of coverage are due to the efforts of NWSC in the

past, currently many other agencies (such as other government bodies, INGOs, and

NGOs) are working in the sector. As such the NWSC is now facing the challenge of

integrating the efforts of all the agencies working in the sector towards the sect oral

national and the millennium development goals. In order to take on this challenge, NWSC

is preparing to start the task of developing database on actual status of coverage, and has

plan of networking of available information sources, and formation and activation of sect

oral coordination forum. NWSC is currently in the process of devolving all its district

level operations to the local district authorities focusing more on central level projects and

coordinating activities.

8

2.2 Establishment

2.2.1 Statutory Provision

After realizing demanding of conduit water in Kathmandu valley, government had

established a systematic development of water supply system with the PANI ADDA

(PANI GOSWARA) unit in May 1973. The then His Majesty’s Government of Nepal had

developed Nepal Water Supply Corporation (NWSC) Act in February, 1990. Under this

ace NWSC has blooming drinking water supply services in twenty three urban areas in

different parts of the country. Under moderated statute in last four decades the following

predecessors had been formed and finally working as a Nepal Water Supply Corporation.

PANI ADDA or PANI GOSWARA until May 1973

WATER SUPPLY AND SEWERAGE BOARD, July 1973 ( under the

Development Board Act, 1957)

WATER SUPPLY AND SERERAGE CORPORATION, July 1985 (under the

Corporation Act, 1965)

NEPAL WATER SUPPLY CORPORATION, February 1990 (under Nepal Water

Supply Corporation Act 1990)

According to NWSC Act 1990, the corporation gets its annual accounts audited by a

certified auditor (Chartered Accountant) appointed by the Office of the Auditor General.

The government of Nepal had developed a PPP (Public Private Partnership) concept for

delivering water supply services to the consumer by handing over water supply scheme to

the local Board in 2005. Under this policy, the Kathmandu Valley Water Supply system

has been functioning under PPP concept since last four years. Similarly Bharatpur and

Hetauda water supply systems are in under process.

9

10

Board of Directors

General Manager

Accounts Department

Finance Department

Administrative Department

Engineering Department

Central Accounts Section

Budget and Treasury

Central Expense Section

Income Supervision Section

Public Information and General administration section

Law and Property Section

Employees Administration Section

Procurement/ Store Section

Branch Offices

Fig 2.1: Organization Structure of NWSC

2.2.2 Provision regarding Capital City:

To overcome the deplorable state of water supply and sanitation situation in the valley,

GON has adopted two pronged strategies of infrastructural development and institutional

reform in the water sector of the valley. The infrastructure improvement aimed to

augment the supply both in terms of quantity and quality includes diversion of 170 MLD

water from Melamchi River through 27 Km tunnel, provision of treatment faculties,

strengthening of distribution network by reduction in leakage and provision of equitable

water distribution and expanding the distribution network laying new primary and

secondary pipelines. The institutional reform aimed to establish a mechanism for

representation of municipalities & the public at a policy level, to protect the operating

company from political interference in management and operational decisions, to

implement an efficient set of tariffs based on the principle of cost recovery, to run

operating company in a professional and commercial way, to introduce PSP modality to

manage service delivery of operating company, and to develop the capacity to implement

improvement programs and Maximize benefits of Melamchi Water Supply Project.

The proposed institutional framework for the provision of water supply and sanitation

facilities in the Kathmandu Valley has objectives: (a) to make it independent of NWSC

and (b) to separate three basic functions namely ownership (planning and investment),

operation and regulation (fixing tariff) as shown in Fig. 1.Thus three entities are formed

for Kathmandu Valley water supply and sanitation sector namely Kathmandu Valley

Water Supply Management Board (KVWSMB), Kathmandu Upatyaka Khanepani

Limited (KUKL) and Water Supply Tariff Fixation Commission (WSTFC).

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Fig 2.2: Organization responsible for water and sanitation services in urban areas of Kathmandu

valley at different periods of time & present institutional arrangements (Source: KUKL at Glance:

Third Anniversary Report, 2010).

Fig 2.3: Overview of Kathmandu valley water management. Source :Adapted from:

“Drinking Water Management in Newa State, available at

http://www.ccd.org.np/news/trans/policy_Drinking_water .pdf

As shown in figures, since 2008, KUKL has been the utility operator for drinking water in

the Kathmandu valley. The KUKL leased the operation from KVWSMB for 30 years.

12

The WSTFC is responsible for the economic reviewing of the tariff system. The

management in city areas of Kathmandu valley. However, it is responsible for the

provision of drinking water to the cities outside Kathmandu valley. Currently, KUKL is

supplying much less water due to the current scarcity. According to the KUKL’s annual

report for 2010, water demand in Kathmandu valley is 320 MLD (million liters per day)

while the supply is only 120 MLD in the dry season excluding losses. The ADB

supported Melamchi Project is currently under construction. This project is going to

supply 170 MLD of water to the Kathmandu valley from the Melamchi River in

Sindhupalchok district.

The larger population, increased economic activities and modern lifestyles exert

significant pressures on water demand. The current water management system of

Kathmandu valley is both insufficient and inefficient due to the old pipe line system.

Many of the distribution lines were laid during the Rana regime. Leakage also is one of

the most important causes of the water shortage. Furthermore, in Kathmandu valley there

are currently three tiers of water supply systems (Moench, 2001). The traditional

dhungedharas, the KUKL supplied piped water (municipal connection) and the tanker

truck supplied water. Policy makers and planners hope that after the completion of the

Melamchi project, there will be sufficient water for the next 40 years. However, the

completion of the project is uncertain due to the inter-basin water conflict between the

people living in the Indrawati basin and the project management (the ADB and the

government of Nepal).

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2.3 NWSC Service Areas

NWSC has endeavored to provide quality service to consumers in spite of innumerable ranges of

problems encountered especially during the dry seasons. The presently NWSC has 22 Branch

offices under its jurisdiction.

Towns Branch Offices Districts Zones

1. Bhadrapur Bhadrapur Jhapa Mechi

2. Biratnagar Biratnagar Morang Koshi

3. Dharan Dharan Sunsari Koshi

4. Rajbiraj Rajbiraj Saptari Sagarmatha

5. Lahan Lahan Siraha Sagarmatha

6. Janakpur Janakpur Dhanusa Janakpur

7. Jaleswor Jaleswor Mahottari Janakpur

8. Malangawa Malangawa Sarlahi Janakpur

9. Gaur Gaur Rautahat Narayani

10. Kalaiya Kalaiya Bara Narayani

11. Birganj Birganj Parsa Narayani

12. Hetauda Hetauda Makwanpur Narayani

13. Bharatpur Bharatpur Chitwan Narayani

14. Pokhara Pokhara Kaski Gandaki

15. Butwal Butwal Rupandehi Lumbini

16. Bhairahawa Bhairahawa Rupandehi Lumbini

17. Taulihawa Taulihawa Kapilbastu Lumbini

18. Krishna Nagar Krishna Nagar Kapilbastu Lumbini

19. Nepalganj Nepalganj Banke Bheri

20. Dhangadi Dhangadi Kailali Seti

21. Mahendra Nagar Mahendra Nagar Kanchanpur Mahakali

22. Banepa&Panauti Banepa Kavre Bagmati

Table2.1: List of Municipal Towns Served

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2.4 Technical Status

2.4.1 WATER SUPPLY

S.N. Description Unit F/Y (2010/11)

1. Water Demand MLD 221

2. Water Production

In Dry Season

In Wet Season

MLD

MLD

95.00

125.00

3 Average Production MLD 109.00

4 Deep Tube Wells are in

-Working

-To be Repaired

- Not Repairable

Nos.

Nos.

73

14

13

5 Dug Wells Nos. 3

6 Sump Wells Nos. 2

7 Surface Intakes Nos. 9

8 Water Delivery

-In Dry Season

-In Wet Season

MLD

MLD

66.50

86.10

9 Average Leakage % 30.00

10 Deficit

-In Dry Season

-In Wet Season

MLD

MLD

126.00

98.00

11 Water Connection

-Metered

-Unmetered

-Public Stand Post

Nos.

Nos.

Nos.

109992.00

2029.00

1043.00

12 Total Population Served Thousand 1416.19

13 Service Reservoirs

-Ground Tank

-Overhead Tank

Nos.

Nos.

17

24

14 Water Treatment Facilities

-With Full Treatment System

-Partly

-Chlorination Only

Nos.

Nos.

Nos.

6

1

22

15 Water Tankers No. 4

Table: Water Supply Status

15

2.4.2 Comparative Chart of Last 3 Years

A. Water Demand

S.No. Fiscal Year Unit Water Demand

1. 2007/2008 MLD 188

2. 2008/2009 MLD 203

3. 2009/2010 MLD 221

B. Water Production

S.No. Fiscal Year Unit Water Production

Dry Season Wet Season

1 2007/2008 MLD 85 113

2 2008/2009 MLD 90 118

3 2009/2010 MLD 95 123

C. Water Supply (After Leakage)

S.No. Fiscal Year Unit Water Supply (After Leakage)

Dry Season Wet Season

1 2007/2008 MLD 85 113

2 2008/2009 MLD 90 118

3 2009/2010 MLD 95 123

D. Number of Water Connections

S.No. Fiscal Year Unit Water Production

Metered Unmetered Public Tap Total

1 2007/2008 Nos. 100198 2565 1043 103806

2 2008/2009 Nos. 105953 2196 1043 109192

3 2009/2010 Nos. 109992 2029 1043 119124

16

Fig: Comparative figures for last 3 Years

17

2.4.3 Completed Projects in F/Y 2010/11

A. Water Production Improvement Program

S.N. Description Qty Unit

1 New Tube Well Construction 9 Nos.

2 Procurement of Pumps 21 Sets.

3 Construction of Over Head Tank (under construction) 2 Nos.

4 Construction of Reservoir (under construction) 6 Nos.

5 Pipe Line Extension Work 13 Km

6 Procurement of Transformer 9 Nos.

7 Procurement of Water Tanker 3 Nos.

8 Construction of Mineral Plant (Civil Work) 1 No.

B. Water Storage Project

S.No. Description Qty Unit

Capacity

(MLD)

1 New Tubewell Construction 9 Nos. 11

2

Production improvement from surface sources

(Butwal and Pokhara) 2 Nos. 35

C. Water Distribution Project

1 Distribution Pipe Laying Work 13 Km

D. System Improvent Programs

S.No. Description Qty Unit Capacity

1 Procurement of pumps 21 Nos. various

2 Procurement of Transformer 12 Nos. ….

3 Distribution pipeline extension in different towns 13 Km. ….

18

2.5 General Assessment of the Service System of NWSC

Almost all water production figures are from historical data or are estimated. Only

a few production plants have metering equipment.

It is assumed that NWSC in dry season has a shortfall in supply of some 60%, and

in rainy season the shortfall is 30% of supply.

Treatment plants are in poor functional and maintenance state and spare parts are

not available in all treatment plants. Water is distributed directly to the customer

without treatment from many tube wells from which some waters have high

content of ammonium, iron and some, arsenic.

The use of chemicals is found to be done according to its availability in stock

rather than on the need for water treatment and disinfection.

Properly trained and qualified operators to conduct disinfection are not often

available.

Pumping equipments are not routinely inspected (treatment plants, tube wells and

booster stations). Maintenance is not done in a planned manner.

In many branches, state of their networks and appurtenances were not good.

o About 48 % of the network is older than 25 years.

o Most Branches are not undertaking planned leak detection in their

networks.

o On an average 70 (18 – 200) repairs in the networks are executed per

month.

The most common hydraulic Network Problems are:

o Spaghetti connections,

o Leaks and Contamination

o Unplanned Network,

o No construction Standards.

The Customer service at Branches receives approximate 60 (5 – 200) complaints

per week. The three most common complaints are:

o No or limited supply,

o Leaks & pollution,

o Un-equal distribution.

Branches did not have well structured Operation and Maintenance Plans, Standard

Operating Procedures and Emergency Response Plans.

Branches had not updated drawings of the networks.

19

2.6 Water Quality Unit

The Unit has a fair knowledge on the production and the availability of water as

well as quality of the raw water sources. However, it did not have full knowledge

about the executed treatment processes of water supply and waste water.

NWSC has its own water quality analysis laboratory at Butwal. This laboratory is

in operating condition. This laboratory has been faciliated to analyze physical,

chemical and bacteriological water quality parameters.

Treatment plants are visited regularly, however they are not under the supervision

of the Water Quality Unit.

Generally there is some doubt if “Potable water is supplied according to Water

Quality Standards”.

Operation & Maintenance Plans, Standard Operating Policy (SOP) and

Operational Manuals are not available.

The water quality standards applicable under the License are as set out as the “Water

Quality Standards”. WHO water quality standards are adopted for Nepal but national

water quality standards supersede the WHO standard, where available. NWSC has

started to carry out testing of water sources in accordance with the following

minimum requirements:

No Activities as per License Frequency

1 Raw Water Control

Treated Water Control

For Chemical Water Quality Standards

All Sources before and

after wet seasons (2

times a year)

Water treatment & sources supplying direct into the networksresidual chlorine- turbidity- iron- color

Where aluminum coagulants areUsed in the treatment process. Treated water to be tested on- pH- Aluminum

1* Daily

Bacteriological test- treatment works- Raw water sources

Daily

Monthly

Distribution Network Random testSampling methods, location in accordance with WHO Guidelines

25 locations * daily

Table: Schedule of Water Quality Check of NWSC

20

2.6.1 Source of water supply

Mainly two sources are used; namely Surface Water Source and Ground Water

Source.

There are total 110 numbers of pumps for the supply of ground water in its all

branches.

NWSC is procuring ground water from Pump Set with panel board of 92 in

numbers.

NWSC is also operating tanker service in Pokhara, Butawal, Banepa and Dharan

for public as well as private supply. Public is made through either PVC tanks or

inject point. No additional bill is charged for such supply.

2.7 Human Resources

Human capital is the backbone for effective performance in any organization. There are

910 numbers of employees in NWSC. The Board members of the corporation comprises

of 9 members who lay down the rules and regulations for performance level of its

employees. The Board member is composed as:

- One member from related Department of Water Ministry of the Government.

- One from Finance Ministry of Government of Nepal.

- Three members from specialist in Water sector.

- One member form Municipality.

- Two members as experienced personality in Water from Government or from

public.

- One General Manager as Secretary.

The human capital of NWSC lack sufficient level of training on effective water supply

and quality to be provided to the general public. There are lack of technical staffs inside

the organization resulting delay in repair and maintenance of the system. Modern

technology has not been introduced inside the organization and employees lack computer

skills for proper maintenance of records and flow of information.

21

2.8 Analysis of Financial Performance

Balance Sheet Nepalese Rupees

S.No. Descriptions F/Y (2010/2011) F/Y 2009/2010 F/Y 2008/2009

1 Capital and Liabilities    

  Capital and Fund 470053711.90 470053711.90 470053711.90

  Capital Reserve 105167047.41 105236752.54 105306457.67

  Long Term Loan 964252516.00 812069343.33 659569343.33

  Current Liabilities 823606260.44 865678584.25 750554116.14

  Total 2363079535.75 2253038392.02 1985483629.04

2 Assets and Properties    

  Net Fixed Assets 805788670.16 756058426.78 714028493.50

  Work in Progress 304531635.42 178019216.45 74617063.32

  Total (A) 1110320305.58 934077643.23 788645556.82

3 Current Assets    

  Receivables 240994330.09 351215026.63 315779395.06

  Advance & Deposits 32074961.69 17046220.26 6317156.75

  Life Insurance Funds 8999896.67 8999896.67 7448034.17

  Stock Inventories 152965234.09 224544412.48 231230389.12

  Bank & Cash Balance 393064584.26 325706611.02 362903242.55

  Total (B) 828099006.80 927512167.06 923678217.69

4 Accumulated Loss    

  Total (C) 424660223.37 391448581.73 273159854.53

  Total (A+B+C) 2363079535.75 2253038392.02 1985483629.04

22

Income Statement Nepalese Rupees

S.No Descriptions F/Y 2010/11 F/Y 2009/10 2008/09

N.Rs. N.Rs N.Rs

1 Income

Water Revenue (After Rebate) 271762576.85 261700107.73 247906698.92

Other Income 61271477.08 49999923.81 41553708.03

Total 333034053.93 311700031.54 289460404.95

2 Expenditure

Production 105595936.63 102999776.58 90876859.67

Distribution 62327865.63 67056018.65 45971005.77

Quality Control 3039840.66 2777796.05 2780589.86

Consumer's Account 29405903.93 30635480.83 25454153.11

Administrative Expenses 69774894.77 72054584.56 56640073.91

Write Off

Stock Sale Expenditure 6948957.14 2567964.85 782039.19

Provision for D/D - 3543563.15 1824658.09

Provision for Gruatity Fund 23159454.99 45244306.46 80424696.37

Provision for Life Insurance Fund 1713562.50 39604470.00 1107033.33

Total 301966416.25 366483961.13 305861109.30

Operating Surplus 31067637.68 (54783929.59) (16400704.35)

Interest Payable (45490815.77) (36460356.53) (27578368.51)

Depreciation (28651437.53) (26989850.92) (23540952.31)

Depreciation Transferred from

Capital reserve 69705.13 69705.13 69705.13

Net Profit/Loss (43004910.49) (118164431.9) (67450320.04)

Last Year's Adjustment upto

Previous Year 9866018.85 (124295.29) (962621.65)

Accumulated Loss (391521331.73) (273159854.5) (204746912.84)

Accumulated Loss Carried to B/S (424660223.37) (391448581.73) (273159854.53)

23

Based on the information given in the profit & loss a/c and the balance sheet attached to it, we can interpret the financial performance in the following way:

INTERPRETATION OF P&L A/C

PARTICULARS YEAR 2010-11 AS COMPAREDTO 2009-10

YEAR 2009-10 AS COMPAREDTO 2008-09

REVENUE1. WATER REVENUE 3.85% increase 5.56% decrease2. OTHER INCOME 22.54% increase 20.33% increase

EXPENSES1. PRODUCTION 2.52% increase 13.33% increase2. DISTRIBUTION 7.05% decrease 45.87% increase3. QUALITY CONTROL 9.43% increase 0.1% decrease4. CONSUMERS A/C 4.01% decrease 20.36% increase5. ADMINISTRATIVE EXPS 3.16% decrease 27.21% increase6. STOCK SALE EXPENSES 170.60% increase 228.37% increase7. PROVISION FOR D/DEBTS NO PROVISION IN

10-1194.20% increase

8. PROVISION FOR GRATUITY FUND

48.81% decrease 43.74% increase

9. PROVISION FOR LIFE INSURANCE

95.67% decrease 3477.53% increase

10. INTEREST PAYABLE 24.77% increase 32.21% increase11. DEPRECIATION 6.16% increase 14.65% increase12. DEPRECIATION TRF FROM

CAP. RES.No change No change

OVERALL NET LOSS 63.61% increase 75.19% increase

INTERPRETATION OF BALANCE SHEET

RATIOS 2010-11 2009-10 2008-09

Long Term Debt Ratio

1.43 1.41 1.45

Current Ratio 1.01 1.07 1.4Fixed assets Turnover Ratio

2.965 2.89 2.88

Capital Gearing Ratio

0.597 0.708 0.872

Table: Interpretation of Income Statement and Balance Sheet

24

Note:

Long term Debt Ratio = Long Term Loans/ Capital+Reserves

Current Ratio = Current Assets/ Current Liabilities

Fixed Assets turnover ratio= Net Fixed Assets/ Total Receipts

Capital Gearing Ratio = Equity Share Capital/Fixed Interest Bearing Funds

From the above given profit & loss a/c as well as balance sheet, we can draw following

points:

1. The company is undergoing in a huge loss because of its vast expenditure and low

revenue. The net loss has increased heavily increased year by year as is clear from

the above chart. Every head of expense has been increasing as compared to

previous years, except a few expenses whose steep decrease has timid effect to

bring any year to profitable situation.

2. The net loss of 2009-10 has increased by 75.19% as compared to 2008-09.

Similarly in 2010-11, net loss has increased by 63.61% as compared to 2009-10.

The main reasons are considerable increase in almost every expense like

distribution expenses, stock sale expenses, provision for doubtful debts, gratuity

and provision for life insurance, etc.

3. The provision for life insurance has nearly increased by 35 times & provision of

gratuity by 43.74% in the year 2009-10. This can be interpreted by saying that

many employees were likely to be retrenched and the insurance scheme of many

employees was undertaken in the year 2009-10.

But these figures have decreased by a great extent in 2010-11 as compared to

2009-10. It means that there were new employees just appointed due to which the

company made low provision for gratuity. Likewise the provision for life

insurance has also decreased because many employees had been retrenched.

4. The stock sale expenditure has increased by 228.37% in the year 2009-10 as

compared to 2008-09. It has also increased by 170.60% in 2010-11 than 2009-10.

Because of this the closing inventory has been decreasing considerably as the time

passed on.

25

5. The distribution expenses have decreased in the year 2010-11 as per the chart

prepared above. Thus more water pipelines may not have been increased in

2010/11.

6. The low increase of production expense in 2010-11 as compared to previous years

shows that the company has been able to cope off with the burden to some extent

in this head.

7. The distribution expenses have decreased in 2010-11 than 2009-10 which is a

good position.

8. The decrease in consumer’s a/c in 2010-11 has also decreased the expenditure to

some extent.

9. The increase in depreciation is due to increase in net fixed assets of the company

as is clearly evident from the attached balance sheet.

10. The company has taken huge loans and loan has also increased considerably.

Thus, the interest payable has also been increasing as the year passes on.

11. The long term debt ratio is around a stable ratio in the three years. Though this

ratio is not heavy, yet it’s adverse for the company because the company has huge

accumulated carried forward loses of previous years and its current profit is

unable to pay all the interest on these loans.

12. The current liabilities have decreased in 2010-11 which is as a result of decrease

in provision for gratuity and life insurance, decrease in administrative expenses

and so on.

13. The Capital reserve has decreased by equal amount in all the three years as it has

been transferred to profit and loss a/c as depreciation.

14. The collection from debtors became favorable in 2010-11 and so it has decreased

in this year. Likewise the company has made no provision for doubtful debts in

this year.

26

15. The company has been undertaking many capital works and hence there is a

considerable rise in the work in progress in balance sheet.

16. The capital gearing ratio is low. It’s not a good sign for the long term

effectiveness.

Thus comparing and studying the balance sheet and profit and loss a/c we can say that:

a. The company is undergoing heavy losses. It might affect the going concern

principle. If same condition remains in the future, the company might be wound

up in the near future.

b. The company can improve its position by requesting subsidy from the

government. Likewise, it can cutoff unnecessary expenditures and leakages of

funds to improve its condition.

27

2.9 Summary of Mahendra Nagar Drinking Water Supply System

Ground water is the major source of water supply in the Mahendranagar municipality.

Nepal Water Supply Corporation (NWSC) Mahendranagar Branch is the institutional

entity for water supply management in this municipality. Although efforts have been

taken since several years back, still more than 70% of the population of the municipality

does not have access to NWSC services. Households without access to private drinking

water connections are using tube wells and public taps to fulfill their water needs.

The main feature of the organizational and financial setting of NWSC is its high degree of

centralization. Programs, policies and budget are decided in the head office of NWSC in

Kathmandu. Such approach widely limits the capacity of the branch office to manage the

system and take own initiatives to improve the service. Participation of local community

and representation of consumers in the decision-making is neglected in NWSC system.

Similarly, coordination with local stakeholders such as municipality is also lacking.

NWSC has financial constraints to improve existing water supply system and carry out

new projects. This Branch Office has been running with operating loss since it assumed

the management of the water supply system in 2000.

Moreover, the amount of arrears is alarming, reaching to as high as NRs.3, 123,500 by the

end of fiscal year. The Arrears to be recovered generally consist of water bills not paid by

the consumers and public institutions. The estimated amount of unaccounted for water

(UFW) is also remarkable with 31% of the total production. Leakages in the distribution

pipes and an improper monitoring and maintenance are the main causes behind the large

amount of UFW.

Major challenges of NWSC to ensure sustainability of the system and improve the level

of service include well-planned maintenance and extension of the existing system.

Regular dialogue and interaction with users would also contribute to guarantee the well

functioning of the existing water supply system.

28

2.9.1 Description of the WSS Intervention

Mahendranagar Municipality is located in Kanchanpur District which falls in the Far

Western development region of Nepal. Most of the wards in municipality are rural-based.

Only wards 4, 6 and 18 are urban-based and two other wards (9 and 13) are in the process

of urbanization.

The population of this municipality is 3, 77,899 with average family size of 5.88. The

average literacy rate is 57.6%. Mahendranagar has a long history of water supply that

goes back to 1973 when the Department of Water Supply and Sewerage (DWSS)

constructed the first Water Supply Utility under the grant support of Indian Cooperation

Mission (ICM). Under this grant support, the DWSS constructed a tube-well along with

treatment facilities, service reservoir, and distribution system and service connections.

Additionally, in 1987, the DWSS accomplished the construction of another tube-well to

further enhance the capacity of the system. However, none of the tube wells constructed

in 1973 and 1987 are currently operational.

29

fig: overhead reservoir constructed in 1973 fig: private tap managed by NWSC

The demand of water supply in terms of quality and quantity increased over the years due

to increase in urban population. Government of Nepal took initiative by making a request

to Japanese Government for the improvement of water supply utility in the municipality.

In this regard, Japanese Government extended support to the government through Japan

International Cooperation Agency (JICA) in 1992. Construction of two deep tube-wells,

treatment facilities, elevated reservoir and extension of transmission main and distribution

pipeline were the major part of the infrastructure developed under Japanese support. With

the increasing infrastructure and system improvements, overall production and

distribution capacity of the water supply system was significantly increased. This system

was maintained and operated by Water Supply and Sanitation district Office (WSSD)

until 1999, which later was handed over to Nepal Water Supply Corporation (NWSC) for

operation and maintenance. Subsequently, as a sole authority, NWSC is undertaking

overall responsibility1 for drinking water supply in the municipality.

Only the two tube wells constructed with the support of JICA along with its own more

two wells are currently in operation. The existing capacity of NWSC is 8000 private

connections. However, due to reduction in water yielding capacity, high level of leakage

and lack of proper repair, maintenance and replacement, the existing capacity cannot be

fully utilized. The reduction of production capacity and increasing of water supply

demand has put NWSC under a great public pressure.

According to NWSC Mahendranagar Branch, NWSC has been serving to more than

25,000 populations in four command areas of wards 3, 4, 6 and 18 through 1,500 private

connections and 40 public taps.

Public taps are located at various parts of the wards and are meant to provide water for

those community people who cannot afford private pipeline connection. People residing

30

in 15 wards (out of 19), which constitute about 70% of the total population, are deprived

of NWSC water supply. Most of them also rely on public/private hand-pumps and tube-

wells. However, the quality of ground water is not good as it has significant level of

arsenic and calcium carbonate content.

Meeting demand of deprived population is a challenge for NWSC and even for the

municipality. Now municipality is making efforts to approach different institutions as

there is a good source of available water (river Mahakali) to undertake a big-scale project.

And the effort is still going on for exploring potential partners/agencies for the support.

At the small-scale, it has been making its endeavors with its limited resources to help

people installing public hand-pumps and in conserving/managing other natural local

based resources. But this would not be appropriate solution since the quality of ground

water is not good; there is a significant level of arsenic contains in the case of

groundwater, and for other natural sources there is high risk of contamination because of

lack of appropriate sewerage and drainage system in the municipality.

Regarding sanitation, about 60% households do not have private toilet. Altogether there

are 12 public toilets in the municipality and there is increasing demand of more public

toilets in different parts of the municipality. Most of the disadvantaged people are

compelled to use open place to defecate. This is one of the major problems in health and

sanitation concern in the municipality. Moreover, all the toilets are connected with septic

tank since there is no sewerage system; and drainage is also limited within core part of the

municipality. Similarly, proper system for solid waste management is lacking.

2.9.2 Organizational and Institutional Aspects

Organizational structure of Mahendranagar Branch

Mahendranagar Water Supply Corporation is a branch office of NWSC which is

accountable to its Head Office in Kathmandu. NWSC Head Office is responsible for

overall planning, policy and program development. The role of branch office is to

implement district level program priorities and actions. The Branch office’s

organizational structure comprises of three major sections - Technical, Administration

and Account. The total number of staff currently working in NWSC, Mahendranagar is

21. Out of which only 10 are permanent and 11 are on contract basis.

The technical section is headed by an overseer and is responsible for overall distribution

and production. A team of ten staff including junior plumbers, helpers and labor are

designated to this section. Administration Section is responsible for the administration

31

and management of the branch office. It is headed by Technical Assistant and five

support staff. Similarly in the Account Section there are five positions consisting of

accountant, cashier, meter-readers and assistants. The overall responsibility is of the

Branch Manager who is looking two branches (Mahendranagar and Dhangadhi) at a time.

NWSC has centralized planning and administration system. Generally, Branch Office

does not have significant role in planning and decision-making. It requires prior approval

in making every major decision. Further, a branch office cannot take any decision with

regard to utilization of revenue on regular maintenance and improvement of the system

even if branch is running on profit. The major role and responsibility of branch office is

simply to move forward district level programs and policies and carry on regular

operation and maintenance with centrally allocated budget.

Centralized governance and decision making system is one of the major hindrances for

the branch office resulting delay in decision-making process. Similarly, lack of role of the

branch office in planning and policy development particularly is another issue. The

Branch office has been provided with role simply on implementation of district-based

programs. Adequate capacity and resources on operation and management is itself a big

challenge for NWSC. Consequently, all the branch offices bound to face resource deficit

problem. The Branch office is suffering with under budgeting even to carry on regular

operation and maintenance of existing infrastructure. Similarly, under-staffing and

lacking human development initiatives are the other parts of the challenge. Moreover,

capacity building and staff training has not been a part of regular process.

32

Fig: Stakeholders' map and their interactions

Stakeholders' Group Main Activity

WSSDO Management of Water Supply until1999

NWSC Head Office Overall Planning, policy and program development

NWSC- Mahendranagar Management of water supply system

Technical Section Operation and maintenance of the system

Donor agencies Support of expansion of the system

Municipality Support of deprived population

Table: Main Role of the Stakeholders.

Local participation

The success of community oriented social and development initiatives largely depends on

the level of public participation and their share of ownership. Unfortunately, in the case of

NWSC system public participation is absent. All the planning, policies and development

initiatives are designed at the central level and are implemented by its branch office.

Although it provides service to the people, its ultimate accountability is with its central

office. Peoples’ participation has not been considered at every level of planning and

decision-making. People, the end users of the service cannot even participate in the

33

process of tariff determination. There is no specific mechanism for information

dissemination and awareness regarding the service delivery. At the same time, NWSC has

not even taken initiatives to coordinate with other stakeholders (municipality and other

supporting agencies). No regular dialogue, discussion and interaction is taking place with

the NWSC Branch Office management team, municipality and with the people as end-

users specially in the process of planning and implementation of the activities related to

water supply.

These are some ground realities that do not create spaces and discourage collaboration

and partnership with people and other institutional entities. Consequently, the level of

contribution from local people is very low. This can also be linked with increasing arrears

and unauthorized usage of water with breakage of transmission main. However, they are

enthusiastic to contribute and be part of every initiative for quality drinking water.

NWSC Mahendranagar has not integrated sanitation and public awareness as an

important component of its services. Its primary focus is only on drinking water supply

management. However, various government and non-government organizations such as

Family Planning Association of Nepal, District Public Health Office, AIDS program,

Tharu Mahila Bikas Manch and other local non-government organizations have been

working with different activities on public health, education and economic empowerment.

With the increasing public awareness, number of private toilets has been increased.

Moreover, people’s participation in case of drinking water is increasing as they are

coming up with planning and proposals related to drinking water, sewerage and drainage

system. Various community development interest groups are formed in different parts of

the municipality. Local level discussion, interaction and formal and informal dialogue is

taking place towards taking joint initiative exploring ways and means for sustainable

community development. The joint initiatives of Community Development Committee

(SamjhanaTolBikasSanstha, AmarsahidTolBikasSanshta, SiddhibinayakTolBikasSanstha

and JanakiTolBikasSanstha) can be referred as an indicator of community level

initiatives. Significant behavioral changes in regard to people perception are noted on

health-hygiene practices. This can be linked with the increasing demand of pipeline water

supply which is expensive (costs about NRs.3000) in comparison to the costs of hand-

pump (NRs.2000) for ground water. However, sanitation is still a big challenge as there is

no sewerage and drainage system and particular dumping site for solid waste disposal.

Social inclusion

34

Existing water supply system does not have any special provision and facilities to socially

disadvantaged section of the community. The major caste/ethnic group of the area living

within the municipality includes Tharu, Thakuri, Brahmin, Chhetri, Newar and Dalit.

Dalit (disadvantaged and secluded groups) population in the area is about 12%. NWSC

has no particular consideration to these people. There is no preference and provision

applicable on providing private line connection; it serves first come first service basis.

Similarly, there is no discount on the connection charge for new line connection and tariff

on water usage for this section.

The availability of Pubic Stand Posts (PSPs) and public toilets are very limited and not

enough for the accessibility of the poor and disadvantaged people in the municipality.

There is issue of debate on equal distribution of water, distribution of water in PSPs and

its regular maintenance. Some of the harassing situation can also be noted for Dalit on

using water from PSPs. Sometimes, they are mistreated and prevented from fetching

water from the PSPs as they are regarded as un-touchable castes by the so-called upper-

caste people; this is still prevalent in some part of the community.

2.9.3. Financial Aspects

Income and expenditure

As all other branch offices, the major source of income of NWSC Mahendranagar Branch

Office is the water tariff, its fine on delay payment and connection fees from new

consumers which is NRs.2, 265 including deposit for meter.

The annual income of NWSC Mahendranagar Branch is not quite enough to cover-up its

annual expenses. It depends on the annual budget from NWSC central office.

The income and expenditure statements of NWSC Mahendranagar give a financial

overview of the branch office of last Fiscal Years. Upon consultation of staffs it is

revealed that NWSC Mahendranagar Branch Office has been running with operating loss

since 2000/01. Further, the loss seems to be increasing in the subsequent years. Lack of

increase in the water production and new connections on the one hand and on the other an

increase in expenditure on repairing and maintenance are the major factors responsible for

degrading financial position of the branch office. Slight increase in income is noted due to

increase in the water tariff.

3.4.1.1. Arrears

Total arrears to be recovered by the office generally consist of delayed or unpaid water

bills by the defaulters. The arrears are mainly from the government and public taps.

35

According to the NWSC Mahendranagar till the end of fiscal year, total arrears were

about NRs.3,123.5 thousands. This includes arrears from government office with

NRs.880.48 thousands and NRs.2243.04 thousands from general public.

Water Tariff

New tariff regulation is applicable for all NWSC branches from November 2004.

Water Tariff Consumption Level Rate/month

Connection with Meter:

< 10 m3 NRs.50

> 10 m3 NRs.15/ each additional m3

Non-metered connection NRs.360

Table: Water Tariff Structure

The applicable tariff for up to 10 m3 is NRs.50, when the consumption exceeds the limit

of 10 m3 each additional unit is applicable to the rate of NRs.15 per m3. In the case of

non-meter connection a monthly charge of NRs.360 is collected each month.

Water tariff is determined by the NWSC Central Office in Kathmandu and it is applicable

to all 22-branch offices including Kathmandu. In the process of the determination of the

tariff local branch office has no role at all.

Budgetary provision and financial transparency

Total annual budget of Mahendranagar branch is NRs.4.2 million consisting of (NRs.3.7

million) regular and (NRs.0.5 million) development budget. Out of which, annual

maintenance cost is NRs.0.7-0.8 million. All the budgetary payment is transferred

through bank check. And two separate bank accounts are maintained for operational and

non-operational purposes. All local revenue collected locally is to be deposited in non-

operational accounts. Mahendranagar NWSC cannot use this deposit. The budgetary

transfer from Central Office is maintained in operational accounts for all budgetary

expenses including administrative, development and operation and maintenance

expenditure. Branch office is accountable for its central office for all its revenues and the

budget it receives.

The branch office has limited rights in regard to expenditure without approval from

central office and the limit is NRs.25,000. It needs to take approval to expend above the

allocated budget.

36

Internal and external auditing is performed for maintaining the financial transparency.

However, annual program budgets are formulated with the limited participation of office

staff. The collection of cash against the service charge is reported to NWSC head office.

The information on the financial position of the office is not made to other stakeholders

including consumers. The NWSC Mahendranagar is accountable to head office in all

respects where it is also accountable with the consumers in terms of providing services.

Attempts have been made to make the office more accountable to the service delivery

including new connection, disconnection, reconnection, water delivery, water charges,

due date of meter reading, collection of charges, etc.

2.9.4. Sustainability of the Water Supply System

Sustainability of water supply would not be a big issue if it was timely planned and

necessary initiatives were taken. Only about 25,000 people have access to drinking water

supply system while 70% population of municipality is still deprived of receiving NWSC

services. NWSC needs to increase drastically the capacity of the existing system to cover

the non-served population.

Currently, only two tube-wells constructed in 1992 under Japanese grant are functional.

Water production from these two tube-wells is about 4300 lit/min along with 3 pumps.

According to the production and consumption record pattern per day, the unaccounted for

water (UFW) comes in the range of 31% of the total production. As per the record of

NWSC Mahendranagar Branch Office, the total production and consumption per day are

as follows:

Total Production/day: 648 m3

Total Consumption/day: 447.16m3

Water Loss: 200.84 m3

The quality of the water supplied by NWSC is not to the recommended level of standard,

although it is better than the normal ground water. The level of calcium carbonate is

extremely high (about 600/ppm) compared to normally recommended range of 150-

225/ppm. The initial treatment facilities constructed by DWSS in 1973 are no more in

operation at present. Current operational treatment facilities with rapid sand filter, pre-

chlorination unit and clear water reservoir were constructed under Japanese grant aid

support in 1992. However, some of the treatment facilities such as pre-chlorination plant

are not in operation today and therefore chlorination is done manually. Consequently, the

supplied water may not be disinfected regularly. Because of high rate of leakage problems

37

and no proper system of sewerage and drainage there is also likelihood of water

contamination.

Fig: wate r treatment plant constructed in Lime incrustation in distribution pipe

1973. Currently, not in operation

38

People have collective complaints over NWSC and raises questions of accountability and its

efficiency. NWSC Mahendranagar reported to be receiving around 70 complaints per month

from consumers. The major complaints are related with leakages from pipe joints, meter

blocks, etc. Replacement of meters is taking place with irregularities due to shortage of

meters in NWSC, Mahendranagar.

NWSC needs to go with immediate and long term planning to sort out its problems. It should

work in collaboration and partnership with municipality and other agencies and design a

mega project in the long run. And in the short term, NWSC can enhance its capacity working

with users to control leakages, reducing unnecessary consumption and encouraging timely

payment of bills and settling arrears. However, there are other aspects to be improved and

NWSC should give due priority on the following:

Replacing pipelines and controlling leakage of water;

Taking initiatives to repair non-operating two tube wells;

Putting in place operation and maintenance manual to avoid frequent damages of

infrastructures

Installing treatment plant such as pre-chlorination unit and other additional plant to

provide quality water supply.

Extension of pumping hours to increase the per capita supplied water and coverage

area.

39

SOCIAL INSTITUTIONAL

ECONOMIC TECHNOLOGICAL

ENVIRONMENTAL

ECONOMIC

Strengths Significant behavioral changes related to hygienic practices during last years.

Municipality is making efforts to provide water supply to deprived areas.

Weaknesses

Women’s participation is ignored at all levels of policymaking and implementation. NWSC has no any special considerations to disadvantaged groups.

Centralized planning and administration system in NWSC. Lack of coordination among concerning local stakeholders. The system is not transparent for consumers. Low level of local participation.

NWSC is facing financial constraints to improve existing system and carry out new projects. Under budgeting to carry out regular operation and maintenance. Lack of provisions for disadvantaged groups in NWSC facilities.

Unequal distribution of water due to irregular pressure. Bad condition of some of the pipes and high level of leakage. Risk of supplying water with bacterial contamination due to breakdown of chlorination plant.

Sanitation coverage is still very low in the municipality. Lack of appropriate sewerage and drain in the municipality.

Opportunities

Formation of community development interest groups, which are coming up with new initiatives.

Integration of public awareness and sanitation as part of the NWSC services. Higher degree of collaboration between NWSC and local institutions.

Users expressed their willingness to pay for improved water supply services.

Repair of non-operating tube wells. Provision of water supply to the deprived population.

Mahakali river is a potential source for the expansion of the system.

Threats High percentage of Mahendraganar population has no access to improved water supply and sanitation facilities.

Unpaid water bills from regular users and public institutions.

Lime incrustations in distribution pipes.

Overuse of groundwater. Many disadvantaged households use public place to defecate.

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Table: SWOT ANALYSIS OF MAHENDRANAGAR BRANCH

CHAPTER: 3

Findings, Suggestions and

Conclusion

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3.1. Suggestions

With the overall assessments of the water supply system of Mahendranagar Municipality,

some of the conclusive recommendation can be made to enhance its capacity and existing

service delivery system. NWSC and Mahendranagar Municipality should focus upon

collaboration and partnership building. On top of that, special consideration should be given

to the following areas:

Special initiative should be taken for proper representation of the consumers in the

management of NWSC;

Channel of collaboration and partnership should be enhanced with municipality,

NGOs and other agencies;

Issues of health and hygiene should be incorporated within NWSC and municipality

programmatic planning;

Financial incentives be offered for the promotion of toilet among the poor and dalit

households;

More PSPs be established and connection charge and water tariff be reduced for the

poor, dalit and ethnic minorities;

Public awareness, education and interaction are to be regularly performed in order to

held dialogue among NWSC, municipality and people in general. This could be

instrumental in partnership building.

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NWSC need to look into and take appropriate measures for the improvements of the

following components:

Adopt the principles of decentralization by providing more authorities to branch

offices;

Encourage Branch Manager and other staff in taking decisions independently;

Develop Job Description of all staff and encourage the staff members to work

according to defined job description;

Conduct need-based training for the staff members, and make it a part of regular

strategies to enhance the skills of the staff;

Introduce computerized accounting system by providing adequate training to staff of

Account Section;

Update, document and disseminate Management Information System regularly and

make it use in management decision-making process;

Conduct regular monitoring and evaluation of staff effectively.

3.2. Findings or Lesson learnt

The major lessons learned during the assessment process were as follows:

Decentralization is necessary to deliver optimum level of output and services. There

is centralized structure in the Nepal Water Supply Corporation. All the decisions are

taken at the central office, Kathmandu. There is little de-concentration in respect of

administrative functions, but there is no financial decentralization at all. As a result,

the branch office has to wait for long for any decisions. Moreover, they lack

autonomy to function like a corporate organization. This has led to financial loss to

the corporation on the one hand and lack of efficient delivery of water services on the

other.

People’s participation is the prerequisite for successful operation of a local institution.

Apart from the performance, the local development organization needs to involve the

local people to the extent possible. Involvement of people as end-users helps

sustainable use of resources and their preservation and sustainable management.

Public participation and contribution can be ensured if they are properly handled and

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provided spaces for dialogue and discussion to justify the need of resources and

contribution. Ignorance of public participation leads to unequal distribution of the

resources and invite anger, unrest and conflict. However, there is no provision for

community participation at all in the NWSC system at the local level. This has

therefore neglected one of the principles of democracy. Perpetuating exclusion and

discrimination could lead either non-participation in all socio-economic and

development initiatives or lasting conflict for the share of resources, power and

positions.

Collaboration and partnership among concerning stakeholders and beneficiaries lead

greater amount of capacity and allow working in broader framework. Apart from

performance and participation, how effective the governance of an organization is,

also depends on the level of partnership that it has built at the local level. In fact,

because of the centralized structure, and lack of participation of community and other

stakeholders the partnership is lacking in the NWSC system.

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PROBLEMS

FACED

Strategies to solve the

problems

Extent to

which the

problem

was solved

Lessons learned

FINANCIAL Delay in water

bill payment from

regular

households and

public institutions

Awareness sense

towards the system

efficient management

and a more participatory

approach. Incentives as

well as penalty sysment

would also contribute to

foster a more punctual

payment

Unpaid

bills still

share a

large

amount

Delay in bill payment is a

symptom of inefficient

management of the system and

dissatisfaction of the users.

Lack of participation of local

community in decision making

process causes lack of

ownership sense and careless

attitude of users towards the

system

INSTITUTIONAL Policies,

programmes and

budget are

decided in the

head office

leaving little

management

margin to the

branch office.

Decentralization system

would permit to make

decisions with the

involvement of

concerned stakeholders

Manageme

nt of

NWSC is

still

centralized

Centraliztion models restrain

the involvement of local

stakeholders and the efficient

exposure and fulfillment of

local needs

SUSTAINABILITY Large

proportion of

unaccounted

for water

(UFW) due

tohigh degree

of leakages

and ageing of

the system

Program of leakage

control. Regular

monitoring of

infrastructures

Problem

has not

been

solved

yet.

Regular monitoring and

maintenance tasks need

to be carefully planned in

order to avoid UFW.

Control of UFW will also

reduce the value of non-

revenue.

Table: Problems faced and Solutions

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3.3. Conclusion

From the overall analysis of NWSC, it can be rightly said that NWSC is not being able to

perform as it should in delivering drinking water service to the public. NWSC has the

mandate to upgrade the water network of the country and also to tap alternative sources of

drinking water. But NWSC has come a cropper, not only in its attempts to tap alternative

water sources, but also in managing the existing water supply network, leading to a severe

crisis, as also to controversies. Despite the fact that NSWC is a corporation, it has not been

operating on economic and financial principles, and has been marred with poor management.

One of the reasons for the anomaly is the intervention from government and politicians in its

management. The repercussion of such a weak management, as reflected in poor service

delivery, is higher on poor than better off households.

In spite of reforms taken place in the corporation in the form of privatization of Kathmandu

based water supply, it is still financially unsustainable. Because of its growing deficit, it is

urgent that NWSC be run following sound financial principles so as to provide sustainable

water supply. So, in this regard, it has to further privatize its other branches for effective

management.

The tariff structure fixed by the corporation is fixed since decades, resulting low level of

earnings with respect to its expenses. This hints that long and sustainable effort is needed to

mitigate the loss of NWSC in the coming years. This puts to a great challenge to the

Corporation in view of growing cost of water in the days ahead. To make the Corporation

financially sound, it is necessary to increase tariff significantly or to pay the loss by the

government. The latter option of cost recovery is not a sustainable option.

Last but not the least; proper decentralization of authority in rural branches is the most for

proper functioning of the corporation as a whole.

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