NEDA Wants Price Structure of Water Utilities Overhauled

The National Economic and Development Authority (NEDA) of the Philipines wants an overhaul of the pricing structure of water utilities in favor of a mechanism that will decentralize resource development and treat water as an economic good much like minerals, forest products and Coca Cola.

NEDA Director General Dante Canlas said that the Arroyo Administration is studying several models that will reflect the economic value of water resources.

The proposal will ultimately lead to an across-the-board increase in water rates but Canlas said this will be accompanied by a more effective allocation of water supply to primary users such as household, industry and agriculture.

According to Canlas, the existing policy regime encourages waste on a scale that undermines the sustainability of investments in the water sector and threatens rapid resource depletion.

"In general, we need a comprehensive policy review," Canlas pointed out. "The increase in water demand due to population growth and industrialization has created the need to manage and allocate water more efficiently."

The policy reforms, Canlas said, will be discussed in the 3rd National Water Summit that will be the culmination of efforts pooled by various donor countries and agencies such as the World Bank, Australian Agency for International Development, the Sweden-based Global Water Partnership and the International Water Management Institute based in Sri Lanka.

NEDA assistant director general Reuben Reinoso explained that despite the enactment of the Water Code in the early 1990s, the policy structure remains arbitrary especially in resource management and pricing.

The model under study, according to Reinoso, is the so-called River Basin Approach that will decentralize both the development and management of water resources.

This will make protection and preservation easier while adjusting price structures to the specific conditions of the water resource.

Reinoso said the raw water pricing policy will differentiate between sources, whether ground water or surface water; factoring in basic considerations such as cost of extraction, treatment, distribution and maintenance. Reinoso admitted that this would result in a next increase in water rates but only because the public water utility system charges minimal rates, roughly equivalent to one-tenth of the actual value of the water supply for both domestic, industrial and agricultural uses.

The Philippine Star

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