DHULIKHEL

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TABLE OF CONTENTS 1. SUMMARY OF DHULIKHEL DRINKING WATER SUPPLY PROJECT .......................... 1 2. BACKGROUND AND CONTEXT ................................................................. 2 3. DESCRIPTION OF THE NEW DRINKING WATER SUPPLY SYSTEM .......................... 3 4. INSTITUTIONAL AND ORGANISATIONAL ASPECTS .......................................... 5

4.1. Role of gender and social inclusion .................................................... 7 4.2. Social conflicts ............................................................................ 8

5. FINANCIAL ASPECTS ............................................................................ 9 5.1. General description of financial arrangements ...................................... 9 5.2. Revenue and Expenditure of the Drinking Water System ......................... 10 5.3. Water Tariff .............................................................................. 11 5.4. Financial incentives and penalty system for promoting prompt payment ..... 13 5.5. Financial Transparency ................................................................. 13

6. SUSTAINABILITY OF THE SYSTEM ........................................................... 14 7. CONCLUSION .................................................................................. 16 8. LESSONS LEARNED AND SUGGESTIONS .................................................... 16 REFERENCES ...................................................................................... 20 ANNEX ............................................................................................. 21 LIST OF TABLES Table 1. Role of the stakeholders ............................................................... 6 Table 2. Number of Staff by Position ........................................................... 7 Table 3. Major Heads of Project Cost and Source of Fund (NRs.) ......................... 9 Table 4. Connection Fee for Private Tap ...................................................... 9 Table 5. Sources of Income of the Water Users' Committee ............................. 10 Table 6. Expenditure Pattern of Dhulikhel Drinking Water Users' Committee ......... 11 Table 7. Rate of Water Tariff .................................................................. 12 Table 8. Fine for the delayed payment ...................................................... 13 Table 9. Some suggestions ..................................................................... 17 Table 10. Problems and Solutions ............................................................. 18 Table 11. SWOT matrix ......................................................................... 19

LIST OF FIGURES Figure 1. Drinking Water Treatment Plant .................................................... 3 Figure 2. Public tap managed by the Users Committee ..................................... 3 Figure 3. Stakeholder’s map and their interactions ......................................... 5 Figure 4. Distribution of Households by the Amount of Monthly Water Bill ............ 12 Figure 5. Households reporting about access to the information at WUC ............. 14

1. SUMMARY OF DHULIKHEL DRINKING WATER SUPPLY PROJECT

Number of taps: 1033 private taps (46% of municipality households) and 27 public taps Main institutions: DWSS – GoN, GTZ and Users’ Committee Capital cost of the project: NRs.37.6 million Type of community contribution: management and O&M of the system and O&M cost Main features:

The users committee has been managing the system effectively for more than 15 years.

The users committee maintains the new water supply system and the old system consisting of public taps.

Successful penalty and incentive system to ensure prompt payment.

Dhulikhel Drinking Water Supply system is one of the oldest systems managed by users’ committee in Nepal. The system was built with the concerted effort of community from the phase of identification to implementation. German Development Agency (GTZ) provided financial support to the local community after ensuring the involvement of the Government of Nepal (GON) and formation of a users’ committee with the collection of NRs.300,000 as operation and maintenance fund. The total capital cost of the system was NRs.37.6 million. After the handover of the Water Supply System in 1992, the user committee has been effectively managing the system and supplying water to more than 10,000 population. DWSS provided financial support to the users committee in a declining proportion for operation and maintenance of the system during the initial years. Currently, a management and technical unit with 16 paid staff carries out the daily operation and maintenance of the system. The system has been operating sustainably mainly because of the management by the user committee and active leaders of the community. Users have been meeting the operation and maintenance cost of the system through the payment of connection fees and water tariff. The water tariff is progressive, with an initial minimum charge of NRs.60 for 10,000 litres. NRs.10 rebate is offered in the water bill for the timely payment, and therefore most of the small consumers pay only NRs.50 for the minimum consumption of water. This provision was also introduced with the intention of helping poor and disadvantaged groups of population. However, ultra poor households, who cannot afford connection charge for private tap connection, are provided with public tap free of cost. The public taps also operate under the management of the user committee. Most of the households expressed satisfaction on the service of the water supply system, and were content with water quality and the management of the system. However, expansion of the system is demanded by the non-served population but currently the system lacks capacity to produce enough water to satisfy the petition. Even thought the users committee has been operating with surplus, the operation and maintenance fund is not sufficient to expand the system. Thus, the users committee is currently looking for donors to enlarge the system.

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2. BACKGROUND AND CONTEXT

SOCIOECONOMIC FEATURES**

Average illiteracy rate: 25% Annual Growth Rate 1991-2001: 1.6% Major ethnic groups and castes: Newar, Tamang, Brahmin and Chhetri Main occupations of the head of the household: 20% agriculture, 18% wage/salary, 12% self employed in non-agriculture sector Source of drinking water (HH): 88% tap, 6.5% spout Type of Latrine: 58% flush latrine, 23% no toilet

Located at about 30 km east of Kathmandu, the capital city of Nepal, Dhulikhel is one of the three municipalities of Kavrepalanchok district. The municipality has 11,521 populations living in 2,255 households. Newar, Tamang, Brahmin and Chhetri are major caste and ethnic groups of the municipality. Dhulikhel will become a gate way to Kathmandu after the full operation of Bishweshwar Prasad (BP) Koirala Highway, which links it with Terai region of the country. In Dhulikhel the main source of drinking water is pipe water followed by spring water. Three out of four households have toilet of one type or the other (see socioeconomic features chart). Dhulikhel has been developing fast as a centre for tourism, education and quality health because of its calm, serene and clean environment and beautiful sceneries. The opening up of Kathmandu University, and tourist hotel and resorts in Dhulikhel has increased the inflow of population, expanding demand for water and other infrastructure and services. In the early days, the town was dirty and uncivilized and served as a transmission channel of communicable diseases like cholera and other epidemics, claiming lives of people. Realizing such problem some social and political leaders of the community started to make aware the people of the town on personal hygiene and sanitation. With this awareness, people started to construct toilets. Besides, people started managing household wastes by collecting and disposing it through municipality tractor. Now most of the households have toilet though few poor families are compelled to use public places because of lack of space to make toilet in their houses. The Dhulikhel municipality has two water supply systems; one is the old and other is the new supply system. Built at the initiation of community with the financial support of Indian Embassy as early as 1982, the old system has now 27 public taps located in wards 2, 3, 4 and 5 of the municipality.* The system collects water from three springs located nearby a forest area. The capacity of reservoir of the system is only 40,000 litres, which was insufficient to meet the growing demand for water of even the population of core urban areas. Moreover, drinking water supplied from this system was contaminated due to unscientifically constructed intake and reservoir. However, public taps are still functional and are managed by the user committee * A ward is lowest administrative unit of a municipality or a Village Development Committee. A municipality has nine or more wards depending on the size of population of the municipality. The Dhulikhel has only nine wards. ** CBS, Population Census, 2001

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formed for the new water supply system. This case study mainly focuses on the new system, as it is the main source of water supply with sustainable institutional and financial mechanism. With the rapid increase in population, and hotels, educational as well as health institutions, pressure on old system started mounting. The then Mayor of the municipality, with the support of some energetic youth social workers, started looking for alternatives so as to fulfil the growing water demand. In 1983 people of Dhulikhel requested to the government to provide adequate drinking water supply in the municipality. The government then inspected some of the sources of water and conducted a feasibility survey. The study concluded that the cost of future drinking water project would be very high to bring water from distant sources and would be difficult to install without support of external donor.

3. DESCRIPTION OF THE NEW DRINKING WATER SUPPLY SYSTEM Dhulikhel community approached German Development Agency (GTZ) in 1987, which was working in Bhaktapur then. GTZ put two conditions to the community: first to bring a request letter from the government, and the second to convert Dhulikhel Village Development Committee (VDC) into municipality. Then the delegation of Dhulikhel people approached concerned ministries and demanded for the two requirements as asked by the GTZ. Later, the Government converted Dhulikhel VDC into municipality in 1986, and also sent a request letter to GTZ for the provision of drinking water in the municipality. Besides, the community fulfilled some other conditions including formation of a water user committee and collection of NRs.300,000 as operation and maintenance fund. With the fulfilment of the above conditions, GTZ became ready to provide technical and financial assistance to establish Dhulikhel Drinking Water Supply system. After getting assurance from GTZ, some energetic youths visited different possible places to find out reliable water source. Ultimately they identified Khar Khola (Khar Stream) located at 13.5 km in Bhumidanda Village Development Committee (VDC), southeast of Phulchoki Mountain. They made an agreement with the VDC and submitted a request for support from GTZ to bring water to Dhulikhel.

Figure 2. Public tap managed by the Users CommitteeFigure 1. Drinking Water Treatment

Plant

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The technology of the Dhulikhel Drinking Water Supply System is advanced. The technology including the filtration plant with horizontal roughening filter and slow sand filtration unit (figure 1) was accepted by the community of Dhulikhel and appreciated by the other users' committees of different parts of the country because of its high quality. The water discharged at the source was 32.24 lps in 1998 and is now significantly decreased. The system used to supply water 24 hours, but now it is supplying only eight hours per day. The reason behind the decrease in water supply are many including decreased water discharge at source, rapid increase in population, extension of water supply to other wards, which were not included in the designed phase, and high demand for water from health and educational institutions, hotels and restaurants. The project work started in 1987 and was completed in 1991. Altogether 1,033 private taps were connected up to July 2006 in the new system covering 46 percent of households in the municipality. Of them about seven percent have been connected to the institutions (government, semi-government, non- government offices, hotels, and educational institutions). This project covered 6,840 populations in base year (1987) and estimated that it will reach 14,387 in design period (after 25 years) in 2012. The system was designed to distribute drinking water at core city area (i.e. ward no. 2, 3, 4, 5) of Dhulikhel municipality, but at present it covers almost all parts of the four core city wards and some parts of wards 1, 6, and 7 of the municipality. Apart from the private connections, 27 public taps of the old system are serving to about 28 percent population of the municipality (figure 2). The household survey conducted among 70 households of wards 3 and 4 of the municipality found that only 14 percent of households have been fetching water from public taps within 10 minutes. Out of them 80% households reported that 10 and more households collect water from a public tap. Generally, poor and disadvantaged group of people including Dalits (oppressed people) are the beneficiaries of public taps who are getting free water. These people could not afford minimum connection fee of NRs.2,000 in the beginning (now NRs.3,000) to connect private tap in their house from the new system. However, the public taps are also used by some of the private tap holders, mainly for washing clothes, bathing, irrigating garden or vegetable garden because the water from public tap is free of cost. Sometimes, there is conflict between low caste Dalits and higher caste people as the low caste people are not allowed to fetch water together with the high class and have to wait until the so-called high caste people finish fetching water.

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4. INSTITUTIONAL AND ORGANISATIONAL ASPECTS Department of Water Supply and Sewerage (DWWS), Government of Nepal; German Government through German Development Agency/Urban Development through Local Efforts (GTZ/UDLE); Dhulikhel Municipality and Dhulikhel Drinking Water User's Committee are the stakeholders of this project. A tripartite agreement was signed between Government of Nepal, German Government and Dhulikhel Drinking Water Users' Committee, before the initiation of the project work. People of Dhulikhel have actively participated in various phases and activities of the project like planning, implementation, operation and maintenance. Some technical and financial support was also provided from Water Supply and Sanitation District Office and municipality during the implementation phase of the project (see figure 3 and table 1). The government of Nepal handed over Dhulikhel Drinking Water Project to Dhulikhel Drinking Water User's Committee (WUC) officially on the 7th July 1992 and handed over the old drinking water system at the end of January 1993. Since then all the management of both systems has been performed by the Dhulikhel WUC effectively, which includes production and distribution of water, day-to-day maintenance of system, financial, administrative, personnel as well as overall management of the two systems.

Figure 3. Stakeholder’s map and their interactions interactions

Institutional area Economic area Social area Technical area Institutional area Economic area Social area Technical area

SORT OF STAKEHOLDER SORT OF INTERACTION SORT OF STAKEHOLDER SORT OF INTERACTION

Economic

Negotiation

Direct Support

Alliance

DDWSUC Management Unit

GTZ

Dhulikhel Municipality

DWSS - GoN

WSSDO

General Assembly

Institutional

Social

Technical

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Table 1. Role of the stakeholders

Stakeholders Main activity GTZ Major financial assistance

DWSS - GoN Technical and financial support during the initial years of the project

Dhulikhel Municipality Technical and financial assistance WSSDO Technical and financial assistance Dhulikhel Water Users’ Committee

Overall management of the WSS system

Technical and Management Unit

Day to day operation and maintenance of the system

Initially, an ad-hoc committee was formed to construct Dhulikhel Drinking Water System. The District Drinking Water Officer and Executive Officer of the municipality were also member and Secretary of the committee, respectively. The main responsibilities of the adhoc committee were to acquire necessary land, supervise construction, help in the policy formulation, set up office, take over the project after completion, and hold election of the User Committee. The adhoc-committee completed its tenure successfully, and organised the first election of the users' committee in July 1993. Since then by now three-elected user committees have been formed. The third elected committee is in effect since April 2004. Only four of the above stakeholders have active role in Dhulikhel Water Supply System currently. They are general assembly, the water user committee, management unit and the municipality. General Assembly is the apex body of Dhulikhel Drinking Water Supply System. The entire private tap owners are members of the General Assembly. They openly discuss on all issues of the system including its management. The assembly elects a nine member water Users' Committee (WUC) for four years including one chairman, one vice-chairman and two female members, based on one tap (private) one vote basis. † Besides, the Mayor of Dhulikhel Municipality or a person nominated by him/her, and the Manager of the Users' Committee Office are the ex-officio member and secretary of the committee respectively.‡ Some of the community members have been actively contributing to make this system successful right from the very beginning. They represent as the founding members of the User Committee. Thus, the total members of the committee are more than 11. A management and technical team consisting of 16 paid staffs are taking care of day-to-day operation and maintenance work of the system (Table 2). A Manager heads the team. It is responsible to the Water User Committee and the Committee, in turn, is responsible to the General Assembly. The users' committee is solely responsible for the management of water supply. It has been managing the system effectively following the guidelines of General † But the public tap users are deprived of such a right. However, they do not bear any cost for the use of water. ‡ At present, in the absence of elected body in the municipality, the Executive Officer of the municipality has been discharging the functions on behalf of the Committee.

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Table 2. Number of Staff by Position

Staff Number Manager/engineer 1 Accountant 1 Deputy Accountant 1 Store Keeper 1 Meter Reader 2 Plumbers 3 Assistant Plumbers 3 Peon/Guard 4 Total 16

Source: Dhulikhel Water Users' Committee

Assembly and/or taking in confidence of water users. The DWSS has little role in the management of water after the handover of the project to the users' committee in 1992. However, a gradual process of phase over was adopted. The DWSS has provided technical and financial help to the users' committee up to the first three years of the project, in declining trend (100 percent, 50 percent and 25 percent of the total budget in the first second and third year, respectively). Dhulikhel Drinking Water Users' Committee is fully autonomous body in all respects. It is running under its own constitution registered in the respective Government institution. The municipality represents as one ex-officio member of the committee in order to ensure coordination and cooperation between the municipality and the committee. All the decision of the committee meeting is disseminated through notice board of the users' committee office.

4.1. Role of gender and social inclusion The constitution of Dhulikhel Drinking Water Users' Committee has a provision of two female members out of nine-elected member of the committee. Besides, women are free to compete with men in more seats and positions. The current user committee has two female members and their role is effective. Women have played a key role to deposit NRs 2,000 for private tap connection in the beginning when some of their male counterparts demanded water free. They convinced their husbands or other male member to support the project. However, poor and disadvantaged group have fewer roles in the system. Since the beginning of the Dhulikhel Drinking Water Project there is not any representation from the vulnerable social groups in the water user committee. The key informants expressed that the issue of social inclusion is new and never realised before as the users' committee has not discriminated such people.

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4.2. Social conflicts Conflict is the feature of a dynamic society, however, it should be used for the development rather than for destruction of the society. Therefore, its timely management is necessary by addressing the concern and mobilising people for development. There are three types of ongoing conflict in Dhulikhel municipality as follows:

(i) Conflict between users and non-users of drinking water within the municipality

(ii) Conflict between users of the new system and the old system (iii) Conflict between the people of Dhulikhel and those of surrounding

municipalities

The first conflict is the result of limiting water service mainly to core area of the municipality with the pretension that the system was designed only for core area and that it is technically infeasible to extend water supply in other wards because they are not located at the level of core city area. While technical feasibility has its own dimension, there is inherent selfishness among better off people of the core area that if water is distributed in other wards then there will be shortage of water in their core city area. However, despite such unwillingness from water users of the core area, the constant demand for water from other wards made the user committee to cajole some of the households of other wards by extending water supply. The second conflict is between the poor and better off families of the core area. The poor families are using water generally from public taps, whereas the better off families are using water from private taps. The public taps are from old water source, whereas the private taps are from new water source. The water from public connection is free, but private connection holders have to pay water fee. Therefore, people of the private connections at times use water from public taps for bathing and washing which consume more water than the water is used for cooking. As the private connection holders are upper caste people, the existing culture does not allow low caste people to fetch water until rich people complete their activity at the public taps. This has resulted into some conflict between poor and better off families of the core area. It is interesting to note that poor families who are main users of public tap water have not complained about water quality of the public taps, whereas those with private connections have suggested for regular treatment and filtration of water of old system. Such a suggestion has come because water of new system is treated as well as filtered regularly. The third conflict is between the people of Dhulikhel Municipality and the downstream population of Panauti and part of Banepa Municipality. As people of Dhulikhel started disposing human faeces in open drain it has polluted environment downstream. Moreover, there is conflict of interest between source owners which is located in another Village development Committee (Bhumidanda) and water users of Dhulikhel. The source owners are demanding for some support, otherwise they will prohibit water from the source in the future.

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5. FINANCIAL ASPECTS

5.1. General description of financial arrangements The total project cost of Dhulikhel Drinking Water Supply System was NRs.37.6 million, with 94.8 percent of the total cost borne by German Government/GTZ and the rest by the Government of Nepal. German Government in the form of donation through GTZ/UDLE supported all the cost of pipe, fittings, tools, construction materials and labour cost for the transmission line and distribution line including water meter; and the Government of Nepal borne all the administrative cost (Table 3). Thus, the community people have not made financial contribution (cash and kind) during the construction of the project. However, the user committee is bearing some cost for the maintenance of the past development works undertaken at the VDC where the source is located.

Table 3. Major Heads of Project Cost and Source of Fund (NRs.)

Project Cost Sources of Fund Description Amount in

NRs. Description Amount in

NRs. Dhulikhel Drinking Water Project

34,673,054 Donation from German Government

35,700,000

Panauti Drinking Water Project

698,021 Government of Nepal 1,960,195

Neighbouring VDC's Drinking Water Systems Improvement

328,925

Administrative Expenses 1,960,195 Total 37,660,195 Total 37,660,195

Source: Dhulikhel Drinking Water Users' Committee

The user committee raised NRs.300,000 from the community as an operation and maintenance (O&M) fund. In order to collect the fund the committee has charged NRs 2,000 as a connection fee with an applicant. Out of NRs.2000, half was deposited as O&M fund and the rest was spent for meter cost and installation fee. Thus, community has contributed for the operation and maintenance fund. The committee increased the installation charge from NRs.2,000 to NRs.3,000 in 2006. This charge includes deposit (NRs.1,000), meter cost (NRs.1,500) and connection fee (NRs.500). However, until now public tap users (about 28% population) are using water free of cost where the operation and maintenance cost of the system is also borne by the user committee of the new system.

Table 4. Connection Fee for Private Tap

Length 2001/02 to 2005/06

(NRs.) 2006/07 (NRs.)

0-100 400 500 Additional per feet 4 5 Meter Charge 1,100 1,500 Deposit 1,000 1,000

Source: Dhulikhel Drinking Water Users' Committee

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Currently, connection fee of each private tap is NRs.500 for up to 100 feet distance, which was NRs.400 till September 2006. After 100 meter, NRs.5 is charged per additional feet connection (Table 4). All the key informant and consumers expressed that this is reasonable rate. However, if the inflation is accounted then the increased rate of 2006/07 is less than that of 2001/02.

5.2. Revenue and Expenditure of the Drinking Water System Water tariff, meter charge, installation charge, maintenance of private taps, interest from bank deposit and miscellaneous (fine/penalty, etc) are the major income sources of the committee. Of all the sources, water tariff is the dominant one generating around 91 percent of revenue during the period 2004/5 – 2006/07. The second main source is the interest from bank deposit, which shares around seven percent during the period. All other sources have a negligible share in the total revenue of the Water User Committee (Table 5).

Table 5. Sources of Income of the Water Users' Committee

FY 2004/05 FY 2005/06 FY 2006/07 (est.)

Heads Amount (NRs)

% Amount (NRs)

% Amount (NRs)

%

Water Tariff 3,659,583.6 90.5 4,069,861.8 91.9 4,650,435.7 90.7

Meter Fee 39,600.0 1.0 37,400.0 0.8 56,900.0 1.1

Installation Charge 15,000.0 0.4 20,000.0 0.5 21,100.0 0.4

Maintenance and Miscellaneous

19,736.0 0.5 12,274.0 0.3 14,262.0 0.3

Interest from Deposit 308,340.7 7.6 288,758.2 6.5 385,069.9 7.5

Total 4,042,260.3 100.0 4,428,294.0 100.0 5,127,767.6 100.0

Source: Dhulikhel Drinking Water Users' Committee

The amount of income of the committee has increased from NRs.4.0 million in 2004/05 to 4.4 million in 2005/06, an increase of 10 percent. There is consistent increase in the revenue from water tariff over the period. The actual cost structure of the water supply system for the year 2004/05 and 2005/06 and the proposed cost for the year 2006/07 is given in Table 6. The total expenditure is increasing over the years. Out of the total cost of about NRs.3.9 million in the fiscal year 2005/06, 80.2 percent was operation and maintenance cost, whereas only 19.8 was the capital cost. Among the main items of expenditure in the O&M head, salary is the main item sharing 29.4 percent of the cost. This is followed by donation. It is surprising to note that as high as one fourth of the expenditure was made on this item in 2005/06. However, the share of donation in the preceding year was just only about five percent. As to the capital cost, the main share is that of public construction and maintenance which was about 15 percent of the total expenditure. A comparison of the revenue and expenditure shows that Dhulikhel Drinking Water System is operating in surplus. Thus, the total balance of the committee up to the end of the FY 2005/06 was NRs.4,367,236. The users' committee has fully recovered

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operational and maintenance cost from its own source. The committee has been successful to balance NRs.1,451,926.6 in 2005/06.

Table 6. Expenditure Pattern of Dhulikhel Drinking Water Users' Committee

Expenditure Heads FY 2004/05

(NRs) FY 2005/06

(NRs) FY 2006/07

(proposed) (NRs) A. Operation and Maintenance

1,856,943.3 67.6 3,099,553.3 80.2 2,802,793.0 76.2

Salary 1,122,680.0 40.9 1,136,408.0 29.4 1,284,129.8 34.9 Allowances 125,975.0 4.6 81,200.0 2.1 119,400.0 3.2 Dearness allowance - .. 76,464.0 2.0 - .. DSA 26,305.0 1.0 54,660.3 1.4 34,986.1 1.0 Apron 4,888.8 0.2 2,970.0 0.1 240.0 0.0 Medical 4,069.6 0.1 - .. 114.0 0.0 Water and Electricity tariff

23,284.9 0.8 26,450.0 0.7 24,098.6 0.7

Telephone 23,005.3 0.8 22,700.5 0.6 24,804.4 0.7 Other Services 46,486.8 1.7 130,128.5 3.4 178,204.7 4.8 Rent/Transportation 40,845.0 1.5 50,600.0 1.3 83,447.0 2.3 Maintenance 17,119.1 0.6 21,452.3 0.6 117,882.5 3.2 Public Maintenance - .. 202,639.6 5.2 - .. Stationary, and other office necessities

59,958.0 2.2 63,613.6 1.6 76,314.6 2.1

Printing 28,770.0 1.0 32,421.7 0.8 28,596.0 0.8 Papers/Books 8,370.0 0.3 7,800.0 0.2 9,729.0 0.3 Fuel 9,695.0 0.4 16,394.0 0.4 21,888.5 0.6 Chemicals 34,990.0 1.3 2,797.5 0.1 44,328.5 1.2 Miscellaneous 144,809.0 5.3 86,475.0 2.2 137,311.0 3.7 Donation/Grant 132,392.0 4.8 963,000.0 24.9 413,000.0 11.2 Meter and Lab Equipment

- .. 121,378.8 3.1 204,318.3 5.6

B. Capital Cost 891,090.5 32.4 767,038.7 19.8 873,048.0 23.8 Furniture 29,959.0 1.1 - .. 12,345.3 0.3 Equipments 11,720.0 0.4 136,018.0 3.5 249,976.1 6.8 House construction and Maintenance

- .. 57,100.0 1.5 0.0 0.0

Public construction and Maintenance

849,411.5 30.9 573,920.7 14.8 610,726.7 16.6

Total Expenditure 2,748,033.8 100.0 3,866,591.9 100.0 3,675,841.0 100.0

Source: Dhulikhel Drinking Water Users' Committee

5.3. Water Tariff The water tariff rate is given in Table 7. The lifeline monthly rate for 10 cubic litres of water has recently been increased from NRs.50 to NRs.60. The household survey conducted in November 2006 found that half of the sample households are paying water bill ranging from NRs.51 to 100, and additional 16 percent are paying in between NRs.101 to NRs.150. It is interesting to note that another 16 percent of households are paying even less than NRs.50 per month. This indicates that there are households who are paying less than current lifeline rate. This could be due to two or

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more families having one connection and sharing it between them. However, this needs further investigation. In summary, there are only 19 percent of households who are paying more than NRs.200 monthly water bill (Figure 4). In the beginning the minimum rate was fixed on the basis of the cost per unit of water.

Table 7. Rate of Water Tariff

Unit Rate of Water Tariff in NRs

1990/91 2001/02 2006/07 Up to 10,000 Litres 35.0 50.0 60.0 11,000-25,000 Litres 6.0 6.5 26,000-50,000 Litres 9.0 10.0 51,000 Litres and over 20.0 22.0

Source: Dhulikhel Drinking Water Users' Committee

Figure 4. Distribution of Households by the Amount of Monthly Water Bill

15,7

50

15,7

5,7

12,9

0 20 40 60

less than 50

51 - 100

101 -150

151 - 200

above 200

Am

ount

(NR

s)

Percentage (%)

The Dhulikhel Drinking Water Supply Project has been operating for 16 years and since then the user committee has increased water tariff only twice. The first increase was done in 2001/02 and the second one in the current fiscal year 2006/07. Between the period of 16 years, the lifeline rate increased just by 41.7 percent, from NRs.35 in 1990/91 to NRs.60 in 2006/07 (Table 7). However, during the period the GDP deflator increased from 66.4 in 1990/91 to 178.5, implying that the prices has increased by 168.8 percent during the period. This implies that in real terms, there is decrease in the water tariff rate now compared to 1990/91. The right to increase water tariff lies with the general assembly of water users, which generally holds once a year. In order to increase the tariff, Water User Committee has to recommend general assembly to increase tariff mentioning clearly the reasons. It has been proposed recently to increase water tariff by 10 percent at an interval of two years in order to meet increasing operation and maintenance cost and generate sufficient fund for replacement of fixed assets at the end of its useful life. The proposition of the user committee was passed by the General Assembly. The 16-member management and technical unit under the users' committee (as mentioned above) are responsible for the collection of revenue. It has a separate Account Section headed by an accountant and supported by deputy accountant.

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5.4. Financial incentives and penalty system for promoting prompt payment Water tariff is progressive. It ranges from NRs.6 to NRs.22 per cubic meter. A timely paying consumer receives a rebate of NRs.10. Again, the ultra poor people, who cannot afford connection charge for private tap connection, are provided free water from public tap. According to the current provision, a household is responsible to pay water tariff within 60 days from the first day of the month. Those who pay within 45 days can get NRs.10 as rebate/discount. Household failing to pay within this period has to pay fine which ranges from five percent to 48 percent (Table 8). It is interesting to note that the rate of fine is fixed at the regressive rate, initially at the rate of five percent per week then later at the rate of two percent of the water bill per week. If the bill is not paid within 144 days, the management of users' committee can disconnect the water tap of the defaulter any time giving notice or without doing so. After disconnection the costumer can connect the tap paying all dues including fine as per the rule of the user committee.

Table 8. Fine for the delayed payment

Period Rebate/Fine Within 45 days Rebate NRs.10 46 – 60 days Full amount of water bill

From 61 to 116 days Additional 5 percent fine on total water bill every week (i.e. 5% to 40%)

From 117 to 144 days Additional 2 percent fine on water bill every week (i.e. 42% to 48%)

Source: Dhulikhel Drinking Water Users' Committee

The committee has not faced much problem in the collection of tariff and other non-tariff resources from the consumers except from few who have been living outside community for long time. But there are some delays from the government and non-government institutions, which consume a large amount of water. Now the problem of late payment is being minimised as the user committee started to make public the defaulters which have not paid the water bill for the last consecutive months by announcing or publishing their names in the public media, and tap is disconnected whose outstanding bill is continued since last one year. The situation is now improved and the outstanding bill excluding fine has declined from NRs.936,231 in 2005/06 to NRs.710,765 in 2006/07.

5.5. Financial Transparency The Water User Committee has deposited earnings from the system in different banks. It makes all payments (small or large) through bank cheques. It does not operate petty cash system; as a result it has been facing some problems. The auditor during audit also suggested for making a provision of petty cash system. Water User Committee accepts cash or cheque for its receipts. The committee has billing system to collect revenue of any amount. The committee does not deposit collected revenue daily. Thus, the auditor has suggested for depositing revenue on

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the same day. But the office staff said that they have to close their collection counter at 2 pm to follow such a system, whereas water consumers demand for opening the payment counter during whole office hour. At the end of every fiscal year, the committee performs audit from a registered auditor, and the audit report is published, disseminated and distributed to the members of general assembly in the annual general assembly meeting each year. There was not any forgery on financial malpractices as mentioned in the auditor’s report of recent year. Moreover, expenditure was made as per the planned or allocated budget in different heads. The entire financial ledger is kept as per the double accounting system. The user committee has subsidiary ledger. According to the comment made by the auditor the amount of main register and subsidiary register tally each other. However, the audit report suggested forming a Project Rehabilitation Fund by depositing certain amount from its annual saving for the sustainability of the water supply system. The users' committee meeting reviews on financial aspects every month and decides expenses for next month. No amount is spent without the decision of the user committee. Households were asked whether they have access to information including financial information from the WUC. In response, 75 percent said that they have access to information, however 23 percent said that they do not care (Figure 5). This further corroborates the financial transparency as a rule of the WUC. Moreover, water users have access to any relevant information including financial information. The copy of minutes of each user committee meeting is posted at notice board of the committee to inform consumers. Similarly, annual audit report submitted from authorized auditor is distributed to all water users in published form during assembly meeting.

Figure 5. Households reporting about access to the information at WUC

Yes73%

No1%

Don't Care23%

Missing 3%

6. SUSTAINABILITY OF THE SYSTEM The Dhulikhel Water Supply System is regarded as a sustainable system as it is constantly operating since the last 16 years. Moreover, started from a fund of NRs.0.3 million in the beginning, the WUC has now as high as NRs.4.4 million fund. However, water tariff has increased by two percent per annum during the 16-year period, which is less than annual rate of inflation, implying that water tariff, in fact, decreased in real sense. In spite of this, the system is technically and financially sustainable.

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The main reason why the system is technically sustainable is that it was built using German technology and materials. Moreover, the system was carefully taken care of by the technical and management unit. Financially, the water user committee is self-sustained. Annually its bank balance is growing and interest from the bank is accumulating and has become one of the major sources of revenue for meeting of operation and maintenance cost. The main reason for growing fund is the financial transparency and little misuse of revenue collected from water tariff. However, in view of the wider definition of sustainability, it can be said that the system is not much sustainable as it could not expand much during 16 years despite there was a high demand for water. The main reason is that the committee was not able to construct another water supply system from its own resources. Service delivery of the drinking water system is prompt and most of the consumers are happy with the services. A study by WELINK Consultants (2006) found that per capita water consumption is 65 lpd. Of the total water consumption more than two-third is consumed by public and less than one third by the institutions. There was 24-hour supply up to March 2006, however, because of the increased number of connections and growing demand for water the supply hour was reduced to eight hours since April 2006. Quality of water in the new system is very good. Water quality examined during February and March 2003 found that the water supplied by the system is safe, as per the WHO standard (see Annex 1). This is also corroborated by the fact that as high as 97 percent of 70 sample households reported that the quality of water is good, and 70 percent said that they are fully satisfied with the quality of water. However, only 43 percent reported that they are very much satisfied by the amount of water supplied. Almost all of the households said that they are satisfied with the management of water system, and a quarter of households held that there is room for improvement in the system. According to the members of water users' committee the quality of water of the old system or of the public tap is not as good as of the new system or of private tap as the water from old source is treated frequently but not filtrated. But the poor people are happy because they are getting sufficient water at free of cost within five minutes. They, however, complained that some of the private tap owners also come at public tap to take bath, wash clothes and utensils because it is free. In the old system one reservoir with the capacity of 100,000 litres is under construction and the committee is also planning to install a filtration plant to distribute quality water to the users of the old system, which is now distributed only with chlorination. To make the system sustainable and cover whole municipal area, the committee is now looking for another source at Sishakhani in Kushadevi VDC, which is 14 km away from the existing reservoir of the new system. At the same time the committee is looking for donor to implement the project timely and effectively. After the completion of new system, hygiene and health of the people improved gradually. Now the people of Dhulikhel suffer less from water borne diseases

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compared to before. Similarly, sanitation situation of the municipality has also been improved much with the active support of municipality office.

7. CONCLUSION Based on the preceding analysis, the following are strong points of the Dhulikhel water Supply System:

• High level of performance • Full recovery of O and M cost • High collection rate of water tariff • 24-hour service for a long time • Low connection fee • Small unaccounted for water • Constant operation of the system

The above strengths are mainly due to the effective management by the Water User Committee. However, there are some weak points of the system, which are low service coverage and reduced supply of water. Among the different developmental activities initiated by local people with financial and technical support of different agencies, Dhulikhel Drinking Water Supply Project is an exemplary masterpiece at national level.

8. LESSONS LEARNED AND SUGGESTIONS Following are the lessons learned from this case study: Partnership between different stakeholders including users, municipality, DWSS and GTZ was key to the successful implementation of the project. Involvement of the beneficiary communities from the very beginning of the project to the completion stage, and provision of capacity building measures to enable the committee of local users, have sustained the project for more than 15 years without any major repair. Collaboration between different partners is successful when every partner has interest, and when there is clear division of the role and responsibilities of each partner and to which the partner feel committed. The introduction of a policy of supporting such project with initial financial support for the first three years in a declining proportion attracted the water users committee to come forward and take over the operation and management function of the system.

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The success of the user group approach depends on the leadership of the group. The case of Dhulikhel suggests that even a single leader can motivate the community to undertake development works. Although it is not mandatory, if the leader of the groups is also the leader of a local organization, it helps muster community participation and support. Despite a general belief that the Government’s obligation is to provide water free of charges, the WUC is able to persuade users to pay for the services because users have a belief that their contribution is not misused. Drinking water system operated by the users committee is financially more sustainable than the government operated system. Despite the fact that water tariff is low, the Dhulikhel water supply system is financially sustainable. This is mainly because of financial transparency, accountability of the user committee to the water users and higher collection rate. If Users Committee is not given full mandate for increasing tariff rate then it is difficult to increase tariff from the general assembly of all water users, which are too large in a municipality to come to a conclusion. Sustainable service delivery depends on the decentralisation of authority, and a water system is more sustainable when producers and users are the same people. Public awareness and community participation are critical aspects of any development intervention. As the level of awareness increases among local community, their willingness to contribute for water and sanitation also intensifies. Announcement of the names of the defaulters in the media has been proved to be an effective system to collect arrears. Despite the existing incentive and penalty system to ensure prompt payment, some public and private institutions were not paying regularly the water tariff. As a solution, the users committee decided to publish the details of the defaulters in the media, which increased the collection rate.

Table 9. Some suggestions

SUGGESTIONS

• Provision of petty cash system for paying small sums of money • Improvement of water quality in old system with the introduction of a filtration system • System should be expanded to provide piped water to the non-served wards of the

municipality. This requires increasing tariff rate of the new system and also pricing water from the public taps though at a lower rate.

• Creation of Project Rehabilitation Fund in order to generate fund for further improvements of the system

Table 10. Problems and Solutions

PROBLEMS FACED Strategies to solve the

problem Extent to which the problem

was solved LESSONS LEARNED

FINANCIAL

Delay in water tariff payment from some government and non-government institutions, which consume a large amount of water.

The users committee has designed an incentive and a penalty system to promote prompt payment. Users committee has recently started to publish the names of the defaulters in the media.

Collection rate has improved with the introduction of the announcement measure.

Designing an effective incentive and penalty system is a key issue to ensure the financial sustainability of the system.

INSTITUTIONAL

The main source of water of the system is located in the neighboring VDC, which asked for the compensation for such use. The people of the source VDC are asking for further support.

An agreement was signed between people of the VDC and the users committee before implementation of the project. Further dialogue among the involved parties is required in order to reach an agreement.

This conflict is still a pressing issue

When a source of water is not under the jurisdiction of the users committee it is important to obtain the authorisation of the concerned stakeholder in order to avoid future protests.

SUSTAINABILITY

Many households of the municipality are demanding connection to the new system. However, the system lacks the capacity to provide water to all households of municipality.

Reduction of the amount of water supplied to current users. Users committee is searching donors to expand the existing system. Creation of a Project Rehabilitation Fund where part of the revenue is deposited as annual saving in order to generate fund for further improvements of the system.

Extension of the system has not been performed yet.

Fund for large-scale operation and maintenance of the system needs to be generated to guarantee sustainability and expansion of the system.

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Table 11. SWOT matrix

SOCIAL INSTITUTIONAL FINANCIAL TECHNOLOGICAL ENVIRONMENTAL

Strengths

Local community is actively involved in the management of the water supply system.

Dhulikhel WUC is a fully autonomous body. The users committee has been managing the system effectively for more than 15 years. Municipality and WSSDO provided assistance during implementation phase.

Dhulikhel Drinking Water System is operating with surplus. DWSS financially supported the users committee in a declining proportion during the first years of operation of the system. Effective incentive and penalty system to ensure punctual payment.

Good quality of water in the new system because of the construction of a filtration plant. Use of German technology and materials.

Lower incidence of diseases and improved health of the population. Improvement of environmental sanitation and hygiene of the community.

Weaknesses Low castes are mistreated due to deep-rooted cultural practices.

Poor and Public tap owners are not included in the decision making process.

Delay in water payment from some government and non-government institutions. Inability of Dhulikhel WUC to expand the system. No provision of petty cash system, and daily deposit of collected revenue.

Water of the old system is not filtered. Water production capacity of the system is limited.

Pollution of downstream environment due to disposal of faeces in the open drain.

Opportunities Inclusion of disadvantaged groups in the users committee.

Higher interaction of the users committee with local bodies such as municipality and WSSDO.

Provision of petty cash system. Deposit of collected revenue daily. Creation of Project Rehabilitation Fund.

Extension of the system to other wards of municipality.

Construction of a wastewater water treatment plant.

Threats

Neighbouring VDC where the source of water is located wants to control the water source.

Tariff has been increased less than inflation rate.

Decrease of water flow at source of the new system.

Still few households practice open defecation.

REFERENCES CBS (2005), Poverty Trends in Nepal (1995-96 and 2003-04), Central Bureau of Statistics, Kathmandu, Nepal. CBS (2001), Population Census 2001, Central Bureau of Statistics, Kathmandu, Nepal. CBS, The World Bank, DFID and ADB (2006), Resilience Amidst Conflict: An Assessment of Poverty in Nepal, 1995-96 and 2003-05, Central Bureau of Statistics, National Planning Commission, Government of Nepal, Kathmandu, 2006. MOF (2006), Economic Survey, Fiscal Year 2005/06, Ministry of Finance, Government of Nepal, Kathmandu, July 2006. NPC (2002), The Tenth Plan (2002 – 07), National Planning Commission, His Majesty’s Government of Nepal, Kathmandu, 2002. NPC and UNCT (2005), Nepal Millennium Development Goals: Progress Report 2005, National Planning Commission/United Nations Country Team of Nepal, Kathmandu, Nepal. Tamaki, Keiichi (2003), Connecting the Poor for Free, September 2003. WELink (2006), Detailed Survey, Design and Cost Estimate for Augmentation, Extension and Improvement of Dhulikhel Water Supply Project, Main Report, Submitted to Dhulikhel Water Users’ Committee, Kavre, Nepal, WELink Consultants (P) Ltd., Kathmandu, Nepal, Kathmandu, February 2006. WELink (2003), Review of Existing Situation and Formulation of Future Strategies, Final Report, Vol I: Main Report, Submitted to Dhulikhel Water Supply Users’ Committee, Kavre, Nepal, WELink Consultants (P) Ltd., Kathmandu, Nepal, Kathmandu, September 2003.

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ANNEX

Water Quality of Dhulikhel Water Supply System in 2003

Parameters Source Before filtration

After filtration

Tap at WUC

Office

WHO limit for drinking

water Date of Examination Feb. 13 March 27 March 27 March 27 - Temperature 14 C 21 C 21 C 21 C pH 7.83 7.74 7.52 7.81 6.5-8.5 Total dissolved Solids (mg/lit)

130 119 115 119 1000

Turbidity(NTU) 0.6 2.3 0.2 0.1 5 Iron (mg/lit) 0.031 0.0101 0.108 0.065 0.3 Ammonia (mg/lit) 0.052 0.102 0.014 0.029 1.5 Total hardness as calcium carbonate (CaCo3) (mg/lit)

11 110 98 108 500

Chloride (mg/lit) 2.0 0.5 0.2 1.5 250 Total Alkalinity as CaCo3 (mg/lit)

31.89 137.92 120.6 120.6 -

Calcium (mg/lit) 112 100 94 98 - Total standard solids (mg/lit)

20 340 158 74 1000

Coliform (CFU/100) 17 13 2 9 0

Source: Review of Existing Situation and Formulation of Future Strategy, Final Report Vol. I, WELINK Consultants (P) Ltd., 2003, Kathmandu.

List of Key Informants 1. Mr. Bel Prasad Shrestha, Former Mayor of Dhulikhel Municipality and first

chairman of the Dhulikhel Drinking Water Users' Committee. 2. Krishna Bhusan Khoju, Vice-chairman of Dhulikhel Drinking Water Users'

Committee. 3. Yog Laxmi Shrestha, Female member, Dhulikhel Drinking Water Users' Committee

and also head master of a school. 4. Buddha Ram Benju, Former Ward Chairman, Ward No. 3. 5. Indra Lal Chochchhe Shrestha, Former Ward Chairman, Ward No. 4. 6. Rameshwor Parajuli, Manager, Dhulikhel Drinking Water Users' Committee.