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An Approach for Meeting The Finance Challenge Towards The Sustainable Solution for Water Security In Growing Cities

Ganga Datta Nepal

Country Team Leader
Email: ganga.nepal@washfin.org/nepal_ganga@yahoo.com


DOI Link


Investment, Sustainable, Water Security, Infrastructure, Mitigation

Published on:



Vol. No. 5, 1, (2023)




To address the growing water crisis and achieve the Sustainable Development Goals (SDG) 2030, the proper water resources management with realistic planning and investment for water and sanitation is a must. In the developing countries like Nepal, government alone cannot deliver the required water services for the growing urban population, where private sector is less interested and reluctant to invest due to the higher risks and lower returns. The earlier practices of the Public Private Partnership (PPP) approach in water services sector have also provided the mixed results for the sustainable service delivery. Better understanding of the economic value and finanace for water resources are required to  achieve the set target of managing water supply services of scarce zone. Additionally, formulation of essential and realistic policies, operational strategies or plans for cost recovery and sustainable financing to increase services, particularly for the deprived and poor are equally important. Due to the lack of systematic knowledge, strategies for cost recovery are typically not comprehensive and can fulfil only few aspects of sustainability index. This leads to the degradation and low performance of water supply systems, resulting in failure to deliver the reliable services for the users. For a better living environment in cities, there are new and innovative ways to solve the problem of sustainable financing for water services such as blended finance, leveraging the services, involvement of private sector, promotion of commercial banks for the sustainable financing of infrastructure for water services. Regardless, the real challenge is how to overcome the barriers by increasing the investments and contributions for coping with the problems on water security in consideration with also climate change and natural disasters  like floods and droughts, which  needs proper mitigation measures and sustainable growth in line with SDG target.


Water supply and demand is increasing day by day as per the increasing population in the cities and the urban centres. Cities are being crowded and unhygienic to live in due to the lack of sufficient water supply facility and also due to lack of proper management system for wastewater and faecal sludge. Now the time has come to start an awareness in municipal management and equal involvement of public towards the treatment of solid and liquid waste.

There should be proper water resources management: realistic planning and investment for water and sanitation can only achieve the Sustainable Development Goals (SDG) 2030. Developing countries like Nepal government alone cannot deliver the required water services for the growing population of cities, still private sector is not interested and reluctant to invest due to the risks and low returns (Shah, 2016). An improved and reliable access to water supply is primordial for social and economic development of the country. It has direct links to public health and wellbeing of the community people. Access to drinking water is essential but not enough to achieve significant improvement of health situation for the urban population. Through these activities, the prevalence of water-borne diseases has been considerably reduced in the targeted population, with a recognized lasting effect. One of the main features is the collection of tariffs. Users’ will pay the tariffs to recover the costs of the water supply service to ensure sustainability of the system (Shah, 2016). To set the tariff, there isneed to agree upon by the consumer through a fully transparent procedure, independently for each community, which is then presented to the local committee for approval.

The cost and tariff include not only the running costs of the water supply system, like the electricity consumption for pumping, maintenance services, pay for the staffs/ technicians but also the depreciation for repayment through the collected funds saved and deposited at the bank. These remaining funds can then be used either to repay a loan contracted to build the initial water supply system, or to build extensions of the service areas and replacement of the heavy equipment. For the drinking water system, over the years, the money set aside is less important since the water system needs more maintenance. Different experiences from the urban, small towns and semi -urban areas after five years demonstrates that the maintenance expenses increase significantly over the period of time. Similarly, the cost of all investment is reflected in the tariff and is repaid over 5, 10 or 25 years, depending on the type of technology and equipment for their lifespan (Datta et.al, 2015).


The methodology required for the cost recovery business model for the sustainable financing to secure the water for the frequently populated cities and to improve the commercial viability and business planning for water supply operations to achieve full water supply coverage for the city are as follows:

i. Assessment of performance indicators on existing water supply services for the city
ii. Estimation of demand facility
iii. Identification of capacity and willingness to pay
iv. Financial and accounting analysis of existing water supply services
v. Business planning based on coverage gap and
vi. Estimation for capital investment projects towards full coverage

Results and Discussion

For the city-wide coverage on water supply, an assessment of performance indicators will be done. Then estimation of demand facility will be calculated. There is also investigation to find the capacity and willingness to pay from the consumer. It will be then coupled with the financial and accounting analysis of existing water supply services and forecast for the future. Then there will be gap analysis based on existing situation for the full coverage. The gap analysis will forward the estimation of capital investment projects for the full coverage

Consumer Perspective
For cost recovery business and continuity planning is effective for the requirements of consumer’s expectations, it should be a part of the water supply utility’s organizational culture. Every organization, including water supply utilities, should have a culture. Although culture is intangible and often taken for granted, it provides a core set of values and assumptions, and guides day‐to‐day activities of personnel in the workplace. The sustainability aspect of the water supply utilities and authorities at different level, is not an easy system to run. For the progress and delivery success need to be given, capacities need to be developed and trust should be built, which takes time and persuasion.

The cost recovery business model provides information to help consumer to make an initial assessment as capability to effectively utilize new funding and internal resources to accomplish the following goals to achieve;
– Assessment for need system structure; that will provide the demands of our growing service area.
– Enhance capacity of water utility in critical areas related to capital project monitoring and evaluation, asset management, NRW reduction and water quality laboratory establishment.
– Extension of services and attraction of consumer for house connections – on time service provisions for the consumer.
– Management of asset to ensure that operation and maintenance as per the need and to obtain the maximum span of life from investment in water system assets.
– Reduce Non-Revenue Water (NRW), by reducing leakage, replacing and under registering customer meters and eliminating illegal water to provide more water to meet the demand and increase revenues.
– Consumers’ grievances handling and satisfaction survey, for the better understanding of the customer concerns and development of plans to meet customer expectations.
Business plan Perspective
The goal of the cost recovery model business plan project is to accomplish the identified, structured and effective utility management planning and prioritization of the tools. The Business Plan includes information about service area, institutional and organizational structure, water supply assets, customer base, and tariffs. It also includes a summary of the most challenging threats and weaknesses that we plan to overcome through the business plan projects as follows:

– Details of each of the plan project goals including activities and cost estimates needed to accomplish each business plan project goal.
– It includes the details on how water utility proposes to finance the capital investment projects that make-up the first business plan project goal (Construct Urgently Needed Infrastructure) and other general improvements.
– The estimated cost, proposed financing plan and timeline to construct these capital projects and other general improvements.
– It includes a list of potential risks and mitigations measures.

*NRW: Non revenue water (NRW) is water that has been produced and is “lost” before it reaches the customer; for ex. pipe leakages.

Cost Recovery Model
The main features of water utility are the collection of tariffs per cubic meter off water provided. This tariff is agreed upon by the population through the fully transparent procedure, independently for each cluster of community, which is then presented to the local agencies general assembly to approve. Tariff includes not only the cost of energy to run the water supply system, operation and maintenance, village maintenance worker (VMW) but also amortization, through the funds saved and kept at the bank. These remaining funds can be used either to repay a contracted loan for the construction of initial stage of water supply system, or to build extensions of the distribution network and/or replacement of the other heavy equipments like treatment systems.

For a cost per capita, the initial investment cost remains affordable, as demonstrated by the amount of systems successfully is set and run. This model is advantageous to supply water from the shared tap-stands where all private households will be connected through the watermeters. It will perform better with multi-community cluster where several communities depend on a single source of water, be it underground water or surface water.

Affordable and Accepted Tariff
The tariff is elaborated with the help of of community clusters per cubic meters, the initial investment cost remains affordable, as demonstrated by the amount of systems successfully set up and run. It also works for multi-cluster systems where several clusters depend on a single source of water, be it underground water or surface water. Foremost, the initial phase is crucial and requires a strong commitment from the utility. For full coverage and ownership of the systems, the full engagement of and by the population is required to mobilize the resources for the water supply system, design and construction work and defining the tariff structure as agreed by them through their general assembly, transparent management and control from population, accountability of executive bodies on the technical and financial situation of the system.

Results contd.

Water security for the growing cities
Securing water supply facility directly associated with public healths, economic upliftment, clean and hygeineic environment, also supports the stability on political situation, and disaster risk reduction (DRR). Both the cases of less water and excess water are the factors of vulnerability. When the water is less, people will be insecured and it becomes a public health issue, where excess water means flooding and disaster prone. So, proper management of infrastructure to rely on is the key factor.

Proper water security means management and improvement of resources by minimizing and mitigating associated risks. Also, regular operation and maintenance of water supply and sanitation system will reduce its vulernabvility. Likewise, the drinking water system infrastructure combined with grey and green infrastructure system establishment including proper operation and maintenance of infrastructures will also ensure the water security to meet the demand of the growing cities.

**Gray water: water from domestic wastewater generated in households or office buildings from streams without fecal contamination
***Green water: Green water is the portion stored in soil and potentially available for uptake by plants

Following are the key considerations for implementing water security principles:
– Delivering on demand principle
– Establish cost recovery model
– Effective communications and adaptive management
– Accountability by mobilizing promised resources and fulfilling responsibilities – Comply with regulations.

Variety of mitigation measures, further improvement and enhancement of system and Non Reveune Water (NRW) principle can be used to improve the water security for the city population. There also should be policy implications for establishing the grey and green infrastructure system, regulatory framework to run it, instituational establishment and along with social and behavious change communications (BCC) measures.


Sustainable Development Goal (SDG) 6 reflects towards Clean Water and Sanitation (Shah 2016). It also focuses on water management and increasing water security for water supply sanitation and hygiene (WASH) sector. To cope with the problems on water security; cost recovery business model is one of the most sustainable solutions. This includes how to explore the new ‘waterscapes and source protection’. The cost recovery business model provides modality and information to help consumer by providing an initial assessment, to find the capability of effectively utilizing the new funding mechanism as well as to run the internal resources.


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2. DWSSM/ISSAU (2020): Business Plan making directives for water supply and sanitation consumers association.
3. Lambert, A., Brown, T., Takizawa, M., Weimer, D., (1999). A review of performance indicators for real losses from water supply systems. Journal of Water Supply; research and technology-AQUA, 48, 227-237.
4. Olmstead, S., Hanemann, W., Stavins, R., (2007). Water demand under alternative price structures, Journal of Enviromental Economics and Management 54, 181-198.
5. Shah, T. (2016). Increasing Water Security: The Key to Implementing the Sustainable Development Goals.
6. SVWSUO (2019): Business Plan Surkhet Valley Water Supply User’s Organization
7. The World Bank. (2015). World Development Report 2015: Mind, Society, and Behavior. US EPA. (2013). Getting in Step: Engaging Stakeholders in Your Watershed, 2nd ed.

Authors Information

Mr. Ganga Datta Nepal

Mr. Ganga Datta Nepal has more than 2 decades work experiences in the field of Water Supply Sanitation Hygiene (WASH), Climate change and Public health sector in multicultural environment both regular development and humanitarian context in national and international arena. The WASH program focused on improving public health: reduce mortality by providing safe and ample water supply and hygienic sanitation. Overall expertise on WASH sector: Project Cycle Management, Project Evaluation, Result Based Monitoring (RBM), Supervision, Capacity Development. Mr. Nepal have high competence in boarder programming with strong skills in project, staff, financial, logisticmanagement, monitoring, evaluation, business development, donor reporting, coordination, and sector representation. Mr. Nepal holds Post Graduate Degrees from Germany and Nepal, and PG Diploma from the Netherlands, including many other Development Planning Management, WASH, Climate Change and IT based trainings covering technical and managerial aspects. Dynamic personality and having positive attitude, problem solving and have good team dynamics.

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