The World Bank/WBI’s CBNRM Initiative

Case Received: February 7, 1998

Author: Serguey Belyaev

Tel/Fax: +7 3432 741280 / 748210

Email: ubcppi@dialup.mplik.ru

Country:  Russian Federation (RF)

Region:   Ural. Sverdlovsk oblast (constituent of the RF) - one of the most important and oldest industrial centers of the RF.

Natural resource:   Water

Relevant contextual factors:   economic, institutional

Author involving.    The case is essential part of "The Urals Regional Water Resources Management for the Ekaterinburg Water Supply System" Subcomponent of the Environment Management Project of the Russian Federation. The Project is being implemented with the support of a loan financed by the World Bank. Implementation period is 1996-1999. Author (S. Belyaev) is Subcomponent Program Manager.

Abstract.    In the report will be presented proposals on institutional economic improvements of water management sector of the Russian Federation Constituent (example of Sverdlovsk oblast), which are aimed at it's sustainable development under market economy conditions. Proposals are based on profound study of present-day conditions of water management sector of the oblast, of applicable Russian and international experience. Such proposals are not contrary to current Russian legislation. They are made in the form of a number of administrative and legislative documents at the level of the Russian Federation Constituent. In the report will be presented information on the process of implementation of improved sector management mechanisms, on problems arising out of this.

Ekaterinburg city (about 1.4 million inhabitants) is located in Sverdlovsk Oblast. It is one of the oldest industrial centers of the Urals Region. The water management system providing Ekaterinburg water supply uses three river basins, numerous reservoirs and inter-basin water transfer facilities. Because groundwater resources are very limited surface waters are the main source for Ekaterinburg water supply system. Transboundary Water Management is one of the major problems for Sverdlovsk oblast. On one hand, the Ekaterinburg water supply system is 20-50 per cent supplied with water abstracted within the territory of the neighboring Oblast of Chelyabinsk; on the other hand, large quantities of effluents are generated in the Sverdlovsk oblast and pollute neighboring downstream oblasts. The condition of these water sources, have been categorized in terms of contamination as "high" and "extremely high" in accordance with the hygienic/sanitary classification.

Domestic water consumption in the Ekaterinburg is about 350 liters per capita per day. Water losses in the Ekaterinburg water distribution system are estimated to be 30%, and 50-60% of the distribution system pipes are thought to be replaced (total length of the pipe system is about 1100 km). Quality of services related to drinking water supply is inadequate and characterized by intermittent water deliveries, periodical incompliances with drinking water standards for total iron, residual chlorine, chloroform, COD, phenols, and organoleptical and bacteriological indicators.

The primary reason of current critical situation in oblast water sector is that present institutional economic mechanisms of management of the sector do not satisfy requirements of existing ecological, economic and social situation. Namely:

• rights of ownership and disposal of water bodies is not neatly determined;
• functions of water resources management are excessively centralized at the federal level;
• system of payments for water use is not based on evaluation of really necessary expenses for rehabilitation and protection of water resources, does not stimulate efficient water use;
• municipal water supply and sewerage system does not provide required quality of services;
• competition in the sphere of water supply and sewerage services is absent;
• there are no mechanisms providing finance flows which are necessary for sustainable functioning of the sector and guaranteeing reimbursement of investments.

Public health officials believe that environmental conditions in the oblast and surrounding areas, which have greatly effected the quality of drinking water supplies, have been a primary factor in the reported higher than average incidence of disease and worsening morbidity rates.

The main task is to ground institutional economic and legal basis for sustainable development of water supply sector under market economy conditions.

At the present Ekaterinburg city and Oblast authorities have approved and launched a Framework Program whose objective is to establish institutional, economic, legal, regulatory, and technological background for efficient use of water resources and the sustainable development of the Ekaterinburg water supply and sewerage system. The Work Plan of the EMP Urals Subcomponent has been recognized to be an integral part of the Framework Program. It focuses on the assessment of the current condition of the water sources and watershed areas, facilities and installations of the Ekaterinburg water supply and sewerage system, and on the evaluation of the current economic, institutional, legal, and regulatory mechanisms of the water supply and waste water management sector operations, as well as on the formulation of recommendations on their improvement.

Both municipal and oblast authorities are interested in changes, for they are responsible to the population for quality of water supply services, for environment conditions. Water supply enterprises beware of changes but they understand it is necessary. Their fears are connected with probable changes of their monopolistic position, with necessity to make their activity more clear. Population is interested in the final result - safe environment and improvement of the quality of water supply services.

Initiative of preparation and carrying out of changes belongs to the Subcomponent implementation team. Ekaterinburg administration and Sverdlovsk oblast government took the responsibility for realisation of these changes, having included them into official plans and activity programs for 1998-2000.

The following main outcome documents were prepared in 1997 (and were preliminary approved by all stakeholders):

• Draft Concept of water management policy of the Sverdlovsk Oblast (major objectives, key principles, institutional and financial instruments for its implementation).
• Draft Oblast law «On regulation of water relationship in the Sverdlovsk Oblast area».
• Draft Agreement on delineation of rights between the Sverdlovsk Oblast Government and the RF Government in ownership, use and disposal of water bodies located within the Sverdlovsk Oblast area.
• Proposals on structure of water resources use payments.
• Approach to the formulation of Basin Agreements (between the Oblast and other constituents of the Russian Federation) to manage transboundary waters and water bodies including legal, economic and institutional mechanisms, and technical aspects such as operation maintenance and monitoring.
• The Charter of the Fund «Water Supply and Waste Water Management of Ekaterinburg».
• Agreement for transfer of the property (the major installations of the water supply and sewerage system) for the entrusted management to the operating company.
• The operating contract for the municipal water supply and sewerage system utilities.
• Approach to the definition of tariffs for water supply and sewerage services which provides phased transition to total self-financing of the Ekaterinburg water sector (including capital costs).
• Provisions for integrated audit of the operating company.

As a result of implementation of proposals formulated in these documents we expect:

• clear delineation between all involved parties of rights of ownership, disposal and of responsibility for condition of water bodies, hydro-engineering installations, installations of water supply and sewerage system;
• arrangement of financial flows providing sustainable functioning of water management sector and loan reimbursement;
• improvement of investment atmosphere, attracting of finances from international financial markets;
• elaboration and implementation of five years program of water management sector improvement;
• improvement of quality of drinking water supply services, resources-economy and reduction of unfavorable effect for water bodies, essential decrease of risk for population health.

In case of success the proposed scheme of water management sector functioning may be recommended for application first of all in other constituents of the Russian Federation. The experience may be useful also for former USSR republics and probably for other countries with transition economy.

Purposeful professional work on public opinion deserves special attention. Proposed changes will hardly avoid increase of tariffs for water supply and sewerage services. Such decision may have negative political consequences for authorities. So it is necessary to organize public opinion in such way that pressure upon authorities because of tariffs increase was less than pressure because of environment pollution and unsatisfactory quality of water supply services. At that it is necessary to provide maximum availability of information on one hand about water resources condition and drinking water quality and on the other hand about receipt and expense of finances at cost of population` payments, aimed to solution of water management problems.

In any case the changes must be based on profound social economic analysis, must be carried out step-by-step with purposeful assistance of the poorest layers of population.