Water is considered a strategic sector in most developing countries and supplies have traditionally been controlled by state monopolies. This has long been the case in Sri Lanka, but in recent years the traditional organisational structure and mode of service delivery have come under increasing pressure to change and become more consumer-oriented, more business-like, and less dependent on state subsidies. A University of Loughborough and University of Birmingham research team recently examined developments in the Sri Lanka's urban water supply sector and what these experiences imply in general for government's role in water delivery.

As in most developing countries, urban water supply in Sri Lanka is run and managed by a state monopoly - the National Water Supply and Drainage Board (NWSDB). Past efforts at reform were frustrated by overlaps in responsibility, inconsistency in policy frameworks and flaws in strategies for implementing reforms. Several different State agencies were involved in the sector but coordination between them was lacking. In the past few years a new co-ordinating body and new mechanisms have been set in place to streamline decision-making processes. Organisational restructuring and improved tariff management, underpinned by government insistence on financial viability, have led to significantly improved performance. Returns on fixed assets improved from minus 6.9 percent in 1989 to 13.0 percent in 1995, and ratio of recurrent costs to total revenue (operating ratio) fell from a dismal figure of 127.9 percent to 63.3 percent during the same period. In relation to Sri Lanka's specific conditions and problems, the r

• government has a part to play in ironing out disparities between urban and rural areas in access to portable water; cross-subsidies have been used in favour of rural communities in order to help bridge the gap
• there is some tension between donor pressures to bring in the private sector and remove subsidies, especially for urban areas, and government wish to maintain ownership and control
• there is apparent tension between water as a 'merit good' in which government has a social responsibility to provide for rural and small township communities, and water as an economic good demanding commercial tariffs.

More generally, the Loughborough and Birmingham researchers offer the following policy suggestions:

• Change of ownership is not the key issue; what is important is for government to understand its ownership role and grant operational autonomy to professional managers.
• Performance can be improved by adopting some new public management practices, including contracting-out to the private sector, in order to maximise operational efficiency.
• There is need to shift from reactive, technically-oriented administration to proactive managerial leadership roles
• Designing and managing a tariff system that discriminates between rich urban areas (who can afford commercial rates) and poor rural and small township communities (who cannot) is a key challenge for government and managers
• The task of government is to create an enabling environment, including the right regulations and policy frameworks, adequate funding, and de-politicisation of appointments.

Source(s):
Sri Lanka: Urban Water Supply. Role of Government in Adjusting Economies, Paper #17. Development Administration Group, University of Birmingham, R. Franceys (1997)

Funded by: ESCOR/DFID, UK (1994-98)

id21 Research Highlight: 1998-Apr-11

Further Information:
R. A. Nickson (Sector Manager)
School of Public Policy
University of Birmingham
Birmingham
B15 2TT
UK

Tel: +44 (0) 121 414 4963
Fax: +44 (0) 121 414 7164
Contact the contributor: R.A.Nickson@bham.ac.uk

School of Public Policy, University of Birmingham, UK

R. Franceys
Water Engineering and Development Centre (WEDC)
University of Loughborough
Loughborough
Leics
LE11 3TU
UK

Water, Engineering and Development Centre (WEDC), University of Loughborough, UK