ISLAMABAD: The World Bank has asked the Punjab government to freeze its current budgetary support to the Water and Sanitation Agencies (Wasas) and link future grants to them with improvement in their performance.

A performance grants fund with an initial endowment of Rs10 million could be set up, later to be augmented by donor funds as well as municipal bonds and bank financing, according to a policy paper.

The paper has been submitted to the provincial government and during the fiscal year 2016-17 it is expected to amend the Provincial Finance Commission formula.

The Punjab government had requested the World Bank to formulate a draft policy on “performance grants” for Punjab Wasas – of Lahore, Faisalabad, Gujranwala, Rawalpindi and Multan – for effective utilisation of funds.

According to the policy paper, a programme for performance-based grants, over and above all current transfers, for Wasas was agreed with the government.

The finance commission formula is skewed towards population and lack of infrastructure, and does not account for performance or incentivised performance. Budgetary support for Wasas is an avoidable burden on the resources and the provincial government diverts substantial funding from other essential social sectors to fund Wasas.

Consequently, Wasas are a burden on the Punjab government because they draw substantial funding for their development and operating shortfalls, the paper points out.

Between 2010 and 2013, revenue receipts of the five Wasas were Rs42,548m of which Rs21,100m, or 49.5 per cent, came from the Punjab government as an operational subsidy. Wasas generated only Rs13,000m, or 31pc of the total.

This financial fact sheet shows that Wasas in Punjab are nowhere close to becoming self-sustaining, according to the paper.

The financial gap shows the vulnerability of Wasas to provide adequate services to the fast-growing urban areas of Punjab. Financial woes of Wasas are compounded by the fact that significant financial inflows are lost each year because of poor collection efficiency and inefficient management of fiscal flows.

The diagnostic work confirmed that Wasas were highly dependent on the provincial government for development work and operational expenses. Their poor performance regarding billing and collection of huge arrears, in some cases for the past 20 years, was reflected in the ledgers, and a substantial portion of revenue was lost due to high non-revenue water.

Estimates suggest that the five Wasas are losing 359m cubic metres of water per year on account of non-revenue water which is roughly $31m per year, including electricity cost of pumping water that is not resulting in revenue.

If only 60pc of this water is saved, through plugging leaks, it will be enough to provide over 660,000 new connections serving over 4.5m people in Lahore, Faisalabad, Gujranwala, Rawalpindi and Multan. The additional revenue potential from new connections is over $21m per year.

The policy paper emphasised the conversion of Wasas from ‘Net Drain to Gain’ institutions through a range of short- and medium- to long-term reform strategies. The policy paper’s objective is to create self-sustaining Wasas which are no longer a burden on the government budget so that budgetary resources can be released for other functions of government.

The policy paper targets the achievement of operational sustainability in three to five years and total independence from the budget in five to seven years.

Published in Dawn, October 7th, 2015

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