EDITORIAL - Divest the NWC

Published: Friday | November 30, 2012 Comments 0

The default response will be consumer outrage at the National Water Commission's (NWC) signal of its intention to request a rise in its tariffs.

Indeed, people are already being primed to that reaction by members of Parliament's Public Administration and Appropriations Committee. Mikael Phillips, a government member of the committee, for instance, argued that the water company's first priority should be to become more efficient.

Mr Phillips, on the face of it, has a point, especially when contrasted with the fact that 68 per cent of the NWC's water is not paid for. Or, put more starkly, that is nearly 130 million gallons of water a day, or more than 47 billion gallons a year.

But neither these figures nor Mr Phillips' observations, by themselves, tell a full or contextual story of the crisis facing the NWC and how it is to be solved.

Of the 47 billion gallons for which the NWC will not be paid, some is 'social water' - that is, water supplied to communities free of charge as part of the Government's social welfare policy. A significant portion is stolen. The larger amount, however, goes to waste. All of these contribute to the nearly J$3 billion that will be lost by the commission this fiscal year, its accumulated deficit of more than $17 billion, and despite previous write-offs, long-term debt topping $10 billion - and rising.

Indeed, there can be very few companies, in any sector - and none of which we are aware - that could be paid for less than one-third of its output and continue to survive, except, as in the case of the NWC, where it can count on taxpayers. And even then, given the Government's fiscal problem, the NWC merely limps along without fixing its fundamental problem, which would put it on a path to financial sustainability.

The water company's big issue is the old, corroded pipes, laid generations ago, through which it transports water, especially in its main urban markets. These, in addition to the new trunk systems required across the country, need to be excavated and relaid.

stop underpricing water

The NWC, however, does not have the money. Indeed, even new water-supply projects, largely financed by external agencies, are often delayed because of the slow delivery of domestic, counterpart funding.

These fiscal issues are exacerbated by government policy that underprices the commodity. The basic price at which the NWC sells water to domestic consumers, at J$0.27 per gallon, bears no relation to the real cost of production and delivery to consumers. Fear of political backlash has, up to now, prevented administrations from introducing a rational pricing policy, including differential charges, taking into account where water is being delivered and the real cost of getting it there.

There is a way around these perceived constraints. The Government must find the courage to explain its fiscal constraints, its inability to adequately finance the NWC and the fact that the long-term solution rests in divesting the water company.

It can't be beyond Jamaica's policymakers to fashion a divestment model for water that ensures the protection of consumers, including a cushion for the society's most vulnerable.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.

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