PAKISTAN: Karachi water and sewerage to be operated by private sector

19 September 1997
NEWS

The provincial government of Sind is expected to issue tender documents in October for a concession to operate Karachi Water & Sewerage Board (KWSB), project sources say. The government will invite private developers to take on all operations of the board, including tariff collection, under a concession agreement expected to last 20-25 years. The board provides water and sewerage services to about 700,000 households.

Bid documents are being prepared in conjunction with France's Banque Paribas, acting as financial consultant, and the UK's

Sir William Halcrow & Partners, the technical consultant. Companies will initially be invited to apply to prequalify for the project before being sent the bidding documents. The project has an ambitious timetable which anticipates the concession starting in 1998.

The concessionaire will be obliged to meet performance targets, with the government specifying required improvements to services, especially in the first five years, the sources say. The actual amount of investment required in the first five years will not be specified, but in order to meet service commitments the concessionaire is expected to have to invest $350 million-500 million in the existing infrastructure.

Details on the legal framework and tariff mechanism are yet to be finalised. One possible option is that the government will indicate to bidders the maximum amount by which tariffs can be increased. Proposals for lower tariffs could be submitted as part of the bid for the concession. The government is also understood to be seeking a mechanism by which people on lower incomes can be charged lower tariffs.

One of the challenges faced by the new developer will be to introduce a culture of paying for water and sewerage services amongst individual customers, the sources say. KWSB does not currently have a good record for revenue collection. However, the sources attribute the reluctance of many to pay to the unreliability of the current service and say that willingness to pay will increase with improvements to service.

It is anticipated that an independent regulator will be established to monitor the concession. The regulator will ensure that obligations concerning improvements to service are met and that tariffs are kept within set levels.

The sources say that a number of international companies have already expressed interest in the project. Jerome Monod, chairman of France's Lyonnaise des Eaux, which already runs several such concessions, recently visited Pakistan, meeting President Farooq Leghari and Prime Minister Nawaz Sharif. The company is also understood to have held talks with potential local partners. Other international operators are also interested in the scheme, the sources say.

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