Water tariff hike: Wasa grabbing money?

Md Belal Hossain, a pensioner from Old Dhaka, was livid when he picked up the morning paper on Wednesday: he learnt that Wasa was pushing to hike the water tariff by up to 40 percent.

"Is this a joke that I will have to pay more for the smelly, yellow water that flows out of my tap?" a furious Hossain told The Daily Star yesterday.

Rarely does he get clear water, and even then, the water is not fit to put in the mouth: there is a foul smell.

"This is just not acceptable. On what basis is Wasa raising the price?" he said, while demanding better service quality.

Like Hossain, hundreds of thousands of city dwellers are indignantly questioning the rationale behind the tariff hike -- which would be Wasa's third in three years and 16th in 13 years -- despite failing to fulfil the pledge of providing safe drinking water to the vast majority of the capital's two crore residents.

And when one combs through the annual reports, Wasa's bid to hike the tariff -- by 38.8 percent to Tk 21 per unit (1,000 litres) for residential use and by 31 percent to Tk 55 per unit -- seems like money-grabbing.

For instance, in fiscal 2020-21, the Dhaka Water Supply and Sewerage Authority (Wasa) logged in a profit of Tk 49.6 crore, up 7 percent year-on-year, according to its audited financial report.

In fiscal 2016-17, it was Tk 22.6 crore, meaning the state-owned organisation's profit has more than doubled in five years.

"I don't see any logic behind the price hike of water as it is making profits over the last several years and has huge retained earnings," said Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue.

Retained earnings are the portion of a company's cumulative profit that is held or retained and saved for future use, particularly for investment purposes. At the end of fiscal 2020-21, Dhaka Wasa's retained earnings stood at a staggering Tk 892 crore.

"Wasa could very well have dipped into its retained earnings instead of going for a tariff hike when the inflation is already on the up," he said.

In December last year, inflation stood at 6.05 percent, the highest in 14 months, according to the Bangladesh Bureau of Statistics.

"Now is not the time to increase the water price -- I don't know how the management can think of such a step that will only heighten the fixed income and the lower middle-class's woes," said Ghulam Rahman, president of the Consumers Association of Bangladesh.

Taqsem A Khan, managing director of Dhaka Wasa, remains defiant that a tariff hike is the need of the hour. Wasa's production cost is higher than the tariff, with the government making up the difference with subsidy.

"We are counting the subsidy as an income. You are not considering the capital expenditure or investment but just the operating cost," he told The Daily Star on Saturday.

Dhaka Wasa has a huge loan but the government is not taking the repayment considering it as a subsidy, he said.

"If we pay the correct repayment instalment and count the depreciation fully, then the image that we are a profitable company will collapse."

When told that the other state-run entities are showing the depreciation in their balance sheets, Khan said: "Those entities that you talked about have no way to earning and no management."

Wasa is implementing some projects, whose costs are not included in the financial report, said a board member on condition of anonymity.

Its ongoing projects cost about Tk 9,362 crore, according to the audit report.

Since those projects are not complete yet and are not operational, the interest rate and depreciation costs are not counted in the balance sheet.

When the interest, depreciation and other costs are added, such profit will not be seen in the financial statement, he said.

The direct subsidy is not included in the financial report save for those on the drainage project, which has a government grant of Tk 10 crore for drainage maintenance.

When the loan is included in the financial statement, the cost will rise and Wasa will sink into loss and then the question of subsidy will arise, he said.

In response to the proposal for the tariff hike, the board instructed the management to bring the specific estimated cost that will rise in the coming months for the interest and depreciation of the ongoing projects such that an informed decision can be made.

"The general people should know how much the cost has risen -- we do not want the tariff hike to look like showing elephants to the blind," he added.

Wasa is simply overstating its profit if it is not counting depreciation on investment expenditure or interest on debt, said a commissioner of the Bangladesh Securities and Exchange Commission (BSEC), who is also a financial analyst.

Seeing the financial report, the commissioner said the Wasa top boss's comments do not match with its financial report because the projects are yet to ready for use so their depreciation and interest cost do not count.

On the other hand, it is not using any subsidy except Tk 10 crore, the BSEC commissioner said.

"So, it is profitable now but once the ongoing projects are complete, it may incur a loss," he added.

AK Enamul Haque, an urban economist, however, has a win-win situation for both parties.

Though its production cost is high, Wasa is counting profit because people are paying for more water than they use.

This is because of the use of water pumps to pull water from the WASA supply line. The pumps keep the water metre ticking as normal even when the flow of water is faint.

While WASA has reduced the system loss markedly, the bill is still high for city dwellers, according to Haque, the dean of the faculty of business and economics at the East West University.

In 2010, the system loss was about 40 percent. Now, it is down to 5 percent, the annual report shows.

"If Dhaka Wasa raise the tariffs and at the same time, it can restrict the overbilling, then people will not be impacted. So, my point is the service provider should ensure the pressurised WASA pipeline to reduce the excess billing," he added.