Water subsidies cost the country LE40 million a day, a burden it is no longer able to bear, President Abdel-Fattah Al-Sisi recently told the Egyptian people while inaugurating a number of development projects. His words were part of a larger speech outlining some of the challenges the state faces in providing for the people, and they underlined the increasing trend for the government to reform its finances by gradually cutting subsidies on public services. “The state cannot continue this way. It is not that it does not want to. It simply cannot,” Al-Sisi said. Egypt's budget deficit stood at 10.8 per cent of GDP in 2014-2015, and the government is targeting to bring it down to 9.5 per cent in the current fiscal year. A month or so ago a new water tariff structure was put in place in a bid to reduce state spending on water. The new prices for consumers are LE0.30 for consumption up to 10 cubic metres per day, an increase of LE0.07; LE0.70 for 20 cubic metres, up from LE0.60; LE1.05 for consumption up to 40 cubic metres, up from LE1; and LE1.55 for consumption exceeding 40 cubic metres, up from LE1.35. In addition to the increases, water bills will also now be collected on a monthly basis rather than every two or three months. Water prices were last increased in July 2015 when they saw a 100 per cent increase. But even then the tariffs for the lowest tranche (consumption of up to 10 cubic metres per day) had not increased in 40 years, said Ahmed Moawad, a board member of the Holding Company for Water and Wastewater. The government acknowledged the need not to harm low-income families by the new prices, Moawad said, which was why the increase was only of LE0.07 for those on limited incomes. The highest tranche (consumption of more than 40 cubic metres) used to be charged LE0.45 but now will pay LE1.55. Consumers of 40 cubic metres and above mostly include villa owners who may be using water for their gardens. “It is only fair that those who consume more pay more,” Moawad said. He explained that a cubic metre of water costs LE1.5 on average, which means that for most of the tranches the government does not recover its production costs. “We do not seek to make a profit, just to cover costs,” he stressed. Costs have been on the rise, said Nadia Abdou, former head of the Alexandria Water Company (AWC) and current deputy to the Beheira governor. Abdou has experience implementing price modifications that goes back to 2006. The prices of inputs and the chemicals that go into water processing have increased, she said, in addition to the rising cost of the electricity used to operate the plants. She also stressed that those whose consumption is low will not be affected by the tariff increases. Around 80 per cent of the water consumed in the country is by individuals with higher incomes, by virtue of the fact that they may own the facilities that enable them to do so, such as multiple bathrooms and modern washing machines, she said. There is also the additional cost of pumping water to different districts. The further away a district is from a water plant, the costlier it is to deliver the water because it means using more pumps and more electricity to operate them. In the years following the 25 January Revolution in 2011, there was a lot of illegal construction that led to the theft of water, Abdou said, adding that pipes had also been stolen. “We should have started adjusting the pricing structure years ago,” Abdou said. “The prices must increase so that the companies do not go bankrupt.” The government pays an annual LE1.75 billion bill to cover the cost of delivering drinking water, Mamdouh Raslan of the Holding Company for Water and Wastewater said following the recent tariff increases. Not only are revenues not covering costs, but the previous pricing structure had created a culture of waste, Abdou pointed out. There has been a history of inefficient water consumption in the country, despite campaigns to increase awareness. “We need to increase production by one million cubic metres every year to cover the increase in population and the needs of industry,” said Abdou. It will cost LE1 billion to create the grid to accommodate the extra demand and to transport the necessary water, she added. Current production capacity is 25 million cubic metres. Not only should there be work on adjusting pricing, but new technologies must be adopted to rationalise use, stressed Abdou. She said the government should look at what developed countries that do not lack financial resources or suffer water scarcity are doing to rationalise water usage. The new pricing system could also help in the rationalisation of water consumption at a time when Egypt's share of Nile water is at risk in the light of the construction of the Grand Ethiopian Renaissance Dam.
