Developing a More Inclusive Water Tariff Policy in Uganda

While the water supply and sanitation sector in Uganda has undergone significant, systemic changes over the last decade, the 2009 Tariff Policy no longer spoke to the realities of delivering safe, financially sustainable, and socially equitable services. For this reason, Uganda’s Ministry of Water and Environment (MWE) decided to review existing water tariffs and develop a new tariff policy suitable for multiple models of managing networked and non-networked water service systems and sources.

The first step was to assess the 2009 Tariff Policy. The major observations were:

• Limited scope: The policy mostly covered small towns, rural growth centres, and sewered sanitation, with little attention on urban areas and non-sewered sanitation.
• Out of date: The policy’s strategy and targets aligned with outdated national and international goals (e.g., the Poverty Eradication Action Plan (PEAP), which ended in 2011, and the Millennium Development Goals, which ended in 2015).
• Inadequate subsidisation framework: The policy did not allow for cross-subsidisation between customer types.
• Unclear steps for implementation: Implementation activities, roles, and responsibilities were not clearly outlined or assigned.

Through further research and consultations, four key priorities emerged for a new tariff policy:

1. Structured and transparent subsidies: A policy should encourage clarity and transparency about how and why public finance is being leveraged to improve services.
2. Flexibility: A policy should outline common guiding principles for all providers while allowing them to develop tariff structures appropriate for their service delivery context.
3. Reinforce service provider contracts and business plans: A policy should guide how various instruments will work together to guide service planning and delivery.
4. Long-term cost recovery: Tariffs should be situated in a long-term strategy to improve cost-recovery rates.

The new tariff policy, developed by Athena Infonomics in partnership with WSS Services (U) Ltd., was accepted by MWE in 2023 and now:

• Covers all declared water and sewer authorities, water point sources, and all aspects of sewered sanitation and non-sewered sanitation.
• Establishes a uniform tariff structure across all systems and service areas.
• Promotes inclusivity through different tariffs for specific customer groups, including poor households who were previously only able to access lower-cost water through public standpipes, and allows for cross-subsidisation within a service area.
• Provides a more relevant and expanded concept of subsidies, including eligibility requirements for subsidies linked to performance improvement plans.
• Includes an implementation strategy that stipulates activities and assigns roles and responsibilities to MWE departments.

This last point is fundamental. One of the findings from this process was that many service authorities need to build up their own internal systems, assign roles and responsibilities, before they can design and implement a sophisticated, context-appropriate tariff structure. This is especially true in the case of Uganda’s six regional ‘Umbrella Authorities’ (UAs), which cover rural communities and small towns that the national water utility does not reach. As relatively new service authorities, the UAs need to build up their internal organisational capacities and processes if they are to serve geographically disparate and financially challenging customer bases without government support.

The new policy’s accompanying implementation strategy therefore includes several prerequisites if new tariff structures are to be successfully designed and applied. Efforts to professionalise the UAs are underway, including a World Bank-funded project where Athena Infonomics is supporting improved accounting/financial systems and ingraining sustainable operations and maintenance practices.

Positioning UAs and other stakeholders to respond to the new tariff policy will take time, but the revised policy and associated tariff-setting guidelines are a major turning point in the delivery of water sanitation services in Uganda, underlining MWE’s commitment to achieving universal access to safely managed water and sanitation through steady systems-building. The provisions in the new tariff policy are also well aligned with the principles of citywide inclusive sanitation. The International Water Association’s publication on “Lessons Learnt: Regulating for Citywide Inclusive Sanitation” particularly highlights cross-subsidisation from water to sanitation, and from affluent areas to less affluent areas, to make service provision affordable and feasible.

We invite you to continue the discussion around inclusive water and sanitation systems and regulations at the upcoming IWA Water and Development Congress in Kigali, Rwanda on 10-14 December 2023. Registration is open.

Cover image: courtesy of Nina R. via Flickr