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LESSONS:

Wuhan Wastewater Management

sector: Water and Other Urban Infrastructure and Services | country: China, People’s Republic of

Wastewater tariff. The required tariff was accurately estimated at appraisal and was made a loan covenant to assure the Wuhan Urban Drainage Development Company’s (WUDDC) financial autonomy. During project implementation, the tariff was adjusted but was still insufficient to achieve the goal set for the WUDDC. The delay in the tariff increase was not only due to lack of support from relevant government agencies, but mainly because of the Wuhan municipal government’s (WMG) concerns on social stabilities caused by inflation and overall prices increases in recent years. As the top concerns of the central and local governments, the governments in most cases subsidize wastewater treatment plants (WWTPs) from the government budget to ensure the operations of the WWTPs. The objective of a tariff increase has not yet been achieved to date, so there is a need to further strengthen policy dialogue on the tariff increases for the future achievement of full cost recovery for wastewater services.

Land acquisition and resettlement. Because of land use changes in updated urban development programs, the Luobuzui WWTP was relocated after the issuance of the land-use permit. Resettlement impacts were consequently different from those anticipated in the resettlement plans, and identification of a new WWTP site caused implementation delays and difficulties. The change mandated the adaptation of the associated wastewater collection system, which made resettlement more difficult. To ensure smooth project implementation, such changes should be anticipated during project preparation or recognized at an earlier stage of implementation.

Schedule for implementation and financing. The WMG should have increased the wastewater tariff to raise the required funding instead of requiring the WUDDC to borrow more from domestic banks. The WUDDC�s audited financial reports indicate that its short-term indebtedness is much higher than the typical for such an enterprise. The more timely reallocation of unused loan proceeds could have achieved full utilization of the loan proceeds including savings on interest during construction. The finance department of the WUDDC should have monitored and controlled the implementation schedule and financing plan to minimize commitment charges.

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