Clean up sanitation
- Miguel Fernández
- Jun 12
- 4 min read
Water and sewage services need to be and can be self-sustainable, not least to avoid overloading the health sector, since they are preventive medicine.
The tariff must cover the costs of investment, operation, maintenance, training, expansion, management, time and the risk inherent to any activity.
Sanitation is a natural monopoly and a market with low price elasticity. “Consumers” cannot change their daily water needs very much in a sustainable way.
As a monopoly, the permanent presence of the State, regulating and supervising, is considered an axiom. However, the provision of the service by the State itself, both over time and in many locations, has proven to be inefficient and insufficient to achieve even reasonable levels of service, far from achieving the much-needed and desired universalization of sanitation services. This failure is certainly due to who, in these cases, supervises the State?
This article aims to recall the history of the current tariff structure, which is based on progressive tariffs, a kind of “increasing steps” for internal cross-subsidies. This model has been systematically and mysteriously assumed as the absolute format for charging in the sector.
The creation of this tariff model, which is in force here in Brazil, took place around 1973, during the Médici government, with Delfim Neto as minister, who decided to “contain” inflation by freezing the prices of “public services”, including sanitation services in Rio. At the time, Brazilian inflation was measured in the city of Rio, but was valid for the entire country.
The then CEDAG and ESAG (Guanabara Water and Sewage Company), both with large debts to the World Bank (WB) and the Inter-American Bank (IDB), originating from the Guandú system and the Interceptor and Oceanic Emissary, reacted to the situation by creating a “basic tariff”, frozen, as Brasília wanted, but adding “increasing steps” to financially rebalance the collection, generating a type of internal cross-subsidy.
At the time, to justify this, it was argued that it would be a form of income redistribution, since those who consumed more water were the richest. This fake news remains to this day. Censuses generally indicate that poorer households are more densely populated and tend to have more residents.
In other words, through economic repression, consumption would be reduced, leading the population to take fewer showers, go to the bathroom less often, drink less water, etc. It is even cruel because it is so unfair to the less favored! But it was a pleasant surprise for lenders.
In practice, this new tariff model made it difficult to see the increases and significantly increased revenue. As a result, banks began to receive their loans with ease and enthusiastically support this structure, spreading it around the world.
At first, the “steps” were more modest. Not today. The same cubic meter (m3) of water charged in Rio varies more than seven times, depending on the recipient! Since the m3 of sewage follows the m3 of water, the problem is sublimated. For example, in August 2023, a consumption of 30m3/month (4 people/household at 250 liters per inhabitant per day) results in a bill of ± R$540.00. For 6 people (45m3/month), it would be R$1,040.00. A 50% increase in consumption (from 4 to 6 people) represents almost a 100% increase in the bill and in the value of the same m3, in the same place, which does not seem reasonable to anyone. At SABESP, COPASA-MG, in all states and many countries, it is practically the same.
Today, rates are difficult to understand, manage and audit. Since there are no laws to be followed (neither in the legal nor in the scientific sense), each place ends up doing it the way it thinks is convenient. If it were to achieve “social justice” by charging for water and sewage (sanitation), it would be better to charge for an “installed demand”, incorporating real estate speculation into the payers, that is, empty land and houses (as long as there is piping available in front). Or take into account things that are currently ignored that would contribute to the economy of the system, such as transportation distance (proximity to the water source), etc.
It is time to say that these injustices create a hostile environment for operators/concessionaires (whether state-owned or private), creating situations that lead to unnecessary expenses that feed back into costs and demands for rate increases.
Social needs should not and cannot be ignored. It should be noted that there is a so-called “social tariff”, worth around R$50.00/month, as long as less than 15m3/month is used (this is what is implied by a confusing explanation available on the concessionaires’ websites), subsidized by normal rates.
To whom is the social tariff attributed? By whom? The author of this article believes that the subsidy for those who cannot pay should be treated with programs such as “water vouchers”, even if it is an internal subsidy or linked to another infrastructure.
He also believes that the transition from the current structure to a more rational one needs to be studied and implemented cautiously and gradually so as not to create financial imbalances or be at the mercy of sabotage by potential opposing interests.
Miguel Fernández y Fernández, Engineer and columnist,
4.909 toques
Rio de Janeiro, publicado no Jornal O Dia em 04 de outubro de 2023, pág 11.
publicado na revista Engenharia, edição 657 de out2023, págs 58,59 e 60
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