Water Supply and Sanitation in Saudi Arabia - Tariffs and Cost Recovery

Tariffs and Cost Recovery

Tariffs. Average water tariffs range from US$0.06 to US$0.10/m3, which are among the lowest in the world. The Kingdom has an increasing block tariff structure, but the majority of the consumers fall in the first two blocks where water charges are minimal. Customers with a water use of less than 100 cubic meter per month pay only 0.1 Riyals/m3 (US$0.03/m3). In other countries where increasing-block tariffs are used - such as in Jordan, Yemen or Tunisia - the lifeline consumption benefiting from a lower tariff level is typically set at 20 cubic meters per month or less. The tariff level and structure, combined with a low share of metering, provide little or no incentive to conserve water. Proposals for water tariff adjustments have been formulated, most recently through a study by a Saudi think tank, the Al-Aghar Group in partnership the Bushnak Academy, presented at the Saudi Water and Power Forum 2010. But so far no decision has been taken.

Prices for water sold by tanker trucks. A cubic meter of water supplied by a water tanker may cost as much as 6 Riyals (US$ 1.50), or about 20 times more than water supplied through the network. Citizens who are not connected to the piped network, who are often poor, pay up to 40 times more for water than connected households. The monthly water bill is about 1 Riyal (US$0.27), compared to an average mobile phone bill of 200 Riyals.

Sale of treated effluent. Through the Treated Sewage Effluent Initiative (TSEI) of the National Water Company, treated wastewater is sold to major water customers, such as industries or golf course operators, under long-term contracts of up to 25 years. This generates a revenue stream that allows to recover the costs of wastewater treatment under Build-Operate Transfer (BOT) projects financed by the private sector. As of 2011, it was estimated that NWC had signed TSE agreements worth more than 5 billion Saudi Riyals (USD 1.33 billion).

Cost recovery and subsidies. Few – if any – of the regional branches of MOWE have sufficient revenues to recover costs, despite the fact that they receive desalinated water for free. For example, the Riyadh branch – probably one of the best performing branches - had revenues of 370 million Riyals in 2004, but expenses of 570 million Riyals. On average, "the government is only recovering one or two percent of its costs, and the (subsidy) plans are benefiting the rich, not the poor", according to Adil Bushnak. There is no recovery of the cost of wastewater collection and treatment from those who generate the wastewater. According to a 2000 estimate by the World Bank, the government paid annual subsidies of US$3.2 billion, equivalent to 1.7% of GDP and 7% of oil revenues.