Water tariffs do not reflect 'opaque subsidies'

The full cost of water should be reflected in water tariffs following a through analysis of the situation, a report proposing  a policy framework for Malta’s national water policy prepared by the Today Policy Institute states. 

The report authored by World Bank expert  Lee Roberts, Malta’s leading hydrologist and water treatment engineer Marco  Cremona, and former Royal Dutch Shell geologist Gordon Knox, entitled “Why Malta’s  National Water Plan Requires an Analytical Policy Framework” - argues that a  national water plan cannot deliver the required results without proper studies and an analysis of current policies.

It also critices the tendency by policy makers “to follow political imperatives” as was the case when the current government reduced water tariffs by 5%.

The report laments the lack of any studies to determine the true cost of water.

The only statistic available is one derived  from an EU study, according to which Maltese consumers pay EUR 1.39 for the first 33 m3 of consumed water that has a production cost of EUR 0.40.

But the production costs do not include the environmental cost of electricity generation, and the cost of resource depletion.  The report refers to the EU directive according to which there should be “full cost recovery” in water production and distribution.

Costs which should be included according to the report include the environmental cost of using fossil fuel electricity to produce RO water and the cost pumping groundwater “from overexploited aquifers”.

Since these costs are not accounted for current tariffs inevitably “include a subsidy that is both unknown and opaque”.

But while tariffs should reflect the true cost of water tariffs should reflect a “basic right to water, protect low income users, advantage low consumers, and penalise profligacy”, the report concludes.

Moreover at present, no differentiation in price is made based on how water is used.

“This may not matter in a country where water is abundant, but waterstressed countries are compelled to pay attention to the uses to which scarce water is put”.

The report also refers to the paradox; that of living in a country where its tap water  is heavily chlorinated to ensure it is fully safe for drinking, but as a consequence of which, there is a perception that few people drink it.

“What starts as first class water, created at significant economic and environmental cost, ends up being used as second class water. This is a major economic irrationality. It may be that this is inescapable, but no known effort has been made to analyse whether there are strategies to resolve this paradox”.

The report singles out the agricultural sector as the heaviest consumer of water resources and calls for a reliable analysis of the costs, earnings and competitiveness of Malta’s agricultural production which also take in to account the impact of agricultural on water resources.

The report calls on government to establish a justification for future investment  with the aim of making agriculture more cost-efficient.

The report laments the general lack of information insisting that there are only rough estimates of when, with current extraction rates, groundwater will become unusable for the public water supply without expensive polishing.

Nor is it known at which point the nitrate contamination will be irreversible at affordable cost.