Water Pricing for Sustainable and Inclusive Growth

The Awash River Basin in central-east Ethiopia is the most utilised and industrialised basin in the country with tremendous economic importance. In the Awash sub-basin with 1,2 million water-users, almost 60% of the water of the entire basin in consumed. While the pressure on the water system is increasing due to socio-economic growth, over 90% of the water is already used for irrigation, with large-scale upstream farms being the first to abstract from limited sources. Poorly regulated water resources and inefficient use lead to decreasing agro-potential for the area, while vulnerable smallholders and downstream users are the first to ‘dry up’.

A consortium of six partners is positioned to address the water management challenges in Awash sub-basin: two Ethiopian regulatory bodies, two private partners, a Dutch regulator partner and an non-governmental organisation (NGO). The main goal is to improve the management of water resources for more equitable and efficient water use.

The strategy for improved water resource management is to introduce a public revenue model for water pricing, stressing the economic value for water and triggering more efficient and equitable use. To do so the project strengthens the service provider (the regulator) on the one hand, and helps to develop (ecosystem)-services on the other hand to serve end-users and benefit the sub-basin environmentally in the long run.

The service provider is strengthened through achieving 

1. Installed instrumentation and monitoring system for informed decisionmaking;
2. Full user-registration and an implemented priority ladder for water allocation and licensing;
3. Improved open and transparent communication between regulator and water users;
4. An implemented billing & charging system. Paying water-users benefit from improved services through achieving:
   1. Strengthened water user associations empowering vulnerable smallholders;
   2. Inclusive stakeholder dialogue among big/small users up-/downstream on allocation and conservation services in the watershed;
   3. Watershed conservation and reduce-, reuse- and recycle- (3R-)measures leading to increase resilience;
   4. A scaled pilot on a water forecasting service to increase water-use efficiency.

After the 6-year project lifetime, an effective and professional regulator has a financially and institutionally sustainable water pricing regime running, based on equitable allocation and a transparent licensing practice. At least 90% of user charges are collected from 80% of the water volume allocated. Improved services are indirectly benefiting all 1.2 million people in the sub-basin, but in particular 190,000 people benefiting from a total of 407,000 ha watershed conservation and 3-R measures; 1,700 of them being vulnerable and (partially) downstream smallholders achieving more equitable water-access, at least 40% of them women. For 20,000 ha a water-use efficiency increase of 22% is achieved. The project delivers a proven public private partnership (PPP) model for introducing water pricing and improved water service provision, for uptake in other regions.