The Value and Price of Water

Perception of "Water" and the Value of Water

The importance and value of water can be explained and talked about in many ways, but the very short and concise verse "We created every living thing from water" (Anbiya/30) shows very clearly and strikingly how important and indispensable water is in the lives of us creatures.

Basic Principles for Pricing Water

There is hardly a moment when we do not use water in our daily lives. Aside from the use of water for hand and face washing and other human needs, water is essential in the production of the clothes we wear, in the production of the phone you are holding in your hand, in the production of the books around us. In fact, for every 30 questions we ask artificial intelligence, which has recently become an integral part of our work, the AI consumes a plastic bottle of water. Keeping efficiency at a high level in the use of such an important commodity for our lives, it is important to set the price of water at a level that reflects the value of water. The basic national and international principles that should be taken into consideration in the pricing of water can be summarized as follows:

1. Full Cost Recovery: Water pricing should aim to recover the costs of providing, maintaining and delivering water infrastructure and services. This includes costs related to infrastructure investment, operation, maintenance and environmental protection. Full cost recovery encourages more efficient use of water resources and ensures the financial sustainability of water systems.
2. Economic Efficiency: Water pricing should reflect the scarcity and economic value of water. It should incentivize users to allocate water resources for their most efficient use. Prices that reflect the true value of water help prevent overuse and waste.
3. Equity and Affordability: While aiming to recover the full cost, water pricing should also consider the affordability of water services for all segments of society, especially disadvantaged or low-income populations. Social equity concerns may lead to the implementation of tiered pricing structures or targeted subsidies.
4. Demand Management: Water pricing can influence consumer behavior and encourage efficient water use. By charging higher prices for excessive use, water pricing can encourage water conservation and discourage wasteful practices.
5. Allocation Efficiency: Water pricing should take into account the different needs and uses of water, such as agricultural, industrial and domestic uses. Pricing should allocate water among various users and sectors in a way that reflects their relative importance to the economy and society.
6. Environmental Considerations: Water pricing should take into account the environmental impact of water use. Pricing mechanisms can incentivize the protection of ecosystems and water quality by incorporating environmental externalities into the cost of water.
7. Transparency and Accountability: Water pricing should be transparent and easily understood by users. Clear pricing structures help users make informed decisions about their water use and promote accountability in water management.
8. Flexibility and Adaptability: Water pricing structures should be adaptable to changing conditions, such as changes in water availability, population growth and technological advances. Flexibility enables pricing mechanisms to respond to evolving needs and challenges.
9. Long-Term Planning: Water pricing should be part of a broader water management strategy that considers long-term sustainability, resilience to climate change and integrated water resources management.

KOSKI (Konya Water and Sewerage Administration General Directorate) takes a balanced approach in setting tap water prices, taking into account national and international principles. However, in order for the price of water to reflect its value, all stakeholders need to address this issue with a holistic perspective. While it is not possible to fully recover the cost, prices are set slightly lower than they should be by prioritizing the principle of equity and affordability. However, even in setting prices lower, long-term planning and economic efficiency principles are taken into account, and an optimal price level is targeted to ensure allocation efficiency and, most importantly, that water is not wasted.

Water Prices in Konya

The table below shows the prices of water supplied to households in Konya center excluding VAT (Value Added Tax) and ECT (Environmental Cleaning Tax) and the prices of another province as of 01.08.2023.

In order to create the invoice, 1% VAT for drinking water, 10% VAT for wastewater and 1.50 TL ECT per m3 will be added to the information in the table. For a better understanding of the prices, let's create an example assuming that a residential subscriber in both cities consumes 25 m3 of water.

While a subscriber with 25 m3 water consumption pays a bill of 486 TL in Konya, a subscriber with the same amount of water consumption in another province receives a bill 128% higher and pays a bill of 1,109 TL. In addition, water and sewerage administrations do not receive any share of the ECT collected on behalf of district municipalities.

KOSKI ranks 18th among the 30 metropolitan water utilities and offers drinking water services at a price (14.82 TL) that is lower (1.74 TL) than the average (16.56 TL) (For detailed graph see https://public.flourish.studio/visualisation/14102130/). The m3 price of the most expensive water is 28.81 TL, while the cheapest water price is around 7.63 TL. The margin between these two is 21.18 TL, which is quite high.

As of August 1st, 2023, the m3 price of water and wastewater in Konya is 14.82 TL excluding VAT and ECT. Water utilities update their drinking water service prices on a monthly basis according to the D-PPI (domestic producer price index) or CPI (consumer price index) or the average of the two, and in some periods, by giving a diluted increase. In accordance with the decision taken at the General Assembly in November 2022, KOSKI updates its prices every 3 months in January, April, July and October at the rate of CPI.

Financial Outlook of KOSKI

KOSKI, whose main service purpose is to provide drinking water to households and to ensure the removal of wastewater, is a public institution under the leadership of the Mayor of Konya Metropolitan Municipality and it has a separate law and an organization as in 30 other metropolitan municipalities. As can be followed from the definition, the main source of income of water utilities is the revenues from the water and wastewater services they provide. Wastewater revenues are also referred to as environmental and welfare revenues in the literature.

As of July 31st, 2023, 39 of every 100 liras of KOSKI's revenues in 2023 consist of revenues from water services and 17 of them consist of revenues from wastewater services. Thus, more than half of its revenue was generated from these two services. In the same period, 13% share was allocated to the construction of drinking water facilities and 8% to the construction of sewerage facilities. Purchases of goods and services and electricity expenditures for these services amounted to 10% and 17%, respectively. When these four items are added together, it corresponds to approximately half of the budget. In other words, the water bill and wastewater fee paid by each subscriber actually returns to that subscriber and Konya as investment, drinking water plant infrastructure and sewage plant infrastructure.

The price of tap water provided by KOSKI is approximately 1.5 per thousand of the price of bottled water. In order to use our diminishing underground and surface water resources more sparingly and efficiently, necessary measures should be taken today. There are scenarios that in the not too distant future, people will use bottled water even for their daily personal needs. Every drop saved today is a drop provided for future generations.

Conclusion and Evaluation

As mentioned in the basic principles of water pricing, it is considered essential to continue to set optimal prices for the human right to use, especially for 15 m3. On the other hand, we should set higher prices for the 2nd tier to ensure the long-term sustainability of infrastructure investments in Konya; to use our water more efficiently and to raise awareness in society about our diminishing water resources. Therefore we can set a fair price to reflect the value of water.