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Resource allocation and finance

Governments can finance support programmes for sanitation services by the 3 Ts: Taxes, Tariffs and Transfers.

Published on: 07/08/2012

Taxes are resources raised by the central government and other government agencies. Tariffs are finances raised from users and transfers are funds (grants and loans) from external support agencies. An OECD publication advises a combination of efficiency gains, adjusted targets and taxes, transfers and repayable financing. Alternatives to public sector financing can be found on the WASH News Finance Blog and in a Thematic Overview Paper titled Sanitation Financing Models for the Urban Poor.

Modification to a full-cycle services approach means better investments upfront to develop a self-financing toilet market approach. A case study by WASHCost India in the state of Andhra Pradesh on real costs and current resources showed that currently the sanitation sector gets marginal allocation. Also, budget allocations are biased in favour of infrastructure to the neglect of demand management and governance issues. A paradigm shift is needed towards a self-reliant sanitation approach rather than tagging it with drinking water. For costing, the WASHCost reviewed various costing tools.

To match resources to demands, EAWAG and SANDEC have developed the Household-Centred Environmental Sanitation (HCES) approach. HCES is a method which starts an holistic planning process with household decisions on service needs and then moves outward from the household to the neighbourhood, town (or district) and upper levels of government. Thus, the link between community expression of needs and mobilization of resources to solve them is assured. HCES uses environmental sanitation as an entry point for the planning and provision of all basic environmental services and their financing. HCES components are depicted in the diagramme below.

 

The Household-Centred Environmental Sanitation Approach (Source: Eawag & Sandec: http://www.irc.nl/page/46167)

A comparative study of public finance in India, Thailand and Tanzania produced four lessons for improving the delivery of public finance for sanitation:

  1. Allocate public funding to support the underlying support structure for the sector;
  2. Strengthen service providers and invest in rationalising the sector;
  3. Target funds available for hardware more effectively;
  4. Adapt the strategy through time to reflect changes in the sector and the environment.

Background information and materials referred to in the article:

  • transfers are funds from external support agencies
  • an OECD publication advises a combination of efficiency gains
  • Thematic Overview Paper titled Sanitation Financing Models for the Urban Poor
  • A case study by WASHCost India in the state of Andhra Pradesh on real costs and current resources showed that currently the sanitation sector gets marginal allocation.
  • WASHCost reviewed various costing tools
  • EAWAG and SANDEC have developed the Household-Centred Environmental Sanitation (HCES) approach
  • comparative study of public finance for sanitation in India, Thailand and Tanzania

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