Getting the Assumptions Right: Private Sector Participation Transaction Design and the Poor in Southwest Sri Lanka (Water Supply & Sanitation Sector Board Discussion Paper Series No.7, October 2006)

In this paper, we will investigate how a set of basic assumptions on service coverage, service levels, tariffs, and subsidies in the proposed transactions in Southwest Sri Lanka held up against consumer preferences. If the assumptions underlying the transaction design are flawed, the distribution of benefits between the different stakeholders will be affected and transactions can run into problems. We then propose, in a case where the basic assumptions underlying the PSP transaction design could have been adjusted to especially ensure that the poor will benefit from a PSP transaction.
       
Section 2 of this paper provides the background information and describes the main features of the survey data. Section 3 discusses a set of features that were used in the initial transaction design. Section 4 shows the impact of the different household preferences on these transaction features, and what this means in term of redesigning these features to ensure that the transaction would be more pro-poor. Conclusions and policy recommendations follow in section 5 of the paper.

Table of Contents:

Foreword

1.    Introduction

2.    Survey Results
Socioeconomic Characteristics
Water and Sanitation Characteristics

3.    Features of the PSP Transactions
Universal Service Obligation
Service Performance Specifications
Tariff and Subsidy Policy
Tariff Structure
Connection Charges

4.    Results from the Household Survey
Universal Service Obligation
Service Levels and Standards
Tariffs, Subsidies and Connection Fees
Household Perceptions
Conclusions

References

Annex 1. The Sri Lanka Transaction Design