Water shortage in Metro is beyond El Niño

A depleted Angat Dam (photo by Raffy Lerma)

The water shortage in Metro Manila has been conveniently blamed by the private water concessionaires and authorities on everything else but themselves. They blamed it on El Niño for drying up the Angat Dam. They blamed it on “Basyang” for not pouring enough rains on Norzagaray, Bulacan to replenish the dam’s water (read news report here).

But how much of the current shortage can be blamed on natural phenomenon and how much should be attributed to policy errors like water privatization? True, the prolonged dry spell depleted water to precarious levels not only in Angat but in several major dams around the country. The impact on domestic water supply in Metro Manila, however, could have been tolerable or at least not as bad as it is now if not for structural issues related to the privatization of the Metropolitan Waterworks and Sewerage System (MWSS) almost 13 years ago.

All-time low

According to the latest report, Angat Dam’s water, which supplies 97 percent of the domestic water needs of some 14 million people in Metro Manila and parts of Cavite and Rizal, has already dropped to an alarming 157.59 meters as of Sunday (July 18). This is an all-time low, with the previous record pegged at 158.15 meters recorded during the 1998 El Niño episode. The critical level of Angat Dam is 180 meters.

One of the private companies that took over the water distribution function of MWSS, Maynilad Water Services Inc., has already resorted to rationing water to some areas in its concession area. (Maynilad serves the West Zone of the old MWSS service area, while Manila Water Co. Inc. serves the East Zone)  Maynilad said that its water allocation has declined by 30 percent, causing supply disruptions since last week.

But many of these areas in Maynilad’s west zone have long been experiencing water supply problems even before the current El Niño. “Unfortunately, the reduction in our water allocation has forced us to ration water in elevated areas, in areas with a lot of water loss usually due to illegal connections, and in areas that need further service upgrade,” a Maynilad official said, describing the areas currently experiencing water supply disruption.

A failed policy

Among the many promises made by the private water concessionaires and hyped by the then Ramos administration was upgrading the decrepit water system infrastructure. Such upgrade intends to substantially reduce non-revenue water (NRW, or water lost due to leaks and pilferage) and help achieve universal and 24/7 water supply for an increasing number of households. In their original concession agreement with MWSS, the private water firms promised to provide universal access by 2001.

But until today, less than 60 percent of 790,000 households in Maynilad’s service area have 24-hour water service while only 74 percent receive water at 7-pound per square inch (PSI) or stronger pressure (read here). More than half (53 percent) of water allocated to Maynilad continues to get wasted because of leaks and pilferage (read here). Meanwhile, Manila Water, claims 99 percent water supply coverage in its service area but will not say how big the portion is with individual and direct household connection and those serviced by private water suppliers or “middlemen”. These areas served by a third party private contractor are often poor communities and most vulnerable to water supply disruption.

There is no available data that break down NRW into leaks and pilferage. But the continued pervasiveness of illegal connections may be explained by skyrocketing water bills due to full-cost recovery under water privatization. Since MWSS was privatized, Maynilad’s basic charge has already soared by 449 percent and Manila Water, by 845 percent. Put that in a situation of worsening job scarcity, stagnant wages and income, and rapid increases in the overall cost of living and you will get the picture. (See Chart)

 

Reverse privatization

Maynilad and Manila Water must be held accountable for failing to provide, after more than a decade of privatization, reliable and universal access to water for the people – a situation that has just been aggravated today by the El Niño.

Certainly, there is a need to reverse water privatization, a neoliberal policy that has already been discredited worldwide. Public control must be asserted especially over water which is not a simple commodity or service that we can afford to leave in the hands of profit-seeking companies.

The Aquino administration can start this by suspending the sale of the Angat Dam itself, which has been auctioned to a Korean power company last April. The further privatization of water through the sale of Angat Dam will mean worse water shortages in the coming months and years, with or without an El Niño.

These issues must be included in the medium-term policy agenda of the new administration.

Stopgap measures

But in the meantime, as a stopgap measure, Malacañang, the private concessionaires, MWSS, National Water Resources Board (NWRB) and other concerned government agencies must come out with a detailed plan on how they will ensure that water for domestic use will be available. Due focus must be given to vulnerable communities as they tend to be displaced under a privatized water system by well-off customers and commercial establishments even during times of abundant water supply.

Authorities must also strictly monitor and regulate the wasteful use of water by golf courses, malls, hotels, private parks, car wash shops, and other commercial establishments. An 18-hole golf course, for instance, consumes an average of 2.3 million liters of water per day, according to the United Nations (UN), causing an enormous impact on water withdrawals, and competing with the basic water needs of as much as 115,000 people.

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Today is World Water(less) Day

"Water for the people now!"

Unknown to most Filipinos, today (March 22) is the international observance of the World Water Day. This initiative grew out of the 1992 United Nations Conference on Environment and Development (UNCED) better known as the Earth Summit held in Rio Janeiro, Brazil.

For this year, the theme is “Clean Water for a Healthy World”, with a campaign, said the UN, “to raise the profile of water quality at the political level so that water quality considerations are made alongside those of water quantity”.

According to the World Health Organization (WHO), water, together with sanitation and hygiene, have important impacts on both health and disease. In a 2008 report, the WHO noted grim facts on the health situation in relation to access to water, to wit:

  • 3.575 million people die each year from water-related disease
  • 43 percent of water-related deaths are due to diarrhea
  • 84 percent of water-related deaths are in children ages 0 – 14
  • 98 percent of water-related deaths occur in the developing world

Meanwhile, a more recent (2010) report by the WHO and the United Nations  Children’s Fund (Unicef) noted disparities between countries, regions, and urban and rural areas in terms of access to sanitation:

  • 2.6 billion people or 39 per cent of the world’s population live without access to improved sanitation. The vast majority live in Asia and sub-Saharan Africa.
  • In the developed regions almost the entire population (99 per cent) used improved facilities as compared to 52 per cent in developing regions.
  • At current rates of progress the world will miss the MDG sanitation target by almost 1 billion people, which claims to: “halve, by 2015 the proportion of people without sustainable access to safe drinking water and basic sanitation,” by 13 per cent. And the MDGs are not the end of the sanitation challenge. Even if the target is met some 1.7 billion people will still not have access to improved sanitation facilities.
  • Rural/urban disparities are particularly apparent in sub-Saharan Africa, and the Caribbean, Southern Asia and Oceania where improved sanitation coverage is highest among the urban population despite the vast majority living in rural areas.
  • 751 million people share their sanitation facilities with other households or only use public facilities.

Such appalling global reality is reflected in the Philippines where the poor have been increasingly deprived of access to water for basic domestic use due to neoliberal policies such as privatization of water services and resources. The situation continues to deteriorate today due to the El Niño that has further limited water supply available for the people, especially the poor.

According to the 2007 Annual Poverty Indicator Survey (APIS) of the National Statistics Office (NSO):

  • 17.1 percent of all families in the country do not have access to safe drinking water and are forced to get water from unsafe sources such as unprotected well (5.7 percent); developed spring (4.8 percent); undeveloped spring (1.9 percent); river, stream, pond, lake or dam (1.1 percent); rainwater (0.4 percent); tanker truck or peddler (2.3 percent); and other sources (0.8 percent).
  • Access to water is expectedly lower for poor families as the same NSO survey show that 30 percent of the poorest 30 percent of Filipino families do not have access to safe water supply.

The advocacy group Water for the People Network (WPN) intends to draw public attention to this situation of lack of access to water for basic domestic use and for people’s livelihood amid the El Niño and continuing privatization of the country’s water resources.

Tomorrow, March 23, the WPN will hold a roundtable discussion on Angat Dam’s privatization together with the Commission on Human Rights (CHR) and other stakeholders including farmers from Bulacan, consumers as well as water agencies including the Metropolitan Waterworks and Sewerage System (MWSS).

More on the Angat Dam privatization and the WPN’s roundtable later.

Overpriced oil inflates costs of El Niño, power crisis

Petron and other oil firms have been jacking up pump prices in recent weeks (Photo from http://www.petronmarketing.com)

Those who are ready to absolve government for the harmful effects of El Niño should think again. While El Niño is a natural phenomenon, its impact on the people and the economy could have been eased by right government policies. Sadly, the policies in place have exposed the country not only to the strongest blows from what experts describe as a “moderate” El Niño. These flawed policies have also exposed us to El Niño’s magnified impact.

Deregulated, privatized energy

Take the case of power and oil – strategic sectors that have been privatized and deregulated by government. As the water level in dams around the country fell, hydropower generation also declined. Consequently, more power is generated from plants running on expensive and overpriced oil. To make the situation worse, oil prices have been on an uptrend again in the past few weeks. Electricity bills, which are also artificially bloated, climbed as a result. Prices of other commodities and services are sure to follow.

Such predicament could have been capably addressed by a government that has the needed policy tools. But it threw away these tools when it allowed private corporations to take control of the entire energy sector. It tried to reclaim some of these tools through emergency powers but was met with understandable public skepticism. In the end, the reality that Congress could not be convened at this point in the election season forced government to give up the plan.

As an alternative, government now intends to lease modular generating sets that could produce an additional 160 megawatts (MW) of electricity for Mindanao. By itself, this plan is already costly with an initial tab of P5.5 billion aside from increasing power rates in Mindanao by P14 per kilowatt-hour (kWh). But it is made even costlier by overpriced oil that will be used in great amounts to feed the generating sets.

Amid the El Niño, energy companies, with their greed and abuses un-moderated, are having a heyday.

P8.12 per liter overpricing

In the coming months, households not only in Mindanao will have to pay for higher electricity bills. The reason is not only the limited supply of cheaper hydropower due to El Niño. As more power is generated by oil-fed power plants, consumers also become more exposed to the impact of frequent oil price hikes and overpriced petroleum.

Under Republic Act (RA) 8479 or the Oil Deregulation Law of 1998, oil companies are allowed to increase pump prices at whim. They are not even required to inform the public about their price changes, much less explain their price hikes. This policy has been abused to the hilt by the oil firms. The National Economic Development Authority (Neda) itself has once confirmed that oil firms are indeed overpricing their products.

As of January 2010, oil products in the country are still overpriced by an average of P8.12 per liter. This figure is based on the monthly difference between the ideal and actual changes in pump prices from January 2008 to January 2010. The ideal pump price adjustment is computed using the difference in the monthly averages of Dubai crude and foreign exchange (forex) rate during the said period. The actual price movement, meanwhile, is based on the Department of Energy’s (DOE) monitoring.

There is no consolidated data yet on actual pump price movement for February and March. But note that in February, there should have been an 83-centavo per liter rollback based on Dubai crude and forex monthly movements. The actual pump price of diesel, however, did not move during the said month while kerosene prices even jumped by 25 centavos a liter. In other words, the overpricing could be much higher (aside from the fact that even before imported oil reach our ports, they are already overpriced due to global monopoly control by the oil giants).

Daily overcharges of P7.44 M for Minda extra power

Meanwhile, government’s plan to lease modular generation sets to produce

Power generated by the Agus and other hydroelectric power plants in Mindanao has drastically fallen due to El Nino (photo from http://static.panoramio.com/)

an additional 160 MW of electricity in Mindanao will require millions of liters of petroleum. For purposes of comparison, let us look at the 1 MW Generac Diesel Power Module manufactured by Mitsubishi. This generator, running at 100 percent capacity, consumes 238.56 liters per hour of diesel; at 75 percent, 178.92 liters; and at 50 percent, 119.28 liters.

Using this as yardstick, and factoring in the P8.12 per liter in overpricing, we can estimate how much the people will needlessly spend for additional electricity in Mindanao. We shall use the 100 percent capacity level since the generating plants that will be leased need to run at full capacity to augment the power shortage in the region.

Per hour, the overpricing would be equivalent to P1,937.11. If a 1-MW generator runs for the entire day, the extra cost would be P46,490.57. If the entire 160 MW is generated in a day, the figure would be P7.44 million. For one month (30 days), the overpricing would be P223.15 million. If the 160-MW generators were commissioned for three months (April to June), taxpayers will unjustly shell out around P669.45 million on top of the real price of diesel and the cost of leasing the generating plants.

Unabated oil price hikes and overpricing also worsen the people’s burden due to El Niño in other ways. For instance, farmers who rely on irrigation pumps and fishers who use motorized bancas will have to pay more for gasoline. Note that due to El Niño, more farmers turn to irrigation pumps. Fishers also consume more gasoline as they spend more time fishing (warm temperature drives fish to deeper waters, fishers claim).

Overpriced power, too

Meanwhile, outstanding issues in the power sector continue to unjustly burden the people with or without an El Niño. Due to the ongoing implementation of RA 9136 or the Electric Power Industry Reform Act (Epira) of 2001, power rates remain exorbitant and continue to shoot up. Automatic adjustment in generation charges, for instance, allowed Meralco to again hike its rates for March by P1.38 per kWh. Just last year, Meralco jacked up its distribution rates by 41 centavos per kWh.

The Epira-created Wholesale Electricity Spot Market (WESM) also gave more opportunities for the new private power monopolies to manipulate electricity rates. In February this year, for example, power rates in the WESM spiked to as much as P68 per kWh, which Arroyo’s own economic adviser Albay Gov. Joey Salceda described as “unspeakable”. Apparently, power companies trading in the spot market withheld supply, a market abuse easily done by firms in control of both distribution and generation, jacking up prices in the process. Power sold in the Luzon grid is dispatched through the WESM, a mechanism that will also be set up in the Visayas soon.

These increases become more deplorable as power companies, like the oil firms, also overcharge the consumers. In its December 2009 report, for instance, the Commission on Audit (COA) said that Meralco’s illegal charges could reach more than P7 billion. And Meralco has not even com-

Activists call for the nationalization of the oil industry (photo from http://www.bayan.ph)

pletely refunded the P34.12 billion in overcharges that it illegally imposed on its almost 5 million customers in the past.

Nationalized energy

The energy sector is a lucrative industry but the billions of profits it makes come at the expense of the people and national development. Such greed and abuse become more deplorable during times of natural calamities such as the current El Niño when the people’s poverty and hunger intensify and the domestic economy is further undermined.

What we need is an oil and power industry that is not privatized and deregulated, and that is not controlled by the Cojuangcos, Aboitizes, Lopezes, Pangilinans and their American, European, and Japanese partners. What we need is an energy sector that is nationalized, state-owned, and effectively controlled by the Filipino people. Only then can we stop overpricing in petroleum and electricity, and better plan the energy needs of our people and economy.

Notes on sugar production, supply, and prices

Photo from The Philippine Star (Boy Santos)

Government’s move to import duty-free 150,000 metric tons (MT) of sugar to supposedly mitigate soaring local prices may cause more harm than good for end-consumers as it encourages further speculation in supply and prices in the domestic market.

The importation implies a situation of tight domestic supply and reliance on the world market where prices are skyrocketing. This provides more fertile ground for traders to exploit and further jack up local prices. However, what government does not mention is that while it is scrambling to import expensive sugar, it is also committed to export about 158,906 MT of sugar to the US this year under a quota system.

Thus the simple question is: Why will we need to import to stabilize local supply and prices and yet export sugar to the US instead of ensuring our own needs?

Historical sugar supply and demand in the Philippines clearly indicate that we do not face an actual deficit that could justify the price hikes. The only plausible explanation behind the sudden and steep hike in sugar prices is speculation and hoarding by traders who benefit most from high sugar prices.

Price increases

As of January 30, 2010, the prevailing retail price of refined sugar in Metro Manila is P54 per kilogram (kg) and brown (raw) sugar, P44, according to a price bulletin issued by the Bureau of Agricultural Statistics (BAS). For the whole January, the BAS has monitored five rounds of increase in sugar retail prices that hiked prices by a total of P8 per kg for refined and brown sugar.

The frequent and unusual price increases in sugar retail prices was observed to have started in the last week of November 2009. It has soared since then by P14 per kg for refined sugar and by P12 for brown sugar. Prior to that, the last monitored increase was in mid-October by P2 per kg. Before that, prices have remained steady for almost nine months (February to October). (See Table 1)

Table 1. Retail* price of sugar in Metro Manila, for the dates indicated (in P per kg)
Week monitored Refined sugar Brown (raw) sugar
February 7, 2009 36 30
October 15, 2009 38 30
November 21, 2009 40 32
November 24, 2009 42 34
December 8, 2009 44 34
December 22, 2009 45 34
January 5, 2010 46 36
January 9, 2010 48 38
January 12, 2010 50 40
January 19, 2010 52 44
January 30, 2010 54 44
* Monitored retail prices in Obrero Market, Guadalupe Market, Malabon Central Market, New Muntilupa Public Market, Susano Market, Pasay Public Market, Mutya ng Pasig Public Market, Quinta Public Market, Sangandaan Market and Trading Center, and Marikina Market Zone

As monitored and compiled by the Bureau of Agricultural Statistics (BAS)

Sugar Regulatory Administration (SRA) head Raphael Coscolluela said that retail prices are increasing due to increasing mill gate buying price, which in turn is supposedly based on world prices. Global prices are increasing, on the other hand, because of a shortage of 9-13 million tons in the world market. For the last two years, Coscolluela explained that sugar production worldwide, including in the Philippines, had gone down due to bad weather, low prices, and high cost of inputs.[1]

Data from the Food and Agriculture Organization (FAO) show that the annual sugar price index in 2009 rose to 257.3 from 181.6 in 2008 and 143 in 2007. It rose sharply in the latter part of last year, reaching 334 in December from a monthly price index of only 177.5 in January and 233.1 in June.

No justifiable reason

There is no justifiable reason for local sugar prices to increase due to increasing global prices. The Philippines is not highly dependent on imported sugar and in fact, is a net sugar exporter.

Available production and consumption (or withdrawals, which also include those for export) data on raw and refined sugar covering crop years 1987-88 to 2008-09, as compiled by the Philippine Sugar Millers Association (PSMA), show that in 22 of these years, deficit in supply and demand/withdrawals occurred seven times – in 1994-1995, and from crop years 1996-97 to 2001-02. But of these seven instances of “shortage”, five can be considered artificial.

Note that the country also continued to fulfill its export commitments to the US and other countries during these years of deficit. If exports to the US were deducted from the deficits, actual shortfall will only be in two crop years – 1998-99 and 1999-2000 – following a major and prolonged El Niño episode in 1997-98. (See Table 2)

Table 2. Summary of Philippine sugar (raw and refined) supply and demand balance, Crop years 1992-93 to 2009-10 (in MT)
Crop years Balance Exports Balance without US exports
Total US
1992-93 402,521 296,172 170,017 572,538
1993-94 53,010 303,525 143,186 196,196
1994-95 (137,519) 167,144 167,140 29,621
1995-96 17,523 256,101 256,102 273,625
1996-97 (126,840) 277,736 294,497 167,657
1997-98 (112,406) 222,304 222,304 109,898
1998-99 (191,669) 157,943 157,943 (33,726)
1999-00 (344,882) 101,999 101,999 (242,883)
2000-01 (86,856) 99,839 99,839 12,983
2001-02 (37,181) 84,283 84,283 47,102
2002-03 125,194 153,533 153,533 278,727
2003-04 315,385 213,053 213,053 528,438
2004-05 148,041 283,076 283,076 431,117
2005-06 209,617 238,446 238,446 448,063
2006-07 339,352 218,977 218,977 558,329
2007-08 474,846 172,672 172,672 647,518
2008-09 165,187 57,885 57,885 223,072
Source of basic data: Philippine Sugar Millers Association (PMSA)

Philippine sugar exports go to the US market under its Tariff Rate Quota (TRQ) system. This system sets the specified volume of raw cane sugar that the US will allow to enter its market at a relatively low tariff as part of its commitment under the World Trade Organization (WTO) Uruguay Round agreements.

For 2010, the US Trade Representative (USTR) is allocating 142,160 metric tons raw value (MTRV) or about 158,906 MT of raw cane sugar to the Philippines. It is the third biggest allocation out of 40 countries (accounting for 12.7 percent of the total) granted with quota, behind only the Dominican Republic and Brazil, under the US’s TRQ system.[2]

El Niño, biofuels

Official data, however, also show that in the last crop year (2008-09), raw and refined sugar production declined by 3.56 million MT or about 13 percent. Another year of lower production this year due to the expected El Niño could put the country in a similar situation in the 1998-2000-period, government officials and industry players said.

While production in 2008-09 did fall, the country still managed to post a surplus of about 165,187 MT of raw and refined sugar in that crop year. This surplus had already taken into account the country’s quota exports to the US of 57,885 MT in 2008-09. If we did not export to the US, the surplus would reach 223,072 MT. (See Table 2)

There is no official estimate yet on how big the impact of this year’s El Niño on the sugar industry will be. Large sugar players though are reporting production decline and anticipate further plunge. Victorias Milling, for instance, said that its production already fell by 18 percent last year and may again decline this year due to extreme weather events.[3]

Aside from El Niño, another source of pressure on local sugar production and supply is the competition from biofuels. The diversion of cane from sugar millers for the production of ethanol means less available sugar for the country’s food requirements. Republic Act (RA) 9367 or The Biofuels Act of 2006 mandated a 5-10 percent ethanol blend for gasoline products sold in the country.

Best safeguard

But at this point, everything is still speculative. And the best safeguard that we have against threat of lower production is not the importation of expensive sugar but an immediate halt to exportation, in particular to the US. This is justified by our food security interests. During the height of the global rice crisis in 2008, major rice exporters such as Thailand and India suspended exports. The SRA simply needs to fulfill its mandate of regulating sugar export to ensure domestic supply.

For the surging prices, government must impose a price ceiling and not simply a suggested retail price (SRP). Sugar, as a basic necessity, is among the products covered by RA 7581 or the Price Act of 1992. At present, the government’s SRP of P54 per kilo reflects the massive speculation in sugar prices and thus unreasonable. The sugar imports, at best, could only bring down prices to a still inflated P48 per kilo.[4]

A more rational retail price should be about only P42 or the prevailing price in Metro Manila in the last week of November, based on the assumption that the steep increases in prices since December are speculative and not justified by the supply-demand balance and changes in production costs. This must be accompanied by a serious crackdown not on small retail outlets but on the largest private sugar traders that hoard supply.

Another policy move in relation to supply should be the review of the biofuels program. RA 9367 itself provides for a review by the National Biofuel Board (NBB) of the supply of locally-sourced biofuel feedstock such as sugar cane and make necessary adjustments in the biofuel blend. Even before the recent surge in sugar prices, the local sugar industry could supply only about 79 percent of RA 9367’s minimum requirements (i.e. 5 percent ethanol blend).[5] Surging food prices, on top of land reform and environmental issues, must pressure policymakers to reconsider the country’s biofuels program and correct a policy that further undermines local food production.

Private traders, of course, want to take advantage of high global sugar prices and would rather export their commodity for larger profits. Or some commercial planters may want to sell their produce to ethanol plants that offer a bigger margin. Neoliberal thinking dictates that this must be allowed so that market forces can determine the best value of a commodity. But at the receiving end would be the ordinary people who will be forced to contend with high and increasing prices and at the same time the direct producers of sugar – the poor farm and factory workers – who continue to receive depressed wages amid soaring market prices.

Sources


[1] GMA News website, “Sugar prices may go up P54/kilo in February”, January 26, 2010, http://www.gmanews.tv/story/182452/sugar-prices-may-go-up-to-p54kilo-in-february

[2] US Trade Representative website, “USTR announces FY 2010 Tariff-Rate Quota allocations for raw cane sugar, refined and specialty sugar, and sugar-containing products”, http://www.ustr.gov/about-us/press-office/press-releases/2009/september/ustr-announces-fy-2010-tariff-rate-quota-allocat

[3] Manila Times website, “Domestic sugar output to plunge further”, January 28, 2010, http://www.manilatimes.net/index.php/top-stories/10471-domestic-sugar-output-to-plunge-further

[4] GMA News website, “Agri dept expects imports to bring down sugar prices to P48/kilo”, January 29, 2010, http://www.gmanews.tv/story/182730/agri-dept-expects-imports-to-bring-down-sugar-prices-to-p48kilo

[5] Arnold Padilla, “Pro-Arroyo landlords in Congress to reap profits from Biofuels Act”, IBON Features, published by Bulatlat.com, Vol. VII No. 3, February 18-24, 2007, http://www.bulatlat.com/news/7-3/7-3-biofuels.htm