1. The Nepal Water Supply Corporation (NWSC) was originally responsible for planning, owning, operating
and regulating the water supply and sanitation system for the majority of urban centers in Nepal
including the Kathmandu Valley and some areas of outside urban centers as well. To separate the
functions of policy formulation, planning, operations and regulation, and for ensuring sustainable and
inclusive urban water supply and sanitation service delivery in Kathmandu Valley through improved O&M,
efficient management, cost effectiveness and pricing strategy, in 2006-07, the Government of Nepal (GoN)
passed a series of acts for urban water sector reform which include Water Supply Management Board Act,
Nepal (2006), Water Tariff Fixation Commission Act, Nepal (2006) and Nepal Water Supply Corporation Act
2nd Amendment (2007).
2. After enactments of these acts, the NWSC operations in the Kathmandu Valley were unbundled. The
ownership of the water supply and sewerage assets and the responsibility for developing and overseeing
service delivery policies, and providing licenses to service providers for the operation and management
of the Kathmandu Valley water supply and sanitation service system was transferred to the state-owned
Kathmandu Valley Water Supply Management Board (KVWSMB). KVWSMB or “Valley Board” is an autonomous
government body formed under the Water Supply Management Board Act (2006) and reports to the Ministry of
Water Supply (MoWS). The 11-member board of KVWSMB consist of representatives from GoN, Kathmandu
municipality, Lalitpur municipality, Bhaktapur municipality Madhyapur municipality, Kirtipur
municipality, three district development committees, and the Consumer Association and Federation of
Nepal Chamber of Commerce and Industries (FNCCI).
3. To operate the urban drinking water supply of the Kathmandu Valley based on commercial principles, in
2008 KVWSMB entrusted the operation and management of all water and wastewater services of the greater
Kathmandu Valley to Kathmandu Upatyaka Khanepani Limited (KUKL), a public company registered under the
Nepal Government’s Company Act 2063 and operating as a Public Private Partnership (PPP) modality, under
a 30 years License and Asset Lease Agreement. Once completed, KUKL will also take over the
infrastructure built under the Melamchi Water Supply Project and Kathmandu Valley Water Supply
Improvement Project. The KUKL service area is shown in Figure 1 below. The Government of Nepal (30%) and
Municipalities in the Valley (50%) are the major shareholders of KUKL, with the remaining shareholders
including private sector organisations (FNCCI - 3%, Lalitpur Chamber of Commerce and Industries – 1.5%,
Nepal Chamber of Commerce- 9%, Bhaktapur Chamber of Commerce and Industries -1.5%), and an employee
trust paid by the government (5%). It is governed by a nine-member Board of Directors, of which six are
nominated by shareholders (two from GoN, two from Kathmandu Metropolitan City, one from Lalitpur
Metropolitan City and one from private sector organisations) and remaining three are independent members.
4. The License and Asset Lease Agreement between KVWSMB and KUKL outlines the terms and conditions for
transferring the assets owned by KVWSMB to KUKL for the purpose of providing water supply and sanitation
services in the Kathmandu Valley, including existing water abstraction, transmission, treatment and
distribution infrastructure and the assets being constructed under the Melamchi Water Supply Project.
Among other activities, KUKL is obligated to provide services, undertake repair and maintenance work,
develop and maintain an asset inventory, and prepare a Capital Investment and Asset Management Plan
(CIAMP). The Asset Lease Agreement specifies that KUKL is responsible for constructing new assets in
accordance with the CIAMP with financing from KVWSMB. The agreement specifies that KUKL will pay lease
fees to KVWSMB based on gross revenues invoiced and valuation of service assets and as well as bulk
water charges after commissioning of Melamchi tunnel. The main section of the lease agreement doesn’t
elaborate on staffing or human resources issues barring secondment of NWSC staff to operator for an
initial period of 12 months.
5. An independent pricing regulator (Water Supply Tariff Fixation Commission - WSTFC) was also
established during the same period, to set and monitor tariffs and standards of water and wastewater
services in all of Nepal, collect data on financial and operational performance, and handle consumer
complaints. For the Kathmandu Valley, WSTFC and KUKL developed a customer charter, which stipulates the
roles and responsibilities of both the customer and the utility. It was envisaged that the presence of
WTFC, as in independent regulator, would reduce the extent of political interference in tariff setting
and allow water operators including KUKL to operate on commercial principles.
6. Nepal adopted a new constitution in 2015, which restructured the country into a federal republic and
divided the nation into seven provinces and devolved powers, responsibilities, and resources for water
supply and sanitation to local governments. While devolution is at the heart of the constitution, the
roles of each level of government remain undefined: Water supply is included in the Schedule 9 of the
constitution (list of concurrent powers of federal, state and local levels), Schedule 8 (list of local
level power), Schedule 7 (list of concurrent powers of federal and state) and Schedule 6 (list of State
level power). Similarly sanitation services was also included in multiple Schedules. Thus provision of
water supply and sanitation services is an overlapping mandate across the three levels of government.
7. The Kathmandu Valley is a bowl-shaped watershed of approximately 665 km2 with an estimated population
of 3.1 million. KUKL’s service area covers about 330 km2 of the total Valley area (45%), providing water
to roughly 71% of the population. Outside the KUKL service areas water supply is provided by community
led initiatives. Current water services in the Kathmandu Valley are grossly inadequate and unreliable
and duration of supply varies across the valley and some recent case studies suggest that an average
household receive 1.5 hours of water supply every five days from the public utility. Based on 2018 data,
the total KUKL average supply accounts for only 20-25% of demand, causing the majority of the population
to rely on tanker trucks, bottled water and both deep and shallow wells for their water supply.
8. Kathmandu Upatyaka Khanepani Limited (KUKL). Since its establishment KUKL has struggled to deliver
water supply and sanitation services in the Valley due to non-availability of adequate quantity of
potable water and a number of institutional challenges which are summarised below:
a. Limited availability of raw water in the Valley due to delays in commissioning the Melamchi Water
Supply Project. This also delayed commissioning of new water treatment plants, transmission system and
b. For current water supply services, KUKL mostly depends on an outdated and dilapidated water supply
transmission and distribution system which outlived its deign life, resulting high physical losses
ranging between 40%-60% of total production). The current production of drinking water in the Valley
from local sources varies from 139 MLD in wet season and 90 MLD in dry season. Considering the physical
losses maximum quantity reaching at customer end at any point of time is only 65MLD whereas current
demand is about 350 MLD.
c. As an organisation KUKL has not been able to evolved due to lack of vision, political interference,
weak leadership, limited financial resources, absence of skilled manpower, inefficient operation
processes, transfer of past operational liabilities of NWSC, poor data management including customer
database and absence of defined organisational development plan, guidelines and standard operating
practices/ manual for its operation. Moreover, trade unions with multiple political affiliations have
had a strong influence on all decision-making processes, which has curtailed the various attempts made
to strengthen organizational capacity.
9. The other two institutions, KVWSMB and WTFC, also face serious internal and external challenges
including organizational structures and staff capacities needed to function effectively and deliver
their mandates. Moreover, lack of synergy among the institutions also diminished their capacity to
collectively address the challenges of water scarcity.
10. The Melamchi Water Supply Project and Kathmandu Valley Water Supply Improvement Project are in
advance stages of implementation and it is anticipated that progressive commissioning of these schemes
will start from third quarter of 2020. The current organizational and staff capacity of KUKL pose a
significant challenge for seamless transition between the construction and O&M phases of both the
projects. There are serious apprehensions about the capacity of KUKL to take over those facilities and
operate and maintain the assets per standard procedures and ensure sustainable service delivery.
B. Objective and Purpose of the Assignment
The overall assignment has been structured into two phases. In Phase 1, the expert along with a pool of
four other experts: Institutional Development Specialist-Water Utility (International), Senior Utility
Finance Specialist (International), Water Utility Engineer (National) and Finance Specialist (National),
will support MoWS to:
(i) Carry out a rapid institutional assessment of KUKL, and KVWSMB based on the (i) review of available
reports, documents, legal aspects including devolution of powers, and (ii) stakeholders consultations;
(ii) Identify immediate actions needed to strengthen operational capacity of KUKL to take over the O&M
responsibilities post commissioning of schemes under Melamchi Water Supply Project and Kathmandu Valley
Water Supply Improvement Project and
(iii) Prepare TOR for carrying out a comprehensive institutional audit of all four agencies involved in
the WASH sector in the Kathmandu Valley covering legal, regulatory, operational, HR, management, board
functioning, technical etc and suggest options for institutional strengthening/ re-structuring or
complete business process reengineering, including challenges and opportunities.
During Phase 2, the expert will support ADB and GoN to oversee the deliverables of the agency to be
recruited to carry out an institutional audit and suggest options for institutional strengthening/ re-
structuring. The expert will also help ADB during the policy dialogue with GoN.
Scope of Work
A. Phase 1: The expert with other four experts as a team and with their respective expertise will carry
following tasks in given scope of work:
1. Rapid Assessment of existing situation:
• Review all previous studies, recommendations Business Plan including financial model of KUKL and
KVWSMB and collect secondary data including technical operation, HR, finance, management, and legal.
• Conduct selective stakeholder consultations.
• Prepare a summary matrix of key recommendations of past studies and the status of their implementation.
• Review the past and ongoing reform initiatives to strengthen the capacity of KUKL and KVWSMB, assess
their effectiveness, and identify lessons including what works and what doesn’t.
• Assess key technical issues affecting service delivery.
• Assess organizational structure with roles and responsibilities of key positions including CEO,
functioning of Boards, existing administrative arrangements and business process.
• Examine the IT infrastructure, equipment and logistics facilities available with KUKL and
effectiveness of their use and management by staff.
• Assess KUKL’s customer database, tariff structure across customer categories, revenue sources,
financial management and accounting practice.
• Undertake SWOT analysis of KUKL and KVWSMB to identify the strengths, gaps and weaknesses,
opportunities and challenges and the related risks and threats considering the schemes under Melamchi
Water Supply Project, Kathmandu Valley Water Supply Improvement Project, and Kathmandu Valley Wastewater
Management Project will be handed over to KUKL progressively from Q3 2020.
2. Identify successful utility reform initiatives within and outside the country with similar context:
• Identify institutions within the country like Nepal Electricity Agency, Nepal Telecom and/or other
such similar regional institutional models which have successfully implemented reform programs.
• Appraise the service delivery models used in secondary towns in Nepal for water supply and sanitation
or other Water Board models (towns like Hetauda, Bharatpur, Dharan).
• Identify successful utility reform initiatives outside the country with similar context.
• Identify the key areas for possible replication or customization for KUKL and KVWSMB (as applicable).
3. Immediate actions to improve the capacity of KUKL to take over the completed facilities of Melamchi
Water Supply Project, Kathmandu Valley Water Supply Improvement Project, and Kathmandu Valley Wastewater
Management Project in a systematic manner and operate the assets as per the norms and standards; and
KVWSMB as asset owner:
• Suggest intermediate service level targets considering available resources with key monitoring
(i) bulk water supply and
(ii) at customer end in new DMA areas as well as in old network areas.
• Identify critical actions needed (which are not politically sensitive, do not require any policy/legal
changes and not resource incentive) to strengthen KVWSMB and KUKL‘s capacity in technical, operational,
financial and managerial aspects and to ensure operational autonomy of the institutions. Also asses need
for reorganizing the boundaries (service areas) of the KUKL branches considering the demarcation of new
• Suggest immediate actions for updating KUKL’s SOPs and guidelines.
• Suggest solutions to address staffing issues particularly for the top and middle management in KUKL
using the resources pool available within the Government/ market/ retired staff.
• Taking into consideration the ongoing capacity building initiatives and resources, suggest options how
these initiatives/resources can be best channelized to comply with the actions identified above
including improving the capacity of the technicians and other operational staff.
• Suggest Revenue Improvement Plan including reclassification of service/ customer categories,
adjustment in tariff structure, actions needed to improve collection efficiency and cost reduction
• Recommend how the customer databases can be digitized using available resources.
• Suggest different operating options for different components considering locational and socio
political situation (KUKL on its own, outsourcing, management contracts), consult with stakeholders,
prepare a matrix and suggest best contracting options (including their time span) for the consideration
• Suggest actions to better utilize the existing IT infrastructure including outsourcing of its
• Propose strategies for improving KVWSMB and KUKL’s customer orientation and communications.
• Prepare immediate term reform action plans with timelines, define process and identify resources.
• Review and update the corporate business plan duly including the operations and maintenance cost of
Melamchi Water Supply scheme.
• The team should also identify any other areas that requires KUKL’s attention before taking over the
O&M responsibilities of ongoing projects.
4. Prepare TOR to carry out comprehensive intuitional audit of entire WASH sector in Kathmandu Valley
and the institutions involved and suggest options:
• The TOR should cover:
(i) Agencies to be audited: KUKL, KVWSMB, WSTFC, PID and MWSDB
(ii) Areas to be covered (all key aspects of utility operation): regulatory, technical, HR, internal
operational processes and practices, SOPs, customer and complaint handling system, organizational
structures, management, board functioning, customer database, IT infrastructure and finance.
(iii) Nature of data to be used: Primary data or validated secondary data.
(iv) Analysis of constraints in current management of water supply operations including legal issues,
identify problems and barriers to autonomy and sustainability.
(v) Examine efficacy of current customer engagement and communication plan of KUKL.
(vi) Redefine the vision and mission statements and identify the key corporate and service delivery
principles and communication strategies.
(vii) Rework on the water service charter in consultation with all stakeholders. Define overall and zone
wise service level targets considering available resources with key monitoring indicators.
• The TOR should also cover that based on the audit findings, recommend options (at least 3) for
institutional strengthening/ re-engineering of overall WASH sector in Kathmandu Valley will be proposed,
including benefits, challenges and resource requirements for each. This might include changes needed in
legislation (if any), rules, regulations, orders, notifications , norms and standards needs to be
• Under the TOR, preparation of the functional requirements for updating or developing following IT
based tools also needs to be included:
(i) Dynamic asset management system,
(ii) Complete digitization of customer database with all socio-economic details,
(iii) IT based Water audit (using IWA water balance tools/software) and continuous NRW assessment of
each DMA, and
(iv) Digitization of water operation account covering expenditure, revenue, billing collection and with
details of arrears and current year demand and collection.
(v) And for their integration.
• The coverage of the TOR will be further deliberated based on the stakeholders consultations and
discussions during this assignment.
The expert will be responsible for the overall assessment and delivery of the Phase 1 activities,
ensuring the highest quality with the team of other four experts. He/she will do necessary coordination
with other team members and ensure consistency across deliverables and also support in preparing the key
action points and provide guidance. The expert will lead the team to prepare rapid institutional
assessment covering all the aspects including technical, operational, tariff, financial and
institutional and public communication aspects and based on which identify immediate workable solutions
which are not resource intensive and can be achieved within the scope of ongoing initiative. The expert
will prepare the TOR for carrying out comprehensive intuitional audit of entire WASH sector with the
input of other team members. He/she will also lead the team for updating guidelines and operation
practices which are critical for KUKL to adopt before taking over O&M responsibilities of Melamchi Water
Supply Project, Kathmandu Valley Water Supply Improvement Project, and Kathmandu Valley Wastewater
B. Phase 2: During this phase (6-7 months period after completion of Phase 1), the expert and
Institutional Development Specialist-Water Utility will help ADB and GoN to oversee the deliverables of
the firm, be recruited to carry out the institutional audit and suggest options for institutional
strengthening/ re-structuring. The expert will also help the firm identifying options for institutional
strengthening/re-engineering, including challenges and opportunities, and support ADB during the policy
dialogue with GoN.
Detailed Tasks and/or Expected Output
During the Phase 1 stage, the expert, along with Institutional Development Specialist-Water Utility,
Senior Utility Finance Expert, Water Utility Engineer and Finance Specialist, will submit the following
reports. After the submission of each report, there will be a joint presentation by the team to the
MoWS, KVWSMB, PID, KUKL, MWSDB, and ADB.
1. Existing Situation Study (Within 1.5 months of mobilization): Presenting the findings from rapid
assessment as per detailed task mentioned in Phase 1 above, including the review of reports, secondary
data collection, initial assessment and methodology.
2. Draft Final Report (Within 4 months of mobilization): Draft documents of all tasks performed as per
overall TOR for Phase 1 including recommendations and presenting main findings of the draft final
report; and conduct one workshop to share the findings.
3. Final Report (Within 5 months of mobilization): Final version of the above based on comments
received from ADB and GoN and other relevant stakeholders based on review of the draft final report,
satisfying all requirements of the TOR stated for Phase 1. A comments-response matrix should be
submitted by the consultants demonstrating how comments were adequately responded to and incorporated
into the final report. The final report should include a brief note summarizing the methodology and key
findings to serve as a stand-alone advisory note for clients. The team needs to conduct a day long
sensitisation session for MoWS, KVWSMB, PID, KUKL, MWSDB and other key stakeholders on key reform issues
and action points.
After completion of Phase 2 (Within in 12 months from mobilization), the consultant, along with
Institutional Development Specialist (Water Utility), will submit an assignment completion report
covering their review of the consulting firm’s deliverables and support provided to GoN and ADB.
Minimum Qualification Requirements
The expert should be a post graduate in engineering or management professional with at least 15 years of
experience in water utility management and involved in developing the process requirements of major
water utilities in the region. The expert must have experience in carrying out similar institutional
diagnostics studies and also supervised implementation of water utility reform program. Working
experience with governments is desired.
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