Nepal nationals: Water Utility Expert

A.	Background
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  
distribution networks.
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. The subject expert will primarily provide 
service for Phase 1. In Phase 1, the expert along with a pool of four other experts: Institutional 
Development Specialist-Water Utility (International),  Senior Utility Finance Specialist 
(International), Team Leader cum Water Operator Specialist (International) 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.

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 
indicators for
(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 
DMAs.
• 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 
strategies. 
• 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 
of MoWS.
• Suggest actions to better utilize the existing IT infrastructure including outsourcing of its 
operation.
• 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 
specified
• 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 to carry out the rapid institutional assessment as stated above with the 
team of international and national experts. He/she will help the team in data and report collection, 
analysis of technical and operational data, follow up with clients and coordination, share country 
specific knowledge on the technical and operation aspects of water utilities in Nepal. The expert will 
also provide input to prepare TOR for carrying out comprehensive intuitional audit of entire WASH sector 
along with other team members.  He/She will also support in preparing the action plans and in 
preparing/updating guidelines and SOPs related to technical and operational aspects, 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 Management Project.

During the Phase 1 stage, the expert, along with Institutional Development Specialist-Water Utility, 
Senior Utility Finance Expert, Team Leader cum Water Operator Specialist 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.