Overview of PBG for Drinking Water

PBG for drinking water is implemented in 2010 and 2011, involving 35 local governments. The funding for PBG came from foreign grants provided by the Australian Government through AusAID. The main objective of the project is to support the achievement of one of MDG targets, which is to reduce by half the proportion of the population without sustainable access to safe drinking water and basic sanitation, with priority on low-income citizens. A secondary objective is to strengthen the financial position of water utilities, and to enhance the commitment of local governments to their water supply company/waste water treatment company. The outcome of the project is expected to be improved public services provided to the population (Ministry of Public Works 2010).

PBG for drinking water is granted to local governments, on the condition that they will make investment in their water supply companies. It targeted 77,000 household connections to piped water. Assuming six persons per household, about 462,000 persons would benefit from the additional connections. The amount of the grant is set at IDR 2 million per connection for the first 1,000 connections, and IDR 3 million subsequently. The line ministry responsible for this project is the Ministry of Public Works. It acts as executing agency and works closely with AusAID in monitoring, evaluating, and verifying the implementation. Ministry of Public Works also has issued a Water and Sanitation PBG Project Implementation Manual (PIM), a guideline of PBG project implementation. The PIM poses a number of criteria to the local government as

the recipient of the grant, and the ultimate beneficiary. In addition, the PIM specifies technical requirements for the service connections.

The eligibility criteria, selection of grants recipient, project implementation, and verification and reimbursement process are explained in the Consolidated Report of Verification Survey for Water and Sanitation Hibah (Australia-Indonesia Partnership 2011a). The explanation is summarized in the following sections.

6.3.1. Eligibility Criteria

Local governments interested to participate in PBG for drinking water program have to fulfill a number of criteria to determine eligibility. There are four categories of eligibility:

recipient eligibility, beneficiary eligibility, technical eligibility, and additional eligibility. All eligibilities must be met to qualify as grants recipient.

a. Recipient eligibility

The recipient of PBG for drinking water is local government. To be eligible, the local government must meet the following criteria:

- The local government and its water supply company do not have outstanding debt to the central government, or are involved in a program to restructure their outstanding debt.

- There is sufficient capacity to distribute water to new consumers.

b. Beneficiary eligibility

Beneficiary is customers who benefit from household connections funded by PBG for drinking water. The eligibility criteria for beneficiary are:

- Categorization as low income household as determined by the head of the region.

- Installed electrical power of ≤ 1,300 VA, while 50% of the targeted beneficiaries have installed electrical power of ≤ 900 VA.

- Willingness and ability to meet the water supply company’s customer requirements.

c. Technical eligibility

- Connection is made subsequent to conclusion of the grants agreement between the Ministry of Finance and local governments.

- The technical specifications of the service connection are in line with the quality standard in use by the water supply company, which should refer to the technical standard issued by the Ministry of Public Works and the national standards of Indonesia.

d. Additional eligibility

- Availability of a list of potential beneficiaries.

- Availability of an implementation document covering at least the value of the grant for the number of service connections to be installed per year.

- Availability of a technical planning document, i.e. detailed engineering design (DED), for the service connections to be installed.

- Readiness for verification and audit.

- Availability of operational funds for related activities in the local governments receiving grants.

6.3.2. Selection of PBG Recipients

Figure 6.5 below summarizes selection process of PBG recipients. The Ministry of Public Works made a list of potential PBG recipients, based on the water capacity available in each region to serve additional customers. The Ministry of Finance provides fiscal capacity data and outstanding debt data of potential recipients. Based on the data, the potential recipients are sorted into shortlisted candidates. A baseline survey is then carried out in regions whose local governments satisfied the recipient criteria. The survey is to confirm the status of beneficiary criteria; it aimed at identifying low-income households interested in connecting to a piped-water system of the water supply company. If the beneficiary criteria are satisfied, the Ministry of

Public Works, the Ministry of Finance, and local governments coordinate to check the status of technical and additional eligibility. After all eligibility criteria are met, the process for grants application by local governments begins.²¹

Local governments selected as PBG recipients are required to submit certain documents to confirm their commitment in PBG projects. This confirmation signifies the local autonomy in PBG; local governments have the liberty to decide their participation in the program. Grant agreements are then signed by the Minister of Finance and mayor/regent, or their representatives. Thirty-five local governments are selected as recipients of PBG for drinking water in 2010 and 2011. The process of selecting recipients, implementing the programs, monitoring, verification, and disbursements are conducted in close coordination with the donor, AusAID.

6.3.3. PBG Implementation

Figure 6.6 below summarizes the implementation process of PBG for drinking water.

PBG for drinking water requires pre-financing. Recipient local governments allocated the funds

21 Based on interview with Reni, project officer, Directorate of Drinking Water Improvement, Ministry of Public Works, March 2012.

Ministry of Public Works Checking water capacity

Checking potential additional customer

Ministry of Finance Checking fiscal capacity Checking outstanding debt

status

Selected Local Governments

Ministry of Public Works/

AusAID Baseline Survey

Ministry of Public Works/ Ministry of Finance/ Local Government

Supporting documents and Commitments

Ministry of Finance/ Local Governments Signing Grants Agreement Recipient criteria

Beneficiary criteria

Technical criteria Additional criteria

Figure 6.5.

Selection Process of PBG Recipients

from local budget for equity investment in their water supply company. With this investment, water supply companies build piped-water household connections for low income households, and report the works to local governments.

Application for reimbursement can be processed if the connections worked well according to standards determined by the Ministry of Public Works. For PBG project, the proof of the connection’s functionality came from paid water bills for two consecutive months.

Verification is performed by the Ministry of Public Works and AusAID representatives. After the connections are verified, local governments can apply for funds reimbursement to the Ministry of Finance.