Water price hike is all wet
According to the State Comptroller’s Report from October, the Water Authority council should actually be contemplating a price cut.
Pump technology uses air to heat water instantly Photo: stevendepolo
We have been blessed with exceptionally abundant rainfalls and the level of Lake
Kinneret has risen more in December than in any other month for a
But while there is more water to spare, its price will not be
going down. In fact, we will soon be paying more for every drop that comes out
of the tap. In January, the Israel Water Authority’s council, which sets water
policy, plans to increase water costs for households by 3 percent to
If justified, such a price hike might actually be welcomed.
would potentially have the positive side benefit of maintaining a strict regimen
of water conservation at a time when too many Israelis, faced with impressive
downpours, are mistakenly becoming complacent and allowing themselves to waste
water. However, according to the State Comptroller’s Report from October, not
only is it inadvisable to raise water prices, the Water Authority council should
actually be contemplating a price cut.
Since 2010, water prices have gone
up by roughly 30% in accordance with a government decision that the price paid
for water should reflect real costs. In theory this sounds fair. But the reality
is much different. The sharp rise in water prices paid by households over the
past two years reflects – at least in part – inefficiencies, cross-subsidization
and taxation, not the real cost of water.
According to the comptroller’s
report, at the beginning of 2011 an advisory firm hired by the Israel Water
Authority found that too many water corporations had been created as part of
sweeping reforms first passed by prime minister Ariel Sharon’s government back
Only 13 corporations were needed to manage water and sewage
services for 137 municipalities and local councils, according to the advisory
firm, not 54 as is the case now. Reducing the number of corporations would do
away with wasteful overlapping functions and redundant management and operation
costs and would result in a 7% decrease in water prices.
creation of the corporations was designed to remedy a situation in which
municipalities were responsible for water and sewage services. Too often, these
municipalities diverted revenues ostensibly collected for water to seemingly
more urgent needs while water infrastructure was left untended and pipes and
sewage leaked. But the advent of corporations have created another problem:
politicians on both the local and national level have an interest in creating as
many corporations as possible so that they can pass out jobs to
Another problem is cross-subsidization. An absurd situation has
been created in which households – not the state – subsidize the low water
prices enjoyed by farmers, industry and some hospitals, hotels and mikvaot
(ritual baths). According to the comptroller’s report, this subsidy made up 10%
of the price paid by households in 2010 and 2011. It is perfectly legitimate for
the government to encourage agriculture and industry by providing subsidized
water prices, though the reasoning behind such a move is questionable. However,
it is unfair to expect poor households who can barely afford their own water
bill to pay extra so that businesses can benefit from particularly low water
prices. Indeed, many poor families have had their water cut off because they
can’t pay the bill.
Another aspect of government policy that artificially
jacks up water prices is taxation. Inexplicably, we pay value-added tax on
water. Like other necessities such as fruits and vegetables there should be no
VAT on water.
Doing away with the tax would significantly lower water
The present government can still reverse the decision to raise
water prices before January 1. At the very least, the planned price hike should
be postponed. There is desperate need for a public debate on water
Issues such as subsidies for agriculture and industry, VAT and
streamlining of the water corporations should be discussed.
government will reach the conclusion that instead of a hike, what is in order is
a cut in water prices. The increased rainfall after years of drought provides
the ideal backdrop for a new focus on water price policy.