Azersu: Red Tape and Corruption

By the decision of the Tariff (Price) Council of Azerbaijan the state monopoly services of Azersu increased the price of water and sewerage by the average of 10.4% from May 16.

As a whole, the two types of services to the residents of Baku and Absheron increased by 35.8%, by 45.1% for the regions, by 53.8% for the budgetary organizations, by 53.8% for industrial and commercial areas, and for using water as a raw material for the production of bottled water, soft drinks, fruit drinks, etc., the price dropped by 27.5%.

At the same time due to the tradition of "closed" government of Azerbaijan, no comments or explanations were given on the eve of the price increase. There was no discussion.

Last time the tariffs for water and sanitation were increased accordingly 2 and 4 times in January 2007. Then the fact was justified by the increase in electricity prices by 40%, but this is not enough given the low transparency of the company and its dubious activities. For example, while on the civil society's insistence the norm of water consumption was reduced twice from 12 cubic meters per person to 6 cubic meters.

In 2015, the loss amounted to 95 million AZN and the whole reached 886 million manats, of which 800 million (more than $ 1 billion) was non-denominated manats.

Total revenue amounted to 141 million manats and 23.3 million manats was allocated to support. Out of this amount 88 million manats was the cost of water.

Thus, the attempt by the government to improve the chronically dire state of the company at the citizens’ expense will give nothing, and the money of the consumers, as well as state funds, will be lost as before.

Bad Mark for Weak Development of Loan Funds

At the end of December 2015 the management of JSC Azersu received a “bad mark” from the Accounting Chamber for the poor development of credit for a number of projects aimed at the reconstruction of water supply and sewerage systems in the country.

We are talking about credit and budgetary funds in the framework of two projects: "Water supply and sewerage system in small cities of Azerbaijan" (donor - Japan International Cooperation Agency) and "Program II of the open municipal infrastructure" (funded by KfW German bank). The auditors found that only 21.2% of the credit taken under state guarantee was disbursed in 5.5 years of implementation, even though the excess duration of the project leads to an increase in the funds allocated by the government to repay the loan. It was also revealed that the payment of funds to the contractors was to a greater extent than was originally envisaged due to the inefficient billing system.

The Open Municipal Infrastructure Program II provides for the modernization of the water supply and sewerage systems of Ganja and Sheki. For its implementation KreditanstaltfurWiederaufbau (KfW) Bank provided a loan of 37 million Euros and the Swiss State Secretariat for Economic Affairs (SECO) provided a grant of 10 million EUR. Another 7 million EUR was the share of the local government. The project Water Supply and Sewerage in Small Towns involves reconstruction of water supply and sewerage systems in 10 cities and regional centers of Azerbaijan with a combined population of 400 thousand people. Under the terms of the loan agreement signed on May 29, 2009, JBIC will provide a loan of $ 38 billion Japanese yen (US $ 400 million) at 1.4% per annum for 30 years, including a 10-year grace period.

So-called Uninterrupted Water Supply

Azersu, according to the law on water, is obliged to indicate the quality of the water and the hours of the water supply in its agreements with the customers, which is not done at all. In this sense, there is a massive violation of the rights of consumers. Only 40% of the consumers receive water uninterruptedly. For example, in many areas of the city and its suburbs water is still supplied into the buildings 2 times a day or a two day for two hours each, or once for 2-3 hours. At the same time, there are entire neighborhoods in the capital, where water is supplied 24 hours a day. Moreover, if the city center receives fresh water, in the vicinity the water supplied is not suitable for drinking. But the fee for the water is charged at a single rate. Water quality in both cases does not meet the standard. The State Committee on Standardization, Metrology and Patent, dealing with the approval of national standards, in July 2010, became a member of the Codex Alimentarius Commission, committing itself to bring up the standards in Azerbaijan to the international level. However, to date, these standards are not defined. The Public Association for Assistance to Economic Initiatives, with the support of the European Commission and the organization OXFAM, has conducted research in connection with the drinking water quality and standards of its supply. Samir Aliyev noted that the WHO guidelines on the availability of drinking water in Azerbaijan are still outstanding.

Water and Sewerage in Baku Suburbs

In 2009 a state program was adopted to supply all the suburban settlements of Baku with drinking water and sanitation to the end of 2013. As a result, despite the multimillion-dollar funds, there is neither water, nor sanitation. Interestingly, fresh water was partially supplied to the spontaneously grown low-storey housing estates, where the state does not recognize the legality of land allocation (such as the lands belonging to the Affairs Section of the Presidential Administration of Azerbaijan), as well as to suburban cottage areas, where people do not live permanently, and only reside along the roads selectively.

Golden Counters

In April 2006, Turan IA submitted a report to the Office of the President on the theft and abuse in Azersu and proposed to introduce compulsory metering of water consumption with water measuring devices. In May of the same year, the President of Azersu Nizamaddin Rzayev announced a three-year state program of installation of meters, which should have been completed before the end of 2008. According to Azersu, as of 1 January 2016 from 1 million 308.5 thousand customers from the population water meters were provided only to 792,260 customers (60.5%).

Meters allow the citizens to transparently monitor water consumption, which apparently is not in the interests of the company, which writes off funds for the delivery of water according to the standards. This approach has been completely eliminated in other monopolists - Azerishyg (for electricity) and Azerigaz (for gas supplies).

In March this year, President Ilham Aliyev allocated 12 million AZN again to provide consumers with counters.

In April, Azersu announced a tender procedure for the purchase and installation of 50 thousand smart-type (pre-pay) water meters for the Baku population. 30% of the private customers in Baku have no water measuring devices, which Azersu has to install. Turan estimated that the installation of one meter will cost 240 manats. JSC Azersu does not comment on the reason for such high prices: foreign manufacturers of smart-type water meters offer their products at a price of $ 25 (38 AZN). For large orders, the price drops to $ 20 or 30 manats. The funds can be enough to set around 400 thousand water meters and to complete the full installation of meters in Baku. In 2014, Azerbaijan purchased 129,500 water meters worth $ 102.3 each in Turkey. At the same time in 2015 Azerbaijani companies exported (mostly to Georgia) 23.7 thousand water meters at a price of $ 18.4.

Pipeline Matter Smells Fishy  

When laying the pipeline Oguz-Gabala-Baku, which started in 2010, it was promised that the share of the population that will receive access to uninterrupted water supply would increase from 40% to 70%. However, even after that 40% of the people of the capital still get their water constantly and 60% get it intermittently.

The project of the pipeline 262 km long was invested 993 million dollars. It was promised that the volume of supply of fresh water to the capital would reach 19 cubic meters per second instead of the 14 cubic meters per second, which is provided by five water pipelines coming to Baku - Shollar, Khachmaz, Kura 1, Kura 2 and Jeyranbatan.

According to press reports, the multi-million dollar investment of the state and foreign investors in Azersu continues, as well as the reports of the launch of new facilities and new achievements. Water seems to write off everything.

P.S. A good investigation of water pipelines and Azersu was held in 2012 by the http://haqqin.az/investigations/13 portal. Since then, little has changed.