The bank says: “In our opinion, imposing more regulation on agricultural activities coupled with removing the subsidies on water are possible solutions to save strategic water resources.”

The report was published on the day before CEO of the National Water Company Loay Al-Musallam announced the imminent introduction of higher water charges. He told delegates at the Saudi Water and Power Forum in Jeddah on Oct. 5 that consumption in the Kingdom was “growing exponentially due to the lack of incentive for the customer to conserve water.” He added: “There is no doubt that water tariff changes are imminent and they have to be assumed very, very quickly.”

The NCB report adds momentum to the argument for the need for a price structure that will remove much if not the entire government subsidy on water that currently stands in excess of 90 percent. Al-Musallam said that changes were critical for the sustainability in the Kingdom and to ensure the national viability of the water sector.

The 223-word comment by the NCB is significant. For several years Saudi and international water experts have been suggesting loudly that water should be charged at a more realistic level to develop a perception among consumers that it has real monetary value as a scarce resource. It has been something of a political hot potato in the Kingdom.

The introduction of commercially viable water charges in Hungary saw a consequent 50 percent reduction in water consumption.

There is a long-standing assumption in the water industry locally that the introduction of charges is inevitable; it is simply a matter of how much and how to collect the revenue. Much of the current debate is over the most practical structure for pricing water.

The NCB comment says, “Saudi Arabia is ranked the third largest consumer (in the world), with daily per capita water consumption amounting to 248.7 liters. The scarcity of water resources can be attributed to: 1) the very low rainfall, estimated at 70-100 mm per year; 2) the growing demand for water as population grows at high rates (growth rate is estimated at 2.3 percent in 2009); and 3) water is subsidized by the government; thus demand is artificially high.”

It specifically highlights the very low financial returns on huge agricultural consumption. “While the agricultural sector consumed more than 85 percent of total water consumption, its contribution to GDP in nominal terms was only 3 percent in 2009.” It added that this could be explained “by the fact that most farms and agricultural businesses are run by either families or small companies.”

Whilst there is no definite date for water charges to be introduced, the debate on the structure seems to be leaning toward a block tariff. The first “block” would carry a nominal charge and would be of sufficient volume for reasonable daily living; the next would carry an increased charge, and as consumption rises beyond essential use and into luxury use, charges would rise drastically.

The UN, in its World Water Assessment Program, suggests that each person needs 20-50 liters of safe fresh water a day to ensure their basic needs for drinking, cooking and cleaning. This could act as a baseline for any future tariff structure in the Kingdom.