Water sector received €1.4 billion in subsidies but remains below what is desirable
The water sector has received, in the last ten years, subsidies for exploration of around 1.4 billion euros, but its performance continues “below desirable”, according to the conclusions of a study released this Tuesday.
The work, presented at the conference of the Association of Portuguese Companies for the Environmental Sector (AEPSA) and carried out by Rui Cunha Marques, from Fundec, from the Instituto Superior Técnico, outlines a scenario of dependence on subsidies and little progress in this sector.
“In the last 10 years, it is estimated that around 1.4 billion euros were allocated to subsidies for the operation of water services”, and these amounts “could have been directed by the municipalities to other investments, or priority public services for regional development”, reads a statement.
Even so, “the sector presents an average level of performance that is below what is desirable and sustainable, and reveals an increase in asymmetries, in an increasingly accentuated difference between the best and worst performers, in the different management entities”.
The author of the study also concluded that “annual financial flows in the water and sanitation sectors related to subsidies and market distortions largely exceed 500 million euros”, indicating that, with this standard, they are ” excessively dependent on subsidies, which in the medium and long term is negative for their development and sustainability”.
These subsidies, which “did not acquire a temporary nature and did not allow existing barriers and difficulties to be overcome”, did not improve the sector, with “the main performance indicators of supply services of water and wastewater sanitation in 2021 are not significantly better than those seen in 2012”.
At the same time, water supply service coverage grew by just 1%, according to the study, from 96% to around 97%.
This work also concluded that “the totality of subsidies for water supply and sanitation services, exclusively covering subsidies for exploration and investment, reached more than 223 million euros” in 2021.
Of these, the majority are attributed to the direct management model (around 58.1% of the total), followed by the Águas de Portugal public concession management model (26%) and the delegated management with 15.3%.
The private concession model accounts for 0.6% of the total grant amounts awarded.
According to the conclusions, the investments made under the PO SEUR – Operational Program Sustainability and Efficiency in the Use of Resources, until September 2023, by management model, “demonstrate that until that date the value was attributed of 660,879,215 euros in investment subsidies for the urban water cycle”.
Only around 1.2% of this amount “was allocated to private management entities that obligatorily reflect these subsidies in lower tariffs, and which serve almost 20% of the Portuguese population”.
“There are no reasons for this differentiation and discrimination of users in the provision of an essential public service depending on its management model”, reads if in the document.
The study argues that “water supply and sanitation services must be financially self-sustainable” and that their expenses must be “paid by users, through tariffs, in accordance with user principles payer and the polluter pays”.
This is not what happens in Portugal, he maintained. “As tariffs are artificially low in most municipalities, for political reasons, costs have to be supported by subsidy mechanisms”, and “in 2021 alone, exploration subsidies made up more than 121 million euros”.
This means, he assured, that each Portuguese person paid at least 12.3 euros in taxes in the year under analysis, “to subsidize water supply and sanitation services”.
The study recalls that, according to PENSAARP 2030 (Strategic Plan for Water Supply and Waste and Rainwater Sanitation 2030), average tariff increases of around 40% will be necessary, also calling for an “intelligent” distribution of subsidies and conditioned on the improvement of operational results.
