Nepal: Output-Based Aid for Municipal Solid Waste Management

Objective: This project was to provide "transitional subsidies" to support a gradual increase in household charges for improved solid waste management (SWM) services in selected municipalities over a four-year period. The project complemented the World Bank's Nepal Emerging Towns Project and would use its existing institutional safeguards arrangements to a large extent. 

Most municipalities in Nepal either did not charge any fee for solid waste services or the fees charged have been far below cost recovery levels. While the intention was not to transfer the full costs of solid waste management to households, the municipalities were committed to increasing household charges (and hence household contribution to the cost of properly managing solid waste) to ensure the financial viability of providing the services and enable their expansion over time. However, the municipalities wanted to gradually phase-in the increase in charges, both to ease the burden on households and to demonstrate improvements in service performance before a significant portion of the costs of those improvements were passed onto the households.

GPOBA’s incentive-based approach was to tackle two problems: the ineffective collection of solid waste management fees and the missed opportunity for managing solid waste sustainably. The scheme was to bridge the gap between the cost of delivering improved SWM services, such as capital costs and operations and maintenance costs, and the revenues that municipalities could collect for these services.

Outputs: The project partially achieved its development objectives in four municipalities, and was successful in the following areas: establishing an institutional framework for SWM in municipalities; improving service delivery, with one of the participating municipalities (Dhankhuta) recognized as the cleanest city in Nepal; and strengthening financial sustainability by significantly increasing the revenues from SWM services.