Revision of the Sanitation Framework will prioritize lower tariff – 03/04/2023 – Market

Sanitation concessions that use federal funds will have as a criterion for selecting the winner the lowest tariff value and the fastest service universalization schedule. Today, whoever offers the highest grant wins.

“Sanitation money has to go to sanitation, it cannot go to paving the street, paying for parties,” he told Sheet Minister of Cities, Jader Barbalho Filho (MDB)

The change will be in the decree revising the rules of the Sanitation Framework, which will be presented on Wednesday (5) in a ceremony at the Planalto Palace.

Another definition that will be in the text will be to establish the ANA (National Water Agency) as responsible for regulating the sector, following guidelines from the Ministry of Cities. Clarity in this regard was requested by the private sector during the discussions that led to the new decree.

As anticipated the Sheetthe decree will also remove the 25% restriction on PPP (Public Private Partnership) participation in sanitation concessions.

“President Lula (PT) determined that what we want is investment in the sector and no one alone will achieve that”, pointed out the minister. He estimates that the changes will unlock at least R$ 120 billion in investments in the sector.

This is because 1,113 municipalities would be prevented from receiving federal funds to promote investments in basic sanitation in cities as of March 31 of this year if no changes were made to the framework. According to the Ministry of Cities, almost 30 million people live in these places.

This lag came about for several reasons. The first was the proof of technical and financial capacity to promote investments, whose new deadline becomes the end of 2024.

Other cities could not access federal resources because they did not regionalize in time. In this case, the new deadline is 2025. Regionalization is the creation of a concession contract with several municipalities.

The creation of these groups allows a gain of scale and cross-subsidy, with more economically attractive cities helping to make investments viable in municipalities with less commercial appeal.

A third case is that of cities that have a sanitation service with an expired or non-existent contract. In this case, the decree provides for the creation of micro-regions and, thus, state or municipal companies can become the direct service provider without going through a bidding process.

The Sanitation Framework provides for universal access to basic sanitation by 2033. It consists of providing water for 99% of the Brazilian population and sewage collection and treatment for 90%. The goal was defined when the project was approved, in 2020.

The changes in the framework will all be made through the decree that will be presented on Wednesday and will not require sending a bill to the National Congress.

All participants in the discussions about the changes in the decree —municipal, state and private companies and the federal government— preferred not to have to go through the Chamber of Deputies and the Senate with the changes.

This is because a new legal change could increase legal uncertainty in the sector and, in addition, the government has not yet tested its base in the National Congress.