The report prepared by UNDP and Hacettepe University, which reveals that a policy focused on the poor is not implemented on the tariffs of water, electricity and natural gas, points out that unless precautions are taken, the poor will be burdened more after the privatization.

The report “Taking Poverty into Consideration for Public Utilities Governance” states that the electricity, water and natural gas expenses constitute a big share of poor households' total expenditures. The poor, for whom no state assistance is provided, develop a number of strategies in order to continue their consumption.

The report published by Hacepette University’s Center for Market Economy and Entrepreneurship and UNDP was launched in Ankara on 11 March 2009 at a meeting open to the press. The study comes at a time when Turkey has witnessed a number of reforms in the utilities sector, and private sector has become an important provider of services through privatization of utilities. This is the first study conducted in Turkey where water tariffs of different provinces were compared systematically to understand consumption and expenditure patterns of poor and non-poor households.

The authors of the report, Necmiddin Bağdadioğlu from Hacettepe University, Alparslan Basaran from Hacettepe University, Sibel Kalaycıoğlu from Middle East Technical University and Abuzer Pınar from Ankara University, presented the main findings of the study (please click here to read their presentation - Turkish), which states that there is no social assistance provided to poor regarding the consumption of electricity, natural gas and water, and  it calls for engagement of civil society in utility pricing. The study also recommends the establishment of a Water Sector Regulatory Authority to ensure transparency and competitiveness. 

Please click here to read the summary of the report "Taking Poverty into Consideration for Public Utilities Governance".

Why this Research?

The report underlines that one of the basic goals of the development policies is to reduce the poverty. In case of  production of electricity, natural gas and water services by the public sector, it is possible to determine prices lower than costs, thus it is possible to protect the poor. In the report, it is stated that in many countries; especially in England and Continental Europe, interests of the poor are taken into consideration. In Turkey though there are arrangements in favor of consumers only in the electricity sector.

The main objective of the study is to define the effects of the probable price increases on the poor consumers and provide recommendations to reverse the negative repercussions in case of the privatization of the electricity, natural gas and water sectors.

The Methodology of the Study

The research aims to define particularly how the prices after the privatization will affect electricity, natural gas and water consumption of the poor people. Turkish Statistical Institute (TÜİK)’s “2003 Household Budget Survey” is used in the research since TÜİK’s study was carried out in different cities. Since “2003 Household Budget Survey” is the most comprehensive survey and all the poverty researches are based on micro data results like ‘Household Budget Survey’, this data source was used. TUIK’s other data sources that were used in the study are as follows:

1. Electiricity, Water and Gas Statistics (1999)
2. Household Budget Survey  (2002)
3. Household Budget Survey  (2004)
4. Household Budget Survey  (2005)
5. Household Budget Survey  (2006)

The results obtained from the field studies in Çankırı, Kars, Şanlıurfa and İstanbul are considered. With the aim of providing services for the poor despite price rises, the situation is examined within the scope of EU legislations about how to use the government assistance.

The research includes households' consumption data before the reform; then the amount of household consumption is calculated by considering the possible rate after the reform. This way, the possible effects of the reform are examined. The research, which aims to add the cost of the illegal electricity, gas and water consumption to the price, applies this methodology only for the electricity sector because it was possible to reach the illegal electricity consumption only in that sector.

Bills Constitute a Great Deal of the Poor’s Expenditure

The cities within the scope of the research, have distinctive qualities. İstanbul is the biggest and the most heterogeneous city in Turkey where poverty is highly visible and there are many challanges on the issue. The assistance carried out in İstanbul for the poor, is considered to be chaotic, arbitrary, not transparent. According to the research, natural gas is consumed the most in the European side of Istanbul. In poor households, expenditures on heating precede those in health, education and entertainment. It is stated that there are challanges in Kars concerning water which create health problems for women.

The research indicates that generally water, gas and electricity expenses are significantly below the poverty line. The regions like Istanbul, Aegean and Mediterrean, where the population is dense and the income share is high, decrease Turkey’s average. But the cities which have been effected in the most negative way from the new electricity price are Van, Mardin, Şanlıurfa, Ağrı, Erzurum and Adana. When the illegal water consumption is added to the water price, the water consumption becomes more expensive.

Poverty Line: Electricity, Water and Natural Gas

The research divides the target group into 10 different brackets and indicates that the budget for the bills of the households, except those in the richest three brackets, is above that of the Turkey’s average. These consumption shares are significantly below poverty line and only the households in Gaziantep face water shortage since their share of water consumption out of all the expenditure is 4.83%. Kayseri is very close to facing water shortage with a %3.9. The report emphasizes that the water poverty line is taken as % 3 in the developed countries and it is % 5 in the developing countries. In consideration of the development level of Turkey, the water poverty line in Turkey is regarded as %4.

Those, whose monthly electricity expenses exceed %10 percent of monthly household income or total consumption, are considered to be ‘Electricity Poor’. Those, whose monthly natural gas expenses exceed the %10 percent of natural gas usable income or total consumption, are considered to be ‘Natural Gas Poor’. The shares of income distribution of the regions and the ratio of electricity consumption in total household expenditures are as follows: average of Turkey is %3,96, it is %5,26 in the West Marmara, %4,99 in Central Anatolia and %4.40 in the Southern East Anatolia.

Concerning natural gas consumption, the average of the other cities except Istanbul is above Turkey’s average: %5,69 in Ankara, %4,98 in Bursa  and %4,96 in Kocaeli.  In the water consumption, just as in electricity consumption,  West Marmara's average is %2,79, those of Middle Anatolia and Southern Anatolia  are %3,48 and %2,73 respectively.

To sum up, the field studies reveal that the electricity, water, natural gas/bottled gas bills have an important share in the household expenses.

Strategies to Deal with Poverty

Families strive to pay these bills even late although they are very costly for the family budgets. Often poor households develop some strategies in order to deal with these expensive bills. The common one is to pay fines after the deadline or to consume electricity and water in an illegal manner. According to the research, due to the lack of social assistance and the economic problems, families are engaged in illegal consumption. Since illegal consumption has a very severe punisment, it is a less common strategy. Not sending children to the school, using less energy or borrowing money are some other strategies.

What should be done?

According to the report, if the prices are arranged in consideration of the poor, the illegal consumption can be prevented. Another important issue is to determine price brackets and consumption ranges depending on the consumption amount of different income levels.

The success of policies, that take into consideration the poor in the consumption of electricity, natural gas and water, to a great extent depends on informing consumers about price brackets and how much it costs  in each price bracket, including clearly pro-poor arrangements in the contract of privatization and following up of the practices by the supreme board of the sector.

According to the authorities, the prices have to be decreased, the current infrastructure has to be enhanced and a cheaper and more quality service has to be provided. The households, who were interviewed, state that these services can be provided cheaper through savings created by government upon eliminating corruption. The report indicates that as it is impossible to survive without electricity and water, the government has to develop social policies for the poor.