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Water Tariffs

Appropriate structures that do not
disadvantage the poor




          Rational water tariffs for poor and non-poor consumers in developing countries (Mara, 2005)

The poor pay more [for water] (UNESCAP, webpage 1997 data)
The water vendors of Nigeria (BBC News, 2009)


The poor pay more for water

No connection fees
− at last sense is prevailing!
Connecting the Poor: Dealing with Connection Fee Hang-ups (ADB, 2007)
Issues Paper: The Hows and Whys of Water Connection Charges (ADB, 2008) “High and upfront water connection charges often act as a major barrier to connecting the poor. So why charge for a connection? Mobile companies provide free phones to attract subscribers. Supermarkets do not charge entrance fees to potential shoppers. Why can this not be applied to water services?”

Costs of urban utility water connections: Excessive burden to the poor (Utilities Policy, 2007)

The price of water (Bonn Principles Series #4, IWA, 2007) Principle: The price of water should be set so that price does not prevent consumers from obtaining water of sufficient quantity and quality to meet fundamental domestic needs. 

Tariff Design (chapter 5 of Annotated Reading List for a Body of Knowledge on Infrastructure Regulation, PPIAF/World Bank, 2008)

Managing Water for All: An OECD Perspective on Pricing and Financing (OECD, 2009):  Full report   Key Messages for Policy Makers.

Cost Recovery, Equity, and Efficiency in Water Tariffs: Evidence from African Utilities (World Bank, 2008)

A Framework for Analyzing Tariffs and Subsidies in Water Provision to Urban Households in Developing Countries (UN, 2007) − “The aim of the paper is to present a basic conceptual framework for understanding the main practical issues and challenges relating to tariffs and subsidies in the water sector in developing countries.”

Providing water to the urban poor in developing countries: the role of tariffs and subsidies (UN DESA, 2007)

A Framework for Analyzing Tariffs and Subsidies in Water Provision to Urban Households in Developing Countries (UN DESA, 2008)

Subsidised water connections for the urban poor (SADOCC, 2008)

Pro-Poor Subsidies for Water Connections in West Africa (Water Working Note #3, The World Bank, 2005) Executive Summary.

Pricing, Subsidies, and the Poor: Demand for Improved Water Services in Central America (World Bank, 1999)

Helping Regulators Improve Services to the Poor (BPD Water and Sanitation webpage with links to two well-worth-reading pdf files) 

Charging to Enter the Water Shop? (Cranfield University, 2006)

Charging to enter the water shop? The costs of urban water connections for the poor (WST−WS, 2005) 

Community Managed System for Operation, Billing & Collection of Water Charges (UN Habitat, 2006)

Pricing Water and Sanitation Services (background paper for HDR 2006)

Pricing water (OECD Observer, 2003)

Modelling domestic water tariffs (eWISA, 2004)

Water and Sanitation Tariffs for the Poor (WEDC, 2004)

Beyond Cost Recovery: Setting User Charges for Financial, Economic, and Social Goals (ADB, 2004)

Tariffs, subsidies and development funding (ADB, 2003) [Chapter 11 of Asian Water Supplies: Reaching the Urban Poor]

          Water Tariffs and Subsidies in South Asia [WSP, 2003]
                Paper 1   Paper 2   Paper 3   Paper 4   Paper 5   Nagari #12

Municipal water pricing and tariff design: a reform agenda for South Asia  (Water Policy, 2003)

Should we pay for water? And, if so, how? [by John Kalbermatten - Urban Age, 1999]

          The Price of Water [IWA webpage with links to relevant documents]

Water valuation (Chapter 3 of Managing Water Demand: Policies, Practices, and Lessons from the Middle East and North Africa Forums, IDRC, 2005)

The challenge of economic regulation of water and sanitation in urban India (Habitat International, 2008)

Setting up payment systems (MIT Urban Upgrading webpage)

Establishing pricing policy (MIT Urban Upgrading webpage)

If you are planning to use an Increasing Block Tariff stucture to charge everyone (in- cluding the poor) for water, then be aware of the pitfalls:

The Political Economy of Increasing Block Tariffs for Water in Developing Countries
(IDRC, 1998)
Quantity-based subsidies are not effective in targeting the poor (World Bank, 2005)
Possible adverse effects of increasing block water tariffs in developing countries (Economic Development and Cultural Change, 1992)
The determinants of water connection and water consumption: Empirical evidence from a Cambodian household survey (World Development, 2008) Quote: The policy implication of this research is that development practitioners should consider a connection (rather than a consumption) subsidy scheme, as it would stimulate increased access to clean water among all households, including the poorest.
Demand and distributional effects of water pricing policies
(Ecological Economics, 2007)
Quote: For the current combined regressive–progressive block price system [in São Paulo], the poor spend almost 4.2% to 4.7% of their income on water. The rich only pay 0.4% to 0.5% of their income whereas they consume more than twice as much. A progressive block price or an income-dependent price system may result in a more equalized income distribution.

Unintended consequences of increasing block tariffs pricing policy in urban water (Water Resources Research, 2007)
Residential water demand model under block rate pricing: A case study of Beijing, China (Communications in Nonlinear Science and Numerical Simulation, 2008)

Block rate pricing of water in Indonesia: An analysis of welfare effects (Bulletin of Indonesian Economic Studies, 2000)

Estimating water demand under increasing-block tariffs using aggregate data and proportions of users per block (Environmental and Resource Economics, 2003)

The sustainable residential water use: Sustainability, efficiency and social equity – the European exp- erience (Ecological Economics, 2008)

Water demand under alternative price structures (Journal of Environmental Economics and Management, 2007) 

Urban and rural attitudes toward municipal water controls: A study of a semi-arid region with limited water supplies (Ecological Economics, 2008) − in urban areas in Texas it was found that “a hybrid conservation policy that includes mandatory restrictions, fines for overuse, and pricing increases could be more acceptable, and hence more efficient, than a policy that only consists of regulation.”

Performance Improvement Planning: Developing Effective Billing and Collection Practices (WSP, 2008) 

Making water-excreta accounts (Down to Earth, CSE, India, 2009) – quote: pricing of water and waste is incomplete without its political economy. Who gets the water and how much? In answering that, you will learn the political economy of water and excreta where the rich, and not the poor, are subsidized in urban India.”

        See also: Willingness to Pay    Microfinance/Microcredit