Water Markets, Demand and Cost Recovery for Piped Water Supply Services : Evidence from Southwest Sri Lanka

In many countries water supply is a service that is seriously underpriced, especially for residential consumers. This has led to a call for setting cost recovery policies to ensure that the tariffs charged for water supply cover the full cost of providing for the service. Yet, the question arises on how consumers will react to such price increases. The authors illustrate the impact of price increases on consumption of piped water through a study of the demand for water of piped and non-piped households using cross-sectional data from 1,800 households in Southwest Sri Lanka. The (marginal) price elasticity is estimated at -0.74 for households exclusively relying on piped water, and at -0.69 for households using piped water but supplementing their supply with other water sources, with no significant differences between income groups. Those households that depend on non-piped water sources have a time cost elasticity (as a proxy for price elasticity) of only -0.06. The authors discuss the implications of these results in terms of pricing policy.

Bibliographic Details

Main Authors:	Nauges, Celine, van den Berg, Caroline
Language:	English
Published:	World Bank, Washington, DC 2006-06
Subjects:	ACCESS TO SAFE WATER, ALTERNATIVE WATER SOURCES, BLOCK PRICING, BLOCK RATE, BLOCK RATE STRUCTURE, CONSTRUCTION, CONTINGENT VALUATION, COST RECOVERY, COST RECOVERY POLICIES, CUBIC METER, CUBIC METERS, DELIVERY OF WATER, DELIVERY OF WATER SUPPLY, DEMAND FOR WATER, DISTRIBUTION OF WATER, DISTRIBUTION SYSTEM, FIXED COSTS, FIXED FEE, HAND PUMP, HOUSE CONNECTION, HOUSEHOLD, HOUSEHOLD INCOME, HOUSEHOLDS, LITRES PER DAY, LOW-INCOME HOUSEHOLDS, METER INSTALLATION, MONTHLY WATER BILL, MONTHLY WATER USE, PIPE LAYING, PIPED WATER, POOR WATER QUALITY, PRICE ELASTICITIES, PRICE ELASTICITY, PRIVATE WELLS, PUBLIC WELLS, PUMPS, QUALITY OF WATER, RAINWATER, RESIDENTIAL CONSUMERS, SANITATION SERVICES, SERVICE AREA, SERVICE PROVISION, SURFACE WATER, TARIFF STRUCTURE, TOILETS, TOWN, TOWNS, TYPE OF CONNECTION, UTILITIES, UTILITY SERVICES, WATER, WATER AVAILABILITY, WATER CONSUMPTION, WATER DEMAND, WATER DEMAND FUNCTIONS, WATER DEPARTMENT, WATER DISTRIBUTION, WATER DISTRIBUTION SYSTEM, WATER MARKETS, WATER PARTNERSHIP, WATER PRESSURE, WATER SERVICE, WATER SOURCE, WATER SOURCES, WATER SUPPLY, WATER SUPPLY SERVICES, WATER TARIFF, WATER TARIFFS, WATER TREATMENT, WATER USE, WELLS,
Online Access:	http://documents.worldbank.org/curated/en/2006/06/6858795/water-markets-demand-cost-recovery-piped-water-supply-services-evidence-southwest-sri-lanka-water-markets-demand-cost-recovery-piped-water-supply-services-evidence-southwest-sri-lanka https://hdl.handle.net/10986/8445
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