Community Water Supply: Should The Poor Have To Pay Donald T. Lauria Department of Environmental Sciences and Engineering.

Community Water Supply:Should The Poor Have To Pay

Donald T. Lauria

Department of Environmental Sciences and Engineering

General Stats In Zambia, 1 adult in 4 can read and write; in the

US 100 % can read and write Average life expectancy in Guinea is 40 yrs, 50

yrs in Chad and Sudan, 78 yrs in New Zealand India and Pakistan spend $5/ yr per capita for

health; industrialized countries: $3 to $4,000 In Niger and Burkina Faso 50 % of children

under age 5 suffer from malnutrition; Europe and North America have no measurable malnutrition.

In Bhutan 3% of the births are attended by a health professional; in industrialized countries it is 100%.

General Stats

In Mali 16 out of 100 newborns die at birth; in US fewer than 1 out of 100

The per capita gross national product in Pakistan is $420/ yr, in Cameroon it is $820/ yr, in Great Britain it is $18,000/ yr

Annual energy consumption in industrialized countries is 5 tons of oil /capita; in the 40 poorest countries it is less than one-half ton

Households in the 40 poorest countries spend half their income on food; industrialized countries spend 15%

In Tanzania, Mozambique and Guinea-Bissau external debt is 3 times their GNP

The birth rate in West Africa is over 3% /yr, population will double in 20 yrs; in the industrialized countries population doubling time is more than 100 years.

Health Stats

Each year, 4 billion diarrhea cases due to inadequate water & sanitation cause 2.2 million deaths

The dying are mostly children under age 5 One child dies every 15 seconds: 4/minute= 240/hour= 6,000/day=

170,000/month= 2 million/yr

Water & Sanitation Stats

82% of world population has access to improved water supply and 60% has access to improved sanitation, BUT

More than 1 billion persons (1/6 world’s pop) have no access to improved water supply

2.4 billion persons (2 out of 5) have no access to improved sanitation

Majority without access are in Asia and Africa World population in 1990s increased about 800

million; in that decade, 816 million additional persons received improved water and 747 million received improved sanitation

Expenditures US$ Billion/yr

Global water supply and sanitation 16 Ice cream in Europe 11 Pet food in Europe & US 17 Wine, beer, alcohol in Europe 105 Wine, beer, alcohol in US 78 US Dept Defense in 2002 344 US Dept Homeland Security 2002 26

Organization of Seminar

• What is most important water need?

• Water: is it commercial or social good?

• What should be source of subsidies?

• Which households to subsidize?

• What to subsidize: connections? consumption?

What is Most Important Need?

• Higher Prices

• Revenues don’t usually cover costs

• Systems fall into disrepair

• Users stop paying their bills

• Downward spiral of decline and disuse

Is Water Ordinary or Social Good?

• Ordinary

• Exclusion Accessibility

• Consumption Subtractability Benefits don’t decrease with multiple

users

EXCLUSION

Feasible Infeasible

CONSUMPTION

Individual

Individual Goods

Common Pool

Goods

Joint Toll Goods

Collective Goods

EXCLUSION

Feasible Infeasible

CONSUMPTION

IndividualFood

Clothing

TV Sets

Police & Fire

Hway Travel

Well Water

JointMovie

Cable TV

Telephone

Street Lighting

Network TV

Nat’l Defense

Worthy Goods (Merit Wants)

• Worthy goods are usually toll goods

• Society removes barriers to access…

• Because benefits to society are LARGE

• Benefits are both private & public (externalities… spillovers)

• WGs are provided for everyone

• Paid for from taxes a/o user revenues

Examples of Worthy Goods

• Public Schools & Colleges

• Chapel Hill Buses

• Museums

• Vaccinations

• Highways

Should Water Be Subsidized?

• Water is like an individual good

• Possible to restrict access by charging fee

• Water benefits mostly private

• Small spillovers to society

• Thus… it is hard to justify subsidies

• Sanitation is different: easier to justify

• Substantial spillover benefits w/ sanitation

What Should Be Source of Subsidies?

• If society decides to subsidize…

• Government is unreliable

• Revenues from water users more reliable

• But “rich” households are hard to identify

• Likely sources: industries & large users

• These sources are easy to identify

Problem With Industries

• Industries are needed to generate basic revenue to sustain water system

• If water price is too high, they will disconnect and develop their own source

• No economic rationale to charge them more than households

Problem With Large Users

P1

P2

Q1 Quantity

Price

Block 1 Block 2

IBT with lifeline rate for “the poor”

Problem With Large Users

• Poorest households (in tenements) share single meter, which…

• Puts their consumption in high-price block

• Same for individual households that sell to poor neighbors without connections

• Thus, poorest users subsidize the wealthy

Which Houses Should Be Subsidized?

• Consider subsidies for connections…• Hard to subsidize squatters (the poorest)• Their communities are not stable• No land use plans for squatter areas• Risky to lay expensive pipe in unstable

areas without roads and ROWs• Thus, “the poor” with tenure are targeted• But owners are not “the poorest”

Hard to Subsidize Poor Households With Land Tenure

• No clear criteria for identifying “the poor”

• 3 approaches

– Screen each applicant

– Screen by neighborhood

– Offer different technologies

• These approaches are expensive

What Seems To Be Needed

• Can’t subsidize consumption unless rich use more water than poor

• Hard to get info ex ante for tariff design

• Subsidizing connections is more important than subsidizing consumption

• Subsidize all connections, not just “poor”

• Run temporary lines into squatter areas

• Subsidize private water resellers

Questionnaire

1. Most important need?

a. Better treatment

b. More subsidies

c. Better designs

d. Higher prices

2. Ordinary or social?

a. Ordinary

b. Social

3. Subsidize water?

a. Yes

b. No

4. Source of subsidies?

a. Taxes

b. Rich households

c. Large users

d. Industries

Questionnaire

5. Which households?

a. Squatters

b. Poor with tenure

c. a + b

d. All households

e. All with tenure

6. What to subsidize?

a. Connections

b. Consumption

c. Both

7. Hard to implement?

a. Easy

b. Not easy, not hard

c. Hard