Community Water Supply: Should The Poor Have To Pay

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Community Water SupplyShould The Poor Have To
Pay

• Donald T. Lauria
• Department of Environmental Sciences and
  Engineering

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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.

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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.

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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

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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 worlds 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

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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

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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?

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What is Most Important Need?

• Higher Prices
• Revenues dont usually cover costs
• Systems fall into disrepair
• Users stop paying their bills
• Downward spiral of decline and disuse

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Is Water Ordinary or Social Good?

• Ordinary
• Exclusion
• Accessibility
• Consumption
• Subtractability
• Benefits dont decrease with multiple users

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EXCLUSION EXCLUSION
Feasible Infeasible
C O N S U M P T I O N Individual Individual Goods Common Pool Goods
C O N S U M P T I O N Joint Toll Goods Collective Goods
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EXCLUSION EXCLUSION
Feasible Infeasible
C O N S U M P T I O N Individual Food Clothing TV Sets Police Fire Hway Travel Well Water
C O N S U M P T I O N Joint Movie Cable TV Telephone Street Lighting Network TV Natl Defense
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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

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Examples of Worthy Goods

• Public Schools Colleges
• Chapel Hill Buses
• Museums
• Vaccinations
• Highways

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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

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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

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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

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Problem With Large Users
Block 1 Block 2

Price
P2
P1
Quantity
Q1

IBT with lifeline rate for the poor

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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

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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

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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

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What Seems To Be Needed

• Cant 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

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Questionnaire

• 1. Most important need?
• Better treatment
• More subsidies
• Better designs
• Higher prices
• 2. Ordinary or social?
• Ordinary
• Social

• 3. Subsidize water?
• Yes
• No
• 4. Source of subsidies?
• Taxes
• Rich households
• Large users
• Industries

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Questionnaire

• 5. Which households?
• Squatters
• Poor with tenure
• a b
• All households
• All with tenure

• 6. What to subsidize?
• Connections
• Consumption
• Both
• 7. Hard to implement?
• Easy
• Not easy, not hard
• Hard