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Price Responsiveness of Residential, Industrial and Commercial Water Demand in Sri Lanka

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  • Dinusha Dharmaratna
  • Jaai Parasnis

Abstract

Appropriate pricing of water is critical for improving the efficiency of pipe-borne water supply systems in many developing countries. However, existing literature on residential, industrial and commercial water demand has primarily focused on developed countries. This paper estimates the demand for pipe-borne water from residential, industrial and commercial sectors in Sri Lanka. Price elasticity for residential consumers ranges from -0.06 to -0.58 and the income elasticity varies from 0.04 to 0.13. For industrial and commercial sectors, price is not a significant variable in determining water demand. These findings suggest that price increases, in isolation, may not substantially reduce the demand for water and hence have limited role in demand management. However, the inelastic nature of water demand can enable the water utility to improve its financial viability and revenues. The paper provides the empirical foundations for pipe-borne water planning and policies making in developing countries.

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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 44-10.

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Length: 35 pages
Date of creation: May 2010
Date of revision:
Handle: RePEc:mos:moswps:2010-44

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Keywords: water demand; water pricing; block pricing; Sri Lanka;

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