Willingness to Pay and Inclusive Tariff Designs for Improved Water Supply Services in Urban Bangladesh

The study investigates willingness to pay for improved water supply services in urban Bangladesh, using a contingent valuation survey of 3000 households in Khulna city. Since the large connection cost is regarded as one of the major obstacles to expand the piped network among the poor, the study explicitly incorporates the connection cost in addition to monthly charge. The construct validity tests show that the respondents have understood the elicitation questions and answered truthfully. Policy simulations show that poor households are less likely to be connected under fixed charge tariff, and introduction of volumetric tariff will increase the acceptance of the improved water service by poor households. Increasing block tariff shows the highest uptake rate of the improved service by the poor. The large connection cost is found to be a critical bottleneck to expanding the coverage for the poor. Easy payments systems for connection charge such as installment payments, or including the connection costs under the capital investment of the project, will significantly improve the inclusion of the poor in the proposed water supply scheme.