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Cost recovery, equity, and efficiency in water tariffs : evidence from African utilities

Author

Listed:
  • Banerjee, Sudeshna
  • Foster, Vivien
  • Ying, Yvonne
  • Skilling, Heather
  • Wodon, Quentin

Abstract

Water and sanitation utilities in Africa operate in a high-cost environment. They also have a mandate to at least partially recover their costs of operations and maintenance (O&M). As a result, water tariffs are higher than in other regions of the world. The increasing block tariff (IBT) is the most common tariff structure in Africa. Most African utilities are able to achieve O&M cost recovery at the highest block tariffs, but not at the first-block tariffs, which are designed to provide affordable water to low-volume consumers, who are often poor. Atthe same time, few utilities can recover even a small part of their capital costs, even in the highest tariff blocks. Unfortunately, the equity objectives of the IBT structure are not met in many countries. The subsidy to the lowest tariff-block does not benefit the poor exclusively, and the minimum consumption charge is often burdensome for the poorest customers. Many poor households cannot even afford a connection to the piped water network. This can be a significant barrier to expansion for utilities. Therefore, many countries have begun to subsidize household connections. For many households, standposts managed by utilities, donors, or private operators have emerged as an alternative to piped water. Those managed by utilities or that supply utility water are expected to use the formal utility tariffs, which are kept low to make water affordable for low-income households. The price for water that is resold through informal channels, however, is much more expensive than piped water.

Suggested Citation

  • Banerjee, Sudeshna & Foster, Vivien & Ying, Yvonne & Skilling, Heather & Wodon, Quentin, 2010. "Cost recovery, equity, and efficiency in water tariffs : evidence from African utilities," Policy Research Working Paper Series 5384, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5384
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    Citations

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    Cited by:

    1. He, Xiaoping & Reiner, David, 2016. "Electricity demand and basic needs: Empirical evidence from China's households," Energy Policy, Elsevier, vol. 90(C), pages 212-221.
    2. Pushak, Nataliya & Briceno-Garmendia, Cecilia M., 2011. "Zimbabwe's infrastructure : a continental perspective," Policy Research Working Paper Series 5816, The World Bank.
    3. Jimenez-Redal, Ruben & Parker, Alison & Jeffrey, Paul, 2014. "Factors influencing the uptake of household water connections in peri-urban Maputo, Mozambique," Utilities Policy, Elsevier, vol. 28(C), pages 22-27.
    4. Dominguez-Torres, Carolina & Foster, Vivien, 2011. "The Central African Republic's infrastructure : a continental perspective," Policy Research Working Paper Series 5697, The World Bank.
    5. Cecilia Briceño-Garmendia & Karlis Smits & Viven Foster, 2009. "Financing Public Infrastructure in Sub-Saharan Africa," World Bank Other Operational Studies 28238, The World Bank.
    6. Antonio Estache & Caroline Philippe, 2012. "The Impact of Private Participation in Infrastructure in Developing Countries: Taking Stock of about 20 Years of Experience," Working Papers ECARES ECARES 2012-043, ULB -- Universite Libre de Bruxelles.
    7. Sudeshna Banerjee & Heather Skilling & Vivien Foster & Cecilia Briceno-Garmendia & Elvira Morella & Tarik Chfadi, 2008. "Africa - Ebbing Water, Surging Deficits : Urban Water Supply in Sub-Saharan Africa," World Bank Other Operational Studies 7835, The World Bank.
    8. Whittington, Dale & Nauges, Céline & Fuente, David & Wu, Xun, 2015. "A diagnostic tool for estimating the incidence of subsidies delivered by water utilities in low- and medium-income countries, with illustrative simulations," Utilities Policy, Elsevier, vol. 34(C), pages 70-81.
    9. World Bank, 2008. "Zambia Growth, Infrastructure, and Investments : Role for Public Private Partnership," World Bank Other Operational Studies 19483, The World Bank.
    10. World Bank, 2012. "Central African Republic Public Expenditure Review : Creating Fiscal Space to Transition Out of Fragility Through Growth and Poverty Reduction," World Bank Other Operational Studies 13239, The World Bank.
    11. World Bank, 2009. "Cape Verde - Enhancing Planning to Increase Efficiency of Public Spending : Background chapters," World Bank Other Operational Studies 3024, The World Bank.

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