Community Water Supply: Should The Poor Have To Pay

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

2. 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%.

3. 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.

4. 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

5. 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

6. ExpendituresUS$ 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

29. 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?

30. What is Most Important Need? • HigherPrices • Revenues don’t usually cover costs • Systems fall into disrepair • Users stop paying their bills • Downward spiral of decline and disuse

31. Is Water Ordinary or Social Good? • Ordinary • Exclusion • Accessibility • Consumption • Subtractability • Benefits don’t decrease with multiple users

34. 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

35. Examples of Worthy Goods • Public Schools & Colleges • Chapel Hill Buses • Museums • Vaccinations • Highways

36. 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

37. 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

38. 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

39. Problem With Large Users Block 1 Block 2 Price P2 P1 Quantity Q1 IBT with lifeline rate for “the poor”

40. 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

41. 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”

42. 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

43. What Seems To Be Needed • Can’t subsidize consumption unless rich use more water than poor • Hard to get info ex ante fortariffdesign • Subsidizing connections is more important than subsidizing consumption • Subsidize all connections, not just “poor” • Run temporary lines into squatter areas • Subsidize private water resellers

44. 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 Questionnaire

45. 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 Questionnaire