Monday, September 15, 2008

On the municipal price of water

Too low prices for water affects quality of service and have detrimental impacts on the poor. Lessons from India as discussed on Aguanomics:

Municipal water in India, for example, is priced so low that revenues rarely cover the operating costs much less the capital costs of drinking water supply. As a consequence, there is never enough incentive to conserve water and never enough money to maintain the water lines. Consequently, leakage rates (Unaccounted for Water Losses) frequently approach 70%. Ironically, the prices are kept low in the name of protecting the poor but the poor are rarely even connected to the water lines and they wind up gathering water from hydrants or vendors at costs per kiloliter 10 to 20 times as much as that charged to their wealthier neighbors.

Furthermore, while the low prices may seem like a bargain for the middle and upper income consumers, the combination of high leakage rates and poor service mean that most people only receive water for a few hours per day. 

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