Water Pricing to Promote Equity, Efficiency and Sustainability in Faisalabad

LEAD ORGANIZATION

LEAD Pakistan

ORGANIZATIONS INVOLVED

International Growth Center (IGC)

Problem Statement

A better understanding of household water use in developing countries is necessary to manage and expand water systems more effectively while analysis of pricing structure and income elasticities are crucial to devise relevant policies of subsidizing improved water supply, particularly in urban areas of developing economies.

Case Study

This study aims to analyze pricing structure for better management and allocation of water, based on principles of efficiency, equity and sustainability. This study has following objectives:

  1. To review water bodies’ structure and existing water supply policies in Faisalabad Metropolitan.
  2. To estimate price and income elasticity in different segments of the urban area. This analysis can provide better judgement about existing pricing structure and guiding principles for improvement in water infrastructure management.
  3. To analyze consumer perceptions and willingness to pay for safe drinking water in among different income groups as well as different localities.
Primary data collection was undertaken through a survey of 1200 households to estimate demand for drinking water among different water user segments within the urban localities. The main contribution of this study is to provide measures of filtered and un-filtered demand elasticity using robust estimations methods, which may be helpful for policy guidance to devise the pricing structure for urban water utilities. It also predicts consumer perception and willingness to pay for quality drinking water.

Key Concepts

Identifying inefficiencies in water supply, its usage and other environmental and health issues are central to providing a decision context for policy response and action about efficient water supply to urban households.

Outcomes & Lessons Learned

It is observed that on average unfiltered water consumption is high as compared to filtered water consumption. The variable sickness shows that a majority of the region’s population has reported water related diseases which implies that clean water is an important need of the households in Faisalabad. The correlation of price with residential water demand is negative while the correlation of income with residential water demand is positive. The correlation of distance and time to fetch water is negative. The household size, which is a proxy for house story, is positively associated with water consumption. It is noteworthy that the highest correlation lies between price and water demand and between with distance of water source and water consumption. Thus, price and distance are the more conducive factors which determine residential water demand in Faisalabad.

KEY WORDS

Water pricing, equity, sustainability, urban, cities

COUNTRIES OR REGIONS INVOLVED

Faisalabad, Pakistan

KEY STAKEHOLDERS

Domestic water consumers

About the Knowledge Platform

The Knowledge Platform is designed to promote and showcase an emerging set of approaches to water resources management that address climate change and other uncertainties -- increasing the use of "bottom-up approaches" through building capacity towards implementation, informing relevant parties, engaging in discussion, and creating new networks. This is an ongoing project of the Alliance for Global Water Adaptation (AGWA) funded by the World Bank Group.

Contact AGWA

Alliance for Global Water Adaptation
7640 NW Hoodview Cir.
Corvallis, Oregon 97330
USA
http://alliance4water.org