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Water, water everywhere…

Shanta Devarajan's picture

 

 

 

 

 

 

 

 

 

 

 

 

 

On a panel at Water Week, I suggested that most of the problems with urban water come from the same source: mis-pricing of water. 

Water is a private good (if I drink a glass of water, you can’t drink it).  Private goods should be priced at their marginal cost.  Because poor people, like everybody else, need water for life, but they may not be able to afford it, governments typically subsidize water—i.e. price below marginal cost.  A subsidy means that somebody other than the consumer is paying the utility to deliver water.  In many countries, this somebody is a politician, who then uses the power associated with the subsidy for political patronage.   Water pipes go to neighborhoods of the politician’s choosing (which may not be where the poor live).   Meanwhile, poor people, because they need water, buy it from water vendors at 5-16 times the meter rate. 

 

Studies show that the poor also bear coping costs that are more than the cost of supplying water.  In short, the very people we were hoping to protect by subsidizing water are the ones who don’t get the water.  As a poor farmer in Andhra Pradesh once said after a reform raised the price of water to marginal costs, “We will never again allow the government to give us free water.”

Note that the solution is not necessarily to privatize the water company.  It is simply to price water at marginal cost, regardless of whether the utility is private or public. But how can we expect the poor to pay?  By definition they have less money.  

The analogy with cell phones is apt.  Roughly half of Africa’s poor have access to a cell phone.  There is no subsidy: they pay the full cost, even if it is a 50-cent phone card.  And water is a greater necessity than a cell phone.

Raising the price of water to marginal costs is difficult because politicians will resist it, since power will now shift from them to the consumer.  How then can we effect this change, which will benefit millions of poor people?  The only thing I can think of is to widely disseminate the information about coping costs and extremely high prices charged by water vendors, so that the broader public will resist the calls by politicians to keep water prices low. 
 

Comments

Submitted by Lee Travers on
Shanta: Please don't glibly label vendor water prices that are several times higher than (what you tell us are artificially low) metered prices as "extortionary". We don't have a big bundle of empirical work on the topic, but that we have doesn't suggest that vendors earn extraordinary rates of return. True, in rare places cartels achieve that, but most often it's just another competitive business with low barriers to entry and normal returns. If politicians can quote prominent economists as labelling vendor returns extortionary, it will simply divert the dialogue from the core issue that you so nicely identify.

Lee: You're absolutely right. There was no evidence that these prices are extortionary; they're simply very high. Thanks for calling me on the carpet. Shanta

Submitted by Horace Moning on
I a poor black man but i alway wanted to do something for Africa.I want with the water thing if i can afford it.

Submitted by Akinradewo Modebitoye Orobola on
TO me i think water should be free,because water is vital for all,70.9% of water covers the earth surface,clean drinking water is important to al humans and other lifeforms,there must be access to safe drinking water,that is tasteless,transparent,and odorless as the universal solvent. As we know that water is fit for human consumption ,potable water should be available at less cost,by the government,water tankers should be provided by the local government to reach the communities where clean water is not available,supply of cheap potable water with easy distribution to the public or consumer. Boring wells ,reservoirs should be made available to the community on government support,there must be free access to enough safe water supply ,not only to the riches,it must be potable water for all. Promote partner organization that can help communities design and construct sustainable water supply system,that will counter negative effects of lack of adequate water,since water is unique and limited resource. Also there must be water control,that guarantee an efficient use of water,as water is scarce in some areas and is wrong distributed,but very important and must present in all aspect of our life,as millions of people who have no access to portable water, government should collaborate with private entities that make water supply available to the consumer by delegating an institution or board that sees to water control,price,and it´s distribution. Providing safe drinking water and sanitation to people in developing countries,will enhance health, sanitation, and economic development, for poor sanitation can claims lives through disease than any war through guns,lack of safe water supplies can cause infection in impoverished slums and shanty-villages or town with no sanitation facilities or proper hygiene and nutritional status. Therefore it is good to Educate people about how to preserve water to avoid waste,also wastewater management system should be introduce in all town,above all there must be access to clean water ,by the populace. WATER SHOULD BE FREE FOR THE LESS PRIVILEDGE AND EVEN COST LESS FOR THE RICHES,FOR WATER IS A FREES GIFT FROM GOD,ONLY THE PROCESS OF MAKING IT PURE COST MONEY,AND GOVERNMENT SHOULD ASSIST THE WATER INDUSTRY.

Submitted by Anonymous on
The World Bank will never let you have water free. They will encourage western corporations to own the rain in your country... They will go to every country and commodify every aspect of your life, based on a deep-seated, almost religious belief in their own theories. And they will draw these wonderful mathematical pictures to "prove" that they are right. Protest is futile.

Submitted by Akinradewo Modebitoye Orobola on
TO me i think water should be free,because water is vital for all,70.9% of water covers the earth surface,clean drinking water is important to al humans and other lifeforms,there must be access to safe drinking water,that is tasteless,transparent,and odorless as the universal solvent. As we know that water is fit for human consumption ,potable water should be available at less cost,by the government,water tankers should be provided by the local government to reach the communities where clean water is not available,supply of cheap potable water with easy distribution to the public or consumer. Boring wells ,reservoirs should be made available to the community on government support,there must be free access to enough safe water supply ,not only to the riches,it must be potable water for all. Promote partner organization that can help communities design and construct sustainable water supply system,that will counter negative effects of lack of adequate water,since water is unique and limited resource. Also there must be water control,that guarantee an efficient use of water,as water is scarce in some areas and is wrong distributed,but very important and must present in all aspect of our life,as millions of people who have no access to portable water, government should collaborate with private entities that make water supply available to the consumer by delegating an institution or board that sees to water control,price,and it´s distribution. Providing safe drinking water and sanitation to people in developing countries,will enhance health, sanitation, and economic development, for poor sanitation can claims lives through disease than any war through guns,lack of safe water supplies can cause infection in impoverished slums and shanty-villages or town with no sanitation facilities or proper hygiene and nutritional status. Therefore it is good to Educate people about how to preserve water to avoid waste,also wastewater management system should be introduce in all town,above all there must be access to clean water ,by the populace. WATER SHOULD BE FREE FOR THE LESS PRIVILEDGE AND EVEN COST LESS FOR THE RICHES,FOR WATER IS A FREES GIFT FROM GOD,ONLY THE PROCESS OF MAKING IT PURE COST MONEY,AND GOVERNMENT SHOULD ASSIST THE WATER INDUSTRY.

Submitted by Anonymous on
The true development is surely brought by the people themselves and imposed by the government or development partner. People feel that they are part of development process and therefore sense of ownership is cultivated. The development of anything is about brain alerts, if develop area say providing water free of charge means they can even sabotage the infrastructure, even cut pipes of water for cattle consumption especially in areas of pastoralists. There is evidence that, households where there is violence against women, women prefer to fetch water far away as a way of relaxation. So before one imposing subsidies to water first must let know why they are given water, if possible contribute to the water services except older people.

Submitted by mwakarama on
Shanta: Thanks for sparking a debate of this topic. Subsidy cannot be non-definitive; first of all Industrial water consuption will render that subsidy meaningless... the real beneficiary don't even access that water anyway. I have written an un-published book on this subject; a rural town in Northern Uganda my case study. Narrating the story of poor (local government) rural water and sewage management. Your topic now cuts in with new factor; how do you categorize industries in your subsidy; in the big cities there are, mineral water bottlers, soda bottlers, beer bottlers - the whole works - how do you differenciate the poor (who are closer to your program) from these large-scale profit makers? Water supply categorize consumption into categories; household, commercial, industrial, Urban stand points, Urban Poor... but it does seem as though these categorizations are applied to identify pipe-run from the municipality reserviors to end-consumers (nothing to do with price settings). But obviously, your debate topic now introduce "Pricing" as a factor. So that WB water subsidy might clearly identify for you your relevant consumers - the real beneficiaries of your subsidy... needless to say that government would benefit in the sence that, categorizing consumers will help reorganize urban piping, which represent enormous civil engineering.

Submitted by Anonymous on
Why not solve the problem by ensuring that the wealthier countries can pay the additional costs of supplying water to all the urban areas. Water is not that expensive, local governements could chip in, maybe even consumers pay a small price. Water is so essential to development, it is probably an area that international aid should focus more on.

Submitted by plumbing on
For a poor country like Africa , I think it would be very helpful if the price of water will become cheaper.I also agree that clean water is a basic necessity and government should make sure that their citizens will be well distributed with safe drinking water.

Submitted by Ashwini Saxena on
Water, contrary to the general feeling, is not freely available. I have been working in the desert district of Barmer in Rajasthan, India and see how much precious and rare, the commodity that we take for granted, is. Out of 237 water zones, only 30 odd are not in the so-called dark zone (where ground water has been tapped more than appropriate)in the state. What does it mean, it does not mean jsut the shortage of wtaer, it actually means poor water management. Going by the argument that water is a natural resource and a public asset, the control on water bodies by government has to be very strict, this then even amounts to not allow farmers to have dug wells/ borewells for watering the fields. But this becomes an unviable option and thus water though a public asset, gets extracted by all. The challenge that governments face is how to regulate this, who should be/ should not be allowed to extract water, who is to decide as to what is the amount necessary for a person/ household/ factory and so on. This where a market based approach comes in and gets its merit, obviously with the caveat that it tends to make it a more of a commodity than a natural resource. Invariably the private sector has put in the resources to tap very large amounts of ground water and sell it at a premium price. They use the natural (public) resource and charge for it. The way of circumventing this is evidnet the moment you ask for a bill of the wtaer supplied. The bill is for delivery of water, which actually means simply transportation of water. This kind of commercial extraction of water has led to severe water crisis, further fuelled by the lack of rains and any perennial water bearing rivers. Thus while there is little that anyone can do in terms of the raw material supply (i.e. water), the pumping out is completely unregulated/ unmanaged. If this can be curbed a lot fo maladies can be remedied.

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I agree with this comment: "For a poor country like Africa , I think it would be very helpful if the price of water will become cheaper.I also agree that clean water is a basic necessity and government should make sure that their citizens will be well distributed with safe drinking water. "

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