Full Cost Recovery, Affordability, Subsidies and the Poor
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Publication Title | Full cost recovery, affordability, subsidies and the poor |
Publication Type | Paper presented at the International Conference on the Right to Water and Sanitation in Theory and Practice
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Author(s) | Dr. Simone Klawitter, GTZ German Technical Cooperation, Water sector reform program
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Publication Date | 27 Nov 2008
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ISBN-ISSN-EAN | |
Publication URL | |
Contact | |
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Contents |
Summary
Water has become an economic good for which everyone, even the poor, must pay. Household willingness and ability to pay has featured highly in recent thinking on water and sanitation. Even the very poor are willing to pay a large amount of their family budget for access to either a centralized water supply or a supply by a public standpipe knowing that water supply by water vendors is even more costly. To built, rehabilitate and manage water and wastewater infrastructure is cost intensive. The ability to pay for water is limited, and not only in developing countries. Setting the water price right is a balancing act between following the full cost recovery principle and affordability of water and sanitation service taking account of the several possibilities of water subsidies.
The need for subsidies and incentives to help to provide water and sanitation services is understood and widely accepted. Establishing and running a well functioning water and sanitation system, it must be ensured that no human being is excluded from the service due to affordability concerns. Since access to water also generates positive externalities especially regarding health aspects and economic prosperity of the region, equity concerns become very important and need careful targeting by subsidies.
In the light of water as a human right, the question of subsidies appears in a new light. Poverty oriented subsidies can be an important instrument to finance access for poor population segments.
The paper intends to provide information on water and sanitation subsidies in use and elaborates relevant implementation issues especially taking into account the human right to water. Special attention is given to information which is important for commissioning and executing technical assistance to governments interested in exploring the potential of pro-poor water subsidies for water sector reforms. For some of the more in-depth issues discussed, the reader is referred to case studies analysing subsidies in use.
The paper concludes by looking at policy and programming considerations. Key among these are debates on design of subsidies and finance for delivery of pro-poor water and sanitation services which tend to be narrowly focused in traditional sector boundaries. But it is important to recognise that water and sanitation is just one of a wide range of different services typically consumed by poor households. Interventions therefore need to be carefully coordinated to maximise complimentarity and contribute to objectives which transcend individual sectors.
