Research study on financing, pricing and cost recovery - water supply and sanitation services. Volume II. Analysis on willingness-to-pay

In the field of infrastructure management, appropriate strategies on financing, pricing and cost recovery are needed to sustain the system. Water supply and sewerage services (WS&SW), in particular, need special emphasis in view of the important role these services play in human resource development. Presently in India, these services are poorly organized. This study is based on extensive user surveys at both the household and commercial/industrial/institutional levels administered in eight cities: Delhi, Madras, Lucknow, Surat, Visakhapatnam, Solapur, Raipur and Bhubaneswar which exhibit a variety of management patterns. This report, presenting the results of the study, contains seven chapters. After an introduction, Chapter II presents a socio-economic profile of households (hhs) in the selected cities in terms of family size, education, type of house, employment and income levels. Chapter III assesses the general characteristic features of the WS/SW services across the selected cities. Information given on WS services includes: sources and quality of water, methods of obtaining water connections, hh expenditure on WS payment to public authority and capital investment made on hh infrastructure related to WS, and choice of payment for service. On SW service, level of sanitation, expenditure by hhs on the service - municipal and non-municipal, and preferences for improvement of the service are discussed. An analysis of the willingness-to-pay (WTP) for existing/improved WS&SW services is presented in Chapter IV, noting that qualitative and quantitative aspects play a crucial role in a hh's decisions. Chapter V presents the views of non-domestic and domestic users on investing in equity/debenture/bonds, and focuses on issues related to the gaps in infrastructure, the role of debt instruments and the response of the consumers to investment in the capital market. Chapter VI develops a methodology to estimate the WTP and provides a tool to assess the implications of different investments and pricing strategies on efficiency, financial self-sufficiency, affordability and equity. This paves the way for the presentation in Chapter VII of a preliminary version of a simulation model for pricing and financing, its data requirements and sample results obtained in two cities - Surat and Solapur. A note on policy considerations is presented in Appendix 1.