Households’ preferences for water tariff structures in Kathmandu, Nepal

Bhim Raj Suwal, Jane Zhao, Aditi Raina, Xun Wu, Namrata Chindarkar, K. C. Bal Kumar, Dale Whittington*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

Despite being politically sensitive, water tariffs are frequently administered without information about households’ preferences for tariff structures. In this paper we examine the tariff preferences of 1,500 households in Kathmandu, Nepal. We first use a bivariate probit model to examine stated preferences for (1) an increasing block tariff (IBT) and (2) a positive fixed charge. We find that household preferences for IBTs and fixed charges are not easily explained by household socioeconomic and water use characteristics. Second, we ask respondents what they think a fair water bill would be for a randomly assigned quantity of water. We model the responses as a function of both quantity and household socioeconomic and water use characteristics. While households support a water tariff that results in a household’s water bill increasing as a household’s water use increases, we do not find evidence that households support an increasing, nonlinear relationship between water use and a household’s water bill. Our results suggest that respondents desire affordable piped water services and water bills that are calculated fairly for everyone. Because the notion of fairness in Kathmandu varies, utility managers may have considerable latitude in choosing a tariff structure that focuses on other objectives, such as cost recovery, revenue stability, and economic efficiency.

Original languageEnglish
Pages (from-to)9-28
Number of pages20
JournalWater Policy
Volume21
Early online date26 Aug 2019
DOIs
Publication statusPublished - 1 Dec 2019

Keywords

  • Household preferences
  • Increasing block tariff
  • Tariff design
  • Water tariff structure

Research Beacons, Institutes and Platforms

  • Global Development Institute

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