A Private Public Partnership for Water Provision: Evidence from a Willingness to Pay Study in Kolkata Chirodip Majumdar Assistant Professor, Department of Economics, Rabindra Mahavidyalaya, Champadanga, Hooghly, West Bengal, India
Paper Presented in India Water Week on Efficient Water Management:Challenges and Opportunities at Vigyan Bhawan, New Delhi, April 08-12,2013
Why this Study? •To Formulate a Water Pricing Principle that Incorporates Consumers’ Willingness-to-Pay(WTP). •To Propose Support Schemes for the Underprivileged. •To Observe Scope of Private Public Partnership as a Management Option.
Where this Study? •Kolkata (Calcutta), the Capital of West Bengal, India.
When this Study?
•Water Pricing Structure in Calcutta is in a Transitional Phase. •Political and Public Debate Regarding Introduction of a Suitable Water Charge.
How this Study? •A Contingent Valuation Study that Used a Dichotomous Choice WTP Question. •A Household Production Function Framework to Measure Monthly Expenditure on Water Source, Averting Method and Waterborne Illness.
Novelty of the Study •A Transitional Phase Pricing Scheme Incorporates Consent of Users and thus Redress Public and Political Resentment. •A Pricing Structure that can be a Base for Full Cost Recovery in Future.
Present State of Water Infrastructure in Calcutta • Calcutta Municipal Corporation (CMC) is the Largest Surface Water Supplier. Most of the Wards are Fed by Surface Water Supply Completely. • CMC Utilise Ground Water where Surface Water does not Reach. Private Ground Water Sources are also Used. • Nearly 75 Percent of Population is Covered by Municipal Water Supply System. • Standposts Supply to Meet the Demand of Slum Dwellers. • Undesirable Water Quality is the Major Concern of Water Supply System in Calcutta. • Domestic Consumers Generally do not Pay for Water. • Budgetary Allocation on Water Sector is Huge though Revenue Generation is Very Low.
Survey Design • Samples Selected from 10 Wards of Calcutta. • Fifty Households from Each Ward were Chosen from Equidistant Neighbourhoods. • Purposive Sampling was Used to Obtain a Representative Data. • Properly Pretested Questionnaire. • Direct Interview of the Head of the Household by Trained Surveyors. • A Response Rate of 88 Percent. • Average Time for Interview 16 Minutes.
Contingent Valuation Survey Design Issues • A Hypothetical Scenario. • A Risk Ladder Diagram Explaining the Benefit of the Programme. • Information about Alternative Options Available to the Consumer. • Reminder of the Budget Constraint. • A Dichotomous Choice WTP Question. • Higher Expenditure as Utility Bill as the Payment Vehicle. • Quantity Aspect of the WTP Query Captured in terms of Present Use of Water. • Monthly Periodicity of Payment.
% of Yes Response
Willingness to Pay Responses 100 90 80 70 60 50 40 30 20 10 0
52.4 39.8 30.1 26.5
Bid Value (in Rs.)
Results of the Contingent Valuation Study • 17 Protests. • A Logit Model was Used to Estimate Mean WTP of Rs. 59.59 per Household per Month. • Average Water Use of 93.5 Litres per Capita per Day. • Households Already having an In-house Surface Water Connection have Lower Chance to Pay for the Proposed Programme. • People Making Higher Out-of-Pocket Expenditure on Averting Inputs and Treatment for Waterborne Diseases were More Eager to Pay for an Alternative Desirable Quality Water Supply. • Respondents Expecting Substantial Reduction in Averting Expenditure and Medical Treatment are Likely to Pay More. • Education Level of the Respondent, Presence/Absence of Children in the Household,Monthly Household Expenditure were Found to be Significant Explanatory Factors of Variation in WTP Response.
50 45 40 35 30 25 20 15 10 5 0
Expenditure in Rs.
Monthly Out-of-Pocket Expenditure on Water in Rs.
Opinions Regarding Water Provision for the Poor (Percentages in Parenthesis) Opinion
Poor should pay in full
Part government subsidy, part payment from poor and part crosssubsidy
Part government subsidy and part payment from poor
Full government subsidy to the poor
Policy Implications • A Uniform Volumetric Charge of Rs. 4 per Kilolitre. • Households below Poverty Line should Face the Same Charge but will get Average Basic Water Requirement Free. • No Objection on Private Water Utility Operator. • A Public Private Partnership where the Private Operator Charges at WTP and Government Supports the Poor.
Limitations of the Study •Real WTP at the Time of Implementation will Depend on Nature and Extent of Consumer Education. •Does not take into Account the Actual Preference of Urban Poor.
Conclusion •Simple, Transparent and Easy Understandable Uniform Volumetric Charge of Rs. 4 per Kilolitre. •Rebate for the Underprivileged to Meet Basic Water Requirement. •PPP as a Management Option.
Thanks for Your Patience