Households’ Willingness to Pay for Disaster Resilient Safe Drinking Water Sources in Southwestern Coastal Bangladesh

Abstract

Nonfunctionality of engineered water sources after two catastrophic cyclones—Sidr in November 2007 and Aila in May 2009—created acute scarcity of safe drinking water in coastal Bangladesh. The objective of this study was to estimate households’ willingness to pay (WTP) for disaster resilient water sources in Dacope upazila of Khulna District in southwestern coastal Bangladesh. By applying the double bounded dichotomous contingent valuation method to a dataset of 250 randomly selected households, we found that the mean WTP is BDT 263 and that inaccessibility to functional safe drinking water sources is the most significant determining factor of households’ WTP. Projecting mean WTP for a disaster resilient water source project in the study area, we measured a present value of aggregate WTP over project’s life span worth about BDT 624 (USD 7.37) million, which is about 14.30 times the present value of project’s aggregate establishment and maintenance cost. However, charging the local inhabitants a water tariff at mean WTP would lead to the exclusion of around 50% of the people from getting access to the improved water services or create a free riding problem. Through simulation exercises this study determined that the socially optimal water tariff is BDT 50 per month. This tariff would not only generate revenue of more than five times the project cost but would also create access to disaster resilient improved drinking water sources for almost 99% of the people.