Possible adverse effects of increasing block water tariffs in developing countries

Abstract

The use of increasing block water tariffs is widespread throughout developing countries. An increasing block tariff (IBT) is a price structure in which a commodity is priced at a low initial rate up to a specified volume of use (block), then at a higher or several increasingly higher rates for additional blocks used. The findings from the survey in Kumasi show that the increasing block tariff is not achieving its objective of helping the poor to obtain water at minimal cost. Quite the contrary - the poor often pay higher average water prices than better-off households. There are two reasons why this is so. First, households in high-density housing conditions must pay more per unit under the IBT structure than households that share a connection with only a few others. Second, many low-income families do not have private connections at all and purchase water from neighbors, who thus become caught up in increasing block rates as well and probably pass them along to the buyer. These conditions will not occur in all developing countries, and where they do not exist the use of IBT structures may be appropriate. The regressive effects of IBT structures discussed in this article are almost certainly a problem with water pricing policy in other developing countries as well as in Ghana. -from Author