Redistributive impact of increasing block residential water rates: some empirical evidence from Mauritius

Abstract

This paper presents empirical results on progressive incidence of water charges that contradict conventional wisdom in developing and many developed countries. Family size in Mauritius is larger among high-income categories relative to low-income groups. Because of this unusual demographic dimension, increasing block tariffs coupled with lifeline rates below long-term marginal costs applicable to low-volume users produce a different result. Regional disparities in water demand among residential users further contribute to a redistributive strategy. It is interesting to note that extensive metering in urban and rural areas allows low-income consumers to end up in low-rate blocks. Empirical estimates of price, income and household size elasticities for different income categories reveal that low-income households face more than average price elasticity of demand for water and less than average income and household size elasticity. In the light of these results, it has been established that increase in demand for water among richer households has the potential of improving equity in water charges. Computed marginal budget shares derived from a linear expenditure system show that the amount of supernumerary income would be higher for richer people, so that a percentage increase in income may result in higher level spending on water when compared to lower-income households.

The transformative effect of the introduction of water volumetric billing in a disadvantaged housing area in Sweden

“…Depending on the way water is perceived and the societal structure, different payment and subsidy systems have been used. Welfare effects of block tariffs and flat rates have been investigated in Mauritius (Madhoo, 2011), São Paulo (Ruijs, 2007) and Manaus (Olivier, 2010), while Gomez-Lobo et al (2000) considered water-subsidy schemes in Latin America. Gawel et al (2013) compared different approaches to measure affordability.…”

Free-Market Economics and Developmental Statism as Political Paradigms: Implications for Water Governance Theory and Practice in Developing Countries

“…This is a pricing structure that provides some amount of water to poor residents at very low prices, while requiring wealthier residents to pay higher prices. Increasing block-rate tariffs have been implemented in many countries, as they enable water agencies to establish a very low price for the volume of water required for subsistence, while charging much higher prices for water deliveries in excess of minimal requirements (see Evans et al 2002 ;Madhoo 2011 ).…”

Key issues and trends in the water policy literature

“…Three papers looked more broadly at a societal level (Kallidaikurichi and Rao 2010;Reddy 2010;Whitford, Smith et al 2010). Five papers were published on WSS issues in 2011, none of which were focused primarily on just rural or urban WSS issues but considered a broader societal issue, such as van Vliet and Oosterveer (2011) who examined the role of social sciences in improving access to sanitation, Vasquez (2011) who explored official perceptions of municipal water services in Guatemala, Madhoo (2011) who looked at the equity issues resulting from increasing block tariffs, van de Loo (2011) who examined privatisation effects on water access in Kenya, and Mayberry and Baker (2011) who examined the sustainability of small water suppliers in Brazil. Four of the papers published in 2010 and 2011 had been cited by the end of 2011.…”