822 Pkpu92 824—Pk—10102
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822 PKPU92 - 824—PK—10102 Willingness to Pay for Water in Rural Punjab, Pakistan Anjum Altaf Haroon Jamal Dale Wkittington -4 ‘%OI ~ IJNDP-World Bank Water and Sanitation Program The World Banlç, Washington, D.C., U.S.A. © 1992 The International Bank for Reconstruction and DevclopmentfFhe World Bank 1818 H Street, NW Washington, DC 20433 USA Cover photo: Mir Anjum Altaf Manufactured in the United States of America The UNDP-World Bank Water and Sanitation Program was organized as a joint endeavor of the United Nations Development Programme and the World Bank and has been one of the primary players in worldwide efforts to meet the challenge of providing basic water supply and sanitation services to those most in need in the developing world. Partners in this venture are the developing countries themselves and the multilateral and bilateral agencies that fund the Program’s activities. The UNDP-World Bank Water and Sanitation Program produces its own publications and also releases works under the auspices of the World Bank. The Program’s publications are divided into two series, a Water and Sanitation Program Report series and a Water and Sanitation Discussion Paper series. The Program Report series presents formal discussions of the Program’s operations and research activities as well as examinations of relevant projects and trends within the water and sanitation sector. Program Reports are subject to rigorous external review by independent authorities from appropriate fields. The Discussion Paper series is a less formal means of communicating timely and topical observations, findings, and opinions concerning Program activities and sector issues. This document has been prepared and psbllahed by the UNDP-World Bank Water and Sanitation Program, Water and Sanitation Division, Infrastructure and Urban Development Department, the World Bank. Copies may be obtained from the Water and Sanitation Division. Material may be quoted with proper attribution. The fimlinga, interpretations, and ~ndus1ons expressed In this paper are entirely those of the authors and should not be attributed In any manner to the UNDP-World Bank Water and Sanitation Program, the United Nations Development Programme, the World Bank, or any affiliated organizations. Any maps that acannpany the text have been prepared solely for the onnvenlenco of the readers, the designations and presentation of material In them do not Imply the expression of any opinion whatsoever on the part of the UNDP.World Bank Water and Sanitation Progam, the United Nations Development Programme, the World Bank, or any affiliated organizations. Table of Contents Table of Contents UI Acknowledgments vu Executive Summary ix 1. Introduction 1 Objectives 1 Policy Overview 1 Institutional Responsibilities 2 Levels of Service and System Costs 2 Tariffs 3 Future Plans 4 2. Study Design, Methodology, and Site Selection 5 Study Design 5 Methodology 5 Site Selection 6 Sampling within Villages 7 General Description of the Study Areas 7 Sheikhupura, Faisalabad, and Rawalpmdi Districts 8 3. Analytical Overview 11 Principal Lines of Inquiry 11 Actual Choice Behavior 11 Hypothetical Choice Behavior 11 Economic Viability of Investment in Rural Water Supplies 12 Description of Variables Used in the Analysis 12 Explanation and Rationale of Independent Variables 14 Estimation Techniques 18 4. Sweet Water Zone: Overview and Field Procedures 21 Policy Issues 21 Water in the Sweet Water Zone 21 Selection of the Study Villages 22 The Questionnaire and Bidding Games 23 Conducting the Survey 25 5. Findings in the Sweet Water Zone: Analysis of Actual Choice Behavior 27 Upgrading Service Levels 27 Who Installs Electric Motors? 27 Who Connects to Piped Water Systems’ 28 Electric Motor and Household Connection as Alternative Choices 29 Program Report Series iii 6. Findings in the Sweet Water Zone: Analysis of Willingness-to-Pay Bids 31 Hypothetical Choice Behavior 31 Service Options Offered 31 Response of Households in Villages without an Operational Water System 32 Response of Households in Villages with an Operational Piped Water System 33 7. Estimated Revenues and Cost Recovery Potential 37 Provision of a Standard Piped Water System in Villages Familiar with Such Systems 37 Provision of a Standard Piped Water System in Villages Unfamiliar with Such Systems 39 Provision of an Improved System in Villages with an Existing Piped Water System 40 Experiments with Alternative Financing for Household Connections 41 8. Brackish Water Zone: Overview and Field Procedures 43 Selection of Study Villages 44 Description of the Questionnaire and Bidding Games 44 Conducting the Survey 45 9. Findings in the Brackish Water Zone: Analysis of Actual Choice Behavior 47 Who Installs Electric Motors? 47 Who Connects to Piped Water Systems’ 48 Electric Motors and Household Connections 49 10. Findings in the Brackish Water Zone: Analysis of Willingness-to-Pay Bids 51 Willingness to Pay for Connection to a Standard System 51 Willingness to Pay for Connection to an Improved System 52 Response of Households in Villages with and without Operational Piped Water Systems 53 Response of Unconnected Households in Type A Villages 54 11. Estimated Revenues and Cost Recovery Potential 55 Costs of Piped Water Systems 55 Provision of a Standard Piped Water System 55 Provision of an Improved Piped Water System 55 Comparison of Standard and Improved Piped Water Systems 58 12. Arid Zone: Overview and Field Procedures 61 Selection of Study Villages 62 Description of the Questionnaire and Bidding Games 63 Conducting the Survey 64 13. Findings in the Arid Zone: Analysis of Willingness-to-Pay Bids 65 Service Options Evaluated 65 Response of Households in Villages without Plans for Installation of Public Water Systems 65 iv UNDP-World Bank Water and Sanitation Program Willingness to Pay for Connection to a Standard PFIED System with House Connections 66 Willingness to Pay for an Improved Piped Water System with House Connections 66 Multivariate Analysis of Willingness-to-Pay Bids for Piped Water Systems 67 14. Estimated Revenues and Cost Recovery Potential 71 Costs of Piped Water Systems 71 Provision of a Standard Piped Water System 71 Provision of an Improved Piped Water System 73 Provision of a Piped Water System Based on Public Taps 74 15. Conclusions and Policy Suggestions 79 The Nature of Demand for Water in Rural Areas 79 Private Upgrading of Service in Central Punjab 79 The Economics of Village Water Supply Options 81 The Arid Zone 82 Discussion 83 References 87 Appendixes Appendix A 91 Village Profiles 91 A2 Village Profiles 92 A.3 Profiles by Village and Household Type 93 A.4 Pattern of Household Choice over Available Service Options and Approximate Private Costs 94 A.5 Reasons Mentioned by Households for Obtaining a Domestic Connection to Piped Water System 95 A.6 Reasons Mentioned by Households for not Obtaining an Domestic Connection—Type A Village 95 A.7 Relationship between Economic Standing and Choice of Service Level—Type A Village 96 A.8 Level of Satisfaction with Piped Water Supply System—Type A Village . 97 k9 Major Shortcomings of Piped Supply System Mentioned by Households—Type A Village 97 A.I0 Most Important Improvement in Piped Supply System Desired by Households—Type A Village 97 A.11 Household’s Information/Beliefs Regarding Characteristics of Piped Water and Alternative Supply Systems 98 A.12 Number of Years Households Would Keep Handpumps Operational If a Piped Water Supply System Existed in Their Village 99 A.13 Household Preference Regarding Responsibility for Operation and Management of Piped Water Supply Systems 99 Program Report Series v 100 Appendix B B.1 Decision to Install an Electric Motor: Results of a Logit Model 101 B.2 Decision to Connect to a Piped Water Supply System: Results of a Logil Model 102 B.3 Statistical Analysis of Willingness to Pay for a Standard Piped Water Supply System: Results of Ordinary Least Squares Regression Model 103 B.4 Statistical Analysis of Willingness to Pay for an Improved Piped Water Supply System by Households in Villages with an Existing Piped Water Supply System: Results of an Ordinary Least Squares Regression Model 104 Appendix C 105 Cl Distribution of Willingness-to-Pay Bids for a Standard Piped Water System in Villages without an Operational Piped Water Supply 105 C.2 Distribution of WTP Bids for a Standard Piped Water System with a Flexible Financing Arrangement in Villages without an Operational Piped Water Supply 106 C.3 Distribution of WTP Bids for an Improved Piped Water Supply in Villages with an Operational Piped Water System 107 C.4 Connection Frequencies and Estimated Revenues: Provision of a Standard Piped Water System in a Type Bi Village 108 (15 Connection Frequencies and Estimated Revenues: Provision of a Standard Piped Water Supply System in a Type B2 Village 108 (16 Connection Frequencies and Estimated Revenues: Provision of an Improved Piped Water System in a Type A Village 109 (17 Connection Frequencies and Estimated Revenues: Responses to Different Options by Unconnected Households in a Village with an Operational Piped Water Supply 109 Appendix D 110 D.1 Village Profiles 110 D.2 Village Profiles 111 Di Profiles by Village and Household Type 112 D.4 Pattern of Household Choice over Available Service Options and Approximate Private Costs 113 D.5 Reasons Mentioned by Households for Obtaining a Domestic Connection—Type A Village 114 D.6 Reasons Mentioned by Households for Not Obtaining a Domestic Connection—Type A Village 114 D.7 Relationship between Economic Standing and Choice of Service Level—Type A Village 115 D.8 Level of Satisfaction with Piped Water Supply System—Type A Village . D.9 Major Shortcomings of Piped Water Supply System Mentioned by 115 Households—Type A Village 116 D.10 Extent of Information Regarding Parameters of Piped Water Systems 117 D.11 Cost of Piped Water Systems 118 D.12 Perceptions Regarding Quality of Water 118 D.13 Household Preference Regarding Responsibility for Operations and Maintenance of Piped Water Systems 119 vi UNDP-World Bank Waler and Sanitation Program 120 Appendix E E.