Managing Water as an Economic Resource (Development Policy by James Winpenny

By James Winpenny

Water, already a scarce source, is handled as if it have been abundant and unfastened. the duty of offering sufficient water of the necessary caliber to turning out to be populations is straining experts and governments to the restrict because the financial and environmental expenses of recent provide resources boost and wasteful provide, supply and intake platforms persist. dealing with Water as an monetary source argues that the basis of the challenge is the failure of providers and shoppers to regard water as a scarce commodity with an fiscal worth. James Winpenny evaluates regulations for the enhanced administration of present call for, and attracts on case reviews from diverse international locations as he discusses how regulations will be carried out to regard water as an financial solid conferring significant fiscal, monetary and environmental advantages.

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It is inequitable, in that the poor pay much higher unit prices for their water than those fortunate enough to have piped supplies. Rent-seeking also appears in the delivery of irrigation water, and even in the provision of sanitation. In Kumasi, Ghana, people pay each time they use a public latrine—quite literally ‘spending a penny’— and half the revenue is appropriated by local political parties (Whittington, 1991). Formally, as noted in Chapter 1, the optimal allocation system is that which equates the marginal cost of supply with the marginal benefit (shadow price) of the water in use.

Urban tariffs were high, almost certainly above the level of long-term marginal costs, especially for industrial users, in order to subsidise the rural programmes. Subsequent changes have been in a downward direction. Demand was depressed and revenues fell as industries recycled water—a desirable result provided it was not taken to uneconomic lengths— and used cheaper private sources. This was an important reason why consumption fell below projections, especially in more recent years. Provision in the rural areas was less satisfactory.

The combined effect of these policies has been a reduction in per capita water use. e. stabilising groundwater levels). Tucson has to set goals for per capita consumption, which, if exceeded, in theory attract a fine of $10,000 per day from the State Department of Water Resources. Tucson’s official policy of conservation has been steeled by the active use of prices to help manage demand. The rate structure adopted in 1977, and revised in 1980, was basically an average-cost system, but the incorporation of seasonal peak pricing and the increasing block structure (whereby successive increments of consumption attract higher unit rates) were steps in the direction of marginal cost pricing.

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