Delhi Water Supply & Sewerage Services : Coping Costs, Willingness to Pay and Affordability

Smita Misra, Sr. Economist, SASEI, World Bank

December 2006

Delhi Water Supply & Sewerage Services : Coping Costs, Willingness to Pay and Affordability

Smita Misra, Sr. Economist, SASEI, World Bank

December 2006

Overall Study ObjectivesOverall Study Objectives

• To understand Water Supply & Sewerage (WSS) conditions and preferences of representative consumers - Quantity & quality of water consumed- Coping strategies (including use of groundwater) and cost- Demand & preferences for water supply services- Affordable contributions for preferred options

Sample SizeSample Size Delhi (10,000)Delhi (10,000)Delhi (10,000)

Domestic Consumers

(8000)

Domestic Domestic Consumers Consumers

(8000)(8000)

Non-Domestic Consumers

(2000)

NonNon--Domestic Domestic Consumers Consumers

(2000)(2000)

UnderservedUnderserved Authorized Flatted

Authorized Flatted

Authorized Plotted

Authorized Plotted

Juggi Jhopri JJ (Slum) ClustersResettlementColoniesUnauthorized Non-RegularizedUnauthorized RegularizedUrban VillageRural Village

Juggi Jhopri JJ (Slum) ClustersResettlementColoniesUnauthorized Non-RegularizedUnauthorized RegularizedUrban VillageRural Village

Janta Flats/ Type I/ One room tenements

Low Income Group (LIG) Flats / Type II

Middle Income Group (MIG) Flats

High Income Group (HIG) Flats / Luxury Apartments

Janta Flats/ Type I/ One room tenements

Low Income Group (LIG) Flats / Type II

Middle Income Group (MIG) Flats

High Income Group (HIG) Flats / Luxury Apartments

Plots < 100 sq m

Plots 100-150 sq m

Plots 150-300 sq m

Plots > 300 sq m

Plots < 100 sq m

Plots 100-150 sq m

Plots 150-300 sq m

Plots > 300 sq m

Commercial

Institutional

Industrial

Commercial

Institutional

Industrial

Representative Consumer Categories Representative Consumer Categories Surveyed in Different ZonesSurveyed in Different Zones

Sampling Design: Domestic ConsumersSampling Design: Domestic Consumers

• Multi-stage stratified random sampling methodology (Voter List)- Stage I: Zones- Stage II: Colonies- Stage III: Households

• Sampling separately undertaken for:- Delhi Jal Board (DJB) Pilot Project in South 2 & 3 zones- Rest of Delhi under DJB, New Delhi Municipal Corporation

(NDMC) & Delhi Cantonment Board (DCB)

Structure of this PresentationStructure of this Presentation

• Existing Water Supply Arrangements; Compulsions for Coping Strategies and Costs

• Willingness to Pay for Improvements in WSS Services

• Affordability Analysis

• Key Findings

Existing Water Supply Arrangement Existing Water Supply Arrangement ……AuthorisedAuthorised ColoniesColonies

Sources of Water Supply by Zones Sources of Water Supply by Zones ––AuthorisedAuthorised coloniescolonies

12

12

6

9

6

99

96

99

984

4

3

1

1

1

2

3

2

7

4South 2

South 3

Other DJBzones

Average

% hhsOwn bore well Housing society bore wellDJB tanker Bottled waterPiped Water Supply

Sources of Water Supply by Zones Sources of Water Supply by Zones -- UnderservedUnderserved

13

6

13

12

7

2

7

6

67

73

53

62

1

5

7

5

4

2

6

5

22

23

24

23

South 2

South 3

Other DJB zones

Average

% hhs

Own bore well DJB tanker Community hand pumpCommunity stand post Galli tap Piped water supply

Average Hours of Water Supply Average Hours of Water Supply -- DomesticDomestic

0

1

2

3

4

5

6

7

8Ja

nta/

LIG

MIG

/HIG

Plot

s >1

50 s

qm

150-

300

& >

300

sq m To

tal

JJ

Res

et c

ols

Una

uth

Reg

Una

uth

Non

-re

g

Urb

an-R

ural

Villa

ge Tota

l

Hrs

of S

uppl

y

South 2 South 3 Other DJB zones Delhi average

AUTHORISEDAUTHORISED UNDERSERVEDUNDERSERVED

Water Pressure Water Pressure -- DomesticDomestic

30

40

50

60

70

80

90

100

Janta/

LIG

MIG/H

IGPlots

> 150

sq m

t

150-3

00 &

> 30

0 sq m Total

JJ co

loniesRes

et Cols

Unauth R

egUna

uth Non-re

g

Urban

-Rural

Villa

ge

Total%

HH

repo

rting

Low

-pre

ssur

e

South-2 South-3 Rest of Delhi Delhi Average

AUTHORISEDAUTHORISED UNDERSERVEDUNDERSERVED

Water PressureWater Pressure-- Non DomesticNon Domestic

% Establishments

37

38

59

47

57

58

36

48

6

4

5

5

Commercial

Institutional

Industrial

Delhi Total

Low Moderate High

Hrs. of Water Supply

3.6

3.9

3.7

2.9

Water Quality Water Quality

% Households with greater than permissible limit of water quality parameter

0

10

20

30

40

50

60

70

80

90

JJ C

olonies

Reset

ColsUna

uth Non-re

gUna

uth Reg

Urban

-Rural

Villa

ges

Janta/

LIG MIG HIGPlots

<100

m

Plots 10

0-150

sq m

Plots 15

0-300

sq m

Plots >3

00 sq

m

Total

Total Dissolved Solids (TDS) Total Hardness (TH) Alkalinity MPN E-coli

Coping StrategiesCoping Strategies……

Coping Strategies Coping Strategies ……AuthorisedAuthorised ColoniesColonies% Respondents

15

14

8

79

92

84

4

5

4

77

95

82

55

75

71

65

73

57

7

20

6

South - 2

South - 3

Other DJBZones

Borewell Booster PumpGround Level Reservoir (GLR) Over Head Tank (OHT)Internal pipe line Water FilterUnder Ground Reservoir (UGR)

Coping StrategiesCoping Strategies……UnderservedUnderserved % Respondents

1

4

20

25

17

16

1

86

80

72

83

81

2

2

1

5

3

1

80

83

76

75

78

1

76

76

75

75

75

7

25

30

16

18

0

3

6

2

2

3

0

13

13

2

4

JJ

Resettlement

URC

UNRC

Urban-RuralVillages

Total

Borewell Booster PumpGround Level Reservoir (GLR) Overhead Tank (OHT)Internal Pipeline Water FilterUnder Ground Reservoir (UGR) Others

Coping Strategies Coping Strategies -- Non DomesticNon Domestic

% Respondents

30

43

8

60

34

12

Borewell

Pump

UGR/GLR

OHT

Pipeline

Filter

Findings Findings –– Coping costsCoping costs

Coping Cost for Households in Authorized Coping Cost for Households in Authorized ColoniesColonies

10.3Coping cost per KL of water consumed (Rs)

226Total coping cost per HH per month (Rs)

124Recurring cost per HH per month (Rs)

102Capital cost per HH per month (Rs)

6829Investment per HH (Rs)

22Water Consumption per HH per month (KL)

Coping Cost for Households in Underserved Coping Cost for Households in Underserved Colonies Colonies

17.7Average Consumption of Water/month/HH (KL)3259Average investment in water assets per HH (Rs)

59Opportunity cost of time/month/HH (Rs)181 Total coping cost per month per HH (Rs)10.2Average coping cost per KL of water consumed

0.6Time spent on water collection/day/HH (hours)122Capital Cost + Recurring expenses/month (Rs)

73Recurring expenses per month per HH (Rs)49Capital cost per month per HH (Rs)

4355Total Number of Households Surveyed

Water Expenses in Authorized Colonies Water Expenses in Authorized Colonies

Cost/month (Rs)

89

115

111

137

135

140

155

198

248

147

54

92

57

105

141

108

138

204

237

123

33

74

40

83

112

102

150

151

194

102

Janta flat

LIG flat

Type II Govt. Qtrs.

MIG housing

HIG flats

Plots < 100 sq.m

Plots 100-150 sq.m

Plots 150-300 sq.m

Plots > 300 sq.m

All

Mthly water bill

Coping cost -recurring

Coping cost -Investment inassets

Coping Cost Estimates Coping Cost Estimates –– other key findingsother key findings

• Coping costs of domestic consumers in authorized colonies are about Rs 10 per KL of water used

• Coping costs of domestic consumers in underserved areas are about Rs 10 per KL of water used if cost of time spent for water collections is included and Rs 7 per KL of water used if time cost is not included.

• Coping costs of non-domestic consumers are about Rs 12-39 per KL of water used

• These estimates of coping costs of consumers are close to or higher than the cost of supply, estimated at about Rs 9.5 per KL(including interest and depreciation)

Coping Cost for NonCoping Cost for Non--domestic Consumersdomestic Consumers

311910Average Water consumption per consumer per month (KL)

123936Average coping cost of Water/KL (Rs)

384741360Total coping cost per consumer per month (Rs)

298636309Recurring expenses per consumer per month (Rs)

8610551Capital cost per consumer per month (Rs)

576869743375Average Investment per consumer (Rs)

505961534Number of Consumers surveyed

InstitutionalIndustrialCommercial

Coping Cost Coping Cost -- NonNon--domestic Consumersdomestic Consumers

Rs/kL

40

32

57

24

15

11

Comm South2&3

Comm Other

Industrial South2&3

Industrial Other

Institutional South2&3

Institutional Other

coping cost

Willingness to Pay for Improved Water Willingness to Pay for Improved Water ServicesServices……

Analysis of WTP in this study Analysis of WTP in this study -- methodologymethodology

• Contingent valuation method has been applied

• Care has been taken to minimize biases by appropriate scenario building and choice of value elicitation format

• For value elicitation, the payment card method is used: likely improvement in water and sewerage services are explained to the respondents (consumers) who are then asked to indicate acceptable monthly water bill (including sewerage charges) out of a list of possible payments shown to them.

Willingness to pay for improved services, by zone and service level

0%

20%

40%

60%

80%

100%

120%

0 100 200 300 400 500 600

monthly tariff (Rs)

% o

f HH

will

ing

to p

ay

South II & III for A1 service

South II & III for A2 service

Other zones for A2 service

% HH in JJ cluster WTP for Group Connection % HH in JJ cluster WTP for Group Connection (mean = (mean = RsRs 64 to 78 per month)64 to 78 per month)

75 74

61

51

31

20 40 60 80 100

Monthly Tariff (Rs)

% HH Willing to Pay

Estimated Mean WTP of Various NonEstimated Mean WTP of Various Non--Domestic Domestic Consumers for Improved Water Supply Consumers for Improved Water Supply

R s / m o n t h

3 2 2

4 2 8

4 5 7

C o m m e r c i a l

I n d u s t r i a l

I n s t i t u t i o n a l

W T P p e r m o n t h

Comparison of Coping Costs and WTP for Improved Comparison of Coping Costs and WTP for Improved Services Services -- NonNon--domestic Consumersdomestic Consumers

R s / K L

3 6

3 9

1 2 . 4

3 2

2 3

1 5

C o m m e r c i a l

I n d u s t r i a l

I n s t i t u t i o n a l

C o p in g c o s t s W T P

Factors influencing householdsFactors influencing households’’ willingness willingness to pay for improved servicesto pay for improved services• Econometric analysis points out some of the important factors that

influence WTP: - Income- Household size - Education of respondent- Coping cost currently being borne, particularly electricity charges for

booster pumps, maintenance of large storage, repair and maintenance of filter, and expenditure on purchase of water - Perception factor: if the respondent perceived a marked improvement

in supply after the project is implemented

Factors influencing householdsFactors influencing households’’ willingness willingness to pay for improved servicesto pay for improved services• Other important factors influencing WTP:

- Quantity of water consumed (higher water requirement, higher WTP)- Whether the respondent is the owner rather than tenant (WTP more

for owners)- Whether current supply is adequate (WTP more if supply inadequate) - Whether the household is incurring expenses for maintenance of

pipeline (WTP more for households incurring such expenses)- Whether the household has invested in a borewell (low WTP if

invested in borewell)- Whether the household is currently getting water at high pressure (low

WTP for improved services, if getting water at high pressure)

Affordability Analysis Affordability Analysis ……

Considerations underlying determination of Considerations underlying determination of affordability (continued)affordability (continued)• Major difficulty in applying this approach to Delhi is that

a significant proportion of low income households are not paying any water bill- because they collect water from public sources, or- because they have their own source of water

• Therefore, to ascertain affordability, 80th percentile of the ratio in question among low income households (up to Rs 7000/month, accounting for 38% of sample) has been taken.

RATIO 3RATIO 3::Water bill + O&M cost + Water purchase + Maintenance cost of

storage as a proportion of income

RATIO 2:RATIO 2:Water bill + O&M cost of Booster Pump as a proportion of income

RATIO 1:RATIO 1:Water bill as a proportion of

income

POSSIBLE SCENARIOS:POSSIBLE SCENARIOS:

Water supply improvements do not lead to savings in HH coping costs (eg. Continue to use Booster Pumps)

Water supply improvements enable most HHsto save O&M cost (electricity charge) of Booster Pumps

Improvements in water supply enable HHs to save O&M cost of Booster Pumps, cost of water purchased and maintenance cost of large storage

LONGLONG--TERMTERMEFFECTEFFECT

SHORTSHORT--TERMTERMEFFECTEFFECT

IMMEDIATEIMMEDIATEEFFECTEFFECT

8080thth Percentile Percentile (Low(Low--income income HHsHHs):): 2.4%2.4% 3.3%3.3% 3.7%3.7%

Findings of affordability analysisFindings of affordability analysis

• Among medium and high income households almost all can afford to pay water tariff high enough to cover cost of operations, interest and depreciation.

• Among low income households, about 68% can afford to pay water tariff of Rs 4/KL (+50% sewerage charge) which is high enough to cover operating cost.

• About 44% of low income households can afford to pay water tariff high enough to cover operating cost, interest and depreciation.

Key Findings …

Comparison of Average Coping Cost, WTP and Affordability by Comparison of Average Coping Cost, WTP and Affordability by household category, authorized colonieshousehold category, authorized colonies

0

200

400

600

800

1000

1200

JantaFlat

LIG Flat Type IIGovt.Qrtrs.

MIGHousing

HIG Flats Plots <100 sq.m

Plots100-150

sq.m

Plots150-300

sq.m

Plots >300 sq.m

Rs

/ mon

th

Water bill WTP coping cost + current water bill Affordable water bill

Comparison of Average Coping Cost, WTP and Affordability by Comparison of Average Coping Cost, WTP and Affordability by household category, underserved colonieshousehold category, underserved colonies

0

50

100

150

200

250

300

350

400

ResettlementColonies

UnauthorizedRegularised

Colonies

Unauthorized Non-regularised

Colonies

Rural-UrbanVillages

Rs

/ mon

th

Water bill WTP coping cost + current water bill Affordable water bill

Recommendations to Delhi Recommendations to Delhi JalJal Board Board

• Use of Survey information to design consumer feed-back indicators for monitoring improvements in DJB service performance

• Use of Coping Cost, WTP and Affordability information for Design of Tariffs

• Use of tariffs to reduce groundwater (borewell) consumption