A short article arguing for a new accessibility paradigm in urban water policy in developing economies. The traditional affordability agenda, epitomised by many poor-performing Indian utilities, is rapidly being overtaken by the new accessibility paradigm being led by the World Bank and Asian Development Bank.

1. The Accessibility-Affordability
Tightrope in Urban Water Policy:
New Trends, New Approaches
Jonathon Flegg
j.c.flegg@nus.edu.sg
Within developing urban economies an inherent of secondary pro-poor policies can be
tension exists between the twin policy goals of employed in targeting producer surplus towards
providing adequate access to piped water identifying and assisting the urban poor
infrastructure and the affordable pricing of the sustainably access critical water infrastructure.
on-going service. More access to immovable
network infrastructure demands greater costly The ‘Indian’ and ‘Chilean’ Approaches to
investment and long-term financial Urban Water
sustainability, while service affordability erodes
both these conditions in the presence of limited Within the water infrastructure literature there
to the availability of government subsidies. are certainly two discernable philosophical
approaches: one premised on water access as
Policy approaches to urban water supply in a human right or social objective that underpins
developing economies prior to the 1990s was the policy goal of affordability, and another that
dominated by a crude affordability agenda with characterises water as a commodity which
insufficient weight placed on the heavy capital demands the focus of policy be placed on the
requirements of network extension and financial sustainability of water utilities. The
maintenance, but a new policy consensus in later argument is usually premised on the fact
more recent years has become discernable that that a household water connection is
places less stress on affordability as the characterised as a pure private good (rival and
primary or direct objective of urban water policy. excludable), and should involve an adequate
Affordability measures are moving from general level of user payment and cost recovery.
to targeted, and more importantly, are
becoming conditional upon notions of Of course most water experts advocate a
infrastructure accessibility and overall cost pragmatic stance that inhabits the policy space
recovery. After all, argue proponents, what use somewhere between these two philosophical
to the poor is an affordable service that is poles, but in the sense that they characterise
impossible for the vast majority of them to two „ideal types‟ we can introduce the contrast
access? between an accessibility-based „Chilean‟
approach and an affordability-based „Indian‟
As a result best practices now tend to treat approach to urban water provision to the poor
service affordability as an indirect or secondary (see comparison in Table 1). Moreover the
policy objective, the consequence of increased Chilean approach has become the dominant
productive efficiency and financial sustainability. reform paradigm adopted and actively
Once these policy conditions are met, a variety promoted by IGOs such as World Bank, UN
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2. and Asian Development Bank. The World Bank The Indian approach to water supply reached
(2006: viii) put the evolution of their its zenith immediately prior to the 1990s. A
infrastructure agenda this way: caricature of the typical urban water supply in
developing economies at the time was one
The Bank’s first attempt to reach the poor with involving widespread general price subsidies,
infrastructure services, the “basic needs” flat monthly fees rather than volumetric tariffs,
approach launched in the 1970s, produced and stifled public utilities struggling with low
mixed results [the Indian approach]. Starting in collection efficiency and high operating ratios.
the 1980s and gaining momentum in the 1990s, Populist political pressures set prices at below
the Bank actively promoted a new generation of cost recovery, and time inconsistency, the
initiatives aimed at helping the poor to gain problem of unwillingness to accept higher
access to infrastructure services [the Chilean prices because of the poor quality of the
approach]. existing service, held them there.
Indian Chilean The approach is still visible in many failing
Approach Approach urban water utilities in India, where in the
Primary Water Affordability Accessibility capital city of Madhya Pradesh, the Bhopal
Policy Municipal Corporation is running on an
Objective operation ratio of 5.07 and selling water on a
Ownership Public Utilities Regulated cheaper average tariff than any utility in the
Private country (Rs0.60/m3) (ADB 2007). As a result
Companies one-third of residents are still without a
Capital City household connection. Similar situations still
Comparison in exist across India in cities such as Indore,
2004 Kolkata and Visakhapatnam.
Households 69% 99%
Connected Le Blanc‟s analysis (2008: 38) focusing on
Average Tariff 0.11 1.34 utilities in Africa, describes the failure of the
(USD/per m3) affordability-approach similarly:
Connections 33% 99%
Metered The traditional paradigm of consumption
Non-Revenue 53% 34% subsidies passed on to consumers through
Water utilities via low tariffs has repeatedly shown its
Staff per 1000 19.9 2.4 limits. In many countries, most of the subsidies
connections given to utilities have been absorbed by
Government 61% of None inefficiencies, rather than passed on to
Operating operating consumers.
Subsidies costs
Targeted Pro- None Means-Tested As late as 1994 the World Bank-sponsored
Poor Policies Subsidies Algerian Urban Water Supply and Sewerage
Rehabilitation Project failed because “the
Table 1: A brief comparison “ideal types” of policy utilities were not turned into self-financing
approaches taken by developing economies to urban entities, there were no improvements in
water (Irwin 1997; Komives 2005; ADB 2004, 2007)
controlling leakages and reducing the level of
unaccounted-for-water” (World Bank 2006: 12).
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3. The Chilean approach, with its stress on the capacity to pay has typically been assumed
access, developed in the 1990s as a response to be quite low, surveys have found a surprising
to these widespread failures of utilities in urban high percentage willing to pay and a strong
centres across developing economies to rationale for greater focus on investing in
provide adequate access to water supply. household connections (Whittington et al 1998).
Chile‟s reform agenda was to privatise the
country‟s water utilities, regulate and restrict That the unconnected poor regularly pay many
corporate amalgamations, and to replace the times the average tariff of similar connected
cross-subsidising price structure with taxation- consumers leads to the second reason for
funded subsidises targeted at low income moving towards access as a primary policy
households (Irwin 1997; Gomez-Lobo and objective: Crude affordability measures are
Contreras 2003). The pro-poor policy aims to socially regressive (Komives 2005: 171). Flat
ensuring no more than five percent of income is volumetric subsidies and most increasing block
spent on water and sanitation (Irwin 1997). tariffs accrue larger overall subsidisation to
larger, often middle-class consumers. For these
How did the Chilean Approach Eclipse the reasons some analysts (Irwin 1997; Le Blanc
Indian Approach? 2008) have concluded even going beyond the
typical Chilean approach where the water
The first reason is quite obvious: To propose provider is responsible for targeted pro-poor
affordable piped water presumes a priori the subsidisation through geographic-targeting or
existence of a functioning connection. However means testing. This rationale prefers to remove
by proposing a primary of policy goal of crude all socially equity considerations for water
affordability over accessibility, policymakers for providers. “[S]ocial concerns are legitimate, but
a long period fell into that populist yet the responsibility to assist poor customers
anachronistic trap. The unfortunate result is that should belong to the government, not to the
many poor households who actually have utility” (Le Blanc 2008: 42).
capacity and willingness to pay higher prices
have missed out on access. The ADB (2007: 8) Regardless of whether the necessary pro-poor
survey of all Indian water utilities has concluded policies are best targeted from within or outside
those “with the highest coverage also have the the utility (the main point is they are), a broader
highest tariffs, indicating that people are willing principle can be made about subsidisation from
to pay for piped water.” the Latin American experience: If it is to used
then it should be used to directly provide “those
This relation hold true in India where the goods with the highest difference between
substitute for a piped connection is usually free willingness to pay and costs” (Estache and
or cheaper water from a local public stand. The Gomez-Lopo 2001: 1194). In almost all cities in
willingness to pay for piped water is even developing economies this is the one-time
stronger in cities where the major substitute connection fee to access the network rather
water source is sold from informal vendors or than on-going costs. To the extent that
water trucks and usually costs many times the subsidisation has been necessary in
utility‟s tariff price. Such clear incentive experience, it has been most effectively used in
structures that preference private connections extending accessibility rather than for regular
seem to characterise many South East Asian consumption.
urban centres, such as Jakarta, Ho Chi Minh
City and Manila. Even in extremely poor urban
environments, such as Lugazi, Uganda where
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4. [Date]
The Chilean Approach Comes to India Estache, A. and Gomez-Lobo, A. (2001).
“Utilities Privatisation and the Poor: Lessons
In response to the failures of the affordability and Evidence from South America.” World
approach, accessibility has now become the Development 29(7): 1179-98.
primary policy objective of urban water utilities
in developing economies. While political Gomez-Lobo, A., and Contreras. D. (2003).
economy considerations have provided “Water Subsidy Policies: A Comparison of the
resistant to change in many cities (in particular, Chilean and Colombian Schemes.” World Bank
influential, non-poor beneficiaries of crude Economic Review 17 (3): 391–40.
subsidisation), the affordability reform agenda
has even begun in the most entrenched of Irwin, T. (1997). Price Structures, Cross-
India‟s public utilities. In March 2010 Bhopal Subsidies, and Competition in Infrastructure.
Municipal Corporation, with the assistance of Retrieved from: http;//rru.worldbank.org/
ADB, passed an order to triple average tariffs, documents/publicpolicyjournal/107irwin.pdf.
subsidise the installation of meters, and push
towards universal connection coverage at cost Komives, K, Foster, V., Halpern, J. and Wodon,
recovery prices. Q. (2005). Water, Electricity, and the Poor: Who
Benefits from Utility Subsidies? Washington:
Global experience in South Asia, South East World Bank.
Asia, Africa and Latin America demonstrated
making affordability the direct objective of water Le Blanc, D. (2008). A Framework for
policy fails because continuing subsidisation Analyzing Tariffs and Subsidies in Water
jeopardised the financial viability of utilities and Provision to Urban Households in Developing
their capacity to invest in costly network Countries (DESA Working Paper No. 63).
extensions. Without network access subsidies Retrieved from http://www.un.org/esa/
either do not reach the poor or if they do they desa/papers/2008/wp63_2008.pdf.
are socially regressive. Better to follow Chile‟s
example of reaching cost recovery and using Whittington, D., Davis, J., and McClelland, E.
targeted measures to assist the poor, a process (1998). “Implementing a Demand-Driven
that might involve assisting with on-going costs Approach to Community Water Supply
but is even more likely to involve helping them Planning: A Case Study of Lugazi, Uganda”.
get connected. Water International 23: 134-45.
World Bank (2006). World Bank Report -
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