Sunday, September 11, 2005

Tariff Regime to Solve Jeddah's Water Crisis :: Arab News
People respond to incentives. Really. They do.

Quoting from the article based on an interview with Mohammed Baghdadi, director general for water in the Makkah Region:
Although he cannot force conservation on the profligate consumers, “I can introduce a tariff,” he said.

He demonstrated his point with an example. One ten-ton tanker costs about SR60 to fill. To draw ten tons of water from the network, the consumer pays SR6. “Eighty eight percent of the consumers in Jeddah are on the network,” he said, “and they pay very little.”

For the equivalent of first five tankers full however, the consumer pays only SR5 or SR1 for one tanker-full; that is the price of one 330 ml can of soft drink for one tanker of water.

“The history of cheap water is that the government wanted to support people,” said Baghdadi. “So the subsidy was put in place. They also wanted certain groups of people to come and live in Jeddah — so they wanted water and services to be cheap. Now things have changed.”
. . .
“The introduction of a tariff will add an incentive to consumers to conserve and give a measurable value to water. Currently, the only real incentive to save is with those who take water by tanker.”
Emphasis added.

People are not profligate. People prudently respond to the price signals they receive. You send them the message that 10 tons of water is worth one to six 330 ml cans of soft drinks and they will find lots of uses for the water, including very low value uses for the water.

Baghdadi is correct that he cannot force conservation on people and that he can cause people to conserve by raising the price and sending people a truer indication of what it is costing society to provide water.

Full disclosure: I pay nothing for water.

Labels: , , ,


Post a Comment

Links to this post:

Create a Link

<< Home