Development of a Water-Pricing Model for Domestic Water Uses in Dhaka City Using an IWRM Framework

Abstract

Dhaka city is experiencing high water use and rapid declination of groundwater. The current water price in the city is low and based on a uniform rate. To arrest the resource degradation along with pursuing cost recovery and promoting social equity, this paper develops a new pricing model for domestic water uses using the integrated water resources management principles. The development is accomplished through estimation of domestic water usage, evaluation of current water prices, and assessment of groundwater degradation externalities in the Tejgaon area of the city using both primary and secondary data. Two economic and two environmental externalities are incorporated. The model is based on an increasing block tariff strategy, and the estimated unit prices for the first and second blocks are respectively 5% and 75% higher than the existing price. The model has the potential to reduce the domestic water use in the city by up to 27%, increase the revenue for the Dhaka Water Supply and Sewerage Authority by up to 75%, and reduce the water bill for poor households by up to 67%. The model has a great potential for practical deployment and the concept can also be applied to other cities and water uses.