ASi" kUCTURE FlOR DEVELOPMENT

to this purpose without sacrificing other socially - .-..*-..
beneficial public expenditures. 4 E m s e centrally
Price subsidies to infrastructure almost always plannedecnonomies,infrastructurebsubsidides
benefit the nonpoor disproportionately. In develop- ' wentmainlyto the better-o'. -
ing countries, the poor ue kerosene or candles
rather tain electricity for lighting, they rely on pri- -.
* vate vendors or public standpipes rather than inhouse
connections for ater supply, and they are in- . t
ge.(1:1)
frequently served by sewerage systems. In Ecuador . Rt of subsidy to better-off;
the electricitysubsidy was found.to be $36 a year for
tossidytoporthe
37 percent of residential consumers with lowest -- 0 . 1 - 3 '-
use but $500 a year for the better-off households >'.-1 -.
-with highest use. In Bangladesh subsidies on infra- Eleciity -
structure services are roughly six times larger for
the nonpoor than for the poor. Although poor peo- Hou old'gas
ple generally consume more water and sanitation .
services than they do power, a study of five Latn ' UrbaIrsp_ ..
American countries found that water and sewerage
subsidies are diected more to richer than to poorer
"u":-:::'
households (Figure 4.3) Even in fonnerly centraly -. -.
planned Algeria and Hungary, the rich have re- . ' xauo of subsidylto better-of
ceived more than the poor in the way of infrastruc- to ssidy i- to por
tireservicesubsidies (Figure4.4). :. 3' 4
There are, however, ways in which infrastructre, a. - V; - - ' '
subsidies can be structured to improve their effecdireness
in reaching the poor. For example, for
-'
water, increasing-block tariffs can be. used-charg- Wat aind
ing a particularly low "'leline" rate for the firt part '
of consumption (for example, 25 to 50 liters per per- _ ,t,
son per day) and higher rates for additional .
'blocks" of water. This block taiff links price to volume,
and it is more efficient at reaching the poor rtdildtand HimayandWorld-Bank
than a general subsidy because it limits subsidized 19e 9 '5' <
consumption. Increasing-block tariffs also encourage
water conservation and efficent use by increasing
charges at higher use. These tariffs are most effective
when access is universal. When the poor lack connection costs to public services, especially when
access, as is frequently the case, they do not receive payment is required in advance of connection. In
the lifeline rate and typically end up paying much such circumstances, access to credit may be more
higher puces for infrastructure services or their sub- important than subsidized prices. Utilities are often
stitutes-
useful conduits for extending loans to finance con-
Subsidizing access to public infrastructure ser-. nection costs because they can use their regular
vices is often more. useful for ibe poor than price billing procedures to secure repayment In Banglasubsidies-
In Colombia in the early 1980s, water u:il- desh the Grameen Bank provides credit to about 2
ities in Bogoti and Medelin used household survey million poor and landless persons-most of them
data to distinguish between rich and poor house- women. The Bank combines group lending, which
holds and specifically targeted the poor with sub- allows the poor to substitute social oollateral based
- . . sidized connection charges and increasing-block on peer pressure for financial colla -al, with financ-
*: ' tariffs. This cross-subsidy scheme resulted in the ing mechanisms to extend credit for tubewells and
poorest 20 percent receiving a subsidy equivalent to sanitary latrines. In 1993 the Grameen Bank lent $18
* 3.4 percent of their income, financed by the richest million for this purpose and sLice 1992 has proquintile,
who paid a- "tax" equivalent to 0.1 percent
of their income. Many low-income households carnot
mobilize the funds needed to pay heavy initial
- .. . . . . .~~~~~~~~~
vided loans for about 70,000 suction tubewells.
In certain crcumstances, programs providing
employment to the poor represent a highly effective