Hydraulic ram pumps and Sling Pumps

Key Factors for Sustainable Cost RecoveryBox 2: Vicious circles and cost recovery 15Determining which costs users, especially poor users, should cover is a tricky issue. Global experiencesuggests that there are two vicious cycles that water projects can fall into if insufficient attention is paid to tarifflevels, cost recovery and revenue collection. The first cycle details what happens when revenue collection islow, because there is a full-cost recovery tariff that few users pay. 16 Low revenue collection means there isinsufficient income to make necessary repairs, which leads to a run-down service. As the service leveldeteriorates, consumers become less and less willing to continue paying for the service, and the cycleperpetuates itself The second type of cycle begins when projects set low tariffs for poor consumers to addresstheir concern about affordability, and offset these low tariffs with subsidies. 17 Both the low tariffs and thereliance on subsidies in this scenario can cause problems.There is much evidence to suggest that when households pay low amounts for services they have a lowersense of ownership, do not respect the service and are more likely to inadvertently damage the facilities. As aresult of this damage, people become less willing to continue paying even the token tariff. A similar argumentregarding ‘sense of ownership’ can be made for requiring households to pay at least nominal amounts forinfrastructure / connection fees. Requiring households to pay some type of up front fee can lead to a greaterappreciation and respect for the project. Even if the low tariff does not encourage misuse or neglect of thesystem, the reliance on subsidies can set off this second type of vicious cycle. If the subsidies that wereexpected to make up for the lower tariff dry up, maintenance often suffers. 18 Households are in turn less likelyto want to pay for a worse level of service. Cost recovery then takes a double hit, with losses from subsidyrevenue as well as user fees.There are several ways to measure marginalisation and poverty. As the Inter-American DevelopmentBank points out (1998): “Measuring poverty is not so simple. Not only is it difficult to pinpoint thenumber of poor and their location, but also the definitions of poverty and methodologies used tomeasure it vary widely. Most methodologies use minimum income or expenditure measures as a proxyfor the ability of a household or individual to meet basic consumption needs. But poverty is not just aneconomic condition; it is a human condition”. This broader definition of poverty cannot be measuredin dollars and cents. Consequently, in addition to income-based measures of poverty, should also beused other quality-of-life indicators, such as the Human Development Index or a MarginalisationIndex.Box 3: The use of the marginalisation index in MexicoAs an example, the Government of Mexico has applied a marginalisation index in its policy towards the poor inthe rural water supply and sanitation sector (1998-2002). This index is constructed on the basis of severalindicators: education (% of illiteracy in people older than 15 years old); economic activity (% of peopleoccupied in the primary sector); habitat (% of people with drinking water, % with sanitation, % with electricity, %with land). In Mexico, all communities < to 2,500 inhabitants (i.e. more than 200,000 communities) have beencategorised using this marginalisation index. There are five grades of marginalisation: 1) very low, 2) low, 3)medium, 4) high, 5) very high. This classification has allowed the federal, state and local governments ofMexico to adapt their social policy and subsidy strategy in the rural water supply and sanitation sector, beingsure that the communities in greatest need receive greater attention and priority.15161718From BPD ReportThe low payment rate can be due to a variety of causes including lack of penalties for non-payment, acultural belief that water should be free, inability to pay, etc.Governments are often understandably cautious about charging consumers for the actual costs of providingthem with water services because they believe that this amount is unaffordable and an unjust hardship to poorhouseholds. However, evidence suggests that poor households are often used to paying high prices forunimproved water – either in time or money. Many poor households traditionally pay large sums to watervendors, or else they walk for several hours for water of questionable quality. While improved water servicesdo impose a formal billing system on these consumers, they do not necessarily cost more.Direct government or donor subsidies can dry up with financial hardship or altered priorities. Cross-subsidiescan also become insufficient, if the number of cross-subsidisers versus cross-subsidised consumers declines.11