Urban water pricing in Yemen: a comparison of increasing block tariffs to other pricing schemes

Abstract

This study examines the viability of increasing block tariffs (IBTs) to achieve the right balance between efficiency, financial requirements and equity, and compares them to alternative pricing schemes. Using numerical examples, it analyzes the IBT structure of two water utilities in Yemen. The main conclusion is that IBTs exhibit remnants of old thinking among policy makers to promote cheap water for people. In view of similar results from other regions, the current practice of IBTs in developing countries has significant deficiencies and could be replaced by simpler pricing schemes such as a uniform price with a rebate or a discount.