Appropriate pricing and cost recovery in water services

The viability of water services is still constrained by inadequate cost recovery, especially in developing economies. This paper reviews and analyses recent issues and international experiences from water pricing policies and practices. Full cost recovery (FCR) is becoming a recognised policy objective in industrial economies, although irrigation water tariffs are often subsidised. In developing economies water tariffs are generally below the economic cost of water, and tariffs are not adjusted regularly. Case studies from Kenya and Zanzibar illustrate the importance of an appropriate policy environment and institutional arrangements. The main factors contributing to poor economic performance of water utilities are highlighted. Water utilities in developing economies need more management autonomy.