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Beyond second best: the whys, hows and wherefores of water subsidies

Diana Mitlin


This paper will review current thinking and practice on the provision of subsidies to connect to and use water services. Whilst the concentration is on water, the discussions address one of the central challenges of this decade: how can public services be provided effectively within the constraints of the market and with ambitious poverty reduction targets.

The importance of water subsidies in achieving the Millennium Development Goal targets for access to water is widely recognised. This policy may appear to be a reversal of the recent emphasis on cost-recovery for water services. However, as shown below, there have already been examples of where service providers have sought to achieve both objectives. In some circumstances this appears to be possible, but in others it is more difficult. Hence a current issue for providers and regulatory state agencies is how subsidies can be financed, and how they can best be provided. This paper seeks to present the critical issues and experiences to guide further country research with the programme of the Centre. The discussion recognises the current position of many agencies, which is that some subsidies are likely to be necessary if the poorest are to succeed in securing adequate access to water.
The discussion includes a consideration of both formal and informal subsidies. Informal subsidies are, most notably, provided through ways in which companies, or their employees, do not enforce exclusion regulations on certain types of customer despite illegal tapping or non-payment.

Publication information

  • IIED code: G00483
  • Published: Feb 2004 - University of Manchester
  • Theme: Urban
  • Source pub: Centre on Regulation and Competition. Working paper series; paper no. 93
  • Language: English

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Mitlin, Diana (2004) Beyond second best: the whys, hows and wherefores of water subsidies. Centre on Regulation and Competition, working paper no. 93.
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