Pricing efficiency analysis of residential water in Banyumas, Central Java, Indonesia
1999
Nurul Anwar
Demand for residential water was significantly affected by income, number of residents, number of bathrooms, income-effect (ESTD sub i), and household technology (household appliances) that use water. Empirical results show that water is delivered to only 40 percent of households in the service area or 19 percent of the total households in Banyumas Regency. The existing water price is lower than the marginal cost. This encouraged a huge demand for water, especially in the last three years from 1995 to June 1998 when the household connections almost doubled. The current price of residential water is Rp 529.62 per cubic meter. The full cost pricing estimation revealed a marginal opportunity cost (MOC) of Rp 1,393.45. The MOC is made up of MPC [marginal production cost] (Rp 423.12), MEC [marginal external cost] (Rp 41.18), and MUC [marginal user cost] (Rp 929.15). As indicated there is an underpricing of residential water by about 67% in the current pricing structure. The imposition of the full cost price will result in the reduction of water consumption to the optimal level of 2,082,283 cubic meters which is 27% lower than the current level of 7,711,291 cubic meters
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