The Political Economy of Increasing Block Tariffs for Water in Developing Countries

Increasing block tariffs (IBTs) have become the tariff structure of choice in developing countries. Multilateral donors, international financial and engineering consultants, and water sector professionals working in developing countries all commonly presume that IBT structures are the most appropriate way to determine water users' monthly bills. Most, if not all recent water tariff studies performed for developing countries propose IBT structures. The objective of this paper is to critically examine the current fashion of using IBTs in cities in developing countries. In the second section of the paper, we review the common arguments made to justify the adoption of IBTs, and present some actual IBTs currently in use in selected cities. In the third section of the paper we discuss the objectives and considerations involved in water tariff design so as to provide a basis for judging the appropriateness of IBTs.