Social Cost-Benefit Analysis of Improved Water Quality in Rural Areas: An Exploratory Study in Coastal AP

This study attempts to assess the costs and benefits of improved water quality in rural communities on the backdrop of a proposed water purification project in coastal districts of Andhra Pradesh. Important issues assessed include: i) Health sector benefits due to averted illness, ii) Patient expenses saved due to averted illness, and iii) Value of productive days gained due to averted illness. Both qualitative and quantitative information is being elicited from households in six villages in three districts. Group discussions, discussions with local doctors and Naandi Foundation were conducted to get an overview of the situation. Cost-benefit analysis has been carried out from the angle of social welfare rather than from a purely economic point of view. Besides, a willingness to pay survey was conducted to assess the ability of rural communities to pay. Important conclusions of the study include: i) All the sample tests for water quality and discussions with doctors confirm health and water quality linkages. ii) Households incur substantial losses due to ill health and the resultant loss of working days. Losses are more in terms of medical expenses followed by working days lost and expenditure on water. Such losses are relatively more among Below Poverty Line (BPL) households and also among women. iii) Households experience positive Social and Health benefits in the medium to long term. iv) Poor are paying disproportionately higher proportion of their income towards improved water supplies. Hence, discriminatory pricing or cross subsidisation could be a desirable option in order to reduce the burden on poor households. v) The viability of the technology is limited to large villages (above 500 households) eliminating the small and medium villages that are in majority. Appropriate institutional arrangements for managing the existing distribution systems appear to be a better option in these villages. The existing systems are also cost effective when compared with the proposed new technology.