Water Tariff System Analysis, Economic Valuation and Water Demand Function of Sustainable Municipal Consumption: a Case Study of Najafabad City of Isfahan

Nowadays, given that water is recognized as a socioeconomic commodity that plays a vital role in human life, management of its proper use, and emphasis on economic instruments, which is essential for balancing supply and demand. In this regard, the limitation of the water supply has led policymakers to focus on economic demand management tools such as pricing. Thus, the present study aimed to estimate the economic value, analyze the demand function, and water elasticity for domestic consumption, which can be the basis for an effective pricing policy in the water section. To this end, demand functions and elasticity are estimated by consumption levels by using regression analysis. Then, the maximum subscribers’ willingness to pay is estimated and compared with the current tariffs, using the contingent valuation method. The data were collected by filling 385 questionnaires for urban households at Najaf Abad city in 2018. The results showed that according to the increasing block tariff (IBT), the relationships between the levels, price , and income elasticity were -0.27 and 0.32, respectively. Also, the weighted average of water economic value for urban households of this city varies from IRR 5664 to IRR 9379 per cubic meter between the consumer groups and the willingness to pay is lower in the high consumption group. Based on the findings, the economic value of water is higher than the current tariff in all consumption groups. Therefore, it is recommended that water tariffs be reviewed and increased incrementally over time due to its nonzero price elasticities.