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 NajafAbad 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. ‎