Sunday, October 14, 2012

Case Study: Willingness To Pay for Water

There has been an uncertainty around the success of the PPP models in the Indian Utility Market. While some of the fears are well placed, I think that one of the best ways to counter the apprehensions over the revenue projections of the operators, is the Willingness-to-Pay (WTP) analysis of the consumers in question.

The WTP analysis provides a localized and a  stratified consumer response across the socio-economic categories, if well planned and executed. The figure below shows a typical boxplot drawn for a consumer analysis done for one of our clients.
Box-Plot for a typical WTP Study

The client - a private PPP Water Utility operator - had taken over the water supply project of a town with approx 2 lacs consumers. The operator had approached a leading institution for financing the over INR 1000 Cr.

The institutional investor had his apprehensions about the revenue projections and had approached us to do the top-line validation through a WTP Survey and Analysis.

The existing water supply condition of the city was very poor and residents were facing utmost difficulties in meeting their requirements through the ULB supplied water.

We designed the WTP Study using the Contingent Valuation Methodology (CVM) and developed the  framework to execute the study. Key findings, which can be generally seen across other Water consumers, are shown in the adjoining figure.
Key Findings of the WTP Study

The findings helped the operator impress the necessity of the improved quality of water supply and prove that the people, if provided with better services, are willing to bear the cost for the service improvement as well.

The WTP Study did manage to help the operator get to the financial closure.

As we discussed the findings and success story of the WTP Study, we are now engaging with clients not just from the Utility Operators, but even from other service sector enterprises who want to validate their top-line projections before launching new or improved services.

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