Consumer heterogeneity and distributional impacts of economic crisis-driven water tariff reforms in Sri Lanka: a study in Galle

ABSTRACT

This study examines how economic crisis-driven water tariff reforms aimed at cost recovery distributed the financial burden across households with heterogeneous consumption patterns. Using 43 months of data from over 20,000 urban households in Galle (January 2021–July 2024), tariff-related consumption adjustments and revenue impacts were analyzed across three clusters identified through pre-reform patterns. The clusters operated at mean monthly consumption levels of 11.29 ± 5.46, 20.89 ± 6.31, and 33.25 ± 11.46 units (1 unit = 1 m3). Revenue share of low-consumption households (40% of consumers, 25% of consumption) increased from 13.8 to 21.8%; Moderate-consumption households (47% of consumers, 52% of consumption) increased from 45.7 to 49.4%; High-consumption households (13% of consumers, 23% of consumption) declined from 40.6 to 28.7% with minimal changes in consumption share. This divergence stemmed from tariff structure design rather than behavioral adjustment. Fixed service charges increased 300–500%, while volumetric rate progression weakened in upper blocks (400% increases for 0–15 units versus 70–80% for 26–40 units). Although reforms achieved cost recovery goals, they failed the equity principles by imposing disproportionate burdens on low-consumption households.