Pathways to Pricing Municipal Services in the Global South


What is the Value of Municipal Services?


In 2012, the city of Bengaluru (Bangalore), India’s information technology hub and one of Asia’s wealthiest metropolitan areas, stumbled into a waste management crisis. Following a strike by waste workers and closure of one of the city’s largest landfills at Mavallipura, piles of uncollected waste dotted street corners and piled up across neighbourhoods. As mounds of plastic and organic material clogged stormwater drains and choked commutes, households and businesses resorted to burning waste piles. Air quality declined precipitously. As the city was grinding to a standstill, Bengaluru’s reputation as the “Garden City” was under threat.


In response, the municipal and state government took some positive steps to put in place a comprehensive municipal trash system. Civil society organisations representing informal waste pickers had already been mobilising, getting their contributions to the municipal system recognised through an administrative order to begin issuing identity cards to thousands of waste pickers. Spurred by cases in the Karnataka State Supreme Court, local planning agencies began drawing up a long-term vision for the municipal trash system. Drawing down funds transferred from the national government for urban infrastructure, the municipal government increased investments in new waste processing facilities. Out of the small steps by the many stakeholders required to make the system function, an integrated approach seemed to be emerging.


Nearly a decade later, the overall picture of waste management services in Bangalore is still mixed. Major challenges to more transformative improvements remain. While more residential households recycle and segregate their waste at home, weak control at landfills continue to allow unacceptable levels of methane and other toxins pollute the air and sustain the spread of vector-borne diseases. Leachates continue to damage borewells crucial to groundwater supply in poor neighbourhoods.


Like other cities coping with the pressures that urbanisation and economic development put on urban infrastructure systems, solid waste management services in Bangalore confront an enduring question: what is the price of sustainable progress?


Putting Prices to Work


As population growth accelerates in the major metropolises and secondary cities of the global South, few deny any longer the contributions that efficient, reliable, and affordable municipal services make to inclusive economic, social, environmental, and political progress. Clean drinking water and sanitation reduces health risks and increases the productivity of the labour force. Consistent electricity supply reduces business costs, improves production efficiency, and can reduce reliance on dirty fuel sources. Solid waste management keeps cities clean while providing employment opportunities to low-income households in the informal sector.


These benefits, among many others, regularly surpass the costs of upgrading service provision. The case for expanding investments in the public utility sectors operating in municipalities is both financially sound and politically compelling.


For residents and businesses, however, progress improving municipal pricing practice – a basic function of municipal governments – has been too slow.


A new Cities Alliance report by the Global Urban Futures explores how municipal pricing policy reforms can be a step in the right direction for ambitious leaders working in urban services. The report examines pricing practices and tariff structures across four cases – Accra, Ghana (water and sanitation); Bengaluru, India (solid waste management); Metro Buenos Aires (electricity); and Metro Cebu (water).


What Can Municipal Authorities Do?


The challenges to improving the pricing of municipal services, though daunting, are not insurmountable. The study uncovered a variety of options available to municipal authorities in cities with low service coverage. Depending on the local context, municipal authorities can:


Explore alternative infrastructure provision paradigms and new institutional forms of ownership. This can refer to shared or community-owned systems and public-communal partnerships. Carefully evaluate the social targeting of subsidies and make tariff structures more transparent. Collect more data on the demand side of service users, as well as the operations and role of alternative service providers. Engage community actors in service delivery and design of expansion plans. Improve citywide strategies and plans for service delivery expansion. Citywide approaches for the delivery, expansion and long-term investment in capital costs of infrastructure are essential for a more equitable provision and pricing of services.


Getting Everyone to Play Their Part


While local authorities have options in the short-term, improving municipal pricing practice and tariff structures is a long-term process that requires support from national governments.  


As municipal authorities take action on the ground, options for national governments include:


Adopting a broader, cross-sectoral view of the municipal price system. Improving municipal government autonomy to use pricing authority beyond basic revenue generation functions. Expand and increase the stability and predictability of fiscal transfers that support local governments’ planning and investments in infrastructure


The Road Ahead


Under the right conditions, improving pricing practice for municipal services can be a key instrument in fostering higher rates of urban economic growth while also helping to manage the social and environmental consequences of the breakneck pace of change. For instance, higher prices, with subsidies channelled to poor and vulnerable households, hold the potential to signal resource scarcity and in doing so, help address issues of overconsumption. If financial decisionmakers account for the appropriate factors, more transparent and efficient pricing can contribute to an array of desirable objectives such as ensuring spending is allocated to their most efficient use, supporting cost recovery goals in utilities and other service providers, and protecting vulnerable populations by expanding access to services.


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