The public-private mix in urban water supply

One of the most crucial constraints on improving utility performance in urban water supply has been institutional. Until recently such utilities in most countries have been operated by the public sector. Yet most utilities do not have the power to set tariffs. Because the sector has been financially supported through central government grants, government-set tariffs have not had to reflect the full cost of service provision, resulting in significantly subsided tariffs. Given this history of subsidization, governments have been reluctant to raise tariffs to meet cost recovery criteria in order to cover operation and maintenance costs, as well as debt-service obligations for capital investment.