An Econometric Approach to Estimation of Cost of Urban Water Supply: A Case Study to Kolkata Municipal Corporation Area

Abstract

Water is a natural resource. But when raw water is treat and sent it through proper distribution channel, then supplied the treated raw water to end users, then water no longer remain an free natural uneconomic good. Rather it becomes an economic good. Economic goods are being produced out of necessity and coming out from a production process. It is obvious that there must have a cost structure associated with treated water. This perspective of the water as an Economic good compel us to rethink about treating water as economic good with an appropriate cost structure. Therefore in this paper, we shall develop an econometric model for our focused area, consisting of 141 wards of Kolkata Municipal Area. This paper proposes a method to capture the financial characteristics and address the relevant concepts to create a cost structure for municipal water service. The estimation procedure is based on a multivariate regression approach and cost function is represented by a parametrical cost function which has been used to observe system in terms of efficiency, technology, capacity.