© by PSP Volume 29 – No.
03/2020 pages 1465-1473
WILLINGNESS TO PAY FOR QUALITY DRINKING WATER
SERVICES IN URBAN CENTRE:
A CASE STUDY OF PESHAWAR, PAKISTAN
Muhammad1, Umar Hayat2,*, Syed Akhtar Ali Shah1, Muhammad Suleman Bacha3,
Tariq Shah2, Hazrat Bilal4
1
Department of Urban and Regional Planning, University of Peshawar, Peshawar, Pakistan
2
Department of Economics and Development Studies, University of Swat, Pakistan
3
Department of Environmental Sciences, University of Peshawar, Peshawar, Pakistan
4
Centre for Management and Commerce, University of Swat, Pakistan
ABSTRACT
The study performs a focalized study on urban
development, sustainable urban planning and the
positive impact of the households’ willingness to pay
(WTP) information for Quality Drinking Water Ser-
vices (QDWS) for better planning in urban Pesha-
war, Pakistan. Quality drinking water problem exist
almost every developing country. However, in the
process of rapid urbanization and urban sprawl, re-
searcher have focused merely on the physical infra-
structure of the city development and ignored the im-
portance of evidence based planning altogether. In
this study data was collected from 45 urban council
using Contingent Valuation (CV) survey Method.
Bid wise Logit Model was used to analyze the im-
pact of each regressor in the model. Results shows
that most of the households (96.8) avail municipal
services, WSSP serve 89.8%, Cantonment Board 7%
and 3% have their own arrangements. Mainstream
(88.5%) are not satisfied and are WTP, PKR
278/month for QDWS. Result of the Logit Model re-
veals that respondents’ income, education and hous-
ing occupancy status are significant variables and
have positive impact whereas size of household has
a negative impact on the WTP for QDWS. For better
policy and sustainable planning this study suggest
CV survey to elicit households’ WTP for QDWS.
This information will not only generate more reve-
nue, mitigate deadweight loss of the company but
also create a sense of ownership among the people to
cover the loophole between the planners and
end-users.
KEYWORDS:
Willingness to Pay, Quality Drinking Water Service, Lo-
gistic Regression Model, Contingent Valuation Model.
Fresenius Environmental Bulletin
INTRODUCTION
Legally state must provide Sufficient and safe
drinking water to its citizen [1]. In developing coun-
tries, with the passage of time broaden the tap water
supply still the quality of water availability is pri-
mary concerns [2]. The common man facing severe
challenges regarding both quality and quantity to ful-
fill their needs [3, 4]. The demand-supply gap caused
by rapid urban population expansion surpasses the
carrying capacity of the prevailing infrastructure at
current charges [3]. The income revenue from the
existing service charges, budget allocation for devel-
opment programs and state subsidies are not suffi-
cient to sustain sufficient water supply and ensure
safe water [5]. In such circumstances, the users often
resort to alternative sources, like digging out their
own borehole, hand pump and treatment. These are
much costly and less reliable than public tap system
[6, 7]. For sustainable services provision, the inter-
national financing agencies suggest that necessary
resources may be met by authorities from his own
sources [8]. However, people cannot attach the same
value to sufficient and safe drinking water availabil-
ity and changes with time and place. These dispari-
ties in households’ perception are wide-ranging and
are not always elicited by the government organiza-
tions and development agencies in planning or im-
plementing a project [9]. Therefore, the lack of de-
mand side information on public preferences regard-
ing desired level of is major obstacle to planner and
policy maker for the provision of quality drinking
water. Many time projects fails because the needs
and Willingness to Pay (WTP) of the community are
not properly signaled during designing stage [6, 10].
However, these Information are necessary in fram-
ing judicious policies for the preferred service level
and recovering the maintenance costs for efficient
and sustainable service provision [5]. Due to public
good nature and natural monopoly, the price of
drinking water service is not determined in the com-
petitive market. Therefore the use of Contingent Val-
uation (CV) survey to create a hypothetical market
for eliciting WTP is frequently method [11]. This
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method are more comprehensive and give each and
every detail, which has practiced in most developing
countries [12].
Foregoing in view, the use of CV as a survey
tool to elicit households’ WTP (e.g. in Peshawar) can
give key inputs to practitioners, planners and practi-
tioners for sustainable planning for QDWS provi-
sion.
MATERIALS AND METHODS
Study Area and Problem Statement. Pesha-
war’ as a historical and capital of Khyber-Pakh-
tunkhwa, has Economic, political, historical and mil-
itary role. It is a dynamic and keeps 8th rank in pop-
ulation growth in the country. Geographically the
city is bounded by Nowshera, charsadda by East,
North, district Mohmand and Khyber are its north
west and Frontier Region of Kohat is to its south
[17]. Being a provincial capital, peculiar socio-eco-
nomic and strategic characteristics, arrival of Afghan
immigrants and influx of internal migration the city
has experienced tremendous population growth. In
the absence of proper land use planning and institu-
tional frame work the new development in the low
land area
Overburdened the existing carrying capacity of
the water infrastructure in the study area [13]. Re-
sultantly, both quality and quantity of domestic wa-
ter deteriorated with the passage of time [14]. Fur-
ther the lack of financial resources, the rising de-
mand for QDWS has not been met by the authorities.
The prevailing quality of drinking water is not up to
the standard and need further improvement [15].
The city planner usually ignored what actually peo-
ple wants and how much they are WTP for QDWS.
The present study is an effort and carried out a com-
prehensive survey to investigate household’s de-
mand/WTP for QDWS in the city of Peshawar not
only give input to city planner for sustainable plan-
ning but also make the authority self-autonomous in
revenue generation.
Sampling. Using the below Eq. 1 online sam-
ple calculator formulae, the sample size was calcu-
lated and allocated proportionally to each union
council.
𝑍 % ∗ (𝑝) ∗ (1 − 𝑝)
𝑆𝑆 =
𝐶%
Where:
SS= Total No of survey Households.
Z = Z value and its table value is 1.96
p = percentage picking a choice
c = confidence interval (e.g., .04 = ±4)
Using Eq.1 the sample size for the given popu-
lation ac be calculated as:
SS = (Z-score) ² * p*(1-p) / (margin of error) ²
SS = (1.96) ² * 0.5*(1-0.5) / (0.04) ²
SS = 3.8416 * 0.25 / 0.0016
Fresenius Environmental Bulletin
SS = 600
Survey Design and Data collection. For esti-
mating respondents WTP for QDWS, literature sug-
gest various survey methods namely Revealed Pref-
erence Approach by [28, 29], Hedonic Travel Cost
Method by [26, 27] and Contingent Valuation
Method by [21]. As QDWS are non-market and can-
not be bought and sold like normal goods and ser-
vices, therefore a well structure CV survey was car-
ried out and data was collected through face to face
interview from the income earner member/head of
the HH in the line of [20]; [21] studies. Various ap-
plication from developing countries like [22] in
mega city of India, [23] in Kathmandu (Nepal), [24]
in urban areas of Espirito Santo (Brazil), [3] in Mex-
ico City (Mexico) and [25] in the Municipality of
Kissamos (Northwest Crete) give evidence of CVM
studies.
Keeping in view the replication of the above lit-
erature, the present survey was conducted in January
2018 and data was collected through face to face in-
terview in line of [45]. Before the inception of Water
and Sanitation Service Company (WSSP) the munic-
ipal services were provided by various authorities
with overlapping function. Study [46] shows that
water quality is good at source level, however faulty
distribution and storage infrastructure, and their lack
of maintenance are main causes behind water con-
tamination.
To decide that either data can be collected from
each and every respondent as suggested by [23; 24]
or head of the household as conducted by [47, 48].
This decision depends the payment vehicle of the re-
gion that either payment is made by each respondent
or by the head of household [49].
The present study is limited to 45 urban UCs
and as per 2017 census the total urban population
1,970,042 persons. Further the sample size was allo-
cated proportionally to each union council in the line
of [18, 19] studies.
Questionnaire Design. The data was collected
through a well-designed questionnaire using Contin-
gent Valuation Survey (CVM) method. The ques-
tionnaire has two Parts the first part consist of the
demographic characteristics of the household. The
second part consist of information regarding to the
existing stat, practices and for various bids of WTP
Eq. 1 for QDWS.
Before the inception of CV survey, respondents
were presented the proposed service improvement
plan of QDWS. Those who ridiculous to pay were
not further questioned. While those who agree with
the proposed service plan were asked to elicit their
WTP. The proposed QDWS plan for the present
study consisted of:
• The 7/24 water supply service at door step.
• Safe water provision without contamina-
tion.
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TABLE 1
Socio-Economic and water characteristics of Urban Peshawar
Socio-Economic Characteristics Minimum Maximum Mean Std. Deviation
Age of the Respondents (In Years) 20 91 55.5 1.290
Marital status of the Household (1=Married, 2=Unmarried) 1 2 1.92 .269
Size of the Household (In Numbers) 2 30 6.41 3.699
Education of the respondent (0= illiterate, 1=Middle, 2= Matric, 3=
0 6 1.54 1.350
Intermediate, 4= Bachelor, 5= Master, 6=Higher)
Employment Status of the Respondents (1= Unemployed, 2= Govt.
1 4 2.98 .931
Employee,3= Private Employee, 4= Own Business)
Income of Household (In PKR)(1= Up to 50000, 2=51000-100000,
3=100001-150000, 1 6 3.38 1.567
4=151000-200000, 5=200001-250000, 6=251000 and above)
Housing occupancy status (0=Rented. 1=Own) 0 1 .80 .404
Plot size of the Household (In Marla) (1=≤5 Marla, 2=6-10 Marla,
1 6 3.09 1.179
3=11-15 Marla, 4=16-20 Marla,5=> 20 Marla)
Total no of Respondents(N=600)

• And proper monitoring mechanism with
addressing complaints
In Peshawar, the urbanites are willing and do
pay more charges for QDWS. Since the authorities
usually propose the services and set the charges au-
tocratically rather than by competitive market by in-
volve the end-users. Therefore the prevailing service
and applied charges are not revealing the demand of
the majority end users. To make the services sustain-
able and cover the services charges we turn CV sur-
vey to estimate economic value of household will-
ingness to for QDWS. A well-structured question-
naire showing the exact nature of the proposed ser-
vice offered were defined in the questionnaire. Re-
spondents were free to choose and could 'pay' for the
services through various offered bids. Further, they
were asked clearly that if they are willing for QDWS
service plan have to pay extra charges to authority.
Ranges of five (05) bids in PKR were offered
through bidding game method and household re-
sponses were recorded against each bid through dou-
ble-bounded dichotomous choice questions ‘yes’
‘no’. Each household’s response was recorded from
higher bid value to lower bid value till the positive
answer. It is important to note that the lower bench-
mark for the bid value is 251-300 because already
the majority respondents pay PKR 200 at flat rate for
drinking water services. Ranges of bids were used to
estimate average demand curve and consumer sur-
plus.
Analytical Procedure and Model Specifica-
tion. Data was put SPSS software version 20 and
various statistical tools e.g. descriptive statistics and
bid wise logit models were used for analysis of data.
Models like Tobit Models [33], Logit Models [30],
Symmetrically Trimmed Least Squares [31, 32], Or-
dinary Least Square were used depends upon the na-
ture of study. However, Logistic Model is the most
widely and commonly used techniques [34]. So, in
this study linear Logit Model was used for each bid
separately.
In the Logit Model depended variable was con-
structed as ‘WTP’ and dichotomous in nature. It take
value ‘1’ if the HHs are willing to pay and ‘0’ other-
wise.
Generally the probability of an event is given
by
1
𝑃𝑟𝑜𝑏𝑖𝑏𝑖𝑙𝑖𝑡𝑦 (𝑒𝑣𝑒𝑛𝑡) = ;<
𝑒
Where Z denotes variables Y1, Y2……………. Yn
1
𝑃𝑟𝑜𝑏𝑖𝑏𝑖𝑙𝑖𝑡𝑦 (𝑒𝑣𝑒𝑛𝑡) = ;(=>?=@A@)
𝑒
The transform form to find the log of an event
is as:
Ln (probability in favor of an event/1-probibilty of
an event) =Z.
In present study
Z= β0 + β1In + β2Ed+ +β3HHs + β4 HO+ β5HOwn+ εi
Eq.2
In the above equation:
In = Gross Income of the respondents and was
calculated from the expenditure. In the of literature
like [15] in Peshawar, Pakistan; [35] in Kenya; [38]
in the Volta Basin; [36] in Osun State, Nigeria; [37]
in Mali and [39] its value are positive.
Ed= Education of respondent is categorical
variable and its prior sign is positive in the line of
[19, 15, 36, 35, 40] studies. The educated respond-
ents are more conscious about the water quality and
willing to pay more compared to uneducated per-
sons.
HHs= Household Size, its prior sign is negative
from [35, 39].
HO=Household occupation. Its prior sign is
positive as proposed by [6, 41] in his studies.
HOwn=Housing ownership and its proposed
sign is positive and supported by [42, 19]. When re-
spondents are sure that they will be permanent are
more likely to be willing for QDWS increases.
εi = the effect of unmeasured variables.
RESULTS AND DISCUSSION
Socio-Economic and Water Service Charac-
teristics. Table-1 give the details of various charac-
teristics of the urbanites. The average age of the re-
spondents was 55.5 and mostly are married. The size

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of the household varies from large size to very low
and the average size is 6.4 persons. Large family size
was mostly observed in low-income families. Edu-
cation of the respondent are also skewed and varies
from uneducated to higher level. Most of them are
literate and have awareness the water born dieses
cause by low-quality drinking water.
The findings further show that average re-
spondents are matriculate and has no formal educa-
tion of attending higher level schooling. Literature
from various studies like [19, 15] reveals that edu-
cated respondents are more sensitized of his and
family member’s health, hygiene and WTP for
QDWS. About income of respondents’ it was ob-
served during the pilot survey that interviewee con-
ceal their real income due to many reasons. For this
purpose questions were asked and regarding various
expenditure and used as a proxy for their total in-
come. Table-1 shows that financial status of the fam-
ilies fluctuates from low to high income HHs and ex-
treme dualism was observed. According to Eco-
nomic theory, consumer’s demand depends on their
total income [50]. This means rich people induce to
invest more on QDWS as compare to their counter-
part poor respondents.
In contrary, employment of the respondents has
mix-up situation and average of them have their own
private job. The residential size also varies from
small to capacious size, subject to economic status
of the HHs. Table-1 shows that, majority of the re-
spondents have their own housing occupancy and are
pakka make from break or cement blocks.
Respondents Perception on the Prevailing
Domestic Water Services. Table-2 gives an over-
view of the drinking water sources and people per-
ception in urban Peshawar. In Peshawar besides CB
whose services are limited to cantonment area, most
urbanites are served by WSSP and have tap water fa-
cility at doorstep. Most of the respondents, 92.7 per
cent have drinking water from the protected source
(Protected drinking water means, ground water from
deep aquifer like public tap, private bore/hand
pumps). While minor population use water from
shallow and unprotected sources (Unprotected
means self-made shallow wells, spring, ponds and
canal and Khawar water). Since majority of respond-
ents have water from improve source and are on
track to SDG goals 2030 still the water quality is is-
sue of major concern. On the basis of Physical char-
acteristics the water is good and free from contami-
nation at source level. But water become contami-
nated at the distribution line due to old rusted pipes.
This result is also confirmed by [14, 13]. Faced with
such problems, only 6.3 percent of the people treat
water before using for domestic purpose (2.8 percent
boil water, 3 percent use water filters, and 0.5 per-
cent bleach water).
1468
Fresenius Environmental Bulletin
Analysis further reveals that households usu-
ally treat without advance water treatment and use
traditional methods (boiling, straining etc.) and mod-
erate technologies like use filters. The use of low
grade technologies is due to lack of political interest
and poverty of people. In absence of proper water
meter system, the existing water charges are levied
on flat rate @ PKR 200/ month, which is totally in-
justice. In response of their WTP for QDWS, major-
ity of them vote in favor ‘yes’ and were not satisfied
with the existing services.
Households’ Potential WTP for QDWS.
Through bidding game method, the proposed QDWS
plan e.g. Sufficient tap water at door step with 24/7
water supply service, Safe water provision without
contamination and proper monitoring mechanism
with proper addressing complaints of the customer
were presented through hypothetical market. Re-
spondents’ perception were documented against
each bid value for proposed services. Table-3 gives
a frequency of the dichotomous (Yes, No) responses
against each bid.
The above Table-3 shows that bid5 (251-300)
has the highest frequency and mean WTP is PKR
278. The consumer surplus against this bid is PKR
78 and the extra revenue which will be gain by the
service providers if the survey based charges
properly implemented. Further increasing the bid
values, subsequently the frequency of HHs willing
to pay diminishing in the line of demand law for nor-
mal commodities.
Based on Table-3, the average demand curve
given in Figure-1 was drawn by plotting the fre-
quency of HHs responses on the vertical axis and the
value of mean WTP along the horizontal axis. The
demand curve is the intersection of mean value of
HHs WTP against frequency of HHs responses that
are WTP. Each point on the same demand curve
shows the preferences of HHs and downwards slop-
ing. Suppose the QDWS is free commodity, then be-
neath the demand curve shows consumer’s surplus.
However, regional wise official data shows that each
locality has its own service charges. In University
Town and Hayatabad, the water charges are set in a
progressive rate depending on the plot size: For 3-7
Marla plots, it is PKR 200, for 10 Marla plot, it is
PKR 250, for 14 Marla plot, it is PKR 440 and for 1
Kanal PKR 550/month. In University Town these
charges are PKR 350/month. Beside Hayatabad,
most of the water charges PKR 200/month on flat
rate. Cantonment area has its own schedules and col-
lect charges on quarterly basis PKR 230/connection
on. Currently, majority of the people in study area
pay PKR 200 per month for the provision of drinking
water services. Based on the collected information
from the field data the following demand curve was
drawn.
© by PSP Volume 29 – No. 03/2020 pages 1465-1473 Fresenius Environmental Bulletin

TABLE 2
Household responses regarding State of Drinking water in Urban Peshawar
Drinking water services provider in Urban Peshawar
Frequency Percentage
Water and sanitation service company1 539 89.8
Cantonment board 42 7.0
Own/ Private sources 19 3.2
Total 600 100.0
Source of water in urban Peshawar
Private bore/hand pump 18 3.0
Public tap 346 57.7
Both Public and private 192 32.0
Unprotected well 44 7.3
600 100.0
Water treatment
Boiling of water 18 3.0
water filter 17 2.8
Bleaching 3 0.5
Total 38 6.3
Satisfaction regarding the water service
Satisfied 69 11.5
Not satisfied 531 88.5
Responses of WTP for Quality Drinking water
No. 69 11.5
Yes 531 88.5
1
Presently the municipal services of Hayatabad and University Town Peshawar have been again delegated to Peshawar Devel-
opment Authority (PDA).
TABLE 3
Various bids for willingness to pay for Quality Water Service in urban Peshawar
Various bids Frequency of Consumer
Bid No Percent Mean WTP
(In PKR) Responses against each bid Surplus
1 451-500 12 2.25 437 237
2 401-450 16 3.00 425 225
3 351-400 19 3.57 365 165
4 301-350 53 9.96 335 135
5 251-300 432 81.20 278 78
Total 532 100.00

FIGURE 1
Average WTP for Quality Drinking Water Services in Urban Peshawar

It is evident from the above Figure-1 that ma-
jority interviewees’ vote in favor of bid 5 and are
WTP PKR 278/month on average. The prevailing
service charges (PKR 200/month) on flat rate is
lower than the survey based PKR 278/months. The
variance between two values (PKR 78) is consumer
surplus for which they are willing to pay. But this
sum of money become wasted every month without
democratic planning in the system. The monetary
benefits from this public participatory approach in

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TABLE 4
Result of Logistic Regression Model for Quality Drinking Water Service in Urban Peshawar
Dependent Variable: WTP for IWS at different Bids (Dichotomous)
Independent PKR (251-300) PKR (301-350)
variable Estimated Odds Probability Estimated Odds Probability
coefficients ratio (%) coefficients ratio (%)
2.979*** 4.296***
Ih 19.59 95.1 72.77 98.64
(0.387) (0.542)
1.409*** 0.304*
Edu 4.09 80.3 1.31 56.71
(0.1960) (0.196)
-0.037 0.072
HHs 0.96 48.9 0.99 49.75
(0.620) (0.102)
0.279** -0.027
HO 1.32 56.9 1.05 51.29
(0.152) (0.250)
-0.436 0.103
Hocp .642 39.1 1.05 51.15
(0.490) (0.630)
-34.344*** -55.824***
Constant .000 -- .000 ---
(4.403) (6.966)
No of observation, N =432 No of observation, N=53
Pseudo R2=0.601 Pseudo R2=0.649
2
χ =252.897 χ2=178.734
Ø Standard Error value are given in the parenthesis.
Ø Above standard error value shows coefficient of variables(β)
Ø *** significant at 1per cent
Ø **significant at 5 per cent
Ø * significant at 10 per cent
Source: The table is based on Author own calculation from the field data.

planning process is the sum of anticipated extra rev-
enue in the form of consumer's surplus and the miti-
gation of dead weight loss of the public utility com-
pany in form of allocative efficiency. If the public
utility company consider the survey based competi-
tive rate PKR 278/month for the proposed QDWS, it
will create more revenue in the form of extra con-
sumer surplus but as well mitigate the dead weight
loss in the form of allocative efficiency of the public
utility company which foremost necessary for sus-
tainable service provision.
Bid wise Logit Model for QDWS. Table-4
presents various variable analysis through Logistic
Regression Model given in Eq. 2. The odds ratio val-
ues corresponding to each variable indicates the var-
iable’s contribution to the odds in favor of WTP.
Analysis shows that only three (03) factors are dom-
inant in determining of households WTP. These var-
iables ‘In’ ‘Ed’ ‘HO’ and have loading greater than
50% and were selected as defining variables.
‘Ih’, are statistically significant for both bid1
and bid2 at P< 0.05 and P< 0.01. The odd-ratios col-
umn shows that 1 unit increase in ‘Ih’ leads to ap-
proximately 20 and 72 times increase in the house-
hold’s WTP for QDWS for bid1 and bid 2 respec-
tively. This means that changes the ‘Ih’ by one unit
have chances of 95% to pay PKR (300-350) and 99%
chances to pay for PKR (351-400) for QDWS. The
demand theory also presents the importance of in-
come and have directly related to WTP of the HHs
[51].
‘Likewise, ‘In’, ‘Ed’ both are significant at P<
0.01 for bid1 and at P< 0.01for bid2. The odd-ratio
value of education for bid1 is higher than in bid2
means that the probability of households WTP for
bid1 is greater than bid 2. This means that educated
respondents demand the QDWS at lower bid to opti-
mize his limited resources.
Household occupation ‘HO’ have also have a
positive and dominant role in household WTP for
IWS. It is clear from Table 5.17 that ‘HO’ value is
significant at P<0.05 only for bid1 where the odds
ratio value greater than ‘1’ means that changes in
‘HO’ by one rank have the chance of 57% to make
changes of households WTP for QDWS
The coefficient of ‘HHs’ has negative value,
this represent that besides this variable WTP for
QDWS is determined by other factors in the line of
[36]. Similarly, ‘HOwn’ has negative impacts on
WTP for QDWS, means rented household due to
other priorities are not sensitized as compare to re-
spondent having their own ownership. As a conclu-
sion for better policy option, policy makers and ser-
vices provider authority before implementing and in-
crease any water services tariff must consider in-
come, education and occupation of the households
for more revenue collection and sustainable services
provision.
CONCLUSION
This study concludes that majority urbanites
are not satisfied with existing QDWS and are WTP
average PKR 278 per month in spite PKR 200 for
QDWS. The extra amount PKR 78/month will make
the company financially atomized, lessen the
deadweight loss and make the services sustainable.
Furthermore, households’ income, education and oc-
cupation status have positive impact on WTP for

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QDWS. It is recommended that HHs WTP infor-
mation may be used as policy instrument for efficient
and improved water quality services. Further the pol-
icy maker should change the centralize (supply
driven) approach to decentralize (demand-oriented)
to cover the gap which usually exists between the
planners and customer. So, this is a benchmark in
this regard and a spring board for the upcoming re-
searchers in this field.
ACKNOWLEDGEMENTS
The authors are extremely grateful to the par-
ticipants of the survey who embraced us with their
valuable time and cultural hospitality in the field.
The study was self-funded, and no funding of any
kind was received.
The authors declare no conflict of interest.
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Received: 19.04.2019
Accepted: 24.10.2019

CORRESPONDING AUTHOR

Umar Hayat
Department of Economics and Development Studies
University of Swat, Swat – Pakistan

e-mail: umarhayat@uswat.edu.pk

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