Water Taxation and Subsidy Analysis Based on Consumer Water Use Behavior and Water Sources Inside the Kathmandu Valley

Groundwater is a major alternative water source used to cover the deficit of water supplied by Kathmandu Upatyaka Khanepani Limited (KUKL), the authority responsible for water supply inside Kathmandu Valley. The groundwater price relative to that of KUKL affects priority of usage, and hence, groundwater resources sustainability. Therefore, taxation or subsidies on water sources become necessary based on their implication on environment. In this study, we evaluate volumetric water price, including initial investment, operation and maintenance (O&M) cost for different water sources, and compare it with the water price of KUKL, Kathmandu. The results show that shallow groundwater is cheaper than KUKL’s water. For groundwater sustainability, taxation on shallow groundwater seems necessary. For the recent water use of 97 LPCD (liters per capita per day) the taxation requirement is Nepalese Rupee (NRs.) 320/month (0.35% of total expenditure) if the initial investment for well construction and O&M cost are considered, and NRs. 626 (0.7% of total expenditure) if only O&M cost is considered. On the other hand, rainwater harvesting and recharging, the measures to cope with groundwater exploitation, might need 40% to 50% subsidy for their initial investment.