32 Thus 95% of Guatemalan households and 85% of Honduran households are eligible for the social tariff, so that 60-65% of subsidy beneficiaries are not poor, and 80-90% of subsidy resources are captured by the non-poor. Moreover, only around 50% of 31 In a handful of cases additional eligibility criteria are applied based on household characteristics (some Argentine provinces), neighborhood characteristics (Colombia), or whether the family is a beneficiary of other welfare programs (Brazil.) 32 Average household consumption is 102 kilowatt-hours per month in Guatemala and 108 kilowatt-hours per month in Honduras.
31 poor households in Guatemala and Honduras have an electricity connection, and consequently 55-60% of the poor fail to benefit from the social tariff. However, lower errors of inclusion and a less regressive distributional impact are evident in social tariff programs that employ additional eligibility criteria, such as the socio-economic characteristics of the household (e.g. Argentine provincial social tariff schemes) or its neighborhood (e.g. Colombian cross-subsidy scheme.) Badly designed cross-subsidization and other social tariffs that cover too many people imply more public support of utilities. This is indeed the case for Colombia (Box 6). In that country, 80% of residential water customers qualify to benefit from cross-subsidies. Thus, despite the progress made towards the cost recovery tariff objectives established in the 1994 Public Services Law, the water sector continues to make substantial fiscal demands. The Colombian government transferred an average of US$240 million per year to municipally operated water utilities over the period 1998/01, which accounted for 80% of the resources available for investment in the sector. More generally, a narrow base of cross-subsidizers who are over-taxed results in an erosion of the revenue base as the cross-subsidizers opt for self-service (auto-generation or own wells). This is particularly true in the case of water where only about 10% to 15% of the client base is industrial users (as opposed to about 50% in electricity).
32 KEY CHALLENGES The key challenges include improving the social and economic returns from infrastructure, better leveraging the private sector, through a better management of PPI, but also raising new financing for infrastructure. These, and the many underlying steps required are discussed in turn. Improving the social and economic returns from infrastructure Finding better ways to extend affordable service to the poo 33 r Most countries employ considerable subsidies and other programs to promote service expansion, but too many people, especially among the poor, still lack basic services. Access rates have been improving, especially among the poor. But growth rates are slow: on current trends providing safe water to more than 90 percent of the region’s population may take another 15 or 20 years. Speeding up service provision to the poor does not necessarily require additional state resources.
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