Where is the full subsidy, or difference between full and effective tariff. FFCCl From equation (17), we can replace and rearrange the terms to obtain: UU In other words, the full subsidy can be expressed as the sum of the pure subsidy plus the two inefficiency terms (inefficient losses for water and overstaffing for both water and sanitation).

# **3.9 Extrapolating subsidies within countries**

IBNET contains data for utilities in 91 countries,<sup>22</sup> but not all utilities providing either water or sanitation services in each country are included in the database. We can measure the degree of coverage for water and sanitation services respectively in each country by comparing the population served by utilities listed in the IBNET database with the total population served in the country overall. The total population served for water and sanitation services was estimated by multiplying coverage rates from the World Health Organization/United Nations Children’s Fund for piped water facilities and sewered sanitation facilities by population data from the World Bank.<sup>23</sup> By dividing the total population served in a country by the population served in IBNET, we compute an extrapolation factor for each service. Assuming that the average tariff charged by utilities not included in IBNET is equal to that of the utilities in IBNET, and that the average efficiency of both groups is also similar, we estimate total subsidies for each service at the country level by multiplying the total subsidies of the service for utilities in IBNET by the extrapolation factor for that service. The total estimated subsidy level for the WSS sector in each country is then the sum of all utilities’ subsidies in that country.

Nine countries represented in the IBNET database are estimated to have a negative subsidy. Most of these are developed countries, where efficiency may be pushed beyond the level assumed in the Chilean model.<sup>24</sup> Where this is the case, subsidies are assumed to be zero.

# **3.10 Estimating the subsidies for countries not in IBNET**

To extrapolate subsidy estimates to countries not included in the database, we first separate out China and India, while the remaining countries are grouped into four clusters—high income, upper middle income, lower middle income, and low income—based upon the World Bank’s country classifications by income for fiscal year 2019. Next, for water and sanitation separately, we calculate an average subsidy per person served for countries with representation in IBNET, disaggregated into the four clusters (see Appendix B). Then, for countries not in the IBNET database, we multiply the per person subsidy for its cluster by the total population served by the respective service (estimated by multiplying the country’s coverage rate<sup>25</sup> and its total population). Since the main drivers for these estimates are the unit cost in the asset base calculations, the results presented in the report assume a +/-10 percent variation in the unit asset base estimates.

> 22 China and India were not extrapolated due to low proportional representation in IBNET and a general lack of data availability.

> 23 Water and/or sanitation coverage data for 6 countries (Bahrain, Fiji, Indonesia, Kosovo, Kuwait, and Solomon Islands) were incomplete, and were thus supplemented by additional data and estimates. Refer to Appendix B for details.

> 24 See Appendix C for a list of all countries with “negative” subsidies.

> 25 Water and/or sanitation coverage data from the World Health Organization/United Nations Children’s Fund for 3 countries (Austria, Isle of Man, and Micronesia), in addition to the 6 previously cited with partial IBNET data, were incomplete, and were thus supplemented by additional data and estimates. Refer to Appendix B for details.

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