In developing country urban centres of all sizes and capacities, services of all types tend to be deficient. Often, however, decision-making over subsidies accompanies sectoral reforms and may not reflect the same prioritisation that the poor themselves place on services. Typically this is found with sanitation and solid waste services, which are not always prioritised by poor households who lack food security. Yet it is perhaps important to reiterate that these priorities change as the capacity of communities improves. As with delivery systems, it is necessary to consider the flexibility needed to respond to changing demand.
For each service, it is also necessary to decide the focus of the subsidy. This will have a significant impact on all stakeholders - on the incentives for the private partner as much as for the poorest consumer. Is the connection cost to be subsidised, the fixed element of the tariff, or the variable element of the tariff? E.g., if the objective is to promote greater equity, is this best achieved through a rising block tariff structure, which creates a lifeline (or survival) tariff that reduces the unit rate for low-consumption users (but is also available to the non-poor), or by subsidising the costs of connection and infrastructure passed on to new poor consumers?