Proceedings of 3rd Asia-Pacific Business Research Conference 25 - 26 February 2013, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-19-1 Identification of the Critical Factors for Design and Implementation of Cost Reflective Tariff System for Domestic Water Supply in Sri Lanka VGU Ranjith and SWSB Dasanayaka, PhD The main purpose of this study is to identify critical factors affecting the design and implementation of a cost reflective tariff system for domestic water supply in Sri Lanka. This study was carried out through a situational analysis, survey and in-depth interviews with various stakeholders in Sri Lankan water sector. A structured questionnaire survey identified the economic affordability of consumers randomly selected in the Western Province of Sri Lanka. The situational analysis shows that the water supply entity, National Water and Drainage Board, in Sri Lanka is unable to recover the cost of supplying domestic water, due to the non-existence of a cost reflective domestic tariff structure. Survey responses show that the existing tariff structure has failed to generate sufficient rate of return by achieving equity. Facilitating access to safe drinking water for people has great impact on socio-economic development in Sri Lanka. This study is focused on the water tariff and subsidies, both from a normative and a positive side. The scope of the study is limited to tariff, subsidies and related policy issues of domestic drinking water in Western Province comprising of districts of Colombo, Gampaha and Kalutara districts. Keywords: Domestic Water Consumption, Consumer, Water Tariff, Economic Affordability, Western Province, Sri Lanka. ____________________ VGU Ranjith, MBA, Chief Engineer, National Water and Drainage Board, Kelani Water Treatment Plant, Pattivila, Sri Lanka, Tel/Fax +94117631585, E mail: vithanagamage@gmail.com SWSB Dasanayaka, PhD, Professor of Management of Technology, Dept. of Management of Technology, Faculty of Engineering, University of Moratuwa, Moratuwa, Sri Lanka, Tel: +94112606945, Fax: +94112650622, E mail: sarath.iba07@gmail.com