This study aims to measure the efficacy of drinking water in terms of the economic impacts and risk of illness involved in using perilous water sources. Socio-economic factors were also considered. A multidisciplinary approach was employed to analyze the data, including the cost of illness (COI), regression technique, and irrigation water efficiency methods. The primary data set consisted of 210 peri-urban and urban households. It was found that the average cost of illness was higher in peri-urban ($10.79 USD) areas, while willingness to pay for quality water was higher in urban residents. Social status, income, and family size was positively associated with the cost of illness, while education, the source of drinking water (ground water and others), and awareness about safe drinking were negatively associated with the cost of illness. Furthermore, urban residents were more efficient in terms of conveyance and water use. This is one of the first studies to apply irrigation water efficiency methods to measure drinking water efficiency. The results are timely and important with both practical and social implications, including guiding policy framework. It is suggested that family planning programs be made more effective to control family size. The filtration plants to enhance drinking water quality be installed in the central places of each town/division/union council. A public-private partnership could work to provide affordable quality drinking water.