Water Supply and Pricing in India: An Analysis

By Suhasini Srinivasan, Army Institute Of Law, Mohali.

Water Supply and price problems:

Depleting groundwater table and deteriorating groundwater quality are threatening the sustainability of both urban and rural water supply in many parts of India. The supply of cities that depend on surface water is threatened by pollution, increasing water scarcity and conflicts among users. For example, Bangalore depends to a large extent on water pumped since 1974 from the Kaveri river, whose waters are disputed between the states of Karnataka and Tamil Nadu. As in other Indian cities, the response to water scarcity is to transfer more water over large distances at high costs.

Efforts at ‘privatization’ of water have created a storm in India. One of the major perceived threats is that of steep hikes in water tariffs and a pricing out of the poor. Some key questions that seem to emerge: What is the price of water to the supplier? What are people being charged out there? Where are our institutions headed in the balance between equity-accessibility and cost recovery in the politically contested terrain of piped water?

Case study- Bangalore:

One perspective – from Bangalore – is illustrative of the situation in much of urban India. There is a general consensus that the Bangalore Water Supply and Sewerage Board (BWSSB) is among the best performing water supply institutions in India. For a start, all legal water connections are metered, and most meters work well.

Secondly the system has an ‘increasing block’ tariff (the rate of billing goes up as the consumption goes up); this is applied by many others in India and seen as socially just.

Third, the institution runs a ‘water Adalat’ – a consumer court of sorts where consumers air their grievances and hopefully get their concerns redressed. Bill payment is computerised, leakages in the system are known in it. According to a paper, by Prof. G S Sastry from the Institute for Social and Economic Change, this figure is Rs.23.13 a kilolitre. Prof. Sastry also points out that if the leakage factor were to be considered, the production cost of water would work out to Rs.34.25 a kilolitre. We will rest that issue for the present, and say that the BWSSB spends money at Rs.23 a kilolitre and recovers this through an increasing block tariff from the consumers. Industrial tariff: Rs.60 per kilolitre.

The domestic sector constitutes the bulk of consumers for the service provider, so let us focus on this. Let it also be clear that Bangalore is rather uniquely placed for more reasons with regard to water supply. Being on a ridge at around 900 meters above sea level water has to be pumped into the city from its sources to a height of 300 metres and around 90 kilometers. This leads to very high pumping costs, and, therefore, a high cost of water to the supplier. BWSSB’s accounts are also fairly credible; it has a ‘double entry system’ of book- keeping and is in a position to calculate the cost of water exclusively. If a municipality were to supply water this figure would lie buried in a general accounts – usually single entry – and would be very difficult to quantify unless kept and maintained as a separate head of account.

Water prices:

What is the impact of BWSSB’s tariffs? Consider a family that consumes 25,000 litres (25 Kilolitres) each month, which at about 800 liters a day is not unusual. At the end of the month, the family would get a bill for Rs.201 for water consumption. It has cost the BWSSB Rs.575 (23 rupees times 25 kilolitres) to supply this water to the consumer’s doorstep. Since the family only pays Rs.201, it has received a subsidy of Rs.374 for that month. Now this is repeated month after month for middle-class homeowners, nearly all of whom can afford to pay the true cost of water. The family also has no incentive to be conservative with water use; whatever it consumes between 8000 liters to 25,000 liters, the bill will still read Rs.201 as a minimum charge. The more domestic connections the BWSSB gives out, the more it stands to lose monetarily.

In the case of the Karnataka Urban Water Supply and Drainage Board – the KUWSDB, which is responsible for bulk water supply to more than 213 towns and cities across Karnataka – the situation is even worse.

Minimum Uniform water rates-

• 3 per kilolitre in respect of corporations other than Bangalore City.

• 2.50 per kilolitre in respect of City Municipal Councils.

• 2 per kilolitre in respect of Town Municipal Councils and Town Panchayats.

So if a similar family consumes 25,000 litres in Mysore, its water bill for the month would be Rs.75, about a third of the cost in Bangalore. (It is, however, to be noted that the production cost of water in Mysore would be far less since the Cauvery flows close by and there are no heights to which the water needs to be pumped)

There are clearly perverse incentives in operation here. There is also a loss for the BWSSB or the KUWSDB. These institutions are then left with no funds to invest in repairs and maintenance, or for capital investments for the expansion of their services. A predictable fallout of this is that the poor everywhere get left out. When the anti-privatization people agitate for a status quo in prices, they should remember that the misdirected subsidies will continue along these lines. The better off are the ones receiving huge subsidies while the poor languish without even basic access to water in many neighbourhoods of our cities and towns.

Alternatives:

How can the situation be remedied? Here is one possibility. Let us follow the South African example and make the first 6000 liters of water to each family free. Now, to break even, the BWSSB has to recover its Rs.575 spent on supplying water from the next 19000 liters of water. The appropriate tariff works out to Rs.30 per kilolitre beyond the first 6000 liters. Assuming no elasticity in consumption this satisfies equity, access and cost recovery requirements. It, of course, means that the monthly bill for our typical family household will be higher, at Rs.575 instead of Rs.201. But if this family reduces its consumption to a more reasonable 15,000 liters the water bill will drop to Rs.270, pretty close to the original cost. Countries like Germany have driven down per capita consumption to 100 litres per person per day. By adopting this approach, consumers can be steered towards more conscious conservation of water, and BWSSB will save 10,000 liters of water from each middle-class family to give to somebody else.

Even under such a revised tariff, the BWSSB would still continue to make a loss, but strong signals advocating water conservation would be sent to the consumers. More importantly, it would infuse BWSSB’s operations with a high focus on efficiency and cost recovery; as long as institutions delivering public services, especially essential services, have this focus, they can extend their services and maintain their infrastructure comfortably.

Suggestive measures (Uttar Pradesh Example) :

1. Introduction to Water Laws and Policies in Uttar Pradesh

• Laws related to water deals with ownership, access and control of water resources.
• The linkage between the land ownership and water rights in the water laws.
• The present laws related to water is mostly beneficial to landowners and the marginalized communities and landless farmers are at the loss.
• Ignorance of such laws by the marginalized community has added to the problems encountered by them particularly caste-based discrimination.
• There is a strong need for enhancement of understanding of water laws and ongoing changes in the water sector.

2. Human Right to water

• Drinking water has been recognized as fundamental human right as per Article 21 of the Indian Constitution.
• Supreme Court of India and various High Courts have recognized this right in various cases.
• All human beings are entitled to equal and non-discriminatory supply of a sufficient amount of safe water.
• Civil Society Groups can play a crucial role by raising awareness regarding the fundamental human right to water.
• Fundamental human right to water should be included in ongoing reforms in the water sector. Hence, there should be a legal mechanism to implement the human right to water.

3. Rural Water Supply- Swajaldhara and National Rural Drinking Water Programme 2010

• Accelerated Rural Water Supply Programme (1972) was the first such national level policy framework for water supply in rural areas.
• Swajal project led to the formation of Swajaldhara guidelines. The guidelines adopted and implemented the principles of community participation and decentralisation.
• The new policy framework on rural water supply was adopted namely National Rural Drinking Water Programme (NRDWP). Almost all existing programmes have been subsumed in NRDWP.

NRDWP calls for an integrated approach seeking to converge related sectors such as health, education and rural employment.

4. Privatization –

• Major potential Impacts of privatization are:

-High pricing of water supply

-Water will turn into a tradable commodity

-Marginalized and vulnerable section of the society will not be able to afford the water since it will be traded as commodity

• Current water law/sector reforms should encourage public sector privatization.

Conclusion:

A fair pricing policy will ensure that the rich cough up the true cost of receiving their services, and the poor are subsidised. Other steps too can be taken to augment such rational pricing. Ceilings on water availability, managing sewage adequately, preparing a sinking fund to replace old pipes and machinery, becoming democratically accountable, managing the catchment of its water source to name just a few. But tariff revision is politically and socially the most challenging decision needed. Unless the tariff issue is brought out to the open, debated at length and addressed by consensus, we will continue to struggle to provide decent water to our citizens.