Fixing water pricing is not just a matter of introducing some user charges here and raising a few taxes there. It is the need of the hour to tackle the concurrent issues, improve the service levels and implement a cost recovery policy. The policy should be balanced in terms of affordability considerations and sustainability imperatives, writes Sumantra Das.
Water being an essential public requirement, it becomes important that its cost policy should be focused on shifting from an equal (and low) tariffs inequitable access regime to a differentiated tariff equitable access regime. Even though several efforts have been made by the government under the National Water Policy statements of 1987, 2002 and 2012 to identify the bottlenecks and find out a rational solution, it seems there is a long way to go.
The declining per capita availability of water for various uses raised serious concerns for regulating the use of this finite but vital natural resource inter alia through a rational structure involving all those are involved in water planning, development and management. In this regard, the National Water Policy statements of 1987, 2002 and 2012 which not only mentioned about the scarcity value to the users but also focussed the need to provide motivation for economy in its use and ensure realisation of at least the operational and maintenance charges of providing the service initially as well as a part of the capital cost subsequently.
However, in reality, the states that are giving due considerations including paying capacity of the consumer in fixation of water rates to generate revenue and other related cost remain mostly unsuccessful. In spite of several efforts made by the states, the revenue realisation is still remain inadequate as the average water tariffs in urban India continue to be low relative to costs, even as affordability concerns constrain meaningful progress on cost recovery.
A challenging task
No Indian city has achieved 24x7 supply yet. With a few exceptions, water supply is un-metered and losses are upwards of 50 per cent. A vicious circle of under-investment, poor service levels, poor cost recovery and weak water utilities has led to expensive coping mechanisms (tankers, bubble-top cans, deeper and deeper bore-wells) be¡coming main stream and this has made water supply exclusive and inequitable. As the HPEC report (and several other studies) points, the poor end up bearing the brunt, an outcome that is opposite of what policy should have achieved. Efforts to correct water pricing in this backdrop have tended to often focus narrowly on levy and revision of user charges without adequate attention to service delivery commitments and tacking affordability considerations squarely. It is not surprising that even relatively minor water tariff increases have there¡fore tended to evoke emotive reactions and angry protests.
´Given the large constituency that this represents, politicians find it difficult to support any measures that imply raising the prices of inputs to the agricultural process, whether water, electricity or fertiliser, says Anand Madhavan, Group Head Energy & Urban Infrastructure, ICRA Management Consulting Services.
Recent efforts notwithstanding revenues of urban water supply systems fall woefully short of their costs. Urban water supply systems recovered only about 30-35 per cent of O&M costs vis-a-vis 100 per cent of O&M cost recovery targeted under JNNURM and reiterated in the Draft National Water Policy 2012. With a large section of society having genuine difficulties in paying full cost of water and sanitation services, urban water pricing has become a complex challenge to tackle.
´Some states have made progress in levying price for consumption of water. In some areas, systems are implemented with 100 per cent metered water supply which is an effective method for pricing. Earlier, and even today, many cities are charging water on flat rate basis depending upon the area, number of connections or property value on fixed percentage basis as water tax,´ observes AV Suresh, President International Opera¡tions & CEO, Forbes Professional, Eureka Forbes.
Efforts to correct water pricing in this backdrop have tended to often focus narrowly on levy and revision of user charges without adequate attention to service delivery commitments and tackling affordability considerations squarely.
Madhavan believes that moving to a reasoned dialogue for sustainable water pricing will require a more holistic approach and actions by water utilities (supported by state and national governments) along four areas: Set and meet threshold service delivery commitments, Track and disseminate information on financials, Articulate and implement a cost recovery policy that balances affordability considerations and sustainability imperatives and, Address the entire water loop and tackle cost recovery and sustainability of water and wastewater management in totality.
´In order to facilitate future water resource programme as well as to recover operation and maintenance cost, it is necessary to implement a cost structure to the user. Stable and enforced pricing mechanisms help water users make rational and economically beneficial choices of their water use entitlement,´ says Ajay Popat, Director, Ion Exchange (India).
Is privatisation a solution?
Interestingly, India tried to implement a cost structure through privatisation although it remains an unsuccessful venture. Cities like Delhi and Mumbai have tried their hands at (partial area-based) privatisation without success.
Smaller cities, however, have taken a lead in experimenting with the privatisation of water management and service delivery. As cities begin to get more comfortable with the idea of private sector handling its water needs, possibly the trend will pick up in right earn¡est across the country.
Time to act
Over the period, we can hope to reach at some organised stage. For instance, in Tamil Nadu urban claims of water reached 80 per cent and most of the people now have access to pipeline water. This has implemented more organised way in the state. Many states and cities are able to create provision for the same.
Enforcing the pricing and ensuring that the sums due are collected requires further political will. We need to escalate the water policy to be implemented on time and on every level, like the power sector reforms which finally happens after comprehensive legislation.
Collective efforts can revive water sector
Over the years, water sector remained as a neglected sector. However, with the respective ministry and Planning Commission´s positive inclination towards the sector will help to give a boost in future.
The present draft on water policy has come out with the objective of taking the existing situation in proper perspective and to proposing a frame work for creation of the over arching system with the suitable law. We would expect the water policy also be able to address the issue of equitable distribution of water what we find so long implemented in fragmented manner.
In India, water management is still in a nascent stage. There are many things to do for us which includes: a) Social campaign to reduce wastage, b) Well guided legislation and incentive to ensure industry to use recycled water, c) Proper implementation of aquifer policy to avoid groundwater depletion, d) Implementation of river basin management plan like GRBMP creating proper sewage network and construction and management of cluster of sewage treatment plants (STPs) with self-generating and self-sustaining power out of biogas (green power and STPs are not dependent of grid power), e) Explore the option of desalination if affordable for the coastal areas, and last but not the least f) proper infrastructure policy with respect to water and wastewater to make it socially acceptable and at the same time attractive for private investment through PPP/BOOT. If these can take place in a proper manner then we will be able to find better days ahead.
Water sector always remain a neglected sector. Unlike energy or any other infrastructure sector water sector never get focussed. However, with the initiative of present ministry, we hope to see the necessary attention to sanitation as well as drinking water will coming soon. In addition, there is a lot of thrust also given by the planning commission on the sector through Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and subsequently New Improved (NI)JNNURM.
If the national water policy along with JNNURM plan and the ministry work together, then I believe water sector also get much attention like other infrastructure sectors which will help to get more investment and development.
This sector has immense potential to attract private investment and hence if we take collective efforts to all as mentioned above, I find investment in water shall be equally acceptable if not more compared to other infrastructure sectors as at the end of the day, you cannot survive without water.
PK Majumdar, Head BOOT, VA Tech Wabag