Recent 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? Is there a need for a re-look at water pricing? What are the possible good models in existence and which are the cities in India that other towns can emulate? What will be the impact of the Jawaharlal Nehru National Urban Renewal Mission's funding on the urban water sector?
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 and efforts on to plug them and bring them down to 15 per cent (from 37% currently). Finally there is a dedicated cell within the body that looks at a structured approach to providing water for the poor.
Where does then the BWSSB stand with regard to water tariffs? The production cost of water is the cost to collect the water from the river, treat it, pump it to the city, store it and distribute it to the consumer and finally bill 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 along the following lines.
Domestic Tariff
| Consumption Slab Liters | Tariff Rs. | Minimum Rs. |
| 0-8000 | 6.00 | 48.00 |
| 8001 – 25,000 | 9.00 | 201.00 |
| 25,001 – 50,000 | 15.00 | 676.00 |
| 50,001 – 75,000 | 30.00 | 1326.00 |
| 75,001- 100,000 | 36.00 | 2226.00 |
| 100,000 and above | 36.00 | 5826.00 |
Non-domestic tariff
| Consumption Slab Liters | Tariff Rs. | Minimum Rs. |
| 0- 10000 | 36.00 | 360.00 |
| 8001 – 25,000 | 39.00 | 390.00 |
| 25,001 – 50,000 | 44.00 | 880.00 |
| 50,001 – 75,000 | 51.00 | 1002.00 |
| 75,001- 100,000 | 57.00 | 2280.00 |
| 100,000 and above | 60.00 |
|
Industrial tariff: Rs.60 per kilo-liter.
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.
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 kiolitres) 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. Their tariff structure works like this:
Minimum Uniform water rates
- Rs.3 per kilolitre in respect of corporations other than Bangalore City.
- Rs.2.50 per kilolitre in respect of City Municipal Councils.
- Rs.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. The water tariff slabs for the domestic sector will then look like this:
| Consumption Slab Liters | Tariff Rs. | Minimum Rs. |
| 0-6000 | 0.00 | 0.00 |
| 6001 – 25,000 | 30.00 | 180.00 |
| 25,001 – 50,000 | 30.00 | 750.00 |
| 50,001 – 75,000 | 30.00 | 1500.00 |
| 75,001- 100,000 | 36.00 | 2250.00 |
| 100,000 and above | 36.00 | 3600.00 |
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.
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.
