With most of the municipalities not recovering even up to 50 per cent of their costs for their urban water supply services, a strong need is being felt for a regulator in the sector. The regulator could be on the lines of the electricity regulatory commissions which fix tariff taking into account input costs.
"The need for putting in place a regulatory framework is important for levying rational water tariffs in towns and cities. Presently most agencies in the country fall short of recovering even operational and maintainence costs through tariffs, with agencies relying on subsidies from their respective state governments to keep afloat," a senior Delhi Jal Board (DJB) official said.
Delhi is a perfect case study of the situation witnessed by municipal bodies dealing in urban water supply across the country. The state-owned DJB, which supplies water to a major portion of Delhi, is propped up by subsidy from the state government. The Board had run up a deficit of Rs 10,130.81 crore in 1999-2000 and Rs 6923.21 crore in 2000-01. The deficit for the current year is projected at Rs 5,825.96 crore.
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"We are surviving on assistance provided by the state government, while tariffs charged from consumers comprises just a fraction of our costs. So, even though the Board is producing an average of 630 MGD of treated water as against a demand of 800 MGD in the city, it is difficult to work out ways to meet the deficit," the DJB official said.
The situation is the same in other cities and towns in the country. However, on the question of rationalising tariffs and linking it to actual costs, there has been an abject lack of initiative from city administrations across the board.
Water tariffs is a prerogative of state governments and political consensus on linking water tariffs to costs has been a stumbling block. Unless a regulator is incorporated and economically viable tariff structures are imposed, there would be no way possible to meet supply constraints and ensure upkeep of existing network, a ministry of water resources official said.
What is ironic is that a majority of people are ready to pay higher charges for better services, but lack of political will to hike tariffs from their ridiculously low levels is a stumbling block, the DJB official said.
"Even if a government decides to levy higher tariffs, there will be resistance from the Opposition, who would try to score political points for daring to touch such a sensitive subject as water rates," he said. The only way to ensure rational tariffs is to incorporate a regulatory framework outside of political intervention, he added.
Rationalised tariffs will automatically link to better quality of service. The price will have to be realistic and there can be a slab system under which different rates can be levied from the rich and poor sections, he said.
Also, unless tariffs are rationalized, the misuse of municipal water will be high. The cost of treated municipal water is below the cost of untreated water which can be pumped from the ground; so naturally people will use treated water for a whole host of purposes resulting in wastage.
The existence of a secure revenue stream, finances to pay bills on time and sound accounting and financial management principles will allow municipalities to access the domestic debt markets and pay for facilities constructed and operated by the private sector, according to a World Bank official.
India's urban water supply suffers mainly because it lacks a commercial orientation and investment needs exceed funding from existing sources. Under an appropriate regulatory framework, the private sector can provide the management expertise and incentives to reduce management expertise and incentives to reduce losses and expand services, he said.
An appropriate strategy would combine tariff increase with improvement in service standards and water availability, he added.