Identifying the five-star hotels as major guzzlers of water, the government has directed them to take a number of "concrete steps" by June to conserve water and install waste water treatment plants by September.
"We have asked 35 five-star hotels to file affidavit informing us about measures they are taking to cut consumption of water. They have been told to set up waste water treatment plants for recycling of waste water by September," a senior official of the environment department said.
They said punitive action will follow in case of non-compliance of the directive.
When asked about the government directive, an official in the Taj Palace Hotel said a number of steps are being taken to ensure water conservation.
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The current average demand of potable water in Delhi is around 1,100 mgd (million gallons per day) and currently Delhi Jal Board supplies around 800 mgd water across the city after treating raw water in its treatment plants.
Large parts of the city witnessed severe water shortage last summer and people even resorted to violent protests in many localities demanding water.