Speaking at an event organised by industry chamber CII, Dikshit noted that population of Delhi was increasing significantly and the per capita consumption of water was probably one of the highest in the world so the city may have to face "great trouble" in the next few years if supply of raw water does not go up.
"We will face great trouble in the next five to seven years if we do not address the issue. Scarcity of water is the main challenge facing the city and we will have to seriously address the issue," Dikshit said.
"We are emphasising on rationalising distribution of water because the per capita consumption of water in Delhi is the highest in the country, probably one of the highest in the world. The per capita consumption is 272 litres of water. This is a kind of wastage," she said.
The current average demand for potable water in Delhi is around 1,100 mgd (million gallons per day) and the Delhi Jal Board supplies around 800 mgd water across the city after treating raw water in its treatment plants.
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Large parts of the city witnessed a severe water shortage last summer and people even resorted to violent protests in many localities.
Earlier this year, the Delhi Government had asked 35 five-star hotels to take immediate steps to cut down their consumption and directed them to set up waste water treatment plants.
The government for the some time has been considering hiking water tariff significantly to cut wastage of the natural resource.
"Housing is a major issue. The reason why Delhi has not been able to catch up with other major capital cities of the world is because of lack housing which has resulted in mushrooming of unauthorised colonies and slums," she said.