urban water pricing - indian institute of public … 3_urban water pricing.pdfwater price – cost...

Urban Water Pricing:Urban Water Pricing:Urban Water Pricing:Urban Water Pricing:Urban Water Pricing:Setting the Stage for ReformsSetting the Stage for ReformsSetting the Stage for ReformsSetting the Stage for ReformsSetting the Stage for Reforms

Om Prakash MathurSandeep Thakur

Series Editors:Aasha Kapur Mehta, Pradeep Sharma

Sujata Singh, R.K. Tiwari

2006

Chhattisgarh Infrastructure Report

AcknowledgmentsAcknowledgmentsAcknowledgmentsAcknowledgmentsAcknowledgmentsThe substantive contributions to the paper made by Dr. Govinda Rao, NIPFP, Dr Dale Whittington, University ofCarolina, Dr. Albert Breton, University of Toronto, Dr Kim Cuenco, World Bank, and participants of a UN-ESCAPRegional Workshop on Pro-Poor and Sustainable Urban Water and Waste Water Management at Thailand are gratefullyacknowledged as is the support provided by Mr P.K. Deb, Joint Secretary, DEA, Mr. S.Banerjee, former Joint Secretary,DEA and Mr. Maurice Dewulf and Dr. Pradeep Sharma, UNDP. Ms Rekha word processed the paper at NIPFP.

Table of ContentsTable of ContentsTable of ContentsTable of ContentsTable of Contents

The Importance of Urban Water Pricing 1

Urban Water Pricing: Instruments and Methods 5

Water Pricing Experiences: A Four-City Survey 10

Water Pricing: Setting the Stage For Reforms 17

Annexure 22

Glossary 24

References 25

4

1

2

3

Chhattisgarh Infrastructure Report

1. Water Tax on Annual Rateable value: Brihanmumbai Mahanagarpalika-1999 5

2. Increasing Block Tariff for Domestic Use -1999 7

3. Uniform Water Tariff 8

4. Linear Water Charge (Domestic), Kerala-1999 8

4(a). Linear Water Charge (Non- Domestic), Kerala-1999 8

5. Two-Part Tariff, Hyderabad 8

6. Pricing Structures of Unmetered Supplies 9

7. Institutional Set-Up for Operating Urban Water Systems, Illustrative-2000 10

8. Institutional Framework for Water Provision -2000 11

9. Water Provision in Sampled Cities-2000 11

10. Water Connection Charge, Pune -2000 13

11. Water Connection Charge, Bangalore-2000 13

12. Annual Water Benefit Tax, Pune 13

13. Water Charge for Metered Connections, Pune 13

14. Annual Water Charge for Slum Settlements, Pune 13

15. Volumetric Domestic Water Tariffs, Bangalore-2000 13

16. Water Charges for Domestic Use in Agra and Allahabad (Rs.)-2000 13

17. Structure of Cost Incurred on Water Provision, as a Percentage of Total Cost (1995/96) 14

18. Structure of Cost Incurred on Water Provision, as a Percentage of Total Cost (1999/00) 14

19. Per Unit/kl Structure of Cost in Water Provision (1999/00) 15

20. Water Account Recoveries 15

21. Water Price – Cost Linkage 16

22. Relationship between Pricing Reforms and Selected Country Characteristics 19

List of Tables

List of Tables, Boxes and FiguresList of Tables, Boxes and FiguresList of Tables, Boxes and FiguresList of Tables, Boxes and FiguresList of Tables, Boxes and Figures

1. National Water Policy, 2002: An Excerpt 3

2. ADB’s Water Pricing Policy 4

3. Water Tariffs in Latin American Countries 9

4. What is capacity to pay for urban water? 16

Boxes

1

1 Water price reform is an important agenda in many developing countries. See the following quote. “The reformulation of tariffs and subsidypolicies is central to the reform of water and sanitation services in developing countries. The traditional model of service provision has coupledpublic ownership with tariffs that are set well below the cost of the service, justifying this in terms of the importance of water services for the healthstatus of the poor. However, results have often been unsatisfactory. Service quality and coverage remain inadequate in many countries, and subsidiesdirected at public water companies have often benefited the middle classes rather than the poor, who remain unconnected to the public network.Reformers have proposed to break out of this low level equilibrium through a combination of private sector

The ImporThe ImporThe ImporThe ImporThe Importance of Urban Wtance of Urban Wtance of Urban Wtance of Urban Wtance of Urban Water Pricingater Pricingater Pricingater Pricingater Pricing

1

Setting appropriate prices is central to the reform of theurban water sector in India.1 Current levels of water pric-ing in most Indian cities and towns are deficient in severalrespects. Firstly, the price of urban water is low in rela-tion to the cost incurred in its provision. Although firmestimates in respect of water price and costs are vague,on an average, prices or recoveries from the sale of waterand other charges relating to water provision are approxi-mately 22 to 25 per cent lower than the operation andmaintenance costs. Recent city-specific studies of Banga-lore, Chennai and Hyderabad show that the typical pricecharged for water for residential use is about Rs.1.50 percubic meter which is one-tenth of the operating and main-tenance costs actually incurred (Raghupathi and Foster,2002), raising serious concerns about the financial viabilityand sustainability of urban water utilities (World Bank,1995). Annual losses on account of operating and main-

taining urban water supply systems are conservatively esti-mated at Rs. 50,000 to 60,000 million, placing an enor-mous burden on water supplying entities. Secondly, un-der-pricing has resulted in poor service and reduced in-centives to expand the spatial coverage of services. Al-though most cities and towns have been able to reach areasonably high level of access to safe water – 90.01 per-cent according to the Census of India, 2001, only about50 percent of the urban households have “tap water withinpremises”. Access to tap water within premises is as lowas 27.1 percent in Bihar, 29.3 percent in Kerala, and 34.9percent in Tamil Nadu. Most households face limitedhours of service and water services are uniformly sub-standard. The cost of intermittent water supplies forhouseholds is said to be high; according to a recent pa-per, the average capital cost for installing pumps, waterfilters, tanks and other equipment is estimated at Rs. 2,620

Urban WUrban WUrban WUrban WUrban Water Pricing:ater Pricing:ater Pricing:ater Pricing:ater Pricing:Setting the Stage for ReformsSetting the Stage for ReformsSetting the Stage for ReformsSetting the Stage for ReformsSetting the Stage for Reforms

Om Prakash Mathur, Sandeep Thakur *

* The views expressed in this paper are those of the authors and do not necessarily reflect the views of GOI, UNDP, IIPA or the collaboratinginstitutions.

2

Urban Water Pricing: Setting the Stage for Reforms

per household (Rana, 2003). In Delhi, the annual cost ofreducing water supply unreliability is placed at Rs. 844per household (Zerah, 2000). The Government of In-dia and the World Bank recently reported that urban watersystems in India “deliver on average 50 to 60 percent oftheir capacity to end-users, compared with 80 to 85 per-cent in other countries. Poor, and sometimes non-existent,management leads to waste and inefficiency, with the re-sultant large claim on resources that could be redeployedfor service improvements”. Tariff adjustments to achievecost recovery are central to the water sector. Most watersupplying entities in India operate at a loss. They financethe shortfall between tariff revenue and costs through op-erating and capital subsidies from the government andthrough depreciation of capital. The result is a low levelequilibrium characterised by low tariff, poor service andlimits on access, especially of poor households.

Thirdly, the objective of large-scale subsidisation of wateron grounds of lack of affordability by the poor has notbeen achieved. Much of the evidence points out that thepoor pay more, often two-to-three times, if coping costswere included, and the price subsidy meant for them andbuilt into tariff structures, e.g., in increasing block tariff(IBT) is appropriated by the non-poor households. Subsi-dies on private taps are poorly targeted, as no more than30 percent of the beneficiaries are poor. Moreover, a largeproportion of urban poor households do not have pri-vate connections and are, therefore, unable to benefit fromwater subsidies. Such regression in the distribution of sub-sidies where the poor do not have access to subsidisedpiped water service is a common phenomenon in Indiancities and towns. Fourthly, under-pricing has affected thefinances of state governments who have either absorbedthe losses of urban water utilities or adjusted the losses byreducing the capital account support to them for capacityexpansion. Although the macroeconomic consequencesof low water prices are difficult to assess, urban waterservices could cost the state governments the equivalentof 0.3 to 0.4 percent of their gross domestic product.When water tariffs are lower than the cost of provision,there is little incentive to expand the service and fewer re-sources are allocated to water than would be optimal.

Urban water services are important for economic growth,productivity and poverty reduction. The financial viabilityand sustainability of India’s water supplying entities has beenconsistently emphasised in water policies enunciated in suc-cessive Five Year Plans. The Working Group set up toformulate the Ninth Five Year Plan for urban water pro-posed adoption of the principle of full cost recovery inorder to enhance the financial viability of the water sectorand full autonomy for institutions responsible for watersupply in determining water tariff and tariff policy. Itproposed that subsidies for the poorer sections should beselective, well targeted, and transparent to ensure that therewas no excessive cross-subsidisation from other sectorslike industry or commerce (Ministry of Urban Affairs andEmployment, 1996). Apart from laying emphasis on thefinancial aspects of urban water utilities and consideringthat urban water has important implications for produc-tivity and quality of life, the Ninth Five Year Plan under-lined the importance of universal coverage of the popula-tion by water supply, adequacy in terms of water con-sumption norms, integration of water supply with liquidwaste management, recycling of waste water and sewageand privatisation and participation of the community inthe management of water supply systems (Planning Com-mission, 1997). In a recent paper titled, Urban Water Sup-ply and Sanitation, the World Bank has made similar ob-servations, stating that setting of water tariffs must increas-ingly focus both on economic efficiency and financial vi-ability, without losing sight of social affordability (WorldBank, 1999). Tariff rationalisation, according to the pa-per, is an essential pre-requisite to the financial viability ofagencies responsible for water supply and for increasingthe financial flows into the sector.

The Tenth Five Year Plan (2002-2007) has reinforced thewater sector agenda as laid out in the Ninth Plan. While anassessment of issues relating to urban water supply is dis-cussed elsewhere, it is important to reproduce the follow-ing quote from the Tenth Plan that sums up the wateragenda: “the unfinished tasks in water supply in urban ar-eas may be summed up as augmentation to reach the pre-scribed norms, higher degree of reliability, assurance ofwater quality, a high standard of operation and manage-

3

The Importance of Urban Water Pricing

Besides creating additional water resources facilitiesfor various uses, adequate emphasis needs to begiven to the physical and financial feasibility ofexisting facilities. There is, therefore, a need to ensurethat the water charges for various users should befixed in such a way that they cover at least theoperation and maintenance charges of providing theservice initially and a part of the capital costsubsequently. These rates should be linked directlyto the quality of service provided. The subsidy onwater rates to the disadvantaged and poorer sectionsof the society should be well targeted and transparent.

Box 1 National Water Policy, 2002: An Excerptment, accountability to customers and in particular spe-cial arrangements to meet the needs of the urban poorand the levy and recovery of user charges to finance themaintenance functions as well as facilitate further invest-ment in the sector. The achievement of these tasks de-pends to a large extent on the willingness of the stategovernments and ULBs (urban local bodies) to restruc-ture water supply organisations, levy reasonable waterrates, take up reforms in billing, accounting and collec-tion; and become creditworthy in order to have access tomarket funding” (Planning Commission 2002). It furtherobserves that the “reforms (in the water sector) relate tomaking the sector more professionally managed, withadequate autonomy and financial powers, and levy ofuser charges preferably determined by an independent regu-latory authority. By the end of the Tenth Plan, the targetwould be to recover full operations and maintenance coststhrough the levy of user charges” (ibid.). Financialsustainability has been emphasised in the Government ofIndia’s National Water Policy, as seen in the quote (Box 1).

This study on ‘Urban Water Pricing: Setting the Stage forReforms’ is in response to the need to further advancethe above-stated agenda. The present position where thewater supplying entities—be these the parastatalorganisations or the municipal governments – run intolosses by selling water below cost and where their losseshave to be either written off or adjusted against futuregrants or absorbed by the states or merely allowed to bekept on the books, is unsustainable. Under-pricing ofurban water, has not only affected the financial health ofwater supply undertakings, but also resulted in wastefulusage of water and as referred to earlier, impeded theexpansion of water services and reduced the coverageof urban poor households.

Although the need for getting the prices right appears obvi-ous and compelling, what is, in fact, an appropriate chargeis neither straightforward nor easy to determine. Litera-ture suggests at least three sets of pricing mechanisms:

i) long-run marginal cost,

ii) short-run marginal cost, and

iii) average costs.

While in themselves they are unassailable, they do not helpa water supplying entity to determine an appropriate chargefor water, which requires addressing a host of questions:what costs are incurred in water provision? What is thenature of these costs? What are the different ways in whichcosts can be recovered? What instruments can be used?Who should pay for the lost water?

The agenda of appropriate urban water pricing as enunciatedin successive Five Year Plans and other initiatives require thatthe following issues be specifically examined and analysed:

i) Instruments of water charging: In what alternative waysis urban water charged and to what extent do theseinstruments meet the contemporary principles of wa-ter charging?

ii) Existing pricing structures: What pricing structures arecurrently in use? What objectives and principles under-lie them? What are these based on?

iii) Price-cost linkages: What part of the cost is recoveredby prices? What is the impact of non-revenue waterand implicit subsidies on cost recovery?

These issues are examined in this paper, using the datadrawn from Bangalore, Vadodara, Allahabad and Agra,as also data from other ongoing studies on the finan-cial structures of municipalities and city-specificparastatal agencies responsible for water provision. Itlays out a framework for pricing reforms in the watersector. It emphasises the need to gather informationabout the structure of supply costs and consumer pref-erences. By understanding the latter, it is expected that

Source: National Water Policy, 2002, The Government of India

4


Conservation of water and its sustainable use areincreasingly critical factors in managing a scarceresource. Governments and civil society need to seewater as an economic good. Financial incentives foroptimising water use will be strengthened through amix of water charges, market-based instruments andpenalties. Public awareness programs will reinforce theincentives, which include water use rights, licenses andcharges, tradable permits, effluent charges, watertreatment fees, access fees, environmental liabilitiesand tax incentives. Managing water demand is afunction of efficient pricing, effective regulation andappropriate reduction and awareness. ADB will promotetariff reforms through its water-related projects andprogrammes to modify structures and rates so that theyreward conservation and penalise waste.

ADB will consistently advise governments of the needto adopt cost recovery principles in their water policiesand strategies. The expansion of access to water and

Box 2: ADB’s Water Pricing Policy

the improved provision of water services require thatcapital costs be funded mainly from within the sectorby accessing the debt market and developingappropriate tariff structures. Consumers will be expectedto meet the full operation and maintenance costs ofwater facilities and service provision in urban and ruralwater supply and sanitation schemes subject to subsidyconsiderations. ADB will also promote the inclusion ofenvironmental externalities and the recovery ofresources management cost in Tariff systems adoptedby DMCs.

Subsidies are a controversial issue in the water sector.ADB will support subsidies for water services in thefollowing circumstances: (i) where treated water useshave beneficial external effects in preventing healthproblems, (ii) where the transaction costs of measuringusage are very high and (iii) where a limited quantityof treated water for the poor is regarded as a basichuman need.

water utility companies will be able to offer price and ser-vice options to consumers that are more efficient than theexisting system.

Section 2 presents the key instruments of urban water charg-ing and water pricing structures. Section 3 analyses theexperiences with urban water pricing in four cities and

supplements this with other examples. This section exam-ines the structure of costs in supplying water and the differ-ent water charging instruments and the outcomes in termsof revenues and expenditures, in particular. Section 4 pro-vides a framework for urban water charging together witha brief explanation of objectives that water pricing mustaim to achieve.

Source: Water for All, The Water Policy of the Asian Development Bank, 2001

5

Natural Resource

Urban WUrban WUrban WUrban WUrban Water Pricing: Instrater Pricing: Instrater Pricing: Instrater Pricing: Instrater Pricing: Instruments anduments anduments anduments anduments andMethodsMethodsMethodsMethodsMethods

Nature of premises Water tax rate (%) Water benefit (%)Residential 20 10Non-residential 45 20

Table 1: Water Tax on Annual Rateable Value: Brihanmumbai Mahanagarpalika - 1999

Source: Government of Maharashtra

Instruments of Urban WaterInstruments of Urban WaterInstruments of Urban WaterInstruments of Urban WaterInstruments of Urban WaterChargingChargingChargingChargingCharging

Three types of instruments are generally used when charg-ing for water. The first is a connection fee or a fixed ac-cess charge. Such a fee is levied to provide the user with aconnection to a municipal (public) water supply system. Aconnection fee or charge is based on the size of the plot orholding or the size of the connection and ferrule or a com-bination of plot size and the size of the ferrule. It is un-clear if the connection fee is designed to contain an ele-ment of the capital cost that is involved in laying out thedistribution network.

The second is a water tax, for which provision exists inmost municipal legislations. It is a tax which is unrelated towater use or consumption. It forms a part of propertytaxation and is leviable on the annual rateable value of landand property and is meant to essentially serve as a generaltax. Conditions under which a water tax may be levied areprescribed in municipal legislations, which, among others,include categories of water users who may be exemptedfrom the payment of water taxes, a ceiling on the rate atwhich water tax may be levied and the use to whichreceipts from such a levy may be applied. For ex-ample, the Uttar Pradesh Municipalities Act laysdown that a water tax may not be levied on prop-erties which have an annual value of less than Rs.300; the Uttar Pradesh Municipal Corporation Act,

1959 lays down that the proceeds of water tax (and drain-age and conservancy taxes) may be pooled and used forpurposes connected with the construction, maintenance,extension and improvement of the service. TheMaharashtra Municipal Act 1965 provides for a generalwater tax as a part of the consolidated tax on propertyand a special water tax for water supplied by the munici-pal council. It further lays down that a municipal council,instead of imposing a special water tax, may fix rates forthe supply of water by measurement. The Bombay Mu-nicipal Corporation Act provides for a water tax if thepremises are not charged for water by measurement; anda water benefit tax, which is in addition to water tax orwater charges on all residential properties in GreaterBombay. Water tax and water benefit tax are applied tothe annual rateable value of premises, with the tax ratedifferentiating between residential and non-residential prop-erties (Table 1).

A third method of charging is a water charge. Conceptu-ally designed as a charge on consumption, it is a ubiquitousinstrument for charging both metered and unmetered watersupplies. Besides a connection fee, a water tax and a water

2

6


2 Development charges are meant to cover the cost of water and sewer lines, and are payable by plot holders. See the Schedule of Rates of the DelhiJal Board.

3 Fixed charges for capital valuation are a feature of the water charging system in Rajasthan. See the Notification of the Public Health EngineeringDepartment, dated 28th May 1998.

charge, there are minor instruments such as a meter rent, alicense fee, a water cess, a meter maintenance charge wheremeters are provided by the water supplying agency, devel-opment charges,2 and fixed charges for the capital renova-tion3 of the water system, which are used for operatingwater supply systems. Many of the instruments yield littlerevenue, raising questions about the purpose for which theyare being kept on statutes or rules.

Water Pricing StructuresWater Pricing StructuresWater Pricing StructuresWater Pricing StructuresWater Pricing Structures

Marginal cost pricing is an indispensable aspect of waterpricing rules (American Water Works Association, 1991).A basic premise for the creation of autonomous waterboards, for instance, was that they will be able to set tariffequal to the marginal cost of providing services to eachcategory of consumers. However, few water-supplyingentities have control over price fixation. Further, imple-menting the principle of marginal cost pricing for waterhas proved to be difficult on account of the problems inusing historical accounting data, estimating external costs,apportioning joint costs and addressing equity-related con-cerns. These problems have impeded the use of marginalcost pricing by water agencies. The American Water WorksAssociation contends in this regard that, “the applicationof the theory of marginal cost pricing to water rates lackconsiderable practicality”. Prices are efficient if they areset equal to the long-run marginal cost of water provision.

Water pricing structures in India are extremely complexand often clumsy. At one level, price structures distinguishbetween metered connections and unmetered connectionsas also bulk provision and non-bulk, discrete provision.At another level, price discrimination is common with (i)categories of water users, which comprise not only theprincipal categories of domestic users and non-domesticusers, but also the assorted categories consisting of wateruse for washing motor vehicles, cattle sheds, stables andthe like and (ii) income groups of households, the assump-tion being that low-income households use lower quanti-

ties of water and high-income households have higherconsumption levels. Water pricing may differ with thequality of water supply, e.g., filtered, unfiltered, tube-wellsupplies, etc. Cross-subsidy is central to the principle ofprice discrimination. As will be seen later, non-domesticusers subsidise the domestic sector. High-income house-holds using larger quantities of water subsidise low-incomehouseholds, raising questions about the desirability of over-loading certain categories of water users.

Water pricing structures are either volumetric or non-volu-metric. Volumetric structures rely in one way or anotheron the volume (quantity) of water and are used only underconditions of metered supplies of water. Non-volumet-ric structures are applied to other measures that are prox-ies to water consumption.

A tariff structure is a set of procedural rules that deter-mine the service conditions and charges for various cat-egories of water users. As stated earlier, charges for waterare based on two components: the volume of water con-sumed and a set of factors other than water use. Concep-tually, it is possible to use one of the two components:thus, water can be charged on the basis of the value ofproperty (water tax) rather than on the level of consump-tion. Alternatively, water can be charged on the basis ofwater use multiplied by the unit price. A variant, whichis more common, is to use a mix of the two, i.e., afixed monthly charge and a charge based on consump-tion. Several types of water tariff are in use in Indian citiesand towns. Increasing block tariff (IBT): An increasing blocktariff is a series of prices that increase in steps as con-sumption rises. The key feature of IBT is that it contrib-utes to equity by allowing low-income households to paylower rates for water than other households. An IBT struc-ture is based on the volumetric component. A water userin a particular category, such as residential, is charged arelatively low price per unit for consumption up to a spe-cific amount. This amount defines the size of the initialblock. A user whose consumption exceeds the size of the

7

initial block faces a higher price per unitfor the additional consumption until he ex-hausts the second block and then a still higherprice until he reaches the top block in theincreasing block structure.4

To construct an increasing block tariff, threeparameters are needed: (i) the number ofblocks, (ii) size of the block in terms of wa-ter and (iii) the price per unit in each block.The case for IBT is argued on several grounds.First, IBT provides equity, as high-income households tendto subsidise the water usage of low-income households.Consumption levels of water among high income house-holds is greater and because a greater percentage of theirwater use occurs in the higher blocks, they pay a higher aver-age price for water. Second, IBT can promote water con-servation and sustainable water use. This is because the pricein the higher blocks is at high rates and discourages wastefulwater use. Third, an IBT is needed to implement marginalcost principles. It is argued in this regard that because mar-ginal costs are expected to rise with total water use, pricesshould rise accordingly with individual household use. Thishas been the main justification for multi-block structures.

Thus, for an increasing and decreasing block tariff struc-ture, a water bill could be calculated as under:

Let

Q* = amount of water sold to a specific consumer.

Q1 = maximum amount of water that can be sold inthe first block at price P1

Q2 = maximum amount of water that can be sold inthe second block at P2

Q3 = maximum amount of water that can be sold inthe third block at P3

If Q* <Q1, then the consumers’ bill = (Q*) P1

If Q1 <Q* <Q2, then the consumer water bill

= P1Q1 + (Q*-Q1) P2

If Q1 + Q2 < Q3, then the consumer’s water bill

= P1Q1 + P2 Q2 + [Q*-(Q1+Q2)] P3

Water utilities in Delhi and Hyderabad use block tariffs fordomestic and non-domestic supplies in combination withother price structures. Delhi uses four blocks of 10 kl(kilolitres) each and the price per unit of water in the termi-nal block is 8.6 times that in the initial block. Hyderabadalso uses four blocks of unequal sizes and the price per unitof water in the fourth block is set at a level that is 3.7 timeshigher than the price in the first block. What is important tonote is that the size of the first block – be it 10 kl or 15 kl, iswell above what would be a true “lifeline” block to meetbasic human needs (Table 2).5

IBT is commonly used in non-domestic metered supplies.Compared with domestic supplies, the price structure fornon-domestic supplies is several times higher, although com-parisons are difficult to make on account of the differencesin the size of blocks. In Delhi, the non-domestic tariff isplaced at Rs. 5/kl (plus 50% per 1000 litres) up to a ceilingof 50 kl beyond which the tariff rate is doubled. InHyderabad, where the size of the initial block is 50 kl (likeDelhi), the water tariff for the initial block is Rs. 8/kl.

Uniform volumetric charge: A uniform volumetric chargeforms an important part of water price structures in severalIndian cities and towns. It is a fixed charge per unit of waterconsumption, which may vary with the category of users. Thus,water charge may be fixed at Rs. 2/kl for domestic users and atanother rate for commercial or industrial users. Like the IBT, a

Urban Water Pricing: Instruments and Methods

4 In a survey of Asian countries, the Asian Development Bank (ADB) found that 20 out of a sample of 38 countries used increasing block tariff.5 A family of five using 40 litres per capita per day for 30 days requires 6 kls in a month; most first block are higher than this. See Vivian Foster, 2001.

“The Design of Pro-Poor Subsides in Urban Water and Sanitation Services in India”. mimeo.

Delhi <10 4 0.35 paise plus 50%for the first block, risingto Rs. 3 plus 50% per thekl for fourth block.

Hyderabad <15 4 Rs.3.7/1000 ltrs witha minimum of Rs.55,rising to Rs.14 per klfor the fourth block.

Table 2: Increasing Block Tariff for Domestic Use - 1999

Source: NIPFP, Field Work

City Size of the Number Waterinitial block (kl) of blocks tariff/kl Rs.

8


uniform tariff is commonly used in such cities as Kanpur, Indore, Surat andMadurai (Table 3). The main merit of uniform tariff lies in its simplicity. At thesame time, it provides no incentive to consumers to effect savings on water useand may in fact, violate the principle of water conservation.

Linear water charge: This is a charge, which rises with consumption, notin blocks, as is the case with IBTs, but with every discrete unit of waterconsumption. Tables 4 and 4a illustrate this for Kerala. Thus, a consumerin Kerala is required to pay a monthly charge of Rs. 22 for consumptionnot exceeding 10 kl, the charge increases to Rs. 25 for a connection levelof 11 kl, and rises in tandem, until it reaches 100 kl for which the chargeis Rs. 550.

Two-part tariff: A two-part tariff with a minimum charge for a fixedquantity of water beyond which the charge may either follow an IBTstructure or a uniform tariff. Conceptually, a minimum charge is in thenature of a rent payable by all users having a water connection, whetheror not water is used (Table 5). The minimum charges are so fixed thatthey are lower than the tariff rate laid down for the initial block, givingthe advantage of a lower tariff to low water consuming households (SeeBox in Annexure).

Tariff for unmetered supplies: Price structures commonly used forunmetered supplies are either annual fixed charges as shown in Table 6,or charges that vary with the size of the water connection. Separatepricing structures are applied to standpoint connections where such chargesare provided for under the rules.

The above example demonstrates the complex nature of water pricestructures in Indian cities and towns. Variations are far too large to be ableto test their adequacy with respect to the objectives that underlie design-ing pricing systems and structures. Most pricing systems, particularly thosewhere water is a municipal responsibility, are historically driven with littlechange having been effected in their format and structure. A typical ex-ample is of the Kolkata Municipal Corporation where users have beendivided into 49 categories for the levy of a connection fee. These catego-ries comprise, among others, stables, cooling plants, flushing purposes inthe market areas, fire fighting, medical practitioners, film actors and paint-ers, owners of newspapers, estate agents, race horse jockey, persons en-gaged in the profession of loading and unloading and others. In recentyears, attempts have been made to simplify the pricing structures and toperiodically adjust them in line with costs. In Bangalore, tariffs have beenrevised six times between 1999-2000; the Bangalore Water Supply andSewerage Board is endowed with powers to adjust the tariff if it is war-ranted on account of an increase in power tariff rates; for the adjustment

City Uniform (Rs./kl) tariffDomestic Industry

Kanpur 2.0 10.0Indore 2.0 22.0Surat 2.0 8.0Madurai 5.0 20.0

Table 3: Uniform Water Tariff


Connection/kl Charge includingmeter inspection

charge (Rs.)10 2211 2512 2813 3125 6750 182

100 550

Table 4: Linear Water Charge(Domestic), Kerala-1999


Connection/kl Charge includingmeter inspection

charge (Rs.)10 10214 10516 12020 14925 18750 370

100 900

Table 4(a): Linear Water Charge (Non- Domestic), Kerala-1999


Part Rs.Part 1Minimum/month 55.0Part 2<15 kl 55.015-25 kl 3.75/kl25-500 kl 6.00/kl>500 kl 14.00//kl

Table 5: Two-Part Tariff, Hyderabad


9

There was a fixed minimum volume, which is chargedfor regardless of whether it is consumed. This is 15m3 in most places; in Panama it is 30 m3 for residentialconsumers and lower amounts for low-income areas.

The marginal per-meter charge for consumption abovethe minimum is a progressive function of the total volumeconsumed. In El Salvador there were three ranges; inNicaragua there were nine; in Panama five, and inVenezuela four. The degree of progressiveness relatedto volume varies considerably from place to place.

There are regional variations, which aim to capturedifferences in costs and/or in social conditions. Thesenormally specify a higher tariff for the metropolitansystem. In Venezuela there were seven “types” oftariff; in El Salvador there were two (metropolitan andother); in Nicaragua there were two geographicaldistinctions within the capital city according to the

Box 3: Water Tariffs in Latin American Countries

distance from an historically important source andthe regions paid less than the capital; in Panamathere were four regional or spatial variants in thetariff.

There was normally a special tariff for “social” cases.Sometimes this only applies to standpipes (ElSalvador); in other cases it applies generally toinformal sett lements (Managua, Panama,Venezuela).

In all these systems, the coverage of micrometering is relatively low; in some of them, it issimply non-existent. In such conditions, the watercompany’s discretionary estimates of each user’swater consumption are crucial to tariff setting. Thisdiscretion is often used with the intention of trimmingthe bill to what the company thinks each part ofthe market will bear.

City Annual flat rate (Rs./year) Annual ferrule based pricesDomestic Industrial Ferrule size Domestic Non-domestic/

industrialVijayawada 480 -Surat - - ½” 120

1” 6481½” 1,296

Belgaum - - 1” 1,155 10,375Gwalior 720 1,440Nagpur ½” 300 1,200

¾” 600 2,400Patiala 20** 60*Kanpur*** ½” 360-1200Gorakhpur ¾” 540-1800

Table 6: Pricing Structures of Unmetered Supplies

Note: Town in Punjab ££ 50-100* Per tap.** For the first tap; for the second and subsequent taps the rate declines.*** In Kanpur, the annual tariff depends on (a) ferrule and (b) annual rateable value.Source: NIPFP, Field Work

of tariff on account ofother factors like salary in-crease or additional main-tenance costs, thegovernment’s approval isessential. The Chennai Met-ropolitan Water Supply andSewerage Board has alsotaken steps to simplify thetariff system. Many pro-gressive municipal corpora-tions, like Mumbai, havealso adjusted the tariffstructure in order to meetthe rising cost of water pro-vision, although it retainsthe historically complexpricing regime.

Urban Water Pricing: Instruments and Methods

Source: Ian Walker, ibid

10


Urban water in India is a state subject; the centralgovernment’s responsibility in respect of water is definedin the River Board Act, 1956 and Inter-State Water Dis-putes Act, 1956 and is limited to the regulation and devel-opment of inter-state rivers and river basins and the pro-vision of support for programmes such as the acceleratedurban water supply, low cost sanitation and establishmentof water monitoring systems. The functions in respect ofthis sector stand allocated to the Public Health EngineeringDepartment (PHED), e.g., in Rajasthan; a state-level agencywith state-wide jurisdiction like the Kerala Water Authorityand Delhi Jal Board; state-level parastatals such as those inKarnataka and Uttar Pradesh (Karnataka Water Supply andSewerage Board and Uttar Pradesh Jal Nigam), metro-

politan-level agencies like in Bangalore, Chennai and Hyderabadand municipal corporations and municipalities in such statesas Gujarat, Madhya Pradesh and Maharashtra. It is not un-common to find the existence of arrangements wherein capi-tal works are dealt with by a state-level agency (PHED), andthe operation and maintenance of water supply systems con-ducted by a city-level agency or municipality (Table 7).

Participation of the formal private sector (excluding the pro-duction of bottled water) in urban water provision and man-agement is negligible, although several cities in India have wit-nessed the emergence of small-scale water providers. Small-scale providers are engaged in providing water to slum andsquatter settlements that are not served by public supplies.

The sample cities namely Agra,Allahabad, Bangalore, Pune,and Vadodara display the samediverse arrangements; the mu-nicipal corporations are respon-sible for the provision of wa-ter in Pune and Vadodara, whilethe Uttar Pradesh Jal Sansthandischarges this function in Agraand Allahabad. A Water Sup-ply and Sewerage Board pro-vides and maintains the watersupply system in Bangalore andis responsible for the capitalexpansion of the system.

WWWWWater Pricing Experiences:ater Pricing Experiences:ater Pricing Experiences:ater Pricing Experiences:ater Pricing Experiences:A FourA FourA FourA FourA Four-City Sur-City Sur-City Sur-City Sur-City Surveyveyveyveyvey

3

Institution Example Spatial JurisdictionPublic Health Rajasthan, Punjab, State-wideEngineering HaryanaDepartment (PHED)State-level Kerala, Delhi State-wide UTparastatal agency (excluding NDMC)Metropolitan agency Bangalore, Chennai, Metropolitan-wide

HyderabadCity-level Uttar Pradesh Lucknow, Varanasi, etcspecialized agencies Jal Sansthans.Municipal Corporations Gujarat, Maharashtra Mumbai, Ahmedabad, etc.

Municipalities (small) Andhra Pradesh,Uttar Pradesh, Tamil Nadu

Table 7: Institutional Set-Up for Operating Urban Water Systems, Illustrative - 2000

Source: NIPFP, Field work

11

Water provision comprises (i) capital improvement work andasset creation, (ii) operations and maintenance and (iii) billing,levy and collection of water charges. Capital improvementworks include source development, installation of plants andpumping stations and laying of distribution networks and thelike. Operations and maintenance functions relate to runningand maintaining the system and ensuring proper distributionof water. Minor capital works include repairs to the system,which also form a part of the operations and maintenanceexpenditure. Levy and collection of charges for providingaccess to, and selling, water constitute an important responsi-bility of water supplying entities.

Pune and Vadodara Municipal Corporations and the Ban-galore Water Supply and Sewerage Board hold responsi-bility for all functions relating to the provision of water.On the other hand, the Agra and Allahabad Jal Sansthansare responsible for the operations and billing and collec-tion of charges, while the responsibility for capital worksrests with the Uttar Pradesh Jal Nigam (Table 8).

Water Provision: Key FeaturesWater Provision: Key FeaturesWater Provision: Key FeaturesWater Provision: Key FeaturesWater Provision: Key Features

The sources of water supply to the sample cities compriserivers in the case of Agra and Allahabad which draw wa-ter from the river Yamuna. Allahabad also draws waterfrom nearly 130 tube wells, dams, and bore wells. Agraand Allahabad do not have any assessment of water de-mand; demand is assumed to be co-terminus with the quan-tity of water that is released from the system. The Banga-lore Water Supply and Sewerage Board (BWSSB) is ableto supply around 90 percent of the water demand andVadodara Municipal Corporation is also reported to bemeeting 98 percent of the city’s water requirements. Ban-galore is supplied with water fromthe Cauvery river, Arkavatty-T.G.Halli and Hessaraghatta rivers witha capacity of 540 million litres perday (mld), 140 mld and 25 mld re-spectively. Pune also has threesources namely, Khadkwasaladam, Pavana dam, and Pashan lake

each with a capacity of 160 mgd, 5 mgd, and 5 mgd re-spectively. The absence of data on effective water demandand its sensitivity to price change remains an importanthandicap in formulating an appropriate water pricing policy.

Other aspects of water supply relate to the installed ca-pacity, water released, volume of water charged and dis-tribution losses. It is common to observe differences be-tween water released and installed capacity (few cities wouldrelease the entire volume of water held in the system) onthe one hand and between water charged and water re-leased, on the other hand, the former usually being lessthan the water released on account of firstly, free waterthat many cities provide and secondly, distributional losses.In recent years, the quantity of non-revenue water has risenenormously.6 Key statistics in respect to these features aregiven in Table 9.

The survey results show that the distributional losses are,on average, 30 percent, which are roughly twice the normsand standards. Free water supplied via public standpostsaccounts for 15 percent in Agra and 28 percent in Allahabad,whereas in Bangalore, the city corporation buys water fromthe Bangalore Water Supply and Sewerage Board (BWSSB)

Agra Uttar Pradesh Jal Sansthan/ Jal Nigam

Allahabad Uttar Pradesh Jal Sansthan/Jal Nigam

Bangalore Bangalore Water Supply andSewerage Board

Pune Pune Municipal CorporationVadodara Vadodara Municipal Corporation

Table 8: Institutional Framework forWater Provision - 2000

Source: City-level Survey

6 Non-revenue water comprises free water, distributional losses and unaccounted for water, a euphemism for water that is drawn illegally.

Source: City-level survey

Features Agra Allahabad Bangalore PuneInstalled capacity (mld) 280 230 705 790Water released (mld) 250(89%) 210(91%) 645(91%) NADistributional losses (mld) 75(30%) 63(30%) 213(33%) 176(22%)Free water (mld) 37.5(15%) 58.8(28%) NA NAWater charged 137.5(55%) 117.6(56%) 432(67%) 517(65%)

Table 9: Water Provision in Sampled Cities - 2000

Water Pricing Experiences: A Four-City Survey

City Institution

12


for free distribution among urban poor communities. Thewater charge ranges from a low of 55 percent in Agra and56 percent in Allahabad to a high of 65 percent in Banga-lore and 67 percent in Pune. These facts, as we show later,have an important bearing on the financial viability of watersupplying entities.

Metered versus unmetered water supplies are another im-portant aspect that have an impact on the pricing structuresand consequently upon the overall financial health of watersupplying organisations. In Agra, of the 110,000 connec-tions, 80 percent are reported to be non-functional with theresult that water billing is done on the basis of a minimumannual charge. This is a peculiar characteristic of domesticmeters; non-domestic meters are reported to be functionalwhere it has been possible to bill on the basis of water con-sumed.7 However, in view of the fact that domestic sup-plies account for 80 percent of the total water consumptionin Agra, which carries a fixed annual charge, stagnation isobserved in the revenues earned from water sales.

The position in Allahabad is similar to that in Agra: of the86,000 water connections only about 55 percent are me-tered, and of these, 90 percent of the metered connec-tions are not in working condition. In other words, five tosix percent of the households in Allahabad have workingmetered connections and pay according to the tariff fixedfor them. In Pune, properties connected to metered con-nections account for 41 percent of the total number ofproperties and properties with unmetered connections ac-count for 27.7 percent. A noteworthy feature of the PuneMunicipal Corporation lies in water connections amongslum households.

Charging InstrumentsCharging InstrumentsCharging InstrumentsCharging InstrumentsCharging Instruments

As indicated earlier, there are different ways in which wa-ter is charged for. In Agra and Allahabad, five instrumentsare used for charging water: a water tax using the annualrateable value (ARV) as the base; water charge on all me-tered and unmetered water connections; meter rent on

metered water connections; development charge/fee forconnections, which is akin to a connection charge; and ser-vice and supervision charges on all connections. Standpostsare not charged for in Agra and Allahabad. An importantfeature of the charging system in Agra and Allahabad isthat the charges discriminate between different categoriesof consumers: thus, the charges vary between domesticconsumers and non-domestic consumers, with non-do-mestic consumers being further categorised into specialindustry categories (Rs. 15/kl), business (Rs. 7.5/kl), gov-ernment and semi-government institutions (Rs. 6.0/kl),Army Cantonment Board (Rs. 4.5 kl), and municipal works(Rs. 3.0/kl).8 The charge for special industry is five timesthat of water for domestic users. Rate structures are givenin Tables 10 to 16. Pricing policies usually do not distin-guish between access and usage. Subsidies are generally onthe price of water, but the access charge (at least in somecities) tends to be high as this is linked to possession ofbuilt-up space. As a result, the subsidies are perverse andanti-poor.

The BWSSB charges a connection fee, which is higher forupper floors in comparison with the ground floor and alsowhere the domestic users pay a lower fee as compared withthe non-domestic users. Domestic consumers in high-rise apart-ment buildings and government institutions are charged atbulk rates and others according to rates for different slabsand meter hire charges. In Pune, where water provision is theresponsibility of the Pune Municipal Corporation, water charg-ing instruments comprise a water connection charge, a watertax, a water benefit tax, volumetric water charge and fixedcharges for new unmetered connections in slum settlements.Thus, water is charged for in different ways, consisting of (i) aone-time charge, invariably for a connection, (ii) an annualcharge or a tax, often leviable on the annual rateable value(ARV), and also a meter rent, generally leviable once a year;and (iii) a water consumption charge collected on a monthly,bi-monthly or an annual basis. A water charge from anunmetered household is more in the nature of a fee, ratherthan a charge and promotes inefficient consumer behaviour.

7 It appears that the low tariff is a disincentive to keeping the meters in working condition. The government requires that water be supplied evenwhen meters are not in working condition.

8 Figures in parenthesis are the per kl charge for each category in Agra.

13

Diameter of the pipe Charges (Rs.)(in inches)

0.50 5000.75 1,0001.00 2,500

1-2.00 5,0002-3.00 7,5003-4.00 10,000

Table 10: Water Connection Charge, Pune - 2000


Basic 1997 2000Annual rateable value 2% 2%

Table 12: Annual Water Benefit Tax,Pune (Rs.)


Type 1997 2000

Domestic 2.00 2.50

Non-domestic 10.00 16.00

Table 13: Water Charge for MeteredConnections, Pune


Consumption Tariff Rs./kl*slab (kl)

<15 5.0015-25 6.5025-50 10.0050-75 25.00

75-100 30.00>100 30.00

Table 15: Volumetric Domestic Water Tariffs,Bangalore - 2000

* A minimum payment of Rs.75/month. The same rate applies to apartments in a high-rise building.Source: City-level survey

Year Rs.

1997 175.02000 250.0

Table 14: Annual Water Chargefor Slum Settlements, Pune


Annual Size of meter connectionrateablevalue 15 mm 20 mm 25 mm

Agra Allahabad Agra Allahabad Agra Allahabad<360 360 480 540 720 840 1080360-2000 720 900 1080 1080 1620 12002001-3500 1080 1080 1620 1200 2400 16803501-5000 1380 1200 2040 1680 3060 2040>5000 1800 1680 2700 1800 3600 2400

Table 16: Water Charges for Domestic Use in Agra and Allahabad - 2000 (Rs.)


Table 11: Water Connection Charge,Bangalore - 2000

Type Fee (Rs.)Domestic (ground floor) Rs. 1,620Domestic (ground and first floors) Rs. 2,220Domestic (ground and two floors) Rs. 2,820 + pro rata

charges @Rs.70/sq.meter

Non-domestic Rs. 1,050 + pro [email protected]/sq.meter



14


Structure of CostStructure of CostStructure of CostStructure of CostStructure of Cost

Water provision includes the production and distributionof water. Costs comprise establishment cost, which in-cludes salaries and wages; electricity charges; chemicals forthe treatment of water; general repairs and maintenanceof plant and machinery; cost of raw water where appli-cable; and interest payments. For the reason that water isdrawn from different sources and distances, the structureof costs varies between different cities, often even widely.We give below the structure of costs for five sample cities.

The data in Tables 17 and 18 show great heterogeneity inthe structure of the cost of water provision, which may

reflect the joint effect of local factors such as geographyand system and operational inefficiencies. In Agra andAllahabad, establishment costs account for anywhere be-tween 50 to 70 percent of the total cost; the same, how-ever, is only about 17 to 20 percent in Bangalore, Pune,and Vadodara.9 Electricity costs are a major cost in Ban-galore, Pune and Vadodara and negligible in Allahabad.Electricity has become an important component of costin the production and distribution of water. Energy costsare particularly high in Bangalore on account of distanceof sources and energy is spent on abstraction, diversionand transport. Also, electricity costs are exogenous to thewater supplying entities.10 Energy costs reflect the three di-

mensional arrangements of wa-ter sources, reservoirs and treat-ment plants in a given topogra-phy and abstraction and recharge.

Per unit costs (kl) of water pro-duction and distribution vary be-tween a low of Rs. 3.22 in Pune,Rs. 2.67 in Allahabad, and Rs. 3.69in Agra, and a high of Rs. 12.98in Bangalore (Table 19). The perunit costs for Agra and Allahabadare inclusive of unpaid electric-ity charges. Of these, as shownearlier, electricity is the principalcost item in Bangalore andPune, and establishment themain cost item in Agra andAllahabad. Most costs on a unitbasis have risen over time, withthe rates of rise in electricitycosts being greater compared toother cost items.

The instruments of watercharges and charging methodshave been stated above. The

9Data on the quantity of electricity used for water production and distribution are not known. In France, with centralised treatment and distributionconsumption of energy, per cubic metre is 0.5 to 0.6 kw.

10Low component of electricity charges in Agra and Allahabad may be explained, in part, by non-payment of electricity charges by the twocorporations, and in part, by easy access to water from river sources like Yamuna.

Structure Agra Allahabad Bangalore Pune Vadodara

Establishment 50.2 65.7 17.7 22.1 18.0

Electricity 18.8 4.0 56.9 44.6 20.4

Chemicals 13.7 10.4 - 2.2 -

General repairs 4.3 8.5 7.8 10.0 29.8

Raw water - - - 16.4 -

Interest payments - - 17.6 4.6 31.4

Others 13.1 11.3 - - 0.4

Total 100.0 100.0 100.0 100.0 100.0

Table 17: Structure of Cost Incurred on Water Provision,as a Percentage of Total Cost (1995/96)


Structure Agra Allahabad Bangalore Pune VadodaraEstablishment 48.6 78.7 20.1 19.0 24.2

Electricity 14.8 1.2 59.5 47.8 48.5

Chemicals 19.5 4.5 - 1.9 -

General repairs 2.3 9.6 7.8 8.8 13.9

Raw water - - - 16.3 -

Interest payments - - 12.8 6.2 13.3

Others 14.9 6.1 - - 0.1

Total 100.0 100.0 100.0 100.0 100.0

Table 18: Structure of Cost Incurred on Water Provision,as a Percentage of Total Cost (1999/00)


15

water supplying entities recover the cost incurred on waterprovision in different ways including a connection charge,water tax, fees, charges etc. The recoveries in the case ofthe sampled cities are shown in Table 20.

Per unit/kl recoveries from the sale of water are Rs. 3.1 inAgra, Rs. 2.28 in Allahabad, Rs. 13.79 in Bangalore and Rs.2.40 in Pune. Over the four-year period, per unit recover-ies have risen at an annual rate ranging from 9.9 percent inPune, to 13.5 percent in Bangalore, and 18.1 and 14.5 per-cent in Allahabad and Agra respectively. An importantpoint to note is that the recovery from water sales has risenat a faster rate over the 1995/1996 to 1999/2000 periodcompared to expenditure on water provision, perhaps sig-nalling that price adjustments have found acceptance as anecessary tool for achieving financial viability among wa-ter supplying entities.

The price of water as manifest in recoveries, however,does not cover the cost incurred in water provision in Agra,Pune and Vadodara. Price is ableto cover 97.9 percent, 48.3 per-cent and 74.4 percent of the costrespectively in Agra, Vadodaraand Pune (Table 21). On a percapita basis, annual losses are Rs.2.69 in Agra, Rs. 64.50 in Puneand Rs. 121.10 in Vadodara. Al-though the losses have declined,the position is still unsustainable.

A few concluding observationsare offered at this stage.

Urban water is charged forin many ways – a connec-tion charge is a one-time

Recoveries (1995/96) per unit/kl, Rs. (1999/00) per unit/kl, Rs.Agra Allahabad Bangalore Pune Agra Allahabad Bangalore Pune

Sale of water 1.61 0.94 7.75 1.56 2.94 1.90 13.29 2.27

Other receipts 0.13 0.17 0.30 0.05 0.16 0.38 0.59 0.12

Total 1.74 1.11 8.04 1.61 3.10 2.28 13.79 2.40

Table 20: Water Account Recoveries


Structure Agra Allahabad Bangalore Pune

Establishment 1.54 1.66 2.61 0.61

Electricity 0.47 0.03 7.72 1.54

Chemicals 0.62 0.10 - 0.06

General repairs 0.07 0.20 0.99 0.28

Raw water - - - 0.53

Interest payments - - 1.66 0.20

Others 0.47 0.13 - -

Subtotal 3.17 2.11 12.98 3.22

Total (including outstanding

electricity charges) 3.69 2.67 12.98 3.22

Water installed capacity (mld) 280 230 705 790

Table 19: Per Unit/kl Structure of Cost in Water Provision (1999/00) (Rs.)


levy; a tax and other rents like meter rents are payableannually, while other consumption charges are eitherpaid every month or at a pre-determined time. Forthis reason, the accounting of revenues of water sup-plying entities assumes a complex character, particu-larly when the life of the water system is unstated orunspecified.

On the cost structure, fixed costs are shown in theform of interest payments or debt charges for thosecases where a water supply system has been upgradedor augmented. Thus, in Agra and Allahabad, whichhave not added any new capacity, these do not form aconstituent of the cost. Further, a perusal of the coststructure shows that, on the one hand, there are non-discretionary expenditures in the form of salary pay-ments and interest and debt charges and on the otherhand, there are electricity charges that are determinedexogenously.


16


With the exception of Bangalore, where tariff revi-sions have led to a marginal surplus, other water sup-plying entities run into losses with the usual conse-quences for service delivery, expansion of water net-works and the like. It means that the most basic re-quirement of any water tariff, i.e., to raise enough rev-enues to cover the cost of service provision, is notmet in most Indian cities. Also, since most householdsin cities which use an IBT fall into the first or secondblock, they end up receiving large subsidies for water.

A high proportion of non-revenue water is a com-mon feature in Indian cities and towns. It should beevident that as long as it cannot be brought down,non-revenue water will impede any attempt torationalise water tariff structures.

Cities Recoveries from Cost incurred on water Recoveries as a % ofsale of water provision water provision

1995/96 1999/00 1995/96 1999/00 1995/96 1999/00Agra 65.98 128.46 84.02 131.15 78.53 97.94

Allahabad 52.75 101.45 63.11 93.91 83.59 108.03

Bangalore 349.58 537.11 387.07 505.35 90.32 106.29

Pune 146.40 187.63 158.24 252.15 92.52 74.41

Vadodara 61.63 112.90 187.00 233.91 32.95 48.26

Table 21: Water Price – Cost Linkage (expressed in per capita Rs. terms)

Note: Unpaid dues for electricity not included in costs.Source: City-level survey

A household in France spends approximately 1.4percent of annual income or five days of annual incomeon water. It is nearly one euro/day for a consumptionlevel of 120 m3/year or 10 m3/month.

In India, below an income level of Rs.2,000/month, thepercentage of income for water expenses would besignificantly higher than in the developed countries. InRajkot, on the basis of an average monthly income ofRs.5,000, the costs are approximately four percent ofthe income, with an average consumption of 65 lpcd.In Vijaywada, the water budget is 5.2 percent and theaverage consumption is 100 lpcd.

Box 4: What is capacity to pay for urban water?

Source: Alain L Dangeard, Dematedee, mimeo, undated.

17

A Framework for ReformsA Framework for ReformsA Framework for ReformsA Framework for ReformsA Framework for Reforms

Pricing of urban water as also other urban infrastructureservices is a key failing in India. Apart from their legendaryinadequacy, both in quality and quantity, the prices that arecharged for the services constitute a relatively small pro-portion of the long–run marginal costs,11 even when itsadverse consequences are widely recognised. First, the in-stitutions responsible for the provision of such servicesdo not receive enough revenues to improve and maintainthem adequately; resulting in poor service for those servedand reduced incentives to extend water to additional popu-lation. Second, cheaper services encourage those with easyaccess to use them excessively. Third, such policies ad-versely affect distribution, as low–income and poor house-holds pay a higher price than higher income households.

Financial viability and tariff setting are linked throughoutthe country’s water sector. The current approach to tariffsetting has resulted in tariff levels often being far belowthe basic operation and maintenance levels, let alone fullcost recovery. Tariff reforms are also constrained by alack of rational tariff structures, which match the costsand charges in relation to the incidence of benefits; lowcurrent tariff levels in most cities make a transition to fullcost recovery politically difficult, due to the high initial re-vision requirements; lack of customer consultation in ser-

vice planning, which is needed to link investment decisionsto effective demand; inadequate accounting systems whichdo not make it possible to assess the real costs of services;and lack of a system of indexation which would enablerevenues to keep up with the rising cost of inputs.

The existing pricing system and structures are thus inad-equate and unsustainable. Price reform under these cir-cumstances would seem not only desirable, but also essen-tial. An efficient system of urban infrastructure services iscrucial for economic growth. The competitiveness of na-tions, as evident from many developing countries, dependson the competitiveness of cities. Price reform of urbanwater is a crucial agenda.

Research in India on water pricing is limited and focused on(a) the adequacy of water tariff and (b) issue of leakages. Inthe case of water, the merits of intermittent supply versusregular supply have also been examined along with the costof metering. An upward revision of water tariff to thepoint of full cost recovery and an indexation mechanism toallow for general price increase, reduction of leakages, changeover from unmetered to metered supplies in the case ofurban water and greater efficiency in revenue collection havebeen highlighted in the agenda for improving the operationsof water services. These are important components in thefinancial viability of urban water utilities.

WWWWWater Pricing:ater Pricing:ater Pricing:ater Pricing:ater Pricing:Setting the Stage For ReformsSetting the Stage For ReformsSetting the Stage For ReformsSetting the Stage For ReformsSetting the Stage For Reforms

4

11 The Bangalore Water Supply and Sewerage Board recently estimated the long–run marginal cost of water to be supplied by Cauvery at Rs. 43/kl. As against this, the weighted monthly average tariff is about Rs. 14.

18


The limited analysis of the finance data of urban waterutilities undertaken for this study has discerned several ar-eas, which, in a way, point to some directions in develop-ing a framework for reform. Five areas are underlinedhere. The first is of primary importance and relates to therelevance and effectiveness of the existing pricing systemand structures. The pricing structure of urban water is dif-ferentiated according to the nature of users, quality, quan-tity and several other factors. What tariff rate is appropri-ate for which part or sub–part and which charging instru-ment is appropriate for which section stands neglected inmost earlier works on pricing matters. It needs to beemphasised that the existing pricing structures make it im-possible to assess whether they can achieve full cost recov-ery or even partial cost recovery. The pricing structures areobsolete and need to be replaced with structures that aresimple, easy to apply and transparent.

A second issue, which has received surprisingly scant atten-tion, is concerned with the user or consumer base, which islimited, narrow and possibly over–exploited. Only 30 to40 percent of urban households pay for water and othersimilar services; the likelihood of any price reform toachieve financial sufficiency and economic efficiency wouldbe dim.

A third issue is linked to the unbalanced revenue base ofwater utilities, with much of the burden currently beingborne by the non–domestic sector. The finance data ofurban water utilities has clearly brought out the extent ofcross–subsidies that exist in the water sector. It has twoadverse impacts: (a) the non–domestic users, mainly in-dustry and commerce, pass on the costs associated withhigher tariff to domestic users in the form of higher pricesof their products, (b) lower prices for households meansmore wastage of water. It is imperative for water utilitiesto move towards a more rational pricing structure, whichmay mean price increases for the domestic users and pricedecreases for the non–domestic users. A rational structuremay yield a positive net benefit as the non–domestic usersmay be expected to pass on the cost savings associatedwith lower water prices in the form of lower output prices.A fourth issue is the complete accounting of costs. Al-

though this paper has utilised the finance data, uncertaintyexists as to whether all costs attributable to the service havebeen accounted for. Doubts arise on account of theindivisibilities of cost components.

Finally, there is the complex issue of the metering of ur-ban water. While the merit of metering is accepted as it issaid to allow households to determine how much waterthey are prepared to pay for, the issue is: how much dif-ference does metering make to revenues in practice? Incountries where this has been empirically examined, me-tering is said to have reduced consumption among, rela-tively better-off households; in others, particularly low-income groups where consumption levels were low, con-sumption registered an increase reflecting the unmet de-mand for the period when water was unmetered and ra-tioned. Experiences of other countries suggest that me-tering should form an integral part of the overall pricereform agenda, rather than being taken up in isolation.Metering should be promoted on the basis of fairness andas a means of improving operating efficiency and lower-ing costs.

International PracticesInternational PracticesInternational PracticesInternational PracticesInternational Practices

Examples of “best practice” in this sphere are fewer thanin other areas such as decentralisation and private sectorparticipation. From the limited evidence available, thereappears to be some attempt at rationalisation of tariffs indeveloping countries. Protection of the poor has beenattempted through a lifeline block, which is cross-subsidisedby other higher consumption blocks. In order to over-come the problem of high rate revisions required for fullcost recovery, a phased introduction of full cost pricing isadopted, as was done in Guinea. The service delivery inGuinea was a commercial operation exercised by a privateoperator. Politically feasible increases in tariffs were madepossible through external credit, which was phased, in or-der to recover full costs from customers over a pre-deter-mined period.

Innovative examples of infrastructure charges for provi-sion of block level distribution and collection networks

19

are available from Brazil, where, under a condominial fi-nancing system, “households pay for the on-lot costs, blockspay for the block sewers and decide what level of servicethey want from these”. Policymakers in Brazil are consid-ering developing water markets to allocate water. Watermarkets are uncommon in Brazil, but have existed in theCariri region. While the Cariri market is a small isolatedsystem, it provides indications of the value of water, thepossibilities of allocating and enforcing water rights andthe willingness of water users to pay and cooperate toassure a secure water supply.

A World Bank study of water pricing experiences classi-fies countries as high, medium and low according to whatit calls a “water pricing progress index” (WPPI). It pre-pared the index using two criteria, viz., current pricing prac-

tices and current mode of funding (The World Bank, 1997).Countries that used some economic pricing method or atthe very least, recovered full operation and maintenancecosts and a portion of capital and maintenance costs and aportion of capital costs from users were grouped in thehigh progress category. Countries which financed watersystems with governmental resources were categorised aslow progress countries. The findings of the study are shownin Table 22 below.

Other overseas experiences suggest that, in some circum-stances, it is possible to charge for actual usage at levelshigher than at the individual household. In others, partici-pation of stakeholders to decide on standards and invest-ment priorities in relation to cost and prices is found to beuseful in water resource planning. In recent concession

Water Pricing: Setting the Stage for Reforms

Table 22: Relationship between Pricing Reforms and Selected Country Characteristics

Rank High Medium Low

Gross National Product

WPPI High Australia, France, New Zealand, Botswana, NamibiaSpain, United States

Medium Israel, Italy, United Kingdom Brazil, Portugal, Madagascar

Low Canada Tunisia India, Pakistan,Tanzania,Uganda

Water Availability

WPPI High Australia, Botswana, France, Namibia,New Zealand Spain,

United States

Medium Brazil Italy, Portugal,United Kingdom,Madagascar Israel, Tunisia

Low Canada India, Pakistan,Tanzania, Uganda

Budget Deficit

WPPI High Australia, France, Namibia, Brazil Botswana,Spain, United States New Zealand

Medium Israel, Italy, Portugal, Tunisia, United KingdomMadagascar

Low Canada, India, Pakistan,Tanzania, Uganda

Source: World Bank 1997

20


contracts for water services, the participation of the pri-vate sector has also helped to reduce the average tarifflevels. This is largely due to the significant efficiency im-provements, which have been possible with the entry ofthe private sector. In Manila, the tariff proposed by thewinning bid for half the city was almost a fourth of theexisting tariff. This clearly highlights the link between im-provements in efficiency and financial viability with accept-able tariff levels. All three criteria much be satisfied for thetariff structure to be effective.

Objectives of Water PricingObjectives of Water PricingObjectives of Water PricingObjectives of Water PricingObjectives of Water Pricing

Setting water tariffs requires striking a balance between fourmain objectives.12

Revenue sufficiency: From the point of view of watersupplying entities, the main purpose of tariff is cost re-covery. The revenue from water users should be sufficientto pay the operation and maintenance cost of the waterutility’s operations, to repay loans undertaken to replaceand expand the capital stock and to provide a return oncapital at risk. The revenue stream must thus be adequateto attract both equity capital and debt financing. Ideallythe revenue stream should be relatively stable and not causecash flow or financing difficulties for the utility.

Economic efficiency: Economic efficiency requires thatprices be set to ensure that consumers face the avoidablecosts of their decisions. In other words, water prices shouldsignal to consumers the financial and other costs imposedon the rest of society. From an economic efficiency per-spective, a tariff should create incentives that ensure, for agiven water supply cost, that users obtain the largest pos-sible aggregate benefits. This means that volumetric watercharges should be set equal to the marginal cost of supply-ing water. In practice, it is commonly assumed that themarginal cost of supplying water can be approximated bythe average incremental cost (AIC), i.e., the average costof water from the next water capacity expansion project.Alternatively, the AIC of additional water may be the unitcost of reducing unaccounted-for-water (UFW).

Equity: Equity means that the water tariff treats similarcustomers equally and that customers in different situa-tions are not treated the same. This would usually be inter-preted as requiring users to pay monthly water bills thatare proportionate to the costs they impose on the utility bytheir water use.

Poverty alleviation: Water services are often seen as a“basic right” and their access as necessary regardless ofwhether or not people can pay. This objective leads manypeople to recommend that water services be providedfree, at least to the poor. Providing water free throughprivate connections can conflict with the objectives of costrecovery and efficient water use.

TTTTTarifarifarifarifariff Restrf Restrf Restrf Restrf Restructuringucturingucturingucturingucturing

Given the objectives, the first step in rationalising tariffstructures is to establish a link between tariff and cost byintroducing separate charges, for the following.

i) Connections: a connection fee to cover the direct costof connecting to the municipal mains. In case of amulti-storeyed system at the block level, it may includethe cost of on-site networks; and a charge for man-agement, billing and metering, which may cover thefixed cost of maintaining the connection;

ii) Distribution systems: an infrastructure developmentcharge to cover the cost of developing or augmentingthe secondary and tertiary distribution systems;

iii) Consumption: a consumption charge for water, on avolumetric basis to cover the cost of creating andmaintaining water abstraction capacity and the primarydistribution system, as well as the economic costs ofwater procurement and operating cost of supply. Allother charges are of no revenue significance.

The key to pricing, however, is the consumption chargefor water. Which charging method would ensure com-patibility with the objectives? It is necessary to underscorethe role of the ‘equity’ objectives in water tariff fixation.Secondly, acceptable tariffs require that adequate service

12 Adopted from Dale Whittington, 2002. Municipal Water Pricing: Getting Started on Tariff Reforms and Subsidies in South Asia. National Instituteof Public Finance and Policy, New Delhi.

21

levels are provided and maintained for the poor withintheir affordability limits. Typically, it has meant fixing lowerthan optimal levels of pricing, ignoring the financial viabil-ity considerations. Instead of lower tariffs, it is useful tobase tariff levels on financial viability criterion and thenmanage affordability issues through mechanisms such as:

i) A lifeline block in the tariff structure for consump-tion-related tariff;

ii) Providing explicit subsidies to the poorer sections forconnection and infrastructure development charges.Under the existing system, subsidies for slum settlementsand special social groups are available from the stateand central government plan allocations. It is essentialthat such subsidies are made explicit, pooled and allo-cated in relation to the overall size of the problem;

iii) Developing and using appropriate credit systems tospread the payment for infrastructure and connectioncharges over time;

iv) Separation of water supply accounts and budgets anda complete assessment and valuation of all its assets.Such provisions already exist in Maharashtra as perSection 95 of the Maharashtra Amendment pursuantto the 74th Constitution Amendment Act;

v) Clear guidelines on costs to be included in determin-ing the different charges;

vi) Measurement of unaccounted for water and the col-lection efficiency of different charges with a clear in-dication of their (a) impact on average tariff levels,and (b) measures to reduce inefficiencies; and

vii) Indexation of average tariff.

An important decision in respect of tariff restructuring isto make a choice between a two-part tariff and an IBTstructure. The IBT structure has been questioned on thegrounds that it gives households with private connectionsmuch more water than is needed at a very low price.13 AnIBT structure is an effective method of water charging to

the extent that the initial block can be fixed at levels, whichcorrespond to a level equal to a household’s essential waterneeds.

Financial viability requires that, over time, revenues equalexpenditure, both operating and capital. It is essential torecognise and reduce inefficiencies related to excess man-power, poor collection of revenues and high levels of waterleakages in the system. It is imperative that strong incen-tives are introduced to reduce these inefficiencies. A criti-cal aspect in sustaining financial viability over time is tointroduce indexation of charges so that the revenues keepup with increases in cost of inputs, which are beyond theutility’s control. In addition, it is important to structuretariffs in ways which do not create disincentives for meter-ing. One alternative would be to introduce group metersin specific settlements. It is likely that, given the historicallylow level of tariffs, many cities will only be able to achievefinancial viability over time. Such a time frame needs to bedetermined and in the interim, subsidies provided to sup-port the transition process as is implied in the City Chal-lenge Fund (CCF).

Another important aspect concerns the possible externali-ties from water and sewerage services. The environmentaland health benefits, especially from improved water qual-ity and sewage collection and treatment, generally accrueto larger groups and are more public in nature. Subsidiesmay be necessary to achieve these benefits. Any such sub-sidies should be internalised at appropriate levels, such as acity or group of cities. Ideally, these groups need to jointlydecide on appropriate service levels, investment and re-sultant tariff levels. This requires that the level of subsidiesbe predictable and allocated in a transparent manner.

The need for price reform in water is evident and com-pelling. The implications of water under-pricing are wellunderstood. Yet, more needs to be learnt about the struc-ture and distribution of demand, the cost structure andthe magnitude of external costs associated with urban watersupply. This is a perspective that goes beyond pricing ofservices.

Water Pricing: Setting the Stage for Reforms

22


Two-Part Tariffs and Benefits for the Poor

his reservation utility UPO. This FP

1, is a net welfareloss since it does not go to the service provider but is areal coping for the poor consumer.

The rich consumer is charged a fixed cost FP1, which

covers consumption of some water units along thehorizontal section, and pays a low price P1 per unit ofadditional water he consumes. The budget line givesthe rate at which he can convert other goodsconsumption of Y – F into extra units of water. Thefixed cost is measured on his reservation utility curveand the price line starts from the point on UO

R givingfree consumption at the fixed cost charged. His waterconsumption is at QR

1 where his budget line is tangentto his indifference curve. A fixed cost that does notextract all surplus and his ability to adjust his

Contd.

AnnexureAnnexureAnnexureAnnexureAnnexure

Water is a peculiar good in that it isessential to life. Therefore the utility itcontributes at low levels of consumptionis very high. But it has many non-essentialuses, and at high levels of consumption.The contribution to utility of the marginalunit may be very low. Demand is inelasticat low levels of consumption but veryelastic at high level.a This has clearimplications for the pricing of water. Figuredevelops a simple example with one rich(R) and one poor (P) consumer. The richconsumer has income level YR and the poorYP. Y can be measured in terms of timeavailable, with the assumption that timecan be translated into income.b

Indifference curves are drawn for each type,showing the combination of water andconsumption of other goods O, which wouldkeep the consumer at the same level ofutility. The indifference UO is the reservationlevel of utility. It originates on the Y-axiswhen other goods consumption O equals income.Initially, the indifference curve is steep; the consumeris willing to give up large amounts of other goods whenwater consumption is low. The curve also approachesthe X-axis asymptotically since water consumptioncan be very large at a low price in terms of other goodsforegone.

Water is priced through a two-part tariff consisting of afixed payment (F), which entails some free units ofconsumption, and a price per unit of additionalconsumption of water, he is able to reach a level ofutility higher than his reservation level. Now, supposein period 1, there is no charge for the poor consumer,but he is subject to rationing of water. The implicitcost of queuing, etc. he is subject to, FP

1, drives him to

23

commodity consumption at the margin take him abovehis reservation utility UO

R. Since he is on the elasticportion of his demand curve, he consumes a large amountof water but derives a low utility from the marginal unit.

Now, consider a price reform in period 2, where bothconsumers are charged a higher unit volume price P2,but lower fixed costs than they were paying in period 1.Thus the rich consumer pays FR2 > FP2. Theconsumption of the poor consumer goes up QP2, buthe remains on the inelastic part of his demand curve,and he reaches a higher level of utility, U1P. Althoughhe is paying a small fixed cost, lower than his earliercoping costs, his choice of additional units ofconsumption is voluntary, and takes him to a higherindifference curve. A French student of BMC’s watersupply reported that in the current rationing regimeconsumption is taken to be 240 lpcd for the richconsumer and 45 lpcd for slums.c The changes proposedwould improve water equity and the welfare of the poor.The consumption of the rich consumer falls much more.But since he was on the elastic part of his demand curve,the total utility loss from the marginal units ofconsumption is not very high. A high fixed and low volumecharge turns all rich consumers into high volumeconsumers. If the fixed cost he was paying earlier washigh, he may continue to be on the same utility level U1

R.If the fixed cost he was paying earlier was lower at YR

A

(<FR1) his utility level may fall from U2

R to U1R, after the

change, but he would continue to be above his reservationutility.Moreover, social welfare will rise since the consumptionof the rich falls about double the rise in the consumptionof the poor. Assume that there are constrains inexpanding the supply of water, and that earlier some

poor were uncovered. Now enough water is releasedto cover two poor consumers. The move is revenueenhancing, since a higher price is paid per unit of water,and the fall in fixed costs charged to the rich consumersis more than made up by the smaller fixed cost nowactually paid by double the number of poor consumers.Although in order to simplify the diagram we kept P2the same for rich and poor consumers, the poor couldbe charged a lower price that varies with theconsumption slab. Such differential pricing is common.If the coping strategies of the poor earlier includedpuncturing pipes, and stealing water, these changeswill reduce such wastage, and further improve revenuesfor the water suppliers.a. Samuelson in his famous textbook had used this paradox to

illustrate the difference between total and marginal utility. Hepointed out that diamonds, which are not essential to life,have a very high price, but water whose contribution to totalutility is much higher has a very low price. The reason is thatwater is supplied to the point where its marginal utility is verylow. Like air it is almost a free good. But in modern communitiesdelivering potable water to every doorstep is quite expensive,and costs have to be recovered. See Morris (2001) for anearlier treatment, which does not, however, analyse twopart tariffs.

b. T. C. Anant made the point that the poor may not be able toconvert time into income. Indeed this belief is the reason thatqueuing is used as a means of targeting the consumption ofthe poor. But the poor cannot afford to be unemployed andoften have multi-activity going on so that there is an incomeloss in queuing. Since water is essential to life high timecosts of collecting it can have very large opportunity costs. Iknow of one poor family who, since it took a large amount oftime to collect their daily requirement of water, and the motherhad a job, withdrew their daughter from school to performthe task.

c. Presentation at IGIDR by a French engineer from Cerna in2002.

Source: India Infrastructure Report, 2004

Annexure

24


Average incremental cost (AIC): The average cost of futurewater supply projects. The average incremental costs can be calculatedby dividing the discounted value of future supply costs by the(similarly discounted) amount of additional water.Depreciation: A reduction in the value of an asset through wearand tear. The consumption of capital assets is one of the costs ingenerating revenues and should therefore be taken into accountwhen calculating total costs.Discounting: A deduction from face value of future costs andrevenues. Fundamentally, future costs are less burdensome thanpresent costs and present benefits (or revenues) are preferable tofuture benefits (or revenues). It is therefore necessary to adjust forthese “time preferences” in order to obtain a true present value.Environmental sustainability: The need to follow a path ofdevelopment that is environmentally sustainable, where the scarcityof water resources is recognised.

GlossarGlossarGlossarGlossarGlossaryyyyy

Financial viability: The need for water service authorities torecover from water users all the costs associated with the provisionof water services, including the cost of capital, refurbishment andreplacement.

Marginal cost pricing: Setting the unit price of all goods equal tothe cost of producing and supplying the next or last unit.

Social equity: The need to redress the imbalances of thepast with respect to the provision of adequate access to watersupply services.

Water supplying entities: Refers to municipal authorities, state-level and city-level parastatal boards, Public Health Departments,and who have either the statutory responsibility for the provisionof water services or are de facto providers of water.

25

Andrews, Charles T. and Yniguez, Cesar E. 2004. ‘Water in AsianCities’, Asian Development Bank, Manila.

Asian Development Bank. ‘Water for All’, The Water Policy of theAsian Development Bank, Manila.

Boland, John J. and Whittington, Dale Undated. ‘The PoliticalEconomy of Water Tariff Design in Developing Countries:Increasing Block Tariffs versus Uniform Price with Rebate’, inAriel Dinar, 2000. The Political Economy of Water Pricing Reforms.Oxford University Press, Washington D.C.

Brook, Penelope J. and Locussol, Alain Undated. ‘Easing TariffIncreases: Financing the Transition to Cost-Recovering WaterTariffs in Guinea’, Mimeo (OBA Book Homepage).

Denver, Colorado 1991. Water Rates Manual, American Water WorksAssociation.

Dinar, Ariel 2000. The Political Economy of Water Pricing Reforms.Oxford University Press, Washington D.C.

Foster, Vivian et al. undated. ‘Water Tariffs and Subsides in SouthAsia: Can Subsidies be better Targeted’, mimeo.

Government of India, 2002. National Water Policy, New Delhi.

Infrastructure Development Finance Company, 2004. IndiaInfrastructure Report. 3i Network. Oxford University Press,New Delhi.

Ministry of Urban Affairs and Employment, 1996. Report of theWorking Group on ‘Urban Water Supply and Sanitation Sectorfor the Ninth Five Year Plan (1997-2002)’, New Delhi.

ReferencesReferencesReferencesReferencesReferences

Planning Commission, 2002. Tenth Five Year Plan, 2002-2007,New Delhi.

Planning Commission, 1997. Ninth Five Year Plan, 1997-2002,New Delhi.

Raghupathi, Usha P. and Foster, Vivian 2002. ‘Water Tariffs andSubsidies in South Asia’, mimeo.

Rana, P. S. 2003. ‘Pricing of water for Sustainability’, mimeo.

The World Bank, 1999. Urban Water Supply and Sanitation, AlliedPublishers, New Delhi.

The World Bank, 1997. Water Pricing Experiences: AnInternational Perspective. World Bank Technical Paper No.386,Washington D. C.

The World Bank, 1995. Urban Water Supply and Sanitation, quotedin ‘UNDP-Water and Sanitation Programmes, Water for India’sPoor: Who Pays the Price for Broken Promises’, October 1999.

Walker, Ian et al. undated. ‘Pricing, Subsidies and the Poor Demandfor Improved Water Services in Central America’. mimeo.

Whittington, Dale 2002. ‘Municipal Water Pricing: Getting Startedon Tariff Reforms and Subsidies in South Asia’, NationalInstitute of Public Finance and Policy, New Delhi. mimeo.

Zerah, Marie-Helene 2000. ‘Water: Unreliable Supply in De’, CentreDe Sciences Humains, New Delhi.

About the Series EditorsAbout the Series EditorsAbout the Series EditorsAbout the Series EditorsAbout the Series Editors

Aasha Kapur Mehta is Professor of Economics at the Indian Institute of Public Administration, New Delhi and leads theChronic Poverty Research Centre’s work in India. She has a Masters from Delhi School of Economics, an M.Phil fromJawaharlal Nehru University and a PhD from Iowa State University, USA. She has been teaching since 1975, initially ata college of Delhi University and then at IIPA since 1986. She is a Fulbright scholar and a McNamara fellow. Her areaof research is now entirely focused on poverty reduction and equity related issues.

Pradeep Sharma is an Assistant Resident Representative and heads the Public Policy and Local Governance Unit inthe India Country Office of United Nations Development Programme (UNDP). A post-graduate from University of EastAnglia (UK) and Doctorate from Jawaharlal Nehru University, he has held several advisory positions in the Governmentof India and has taught economic policy at LBS National Academy of Administration, Mussoorie. He has severalpublications to his credit.

Sujata Singh is an Associate Professor at the Indian Institute of Public Administration. She completed her doctoralstudies in Public Administration and Public Policy at Auburn University, USA. Her primary research interests are in thearea of Comparative and Development Administration, Public Policy Analysis, Organizational Theory and Evaluation ofRural Development Programmes.

R.K. Tiwari is Senior Consultant, Centre for Public Policy and Governance, Institute of Applied Manpower Research,Delhi. He was formerly Professor of Public Administration at the Indian Institute of Public Administration (IIPA), NewDelhi. He received his education at Gwalior, Allahabad and Delhi. He has undertaken a number of research studies inDevelopment Administration, Rural Development, Personnel Administration, Tribal Development, Human Rights andPublic Policy. He has conducted consultancy assignments for the Department of Posts and in the Ministry of RuralDevelopment, Government of India; and for the Government of Orissa and the Narmada Planning Agency, Governmentof Madhya Pradesh. He has published several books.

urban water pricing - indian institute of public … 3_urban water pricing.pdfwater price – cost...

Documents