Poor pricing is one of
the main reasons for irresponsible water use
Water subsidy to Indian industry is one of the classical cases of poor pricing of natural
resources leading to its massive exploitation. Using more water does not hurt Indian
industry, so it uses and abuses water recklessly.
The three components to
water cost in industries are:
cess paid to pollution control boards based on the amount of wastewater discharged
Cost of buying water from water suppliers, like the
municipality or private water suppliers
Water self-sourced from river or groundwater comes
free of cost in most places, except where municipalities have put their foot down.
Water Cess: peanuts
Recently, the government of India revised the water charge for industry and
amended the Water (Prevention and Control of Pollution) Cess Act, 1977. The new water
rates were meant to be an impressive three times high than the current ones.
A closer look at the new
act, however, proved disappointing. The revised cost of water is still so cheap that it
will hardly be the incentive industry needs to improve its water efficiency.
|Cost of buying water
|1. Hyderabad Muncipal water supply
& Sewerage 2. Guntur 3.
Ahmedabad Municipal Corporation 4. Baruch Municipal
Corporation 5. Rajkot Municipal Corporation 6. Surat 7. Veraval patan 8. Ankleshwar industrial area 9. Solan
10. Kerala Water Authority 11.
Nagpur Municipal corporation 12. Kolhapur Municipal
Corporation 13. Mumbai 14.
Orissa Water Supply & Sewage Board 15. Punjab Water
Supply & Sewage Board 16. Chandigarh 17. Madras Water Supply & Sewage Board 18.
Calcutta Municipal Development Authority 19. Rajasthan Water
Supply & Sewage Board 20. Jaipur 21.
Bangalore'97 22. Mysore'00 23.
Jabalpur 24. Lucknow
|Source: P S Rana, Integrated Urban Infrastructure investment
and HUDCOs leading programme, paper presented in the international IHSP seminar on
"Integrated Urban Infrastructure development held on February 1-4, 1995, New Delhi,
in Urban Statistics, Handbook 2000, NIUA, New Delhi, pp 103-104
* Change management finance, water tariff in major Indian cities, January 2002, pg no. 20
It is well-known that the consumption of water for
industrial cooling and boilers is thrice that of process water. Wastewater from cooling
and heating systems are less polluted and with little treatment can be easily recirculated
within the same system. With appropriate regulations or incentives, it is possible in most
cases to have closed-cycle systems for cooling and heating.
The new bill has fixed the
cost of water for industrial cooling and spraying in mine pits or boilers feeds at a mere
10 paise per kilolitre. This is 2-3 times lower than the cost of process water. At this
price, the cooling water cess of thermal power plants (TPPs) will constitute just 0.20 per
cent of total power generation cost (See table: Cost of power...). This is not enough to
induce generation from TPPs in India to reduce their cooling water consumption. In fact,
the new act has made sure that there is no water conservation for three-fourths of water
consumed (cooling water) by industry.
Water pricing in
OECD countries and in USA are mostly based on average cost pricing or marginal cost
pricing. But along with water cost some of these countries have also introduced the
'polluter pay's principle' for the amount of water pollution load discharged by companies.
In comparison the Indian industry pays a pittance.
(2001), using average US$ to Rs exchange rate of 2001 as 47.2.
The cost of process water,
Rs 0. 20-0.30 paise per kilolitre is not enough to encourage any sort of water
conservation by industries. In fact, if we consider that companies in water scarce areas
of Gujarat and Tamil Nadu are already paying Rs 25-60 per kilolitre it is obvious that
water cess rates are dirt cheap. From the point of view of the total production cost also,
the water cess is insignificant. For instance, in two major water consuming industries,
pulp and paper and iron and steel, at new rates the water cess will constitute about
0.1-0.2 per cent and 0.02 - 0.05 percent of the total turnover respectively.
The Water (Prevention and
control of pollution) Cess (Amendment) Act, 2003 is nothing but an instrument meant to
fatten the pockets of institutions such as the SPCBs and CPCB. The government has missed a
golden opportunity to introduce an effective and true economic instrument to reduce
industrial water consumption in India.
When coming from public
supplies like municipal corporations or government agencies like industrial development
authorities in industrial complexes, water must be paid for. Industrial water tariffs from
public supplies in India is typically based on average cost pricing (rather than marginal
cost pricing) and ignore the opportunity cost of water (i.e., benefit foregone in
alternative use). Similarly, the effects of damages caused by industries in polluting
surfacewater and groundwater are ignored in determining water tariffs. Consequently, there
are no pollution taxes and/or effluent charges to be paid by industrial polluters. As a
result, from an economic viewpoint, excessive quantities of water are used, and excessive
pollution is caused.
can use water sensibly. When forced to.
Some of the best
water use practices, be it a thermal power plant, a fertiliser industry, or a refinery, is
evident in one of the most water stressed cities of the country, Chennai. The G.M.R Vasavi
power plant, Madras Fertilizers Limited and the Chennai Petroleum Corporation Limited are
a case in point. The least water consuming pulp and paper company, J K Papers, is located
in the water scarce Rayagada district of Orissa. The least water consuming sugar industry,
Natural Sugar and Allied Industry, is located in the water scarce district of Latur,
Maharastra. The first 'zero-discharge' textile mill in the country, Arvind Mills, is
located in Santej in Gujarat. This list goes on. These instances clearly prove that proper
pricing of natural resources is imperative for the proper management of natural resources.
Water use and water pollution in industries can be reduced only if water pricing is such
that it encourages industries to
|Cost of power generation from thermal power plants in India
||Total power generation
from *TPP (million KWH)
||Cost of power
generation at TPP (Rs crores)
discharged (million m3)
||Total water cess (Rs
||Total water cess as %
of power generation cost
* This also includes wind
power, which is negligible compared to TPP.
** Generation cost per KWH is Rs 3.27.
*** Assuming cooling water cess as Rs. 0.1 and process water cess as Rs. 0.30 per m3.
Source: Information related to power from annual report on the working of SEBs &
Electricity Departments, 2001-2002, Planning Commission and information related to
wastewater discharge and cess from "Water quality in India (Status and trends)
cost, varying efficiency
The cost of water supplied by public supplies varies widely not only between the states
but also within the state. In general, water availability of a given area determines the
cost of water there and this in turn has a direct bearing of efficient water management
(See:Water cost uneven all over India).
study on pulp and paper sector
The Green Rating Project (GRP) of
New Delhi based Centre for Science and Environment (CSE), rates Indian industries on
environment performance. It has recently completed the rating of pulp and paper sector,
which is to be released shortly.
The analysis done by GRP on water consumption pattern in large-scale wood and non-wood
based pulp and paper companies indicates a clear coorelation between the water consumption
pattern and the regional location of the plants.
The findings are as
l Pulp and paper plants located in the water-stressed southern and western part of the
country consume less water than the plants located in the water-abundant northern and
north-eastern parts of the country.
l The average amount of water consumed by south Indian paper mills is about 160 m3 per
tonne paper produced. The same for companies located in western India is 165 m3 per tonne
l The average water
consumed by the north Indian paper companies is about 185 m3 per tonne paper produced. The
same for companies located in water abundant northeastern India is 205 m3 per tonne paper.
The analysis clearly indicates that in the northern and eastern part of the country, well
endowed with water, the water consumption in pulp and paper companies is high and in the
the west and south, which are water-short regions, the water consumption in paper
companies is low.