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All about water use in industry (Download pdf)

Cheapest pickings

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:

Water 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.

Very expensive, elsewhere

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.

Country Cost
United Kingdom 90.00
Turkey 80.50
Hungry 72.00
Portugal 55.00
Spain 51.00
Netherlands 51.00
United States 21.00

Source: OECD (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.

Cost of buying water
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.

Industry 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
conserve water.

Cost of power generation from thermal power plants in India
Year Total power generation from *TPP (million KWH) Cost of power generation at TPP (Rs crores) Total wastewater discharged (million m3) Total water cess (Rs crores) Total water cess as % of power generation cost
2000-2001 37232 121860.99** 27000.9 323 323.12*** 0.265

* 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) 1990-2001, CPCB.

Varying 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).

Case 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 follows:
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 paper.

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.


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