How will India supply drinking water in cities? Many argue the problem is not inadequate water. The problem is the lack of investment in building infrastructure in cities and the lack of managerial capacities to operate the systems, once created. This line of thought then leads logically to policy reform, to invite private investment and hand over public water utilities to private parties to operate.
As a result, private-public partnerships have become the buzzword in water management circles. The problem is that this strategy assumes too much, knows too little. It has no clue about the political economy of water or sewage in India (and other similar countries). It, therefore, makes a simple assumption that if water is ‘correctly’ priced—what is known as full cost pricing—it would facilitate investment from the private sector and provide a solution to the water crisis facing vast regions of the developing world.
As a result, municipal water reforms have become synonymous with the World Bank promoted scheme of 24x7—supply of constant water so that pressure in water pipes will reduce leakage from adjoining sewage pipes and reduce the enormous health burden caused by dirty and polluted water. In the 24x7 water distribution scheme, governments hive off parts of the city water distribution to private contractors. The key presumption is the contractor will reduce water distribution losses—currently estimated to be between 40-50 per cent of water supplied in our cities.
The reasoning is impeccable, except that it forgets the cost of the system has to be affordable, so that it can be sustainable. In India, few municipalities rarely compile water and sewage accounts. But our recent research in compiling city-level data shows a pattern difficult to miss.
Almost all cities—of the 72 we surveyed—are struggling to balance their accounts and failing. The one expense that is killing them is the cost of electricity—to pump water from long distances to the city and then to pump water to each house and to pump the waste from the house to the sewage treatment plant. Bhubaneswar, for instance, brings its water from the river Mahanadi, some 30 km from the city, and spends 56 per cent of costs on electricity. Pune, which has invested in creating a citywide water distribution network, spends roughly Rs 25 crore annually to pump roughly 800 million litres daily of water it supplies to its people.
Thus, when cities search for new sources of water, they rarely consider what it will cost them to bring the water to the city. The plan is sold as an infrastructure project. The costs are paid for as capital expenditure. But what are not considered are how the project and the length of the pipeline—or canal—will impact the city’s finances, and indeed if the city can spend, month after month, on its electricity bill to pump the water. What is also not considered is how the city, which spends higher and higher costs of electricity, will spend on the repair and maintenance of the pipeline. And, if it cannot, will it be able to supply water to all. In other words, can it afford to subsidize all and not just the water-rich.
But this is yet half of the sum. The other half involves not water, but the waste the water will create. The agency will have to price the cost of taking back the waste—the more the water supplied, the more the waste generated— conveying it and then treating. More costs.
Even this is not the full story. If the agency cannot pay for the sewage disposal system, its waste will pollute more water—either the water of its downstream city or its own groundwater. Remember, also, we all live downstream. The cost of pollution makes water economics more difficult. For instance Agra, located downstream of Delhi and Mathura, spends huge amounts of its water budget on buying chlorine to clean water. Now it wants to get another source of water—how long will that stay ‘clean’ is another question.
The fact is no municipality can do what economists preach—raise prices to reflect the full costs. Instead, they spend money on supply and as costs go up, they have to increase the subsidy to the users or supply less to most. On an average, Indian cities charge between Rs 2-3 per kilolitre (kl), when they should be charging Rs 8-10/kl. And if their distribution losses are taken into account, charge between Rs 10-14/kl. If we add sewage costs, then the bill increases by roughly 5 times the cost of water supply. In this case, the family, which pays Rs 2-3/kl will have to pay Rs 40-50/kl. How feasible is this?
But such pricing of water and waste is incomplete without its political economy. For, who gets the water and how much? In answering that, you will learn the political economy of water and excreta where the rich, and not the poor, are subsidized in urban India.