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Water Pricing In India

By :    March 16, 2021

Water Pricing In India

Why in news?

  • The Centre has allowed gram panchayats and local bodies to decide on water usage charges for supply of potable piped water under the Jal Jeevan Mission.

Need For Water Pricing In India

  • India is specially in need of a standardized water pricing regime because of its unprecedented water crisis.
  • About 82% of rural households in India do not have individual piped water supply, and 163 million live without access to clean water close to their homes. 70% of India’s surface water is contaminated.
  • While declining per capita water availability contributes towards India’s water crisis, failure to manage its water resources effectively is also a major reason. India ranks as the third-largest exporter of groundwater through virtual water trade (through agricultural products), while 52% of its wells are facing declines.
  • Municipalities and urban centres are unable to recover the cost of treatment and supply the drinking water to its residents. This is reflected in poor pipeline infrastructure, contaminated water and also the wastage of water.
  • Agriculture: Water use efficiency in agriculture, which consumes around 80% of our water resources, continues to be among the lowest in the world. At 25-35 percent, this compares poorly with 40-45 percent in Malaysia and Morocco and 50-60 percent in Israel, Japan, China and Taiwan.

Water in the Indian Constitution

  • Water is in the State List. It is Entry 17 of the list and hence, states can legislate with respect to rivers.
  • Entry 56 of the Union List, however, gives the Central government the power to regulate and develop inter-state rivers and river valleys.
  • Article 262 also states that the Parliament may provide for the adjudication of any dispute or complaint with respect to the use, distribution or control of the waters of, or in, any inter-State river or river valley.
  • As per Article 262, the Parliament has enacted the following:
  • River Board Act, 1956: This empowered the GOI to establish Boards for Interstate Rivers and river valleys in consultation with State Governments. Till date, no river board has been created.
  • Inter-State Water Dispute Act, 1956: Under this act, if a state government or governments approach the Centre for the constitution of a tribunal, the government may form a tribunal after trying to resolve the dispute through consultations.    (Water Pricing In India)

Dublin Principles

  • These were adopted at the International Conference on Water and the Environment in Dublin, Ireland, in 1992.
  • Fresh water is a finite and vulnerable resource, essential to sustain life, development and the environment
  • Water development and management should be based on a participatory approach, involving users, planners and policy-makers at all levels
  • Women play a central part in the provision, management and safeguarding of water
  • Water has an economic value in all its competing uses and should be recognized as an economic good

Benefits of Appropriate Pricing of Water

  • Tariffs generate revenues to recover specific costs (e.g. operation and maintenance costs)
  • Tariffs generate funds for necessary infrastructure development and expansion as well as for wastewater treatment, hence assuring water quality protection.
  • Charges send appropriate price signals to users about the relationship between water use and water scarcity.
  • Having to pay for water can encourage people to reduce wasting water.
  • Subsidizing tariffs for low-income groups ensure that poor households also have sufficient and affordable water services.
  • Therefore, proper water tariffs provide incentives to improve sustainable water and sanitation services and to use water resources more efficiently.

Issues With Current Water Pricing Mechanism

Irrigation Water Pricing:

  • Water Rates revision: There is an inordinate delay in the revision of water rates. This is due to the lack of linkages between fees collected and funds allocated to irrigation projects, lack of farmers’ participation, poor communication, lack of transparency between farmers and irrigation departments, no users’ penalties.
  • Fixing the price: Prices are fixed on the basis of the mix of social, economic, and political factors. The main criteria for fixing water prices are farmers’ ability to pay, which is determined by output, area irrigated based on the volume of water used, quality of irrigation, and recovery cost of equipment.

Domestic Water Pricing:

  • The actual level of consumption is not known in many cities and states as metering is negligible and flat rates exist.
  • The present water charges are able to recover 22–25 % lower than the O&M costs and do not recover the capital cost or cost for future expansion.
  • Overcharging the commercial users and subsidizing the domestic consumption are also creating problems in the existing systems as there are no norms for fixing these varying rates.
  • In addition to the inadequate pricing, the water sector is characterized by huge inefficiencies due to unaccounted-for water losses (up to 40 %), poor quality, etc.

Industrial Water Pricing:

  • Industries are not only consuming water but also pollute the water resources. However, the rate of cess is very low and the purpose of the cess is not to encourage efficient use of water but to collect resources for financing state pollution control boards.
  • The cost of water has three components: water cess paid to the pollution control boards, cost of buying water from the suppliers (municipalities), and cost of extracting water from rivers and groundwater. There is no consensus on the range of industrial water demand, price elasticity, and sensitivity of the water demand to other factors, such as input prices and output levels.

Other Cross Sectoral Issues:

  • Independent water Regulator: The water charges for industries and the domestic sector vary widely across States. There is no independent statutory water regulatory authority in any State barring Maharashtra. Even here, its mandate, however, only covers water for irrigation leaving the pricing of water for domestic and industrial use at the behest of the State agencies.
  • Federal Challenges: Constitutionally, water is a state subject whereas regulation and development of water is a Union subject. The Central government does not have an approved framework for water pricing. However, the draft National Water Framework Bill, 2016 lays down the principle of water pricing.
  • In the irrigation sector, Kerala was the first State to impose irrigation water charges, in 1974. The seven States/UTs yet to impose such charges are Arunachal Pradesh, Andaman and Nicobar Islands, Nagaland, Meghalaya, Mizoram, Puducherry and Lakshadweep.
  • Inherent design problems associated with water pricing. This is because the government does not exercise control over the sources of water as it does over other natural resources, eg. groundwater.
  • Groundwater: The Centre for the first time issued a notification, in December 2018, for the levy of Groundwater Conservation Fee (GWCF) by industry and domestic users for consumption beyond a certain limit. It is yet to come into effect. o The irrigation sector, which accounts for 90% of the groundwater consumed, has been exempted.

Policy Approach Towards Pricing Of Water In Public System In India

  • The 1987 policy envisaged that the water rates should reflect the scarcity value of the resource and foster economy in water use.
  • The 2002 policy envisaged that the water charges for various uses should cover at least the operation and maintenance charges of providing the service initially, and a part of capital costs subsequently.
  • The latest 2012 National Water Policy envisages that pricing of water should reflect its efficient use and reward its conservation.

Framework To Determine The Water Pricing:

  • The National Water Policy Statement of 2012 regarding Water Pricing advocates the following:
  • Statutory Water Regulatory Authority (WRA): Pricing of water should ensure its efficient use and reward conservation. It should be arrived at through independent statutory Water Regulatory Authority, set up by each state, after wide ranging consultation with all stakeholders.
  • Volumetric Pricing: In order to meet equity, efficiency and economic principles, the water charges should preferably/as a rule be determined on volumetric basis. Such charges should be reviewed periodically.

Role Of Local Bodies In Water Management

  • Under 11th Schedule (Article 243G) of the Constitution, Panchayats can be entrusted with the Minor irrigation, water management and watershed development activities, Drinking water.
  • Under 12th Schedule (Article 243W) of the Constitution, Urban Local Bodies can be entrusted with the Water supply for domestic, industrial and commercial purposes.
  • The state legislatures may devolve these powers and necessary authority to the local bodies to levy tax, fees etc. for the use of these resources.

Wastewater Pricing | Water Pricing In India

  • Differential Pricing: The principle of differential pricing may be retained for the pre-emptive uses of water for drinking and sanitation; and high priority allocation for ensuring food security and supporting livelihood for the poor. o Available water, after meeting the above needs, should increasingly be subjected to allocation and pricing on economic principles so that water is not wasted in unnecessary uses and utilized more gainfully.
  • Recycle and reuse of water, after treatment to specified standards, should also be incentivized through a properly planned tariff system.
  • Groundwater: The over-drawl of groundwater should be minimized by regulating the use of electricity for its extraction. Separate electric feeders for pumping ground water for agricultural use should be considered.
  • Role of Water Users Associations: Water Users Associations (WUAs) should be given statutory powers to collect and retain a portion of water charges, manage the volumetric quantum of water allocated to them and maintain the distribution system in their jurisdiction. WUAs should be given the freedom to fix the rates subject to floor rates determined by WRAs.
  • (Water Pricing In India)


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