A Critique of the Approach Document for Fixing Bulk Water Tariffs

Amit Deoda (deoda@cse.iitb.ac.in) (06D05006)

Akhil Deshmukh (akhild@cse.iitb.ac.in) (06D05007)

A successful tariff plan will not only need to recover O & M costs while assuring affordability
and accessibility but also promote efficiency of water use and environmental sustainability
through such a system. Transparency and simplicity are the characteristics of a successful tariff
plan. This document is a critique on the “Approach Paper On Preparation of Criteria for Bulk
Water Pricing in the State of Maharashtra”.

Thus the details of comments and recommendations on the basis of the said paper are given
below:

Comments:

Reference: Section in AP_VOL I

Jurisdiction:
In respect of supply of water on volumetric basis and formation of Water Committee, Section 60
of MIA, 1976 states

(8) If any holder or occupier is aggrieved by any order or decision of the Water Committee, then such
holder or occupier may submit an appeal to the Executive Engineer within thirty days from the date of
receipt of such order or decision. The decision of the Executive Engineer in such appeal shall be final and
conclusive, and shall not be called in question in any court.

Comment: Paper does not mention about water theft and penalties for that, or even
misclassification of tariff charge to be applied onto the user. In such cases, although the decision
of Executive Engineer is considered final, there should be a provision for escalation of such
issues to higher authorities (eg: District Courts or High Court).

Reference: Section in AP_VOL I

7.13. Recommendations of the Sixth Pay Commission

Consequent upon the acceptance of the recommendations of the Sixth Pay Commission, the
establishment costs have increased by 30% to 40%. To avoid “tariff shock‟, this additional
liability should not be passed on to bulk water users through tariff but should be fully borne by
the State government as subsidy.

Comment: The water pricing should be such that it bears the O&M costs, instead of state
government bearing the increased cost. Any increased cost should not always be incident on
government. In case of vagaries of nature such as drought, tornado or initial establishment cost
government spending is needed & justified.
Reference: Section in AP_VOL I

5.9 National Water Mission as per National Action Plan on Climate Change (NAPCC)
“Incentive structures will be designed to promote water-neutral or water-positive technologies,
recharging of underground water sources and adoption of large scale irrigation programmes which rely
on sprinklers, drip irrigation and ridge and furrow irrigation.”

Comment: Irrigation system such as drip or sprinkle can be afforded by rich farmers.
Getting incentives, for use of such technology, adds to their profit, via more produce and an
additional cost saving due to less water usage. Equity is one of the basic principle on which
MWRRA works. Poor farmers who cannot afford such systems/technology do not get such
benefits, thus creating an economic divide (rich becoming richer, poor becoming poorer). It
would be best to form a plan with discrete distribution of incentive/disincentive so as to
not discourage the rich to go for advanced technology for use, and also promote the poor,
to have efficient usage of water.

Reference: Section in AP_VOL III

13.1.2. Concessions :
(i) In area based tariff, small and marginal farmers shall be levied concessional tariff as under
a. Marginal farmer (< 1 ha holding) - 50% of basic rate
b. Small farmer (1 – 2 ha) - 75% of basic rate
c. Medium and large farmers - basic rate

Comment: Tariff are decided on the basis of landholding of an individual. A land owned by a
family can be registered under the names of individual members, thus shifting the category
from Medium & large farmer, to Small or from Small to marginal farmer land. Such case have to
be monitored, no explicit mention has in been considered in this document.

Reference: Section in AP_VOL III

10 GOVERNMENT SUBSIDY
10.1. Revenue gap if any i.e. arithmetical difference between the project O&M cost and projected
tariff realization shall be provided as State government subsidy and WRD shall confirm
availability of required subsidy. Income derived by RBAs i.e. non tariff income (i.e. income from
sale of tenders, scrap, royalty for hydro power, pisiculture, recreation, tourism in reservoirs) ,
may be adjusted against subsidy, if necessary.

Comment: There will be no motivation for revenue collection by the WUA/WRD or CADA or
any other local revenue collection agencies/departments, since government always pays for the
deficit. And this may emerge as a permanent gap in the revenue realization cycle. Hence the
model is not self-sustaining, and implies the government intervention in the form of subsidy at
each collection period.
Reference: Section in AP_VOL III

Polluter pays principle:

13.2.4. Penalty / Disincentives
Higher rate of water tariff by way of penalty may be considered for Muncipal
Corporation/Muncipalities who do not show adequate progress in setting up STP.

13.3.3. Penalty / Disincentives :

Every industry is expected to treat effluent to desired standard before release into
natural water cause. In such case, applicable rate will be charged. If the effluent is not treated to
the required standard of MPCB, rate equal to twice the applicable rate will be charged

Comments: Charges for industry water usage should be comparable to that required for
treatment of waste water, rather than flat rate of twice the applicable rate. It may be possible for
some industry to pay the penalty, and let the waste water discharged unprocessed, because the
cost incurred to treat waste water might be more than the applicable penalty.

Reference: Section in AP_VOL III

13.1. Agriculture
13.1.1. Principles
(vi) No distinction will be made in tariff fixation between normal and scarcity period.
However, the State may consider remission in water charges in scarcity period by providing
subsidy.

Comment: Providing subsidies during scarcity, would not account for economic usage of water.
People tend to overuse water, and mostly in wasteful way. This accounts to recovery of the
O&M charges through government subsidy, rather than water tariff. This is not self-sustaining
model.

Recommendations

Discretionary prepaid tariff:

• Charge Industrial user prepaid tariff.

• For agricultural & domestic users according to the current policy.
Charging a prepaid tariff would help in early and effective revenue collection.
Within the non-irrigation sector, Industries can afford prepaid tariff for their water
consumption.
Basis for all the quoted and forecasted figures/cost and calculations should be included in
the main document.
You can see below there is no basis given for the assumed figures/percentages. A survey
or findings for these assumed numbers should be quoted, so that the document becomes
convincible and is justified.

12 APPORTIONMENT OF O&M COST

12.2. Firstly a percentage weight shall be assigned to each of the three parameters which shall be
common to all users. The values thus assigned shall be
Parameter Weightage
(i) Affordability - 60%
(ii) Accessibility - 20%
(iii) Quantity & Timeliness - 20%
of Supply (Q&T)

12.5. Assuming 15% of domestic water drawl is used for industry and 15% of industrial water
demand is used for domestic supply.