Urban Areas
Metering. Water metering is the precondition for billing water users on the basis of volume consumed. Estimates of the share of customers metered vary depending on the study auoted. According to the results of a Service Level Benchmarking (SLB) Program carried out by the Ministry of Urban Development in 2006 in 28 cities, the share of metering was 50 percent. According to a 1999 survey of 300 cities about 62% of urban water customers in metropolitan areas and 50% in smaller cities are metered (average 55%). However, meters often do not work so that many "metered" customers are charged flat rates. Bangalore and Pune are among the few Indian cities that meter all their customers. Many other cities have no metering at all or meter only commercial customers. Users of standposts receive water free of charge. A 2007 study of 20 cities by the Jawaharlal Nehru National Urban Renewal Mission with the support of the Asian Development Bank (ADB) showed that only 25% of customers of these utilities were metered. Most other customers paid a flat tariff independent of consumption. Some utilities, such as the one serving Kolkata, actually do not bill residential users at all.
Tariff levels. According to the same ADB study the average tariff for all customers – including industrial, commercial and public customers – is 4.9 (9.0¢ US) per cubic meter. According to a 2007 global water tariff survey by the OECD the residential water tariff for a consumption of 15 m³ was equivalent to US$0.15 per m3 in Bangalore, US$0.12 per m3 in Calcutta, US$0.11 per m3 in New Delhi and US$0.09 per m3 in Mumbai. Only Bangalore had a sewer tariff of US$0.02 per m3. The other three cities did not charge for sewerage, although the better-off tend to be the ones with access to sewers.
Tariff structure. The tariff for customers that are effectively metered is typically a uniform linear tariff, although some cities apply increasing-block tariffs.
Affordability. Urban water tariffs were highly affordable according to data from the year 2000. A family of five living on the poverty line which uses 20 cubic meter of water per month would spend less than 1.2% of its budget on its water bill if it had a water meter. If it did not have a water meter and was charged a flat rate, it would pay 2.0% of its budget. This percentage lies below the often used affordability threshold of 5%. However, at that time the average metered tariff was estimated at only US$0.03 per m3, or less than three times what it was estimated to be in 2007. Apparently no more up-to-date estimates on the share of the average water bill in the budget of the poor are available.
Cost recovery. According to a 2007 study of 20 cities the average rate of cost recovery for operating and maintenance costs of utilities in these cities was 60%. Seven of the 20 utilities generated a cash surplus to partially finance investments. Chennai generated the highest relative surplus. The lowest cost recovery ratio was found in Indore in Madhya Pradesh, which recovered less than 20% of its operating and maintenance costs. According to the results of a Service Level Benchmarking (SLB) Program carried out by the Ministry of Urban Development in 2006 in 28 cities, cost recovery was 67% on average.
Delhi example. In Delhi revenues were just sufficient to cover about 60% of operating costs of the city’s utility in 2004; maintenance has, as a result, been minimal. In the past, the Delhi utility has relied heavily on government financial support for recurrent and capital expenditures in the magnitude of 3 billion (US$54.9 million) per year and 7 billion (US$128.1 million) respectively. As financial support for both capital and recurrent expenditures has been passed on as loans by the Government of the National Capital Territory of Delhi, the utility’s balance sheet is loaded with a huge debt totalling about 50 billion (US$915.0 million) that it is unlikely to be able to service. Accounts receivable represent more than 12 months of billing, part of it being non recoverable. The average tariff was estimated at US$0.074/m³ in 2001, compared to production costs of US$0.085/m³, the latter probably being a very conservative estimate that does not take into account capital costs.
Challenges faced in attempting to increase tariffs. Even if users are willing to pay more for better services, political interests often prevent tariffs from being increased even to a small extent. An example is the city of Jabalpur where the central government and the state government financed a 130 million (US$2.4 million) water supply project from 2000–2004 to be operated by the Jabalpur Municipal Corporation, an entity that collected only less than half of its operational costs in revenues even before this major investment. Even so the municipal corporation initially refused to increase tariffs. Only following pressure from the state government it reluctantly agreed to increase commercial tariffs, but not residential tariffs.
Read more about this topic: Water Supply And Sanitation In India, Tariffs, Cost Recovery and Subsidies
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