Urban Water Pricing: Setting the State for Reforms
Publication dateDec, 2003
DetailsReport submitted to the UNDP
AuthorsOm Prakash Mathur, Sandeep Thakur
Setting appropriate prices is indispensable to providing adequate water to India’s growing urban population. Water in most Indian cities and towns is underpriced, with damaging long-run consequences for households who have limited and poor quality water services and for water supplying entities who are unable to invest and expand water coverage. Most water supply entities – be these the Public Health Engineering Departments (PHED), state or city- level water boards, or municipal governments, run at a loss, and cover the loss – defined as the gap between revenues from the sale of water and cost of water provision – from government subsidies and accelerated depreciation of capital. The result is a low- level equilibrium: low tariff, poor services, and constraints on access, especially of poor households. While the need for appropriate pricing of urban water has been long stressed and is widely recognized as central to broader urban sector reforms, what constitute water price reform remains an elusive and emotive issue. Moreover, the goals and objectives of water pricing are often conflicting. Using city- level experiences of water pricing, particularly in respect of the size of the consumer base, multiple instruments of charging, price discrimination between different water user groups, and price-cost linkages, this study titled as Urban Water Pricing: Setting the Stage for Reforms, provides a framework that spells out key areas of reform, objectives that may govern water pricing, and parameters of tariff rationalization.