Pricing water supply in India

In a recent study on water scarcity in India, consultancy firm Grail Research have found that unless the government makes serious changes to the way it prices and manages water, increased consumption by the nation’s farms, factories and growing population will push drinking water supplies to critical limits by 2050. Its recommendations include increasing desalination and rainwater harvesting, improving watershed management, and use of public-private partnerships for water treatment and distribution.

The report points to the stark difference in prices between supply in Indian cities and elsewhere. The tariff per cubic meter of water, in US dollars (derived by multiplying the tariff per cubic meter in U.S. dollars by the exchange rate as of July 1, 2008, and dividing by the 2005 purchasing power parity rate), adjusted for purchasing power parity, for various cities was in the range of $0.25-0.33 for Indian cities, whereas it was $1.94 in Ankara, Turkey; $4.53 in Manchester, Britain; $2.77 in Cape Town, South Africa; $2.84 in Kathmandu, Nepal; and $2.80 in Boston, Mass.; and $1.39 in Omaha, Nebraska.

The low nominal prices for municipal water supplies in our cities glosses over the high actual cost incurred by the consumers in accessing piped water
1. Large segments of the population don’t have access to piped-in water and are forced to buy it from water vendors at exorbitant prices.
2. The Transparency International's Global Corruption Report for 2008 notes that 40%of water customers in India had made multiple small payments in the previous six months to falsify meter readings so as to lower their bills.
3. Customers also reported that they had paid bribes to speed up repair work (33% of respondents) or expedite new water and sanitation connections (12% of respondents).
4. Other opportunity costs associated with accessing piped water supply in Indian cities are discussed here and here.