Achieving continuous water supply with the help of a private operator in Karnataka
In the cities of Hubli, Belgaum and Gulbarga in the state of Karnataka, the private operator Veolia increased water supply from once every 2-15 days for 1-2 hours, to 24 hours per day for 180,000 people (12% of the population of the 3 cities) within 2 years (2006-2008). This was achieved by carefully selecting and ring-fencing demonstration zones (one in each city), renovating the distribution network, installing meters, introducing a well-functioning commercial system, and effective grass-roots social intermediation by an NGO, all without increasing the amount of bulk water supplied. The project, known by its acronym as KUWASIP (Karnataka Urban Water Sector Improvement Project), was supported by a US$39.5 million loan from the World Bank. It constitutes a milestone for India, where no
large city so far has achieved continuous water supply. The project is expected to be scaled-up to cover the entire area of the three cities.
Micro-credit for water connections in Tamil Nadu
In Tiruchirapalli in Tamil Nadu, the NGO Gramalaya, established in 1987, and women self-help groups promote access to water supply and sanitation by the poor through micro-credit. Among the benefits are that women can spend more time with their children, earn additional income, and sell surplus water to neighbors. This money contributes to her repayment of the WaterCredit loan. The initiative is supported by the US-based non-profit Water Partners International.
The Jamshedpur Utilities and Services Company
The Jamshedpur Utilities and Services Company (JUSCO) provides water and sanitation
services in Jamshedpur, a major industrial center in East India that is home to Tata Steel. Until 2004 a division of Tata Steel provided water to the city's residents. However, service quality
was poor with intermittent supply, high water losses and no metering. To improve this situation and to establish good practices that could be replicated in other Indian cities, JUSCO was set up as a wholly owned subsidiary of Tata Steel in 2004.
Efficiency and service quality improved substantially over the following years. The level on non-revenue water decreased from an estimated 36% in 2005 to 10% in 2009; one quarter of residents received continuous water supply (although the average supply remained at only 7 hours per day) in 2009; the share of metered connections increased from 2% in 2007 to 26% in 2009; the number of customers increased; and the company recovered its operating costs plus a portion of capital costs. Identifying and legalizing illegal connections was an important element in the reduction of non-revenue water. The utility prides itself today of the good drinking water quality provided and encourages its customers to drink from the tap. The utility also operates a wastewater treatment plant that meets discharge standards. The private utility pays salaries that are higher than civil service salaries and conducts extensive training programs for its staff. It has also installed a modern system to track and resolve customer
complaints. Furthermore, it conducts independent annual customer satisfaction surveys.
JUSCO's vision is to be the preferred provider of water supply and other urban services throughout India. Together with Ranhill Malaysia it won a 25-year concession contract for providing the water supply in Haldia City, West Bengal.
There are only limited data on the operating efficiency of utilities in India, and even fewer data on the efficiency of investments.
Concerning operating efficiency, a study of 20 cities by the Jawaharlal Nehru National Urban Renewal Mission with the support of the Asian Development Bank showed an average level of non-revenue water (NRW) of 32%. However, 5 out of the 20 cities did not provide any data. For those that provided data there probably is a large margin of error, since only 25% of connections are metered, which makes it very difficult to estimate non-revenue water. Also, three utilities show NRW levels of less than 20%, two of which have practically no metering, which indicates that the numbers are not reliable and actual values are likely to be higher. In Delhi, which was not included in the ADB study, non-revenue water stood at 53% and there were about 20 employees per 1000 connections. Furthermore, only 70% of revenue billed was actually collected.
Concerning labor productivity, the 20 utilities in the sample had on average 7.4 employees per 1,000 connections, which is much higher than the estimated level for an efficient utility. A survey of a larger sample of Indian utilities showed an average ratio of 10.9 employees per 1,000 connections.
Tariffs, cost recovery and subsidies
Water and sewer tariffs in India are low in both urban and rural areas. In urban areas they were set at the equivalent of about US$0.10 per cubic meter in 2007 and recovered about 60% of operating and maintenance costs, with large differences between cities. Some cities such as Kolkata do not bill residential users at all. In rural areas the level of cost recovery often is even lower than in urban areas and was estaimated at only 20% in rural Punjab. Subsidies were estimated at US$1.1 billion per year in the mid-1990s, accounting to 4% of all government subsidies in India. 70% of those benefiting from the subsidies are not poor.
Metering. Water metering is the precondition for billing water users on the basis of volume consumed. 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 (US$0.1) 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.
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$66.6 million) per year and 7 billion (US$155.4 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 totaling about 50 billion (US$1.1 billion)
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$2.9 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.
Cost recovery in rural areas is low and a majority of the rural water systems are defunct for lack of maintenance. Some state governments subsidize rural water systems, but funds are scarce and insufficient. In rural areas in Punjab, operation and maintenance cost recovery is only about 20%. On one hand, expenditures are high due to high salary levels, high power tariff and a high number of operating staff. On the other hand, revenue is paid only by the 10% of the households who have private connections. Those drawing water from public stand
posts do not pay any water charges at all, although the official tariff for public stand post users is 15 (US$0.3) per month per household.