Water should be treated as an economic good, according to the 1992 UN Dublin Statement. It has an economic value for all its competing uses. Considering the resources and financial sustainability aspects, water pricing is one of the ways to address the above.

For long, in India, water was considered a free good and governments only used to determine the price of water in select cases. Taking a cue from telecom and electricity sectors, this has now changed to some extent as the government has taken a decision to position water regulators. Ideally, water pricing should be effectively implemented by regulators in order to maintain the quality of supply and efficient use of the water resource.

A robust pricing strategy must be in place for individual State water regulator, thus ensuring uniform State-level water tariffs, subsidies, and other factors such as unaccounted for water, connection cost, and metering. The approach to tariff determination is normally based on the cost of service or the ability of various users to pay for the service or a combination of both.

Additionally, under water pricing, it is imperative to segregate the water users, domestic and non-domestic, and devise category-wise tariffs.

National Water Policy 

At the Central level, the National Water Policy (NWP) 2012 highlighted the need for regulatory bodies. The policy mandates a water framework law that will facilitate the establishment of regulatory authorities to plan, manage, and regulate water resources.

Furthermore, it prescribes equitable access to water at a fair price through an independent statutory Water Regulatory Authority to be set up by each State. To ensure efficient use of water across domestic, agricultural and industrial sectors, a wide array of stakeholder consultation is also required at the State level.

The NWP defines the role of the water regulatory authorities, but does not elaborate much on their functions. Their role would also be advising the government and other agencies to regulate water usage, in addition to regulating water tariffs.

Within the broad spectrum of water pricing, the tariff system focusses on the different aspects of pricing along with the involvement of multi-stakeholders in the water sector such as transmission companies, distribution utilities, private operators, and consumers.

Regulatory bodies

Under the tariff system, the regulatory body has the power to authorise volumetric bulk water entitlement based on availability and duration.

Until a few years ago, Maharashtra was the only State that has had a functional water regulatory authority since 2005. Following Maharashtra’s footsteps, Uttar Pradesh also enacted a statute to establish a Water Regulatory Commission in 2014. The water regulator in Andhra Pradesh lacks power in various regulatory aspects and has only an advisory role. Similarly, the Gujarat water regulator, established under an executive notification, lacks a comprehensive regulatory framework.

Several other States such as Kerala, Jharkhand, and Jammu and Kashmir have also set up water regulatory bodies. It is however noteworthy that not all regulatory bodies follow a similar framework.

For example, while most have the power to regulate equitable distribution and quality of water and establish a tariff system, some have the authority to regulate tariffs only in specific sectors (irrigation, industrial, domestic, or their combination), and have no adjudicatory powers for dispute resolution.

Punjab’s experience

Punjab was the latest to set up a water regulator, in 2020. It has a mandate to manage and regulate water usage in the State so as to achieve sustainable management of groundwater balanced with the requirements of the livelihoods of people. It can set standards for optimal use of surface water as well.

Additionally, if the water users do not meet individual targets through conservation measures, the users will not be entitled to water credits to that extent, and shall even be liable to pay this amount to the Authority as part of his groundwater usage charges.

The regulator utilises these groundwater usage charges towards implementing conservation schemes by the government.

Unfortunately, the Punjab regulator has no mandate for water pricing. They are however undertaking these steps using indirect route through water conservation measures, mandating users to save water. If saving of water comes from, say, agriculture sector, this can be reallocated to other sectors that have high demand.

Setting up independent water regulatory bodies with clearly defined roles to ensure efficiency and transparency in the water pricing process is a must. There is a greater need for policy reforms and a robust framework, under which the regulator can plan, develop and provide water services. If such reforms are synthesised, the water regulator would have a role greater than just being an advisor.

They can then set tariff guidelines for charging for water supply, provide a link between the government, water utilities and consumers, advocate best practices in tariff setting among different stakeholders, monitor the quality of supply, incentivise water utilities for setting benchmarks for quality of supply, resolve disputes among stakeholders, etc.

These will ensure enhanced water security in the years ahead.

Sarkar is a Distinguished Fellow in TERI, New Delhi and a former Secretary, Ministry of Water Resources, government of India; Tigala is Associate Fellow in Water Resources Division, TERI