“It is the duty of any responsible government to provide lifeline water to its citizens. We may debate the quantum but can we argue against the principle?” This is what Delhi Chief Minister Arvind Kejriwal tweeted on December 30, 2013, immediately after announcing 666 litres of free water per day or 20 kilolitres of water a month to every household connected with the meter.

I had written in these columns (businessline, January 2, 2014) that free water of this magnitude will have a deleterious impact on Delhi’s water sector, which has turned out to be correct now. When the entire country was in the grip of acute water scarcity of different magnitudes, the announcement of free water came as a shock to many policymakers and economists. Questions were asked whether this move would be economically viable for the Delhi Jal Board (DBJ). Is it necessary to provide free water to every household? Will it be possible to supply the specified quantity of water to all households during the entire year? Will it not encourage inefficiency in water use? Since Delhi does not have any reliable perennial water source, where will the water come from? Given the unprecedented water crisis in Delhi, let us decode what free water supply can do.

Financial implications

Many policymakers in India think that water is a free good that can be supplied freely to all households. This is not possible in today’s context. Water is increasingly becoming an economic good worldwide because of the huge costs involved in storing and distribution. Rainwater is harvested and stored in dams/reservoirs to supply for various purposes, including domestic use. Similarly, the groundwater exploited at an alarming rate for various purposes involves huge drilling and electricity costs. The cost for the management and distribution of water for each urban household is huge, and it is skyrocketing because of urban agglomeration.

The Delhi Government has acted without understanding the financial and other repercussions. Why provide water freely to all households when the per capita income of this State is much higher than the national average? Is it not against the ability to pay principle? At the time of introduction, this scheme was expected to cost about ₹160 crore per annum for DBJ, and to increase manifold in the future. How is DBJ going to manage this cost? According to one estimate, DJB’s net cash revenue surplus increased from ₹40.56 crore in 2007-08 to ₹233.57 crore in 2013-14. The DJB’s dependence on the government for operational costs fell from ₹380 crore in 2009-10 to zero in 2013-14, a remarkable achievement. But due to the free water supply, the financial situation of DJB is in a mess now. DJB’s financial losses have increased from ₹344.05 crore in 2019-20 to ₹1,196.22 crore in 2021-22, and now the board reportedly has a total debt of around ₹73,000 crore.

Promoting Inefficiency

Unlike many northern States, Delhi does not have the luxury of a perennial source of surface water for its use. It needs water from neighbouring Haryana, which is not guaranteed. In fact, the then Haryana Chief Minister Bhupendra Singh Hooda once cautioned that Delhi is getting more than its due share and that Haryana cannot be held responsible for Delhi’s water woes. Besides, the groundwater stock in the State is precarious. The Central Ground Water Board (2020) estimates that the annual draft of groundwater is already more than its annual replenishable groundwater level of 0.29 billion cubic meters (bcm), leaving no scope for further exploitation.

Increased exploitation of groundwater will increase both private and public costs, which does not augur well for sustainable development. With increasing water scarcity, is it necessary to provide free water to all households? Free water accentuates scarcity by encouraging inefficient use, which is one of the main reasons for Delhi’s unprecedented water crisis.

The free water scheme pronounces that if the household consumes more than 20 kilolitres of water, it will have to pay for the entire water consumed with 10 per cent additional charges. How will this work? Who will monitor it? Will it not encourage the consumers to tamper with the meters? In most cities, domestic consumption of water is not monitored systematically as it is a costly exercise. Delhi presently supplies water to about 21.5 million people, with a pipeline network of 15,473 km. If the government tries to measure the consumption of water using meter, the operation and management costs may increase substantially. A recent CAG report underlines that “the Delhi Jal Board has neither a proper system to measure the water supply to different areas nor does it have access to reliable data on population in different areas”. It, therefore, cannot ensure equitable supply of water.

If the government is serious about improving the plight of the poor, it should provide free water only to those households which are identified as economically poor.

It is proved beyond doubt that free supply of any good results in inefficiency. Water is no exception. There is ample evidence from different States that free supply of electricity to the farm sector has not only increased the exploitation of groundwater but also pushed State electricity boards into a financial mess. According to an UN estimate, each person needs 20-50 litres of water a day to ensure their basic needs for drinking, cooking and cleaning. If this is so, the supply of close to 700 litres of water per household a day will surely increase inefficiency.

A study by McKinsey Global Institute underlined that Delhi could experience the biggest increase in water demand from 2010 to 2025 because of rapid urban agglomeration. This means the capital cost requirement for managing the increased water demand will rise in the future.

How will the State generate resources with free supply of water? The Delhi Government must, therefore, rethink its free water policy and, instead, work on providing water to the poor at an affordable rate, without affecting the viability of DJB. If free water supply is allowed to continue, Delhi will face an unmanageable water crisis very soon.

The writer is former full-time Member (Official), Commission for Agricultural Costs and Prices, New Delhi. Views are personal