Regulatory Analysis of Water Supply System in Kolkata

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Water has long been seen as a free product from nature, yet the overall amount of usable water accessible globally is not quite as abundant as people commonly believe. The over-exploitation of the resource has exacerbated the shortage problem. It has been commonly suggested that such withdrawals will result in a situation in which water scarcity will impede economic progress. This problem of water scarcity shoots up in urban locations in a country like India with a huge population burden.

I will be analyzing the water supply system under Kolkata Municipal Corporation (KMC) in the ‘City of Joy.

Brief Overview

Kolkata has one of the oldest water supply systems in India. The western half of the city runs along the right bank of the Hooghly River. The river has a perennial flow. As a result, the city maintains a comparative advantage over many other Indian cities.

The municipal corporation is responsible for providing drinking water to its citizens under Section 234 of the KMC Act. Historically, water supply has not been seen as a commercial activity in Kolkata. The notion of volumetric pricing of water based on water meters is still relatively new in Kolkata. So far, water has been regarded to be nearly free. Domestic users, in particular, do not obtain water through a metered connection and so do not pay based on usage, although the water service and price structure have changed in recent years.

The Demography

The present jurisdiction of Kolkata Municipal Corporation (KMC) spreads over 141 wards and covers an area of 187.33 km. Before independence, the city of Kolkata had a population of 6 lakh people. However, the figure has been exceptionally raised over years. According to reports, Kolkata's current static population is approximately 50 lakhs. Eighteen lakhs of the population live in slums.

The massive infrastructural development works in various locations, stretching on either side of the EM bypass, as well as additional areas of Kolkata like Jadavpur, Garia, Behala, apart from the city proper and northern congruent parts, have been undertaken by both private and public sectors, and are significant issues for such influx of population. Because of this, the pressure to use household water has been excessively tremendous. As a result, there is a high need for potable water, particularly in rapidly increasing areas.

So, the population for the water supply system consists of domestic users from different economic strata. The living spaces can be individually owned houses, small and large apartments, and slums. On the other side, there are industries and other economic centers or businesses that need large quantities of water.

 

Water Supply System Under KMC

Hooghly River is the primary source of potable surface water. The city of Kolkata is presently served with filtered water through five Water Treatment Plants, i.e., Indira Gandhi Water Treatment Plant (IGWTP), Garden Reach Water Works (GRWW), Jai Hind Jal Prakalpa, Jorabagan Water Treatment Plant, and Wattgunge Water Treatment Plant (WWTP). Surface water is treated in these five Water Treatment Plants and distributed throughout the city through an extensive network of 39 intermediate Booster Pumping Stations (BPS) and 25 Elevated Storage Reservoirs (ESR) (KMC, 2021). The Whole system can be summarised in the below flowchart.

Figure 1- Basic flow diagram of water supply and distribution system, Source: Author

 

The Indira Gandhi Water Treatment Plant at Palta Waterworks is the oldest of them, having a capacity of 260 MGD. This waterworks sends water to the Tallah pumping station for temporary storage before being distributed to the city. The other two water treatment facilities are a 120 + 15 MGD treatment plant at Garden Reach and a 120-MGD treatment facility at Dhapa on Kolkata's eastern outskirts, where there is a groundwater arsenic contamination problem. Dhapa Water Treatment Plant today has a capacity of 30 MGD. There is a project going on to shift from groundwater to treated surface water in Dhapa. Jorabagan and Wattgunge have smaller facilities with a capacity of 8 and 5 million gallons per day, respectively. According to the Kolkata Municipal Corporation, the overall capacity of the water treatment facilities in 2015 was 438 MGD, while the city's supply was 315 MGD. A total of 30 MGD of water is also provided through power-driven tube wells in locations where surface water sources are insufficient (KMC, BUDGET STATEMENT, 2020). This makes the per capita water availability more than 200 lcpd in the city.

Besides providing more than 252000 domestic and 25000 industrial and commercial connections, KMC currently supplies treated water through 17019 standposts (Majumdar & Gupta, 2007). The standposts are primarily there to address the needs of nearly 2 million slum people. The unfiltered water supply is provided by 2000 street hydrants and is distributed via a separate distribution network fed by intake pumping stations at Mallickghat and Wattgunge. The unfiltered water is mainly utilized for road washing. Some pavement dwellers utilize it for bathing as well.

The hours of delivery range from 6.5 hours per day in the city center to 4.5 hours in the outer zones served by Dhapa and Garden Reach Water Works. However, outside of the central city, the municipal water supply is supplemented by independent groundwater sources. Total groundwater contribution from KMC as well as private parties are nearing 433 MLD. Groundwater remains the primary water source in the areas that Dhapa Waterworks intends to serve (Ray & Shaw, 2016).

Issues with Water Supply System in Kolkata

The water delivery system in Kolkata's megacity confronts several issues. Despite its good hydrological conditions, Kolkata nonetheless suffers from water shortages. The Kolkata Municipal Corporation's surface water infrastructure does not reach the wards on the outskirts. These areas may also be contaminated by arsenic, putting the inhabitants prone to ailments caused by high levels of arsenic in groundwater. There is a strict regulation of not using groundwater sources in areas where there is a KMC water connection. However, in case of shortages people still use borewells. Because no portion of the city has a 24-hour supply, the water supply pipes are vulnerable to sewage and other impurities that enter the pipelines through fractures when the pressure is low.

Because of the insufficiency of the supply and the short duration of that supply, the population is forced to stockpile water that will be thrown out when the municipal supply is restored, resulting in waste and increasing the supply load. The per capita supply is far lower than the anticipated level. The old, worn-out supply pipes also result in a 30 percent leakage loss (Ray & Shaw, 2016). The standpoint supply system makes the poor better off in terms of access to water, but the losses through standposts are immense. About 95% of standposts are not provided with taps, or taps are stolen. This results in wastage of water during the supply hours (Majumdar & Gupta, 2007).

As a result, the water supply system is vulnerable to water contamination, intermittent flow, leakage, and loss due to unregulated flow, insufficient coverage in slum pockets, excessive reliance on the Tallah tank (which also supplies water to Salt Lake City in the eastern periphery), a lack of metering and low-cost recovery, dual water supply (including both surface water and groundwater), a lack of awareness about judicious water use, and the non-participatory nature of government. The vulnerability of the water supply system rises as one moves away from the core metropolis. Peripheral wards, particularly the eastern fringe, are the most susceptible.

To limit the scope of the assignment, I will be mainly focusing on the financial aspects of the water supply system in Kolkata while also discussing other issues which affect the financial mechanism.

 

Water Supply System in Kolkata – The Finances

In the FY 2020-21, the Kolkata Municipal Corporation's expenditure on water supply was 405 Cr. While the revenue received from the water supply service is only 45 Cr (KMC, BUDGET STATEMENT, 2020). This colossal deficit implies that the water supply service is still a strictly welfare service. This also barred the authorities from any development activities and reduced O&M expenses. The mere 45 Cr is received mainly from the commercial consumers because the domestic water supply is free in the city.

Water Pricing in Kolkata

Water pricing in Kolkata is dependent on a yearly property tax and the size of the ferrule, which controls the flow of water in the supply line in the absence of water meters. Water costs have been levied on commercial and industrial users, as well as a few home customers, since the 1980s. In recent years, the fee for a non-domestic connection, which is determined by ferrule size, has experienced acceptable revisions. Water costs were being paid by a few domestic users, primarily big residential building complexes with ferrule size connections of 20mm and higher.

The initial cost of a KMC domestic connection varies depending on the size of the ferrule. For 10 mm, 15 mm, 20mm, and 25mm ferrule sizes, the current prices are Rs. 525, Rs. 1200, Rs. 2000, and Rs. 3000, respectively (KMC, 2021). Customers must additionally pay a road restoration fee. It should be noted that connections with larger than 15 mm ferrule are rarely available to domestic consumers. Consumers who pay a high yearly property tax are offered the option of connecting to a wider diameter connection. This inhibits towns' ability to raise funds (Ray & Shaw, 2016). The current tariff structure is shown in Figure 2.

Figure 2- Tariff structure. Source- KMC website

 

Analysis of the Financial Regulatory Problems

The idea of providing nearly free water to residents has resulted in massive water waste in Kolkata. The conservation problem is largely ignored. This has also resulted in an increase in government water subsidies. In the last decade, spending on water supply climbed fivefold while earnings only doubled (Ray & Shaw, 2016). A lack of finances hampers the upgrading of Kolkata's water infrastructure.

Who Regulates?

The committee that decides the water charge to be levied is, by composition, very political. It comprises the Urban Development Minister and Minister of State, Municipal Affairs of the Government of West Bengal, representatives of KMC such as The Mayor, Mayor-in-Council, Vice-Chairperson KMDA, Chairman or Mayor of other adjacent municipalities, and some administrative heads such as the Principal Secretaries of Urban Department, Finance Department, and Municipal Affairs Department. The elemental composition allows enough scope to have a political influence on the pricing process that is manifested in the low level of pricing in Kolkata.

The Debate over Pricing Strategies

The Government of West Bengal has been trying to rationalize domestic water charges since 2000. When the left front government in the early 2000s first tried to implement volumetric water pricing, there was massive opposition from the rival parties and even within the ruling party itself. The leaders of the TMC government always tried to neglect this issue till recent times. This is mainly because water prices can have a direct negative effect on the vote bank. In 2015, the KMC asked the Asian Development Bank for a loan of 500 crores for the development of the water infrastructure in the city. ADB agreed to give the loan on the condition of metering the water connection for the domestic users. KMC agreed to this condition. KMC gave the contract to a private firm to install 25000 water meters (Majumdar A. D., 2017). That apart, 25 district metering units are to be installed in the neighborhood to map wastage or excessive use of water accurately. However, opposition within the ruling party has delayed the project for some time now. The mayor even said that there is no plan to tax water consumption for now, the metering is done to monitor the water usage and wastage.

A Rapid RIA on the Pricing Regulation

Evidence from all over the world suggests that the overuse, e.g., the water consumption behavior problems, can be addressed by a robust pricing mechanism for water usage. A robust tariff system can also help in the sustainable financing of the water system, further development of the water infrastructure, and improved operations and maintenance mechanisms. However, this cannot be achieved without political will, which is missing in this case. Nevertheless, the issue of political will can be overcome by a proper regulatory impact analysis of the pricing mechanism.

Willingness to Pay

It is not easy to understand the willingness to pay for a non-market good like water which is also traditionally considered a basic right. However, a Stated Preference Model has been used by the researchers through a survey method. 

Such a study (Majumdar & Gupta, 2009) was done in Kolkata in the year 2009. It was found that households are willing to pay approximately Rs. 3.18 per kilolitre for such a supply. The willingness-to-pay establishes that water pricing is not politically very sensitive and may not have any adverse political implications if a satisfactory supply could be assured. The proposed charge of Rs. 3.18 per kilolitre will favor conservation of the resource and is expected to check water wastage (Majumdar & Gupta, 2009). There is no fixed part in the pricing structure, so this will give enough scope for cross-subsidization for low-income users.

Is Paying for Water Incentive Compatible?

Paying for a dependable, high-quality water supply is a consumer-friendly incentive. Every residence must pay a one-time upfront amount to establish a private water system or receive a KMC connection for a water supply. The family must bear a monthly expense for the operation and maintenance of the water system. Concerns about water quality motivate households to engage in one or more purification activities, such as boiling, filtering, and so on, in order to enhance the quality of the water they consume. Despite paying for these efforts, individuals continue to suffer from water-borne illnesses such as diarrhea and cholera. When such diseases strike, patients must incur significant medical costs. Households waste time purifying and seeking medical treatment when they may be using that time for more productive pursuits. This squandered time has an opportunity cost. Thus, the overall expense sustained by a household is the total cost of water system installation, time inclusive cost of purifying operations, and time inclusive cost of medical treatment. The below table from the study, as mentioned earlier, shows the out-of-pocket water-related expenditure. This expenditure can be seen as scientific evidence to formulate the tariff structure (Majumdar & Gupta, 2007).

Figure 3- Breakdown of out-of-pocket water-related expenditure. Source: (Majumdar & Gupta, 2007)

 

Options for Tariff Structure

The two most used pricing structures based on volumetric pricing are Increasing Block Tariff (IBT) and a uniform charge. In the case of the Uniform charge mechanism, the tariff remains the same for all consumers and consumer classes at all levels of consumption, and IBT implies that the charge for usage rises in blocks with the amount of use. IBT is useful to regulate the consumption pattern and wastage of water at the household level. However, it requires heavy technological support and creates a regulatory burden of monitoring and enforcement. On the other hand, a uniform charge is simple, easy to understand, and easier to administer. It is both revenues sufficient and economically efficient.

Stated preference model-based willingness to pay amount can be set as a uniform charge for water consumption. This process is best for the pilot project of pricing strategy in the city of Kolkata. In addition to that, a cross-subsidization policy should be considered for the people below the poverty line. the current tariff structure of the KMC shown in figure 2 is higher than the willingness to pay and that is the main reason behind the lack of political willingness to impose tariff on water usage. More such studies are required to arrive at optimum price for water usage.

Conclusion

In its Vision 2025 proposal, the KMC aims to replace the groundwater supply with surface water for the entire city. They are also planning a 24/7 water supply system (Majumdar A. D., 2017). However, there is an urgent need to improve the aging water infrastructure in Kolkata along with better maintenance. Replacement of the worn-out pipelines should be done on an emergency basis to stop leakage. All this can be achieved by a sustainable financing model that can only be achieved by measuring and pricing the water supply.

When residents of Kolkata choose a municipal surface water connection, they face several issues such as low quality, insufficient pressure, irregular delivery, and so on. Because better water supply quality is predicted to reduce water-related costs significantly, there is a strong economic case for customers to pay for water.

A transitional phase pricing plan aims to familiarise consumers with a simple volumetric price while recovering as much money as feasible. The plan should serve as a foundation for future complete cost recovery. An optimum price model will help authorities develop rigorous regulations for allowing a private water operator to operate. Thus, acting as a regulator than a provider. Meanwhile, a publicly administered system with a more rational financial outlook may be an appropriate management choice.

 

References

KMC. (2020). BUDGET STATEMENT. Retrieved from Kolkata Municipal Corporation: https://www.kmcgov.in/KMCPortal/downloads/KMC_Budget_English_2019_2020.pdf

KMC. (2021). Kolkata Municipal Corporation. Retrieved from https://www.kmcgov.in/KMCPortal/jsp/WaterSupply.jsp

Majumdar, A. D. (2017, January 10). Kolkata municipal body to meter household water consumption under ADB pressure. Retrieved from Mint: https://www.livemint.com/Politics/KFwcCgu1MR6bgbXt2qR99O/Kolkata-municipal-body-to-meter-household-water-consumption.html

Majumdar, C., & Gupta, G. (2007). The Debate over Municipal Water Pricing: Evidence from Kolkata, India. International Journal of Water Resource Development.

Majumdar, C., & Gupta, G. (2009). Willingness to pay and municipal water pricing in transition: a case study. Journal of Integrative Environmental Sciences .

Ray, B., & Shaw, R. (2016). Water Stress in the Megacity of Kolkata, India, and Its Implications for Urban Resilience. Urban Disasters and Resilience in Asia.