I am guessing! From now on, will my roadside chai (my saviour in winters) be costlier? Reason? Water tariffs have increased across the board in Delhi about five to ten times. Let me add a little preamble.
“Two broad principles were followed in effecting the new tariff structure. The first was to provide incentives for conservation of water by charging less from people who use water judiciously and more from people who use water for wasteful activities. The second criterion was to rationalise the gap beween the increasing cost of producing drinking water and the amount being realised from consumers.”
Hear the familiar refrain in all, here and here: costs of production have gone up, hence the necessity of rationing the resource through use of prices. Prices that have been dictated by a single firm, in this case, the DJB. Now it is arguable whether the prices are actually reflective of the costs incurred?
Conceded that costs have increased. But it is worth looking at lessons from the workings of a market economy and understanding how costs can be decreased, and if costs increase they are along with added value. Would a company like Reynolds ever increase the cost of its produced pens citing increased costs of production and that people in other cities are paying more? Arguably no, it has to deal with two elements: choice of a consumer and competition from other firms.
We at CCS have been thinking of a ward-based service delivery model? Each ward/s in a metro has the choice to provide their customer base to a select water provider. Alternately consumers can buy from other service providers. With competition and choice between water service providers, there will be umpteen benefits to consumers. Production costs will be kept low in order to deal with competition and there will be differential tariffs for different customers. Prices will be a more accurate reflection of actual costs incurred. In absence of competition, true costs are not revealed. The poor? Well, look at the prices they are already paying in their colonies. You will be surprised. Another dimension to the issue. Water is a public good, or more accurately it is under the government’s power. Can water bodies be privatised? Are there advanced models out there to deal with this issue, especially in terms of urban public utilites?
We need to proceed in that direction for otherwise, we would have arbitrary price increases by a firm justifying rising production costs even when its wage bill exceeds its income; 40% of its water is lost through leakage and thefts; only 25% of its connections are metered (this report cites that 90% of Delhi is unmetered) and the rest are based on average consumption of the ‘area’. Imagine the “tragedy of commons” actions in these ‘areas’. All when 25% of Delhi’s population is not able to be served by DJB’s water. And I have not taken into account the total cost borne by Delhi households to deal with the shortage of water, which is about 6.5 time higher the present costs. And now, would these be dealt with?
But for now, my roadside chai won’t be costlier because he obtains the water through theft and competition from other sellers will keep his price the same. A case of wrong alignment of incentives. Important lessons to be learnt. Leave the production and distribution of water to the market and the rule of law to the government.
A government has no business being in business!
Post Disclaimer
The opinions expressed in this essay are those of the authors. They do not purport to reflect the opinions or views of CCS.
