Relevance: GS-3: Indian Economy and issues relating to planning, mobilisation of resources, growth, development, and employment

Key Phrases: Water Regulatory Authority, Water Pricing, UN Dublin Statement 1992, National Water Policy, Optimum Utilisation, Deen Dayal Upadhyaya Gram Jyoti Yojana, Public procurement Policies, Tariff guidelines, Category-Wise Tariffs

Context:

• Taking a cue from the telecom and electricity sectors, the government has taken a decision to create water regulators.
• According to the UN Dublin Statement 1992, water should be treated as an economic good.

Key Highlights:

• Traditionally water has mostly been considered as a free good in India and the government used to determine the price of water in only select cases.
• Water has an economic value for all its competing uses. Thus, water pricing is one of the ways to address the resources and financial sustainability aspects of water.
• 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 into domestic and non-domestic and devise category-wise tariffs.

National Water Policy (NWP) 2012:

• National Water policy was formulated to govern the planning and development of water resources and their optimum utilisation.
• 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 focuses 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.

What is the current status of the working of the 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, 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 the 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.

What are the challenges to water pricing?

1. Export advantage Erosion:
   • It is argued that water pricing may erode India’s export advantage.
   • But this argument ignores how the status quo continues to erode the competitiveness of farmers living in water-deficient parts of India which also coincides with where the incidence of farmer suicides is high.
2. Public procurement Policies:
   • The other challenge to introducing water pricing is the entrenched political economy in different parts of India.
   • The severe water crisis in Latur was in stark contrast to flourishing fields of sugarcane, a water-guzzling crop, sustained by the patronage of politicians in the state of Maharashtra.
   • Then the public procurement policies also promote the cultivation of water-intensive crops, sometimes in those very States where the usage is most inefficient.
3. Inherent Design Problems in Water pricing:
   • This is because the government does not exercise control over the sources of water as it does over other natural resources.

Way Forward:

1. Independent Water Regulatory Bodies:
   • Setting up independent water regulatory bodies with clearly defined roles to ensure efficiency and transparency in the water pricing process is a must.
2. Policy reforms:
   • 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 and provide a link between the government, water utilities, and consumers.
   • It can 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.
3. Metering and appropriate pricing:
   • A robust pricing strategy must be in place for individual State water regulators, thus ensuring uniform State-level water tariffs, subsidies, and other factors such as unaccounted for water, connection cost, and metering.
   • Sixty-one percent of the irrigation uses surface water which will require metering and appropriate pricing.
   • Groundwater has to be priced through proxies—electricity or diesel used by farmers to pump the water.
   • The strategy for pricing should be such that the cost of migration from one method of irrigation to another or from electricity to diesel offsets the difference in cost between the two.
   • The pricing should also take into account the income distribution of water users and hence be accommodative towards poorer farmers or households.
   • It is important to target irrigation water for pricing purposes because it alone comprises more than 78% of the total water usage in India according to data from the ministry of water resources.
4. Separation of Electric Feeders:
   • An important part of this effort will also involve the separation of electric feeders for agricultural and non-agricultural purposes which is already a focus of the government under the Deen Dayal Upadhyaya Gram Jyoti Yojana.

Conclusion:

• Water pricing is the only long-term, sustainable solution to promote efficient and equitable use of this precious natural resource.
• Water pricing should be effectively implemented by regulators in order to maintain the quality of supply and efficient use of the water resource.

Source: The Hindu BL

Mains Question:

Q. Water pricing is one of the ways to address the resources and financial sustainability aspects of water. Critically Examine. (250 words).