The Real Cost of Water

The lopsided cost vs price economics of water can have a debilitating effect on the country.
By Sarika Malhotra   Delhi     Print Edition: May 22, 2016
Photo: Nilanjan Das

Water trains have begun rolling into Maharashtra's Latur to combat the severe drought. Such trains have been seen in past droughts, too - in Maharashtra, Rajasthan and elsewhere. It is, therefore, ironic that the Railways should be accused of perpetrating a water crisis. But it is. Allegedly by overcharging water. According to a petition filed before the National Green Tribunal (NGT) by the Society for Protection of Environment and Biodiversity (SPEnBIO), the Railways have allegedly overdrawn groundwater in all 73 divisions across 16 zones, including in 'notified' areas where they should have taken the Central Ground Water Authority's (CGWA) sanction, but did so at only three places in the past 10 years. Notified areas are where groundwater has already been excessively exploited, and further extraction is allowed only for drinking or after obtaining permissions from the CGWA. "The Railways use huge quantities of water daily to clean their stations, coaches, coach toilets and sheds," says Akash Vashishta, President, SPEnBIO. "Where is all of it coming from?" The petition demands the Railways be directed to set up rainwater harvesting systems instead.

Meanwhile, in the narrow by-lanes of Sahibabad Industrial Area Site IV, part of the National Capital Region, a host of micro industrial units - many occupying no more than 500 sq. ft - produce 'mineral water' using a reverse osmosis (RO) unit, a couple of 1,000-litre plastic water tanks, a pile of empty 20-litre plastic jars or a plastic pouch packaging machine and, above all, a borewell submersible pump. They extract groundwater, run it through their RO units, and sell it in jars or pouches. The entire apparatus can be set up at less than Rs 5 lakh, the biggest expense being the RO unit. A unit that purifies 1,500 litres of water an hour costs about Rs 2.75 lakh. Monthly expenses are around Rs 10,000, primarily on power; monthly profit, around Rs 45,000. "Hum local factory aur quarter mein supply kartey hain (we supply to local factories and houses nearby)," says a 16-year-old manning one such unit. "Shaadi aur function mein bhi mineral water ka order letey hain (we also supply to weddings and other functions)."

None of the units pay anything to the Ghaziabad Municipal Corporation for water. Nor do they think it necessary to take any permission to exploit underground water. "Jiski zameen hoti hai, us zameen ke neechay ka paani bhi uska hota hai (the owner of a piece of land also owns the water beneath the land)," he says. This is probably the underlying thought behind groundwater extraction in India. "The exploitation has had its impact on the groundwater level in Sahibabad, which fell from 16.35 metres below ground level (mbgl) in 1998 to 54.23 mbgl in 2013," says Sushil Raghav, a Sahibabad resident, who has filed a case before the NGT against the Ghaziabad authorities and the CGWA. Indeed, the entire Ghaziabad municipal area is notified and yet houses 14,160 small-scale industries and 145 medium and heavy ones, employing about 100,000 people. "Only five NOCs have been granted by the CGWA in this area. How do these industries meet their water needs? The Municipal Corporation itself sells groundwater to two five-star hotels in the area and three major industries. How is this permissible?" he asks.

Ghaziabad is not an isolated case. Water is illegally being exploited across the country, in places as diverse as Ahmednagar and Hyderabad. And water thefts are not just about drinking water in the country.

The Crisis

India's unprecedented water crisis is affecting everyone - from domestic user to farmer to industrialist. Overall, the per capita availability of water has dropped from 5,177 cubic metres in 1951 to 1,545 cu m in 2011, below the 'stress level' of 1,700 cu m. Going forward, it is likely to get worse. By 2050, India could well reach the water scarcity level of 1,000 cu m.

Photographs by: Sarika Malhotra

WATER THEFT: An illegal packaged mineral water plant (above) and illegally extracted groundwater being poured into a tanker for commercial use in Ghaziabad's Sahibabad Industrial Area. Ghaziabad was declared a 'Notified Area' by the Central Ground Water Authority in 1998, which means extraction of ground water using machines is not legal, except for drinking water for homes with requisite permissions.

The problem is that water is seen largely as a free or low-cost resource - with little effort being made by either the Central or state governments to capture its cost or price it correctly. Besides, water is largely under the control of states - and few states believe water is a finite resource that needs to be carefully managed. But if governments have been callous about the economics and usage of water, so have the consumers - in every sector. And that is leading to a rapid depletion of water resources in the country.

With increased urbanisation and industrialisation, more and more water would go into cities, power and industries, and this will make water a more stretched resource. Amit Srivastava, coordinator of India Resource Centre (IRC) says mismanagement of water resources in India will lead to many more conflicts.

Alarming Trends

Groundwater consumption in India is not only the highest in the world, but also increasing the fastest. Apart from UP, the worst off states, according to a 2011 CGWA estimate, are Punjab, Haryana, Rajasthan, Delhi, Karnataka, Tamil Nadu, Andhra Pradesh and Telangana. A 2009 study by NASA along with the University of California, California Institute of Technology and the University of Udine (Italy) paints an alarming picture in Punjab and Haryana: "Water is being pumped and consumed by human activities - principally to irrigate cropland - faster than the aquifers can be replenished by natural processes...Groundwater levels have been declining by an average of one metre every three years. More than 109 cubic km of groundwater disappeared between 2002 and 2008."

On its part, the CGWA has divided India's 'water blocks' into four categories - safe, semi critical, critical, and over exploited - the last being those where annual replenishment is proving inadequate. Out of the 6,607 assessment units in the country, 1,071 units have been categorised as 'over-exploited'. Water levels in wells have been falling, too. A CGWA study of 14,346 wells showed 46 per cent had lower levels of water than five years ago.

Alongside, surface water levels are also falling - almost all the major rivers now have deficient basins. Reservoirs are similarly depleting, with water levels in 91 major ones currently at their lowest in a decade. Jaijit Bhattacharya, Partner, Infrastructure and Government Services, KPMG, says that the problem arises out of a combination of factors. "On the supply side, there is inadequate capacity of our water storage system, and on the other hand there is growth in demand due to increasing population and industrialisation." Even when it rains, the storage capacity isn't enough to capture it. "According to an estimate by FAO, Indias per capita water storage capacity is 200 kl, which is well below the world average of 900 kl per capita."

Adding to the problem is the pollution of water bodies - a 2014 Central Pollution Control Board (CPCB) report says 302 stretches across 275 rivers in India are polluted. "Traditional water bodies such as ponds, tanks and lakes are in an abysmal state," says Rudresh Kumar Sugam, researcher at the Council on Energy, Environment and Water (CEEW). By 2030, India's usable supply of water could fall short by 50 per cent, according to a study by the National Water Resources Framework (NWRF).

Rains are increasingly proving insufficient in refurbishing water sources. India's total annual precipitation is around 4,000 BCM, of which only 1,123 BCM is utilised: 690 BCM being added to surface water and 433 BCM to groundwater. G.S. Jha, Chairman, Central Water Commission (CWC) says, "Barring a couple of years, there has been deficient rainfall in ten years." Water is finite and we have to be careful, he affirms. "Most of the water comes down as heavy downpour of a few hours rather than steady and continuous rainfall continuing for days," says Shresth Tayal, Fellow, TERI. "As a result, water leads to runoff or water logging only, rather than percolation into the aquifers or maintaining soil moisture."

Bhattacharya of KPMG says that in India, Unaccounted for Water (UFW) in most cities ranges from 30-50 per cent, whereas in developed countries UFW typically ranges from 5-15 per cent. "Absence of adequate metering, network mapping, scientific monitoring system and lack of consciousness have resulted in large scale water wastage and theft."

Who's to Blame?

The blame lies with both agriculture and industry - as well as with government policies that encourage reckless water consumption. Between 1951 and 2009, the number of electric pump sets in use rose from 26,000 to 16.2 million, and diesel pump sets from 83,000 to 9.2 million. States like Andhra Pradesh, Karnataka, Punjab and Tamil Nadu - all groundwater stressed - are known to provide free power to farmers. "Farmers being an important vote bank, politicians shy away from discussing the subsidies they are being given," says Srivastava of IRC. "Agriculture should get subsidies, but these should be properly targeted." Rs 24,000 crore is the subsidy given to agricultural power.

Even states that charge farmers do so on a pro rata basis (the HP of the installed pump set) and not on the basis of actual power consumption. "Those farming land where groundwater can be easily tapped extract as much water as possible," says K.J. Joy, Secretary of Society for Promoting Participative Ecosystem Management (SOPPECOM). "Those who have to install powerful pump sets because the groundwater on their land lies much deeper, pay more for power, while they may not be drawing that much water." A new threat is the growing popularity of solar pumps in states like Gujarat, which need no grid power at all.

As for industry, it contributes to water scarcity but is also increasingly its victim. A 2011 survey of industries, conducted jointly by Columbia University Water Centre and FICCI, had 60 per cent respondents saying limited availability of water was impacting their business, and 87 per cent feared water would be a problem in the next decade.

TERI's Tayal says on percentage terms, water use in industries may not have changed much but its impact has increased substantially. "As per National Commission for Integrated Water Resources Development Plan, Ministry of Water Resources, 1999, industry's water consumption was 34 BCM in 1990 and likely 42 BCM in 2010. However, due to uneven growth in industrial development across the country, local water balance has been disturbed due to industries, especially in south and west India."

Water Guzzlers

Many industries require vast quantities of water - packaged drinking water units, aerated drinks, water parks, tanneries, distilleries and breweries, pulp and paper, fertilisers, textiles and sugar. But perhaps the most water intensive are coal-fired thermal power plants. This March, India's biggest power generator, NTPC, temporarily shut five of its units in Farakka, West Bengal, for lack of water - the first time in a decade. MAHAGENCO's Parli power plant has been closed since June last year, while the Karnataka Power Corporation's Raichur plant shut down recently. "They all shut due to water shortage, though none of them is located in the worst hit areas," says Jai Krishna, campaigner with Greenpeace India.

In India, 70 per cent of power is provided by coal, dwarfing all other power sources, and it is likely to remain the country's power mainstay. Even so, there is scope for increasing water efficiency. Indian coal thermal plants, on average, require 4 cu m of water to produce one megawatt hour (MwH) of power, according to a study by the Centre for Science and Environment (CSE), while those in South Africa - the most efficient of all - use 1.34 cu m (see chart Water Wastage). Also, 76 per cent of coal thermal plants rely on fresh water.

Another 52,000 MW of coal thermal plants are in the pipeline, around 40 per cent of them, as a recent Greenpeace International report noted, in highly water stressed areas. "If the plans are shelved, India would save 1.1 BCM of water a year," says Greenpeace's Krishna.

Dirt Cheap

A major reason for the rampant misuse of water is that it comes cheap. The price varies widely between states - water being a state subject. Charges range from Rs 10 per cu m in Gujarat and Rs 15-60 per cu m in Tamil Nadu to as little as 33 paise per cu m in Andhra Pradesh, if taken from natural sources, and a little more if it comes from reservoirs or canals. (The figures are for 2010, the latest available with the Central Water Commission or CWC.) "Most coal thermal plants pay a pittance for what is one of their primary raw materials," says Priyavrat Bhati, Programme Director, Sustainable Industrialisation, CSE. "Neyveli Lignite Corporation's Barsingar plant in Rajasthan, for example, pays just 70 paise per cu m to take water from the Indira Gandhi canal. Even the plants paying the highest are getting water cheap. JSW Vijayanagar, for instance, pays Rs 20 per cu m, only 0.9 per cent of the price at which it sells its power."

Himanshu Thakkar, Coordinator, South Asia Network on Dams, Rivers and People

"The biggest stress factor for water in India is the lack of governance. There is no democratic water allocation mechanism. It's all ad hoc and opaque"

With high capital and running expenses of major and minor irrigation projects, the government is barely making any money through water tariffs. CWC's 2010 report, which deals with water pricing and irrigation, points out that it is necessary for state governments to evolve a policy for periodic rationalisation and revision of water rates so that the revenue generated by the irrigation sector is able to meet the cost of operation and maintenance. In many States/UTs, no revisions in the water rates have been carried out over several decades. As per CWC's 2010 findings, Goa had not revised its rates in 22 Years, Tamil Nadu in 23 years; Kerala in 36 years; West Bengal in 33 years and Daman & Diu in 30 years. Even in case of the States which had revised their water rates during the decades (1991-2000), the gap between current and previous revisions had been prominently large. Andhra Pradesh in 14 years; Assam in 10 years; Haryana in 10 years; Karnataka in 10 years; Rajasthan in 11 years; Uttarakhand in 15 Years and Uttar Pradesh in 15 years.

The results are evident. While the capital expenditure on the irrigation projects have gradually increased year on year, the gap between gross receipts on account of water charges and working expenses is gradually widening across the country (see Widening Gap). "Water tariff collected from users goes to general treasury or consolidated funds. Funds for operation and management come from general budget. There is no structural link between the two," explains Pradeep Purandare, Retired Associate Professor, Water & Land Management Institute (WALMI), Aurangabad & Former Expert Member, Marathwada Statutory Development Board. "Physical status of canal systems, irrigation performance and availability of funds, at present, have nothing to do with water tariff."

Then, water tariffs for domestic consumption in India are amongst the lowest in the world (see Low Value). Domestic tariff for India (Capital Delhi) is $0.49 per kl for consumers in the >100 kl bracket, whereas Brazil charges $3.41. "However, we need to keep in mind that Delhi's tariff is on the higher side in India. Many states do not charge anything for domestic consumption, for example Kolkata," points out Bhattacharya of KPMG, adding that cost of water depends on the availability of source, technology, institutional mechanism, commercial structure of the water utility, even terrain. "Srinagar has one of the lowest costs of water as the distribution system predominantly runs on gravity, whereas in Jammu, cost is very high as the distribution system heavily depends on ground water lifting." Bangalore, too, being at an elevated level from its main water source, the Kaveri river 100 km away, depends on pumping water against gravity for water supply, increasing the power requirement and cost manifold.

Water being a state subject, there is also no umbrella agency to control its management. There is a National Water Policy - last updated in 2012 - but much of it remains unimplemented. "The biggest stress factor for water in India is the lack of governance," says Himangshu Thakkar, Coordinator, South Asia Network on Dams, Rivers and People (SANDRP). "There is no democratic water allocation mechanism. It's all ad hoc and opaque." Each state has its own water policy. "Water allocation is done by the states," says Shripad Dharmadhikarya, Founder of Manthan Adhyayan Kendra. "Each state has its own method of doing so, which is often not spelt out clearly."

Looking for Solutions

"India needs to implement its National Water Policy, which grades water access," says Srivastava of IRC. "First there must be water for drinking and livestock, then for irrigation and thereafter for industries." There is a constant demand by neo-liberal economists to treat water as an economic good and price water in a way that the full capital investment (including certain return on investment) plus the operation and maintenance cost comes back to the system. Pricing should similarly be determined by quantity consumed.

"Graded tariff is more socially just. A certain amount of water required to sustain livelihood should be supplied at a minimum price or even given away free," says Joy of SOPPECOM. "In countries like South Africa, such lifeline water is not charged at all. But beyond that there should be what is called volumetric supply and pricing - the more consumed, the higher the charge." This has been implemented successfully at a few places in India as well, notably at Ozar, in Maharashtra's Nashik district, at the tail end of Waghad Irrigation Project, by three water users' associations (WUAs), but needs to be replicated nationally.

Philippe Cullet, Visiting Fellow at the Centre for Policy Research

"Existing water laws focus more on regulating and managing use; environmental laws focus on conservation. But allocation is currently something for users to negotiate as best they can"

There is also the possibility of privatisation of water supply, which was tried in Karnataka's Mysuru and Huballi districts, albeit without much success. Kshitij Urs, Co-founder of NGO People's Campaign for Right to Water, says that harnessing available water for better and more equitable distribution is the solution rather than privatising it.

The water policy should also remove all ambiguities about allocation. "Existing water laws focus more on regulating and managing use," says Philippe Cullet, Visiting Fellow at the Centre for Policy Research. "Also, environmental laws focus on conservation of water. But allocation is currently something for users to negotiate as best they can."

Agronomical practices and power subsidies have major repercussions on water use. "There are now agronomical alternatives such as the System of Rice Intensification (SRI) and Sustainable Sugar Initiative (SSI), by which the water requirement of even water intensive crops like paddy and sugarcane can be reduced by 30-40 per cent," says K.B. Biswas, Chairman, CGWA. "These should be introduced widely. Practices like drip irrigation should be encouraged." Equally, subsidies should be reconsidered. "Subsidies should be directed towards water efficient irrigation infrastructure, integrated water resources management interventions such as watershed management and energy efficient pumps," says Sugam of CEEW.

The latest CGWA guidelines, announced last November, if implemented, would also make a major difference. They suggest making NOCs from the CGWA mandatory for all industries. And in over-exploited blocks, the guidelines further propose making all industries recycle and reuse their waste water, withdrawing of fresh water being allowed only if groundwater recharge has been sufficient.

Funds to extend irrigation and augment groundwater recharge are available, but they have to be utilised with care. This year's Budget announced an allocation of Rs 86,500 crore over the next five years to speed up the completion of 89 irrigation projects. It also mentioned a Rs 6,000-crore scheme for sustainable groundwater management. "Already both Central as well as State governments have been spending money like 'water'. Take the case of Maharashtra. CAG report on Management of Irrigation Projects, GoM, 2014 says that Water Resources Department was saddled with 601 projects that were under execution as on June 2013 with an estimated balance cost of Rs 82,609.64 crore," says Purandare of WALMI.

However, irrigated area in the country has been decreasing rather than increasing, despite the crores allocated to building dams and canals in every Budget, Union and states. A 2010 study by Thakkar shows that in 1991/92, net area irrigated by canals was 17.79 million hectare, which by 2006/07 had fallen by 2.44 million hectare. "During these 15 years, the country spent Rs 1,42,000 crore on major and medium irrigation projects," says Thakkar.

The task is indeed formidable, but not impossible. If a desert state like Israel can turn itself into a green oasis, with innovative policies (see Israel's Solutions), so can India.

Additional reporting by Venkatesha Babu; research inputs from Niti Kiran and Avneet Kaur

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