Archive for June, 2008


Fiscal incentives for urban water conservation- Bangalore

June 18, 2008


A thinking for Bangalore

Cities and city utilities all across India are looking for ways to save water as this critical resource becomes scarce or threatens to run out. Getting the consumers is seen as an important way to reduce consumption. While appealing to their good conscience is a nice way it hardly works. The best way is economic incentives since money talks. What then should be the approach to incentivize water conservation? Here is a strategy for Bangalore admittedly starting with certain advantages

Bangalore has every connection metered and an increasing block tariff due to historic reasons. The tariff however heavily subsidizes domestic water with perverse incentives. For example with a production cost of Rs. 24/- a kilo-litre (Rs 18 /- a kilolitre plus losses in the system of 37%) a household with a domestic connection which consumes 25,000 litres of water per month gets a subsidy of Rs. 400 /- approximately per month.

The current increasing block tariff slab for a domestic connection in Bangalore works in this fashion

Slab Production cost Tariff Subsidy Total subsidy at peak of slab consumption

Kilo Litre KL KL KL Rs.

0-8 24.00 6.00 18.00 8 x 18 = 144 /-

8-25 24.00 9.00 15.00 17 x 15 = 255 /-

Total subsidy for consumption of 25 kl 399/-

(Rs 18 x 8 + Rs 15 x 17 ).

This subsidization is simply unsustainable.

Incentives for water conservation: On the other hand if a household harvests rainwater and does not draw a drop of water from the BWSSB it still gets a bill of Rs. 48 /- covering the first slab. While the household has SAVED the BWSSB Rs. 400 /- it has been penalized with a minimum bill.

How then to devise a pricing strategy to include rainwater or recycled water as an incentive for households to consume instead of BWSSB water?

Let us assume an average standard demand of 135 litres per person per day and an average family size of 4. Monthly demand would therefore be 135 x 4 x 30 = 16,200 litres say 16 kilo-litres. This is a reasonable quantity of water a family is expected to consume in a month. Anything less than this shows frugality in water use, conservation and perhaps rainwater harvesting and water recycling, all deeds that the city needs to reward the family for.


How should the reward go to the family?

Let us assume that the family has only used 5 kilolitre of water in a month. Consumption below expected normal demand of 16 kilolitre is 16 – 5 = 11 KL .

Subsidy that the family would have got from the BWSSB at 16 KL of consumption = 8 x 18 + 8 x 15 = Rs 264 /-

Let us define an incentive fund of Rs 18 /-(the gross production cost of water to the BWSSB) minus Rs 9 /- ( a reasonable tariff for the lowest slab in the coming days ) = Rs 9/- per kilolitre

So for every kilo-litre less than 16 kilolitres consumed by a family in a month it will get that saving of water in KL into Rs 9/- as an incentive amount to be set off against future bills.

In this family’s case the incentive amount will be 11 KL x Rs 9 /- = Rs. 99/-

The family saves Rs 99/- the BWSSB saves Rs 165/- a win- win situation for both and for the city too in terms of the waters released to be supplied to others which is 11 KL per month.

Now if this were to be applied all across the city to the nearly 6 lakh connections it would not require anything except an additional row in the water bill. No extra administrative costs would also be expected and most importantly the subsidy would be a reward for those who showed good behaviour.

Compare this to a rebate in property tax which is given in some cities for rainwater harvesting which rewards a house owner and not rentor and also does not send any signal for wise water use and one sees the need for such bold moves on the part of cities and city utilities.

A hard look at water tariffs and a revision is overdue as is the need to economically incentivize the wise water user. Will such water wisdom dawn on us?