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                      Water Pricing 

Effective and efficient utilisation of our priceless water resources to avoid wastage and to control demand, requires an appropriate pricing policy. There is need for integrated pricing structures especially in groundwater extraction and that for agriculture, industry, navigation etc. The pricing policy should match not only the costs of supply (i.e. O & M and capital costs) but also opportunity costs, economic externality costs and environmental externality costs. Integrated pricing structure demands significant changes in current laws, regulatory mechanisms, operational transpirency and facilities.

While drafting water pricing, water rights should be well defined without which the issue of water pricing and its enforcement could not be effective. Also there is immediate need to target the subsidies to selected (needy) groups as can be seen from Punjab where both water and electricity are supplied free and the needy group is not able to utilize it. Another important point in this context is affordability of water by the users and its equity implications.

In India where even the full water supply cost could not be recovered then how could one consider recovering the full economic cost. Also the water price should not only be determined on the basis of pure economic considerations but on social considerations as well. Hence giving an economic value to water without sacrificing social and environmental imperatives is a challenge for both government and for society.

Water price should not be determined only on the basis of pure economic considerations but on social consideration as well there are enough evidences to show that farmers were not averse to pay higher water charges provided supply of water is assured to them.

Marginal value  (MV) of water should not measured without reference to the time factor.  For example during the period of floods the MV of water might be zero but during the periods of drought, the MV of water might be very high.  In case of urban water supply and important question that one is faced is how to define and charge differential prices of water for different sections of the society.  

Project cost overruns occur on account of several interacting factors like delays in land procurement, entry of new organizations, revision of cost estimate by the project authority itself, etc.  It is suggested that consultation with the local people at the stage of planning the project is an important way of moulding public opinion in favour of the project.  A bottom up rather than top down approach is likely to yield better results.

Of the different cost concepts, the question that what would it cost to make water available is very significant.  Such knowledge is essential to enable a more informed decision making for fixing the water tariffs to be charged from different users, extend of subsidies going to the sector.

Introducing water pricing for the purpose of controlling demand require significant changes in current laws, regulating mechanism, operational procedures and facilities.

 (Source: International Conference On Sustainable Development Of water Resources, New Delhi, November 27-30, 2000.)


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