India: Issues in introducing a realistic water pricing regime in urban local bodies (#253)

The city of Jabalpur experienced water shortages. Action was taken through a scheme, which would augment the water supply to the city, by substantially increasing funding. The key lesson is how an empowered local body can respond to water challenges in a successful manner.


Jabalpur, a city of about 1.2 million people, is well-provided with water resources with the river Narmada located close by. However, the water supply was below the per capita requirement. A scheme called Narmada Phase III, which would augment the water supply to the city by about 40% had been languishing for the past 10 years due to funds crunch. 

The present water charges, fixed in 1997-98 as per the directives of the state government, were uneconomical and were uniform irrespective of quantity of water consumption in the absence of proper metering.

In 2000-01, the operational expenditures stood at Rs 130 million whereas the water charges were Rs 80 million, out of which only Rs.56 million was collected on account of collection inefficiency.

From January 2000, the corporation decided to give priority to completion of the scheme. The project cost was around Rs.130 million, which included the state government share of Rs. 34 million. The corporation approached HUDCO, a Central government financial undertaking, for a loan of Rs. 96 million in 2001. On account of the good terms of the Mayor with the state political leadership, the state government immediately disbursed its share.

On submission of the project report, HUDCO asked for a guarantee from the state government for repayment and a unambiguous resolution from the Corporation indicating how water charges would be increased to ensure repayment. Though no systematic survey was conducted, the general perception through interaction with individual citizen revealed that the consumers were willing to pay more to get better water services.

The Corporation did not agree to any kind of an increase for residential consumers and only a token increase for commercial consumers, as they were afraid of repercussions of increased charges on their vote bank. The state government asked the corporation to reconsider its stand. This time the corporation agreed to an increase in water charges for commercial consumers but not for residential consumers.

In spite of the corporation’s stand, the HUDCO agreed to sign the loan agreement in October 2002 with the Municipal Corporation conditionally on the corporation securing the state government guarantee. The state government on pursuance by the Mayor gave the guarantee in January 2003.

HUDCO has started making disbursements from October 2003. The project is nearing completion now. However, water charges have not been increased in 2002-03 or 2003-04.

Lessons learned

In an un-metered water supply scenario, across the board subsidy of water charges benefits the richer consumers more than others since they have more availability of water due to more storage capacity on the same monthly fixed charge per connection. 

Elected bodies lack the willingness to increase charges since they are afraid of backlash affect of the decision on their vote bank. The public is willing to pay provided reasonable services are made available to them and reasons for the water charges increases explained to them. 

The state government did not insist on economically sustainable water charges while issuing the state government guarantee. Thus a fully competent local body did not have to take a decision which could have marked a beginning towards financial self sustainability.

Importance of the case for IWRM

Illustrates how an empowered local body is responsive to the issues of increasing of water charges when faced with the prospect that the planned water supply augmentation scheme may not materialize if it fails to increase the charges.