Over the past two to three centuries, economists have diligently scrutinized and delineated the developmental pathways and growth prospects of nations. Beginning with seminal works such as Adam Smith’s ‘Wealth of Nations’ and extending through various schools of thought including Keynesian, Austrian, and Monetarist perspectives, the discourse predominantly overlooked the ramifications of relentless exploitation of natural resources on the environment. Since the 1980s, we have begun to grasp the inherent flaw underlying our developmental aspirations, growth projections, and future endeavors: the absence of a foundational consideration for sustainability, which should be integral to our diverse developmental frameworks.
In light of this evolving understanding, considerable progress has been made, yet substantial strides remain to be taken. As we focus our attention on sustainability within our developmental paradigms, a sobering realization confronts us. Despite notable advancements in numerous spheres, the vital resource of water—the essence of life itself—stands neglected. It awaits our recognition and utilization of its boundless potential to sustain not only ourselves but also future generations. Thus, it becomes imperative to weave a narrative of development that intricately intertwines with the conservation and prudent management of this finite resource, aligning the trajectory of our society with the imperative of water stewardship.
Water supply and related services play a pivotal role in fostering public health, economic development, and environmental sustainability. What if you were told that the trajectory of a nation’s (city/state/township/civilization) water infrastructure, from conception to its growth into an independent and self-sustaining network often mirrors the broader developmental journey of nations, undergoing distinct phases characterized by evolving priorities and policy imperatives. In a recent work titled “The Development Path of Urban Water and Sanitation Tariffs and Subsidies: A Conceptual Framework”, Dale Whittington et al. bring to light a very interesting perspective and framework to analyze the water infrastructure and thereby make improvements to deal with the impending global water crisis. The path towards achieving universal access is marked by distinct phases, wherein water tariffs and subsidies evolve in response to shifting economic and developmental dynamics. Understanding this trajectory is essential for crafting effective policy interventions that address the complex challenges inherent in water governance.
The story of water and associated services is dominated by financial, political and technical disequilibria in which authorities are faced with the challenge of enhancing service provision and households find themselves either unwilling or financially incapable of covering the escalating costs associated with such services. Consequently, both the efficiency of production and consumption languishes at suboptimal levels, primarily due to insufficient capital investments, operational budgets, and inadequately structured tariff systems. The trajectory of urban water development typically transitions from rudimentary to advanced service delivery, with progress facilitated by adjustments in these imbalances.
During the initial phase, rapid urbanization leads to increased demand for water services, requiring significant investments in infrastructure. But with a majority of the people having low-incomes and living below poverty line, the infrastructure development suffers. The nascent stage of tariff development often results in low or non-existent pricing structures, hindering quality maintenance and impeding system scalability. Consequently, inadequate service delivery and customer dissatisfaction ensue, perpetuating a cycle of inefficiency and underinvestment.
In many countries unconnected households turn to the private sector or informal sources to obtain essential goods and services, such as vended water. And the costs of these goods and services are often high. Low tariffs mean that connected households consume too much water, i.e. the marginal benefit of water to a household is less than the marginal cost of supplying the same. For unconnected households, their water use too is inefficient, but because they consume too little water. For unconnected households, the marginal benefit of water use is higher than the marginal cost of supply from the piped network to which they lack access. They must pay the high marginal cost associated with purchasing water from vendors, collecting water from sources outside the home, self-supplying with private wells, and buying in-house treatment systems. This continues for some time and then a concocted mix of economic, political and technological factors cause further disequilibrium, thereby pushing the nation into the next phase of the water trajectory.
During the initial phase, there’s typically a deadlock in politics between consumers desiring improved services yet resisting tariff hikes, and the water utility unable to enhance services due to financial constraints. Both parties seek governmental assistance in subsidizing services. This deadlock continues until either the state allocates sufficient funds to the utility or consumers consent to tariff increases. However, achieving resolution is uncertain, as state interventions may prove unsuccessful in breaking this deadlock.
As economic growth gains momentum, willingness to pay higher tariffs for improved services increases with rising incomes, particularly among wealthier users. States respond by adjusting tariffs to cover the growing gap between costs and revenues. However, reaching marginal households, often impoverished and unable to contribute significantly to tariff revenues, poses a formidable challenge. Tariff design becomes paramount, necessitating a delicate balance between affordability concerns and revenue adequacy. Despite these efforts, dissatisfaction with service quality persists, exacerbated by poorly targeted subsidies and institutional gaps in wastewater management. While production efficiency sees improvements, consumption efficiency remains compromised by ambiguous price signals and ineffectively targeted subsidies, often leading to environmental degradation.
In the final phase, states shift their focus towards efficiency and service excellence, spurred by imperatives to reduce costs and address evolving environmental considerations. Tariff structures are reengineered to incentivize both production and consumption efficiency, with revenue streams directed towards fortifying supply quality and resilience, while subsidies are meticulously aimed at aiding the economically disadvantaged. However, this transition remains elusive for many economies, underscoring persistent barriers to achieving sustainable water governance.
To argue the case for India warrants a comprehensive analysis in its own right, requiring a separate intervention dedicated to the task. However, with the brevity at hand, we could make an inference regarding India’s position and momentum on this path. India seems to be found somewhere in the initial part of phase 2. In a report published by the organization Statista, approximately 75 percent of rural households in India had a functional tap water connection as of March 3, 2024. 11 states or union territories (UTs) had 100 percent of rural households with connections to a functional tap water supply with the majority of the remaining states/UTs ranging somewhere between 70-90%. But this macroeconomic figure isn’t all there is to the tale. India is now faced with the challenge of meeting rising demands of quality water supply services without undue interruptions as the people’s incomes are rising and so are their aspirations and willingness to spend money on their health and well-being. This is happening at a time when the sources of water are drying up and dying at an alarming rate.
Managing to meet the demand-supply equilibrium in the coming times is going to be more complicated than ever. Joint families are breaking apart and nuclear families are increasingly settling in urban and semi-urban areas, putting additional stress on already stressed urban water supplies. High penetration of borewells in rural and urban India has severely ruptured the rejuvenation of groundwater, leading to steeply declining groundwater levels that are further contaminated by untreated effluents released in the open. Advancing technological innovations that are closely knitted as a part and parcel of our lives are redefining and redirecting the water consumption trajectory. Every 15-20 minutes of interaction with an AI model involves burning about a quarter gallon of water. A rising number of data centers are demanding burgeoning quantities of water for cooling the devices. To add salt to the wounds, there is no stringent monitoring of water usage across industries and households to complement a dynamic understanding of future demands for effective water management.
Therefore, India needs to change its approach and proliferate sustainable green technological interventions to fill in the supply gap. Rural roof top harvesting and greywater recycling needs to be implemented on a much larger scale to boost soil moisture content and agricultural productivity. Of the total Indian population, 65% (900 million) live in rural areas, and 35% (483 million) are concentrated in urban centers. In its September 2022 publication titled ‘Urban Wastewater Scenario In India’, Niti Aayog reports that the estimated wastewater generation is approximately 39,604 Million Liters per Day (MLD) in the rural regions, while in the urban centers, the wastewater generation has been estimated as 72,368 MLD for the year 2020-21. Of the total urban sewage generated, only 28% (20,236 MLD) was the actual quantity of wastewater treated. This implies that 72% of the wastewater remains untreated and is disposed of in lakes, rivers, ponds, canals and groundwater. Even though infrastructure to support an additional 4,827 MLD sewage treatment capacity has been proposed, there still remains a capacity gap of 35,700 MLD (49%) as per the reports latest estimates.
While these numbers are intimidating, they also reveal the immense capacity of greywater recycling to emerge as an economically viable industry catering to an ever-rising demand. Industries that are large scale consumers of water need to come forward to utilize the immense latent potential of greywater recycling and effluent treatment to fulfill their massive needs, in doing so, reducing the undue pressure on public supply services which can then redirect their funds towards improving the obsolete infrastructure and quality of water. As a matter of fact, employing greywater recycling as a source of freshwater is a prospective industry of the near future that needs to be explored in much needed details to untap the boundaries of its massive economic and environmental upside. But it is also important to note that there is a cost attached to recycled water and this cost cannot be the same as the municipal water supply tariffs. Hence, we also need to develop mechanisms to arrive at market determined pricing wherein costs are covered and further demand is created.
The delineation of these three phases underscores the imperative of tailored policy interventions that align with the developmental trajectory of water governance. Recognizing the disparate interests and incentives of states, utilities, and households is paramount in crafting effective and equitable policy frameworks. Concerted efforts need to be put into prioritizing investments in water infrastructure and institutional capacity-building to enhance service delivery. Additionally, implementing tariff reforms that balance affordability, revenue adequacy, and service quality considerations is the need of the hour. Targeting subsidies towards vulnerable populations to ensure equitable access to water and related services that are the fundamental right of every human being is a must. And all this can be enabled effectively by fostering multi-stakeholder collaboration and knowledge exchange to address systemic challenges and promote best practices in water governance. As we navigate the complexities of water governance, let us remain steadfast in our commitment to building robust and inclusive water systems that meet the needs of present and future generations.
