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8/3/2019 CS47: Investigation of Household Payments for Municipal Water Supply in India: Findings and Policy Implications
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Investigation of Household Payments forInvestigation of Household Payments forMunici al Water Su l in India:Munici al Water Su l in India:
Findings and Policy ImplicationsFindings and Policy Implications
Water CoP Catchment Series
Sekhar Bonu and Masayuki TachiiriSekhar Bonu and Masayuki Tachiiri
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Contents of the PresentationContents of the Presentation
.. n ro uc on an ac grounn ro uc on an ac groun
..
3.3. Policy ImplicationsPolicy Implications
4.4. DiscussionDiscussion
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1. Introduction1. Introduction
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Word of CautionWord of Caution
•• It is not about willingness to payIt is not about willingness to pay
•• Provides some insights into affordability andProvides some insights into affordability and
financing gap in water sectorfinancing gap in water sector--only first steponly first step•• n ngs nee to e nterprete w t nn ngs nee to e nterprete w t n
limitations of the surveylimitations of the survey
•• acac -- ox : ere are s so manyox : ere are s so manyunanswered questionsunanswered questions--need to know moreneed to know more
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Data and MethodsData and Methods
•• se na ona y represen a vese na ona y represen a vesurvey data:survey data:
oo National Family Health Survey III (2004National Family Health Survey III (2004--
20052005
oo National Sample Surveys 60National Sample Surveys 60thth (2004) and(2004) and6161stst rounds 2005rounds 2005
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Key Variable and LimitationsKey Variable and Limitations
or other local bodies. This item does notor other local bodies. This item does notinclude the cost of water urchasedinclude the cost of water urchasedthrough tanker, etc.through tanker, etc.
•• Limitation:Limitation: No information on source of No information on source of water. Adjustments had to be made atwater. Adjustments had to be made atstatestate--level using other surveys. No datalevel using other surveys. No data
..coping costs.coping costs.
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100%
21.3
4.7
15.1
. .
75%
Others
20.3
53.250% Tube well or
source of
drinking water at
50.725%
Public tap/ stand pipe
ouse o
level is 71% in
urban and 28%
11.8
.
0%
Piped water(dwelling/yar
d/plot)
in rural
r an ura
Source: National Family Health Survey, 2005.
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n P li Tn P li T29India
44
44
53
53
55
Kerala
Karnataka
A P
Chattisgarh
WB
TN
Major source of tap water in
23
31
31
40
42
NEM P
Jharkhand
B ihar
Orissa
tap water). As
high as 55% in
10
10
12
12
13
15
P u n ab
HP
Uttarkhand
Delhi
Haryana
M aharashtra . .
Scale of
3
6
8
9
10
J K
Rajasthan
UP
Go a
Gujarat
commercial non-revenue water!
0 10 20 30 40 50 60
Source: National Family Health Survey, 2005.
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Source of Water for the PoorSource of Water for the Poor
Piped into dwelling Piped to yard/plot Public tap/stand pipe Others
The poorest urban
households depend
-
21
53
25
18
24
7
29
22
2nd Richest
Richestsignificantly on
public tap/ stand
post
2
6
9
17
40
41
48
36
2nd Poorest
Middle
Is it crude way to
control volume?
13 46 50Poorest
Source: National Famil Health Surve 2005.
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2. Findings2. Findings
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Large Number Pay “Zero”!Large Number Pay “Zero”!6
66% of urban
households (HH)
re orted a in
UP WB
APTN4
5
o t h i n g ( m i
l l i o n
“nil” (35 million
HH), which3
o l d s
w h o p a y n
as 99% in Bihar
and 95% in West
Gujarat
MPKeralaKarnataka
Bihar
NEPunjab Orissa
2
b e r o f h o u s e h
BengaRajasthan
Delhi Haryana ChhattisgarhUttaranchal
UTJKHP
Goa
0
0 25 50 75 100
N u
Source: National Sample Survey of India 61st Rounds (2004 and 2005).
% of households who pay nothing
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Average (weighted) Payments Average (weighted) Payments
80
44% of the
variation in
water char eGoa
UT
60 h a r g e s ( R
s )
payments is
explained by
Karnataka
Delhi
HaryanaHP
R2 = 0.4367
40 e i g h
t e d w a t e r
-
variation in HH
overall
All IndiaTN
Kerala
AP Gujarat
MP
UPUttaranchal
Punjab
20 H H m o n t h l y
expen iturea sgar
Orissa
Jharkhand
WB
NE
Bihar
JK
0
A v e r a g
Source: National Sample Survey of India 61st Rounds (2004 and 2005).
3,000 4,000 5,000 6,000 7,000
Monthly HH expenditure (Rs)
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HH Expenditure on Util it iesHH Expenditure on Util it iesand Othersand Others
On an average,
HH spend 0.6%
on water0.6 4.6 3.6 1.6Overall
a er c arges we g e ec r c y
Telephone Pan+tobacco+alcohol
charges.
0.6
0.5
4.6
4.8
2.2
4.7
2.0
1.3
2nd Richest
Richest
spend 8 times
more on tobacco,0.6
0.6
3.9
4.3
0.5
0.9
2.6
2.4
2nd Poorest
Middle
a co o t an t eyspend on water!!
0.4 3.3 0.2 2.6
0 2 4 6 8 10 12
Poorest
% of HH monthly expenditure
Source: National Sample Survey of India 61st Rounds (2004 and 2005).
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Pa ment b Poor is Contin entPa ment b Poor is Contin enton State Where They Liveon State Where They LiveBihar100
Corre ation between
HH below povertyline and above
AP
Jharkhand
NE
2 =
80
90
a y n o t h i n g
paying is high
(0.66).All India
TN
Kerala
Maharashtra
Chhattisgarh
UP
Uttarakhand
.
60
70
o v e r
t y l i n e w h o p
The state-level
policies do matter!Karnataka
uaraMP Haryana
Punjab
HP30
40
50
u s e h o l d a b o v e
Much can be gainedif WB, Bihar can
emulate UT/J&K
GoaRajasthanDelhiJK
UT
10
20 % o
f h
Source: National Sample Survey of India 61st Rounds (2004 and 2005).
10 20 30 40 50 60 70 80 90 100
% of households below poverty line w ho pay nothing
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Where HH Pay, Rich PayWhere HH Pay, Rich PayTw ice As Much as the PoorTw ice As Much as the Poor
70
Again the corre ations
between how much therich and poor pay by
Goa
UT
R2 = 0.6586
60
y l i n e ( R s )
correlated (0.66). There
is wide variation.
Karnataka
Maharashtra
Delhi
Punab
40
50
o l d s
a b o v e p o v e r
Karnataka is closest to
“ideal” welfare state
ricin , while J&K isAll India
TN
AP
Guarat
MP
Chhattisgarh
RajasthanHaryana
Uttarakhand
HP
20
30
a y m e n t b y h o u s e
on the other end of thespectrum
KeralaOrissa
JharkhandWB
NE
Bihar
UPJK
0
10
A v e r a g e
p
Source: National Sample Survey of India 61st Rounds (2004 and 2005).
0 5 10 15 20 25
Average payment by household below poverty line (Rs)
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Two AssumptionsTwo Assumptions
•• os o r n ng wa er: sos o r n ng wa er: s($0.10) per cubic meter (very($0.10) per cubic meter (veryconservative estimate)conservative estimate)
for drinking water: 1% to 2% of for drinking water: 1% to 2% of
t e ouse o ncome expen turet e ouse o ncome expen ture
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Source: Komives, K., Foster, V. et al. Water, Electricity and the Poor. The World Bank
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CrossCross--countr Com arisoncountr Com arison(selected countries,(selected countries, % of HH expenditure% of HH expenditure))
WaterWater
ElectricityElectricity
and fueland fuel TotalTotalExpecting HH
to a be ondIndiaIndia 0.6%0.6% 4.6%4.6% 5.2%5.2%
ChinaChina 6.3%6.3%
2% of overall
HH expenditure
on water may.. .. ..
JapanJapan 1.6%1.6% 4.9%4.9% 6.5%6.5%
NorwayNorway 1.3%1.3% 4.8%4.8% 6.1%6.1%
be unrealistic
and politically
unacceptablehailandhailand 4.9%4.9%
PhilippinesPhilippines 7.6%7.6%
Central EastCentral East
Some WTP
studies talk
EuropeEurope 1.6%1.6% 3.8%3.8% 5.4%5.4%South East EuropeSouth East Europe 1.5%1.5% 5.2%5.2% 6.7%6.7%
Commonwealth of Commonwealth of
a ou - ,which is far
fetched
Independent stateIndependent state 1.0%1.0% 2.3%2.3% 3.3%3.3%
Latin AmericaLatin America 0.90.9--2.6%2.6%
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RevenueRevenue3
1
1
44.7
57.3
32.4
52
41
67
Jharkhand
W B
Bihar
Water (% )Water (% )
14
11
10
10
81.8
31.6
38.8
42.8
4
57
51
48
JK
U P
N E
Orissa
Current levels of
w ater charge
collection
Even at a low costof Rs5 ($0.10) per
23
2016
16
55.1
67.951.0
24.1
22
1233
60
TN
Gujarat
Chhattisgarh
Kerala
,
deficit is close to
64% of the total
cost for those26
25
24
23
46.5
68.4
41.0
57.5
28
6
35
20
All India
Uttaranchal
M P
A P
provide 120 lpcd
at Rs5 per cu
meter for covered
population
currently
connected, and
74% for all urban42
41
37
33
51.1
51.7
40.5
50.6
7
8
22
16
Punjab
M aharashtra
Haryana
Rajasthan
Deficit to provide
120 lpcd at the
HH.
58
54
52
26.5
33.2
32.2
.
15
13
16
Goa
Delhi
Karnataka
HP
rate of Rs 5 percu meter for
w hole urban
population
Source: National Sample Survey of India 61st Rounds (2004 and 2005).
81 14.9 5
0% 20% 40% 60% 80% 100%
U T
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HHHHExpendituresExpenditures
21.0
22.0
Levels of Levels of
Tariffs for 120Tariffs for 12016.0
17.0
18.0
19.0
.
Rs 2 per cu mt
Rs 5 per cu mt
LP DLP D
12.0
13.0
14.0
15.0
.
p e n d i t u r e
Rs 20 per cu mt
Rs 40 per cu mt
meter is
approximately 1.7%8.0
9.0
10.0
11.0
o f H
o u s e h o l d E x
If Rs10 per cu meter
it is 3.4% of HH4.0
5.0
6.0
7.0 %
expenditure
0.0
1.0
2.0
3.0
E T a P b l h i
l a r a a B a t N KE i a a P r h n
d a l n P P a r
Source: National Sample Survey of India 61st Rounds (2004 and 2005).
S T A G
P u n j
D e
K e r a
M a h a r a s h t
H a r y a W
G u j a r J
A l l I n d
K a r n a t a A
C h h a t t i s g a
J h a r k h a
U t t a r a n c h
R a j a s t h
O r i s
B i h
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HH Expenditure on Water byHH Expenditure on Water byExpenditure QuintileExpenditure Quintile
HH expenditure on 120 lpcd water as a % of overall HH
Rs 5 per cu
expenditure for water at Rs5 per cu meter
9
10
Poorest Quintile Middle Quint ile Richest Quintile
constitutes
5.8% of poorest5
6
7
8
E x p e
n d i t u r e
expenditure!!
2
3
4
% o
f H H
0
C h h a t t i s g a r h
J h a r k h a n d
B i h a r
N E
U T
M P
A P
T N
K a r n a t a k a
A l l I n d i a
M a h a r a s h t r a
W B
H P
O r i s s a
R a j a s t h a n
H a r y a n a
U P
G o a
K e r a l a
J K
D e l h i
G u j a r a t
U t t a r a n c h a l
P u n j a b
Source: National Sample Survey of India 61st Rounds (2004 and 2005).
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Revenue Shortfall for Drinking Water ServicesRevenue Shortfall for Drinking Water Services
All India revenue
shortfall for water7
6
2
2
7
6
2
2
14
12
5
3
35
31
12
8
UT
JK
Goa
HP
Shortfall at Rs5
per cu mt
existing customersranges from:
11
9
9
8
8
11
9
9
8
8
22
19
17
16
54
47
45
42
40
18
Orissa
NE
Chhattisgarh
Uttaranchal
JharkhandAdditional
incrementalshortfall at Rs10
per cu mt
• $545 million
@Rs5 per cu mt,
• $3,080 million for35
17
16
11
35
17
16
11
70
33
32
22
176
83
80
55
Punjab
Haryana
Kerala
Bihar incremental
shortfall at Rs20
per cu mt
Additionalincremental
Rs 20 per cu mt,
and
• $7.3 billion @52
51
44
42
42
52
51
44
42
42
105
103
89
85
83
262
257
222
211
208
Karnataka
WB
MP
Rajasthan
e shortfall at Rs45
per cu mt
Rs45 per cu mt.
177
77
76
72
66
177
77
76
72
66
354
155
152
143
132
886
387
380
358
331
Maharashtra
TN
AP
Gujarat
UP
Source: National Sample Survey of India 61st Rounds (2004 and 2005).
1 10 100 1,000 10,000
Log Scale in $ Million
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3. Policy Implications3. Policy Implications
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In r T riff In r T riff ,,
(expenditure on tobacco and alcohol!) for(expenditure on tobacco and alcohol!) forscope to increasescope to increase--even among the pooreven among the poor
•• Laggard states can emulate better performingLaggard states can emulate better performingstates within India (Bihar and WB emulate HPstates within India (Bihar and WB emulate HP
•• Differential (volumetric) tariff is required toDifferential (volumetric) tariff is required tomake water affordable to poormake water affordable to poor
•• Increasing tariffs is easier said than doneIncreasing tariffs is easier said than done(Delhi Jal Board)(Delhi Jal Board)
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Tariffs:Tariffs:Uniform visUniform vis--àà--vis Variablevis Variable
7 6% of HH expenditure Cost per cubic meter
2.5 14% of HH expenditure Cost per cubic meter
Variable Tariff
Uniform Tariff
4
5
x p e n d i t u r e
3
4
5
m e t e r o f w a t e r
1.5
2.0
E x p e n d i t u r e
8
10
12
b i c m
e t e r ( R s )
1
2
3
% o
f H H
1
2
C o s t o f c u b i
0.5
1.0
% o
f H H
2
4
6
C o s t p e r c u
0Poorest 2nd
Poorest
Middle 2nd
Richest
Richest Overall0
0.0
Poorest 2nd
Poorest
Middle 2nd
Richest
Richest Overall
0
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Mismatch between Cost andMismatch between Cost and Affordability Affordability
affordability for water, there will be significantaffordability for water, there will be significantshortfall in full O&M cost recoveryshortfall in full O&M cost recovery
•• However, this will start easing with economicHowever, this will start easing with economicgrowth as 2% of HH expenditure startsgrowth as 2% of HH expenditure starts
•• Yet, there will be long period where subsidies Yet, there will be long period where subsidiesfrom general tax revenues will be required tofrom general tax revenues will be required to
run water operat ons werun water operat ons we•• Meanwhile priceMeanwhile price--based volume control canbased volume control can
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Revenue Shortfall With & Revenue Shortfall With & Without Volume ControlWithout Volume Control
10,000
Current Covered Po ulation Whole Urban Po ulation30% =40 lpcd; 40%=70 lpcd; 30%=120 lpcd
10000
Current Covered Population Whole Urban Population
100%=120 lpcd
6,000
7,000
8,000
9,000
6000
7000
8000
9000
u e s
h o r t f a l l
2,000
3,000
4,000
5,000
2000
3000
4000
5000
$ m i l l i o n r e v e n
0
,
Rs 5 cu meters Rs 10 cu meter Rs 20 cu meter Rs 40 cu meter
Average 76 lpcd
0
Rs 5 cu meters Rs 10 cu meter Rs 20 cu meter Rs 40 cu meter
Avera e 120 l cd
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withdrawwithdraw•• Subsidies should be tied to clear exit strategy overSubsidies should be tied to clear exit strategy over
•• Tariffs should increase with households increasingTariffs should increase with households increasing
purchasing powerpurchasing power•• Subsidies should be tied to performance so thatSubsidies should be tied to performance so that
overall cost is reducedoverall cost is reduced
continue to pose challenges to exit strategycontinue to pose challenges to exit strategy
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Role of PPPs and PSPsRole of PPPs and PSPs,,
costs, and thus reduce overall subsidiescosts, and thus reduce overall subsidies•• Efficiency gains need to be high enough to cover costEfficiency gains need to be high enough to cover cost
•• PPP/PSP financial structures need to assurePPP/PSP financial structures need to assure
continued inflows of subsidies to meet the HH watercontinued inflows of subsidies to meet the HH waterr v ur v u
•• Water revenue guarantee fund (escrow account) willWater revenue guarantee fund (escrow account) willbe required in each structurebe required in each structure
•• Dedicated and “predictable” tax revenues can financeDedicated and “predictable” tax revenues can financewater fundwater fund— —tobacco and alcohol tax, for example.tobacco and alcohol tax, for example.
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a er una er un
70
8090
Revenue
Water Fund required to underwrite
the gross units of revenuedeficit (629 in this case)
40
50
60
A m o u n t
e c
Revenue
recovered
Rural-urban migration of the poor
Political resistance
Inability to capture increasing HH income for water
10
20
30
Economic growth
Increasing commercial base
Increasing rich households
Increase in consum tion
acroeconom c sta ty an a ter ng growt
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Year--->
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What ADB May Do?What ADB May Do?
unlikely to work??unlikely to work??•• ShortShort--term en a ement is unlikel to work term en a ement is unlikel to work
•• Medium to long term engagement in selectedMedium to long term engagement in selected
towns involving capitals costs, operations andtowns involving capitals costs, operations andma n enance, ena ng s w c earma n enance, ena ng s w c earexit strategyexit strategy
Patna or Ghaya!Patna or Ghaya!
•• Invest more in o erational research: unravelInvest more in o erational research: unravelthe “Black the “Black--box” box”
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Research QuestionsResearch Questions
•• Need to better understand: affordability,Need to better understand: affordability,quantity and price, water charges toquantity and price, water charges tomun c pa y, overa mun c pa nance, o ermun c pa y, overa mun c pa nance, o erexpenditures on water at household levelexpenditures on water at household level
•• Invest more in reliable WTP studiesInvest more in reliable WTP studies
•• Need better benchmarks to control costs forNeed better benchmarks to control costs for
O&MO&M•• Need better policy understanding of existNeed better policy understanding of exist
strategies for water subsidiesstrategies for water subsidies
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4. Discussion4. Discussion
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Finally… Util ity experienceFinally… Util ity experiencefrom Japanfrom Japan
Long term trend in Japan
35,000
40,000
45,000
3.5%
4.0%
25,000
30,000
x p e n d i t u r e ( $
2.0%
2.5%
.
e x
p e n d i t u r e
10,000
15,000
20,000
A n n u a l H H e
1.0%
1.5%
S h a r e i n H H
0
5,000
5 0
5 3
5 6
5 9
6 2
6 5
6 8
7 1
7 4
7 7
8 0
8 3
8 6
8 9
9 2
9 5
9 8
0 1
0 4
0.0%
0.5%
1 1 1 1 1 1 1 1 1 1 1 1 1 9
1 9
1 9
1 9
1 9
2 0
2 0
HH expenditure $ Electricity Gas Water charges Tobacco
8/3/2019 CS47: Investigation of Household Payments for Municipal Water Supply in India: Findings and Policy Implications
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