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For the customer, the correct price of water ensures access to clean water and also signals that excess consumption has a penalty and therefore he is dissuaded from over- consumption. For the institution it means the ability to maintain the system for efficient delivery of water as well as to be able to invest for expansion of services.

Many cities charge for water and include it as part of the property tax. This is a very indirect way of recovering revenue. Others charge a flat rate based on the dimension of the connecting pipe to the household, say, for example Rs. 45 per month for a 3/4inch pipe connection and Rs. 30 a month for a half-inch pipe connection. This too is an arbitrary method of collecting water revenues. There is increasing consensus however that an increasing block tariff makes the most sense. This is what cities such as Bangalore and Hyderabad use for their water charges. Bangalore’s domestic tariff for water looks like this:

0-8,000 litres — Rs. 6 per kilo litre

8,001-25,000 litres — Rs. 9 per kilo litre

25,001-50,000 litres — Rs. 15 per kilo litre

50,001- 75,000 litres — Rs. 30 per kilo litre

And so on

There is a separate charge for non-domestic consumption on an increasing block tariff too and for industrial consumption on a flat basis. These utilities try to provide access to basic water requirement at affordable prices but ask heavier consumers to pay more. The non-domestic and industrial connections actually cross-subsidise the domestic consumers, bringing in an element of social justice.

For historical reasons and thanks to far-sighted decision makers, Bangalore has had an effective metering system almost since water supply started from Thippagondanahalli reservoir in 1932 and therefore is able to levy an effective volumetric charge. Without metering and a system of reading and recording the meters it is impossible to levy an increasing block tariff and to have any meaningful method of charging for water.

While typically the price of water should depend on the marginal cost i.e. the cost of obtaining the next unit of water for consumption, knowing the production cost is important. On this will depend the pricing. The Bangalore water utility charges a flat Rs. 15 on the first 25 kilolitre of water as a sanitary charge. It goes to 15 per cent of the water bill if the consumption is over 25 kilolitres and 20 per cent of the bill if it is over 50 kilolitre. It is usually argued that the true cost of water is captured when it is returned to nature at the same quality at which it was appropriated.

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