Turning the screw on ULBs a little more: Higher rates for water and power

Recent hikes by the Maharashtra State Electricity Distribution Limited Company (MSEDCL) and a similar upward revision of rates by the irrigation department of the Government of Maharashtra (GoM) will make life more difficult for the fund-starved Urban Local Bodies (ULBs) in the state. ULBs have a truncated basket of taxes and charges that they can levy on the citizens, compounded further by the lack of a commensurate rise in their financial kitty. Local councillors resist any rise in municipal taxes as they fear a backlash during municipal elections. In the given situation, the municipal bodies would feel that the screw on them has been turned tighter by the state and its parastatals, making it even more difficult for ULBs to make ends meet. The consequence inevitably will be a fall in the quality of urban life in the state. This article strives to illustrate the ULB plight through the example of the Pune Municipal Corporation (PMC). This situation, however, happens in every state periodically, impacting the liveability of India’s cities.

Water tariff and irrigation

Recently, the Irrigation Department of the Government of Maharashtra (GoM) has asked PMC to pay industrial water usage rates for part of the water that it draws from the dams owned by the GoM. The new rates, after ‘due process’ of the irrigation department, were imposed through a vide order of the Maharashtra Water Resources Regulatory Authority (MWRRA) dated 29 March 2022. The revised rates fix the bulk water tariff for domestic water use at INR 0.55 per 1,000 litres and INR 2.75 for commercial use. However, industrial rates are much higher at INR 11 for processing industries, INR 165 for manufacturing industries using water as raw material, and INR 0.55 for domestic use in industrial units. The irrigation department hitherto bisected the total quantum of water withdrawal into 80 percent domestic and 20 percent commercial for municipal corporations. Now, it has split the 20 percent commercial water into 15 percent commercial and 5 percent industrial, and applied respective rates (INR 2.75 and INR 11/1,000 litres) for the two. Therefore, the PMC will pay five times the domestic rate for 15 percent of commercial water and 20 times the domestic rate for 5 percent of industrial water. The sum effect of these changes means that the water bill for municipal corporations is set to rise steeply.

The municipal bodies would feel that the screw on them has been turned tighter by the state and its parastatals, making it even more difficult for ULBs to make ends meet.

The irrigation department officials have contended that PMC should pay an amount of INR 43 crore for the water it lifts from its dams. The annual quota allocated to the municipal corporation is 11.5 TMC (thousand million or 1 billion cubic feet). However, this was decided more than two decades ago and remains unrevised. Meanwhile, the city has added millions of people to its demography and now must cater to an estimated population of 4.3 million. Therefore, despite the lower allocation, the irrigation department actually has had to provide around 20.5 TMC water. The PMC’s water supply department has contested the rates and their arbitrary categorisation. It argued that water supplied to industrial areas is overwhelmingly used for drinking purposes. The blanket application of industrial rate is, therefore, unfair. The neighbouring sister city, the Pimpri-Chinchwad Municipal Corporation (PCMC), also draws water from the dams in the district. Its requirements have similarly shot upwards because of its population explosion. Consequently, PCMC draws around 7.8 TMC for its citizens. However, these dams are not exclusive to ULBs but also cater to the needs of the farming community that need water for their crops. The cities have, therefore, been mandated to treat their water to such BOD (biological oxygen demand) levels recommended for agriculture and release the treated water into the district’s agricultural system. Cities are central to the state’s economy, and these large cities, by their very size, compel the satisfaction of their demands. In a highly urbanised district, the two large ULBs cited above constitute about 60 percent of the district’s population and increasingly use the dam water for the cities. Agricultural areas are receding with increasing urbanisation, putting larger claims on the district’s resources.

These dams are not exclusive to ULBs but also cater to the needs of the farming community that need water for their crops.

Power concessions

The rate revision of MSEDCL is worrying as, presently, the city corporation shoulders an annual burden of INR 250 crores for electricity bills. The new tariff rates will add INR 60 crores to its power bill. Apart from street lighting and usage in public amenities and administrative offices, the significant consumption is due to pumping and distributing water. The MSEDCL has turned down PMC’s request for concessional rates claiming that the power regulator, the Maharashtra Electricity Regulatory Commission (MERC), has fixed the rates. A comforting factor is that in Pune’s case, water from dams flows due to gravity straight into the city waterworks; many ULBs are not so fortunate. They must contend with a steep pumping head (height from the discharge outlet) that demands heavy power usage and the resultant exorbitant power bills. While MSEDCL brooks no request for concession, it demands land for MSEDCL facilities and the right to dig roads for laying cables, claiming concessional rates that are a fraction of the rates charged from a private citizen. However, it is not willing to consider any reciprocation. Thus, the ULBs are called upon to subsidise the state, a point this author highlighted in detail in an earlier article.

A municipal regulator may continue to oversee water management and set rates, allowing a reasonable amount of revenue to be generated for expansion, maintenance, replacement, and upgradation jobs that the water system entails.

Most cities in Maharashtra do not have their own water sources and rely on the state for water sources. However, Maharashtra has India’s largest urban population, which is set to grow further. Since the state policy prioritises drinking water over other uses, water supply to cities is based on their population and according to the national norms for drinking water per person. Given Maharashtra’s predominantly urban nature, destined to become even more overwhelmingly urban, it may be a reasonable idea to hand over certain dams that are equal to the annual quantity of water required by them to the municipal corporation. Such a move will prevent bureaucratic hassles between the state parastatals and the municipal bodies, and transfer the responsibility for the maintenance and operation of the water bodies to the municipal corporation. A municipal regulator may continue to oversee water management and set rates, allowing a reasonable amount of revenue to be generated for expansion, maintenance, replacement, and upgradation jobs that the water system entails. However, the ineptitude of the ULBs in the water sector cannot be brushed under the carpet. The local politicisation that has crept into the water distribution system, the flip-flops over the installation of water meters over the years, and the reluctance to fix rates in accordance with expenditure are well-known. These need to be fixed. Unfortunately, politics in large cities is now no longer restricted to local politics. State political involvement has increased as the cities have become economically and demographically big, displaying some of the same weaknesses that local politics showed. This does not bode well for local urban governance.

---

Ramanath Jha is Distinguished Fellow at Observer Research Foundation, Mumbai. He works on urbanisation — urban sustainability, urban governance and urban planning.

• Economics and Finance
• Energy
• Urbanisation
• Water
• India
• financial challenges
• higher rates
• Maharashtra
• MSEDCL
• municipal taxes
• ULBs
• water tariff

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.