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Can tariffs increase water use efficiency in India?

Source : Quartz India

Notes by Narsi

When I was young, a common saying by seniors was "Don't waste money like water". The implication was that water is a low-cost, or even a no cost commodity.

That mentality could be partly responsible for India fast becoming a water stressed nation.

The less an economy considers water to be a free commodity, the more efficient its use - this is a no-brainer. What is more difficult to figure out is how to use the lever of price effectively.

Taking the example of Indian farmers, it is well known that significant amounts of inefficiencies exist in the use of water in that sector. But how can tariffs and monetary levers be used to optimize consumption? One way could be to increase the price of electricity they use to pump out water - but we all know how this can be very risky politically (Electricity is still completely free for farmers in six Indian states!).

Pricing water for industries is much easier, and this is perhaps the sweet spot that governments can use in the short term.

Pricing water for residential is more intricate than doing it for industries, given the diverse types of water consumers in a society. Interestingly, less than 10% of total water consumed in the country is from the residential sector. This can however result in a false sense of complacency as what matters is the amount of water available in the water tables locally - if the water consumption intensity from the urban residential sector is high, it will result in water scarcity in the city even if the rural sector does much better.

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