Edelweiss: Every drop counts

Water demand: The obscure details In this section, we look at water demand based on end user industries. Urban/domestic water demand While we do not intend to paint a bleak scenario of urban water supply, it will not be an exaggeration if we say that India has progressively moved to a water stressed situation, driven by ineffective institutional set up and rapid urbanisation.

Water is a state subject, which implies that according to the Constitution of India it comes under the purview of the state government 1 . The 74 th Amendment of the Constitution delegated 18 functions, including water supply to urban local bodies (ULB), and accorded constitutional status to these institutions as the third tier of the government. However, without commensurate increase in their revenue-raising powers, ULBs face inordinate fiscal stress, which has rendered most of them incapable of meeting the challenges of a rapidly urbanising society.Compounding the predicament in the institutional set up is the pace of urbanisation in the country. According to the 2001 census, India’s urban population was 27.8% in 2001, up from

10.8% in 1901. The number of metropolitan cities rose from one in 1901 to 35 in 2001. Currently, ~30% of India’s population lives in urban areas and by 2030 this is likely to increase to ~40%. Given the sheer size of the country’s human capital, India is already the second-largest urban system in the world.

We believe, most problems encountered in the urban water supply sector in India have their genesis in the above two factors. We classify the two problems as macro issues afflicting the sector, while there are a host of micro issues resulting from the above. Of the various micro issues faced in the urban water supply sector, we believe the gravest ones are those of poor financial management indicated by high operating ratios, unmetered connections, water availability and quality. We detail these problems in the section below 2 :

Operating ratio : The average operating ratio (operating expenses/operating revenue) for Indian water utilities is at ~1.63x, implying higher expenses than revenues. While this reflects low productivity, more importantly, it reflects the subsidised character of urban water supply in India. Additionally, high operating ratio reflects lower number of metered connections. However, about one-third of urban water utilities (including Chennai 0.44x, Mumbai 0.49x, Bangalore 0.8x) have an operating ratio of less than 1x. The worst performers on this metric are Indore at 5.33x and Kolkata at 4.73x. Interestingly, Kolkata does not charge tariff for urban water supply, leading to a high operating ratio.

Unmetered connections : On an average, only ~25% of water connections are metered in urban India. A few water utilities like those in Bhopal and Mathura do not have water metering at all. This results in high unaccounted for water (UFW) and high operating ratio.

Water availability : According to a study by the Asian Development Bank on Indian utilities, average water supply in urban areas is ~4.3 hours/day. However, variance across different cities is substantial. Chandigarh has the longest available supply of ~12 hours/day, while Rajkot has a duration of ~0.33 hours/day, followed by Indore at ~0.75 hours/day. Health risks increase when water supply is less than 24 hours, due to contamination of water distribution pipes as a vacuum is created due to absence of water in pipes. Studies point to higher wastage in the absence of 24-hour water supply as water taps are left open even after storing water, thus increasing wastage. Lack of 24-hour supply also impacts the lower strata of the population as they have limited storage facilities. It is pertinent to note here that costs to consumers and utilities are lesser with 24-hour supply. Delivering ~123 litres/capita/day (average daily consumption per capita for urban areas) for one hour requires larger pipes than delivering the same amount of water over 24 hours. The urban water supply situation is grim and we expect regulatory changes to drive reforms in the sector.

Agricultural water demandIndia has total land of ~3.3 mn km 2 . The total cultivable area is ~1.85 mn km 2 , ~56% of the total area. The total land under cultivation has grown at 18% per year between 1950 and 1970, while it grew 2% per year from 1970 to 1990. The total cultivated area was estimated at 1.4 mn sq km in 1995. Agricultural demand for water is driven by the increase in area under irrigation. The area under irrigation in India has increased at a CAGR of ~5.05% over 1962-00.Given the above backdrop, the annual agricultural water demand has grown at a CAGR of ~5.3% over 1975-00; in 2000, it stood at ~558.4 m 3 /p.a.According to NCIWRD, India’s population is expected to be ~1,346- 1,586 mn by 2050. Based on this, the country’s total food requirement is estimated between 382 mn tonne and 449 mn tonne. Wastage, feed requirement, and seed requirement is estimated at 12.5% of food grain production.

Thus, food grain production must double to ~420 mn tonne from the current ~210 mn tonne to meet the projected requirement. Thus, on an average, food grain production needs to be enhanced by ~5 mn tonne per year. Accordingly, targeted growth of 25 mn tonne in food grain production is to be achieved in the Eleventh Plan.

Currently, the average yield rate of food grains in the country is at ~2.5 tonne per ha in areas under irrigation and ~1 tonne per ha in rain-fed areas. Therefore, with the introduction of irrigated agriculture, it can be presumed that there will be a net increase in food grain production by ~1.5 tonne per ha. As per the 16.5 mn ha target set for the Eleventh Plan for creation of irrigation potential, it is likely that food grain production will be enhanced by about 25 mn tonne when the created potential will be put into actual utilization.

Consequently, with population increase driving demand for food grains, we believe the demand for water for agricultural needs is likely to be on an uptrend.However, like the urban water sector, the irrigation sector also has its set of challenges. The focus of the irrigation sector in developing countries like India has been on the supply side till now. The future merits a change in orientation towards proactive demand management under the auspices of the integrated water resources management (IWRM). However, this calls for a paradigm shift, which is easier said than done. Measures such as enacting new water laws, forming basin organisations out of erstwhile regional water departments, and proclaiming water as an economic good are simply not enough. Instead, the situation calls for radical initiatives such as enforcing the recently-drafted water laws, comprehensive water resource management at the basin level, and using price mechanisms to give priority to high-value users. Currently, the so-called IWRM initiatives in India have been unable to change the situation at the ground level. The new age irrigation framework demands promotion of the micro-irrigation technology like drip irrigation (to save water, decrease fertiliser consumption, and increase productivity), subsidies to farmers (bolstered by spreading awareness), and promoting sustainable irrigation methods.

Industrial water demand Approximately 80% of the water used by industry is for heating and cooling, which is discharged after use as waste water or effluent. The balance is used directly in a variety of manufacturing processes. Practically all industrial uses end up polluting the water used, and only a small fraction of the water used is actually consumed. Industry, therefore, uses a huge amount of water and contaminates it heavily and ends up with the problem of having to dispose it of.The highest consumers of water include thermal power plants, pulp and paper, textiles and iron and steel industries.

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