Is AAP Delhi water formula full of leaks?
Vivek Khaitan 02 January 2014

The people of Delhi may be in for a rude shock, following the new water pricing formula of AAP. They may have to shell-out 2-3 times more. Where meters are faulty, cost will be even higher

The Aam Aadmi Party (AAP) has delivered on its electoral promise of providing 700 litres of free water per day per household even before they have proven their majority in the legislature. However, putting aside questions of political morality, no analysis of probable impact of this move on households and on fiscal health of the government, has been released by AAP so far. How genuine is the promise of free water? Could it be that the water bills are set to actually rise for a large number of people?

 

AAP claims to have pioneered the concept of “lifeline water” in India by promising minimum quantity of water required for survival. But how does the economics of water work in practice in Delhi as against what has been claimed conceptually?  How does it impact household budgets? What probable behavioural changes could be expected from different sections of Delhi population because of this measure? Is it a subsidy for the poor or the middle class? Here is the reality.

 

There are three major components of water charge that is billed to domestic consumers (Category 1) in Delhi. (There are two more categories of consumers, residential with mixed commercial use (Category 1A) and commercial and industrial use (Category II) but we have kept them out of our analysis as subsidy is not applicable to them.)
 

  • Metered water consumption: Divided into four slabs with progressively higher rates
  • Sewerage maintenance charges: Levied at 60% of price for metered water consumption
  • Fixed service charges: Levied based on slab under which your metered water consumption falls
     

There are two more components -- water cess charge and meter rent of Delhi Jal Board (DJB) which is negligible and hence not considered in this analysis.

The four slabs with progressively higher rates for each slab for both metered water consumption and fixed service charge are given in Table 1.1

 

Table 1.1

Consumption  per month

Old Rates

Fixed charges

1-10 KL

2.42

60.50

10-20 KL

3.63

121.00

20-30 KL

18.15

181.50

30-above KL

30.25

242.00

1 KL = 1,000 litres

 

Now, the AAP government has made consumption within first two slabs free of cost and increased rates for both metered water consumption and fixed service charge by 10% as per this ET report. Additionally, consumption beyond 20 KL in a month would be chargeable in full and it is implied in this report that such calculation would be on the basis of higher slab rates. The new rate brought in force by AAP is given in Table 1.2

 

Table 1.2

Consumption  per month

New Rates

Fixed charges

1-10 KL

0

0

10-20 KL

0

0

20-30 KL

19.97

199.65

30-above KL

33.28

266.20

    1 KL = 1,000 litres

 

So, how does water billing change at different consumption points for Delhi households? Below is the table (Table 1.3) and graph (Graph 1.1) for comparison. Also, DJB claims to incur a cost of Rs28 per KL including sewerage maintenance cost for supplying water.

 

Table 1.3

S No             

Consumption per month (In KL)

Billing Amount (Old Rate)

Billing Amount (New Rate)

Additional burden due to new rates

Increase in Billing

1

10

99

-

(99)

 

2

15

189

-

(189)

 

3

20

218

-

(218)

 

4

21

308

871

563

183%

5

22

337

903

566

168%

6

23

366

935

569

155%

7

24

395

967

572

145%

8

25

424

999

575

136%

9

26

453

1,031

578

128%

10

27

482

1,063

581

120%

11

28

511

1,095

583

114%

12

29

540

1,127

586

109%

13

30

569

1,159

589

104%

14

31

678

1,278

600

88%

15

35

872

1,491

620

71%

16

40

1,114

1,758

644

58%

17

45

1,356

2,024

668

49%

18

50

1,598

2,290

692

43%

19

55

1,840

2,557

716

39%

20

60

2,082

2,823

741

36%



What are the conclusions from this chart?

  1. Earlier there was a gradual increase in prices as you consume more. Now, there is a steep incline at 21 KL consumption due to a massive combined effect of free water till 20 KL, higher applicable slabs and increase in rates above 20 KL
  2. Marginal rate for consumption even slightly above 20 KL per month is severely high compared to earlier rates, an incredible Rs871 against Rs308 earlier!
  3. Consumers in the 20-30 KL slab get the worst deal and would have to pay 200%-300% times more!
  4. Against principles of fairness, cost for higher category consumers (>30 KL per month) will be less steeper as their bills would go up by 30%-80%

Faulty Meters

Apart from the steep hike, there is an additional problem of fast meters that many in Delhi complain about. We have monitored our meter for past three days and found it to be running faster by 25%-40% (showing a gain of 1.25 to 1.4 KL for filling a water tank of 1,000 litre). Any evidence for such faulty meters is largely anecdotal and a systematic study is required to establish it as a fact. However, complaints of fast-running faulty meter are widespread. If we assume it to be a factor, then actual consumption would have to be limited to less than 500 litres per day to take advantage of new tariff structure. Suspicion about faulty meters will get combined with incentive to stay below the punitive consumption threshold. This will force consumers into adopting means that are totally against the principle and philosophy of AAP. Talk of unintended consequences!

 

Over the course of the next few months, all this will get clearer to Delhi citizens. How will it impact the different consumer classes and what impact it may have on their behaviour?

  1. The middle class in Delhi, who have placed high hopes on AAP due to its clean image, would be in for a rude shock. Any additional gain they expected may not be realised and they may actually have to shell-out 2-3 times more.
  2. Those who can limit their consumption to 20 KL per month do not pay anything and get the best deal. However, if they fail to do so in even one billing cycle, their entire gains would be wiped out and they may have to shell-out some additional money (DJB seems to be settling into a 3-month billing cycle so we have assumed four bills in a year) due to steep incline at 21 KL consumption level. A lower-income category household of up to 5 persons can be expected to limit their consumption within the free water limit and gain from this scenario. However, excess consumption due to extraneous factors (festival consumption, water coolers use in summers, temporary increase in household number due to guests) in even one billing cycle would prove very costly.
  3. DJB allows households to install their own meters which can be sourced from certified manufacturers. But all kinds of water meters are available in the market which can be easily registered with DJB. Of course, it’s entirely possible that model citizens of Delhi would display exemplary behaviour and actually get down to learning about water conservation! And in the case of deviation, the gargantuan bureaucracy planned by AAP that goes by the name of Jan Lokpal would be at hand to take care of the enforcement problem! 
  4. Even assuming that 40%-50% households would be able to limit their consumption and gain from new tariff structure, their gains would be Rs218 per month at the most. However, it does not bear out that such gains are so substantial even for lowest income category that it has become a calling card for AAP. The minimum wage in Delhi for unskilled category is Rs8,086 per month and Rs218 per month for water was a sensible tariff to charge.

As far as fiscal health of DJB is concerned, in the earlier tariff structure, DJB was giving a subsidy of Rs17-18 per KL up to 20 KL per month consumption and was recovering full cost for consumption between 20-30 KL and making a profit of ~40% on consumption beyond 30 KL. In the new tariff structure, DJB would be providing subsidy of Rs28 per KL up to 20 KL per month consumption and would not be able to recover any part of the cost, but would make profit of  ~30% for consumption between 20-30 KL and super-profit of ~50% for consumption beyond 30 KL. Additionally, rate increase is expected across-the-board so billing for other two categories of consumers would also be higher so it may be possible that the new tariff structure actually bring additional revenues to DJB. (The ET report suggests that DJB officials expect a subsidy of Rs160 crore annually. However, this is not clear as household data for water consumption in Delhi is not available in public domain)

 

This policy definitely does not address concerns like water for all, assured supply, good quality, developing long-term sources as Delhi ‘imports’ 80% of its water from other states, cleaning river Yamuna, dual supply lines for potable and non-potable water, metering all connections, tackling tanker mafia, reducing distribution losses for long-term sustainable water availability and supply. Instead, AAP has taken the easy route to gain political mileage. Strangely, price of water was hardly an issue in Delhi (price of electricity was definitely an electoral issue). This move is of a piece whereby a supposed benefit has been provided to half of Delhi which was not asked for but would create a legacy that may be replicated elsewhere and would be difficult to eradicate in near future.

 

Another calling card of AAP, which has generated even more interest and debate, is their promise to reduce electricity rates by 50%. Given that electricity pricing, unlike water pricing, is not entirely in the hands of the Government of Delhi, AAP may want to replicate the same model for new power tariff structure as well. However, sensitivity to electricity bills is quite high in Delhi and any such move to cross-subsidise part of the population may have negative consequences

 

New water tariff structure has been approved for the period Jan-Mar 2014. The bills, therefore, would start hitting households in the month of April and would provide quite a shock just in time for parliamentary elections and a possible re-election in Delhi. AAP would be well-advised to re-think the tariff structure and at least continue with the earlier rates for 0-10 KL and 10-20 KL slabs for billing of consumption beyond 20 KL. Otherwise, the most vociferous backers of AAP, the middle class and young, may not be available to vote for AAP six months down the line.

 

(Vivek Khaitan is an MBA from IIM Calcutta and is working as a management consultant for past five years in New Delhi)

Comments
Tarun jain
4 years ago
My water bill is 131000 for last 18 months and i cant do anything , they are bastards
Raghavendra Rao
8 years ago
Hi Vivek

Very good article. Can i have your mail id so that i can correspond with you.

Regards
Raghavendra Rao
Bangalore.
My Id: [email protected]
T Sekhar
8 years ago
Mr. Vivek,

AAP has been in power for only a week. They will streamline all the above issues in due course. There is nothing wrong in taxing the rich (all of us are paying through our nose now for LPG, petrol etc. - isn't it?), who have wasted public money earlier while in power, collecting only 40% of the water bills! People would now take more care to ensure that they have properly working meters, and Govt. staff who do not co-operate will be taken to task by the Delhi Govt. quickly.

It is better if you post these issues in the AAP site for quicker attention. Pl. see the following video if you have missed out seeing it earlier, to know how Delhi Jal Nigam worked earlier: https://http://www.youtube.com/watch?v=Elbvy3V87Is
Vikas
8 years ago
Vivek, I am still awaiting your response to your comment where you said - "The methodology of calculation" is also changing...
kritika
8 years ago
Vivek, you need to first explain how did you get this calculation of 100% increase.
If the slab rates change only by less than Rs. 3, how did you manage to project such a huge increase. What additional subsidy has been considered in Old rate calculation? And what additional costs for New rate calculation?
Is it a hoax to undermine AAP's policy impact?
Abhijit Gosavi
Replied to kritika comment 8 years ago
Boy, how many times do you expect the author to explain? :(

Nothing wrong in some objective questioning, but go the extra mile with some individual effort (read all comments & use a calculator) --- before calling something a hoax in a public comment :(

AAG

PS: I have also explained some calculations in my own comments, but I sat with EXCEL. And although pricing is a research area for me, I had never seen such a scheme for water before.
mathai
8 years ago
good points to ponder. it is definitely wrong to increase the
bill of 20kl to 30kl range by more than 100%.
but that does not negate the need for supplying free water and if possible free power to those who can not afford the cost.
may be aap will rework the rates to redistribute the subsidy burden which should not be very difficult.
or decide to meet the subsidy from the tax funds.
either way it should not be such a big issue to warrant reconsideration of the free water promise.
as rightly pointed out in this article, aap should find time and expertise to reduce the cost and avoid waste. not only in water and power but also in all the segments of governance. which should not be difficult given the sincerity of aap leaders and involvement of the people
rohit
8 years ago
This is just another biased article. There are many facts, which have not been considered.

I wish that the author had shown the same sincerity to point out mistakes in previous government's policies.

shadi katyal
Replied to rohit comment 8 years ago
The previous Govt did not give free water.
If you have any facts different than this please enlighten us.
shadi katyal
8 years ago
It is evident that only way to get elected is to buy voters with this kind of figure juggling. Now when the populism has become part of elections, why not let the nation flow down with such shenanigan.
Kejriwal is no different than other politicians and he wants perks and power.We saw how he accepted the house and after people criticized he is willing to give it up.
Some one should write about his background.
Sandeep Chowdary
8 years ago
Agree that DJB might make more money now than earlier with the new tariff kicking in.

From the consumer stand point, I believe this will help in water conservation especially by those families who would like to avoid the financial burden due crossing the 20KL, and for those who dont mind the large marginal increase, they will pay more due to the usage.

Also on the 50% reduction in power tariff. While this can be perceived as a populist move, it could very well be a valid number, given the example of what price Gujarat Govt could procure power for, if they wouldnt have opted for taking power from Adani Group for twice the rate.
Another key component of power tariff is cost due to power theft, which was not reduced due to the corruption. Fixing this also would contribute to Power tariff reduction.
SATTI RAJU DUMPALA
8 years ago
Our leaders are short sighted and Kejriwal is no exception. How long would they cheat people with these freebies.
T Sekhar
Replied to SATTI RAJU DUMPALA comment 8 years ago
I do not understand how Kejriwal is taken as short-sighted. Pl. see the following link for more on how AAP decided on this equitable re-allocation of water of Delhi:

https://http://www.youtube.com/watch?v=Elbvy3V87Is
Ashok Aggarwal
8 years ago
The Article is misleading. It is not correct that if a consumer uses more than 20 kl/month, he/she pays for the entire consumption @slab rate of 20-30 kl. it is evident from the press statement as below:

Those consuming more than 20,000 litres per month xwill need to foot the full bill according to the hiked tariff of 10%, also applicable from January 1.

The author should verify facts and correct his post.
Vivek Khaitan
Replied to Ashok Aggarwal comment 8 years ago
This reply is for all those who are doubting calculations and its basis.

As I have said in the article, the basis for the assumption is the news reports (hyperlinked in the article) after DJB press conference which implies that consumption beyond 20 KL would be charged at higher slab and not in respective consumption slabs as was the case earlier. Lots of people have already checked the calculations and found it to be absolutely correct. Please read full comments section for that esp. the exchange between me, Abhijeet Gosavi and Amitabh Kumar

The other thing, about getting the clarification on exact calculation method from govt or DJB, unless you write about such things, you don't get clarification. The purpose of this piece is to get that clarification. Otherwise, bills would start hitting in April 2014 without anybody being wiser about it. If indeed no new calculation method is proposed, a clarification needs to be issued
Vikas
8 years ago
Hi Vivek, In one of your replies you mentioned - "There is a new method of calculation too, no slab-wise calculation like earlier but all consumption between 20-30 KL would be charged at 20-30 KL slab rates which is 6-9 times higher than first 2 slabs so the effect of exponential increase"

Can you please confirm the source of this because this is the inherent assumption in your calculations?
abhishek
8 years ago


25 Kl will be charged 19.97 per KL (Table 1.2)
bill will be (19.97x25=499.25) +fixed surcharge + sever charges
( for 21KL fixed charge=199.65 table 1.2)
499.25+199.65 =698.9

now 60% of 499 is severage chages which will also add to bill
60% of 419.02 is 299.55

now total= bill + severage charges (which is 60% of bill)
= 499.25+199.65+299.55
= 998.45

where as in old bill it is
424Rs I think it is straight 50% rise in bill

the article seems to be legitimately right and Delhi Jal Board press release does not says any thing about these calculations

http://www.delhi.gov.in/wps/wcm/connect/...

and most of the people on AAP group or other places are doubting this article saying that author has assumed that if someone is using even 1 litre extra than 20K then he will have to pay full , I do not know what is an answer to that,except I learnt at some places that it is done to save water but what about tenants who live at the mercy of land lords
Vinay
Replied to abhishek comment 8 years ago
Please do the same calculation useing the old rates it comes to 907.5

Increase is only 10%. The basis of the article is not correct.
Neel
8 years ago
Use less water - period!
Save natural resources which are anyways not abundant - whichever govt rules - nature rules over us all - What we NEED is <500 Litres - rest are wants
Vinay
8 years ago
The whole basis of this article which is the table 1.3 is wrong. It needs to be corrected. 60% charge not applied properly on he old rates section.
Vinay
8 years ago
Why is 60% charge(Sewerage maintenance charges) not added in the old bill table BUT added in the new Bill table. Is it not applicable?

Calculations need to be correct. Approx increase is 10%. Max to 11%.
Depinder
8 years ago
Till the new tariff structure is out, do not speculate that the 20+KL slab will have to pay the entire water bill on the highest slab rate. Kejriwal has just said that the entire consumption above 20KL will
have to be paid for, not at the highest slab rate.
So please do not confuse us by writing such articles.
What the people of Delhi have seen in AAP is an honest politics that they did not see in Congress, BJP and CPM. Please do not denigrate their honesty with these sloppy calculations of water tariff.
What is wrong in higher consumption consumers paying for water?
Pramod Bajaj
8 years ago
Mr Arvind Kejrival has become a full fledged politician. He has taken a populist decision without applying his mind fully that this decision will actually benefit only those people who can easily afford to pay. Earlier Dlehi Jal Board finances were in ruin due to corruption but this solution is no better and the problem of water supply to poor and needy still remains.
NARENDRA GUPTA
8 years ago
Thanks Mr. Khaitan. It is a eye opener. Logic is very clear - At most you are going to save just Rs 218/- per month. Some others like families with grant parents will have to pay the heavy price.
PRABHAT
8 years ago
EVERYBODY CAN NOT BE SATISHFIED BY ANY FORMULA .
IF ONE CAN NOT AFFORD WITHIN FREE CEILING LIMIT , LET HIM PAY MORE AS GOVT NEEDS MONEY TO DEVELOP AND MAINTAIN INFRASTRUCTRE
gcmbinty
Replied to PRABHAT comment 8 years ago
Everybody cannot be satisfied for various reasons: values, tastes, environments, and circumstances besides affiliations. Kejriwal and party must be given fair chance and time. If he is able to achieve 60% of the objective, he is successful.
S A NAQVI
8 years ago
Dear Khaitan,
I have quite disagreement with your calculation for Tabl 1.3; It looks your confused and presenting wrong figures as shown in the table; for an example water bill on the consumption for 21 KL comes to 307.76 and after increase of 10% the current bill shell be for Rs. 340/- (Total difference in the bill Rs. 32.24) but it is surprising to me how you reach on the figure of 871/- (183% increase. Sir kindly provide the break for each slab and basis of calculation. I hope you will come with the fact soon.

S A NAQVI
CFWD
Vivek Khaitan
Replied to S A NAQVI comment 8 years ago
Please read the article carefully and also the comments section where the method of calculation has been clarified by me as well as some readers.

Steep rise is due to removal of first-two lower priced slabs for consumption beyond 20 KL. Reference is ET report hyperlinked in the article
Afsar Jafri
8 years ago
Dear Mr. Khetan,
I have a query regarding Table 1.3 in your article "Is AAP Delhi water formula full of leaks?" where you have shown a steel increase of Rs. 871 from the old rate, i.e. Rs. 308, a difference of Rs. 563. Can you please provide a break up this? how did you reach this figure of Rs. 871.
Thanks
Afsar
NB Nair
8 years ago
Great! There can be hundred good reasons why the pathetic drinking water problem in Delhi can not be solved and that is why the Benebolent Tanker Service is doing that great job in Delhi.
Now AK has found one way perhaps it can be solved. The main question however is to get good drinking water - the cost come next. Yes, even before proving his majority if he had oredered to supply drinking water it is really illegal! He should be prosecuted immediately. nb nair, Gurgaon.
Ashish Singh
8 years ago
On first hand could not understand how 10% increase is turning upto 183% increase ? Seems fishy or messy logic used in calculation.
Abhijit Gosavi
Replied to Ashish Singh comment 8 years ago
There isn't a blanket 10% increase.

The author has explained the logic in his comments. The first two slabs have been taken away, which has led to this.

So many companies have gone out of business because of poor pricing. But this is the government, and people don't have much choice. So, I hope Mr. Kejriwal reads this article and fixes the problem.
Dr Paresh Vaidya
Replied to Ashish Singh comment 8 years ago
You needtoreadcarefully tofind this.Once you cross 660 litres,say use 670 litres, entire 670 litres are priced at 20 Rs a KL. Obviously this will give a peak in graph at 666 litres.
Amitabh Kumar
Replied to Ashish Singh comment 8 years ago
It seems author has used 19.97 for first 30KL, in my opinion 19.97 is price for 20-30KL slab not for 1-30KL. for 1-20KL new rate after 10% increase should be 2.662 and for 10-20KL should be 3.993 but at the moment these are waived.
JOSEPH KORAH
8 years ago
Arvind Kejriwal and team would have definitely done the calculations and if there are any deficiencies I am sure that the AAP will surely look into it and make necessary rectifications. It is necessary to first fix the Inflow meters for the city of Delhi which will only give the correct position. It is shocking the all previous governments were unable to even fix these inflow meters as then only can the monitoring be done.Also the Faulty Meters will have to be identified and replaced. All this takes the requisite time and in due course these initial hiccups will be surely sorted out.
Amitabh Kumar
8 years ago
I find that there is FLAW in your calculation as per new rates. I give below the bill amount as per the old rate and new rate (10% inc in rate & fixed charges).

For 10KL: 99.22 (old), 109.14 (NEW, Waived);
For 20KL: 217.8 (old), 239.58 (NEW, Waived);
For 30KL: 568.7 (old), 625.57 (NEW);
For 40KL: 1113.20 (old), 1224.52 (NEW)

For 30KL and 40KL you have shown new bill as 1,159 & 1,758 respectively. Will explain how?
Abhijit Gosavi
Replied to Amitabh Kumar comment 8 years ago
There is a subtlety in the calculations arising from the 60% sewerage rate that one can miss (I did on first glance):

For 30KL, the new bill will be: (19.97*30*1.6) + 199.65 = 1158.21

For 40KL, the new bill will be:
((19.97*30)+(33.28*10))*1.6 + 266.2 = 1757.24

All the calculations are correct.
Vinay
Replied to Abhijit Gosavi comment 8 years ago
Taking your example of cal: the old rate cal for 30 KL should be:

(18.15*30*1.6)+181.5 = 1052.7

Increase is approx 10%.
Abhijit Gosavi
Replied to Vinay comment 8 years ago
:) :) I've done all the calculations in EXCEL, and every entry in that table is correct! The author has also explained them in many of his comments.

But since many are still disbelieving the calculations, I'll explain one more time (being a prof., I'm used to doing that :-); plus, I am on a short winter break now!):

Note that the old bill used a slab-wise calculation; so the cost for the first 10 KL will be 2.42 per KL, 3.63 per KL for the second 10 KL, and 18.15 per KL for the third 10KL.

For 30 KL, the old bill will hence be:


[(2.42*10)+(3.63*10)+(18.15*10)]*1.6 + 181.5= 568.7


So the increase in the bill is (1158.21-568.7)*100/568.7=103.65%,which is nowhere near 10%. Why? Because in the new bill, the first two slabs are missing.

Of course, the point is the increased revenues from those who consume more than 20KL will need to balance the revenues currently earned from those who consume below 20KL (they will pay nothing in the new scheme). And that's why freebies are difficult to manage economically but easy to promise :(








Amitabh Kumar
Replied to Abhijit Gosavi comment 8 years ago
Abhijit, I believe that it is wrong to use 19.97 for first 30KL as 19.97 is price for 20-30KL slab not for 1-30KL. for 1-20KL new rate after 10% increase should be 2.662 and for 10-20KL should be 3.993 but at the moment these are waived.
Abhijit Gosavi
Replied to Amitabh Kumar comment 8 years ago
Amitabh, see this:

http://articles.economictimes.indiatimes...


Btw, have nothing against the very poor getting free water (who can oppose that?); but this policy was not thought out clearly.

Those who really waste water will see a low increase in billing (in % terms): precisely, the kind of pricing that is considered counterproductive to conservation and increases risk.
Amitabh Kumar
Replied to Abhijit Gosavi comment 8 years ago
I guess you are referring about this part of article. "Under the new system, families that consume 21 kl or more will be charged for the entire quantity of water. So from paying nothing for up to 20 kl of water each month, the usage of even one extra litre will lead to a bill of Rs 884." To me it looks like auhtor's mistake. No where DJB has said this.

Rest of your arguments are okay as I am only interested to understand this calculation. If 19.97 is rate for first 30KL for those who exceeds 20KL then it sounds a bit harsh.
Vivek Khaitan
Replied to Amitabh Kumar comment 8 years ago
Dear Amitabh

The reports were published after DJB press conference on the matter and is consistent across 5-6 news publications. DJB press release is very short and it's difficult to make out calculation method from that one way or the other.

Rgds
Amitabh Kumar
Replied to Vivek Khaitan comment 8 years ago
Dear Vivek,
Please find below relevant excerpt from DJB press release,
"It was decided that domestic consumers, having functional meters
consuming upto 20 Kilolitres per month will be exempted from making
payment of water bills. The consumers consuming more than 20 Kilolitres will
be required to pay the full bill amount as per the water tariff which has been
increased by 10% for the consumers falling in this category."
http://www.delhi.gov.in/wps/wcm/connect/...

so it says that consumers consuming more than 20 Kilolitres will
be required to pay the full bill amount as per the water tariff but there is no mention of calculation and tariff.

In your calculation perhaps you have assumed that 19.97 is the rate for 1-30KL instead of 20-30KL slab. Whereas I interpret that for 1-20KL new rate after 10% increase should be 2.662 and for 10-20KL should be 3.993 but at the moment these are waived.

Since you have done a big analysis and written a big report with an "assumption" so it is worrisome.
Mritiyunjay
8 years ago
If you are closely following this topic, you should know presented figures are baseless because of the absence of any input meters on the 6 inlets to Delhi. Let meters get installed, water get quantified and operation cost get measured. Then only one can optimize the economics of water in Delhi.

Just to avoid any unwanted situation caused by lack of water, this short term measure is quite logical and justified. As per the 80-20 rule, 80% of the basic necessities can be satisfied by just 20% of the budget. Here, cost of free-water is just 2% of Delhi's annual budget. Good governance is no different than good economics.

From a bigger picture, it should be considered as investment rather than spending. Good life, education, infrastructure, job opportunities, business friendly policies will start building up Nation's economy. Economy should again be directed towards investment in people to let the spiral (Road to a developed economy) grow.
shadi katyal
8 years ago
One would have thought that being an income tax officer and IAS cadre ,Mr. Kejeriwal would have calculated the cost to the people. Nothing is free as some one has to pay the bill sooner or later. He might have decided that he can do and get away.
After all he took oath of his children that he will not join hands with Congress and/or BJP.
What kind of culture we have that we lie and take oaths on our children to get to power.
How long we can live with so called FREE Water and power etc.

Rakesh Pandey
8 years ago
One thing that this pricing will do is promote water conservation.
Lets take an example: Suppose for the month of January I used 25 KL, my bill will be Rs. 999, an increase of 136% as per your calculation.

Once I have paid that bill I will be forced to be avoid wastage of water. I will give few examples:
1. I have seen many people washing their cars using running water through a pipe. Can't a bucket be used instead.

2. Use bucket to take bath instead of showers.

3. If a family uses RO, waste water left after treatment of water can be used for mopping floor etc.

Point is for a family of 4-5 persons 666 litres of water per day is sufficient. This is an international standard.
Abhijit Gosavi
Replied to Rakesh Pandey comment 8 years ago
Actually, those standards are unrealistic, my friend, and not followed in the West! This sort of a thing will prevent people from using dishwashers for instance, which families where both parents work find very convenient. Of course, wasting water for cleaning cars is not acceptable, when you can get that done elsewhere for a price.

I don't know how old you are, but when I was a kid, the late Charan Singh (then Finance Minister, I believe) was saying stop using soap, because according to him, it was a luxury, which of course horrified us :( And more importantly, people did not stop using soap (thankfully :)). This is communist thinking --- nothing else!
Rakesh Pandey
Replied to Abhijit Gosavi comment 8 years ago
1. In the U.S, the typical single family home uses about 69.3 gallons (262 litres) of water per day (2008 estimate). This includes (in decreasing order) toilet use, washing machine use, showers, baths, faucet use, and leaks. http://en.wikipedia.org/wiki/Water_use

Abhijit Gosavi
Replied to Rakesh Pandey comment 8 years ago
I just don't know how these numbers can be justified, my friend. Wikipedia numbers aren't always accurate. In the U.S., people use the western toilet, dishwashers, and washing machines (clothes), and most certainly more take showers than baths. Also, in summers, if water is available, people water their lawns. People in India don't do many of these activities, and yet need more water? Isn't there something wrong in these numbers?

What I do know about about quotas is what I learned from my own experience growing up in West Bengal. In the early 1980s, Kolkata had massive power cuts, but we never experienced any. Do you know why? We lived in the area where the CM lived. Then he moved to a different location, and that's when we started experiencing massive power cuts --- at times, 8 hours or more in the day.

Unfortunately, when you place restrictions on use of a resource, those in power, who are always more equal, get away with living in great luxury, while the middle classes are squeezed. Many people will not be able to live within that quota and will end up paying more than they currently pay: that's the bottom line.

Rakesh Pandey
Replied to Abhijit Gosavi comment 8 years ago
What makes you think it is not already happening in Delhi as far as water is concerned. Please see how "official Inequity" exists in water supply in Delhi. Delhi Cantt. & NDMC areas get more water per capita then other areas.: http://www.downtoearth.org.in/content/wh...

As for people not able to live within quote, I went through data for many European countries too, 150 litres/head/day is avg per capita consumption in countries like UK and Germany.
So only when you are really careless will a family of 5 cross a limit of 20KL/month.
Also Arvind Kejriwal have indicated that this limit will be re-examined.
Rakesh Pandey
Replied to Abhijit Gosavi comment 8 years ago
What makes you think it is not already happening in Delhi as far as water is concerned. Please see how "official Inequity" exists in water supply in Delhi. Delhi Cantt. & NDMC areas get more water per capita then other areas.: http://www.downtoearth.org.in/content/wh....

As for people not able to live within quota, I went through data for many European countries too, 150 litres/head/day is avg per capita consumption in countries like UK and Germany.
So only when you are really careless will a family of 5 cross a limit of 20KL/month.
Also Arvind Kejriwal has indicated that this limit will be re-examined.
Rakesh Pandey
Replied to Rakesh Pandey comment 8 years ago
Abhijit Gosavi
Replied to Rakesh Pandey comment 8 years ago
As far as I know in the U.S., the average rate of consumption is 90 U.S. gallons per person per day, which is 340 litres per person per day. So that should translate into 1.7 KL per day per family (of five), which is 51 KL per month.
Varun
8 years ago
All the state electricity boards were in huge losses including Delhi around year 2000. Some of the state electricity boards are still sitting in loss such as UP (loss 14000 crores).

However Delhi privatized electricity distribution in spite of citizens and unions resistance. Citizens were concerned about private rates and unions about bribe money and job losses. After privatization, a regulator was appointed to keep track of cost, distribution losses, infra spending and fair profits and decide on the rates accordingly. Taking the power to decide rates away from political leadership and giving it to regulator was a good thing. Now CM could not promise free power to a section of society or buy votes by giving cheap power nor any pressure group can blackmail him/her.

Now Kejriwal has changed all that. He has destroyed regulator. Also free/low electricity rates are an election issue. So, it effectively means rates cannot go up. Also other states CMs would see it as an easy way to buy votes. And why not. It takes years to setup power plants and infra to supply 24*7 power in all the corners of the state. Economy of scale kicks in much later and on the other hand side you just need to declare to cut rates in half after two days of becoming CM and be a hero. Losses...who cares..it will be the headache of The next CM..I will be PM by then :)
MOHAN
8 years ago
AAP's political formula is also full of leaks!

It will burst/collapse soon.
Amith
8 years ago
Nice article, bitter truth for AAP followers!
gcmbinty
8 years ago
Such inputs as of Mr. Vivek Khaitan are necessary at this stage when the AAP government has put the study in the hands of CAG. It is time to receive as many rational studies as possible within a time frame so as to enable AAP government to arrive at a well studied formula for water charges from the citizens of Delhi. Let us give AAP government a fair chance to prove its worth.

G. C. Mathur
Gaurang Damani
8 years ago
Excellent article, based on real facts and figures.

In any case, how is AAP different from con-gress, which has given doles like NRGEA; Food Security bill etc.

It seems that con-gress will support aap, only till May 2014, so they can eat into BJP votes.
gcmbinty
Replied to Gaurang Damani comment 8 years ago
NREGA is a wonderful scheme introduced by the Congress, but it is the misfortune of the State governments not implementing the same in its spirits - losers are the citizesns, the Aam Admi.

In fact, AAP and the Congress are on the same wavelength and together can achieve a lot for the common man who has so far been exploited by the 'political opportunists' in the party politics.

Rahul Gandhi's traits are matching with that of Anna Hazare-Arvind Kejriwal legion.
Rajan Alexander
8 years ago
Excellent Analysis
sreenath
8 years ago
sathyacumaran
operational head india
After all they have come to power now only and that the old bandygoods like Smt.Shela Dixit Congress who are in grass root level of corruption who have offered unconditional support just to topple the govt and as an beuracrat Shri khejriwal is sure that he could consult the technocracts and replace the old meters with brand new meters at free of cost since the expenditure would be minimal govt could bear it and once if they do this then in parliament election they out beat the congress and with the help of BJP they stabilise as such its too early to pass such wild remarks against AAP afterall they are new borne babies that to for election is new and Khejriwal would wipe out corrution is our surmise and we are waiting for it may the God shower his blessing for him and his party



Jayant Thakur
8 years ago
What could be the solution for this problem? Do you have fair formula for water tariff?
Vivek Khaitan
Replied to Jayant Thakur comment 8 years ago
I can try to work out a formula if I get paid by Delhi Govt :)

DJB had got its act together and was working on a very good formula before AAP came to power, it was fair, equitable and just. Mind you, with that formula, bills had already risen 2-3 times in past 1 year for consumers above 20 KL band and with better enforcement, DJB had become a revenue surplus entity

Real problem is Delhi is to give assurance on supply, provide water to all etc (see all such points in my article) and I suspect, AAP does not believe that they would be in power for long to make any difference on these issues.
ritesh Manilal Poladia
8 years ago
too good analysis....
as summer comes to delhi, ppl wud realise this.
hope they change this formula after 3 months
Ravi
8 years ago
If Moenylife is non-profit registered trust.. as it states in its about overview.. then why the hell its talking like any other political party.. seems like this website is sponsor either by big corrupt party like Congress/BJP… chronic capitalist people.. will never think about society.. but always how to fill their pocket.. From last 60+ years either of this two party have ruled.. n both have looted in big way.. n now when a new party like AAP has emerged as honest party.. both of this party are now feeling the heat.. so they will defiantly use this kind of cheap publicity.. to malign the mind of common man..
Adheer Pai
Replied to Ravi comment 8 years ago
Ravi, please do not make wild accusations against Moneylife. This article DOES NOT accuse AAP of corruption.

The article simply presents the financial scenario - with facts and figures which are accurate.

A middle class family using more than 20K liters per month (even 1 liter above 20K liters) will now suddenly have to pay 2-3 times more. This will typically cause financial problems for joint families with 8-10 family members which use more than 20K liters. Why should they suddenly pay 3 times more ?

The article simply argues for a graded system for billing - just like income tax.





Ravi
Replied to Adheer Pai comment 8 years ago
Adheer Pai, So u agree that the billing will be based on graded system like in income tax.. so is taxing a person based on grads is incorrect? (That is the person who earns more will end up paying more tax bracket of 30%)
And please do also tell why the same kind of tax grading should not be used while billing either in water or electricity?

n you are correct that in Indian family we do live in joint family of 8-10 members.. but in joint family not just one person would be earning for all.. but 3 -4 member would be earning for 8-10 members.. so expenses are shared by all.. n moreover is not we have to encourage everyone to limit the use of water and conserve it.. and use as per the prescribed guidelines set by WHO to use water per person?

Thank You,
Jai Hind..
Adheer Pai
Replied to Ravi comment 8 years ago
Ravi - Did you even read the article ?

What Kejriwal has done is he has removed the graded (slabs) system.

Now as per the new billing system if a family uses 20,001 litres they pay for 20,001 liters. But if the same family uses 20,000 liters then they pay nothing.
That is the gist of the article.

Ravi
Replied to Adheer Pai comment 8 years ago
Well first things let’s make the things simple for ur understanding Mr. Adheer Pai.. exchequer/treasury of govt fund is nothing but the different taxes that govt collects from all.. either via direct and indirect taxes.. like Income tax, service tax, VAT, import duties, property tax.. so the list still goes on..

n these are not only the sources of funds that govt gets.. but also from direct service charges levied based on usages like for water, electricity, and gas..

so the money was never an issue.. But the major issue from past 60+ years was.. CORRUPTION that govt have done..

I hope that u don’t believe the other political parties n their politician.. as they have never thought about society.. but always their priority was to.. how to fill their pocket.. n continue the legacy by involving their future generation in political business of looting the country..

From last 60+ years either of this two party have ruled the nation.. n both have looted in big way.. n now when a new party like AAP has emerged as honest party.. both of this party are now feeling the heat.. so they will defiantly use this kind of sponsored cheap publicity through social media.. n I am sure this site are also sponsored by big corrupt party like Congress/BJP… to malign the mind of common man..

Please do see this n understand.. how things still works in our government office n how far our politician n bureaucrats can go for a loot..
Doo see this video.. http://www.youtube.com/watch?v=xdEBiFUcK...

But if u still find that you have better /best option then u have the right to go with your choice of candidate.. n then forget for next five years to ask them about the common issue that you face day to day, as they would be busy in looting.


Thank You,
Jai Hind :)
Abhijit Gosavi
Replied to Ravi comment 8 years ago
Policies with good intentions do not always make economic sense. The calculations are correct. One has to keep in mind that in the old system there WAS a slab, but with the new system, the first slab has been removed for those who consume 21KL or more. Plus, you have to account for a 60% sewerage maintenance charge, which of course existed previously as well, but you will need to factor that in when you do these calculations.

If you look at the end result, people in the middle will experience the greatest increase in their bills in percent terms. Surely, that cannot be called good economics!
Abhijit Gosavi
Replied to Abhijit Gosavi comment 8 years ago
And if I may add: people in the middle, i.e., those consuming between 20-30KL, will see an increase of an average of Rs570 in their monthly bill, which cannot be pleasant! In fact, it will come as a rude shock to them. Very good analysis by the author!
Vivek Khaitan
Replied to Abhijit Gosavi comment 8 years ago
Thank you Sir :)
Abhijit Gosavi
Replied to Vivek Khaitan comment 8 years ago
You are welcome :) Great job!
Debashis Basu
Replied to Ravi comment 8 years ago
Very impressed by your comments. Full of facts. You will do AAP proud
Ravi
Replied to Debashis Basu comment 8 years ago
Thank u.. n I am also very much impress with your untruthful article on wrong facts.. n defiantly you will make either BJP or Congress high command very Proud.. :p

Jai Hind.. vandey mataram.. vandey mataram :)
Debashis Basu
8 years ago
Folks,
There is nothing wrong in the calculations.
1. You have to add Sewerage maintenance charges which is levied at 60% of price for metered water consumption
2. If you consume 21 kl, you won't pay for 1 kl but for 21 kl, and so on
krishna
8 years ago
if someone is here is from AAP Mang., attention please...
Please make all meters as "pre-paid" so that consumers do not check the water shock of higher water bills.

People should start buying recharge cards after the free limit.
Suiketu Shah
8 years ago
The way Kejriwal and Co have gone to the press ,it seems its the biggest achievement in 65 yrs of Independence India!

Thanks ml for exposing this else we would never know.
koushik Sekhar
8 years ago
Something seems wrong in your calculations. From 21-21. The bill should increase by 19.97 but it increase by 33.28. Please check you tables
Vivek Khaitan
Replied to koushik Sekhar comment 8 years ago
There is 60% sewerage maintenance charge on top of that + the effect of fixed charge
Bhupesh
8 years ago
What about multi or joint family homes with single water connection? AAP does not like people living together?
Sivaraman Hariharan
Replied to Bhupesh comment 8 years ago
Even in case of joint family, as in my case - My family of 5, plus my tenants of 5 numbers, TOTAL 10 members get a water consumption of less than 20 KL per month in Bangalore
Sharad V
8 years ago
Isn't there something fishy in these calculations (or such is the new provision)?

I guess, even with new tariff structure, progressive rates (@10% additional) shall be applicable making the billing amount (new rates) in Table 1.3 for 21 kL as Rs. 338 only ...and not 871!!

Horrendous Work, either way!
Vivek Khaitan
Replied to Sharad V comment 8 years ago
There is a new method of calculation too, no slab-wise calculation like earlier but all consumption between 20-30 KL would be charged at 20-30 KL slab rates which is 6-9 times higher than first 2 slabs so the effect of exponential increase
Sharad V
Replied to Vivek Khaitan comment 8 years ago
Thanks Vivek for confirming this.

And in view of this, your analysis magnifies the inherent fallacy in this hurried policy intervention.

I suppose, this is liable to revision... reverting to slab-wise calculation, at the least, if not more!
Abhinav Choudhary
8 years ago
Sir here are my observations

1. People consuming 21KL will now Have to pay more as compared to,previous slab. This will encourage water conservation. As per norms around 130lit. req per man per day. Multiply it with 4 we will get around 520lit per family per day and multiply it with 30days we get 15.6KL per family per month. 20KL will be more than enough considering guests too.
2. Hike in 20KL -30KL(17.15 to19.97) and in 30Kl - 40KL(30.25 to 33.28) is same around 10%.But when we see %increase in billing dat will be surely less in higher slabs because they were already paying more earlier.
3. In case of faulty meter this policy,surely encourage people to get thier meter corrected as now they dint want to pay for water due to their faulty meter.

So we can say that in the one hand this provided min req. Water free and on the other hand it promotes water conservation and charges more from people who consumes more than req. " A Nicely Balanced Policy"
Vivek Khaitan
Replied to Abhinav Choudhary comment 8 years ago
1. Benchmarks/norms for water consumption are typically based on international experience and does not take into account the fact that Indians culturally use more water, the utility is such norms, therefore, is rather limited. 2. The question is fairness, consumers using more should pay more, not only in absolute pay-out but also in terms of proportion. 3. How new incentives play out can have multiple answers and nobody can claim with certainty what impact would be seen.
Sivaraman Hariharan
Replied to Abhinav Choudhary comment 8 years ago
Yes, I support AAP's water policy. I am sure there will not be any faulty meters, or people tampering the meter.
Rita Krishna
8 years ago
An excellent article, however in defence of AAP, it has to be said that a new political party has to start somewhere. It does not seem fair to imply, as your article does, that the AAP will not also tackle, over time, the other things you raise, such as clean water from the Jamuna etc. An interesting question is whether the fast-running or otherwise, of water meters and other such pervasive myths could somehow be independently verified - or otherwise debunked?

It would clearly have been a grave political miscalculation if higher bills hit customers before the polls, but in general it seems that a right group stands to benefit - those who use the scarce resource frugally and who have managed to maintain a functioning water meter.
Dr vk sharma
8 years ago
Very good and nice analysis, appreciable to VIVEK KHAITAN AND MONEY LIFE TEAM.
Dr.vk sharma
Sivaraman Hariharan
8 years ago
I disagree with the concept of faulty water meter. They work on magnetic principle. I want further details, how can the meter suddenly malfunction ? I did not face or hear such things here, in Bangalore.
Vivek Khaitan
Replied to Sivaraman Hariharan comment 8 years ago
As i said in the article, a systematic study is required to conclusively establish the point one way or the other. However, complaints of faulty meter is widespread and my own little experiment bears that out
Suiketu Shah
8 years ago
Wonderful article.No surprise at the outcome of this "generosity" overnight by Kejriwal.Super article by ml.Keep it up.
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