69974 v5 Cost Recovery and Tariff Practices for UWSS Sector in India Interim Report on Cost Recovery and Tariff Practices for Urban Water Supply and Sanitation in India Dehradun Case Study Prepared for Water and Sanitation Program – South Asia June 2008 Dehradun 1 Cost Recovery and Tariff Practices for UWSS Sector in India DEHRADUN Table of Contents 1 Context and Background................................................................................................ 3 2 City Profile ..................................................................................................................... 3 2.1 Physical Environment and Topography ................................................................... 3 2.2 Demography ........................................................................................................... 3 2.3 Socio-Economic Profile ........................................................................................... 3 3 Institutional Framework for Water Supply and Sewerage Services ................................ 4 3.1 Uttarakhand Jal Sansthan ....................................................................................... 4 3.2 Uttarkhand Pey Jal Nigam ...................................................................................... 5 3.3 Other Agencies ....................................................................................................... 5 4 Existing Infrastructure and Services ............................................................................... 6 4.1 Key issues in service provision ............................................................................... 7 5 Water Supply and Sewerage Finances .......................................................................... 7 5.1 Cost recovery: current performance ........................................................................ 7 5.2 Tariff Structure ........................................................................................................ 8 5.3 Dehradun Consumer Profile .................................................................................. 11 6 Analysis ....................................................................................................................... 12 6.1 Cost Recovery ...................................................................................................... 12 6.2 Economic Efficiency .............................................................................................. 12 6.3 Equity and Protection of Vulnerable Sections........................................................ 13 6.4 Affordability ........................................................................................................... 13 6.5 Resource Conservation ........................................................................................ 13 6.6 Acceptability and Practicality ................................................................................. 13 7 Summary ..................................................................................................................... 13 7.1 Recommendations ................................................................................................ 14 Annex One: Tariff Revisions................................................................................................ 15 Dehradun 2 Cost Recovery and Tariff Practices for UWSS Sector in India DEHRADUN 1 Context and Background In order to access funds for water supply and sanitation improvements under JNNURM, municipal service providers are required to levy ‘reasonable user charges’ so that O&M costs are recovered within seven years. MoUD, with assistance from WSP-SA, has prepared guidelines on the design and implementation of user charge reforms in line with JNNURM requirements. These guidelines are available as a separate document. The guidelines draw on lessons from a review of current user charges and cost recovery arrangements in 23 cities in India. This report focuses on one of those cities: Dehradun. 2 City Profile Dehradun is the administrative center and interim capital of the new state of Uttarakhand, which was formed in November 2000. Its climate and natural beauty make it a preferred location for retirement, but it is also an important educational center having premier academic institutions and research centers including the Indian Military Academy, Forest Research Institute, and the Oil and Natural Gas Corporation Limited’s headquarters, amongst others. The city attracts a large number of tourists, many of them en route to Mussoorie. 2.1 Physical environment and topography Dehradun is situated in the Himalayan foothills in the fertile Doon Valley, at an altitude of 2,200 feet above sea level. Temperatures range from 36°Celsius in summer to 5°Celsius in winter, and there is annual rainfall of 2,000 mm, July and August being the rainiest months. 2.2 Demography At the time of the 2001 Census, Dehradun had a population of 447,808, having experienced rapid growth when it became a new state capital. The trend is expected to continue given the expanding state economy. 2.3 Socio-economic profile Literacy in Dehradun stands at 77 percent, well above the national average of 60 percent. This as well as a high level of international remittances gives the town a per capita income close to Rs. 77,000 (US$1,800) per annum (the national average is Rs. 34,240 - US$800). A commercial boom, fuelled by the establishment of various Special Economic Zones is transforming the city’s relaxed image. Dehradun 3 Cost Recovery and Tariff Practices for UWSS Sector in India 3 Institutional Framework for Water Supply and Sewerage Services In Uttarakhand, water supply and sewerage services are managed by two agencies under the Department of Drinking Water: Uttarakhand Jal Sansthan (UJS) and Uttarakhand Pey Jal Nigam (UPJN). While the former is responsible for the O&M of water supply schemes, the latter is a construction utility providing agency services to UJS. Aided by the World Bank, the Project Management Unit of Swajal Project looks after the rural water supply. Figure 2.1: Water Supply and Sewerage Service Institutional Arrangement in Uttarakhand Since both utilities Government of Uttarakhand undertake their delineated functions Urban Development Department Department of Drinking Water Supply State Drinking Water Supply Mission Uttarakhand Jal Sansthan Uttarakhand Pey Jal Nigam Project Management Unit, SWAJAL The remit of these agencies is state-wide and includes the capital. 3.1 Uttarakhand Jal Sansthan 3.1.1 Organizational arrangements The organizational structure of UJS is provided in Figure 2.2. The city water supply service is divided into urban and rural areas, each headed by a superintending engineer. The two divisions are further divided into zones; the urban division consists of three zones -- North, South and the recently added Pithuwala. An executive engineer supported by a team of assistant and junior engineers heads each zone. For Dehradun itself, there is 138 staff (Figure 2.3). Dehradun 4 Cost Recovery and Tariff Practices for UWSS Sector in India Figure 2.2: Organogram of Uttarakhand Jal Sansthan (State-wide) Secretary, Drinking Water Supply Chief General Manager Finance Secretary Superintendi Superintendi Secretary General Director (Appraisal) ng Engineer, ng Engineer, (Administrati Manager, (Material) (E&M) on) Garwal/Kuma unon Superintendin g Engineer Sr. Appraisal Cell Procurement Electrical & Assistant Accountant Cell Mechanical Accountant Officer Cell Officer Executive Engineer Sr. Audit Office Officer Superintende nt Assistant Engineer Legal Cell Junior Engineer Figure 2.3: Organogram of Uttarakhand Jal Sansthan (Dehradun) General M anager Garhwal Superintending Engineer (Urban) Superintending Engineer (Rural) Executive Engineer (North) Executive Engineer (South) Executive Engineer (M ussorrie) Executive Engineer (M ain Div. Deradun) Executive Engineer (Pithuwala) 3.2 Uttarkhand Pey Jal Nigam UPJN is responsible for executing capital works and overall planning and construction of water supply schemes in Uttarakhand. 3.3 Other agencies The Dehradun Nagar Nigam was established in the year 2000 and is responsible for the city’s cleanliness, solid waste management, maintenance of gardens/dividers/circles, street lighting, bio-medical waste, the slaughterhouse, flood control, encroachment removal, stray cattle management, community toilets, community halls, all storm water and wastewater Dehradun 5 Cost Recovery and Tariff Practices for UWSS Sector in India drainage, parking lots, development works, advertisement, sale of land, house tax, and licensing. Mussoorie-Dehradun Development Authority is the planning and development agency for the municipal limits of Dehradun Nagar Nigam and the 185 villages surrounding both Mussoorie and Dehradun. It was created in 1984 to control haphazard development and environmental degradation, and has lead responsibility for Master Plan implementation. 4 Existing Infrastructure and Services Historically, Dehradun was served primarily by gravity flow schemes, but due to pressure on surface water sources, groundwater has become the dominant source of supply. Being situated in a valley, the city has good water recharge potential and this helps to sustain the tubewells that provide the bulk of the city’s water. There are three broadly defined water supply zones in the city: gravity flow zone (to the north), pumping flow zone (old city and the south) and mixed flow zone, which lies in between (Figure 2.4). Figure 2.4: Water Supply Zones in Dehradun Gravity Zone Mixed Zone Pumping Zone Mixed Flow Zone Source: CDP, 2006 Based on the data provided by UJS, the city’s water supply and sewerage system’s statistical characteristics are detailed in Table 2.1. Table 2.1: Water Supply and Sewerage System in Dehradun Total area served by UJS in Dehradun 69 sq km Total population served by UJS 677118 Total population served including floating population (estimate) Approx 10,00,000 Total number of water charge connections (2006-07) 66865 Total water demand 120000 kld Total water production 106860 kld Per capita water supply per day (with floating population) 108 lpcd Per capita water supply per day (on residential population) 158 lpcd Water deficit 13140 kld Sources of water Dehradun 6 Cost Recovery and Tariff Practices for UWSS Sector in India Number of tubewells 67 Total production of water from tubewells 86740 kld Percentage of tubewell production to total water production 81.17 % Surface water sources: Badal River 6000 kld Mosigate 8000 kld Kolukhet 540 kld Others (Old Kothalgate, New Kothalgate, Calcium Carbide, Bhagwantgate, 500 kld Total production of water from surface sources 15040 kld Percentage of surface water production to total water production 14% Number of handpumps 31 Number of stand osts 745 Number of overhead tanks 29 Number of underground storage 14 Total storage capacity needed 60110 kl Total storage capacity available 34723 kl Shortage in storage capacity 25387 kl Transmission and distribution infrastructure Total length of water pipelines 1585 km Total length of rising main 112 km Number of pumping stations 7 Total length of sewer line 273 km Sewer connections 13642 Number of sewer seats 25081 Number of manholes 18077 Number of sewage treatment facilities: sludge farms 2 Source: Data provided by UJS 4.1 Key issues in service provision The following issues arose from a review of literature and discussion with city officials. They have not been independently verified: There are no master plan documents for water and sewerage services in Dehradun; With rapid economic growth has come unplanned and haphazard infrastructure development. As a result, there is unequal distribution of water supply and sewerage infrastructure, leading to problems of access, pressure and continuity of supply in some areas even though the total supply is ample. Some poor residents have to pay Rs. 250 to Rs. 300 per month to compensate for the inadequacy of the public service; The mandates of UPJN and UJS have effectively reversed over time so that UPJN now plays the lead role in planning and developing water supply schemes, which it hands over UJS for O&M; Automated flow meters are being installed on tubewells, using the SCADA system. There are, however, no flow meters on distribution points, nor any metering at household/user level. It is therefore difficult to monitor NRW, and estimates vary widely from 20-60 percent; Some of the distribution lines are very old and the supply became contaminated during recent floods; and No energy audits are conducted to reduce power bills. This is significant given that a considerable amount of pumping is required for water distribution. 5 Water Supply and Sewerage Finances 5.1 Cost recovery: current performance UJS is able to meet its establishment costs from revenue though it is heavily dependent on government grants to cover its O&M costs, including power charges, which are fully Dehradun 7 Cost Recovery and Tariff Practices for UWSS Sector in India subsidized. This said, records indicate that grants as a percentage of total revenue have decreased from 50 percent to 32 percent in the last few years. For Dehradun specifically, operations contributed 18 percent of UJS revenue in 2006-07, a decline from 26 percent in 2002-03, while establishment expenditure remained more or less stable at 12 percent. Power bills typically remain unpaid for long periods and lump sum settlements are eventually agreed with the state government (Table 2.2). Table 2.2: Operating Income and Expenditure (State-wide) (in Rs. million) Sr. Financial No Year Operating Income including Grants Operating Expenditure % Establish Own Grants to ment Surplu Source O&M Power Total Expendit s/Defic Revenue Grant Grant Total Revenue ure Power O&M Total it 1 2001-02 371.141 84.519 269.804 725.464 48.84 267.241 307.654 150.635 725.530 -.066 2 2002-03 403.065 61.559 335.015 799.639 49.59 285.477 336.077 163.447 785.001 14.638 3 2003-04 414.680 32.000 305.114 751.794 44.84 317.934 305.844 167.452 791.230 39.436 4 2004-05 502.028 21.557 272.162 795.747 36.91 337.143 272.162 170.415 779.720 16.027 5 2005-06 552.754 35.000 320.562 908.316 39.15 355.474 320.562 210.181 886.217 22.099 6 2006-07 602.730 0 280.797 883.527 31.78 384.600 280.797 234.386 899.783 16.256 Operating Income and Expenditure (Dehradun) Sr. Financial No Year Operating Income including Grants Operating Expenditure Own % Establish Source Grants to ment Revenu O&M Power Total Expendit Surplus/ e Grant Grant Total Revenue ure Power O&M Total Deficit 1 2002-03 106.158 26.556 1.414 134.128 20.85 36.286 98.018 13.815 148.119 -13.991 2 2003-04 104.775 6.100 0 110.875 5.50 34.232 43.115 16.466 93.813 17.062 3 2004-05 117.849 63.753 225.536 407.138 71.05 42.706 60.353 15.909 118.968 288.170 4 2005-06 97.478 4.500 29.654 131.632 25.95 43.675 70.882 14.862 129.419 2.213 5 2006-07 110.614 25.283 49.223 185.120 40.25 48.710 0.502 15.828 65.040 120.080 Table 2.3 shows that Dehradun’s contribution to UJS total demand is around 28 percent, with a collection efficiency of around 40 percent, while UJS’s collection efficiency overall stands at 60 percent. On average, UJS collects only 25 percent of previous years’ arrears and collection efficiency is declining. Table 2.3: DCB Statement of Uttarakhand Jal Sansthan (State-wide) (in Rs. million) Demand Collection Balance Discount/Reba Collection with Financial Year Total Demand Previous Year Recovery of Recovery of Percentage Balance at Collection Collection 10/5*100) Year End Discount Demand Demand (Column Current Current Arrears Arrears Sr. No. Total te 1 2 3 4 5 6 7 8 9 10 11 12 2 2000-01 1495.98 3250.86 4746.84 382.97 2419.65 2802.62 105.49 2908.11 61.2 838.73 3 2001-02 1838.73 3363.70 5202.43 513.01 2590.81 3103.82 105.72 3209.54 61.6 1992.89 4 2002-03 1992.89 3722.53 5715.42 567.97 2956.58 3524.55 156.31 3680.86 64.4 2034.56 5 2003-04 2034.56 4485.98 6520.54 620.54 3526.26 4146.80 73.07 4219.87 64.7 2300.67 6 2004-05 2300.69 6041.27 8341.96 789.85 4230.43 5020.28 128.17 5148.45 61.7 3193.50 7 2005-06 3193.51 6313.16 9506.67 857.01 4670.53 5527.54 154.81 5682.35 59.7 3824.32 Dehradun 8 Cost Recovery and Tariff Practices for UWSS Sector in India 8 2006-07 382.432 727.381 1109.813 88.395 514.335 602.730 14.499 617.229 5.56 492.584 Table 2.4: DCB Statement pertaining to Dehradun City Water Supply and Sewerage Service Operations (continued) Demand Collection Balance Percentage Sr. Previou Recove Recovery Total Discoun Collectio Collection Balance No Financial s Year Current Total ry of of Current Collecti t/Rebat n after (Coloumn1 at Year . Year Arrears Demand Demand Arrears Demand on e Discount 0/5*100) End 9 2002-03 62.9 105.8 168.7 ------ ------ 75.1 2.7 72.4 42.9 91.2 10 2003-04 91.2 102.7 193.9 ------ ------ 81.0 3.2 77.8 40.1 110.3 11 2004-05 110.3 126.4 236.7 ------ ------ 100.8 2.3 98.5 41.6 133.1 12 2005-06 133.1 125.2 258.3 ------ ------ 100.0 2.8 97.2 37.6 156.2 13 2006-07 156.2 129.8 286.0 ------ ------ 109.5 3.2 106.3 37.1 172.1 5.2 Tariff structure Tariff-setting is the responsibility of UJS and, in recent years, it has altered the tariff structure to suit consumer demands while keeping cost recovery issues in mind. UJS applies a single part, flat rate charge throughout the state though the applicable rate for a property depends on its designated annual rental value as used in property tax assessments. The switch from volumetric to flat rate water and sewerage charges for domestic users was made in 2003, following consumer complaints of defective meters and meter-reading. Nondomestic users still pay a volumetric rate. The existing tariff structure has two interlinked slabs: (i) Water supply scheme-based This slab segregates areas according to their topography and the technology adopted. The three schemes identified are: 1. Gravity schemes. These do not involve pumping and thus are relatively cheap to operate; 2. Low head schemes. These involve power lifting up to 100 meters (m) from the underground source of water. Dehradun falls under this scheme; and 3. High head schemes. These involve lifting above 100 m, and hence have high power costs. (ii) Property tax valuation Tariffs based on this system are applicable not only to registered connections but also to consumers who have not taken water and sewerage connection as such consumers are charged on the basis of water tax and sewerage tax which are taken as a percentage of the annual rental value of property. Further details are provided in Table 2.5. Table 2.5: Existing Tariff Structure DOMESTIC Type of Targeted Consumer Basis of Rate (per month) based on 10 kl water consumption charge Charging Slab Gravity Low High (Rs.) Head Head (Rs.) (Rs.) Water Applicable to all Annual Till Rs.360.00 77.00 80.50 86.25 Dehradun 9 Cost Recovery and Tariff Practices for UWSS Sector in India charge registered Rental Rs.361.00 to Rs. 80.50 86.25 92.00 connections Value 2000.00 (ARV) of Rs.2001.00 to Rs. 86.25 92.00 103.50 Property 3500.00 Rs.3501.00 to Rs. 115.00 126.50 143.75 6000.00 Rs. 6001.00 to 138.00 143.75 172.50 Rs.8000.00 Above Rs. 8001.00 161.00 172.50 184.00 Applicable to all ARV of Till Rs.360.00 10.00 Sewerage registered Property Rs.361.00 to Rs. 15.00 charge connections 2000.00 Rs.2001.00 and 20.00 above Water Applicable to all Water No. of water Gravity Low Head High charge registered Supply connections (Rs.) (Rs.) Head connections but for Scheme- (Rs.) which ARV-based based One Tap 41 45 50 assessed value of property is not Two Taps 45 50 60 available Three taps 60 75 90 Four Taps 75 90 100 Water taxApplicable to all Fixed 12.5% of ARV properties not having percentage a registered water of ARV of connection. Property Exemption for Below the Poverty Line (BPL) families Sewerage Applicable to all Fixed 3% of property assessment tax properties/households percentage not having a of Property registered water Assessment connection NONDOMESTIC Water Nondomestic users Volumetric Consumer Gravity Low High charge including industries, based on category (Rs./kl) Head Head commercials set ups, meter (Rs/kl) (Rs./kl) government. reading Special category 8 10 12 and industrial Other commercial 7 8 10.50 establishments Government and 6.70 7.50 10.50 semi-government institutions Minimum Nondomestic users Based on Rate (per month) water including industries, water Consumer Gravity Low High charge commercials set ups, supply Category (Rs.) Head Head per month government. scheme (Rs.) (Rs.) Special category 300.00 400.00 500.00 and industrial Other commercial 275.00 325.00 375.00 establishments Government and 275.00 300.00 350.00 semi-government institutions Charitable Charged at rates for domestic institutions category Sewerage Nondomestic users Sewer seat Rs. 20.00 per seat per month charge including industries, based commercials set ups, government. Dehradun 10 Cost Recovery and Tariff Practices for UWSS Sector in India The rationale for applying a water and sewerage tax to unconnected households is that water is Figure 2.5: Distribution of Domestic Consumers over Property Slabs an essential public good and residents without connections must be using water from another Distrib utio n o f Do m e stic C o nne ctio ns o ve r P ro pe rty Sla b s source -- in most cases a ground water source -- and this cost needs to be recognized. 5% 3% 12% 0-360 For new connections, an additional one-time 361-2000 development charge is applied, based on the 10% 50% 2001-3500 3501-6000 plot size, along with administration and water 6001-8000 security charges. 8000 & ABO VE 20% 5.3 Dehradun’s consumer profile In 2006-07, there were 66,685 registered water connections for an estimated population of 677,118, of which 61,030 were domestic and 5,835 nondomestic. Among domestic users, 70 percent fall into the Rs. 0-2,000 property slab (Figure 2.5). The tariff revision of October 2006 abolished water tax for connected consumers and since then there has been a substantial increase in the number of house connections. Table 2.6: Consumer Profile of Uttarakhand Jal Sansthan (Dehradun) Customer No. of Water Charge No. of Water Tax No. of Sewerage Tax No. of Sewer Seat Category As Connections Connections Connections Connections Per Property Assessment Slabs 2005- 2006- 2007- 2005- 2006- 2007- 2005- 2006- 2007- 2005- 2006- 2007- 06 07 08 06 07 08 06 07 08 06 07 08 0-360 2107 3040 27072 11 34 19 104 188 0 41 90 104 5 7 361-2000 7766 1238 12738 769 1214 710 3263 5730 3 2078 3297 3426 9 5 2001-3500 4582 6287 6417 4580 6191 207 1795 2865 3 962 1571 1658 3501-6000 5596 7254 7383 5535 7119 252 2324 3330 3 1211 1746 1807 6001-8000 1455 1836 1885 1438 1793 85 611 865 4 267 347 417 8000 & above 2182 2857 2980 2183 2796 285 959 1372 9 263 397 618 Total domestic 4265 6103 58475 1451 3007 1558 9056 1435 22 4822 7448 8030 consumers 6 0 6 8 0 ND 2270 3371 3373 316 438 56 256 251 0 27 106 78 BC 1914 2464 2054 265 288 54 125 163 2 36 57 97 Total 4184 5835 5427 581 726 110 381 414 2 63 163 175 nondomestic TOTAL 46840 66865 63902 15097 30804 1668 9437 14764 24 4885 7611 8205 If one takes in to account the 2007-08 figures (Table 2.6), the ratio between water charge and water tax connections has undergone a drastic change and standing at 97:3 as against 68:32 in 2006-07. However, these data should be treated with caution since the database management at the utility is inadequate. Dehradun 11 Cost Recovery and Tariff Practices for UWSS Sector in India 6 Analysis 6.1 Cost recovery UJS tariffs are insufficient to recover Table 2.7: Grants Received for Dehradun Urban Water O&M costs as well as capital costs. The Supply Schemes agency is, therefore, heavily dependent Financial Year O&M Grants Power Grants on government subsidies, though the 2002-03 265.56 14.14 inflow of grants is unpredictable (Table 2.7). 2003-04 61 0 2004-05 637.53 2255.36 The cost recovery potential of the tariff 2005-06 45 296.54 regime is, in fact, good but this is not 2006-07 252.83 492.23 being realized, primarily because collection efficiency stands at just 37 percent and half of the potential consumers are not registered. Thirty of the city’s 60 electoral wards were added when the state of Uttarakhand was formed, and property tax assessments have not been carried out in these wards. Linking water charges to plot size and property tax assessments is also problematic, since just 8 percent of charge payers fall into the higher rate category. UJS staff in Dehradun identified the following constraints on cost recovery: Consumer-related issues High-income households tend to develop their own sources rather than taking UJS house connections; Owners of many multi-storey buildings often take a single connection for the entire property and do not disclose their tenants; hence bills are prepared for a single household; Property assessments are often adjusted so that the property falls into a lower charge band; and Ownership disputes create problems in determining responsibility for payment. Billing and collection Billing and collection centers are only located at zonal level – they could be at more accessible locations; Many customers are unaware of UJS billing and payment procedures; and Customers often do not pay their bills on time. If coverage was increased to 90 percent and collection efficiency to 85 percent, revenue would be sufficient to recover O&M costs. 6.2 Economic efficiency Tariffs in Dehradun do not reflect the average cost of water supply, neither do they indicate the incremental cost of developing new sources. Furthermore, nearly all connections are unmetered and charged at fixed rates based on the Annual Rental Value (ARV) of properties. There is, therefore, no incentive for users to moderate consumption. In practice the only factor limiting consumption is the intermittent supply, which operates twice a day for four hours, and with varying pressure. Dehradun 12 Cost Recovery and Tariff Practices for UWSS Sector in India 6.3 Equity and protection of vulnerable sections Since there are no metered customers in Dehradun, the issue of relative fairness in charges for metered and nonmetered customers does not arise. Between domestic and industrial customers, the tariff structure can be said to be fair as the ratio between the lowest rates for domestic use and the rates for industrial use is around five times. Property tax valuations are a poor indictor of ability to pay water charges or of levels of consumption, bearing in mind that many properties are under multiple occupation. UJS provides free standpost supplies for the poorer residents without house connections and does not charge water taxes where a property tax assessment falls below Rs. 360. If a low-income resident takes a house connection, however, a basic charge of Rs. 75 is levied. This is, in effect, a disincentive for taking the connection. 6.4 Affordability Dehradun enjoys a high per capita monthly income -- Rs. 6,000 on average -- so that monthly water charges amount to 0.28 percent to 0.4 percent of household budgets. This suggests that the tariffs are easily affordable to the great majority of residents. A more serious problem is that low rates are charged to people who are well above the poverty line. 6.5 Resource conservation The current tariff structure provides no incentives for users to limit their consumption and reduce waste. 6.6 Acceptability and practicality UJS officials claim that the switch to property tax-based charges was made to address public complaints of faulty meters and meter reading. This may be so, but it has had made cost recovery even more difficult. 7 Summary The existing single part, fixed rate tariff for Dehradun, could, in theory, enable recovery of O&M costs, and the structure tries, though not very effectively, to factor in the relative production costs for different water sources. An automatic increase in tariff rate by 15 percent every three years is also a positive feature. In practice, however, cost recovery arrangements are inadequate. Property tax assessments are prone to misuse, at least half of the properties in Dehradun have not been assessed for property tax which is, in any case, a poor basis for setting water tariffs. Many consumers of UJS water are unregistered, due partly to an incomplete property tax register, but also because some live in buildings under multiple occupation with a single connection. A lack of vigilance in updating the customer database and in billing and collection has exacerbated these problems. There are also equity concerns with the current tariff regime in that many better-off customers pay an artificially low tariff, while poor customers have a disincentive to take a house connection. Dehradun 13 Cost Recovery and Tariff Practices for UWSS Sector in India 7.1 Recommendations In order to improve cost recovery within the existing charging framework, the following actions are recommended: 1. UJS should improve collection efficiency as an urgent priority; 2. It should lobby for the rapid expansion and updating of property tax assessments, and introduce interim measures for collecting arrears from these properties; 3. Discounted connection fees could be piloted as a means of encouraging more consumers to take house connections. However, the incentive to do so may be limited unless the quality of service improves. In the case of buildings under multiple occupation, UJS could also consider: a) The introduction of volumetric rates for bulk connections, in agreement with the building owner. It would be easier to maintain a limited number of meters while saving billing and collection costs from each flat owner; and b) Introducing a minimum monthly charge for each flat, while keeping the bulk supply connection charges intact; and 4. Since the Dehradun water supply is tubewell-oriented, it would be relatively easy for UJS to undertake zoning and initiate 24x7 water supply drives, possibly beginning with pilot projects to test the feasibility and acceptability of this option. An improved service could increase public confidence in the supplier, enabling a switch to volumetric charges. Even if the above measures are implemented, inefficiencies caused by the tariff design will remain. In the longer term, UJS should introduce volumetric, meter-based charges using a fair tariff structure that safeguards the needs of the poor without providing unnecessary subsidies for better-off consumers. Dehradun 14 Cost Recovery and Tariff Practices for UWSS Sector in India Annex 2.1: Tariff Revisions Tariff amendments in Uttarakhand are governed by The Uttarakhand (Uttar Pradesh Water Supply and Sewerage Act, 1975) (Adaptation and Modification Order, 2002) Adaptation and Modification Order, 2007. The highlights of recent changes are presented below. Tariff Amendment: October 2003 Discontinuation of meter-based volumetric charges on domestic connections and switch to a system of water charges based on assessed value (annual rental value -- AVR) of properties. Meter rent on domestic connections was discontinued with the switch to the property tax based system; Amendment of provisions set in the December 1994 tariff order allowing a yearly increase of tariff rates by 15 percent to 7.5 percent; No discount on payment of minimum charges by consumer by due date, 10 percent discount will be given only if the water charge bill is above minimum charges and paid before due date; and Waiver of charges for standposts, keeping in mind the ability to pay of weaker sections. Tariff Amendment: August 2006 Abolition of water tax and sewerage tax for consumers having legal connections. Under earlier provisions, water charge or water tax whichever was higher, was applicable as was the case with sewerage tax and sewerage charge; For properties not having a registered water connection, water tax and sewerage tax have been retained at 12.5 percent and 3 percent of ARV of property, respectively; Introduction of a 15 percent automatic increase in all tariff rates at an interval of every three years in place of the 7.5 percent adopted in October 2003 tariff amendment. This amendment will come in to effect from October 1, 2008; For Below the Poverty Line (BPL) households, taxes were completely exempted; and Service and supervision fees for daily maintenance were also discontinued with the order that consumers are responsible for maintaining private water infrastructure. The comparative rates for domestic connections for 2003 and 2007 are listed in Table A2.1. Table A2.1 : Comparative Tariff Rates for Domestic Connection Domestic Users Gravity Low Head High Head Sr. Slabs for Property 2003 2006 2003 2006 2003 2006 No. Assessment 1 Till Rs. 360.00 67.00 77.00 70.00 80.50 75.00 86.25 2 Rs.361.00 to Rs. 2000.00 70.00 80.50 75.00 86.25 80.00 92.00 3 Rs. 2001.00 to Rs. 3500.00 75.00 86.25 80.00 92.00 90.00 103.50 4 Rs. 3501.00 to Rs. 6000.00 100.00 115.00 110.00 126.50 125.00 143.75 5 Rs. 6001.00 to Rs.8000.00 120.00 138.00 120.00 143.75 150.00 172.50 6 Above Rs. 8001 140.00 161.00 150.00 172.50 160.00 184.00 Dehradun 15