Water Pricing - Fixed Water Charge

With a fixed water charge, the consumer pays a monthly water bill, which is the same independently of the volume consumed. In absence of a water metering system, a fixed water charge is the only possible tariff structure (WHITTINGTON 2006).

Fixed water charges are commonly found in countries where water has historically been abundant and hence metering was not needed to give people an incentive to reduce water consumption. Fixed charges are still quite widely used in industrialised countries, such as Canada, Norway, and the United Kingdom (and until recently in New York City). Despite a lot of water shortages, we find fixed charges also in many small and medium size cities in India, were they are still the most prevalent way to calculate the monthly water bill (WHITTINGTON 2003).

(Adapted from WHITTINGTON 2006)

The fixed charge itself can vary across households or consumer classes depending on characteristics of the consumer. Parameters for setting a fixed charge are for example a higher income and/or greater ability to pay. Higher fixed charges were historically set on valuable residential properties on the assumption that people with a higher income tend to use more water and/or have a greater ability to pay for the water they use. For the same reason it is common to assign commercial entities a different fixed charge than for households. Another common parameter for setting a fixed charge is the diameter of the pipe used by the customer to connect to the distribution system. Households, which generally require a smaller bore than connexions for larger concerns (e.g., businesses, hospitals), are commonly set a lower fixed charge.

On the one hand, a fixed water charge offers some benefits deriving from its simplicity and the fact that it is applicable without a metering system, which is expensive to implement. On the other hand, consumers have no incentive to economise on water use with a fixed tariff, as using more water will not increase their water bill. Furthermore, some of the water might be sold at high prices by street vendors to the households with no access to the taps or connexions. From the cost recovery point of view, “a fixed charge that provide sufficient revenues at one point in time will become increasingly inadequate as the economy and incomes grow and water use increases. Water utilities will be than reluctant to expand coverage because more customers may mean more financial losses. Fixed-charge tariffs are thus especially prone to locking communities into low-level equilibrium traps of few customers, low revenues, and poor service” (WHITTINGTON 2006).

(Adapted from TERI 2010)

In the city of Raipur water is supplied by the Raipur Municipal Corporation (RMC). Raipur Municipal Corporation is also responsible for billing, collection and other operation and maintenance (see also water distribution and water purification). About 65-68% of the total city-area is covered with pipe distribution and about 20% is served with bore wells. Uncovered area of 11% is supplied through tankers.

The fixed water charge in Raipur is based on the ferrule size (pipe size) and differentiated between domestic and commercial users. The charge is set without consideration of the provision costs of water supply and sewerage services (see PPT). The fee is collected once a year from the consumers. Raipur Municipal Corporation recovers just about 34% of its costs from tariff revenues. In 2009, the cost incurred in supplying water to households was about Rs 2’840 (about 62 USD) per cubic meter. Water tariffs in Raipur are at the present too low. At the same time, a considerable amount of water is lost as non-revenue water, which is the water that has been produced and is “lost” before it reaches the customer (due e.g. through leaks but also through theft). To solve these problems, the government plans to set a municipal regulatory agency, which is expected to streamline the water tariff setting procedure, while Raipur Municipal Corporation envisages the future full cost recovery of operation and maintenance and plans to introduce water metering system essential to estimate levels of non revenue water.