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The water crisis
The water crisis

Demystifying Delhi’s Water Crisis

So now that you’re convinced of what the overarching goal is here, let’s try and understand what would happen if the DJB actually achieved it. Since the Ministry of Urban Development (MoUD) pegs the acceptable level of non-revenue water (NRW) at 20%, lets assume that through a variety of measures (such as the ones listed above) the DJB is able to reduce its NRW level to 20% i.e. earn revenue on 80% of its total water production. What would this do?

  • Generate an additional ~Rs 1,400 crore in Revenue (WOW!)

There’s no magic involved here, just some simple math (see table below).

             The DJB would have generated ~Rs 1,400 crore in additional revenue in 2012 if it had met MoUD norms for NRW

Source: Delhi Jal Board, our estimates

Source: Delhi Jal Board, our estimates

  • Cut Current Account Deficit by half (Now, that’s what we’re talking about!)

The additional revenue would cut the DJB’s Current Account deficit (CAD) by half (we’ve used 2012E numbers to illustrate).

Not only would they be able to cover their Operating & Maintenance costs (like they currently do and are mistakenly proud of), they’d also be able cover their entire cost of sales (cost of raw water and raw water arrangements) and half of their interest charges.

Now that’s a bonafide, genuinely pride-worthy achievement!

The additional Revenue would have cut DJB’s 2012E Current Account Deficit by half

Source: Delhi Jal Board, our estimates

Source: Delhi Jal Board, our estimates

 Reduce effective borrowings by ~35% (About time)

With the CAD cut down to half, the DJB would ~35% less in effective borrowings from the government vs. the estimated Rs 4,205 crore for 2012.

A gentle reminder yet again: government money = tax payer money = your money. The government needing less of your money is always a good thing!

While dramatic rise in “revenue water” would require committed, multi-year effort…

So, it’s now clear that raising DJB’s “revenue water” levels to 80% is the way to go.  Awesome! So what’s the problem?

Nothing…except that achieving this long–due goal would require a strong multi-year effort, a large commitment of funds and unwavering political will.

It would involve doing all the things we mentioned earlier in this section plus a variety of other steps including cracking down on water theft and illegal connections.

Chapter 3 of the Comptroller and Auditor General of India (CAG) audit report for Delhi covers in detail the various deficiencies in DBJ operations requiring corrective action.

  • Initial accelerated Capex well worth the annual budgetary savings

The initial acceleration in capital investments that such a multi-year project would require would be well worth the cost when weighted against the Rs 1,400 crore or more in annual savings to the Delhi government once project goals are achieved.

…There’s no excuse for failure   

So, how difficult is this task we’re asking of the DJB – lowering NRW to the vicinity of 20%? Is it impossible? Has no one done it before? Have only a few utilities done it before?

The answers are no, no and no.

  • Many developing nations have achieved lower NRW levels – no excuse for DJB

All developed countries and many developing nations facing challenges similar to those in India, have achieved NRW levels much lower than the DJB’s dismal 63% (2011).

The tables below provide an international perspective and lead us to the inevitable conclusion that NRW levels of 20% are very much possible. The DJB has no real excuse for its staggering underperformance.

                              Some of the lowest NRW                                      Many developing nations have

                              levels in the developed world                              lowered NRW levels to <20% 

Source: World Bank, Asian Development Bank, Metropolitan Consulting Group, International Water Association, water utility websites

Source: World Bank, Asian Development Bank, Metropolitan Consulting Group, International Water Association, water utility websites

Why don’t we just get rid of the DJB?

No DJB = problem solved. Would it not be incredible if things were that simple? Unfortunately, privatization often doesn’t work out.

  • Privatization often not the answer

Privatization of water treatment and distribution has always been a controversial issue. The belief that corporate control translates into efficiency and better management has led a number of countries to experiment with privatization. The results have been mixed.

The privatization of water supply in Manila, Philippines for example, improved water access (from 58% to 84%), but also led to price hikes of 500% between 1997 and 2003!

While private entities usually improve the efficiency of water treatment and distribution, their profit motive often runs counter to goals of accessibility, affordability and equitable distribution.

Bottom-line, we are stuck with the DJB.

We need it whipped into shape, so that the Delhi-ites can get the water utility they deserve. It’s definitely a challenge, but very much possible.

We need a government in Delhi that gets it done. Actually, right now, just having a government would be nice.

Knock knock.

Whose there?

Will.

Will who?

Will you please move on to our next and final section?

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