11.

Conclusions: Looking
Back to Look Ahead
Tariff is an important tool of governance
of public services. It can bring in not only
economic but social and environmental
changes in the way water resources are
managed by the service provider as well as the
service users. Water provides a unique case for
regulation through tariff due to the plurality of
values attached to water as a resource. Tariff
system cannot be designed by treating water as
a pure commodity. It needs to integrate social,
political, environmental, cultural, aesthetic and
recreational values. There is a tendency to
segregate and isolate these values from one
another to allow better management of water.
For example, it is often said that tariff should be
determined purely based on economic concerns
by isolating it from other concerns. Social and
other non-economic values should be
addressed by some other policy instruments
such as allocation criteria or subsidy regime.
But there are reasons why such a segregated and
dis-integrated approach will not be useful in
long-term. The reasons for this can be found in
the understanding that water is totally different
than any other public service. This poses a great
challenge in managing and governing water.
The complexity around the multiplicity of
values attached to water is one of the major
challenges in water governance. Apart from
this, water as a mere physical resource also
poses serious challenges. It is a purely natural
resource managed through artificial man-made
structures. We cannot produce water. Water
availability is highly variable, both temporally
and spatially. It is fluid in nature and has a
natural gravitation-based flow. It evaporates
and seeps into the ground. It is highly connected

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Maharashtra Water Tariff Story

to other ecosystem components. It is a product

of ecosystem services. It is so strongly
embedded into the complex of web of
ecosystem that more we want to manage it
artificially more damage can happen to the
ecosystem services. Overall it can be said that
unlike other infrastructure services and
products water is a highly complex and difficult
to manage. It needs to be handled with extreme
care. Tariff being an important aspect of water
governance a similar care is needed while
designing the tariff system by giving due
consideration to all its facets.
The experience of the tariff determination
process in Maharashtra initiated by MWRRA
showcases the complexities involved in
developing a tariff system. This experience
gains importance due to the multiplicity of
issues and concerns that could be discussed and
considered in designing the tariff system. It
brings into focus the complexities, peculiarities
and challenges of water governance discussed
in the previous paragraphs. These broader
substantive issues came into picture during the
consultation process mainly because of the
participatory nature of the tariff process and
because the process was focussed on bulk
water instead of retail water supply. Bulk
water governance involves the water system
right from its source (such as the storage dam)
to its distribution network. Hence, it brings the
sense of resource unlike the sense of service
that dominates the discussion on retail water
tariff. Bulk water also brings into light the
dynamics between the major categories of
water users (industry, agriculture, domestic)
which also represents the major economic

sectors competing for the limited water

resource. It is in this context of broader issues of
water governance that the tariff process by
MWRRA needs to be seen.
The tariff determination process initiated
by MWRRA, being the first of its kind in India,
provides vital lessons in this regard. The
attempt in this report has been to look back to
look ahead. Thus, the analysis of the past
process and substantive issues around the tariff
process is undertaken in a critical way, not to
just keep indulging and digging out past
failures but to move on to develop a new vision
for the future. Thus, drawing constructive
lessons from the past is important.
There are several lessons from the
procedural and substantive analysis of the tariff
process. Procedural robustness has been
considered as one of the important dimension
of the legitimacy of independent regulators,
especially when such non-majoritarian
institutions are delegated with function of
policy making on issues pertaining to
distribution of costs and benefits (Prayas and
CSLG-JNU, 2007). Tariff is an instrument that
pertains to cost implications on water users and
distribution of the cost burden among the water
users. MWRRA is an independent regulatory
agency entrusted to make decisions on
distribution of these costs and benefits. Hence,
even the minor looking procedural lessons such
as publication of consultation documents in
local language or publishing a comprehensive
reasoned report, gains tremendous importance.
It is in these apparently small looking
procedural lacunas that the larger goal of
gaining legitimacy through procedural
robustness starts losing grounds in the minds of
the stakeholders and the public at large. It is
important to note that MWRRA was responsive

and not totally dismissive to the major demands

made related to enhancing the transparency,
accountability and participationthe three
pillars of procedural robustnessin the tariff
process. The stakeholder group that came
together in form of a loose civil society
coalition played an important role in opening
the spaces of public participation. This is an
important lesson in itself in all future regulatory
processes.
But there is another picture that can be
seen from looking at the broader implications of
the participatory process. The enhanced public
participation provided the grounds-view of the
various social and environmental aspects of
water tariff. It led to making the tariff system
more socially sensitive by ensuring
incorporation of several social criteria in tariff
determination. The overall cost burden on
agriculture, industry and domestic sectors was
also fixed in a way so that the prevalent crosssubsidy regime remains undisturbed. However,
these social-sensitization remained limited to
provision of concessions and did not translate
into the broader demand for basing the tariff on
the criteria of ensuring right to water for life and
livelihoods.
Another vital lesson to draw is that
MWRRA and the public at large lost an
important opportunity to ensure stronger
regulatory purview on financial aspects of
project development, management and
maintenance in water sector. This is the area
that forms the core of sectoral regulation and it
also forms the source of most of the
malpractices, irregularities, corruption and
inefficiencies that cripple the performance of
water sector today. Unfortunately this crucial
and most important dimension of regulation
remained untouched in the process conducted

Maharashtra Water Tariff Story

39

by MWRRA. Was this issue sidelined due to the

heavy focus on socially-relevant concessions?
Was it to be like this by the very design of the
tariff provisions in the MWRRA Act? Or was it
that the MWRRA was not ready to make any
such moves which will disturb the longestablished interests and networks within the
water bureaucracy and politics? More study is
needed to understand the real causes. But it is
clear from the analysis presented that there
were adequate grounds, especially based on the
argument for physical efficiency, to bring
financial aspects of projects under regulatory
purview of MWRRA. This shows how certain
crucial issues such as regulation of costs and
other financial aspects can go unaddressed,
especially when the debate on concessions
and subsidies get centre-staged. Financial
inefficiencies and irregularities will have
implications on the quality of infrastructure and
this in turn will affect the sustainability of
projects. If the public infrastructure fails it is the
disadvantaged sections of the society that will
be most affected, thus making the socialconcessions useless. Hence, regulating the
financial and costs related aspects of water
project/ service is the foundation on which all
other aspects of regulation can be built. Hence,
this area of regulation needs to be given equal
importance, if not more.
There are several instances, apart from
cost & financial regulation, where regulatory
mechanisms remained weak. More specifically
the regulatory process failed to deliver stronger
and effective regulatory mechanisms for
pollution control, water losses, water pilferagetheft, and wasteful use of water. Why does such
an elaborate and participatory process
supplemented by professional consultants does
not deliver on such crucial aspects? One
important lesson that can be drawn in this

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Maharashtra Water Tariff Story

regard is about the logical flow and consistency

in the process of designing regulations.
MWRRA started with a positive note by
allowing stakeholders to comment on the ToR
for consultancy assignment. The public
consultation was also initiated on the basis of an
approach paper and not on the basis of any
fixed proposed design of regulations. An
approach paper will provide more space for the
public to comment and suggest alternative
approaches and principles to be adopted before
going into the specifics. Thus, it opens more
spaces for thinking on alternative ways to
address the problem and also can allow
focussing on the principles or normative
concerns to address the problem. Starting a
consultation process with this thinking will
certainly allow a smooth and logically correct
flow of discussion and design of regulations.
The beginning of the tariff process
conducted by MWRRA seemed to be heading
in the correct direction. But it was not so. The
first draft approach paper prepared by the
Consultant was not really an approach paper.
It had a very short discussion on principles and
normative aspects of water tariff. Leaving aside
the discussion on the overall approach and
principle, the approach paper directly proposed
a concrete methodology for tariff determination
based on its cost-apportionment model. It
should be noted that the same cost
apportionment methodology was used till the
end of the consultation and also accepted in the
final criteria with some minor changes. Thus,
the whole consultation process along with
MWRRAs thinking was fixated to the costapportionment model and later on the
concessions to certain sections of water users.
The approach paper, which was supposed to be
actually giving rise to several methodological
options to be assessed, itself provided one

specific method that sealed the boundary of

discussion in the consultation process. It
became a fate-accompali. What is interesting to
note is that the approach paper was totally silent
on the crucial aspect of regulating financial and
cost related aspects of water projects and
services. Thus, the various rounds of
consultations did not bring any major structural
change in the light-handed regulation (on
governmental affairs of publicly-managed
water utility) assumed in the first approach
paper on all the crucial aspects of water tariff.
This probably explains the failure of this
process to deliver strong and effective
regulatory mechanisms on critical issues such
as costs, operations, water losses, pilferagethefts, water-use efficiency, pollution control
and other aspects.
These are some of the vital lessons to be
drawn from the first-ever regulatory process in
tariff. Independent regulators such as MWRRA
work in a very complex and challenging
governance and regulatory space. Although

such regulatory models are now well

operationalized in electricity sector, water is a
completely different terrain. Constraints and
compulsions arising from mainstream politics
in water sector are far intense than in any other
sector. But ways and mechanisms have to be
developed to overcome these constraints and
compulsions. Intense public participation for
regulatory design is one such way forward. The
initial experience related to water tariff is
encouraging in this direction. But the process is
constrained by the limitations of the larger
normative and governance framework in form
of the legal provisions. The participatory
regulatory design should begin at its source, i.e.
right at the level of the policy and law
formulation. An open, transparent,
participatory process of independent regulation
coupled with a legally coded pro-people and
pro-poor normative framework may provide a
new avenue of strengthening and protecting
public interest in water sector.

Maharashtra Water Tariff Story

41