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Background

1. Unlike developed nations where water-supplies are governed by an independent sector Regulator, most developing countries have unregulated water-supplies.

2. The absence of a Regulator implies possibility of political interference in the operations of water supplies.  

3. Local politicians acting as elected municipal representatives tend to pressurize municipal authorities to keep water tariffs low, as this has positive influence on popular vote-banks who wish to have low-tariffs as consumers

4. This implies loss-making services due to political interference resulting in continued dependence over subsidies and in sector mis-governance.

5. Absence of Regulator in water supply services also implies that data for planning and policy-making is not collected regularly. This implies that municipal authorities have no idea of future planning or setting of concrete goals to achieve.

6. Linkages exist between missing Regulation and failure to collect municipal operational-data, preventing scientific analysis and planning of sector. This implies that the basis for sound water sector planning and policy doesn’t exist, and services are run in adhoc manner furthering the sector chaos and mis-goveranance.

7. Lack of data collection implies that under-performances of municipalities remain unmeasured. This combined with lack of incentives to improve services implies persistence of poor services and water supply operations.

8. With relative performances unknown, there is  lack of competition amongst water supply municipalities and hence lack of goals and targets for improvement.

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Regulatory Challenges in the Indian Water Supplies

Four specific impacts illustrated below arise as a consequence of the missing sector Regulator.  Associated challenges that arise need to be engaged and perused by the policy-makers for improving the  water supply services.

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Methodology

[1] Water-supply data from 199 municipalities in India with populations more than 0.05 million was collected and analyzed

[2] Major water-supply parameters comprised performance indicators such as Water looses (Non-revenue water), Operating Expenditures, Length of Distribution network, Water Produced, Av. hrs of supply per day, and Population covered by water supply.

[3] These water-supply indicators were integrated to evolve comprehensive relative performance measures using data envelopment analysis

[4] Inferences from the analysis were used to evolve reasons for poor municipal performances in view of the fact that sector Regulator is non-existent.

Data Source

Data was collected from the studies undertaken by the  Central Public Health and Environmental Engineering Organization, India . The database Performance Assessment System PAS Project at CEPT University Ahmadabad also provided  comprehensive  database of urban water supplies. Year 2005 database from CPHEEO (CPHEEO, 2005) was used as the base year, followed by the 2011-2013 database of PAS (PAS,2014) as the panel data.

Model specification and DEA Methodology

Data Envelopment Analysis (DEA), a non-parametric mathematical approach for estimating relative inefficiencies  has been employed in the present analysis (Charnes et al, 1978; Banker et al , 1984). An input oriented approach was followed.

DEA-based Mailmquist Index was applied (Amulya and Kulshrestha, 2017) to evaluate increase in  tariffs required from a scientific perspective.

Four different Models were employed with details as illustrated below:

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Analysis and Results

The Sample Characteristics for the 199 municipalities (CPHEEO, 2005) are illustrated below in Table 1

This data availability on consistent set of given indicators reduced to just 71 during the years 2011-13, as data was either collected on differing sets of indicators, or remins uncollected over the years. 

This implies that the data which forms the basis of all planning and policy, is not collected  regularly , and on predefined and fixed sets of parameters. In absence of such data there remains little basis for scientific planning and policy-making for the sector.

Table 2. shows the efficiency ranges for municipalities. It is evident that Efficiencies are very low, and in the 3 models out of 4, more than 60% of the municipalities have relative  efficiencies below even 25%, indicating prevalence of high inefficiencies in the sector.

Table 3 illustrates the savings possible in the water supply operations, in case the municipalities were to improve their efficiencies as per the sector best practices. It is evident that large savings are possible wherein 41% of operational expenditure can be save and 31% of water losses can be curtailed for the social good.

This was followed by an application of Malmquist index for the panel data. The results indicated that tariffs on an average needed an upward revision of upto 5% a year over the next 10 years for the municipalities to avoid losses and dependence on the government subsidies. 

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Introduction and Objectives

Unlike developed nations where water-supplies are governed by an independent sector Regulator, most developing-countries have unregulated water-supplies. As a result, the sector governence lacks professionalism and sector becomes infested in service inefficiencies.

This poster focuses on unwarranted consequences of missing regulation by seeking to answer the following questions:

1. Does absence of a Regulator imply political interference in governance by way of tinkering with tariffs leading to loss-making services reflected in large subsidies?

2.  Does absence of Regulator imply lack-of-competition / underperformance due to non-measurement of relative-performances?

3. Does linkage between the missing Regulation and failure to collect municipal operational-data prevent scientific-analysis of sector-issues?

4.  Does absence of a Regulator imply thet the water-sector planning/services are run in adhoc manner leading to sector mis-goveranance and inefficiencies of operation?

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Conclusions & Recommendations

1. Absence of Regulator implies politial interference in governance. Majority of municipalities depend on subsidies due to mounting financial-losses attributed to political interference wherein elected-representatives decide to keep tariffs unreasonably low to garner political advantage/votes. A dedicated, independent regulator would have ensured tariffs based on cost-pricing / scientific-data / municipal-performances  / people’s capacity-to-pay.

2. DEA-based    Mathematical-model indicated poor municipal-performances with 60% of municipalities exhibiting efficiencies below 25% in 3 out of 4 model formulations. Non-existent regulatory-mechanism ensures inefficiencies remain unmeasured/unknown, while sector remains intrinsically poorly-performing/mismanaged.

3.  The Absence of Regulator implies absence of relative-competition amongst  the municipalities who remain unconnected and unconcerned of sector best-practices

4. The absence of a sector Regulator implies that tariffs stagnate at the same levels for years. There is need to increse these tariffs upto 5% annually to decrese dependence of municipalities on governemnt subsidies. Such factors also make water supply operations  inefficient. 

5. The Impact of non-existent sector-regulator spells inconsistencies in data-collection, endemic across developing countries. This study revealed that if data was collected on increasing numbers of indicators for greater accuracy, data availability decreases drastically. Hence, For the 6 indicators employed in this study, data was available for only 71 out of 199 municipalities, a big difference in 7 years time.

6. The absence of regulator implies water-sector planning and services run in adhoc manner as there remains little basis for sector-planning in absence of consistent/regular data-collection. 

7. Lack of data also hinders scientific-analysis of problems that remain unresolved fuelling public discontent.

Summing Up

Results confirmed that absence of Regulator leads to sector mis-governance. There needs to be an independent mechanism to regulate water-supplies.

This study indicates that water-supply operations in developing-economies like India need to incorporate provisioning of an independent sector-Regulator for sound governance.

This will ensure that water-supply operations become efficient, consumers get benefitted, and municipalities become self-reliant to shun subsidies. This will also ensure that water-supply operations become transparent, and collect operational data regularly in terms of predefined indicators forming a basis for sound planning and policy. This will lead to good governance and wide consumer satisfaction resulting in municipalities that make profits which can be passed on for connecting the poor to water-supplies for common  good of the society.

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