Issues of Pricing Urban Water

With urban expansion and the growth of population, Indian cities are not able to supply water services that are adequate both quantitatively and qualitatively. Most urban water supply authorities prefer to respond to this demand deficit problem by augmenting existing supply via tapping new distant and often costlier water resources. However, there are obvious limits to this approach. It cannot be a permanent solution because it cannot be sustainable in the long run. The soft policy of supply augmentation ignores the role of pricing in water demand management. Water pricing is a complex problem because water is merit good. The pricing policy, therefore, intends to achieve number of objectives, which are often inconsistent of to each other. The objective of this to paper is to focus on the issues that are crucial for determining appropriate price policy and the need to initiate reforms therein.