4 min readJul 13, 2026 06:32 AM IST
First published on: Jul 13, 2026 at 06:32 AM IST
The Moody’s water management ratings, published in June, place India in the highest water-risk category. With 18 per cent of the world population, India has access to only about 4 per cent of global freshwater resources. In 2024, the Ministry of Jal Shakti announced that India’s per capita freshwater availability is shrinking over the decades. Urban demand, driven by population growth, commercial expansion, and changing lifestyles, continues to outpace supply. Yet one of the most powerful levers for influencing water reuse sits neglected: The water tariff. The low price of water in Indian cities is disconnected from the true cost of supply. At the Centre for Sustainable Development, with the Pune International Centre and Pune Knowledge Cluster, we studied the economics of urban water. The Jal Mulya project delved into the costs and prices of urban water supply and examined consumers’ willingness to pay for assured quality of drinking water. The results emphasise the role of tariffs in regulating water use.
Consider this paradox: Grey water, or domestic wastewater from washing, bathing, and kitchen use, can be treated and reused for toilet flushing, construction, gardening and other non-potable applications. However, freshwater is priced much less when compared to the cost of treating grey water. Why would someone invest in grey-water plumbing and recycling when fresh water is cheap?
Our research corroborates what is already known — water tariffs in cities are set, not on the basis of actual costs of abstraction, treatment, storage and distribution of good-quality water, but on the basis of what is politically tolerable. Part of the problem is ignorance, both among the public and the urban local bodies (ULB). Few, if any, ULBs undertake a full-cost accounting of their water operations. Non-revenue water (NRW), that is treated and supplied but lost to leakage or theft, routinely exceeds 30 per cent of total supply in many cities. This is water that has been paid for in terms of energy, chemicals, and infrastructure, but generates no revenue. When NRW remains invisible in accounts, there is no incentive to address it. A conversation about rational water pricing is nearly impossible because of the lack of credible data.
Our study refuted a recurring argument: Raising water tariffs will face consumer resistance. Consumers are willing to pay more for water, provided they are assured of its quality. This is not surprising. Those who buy bottled water for their homes and restaurants already show a willingness to pay more for assured quality. But in many cities, urban water utilities have forfeited the trust of their consumers by failing to deliver potable water on tap. The low tariff and the poor quality are mutually reinforcing: ULBs cannot raise the tariff without improving the service, and vice versa. As a result, households and offices resort to domestic water purifiers. Citizens end up paying twice: Through water tariffs and in the purchase and maintenance of equipment.
But this cost is not borne equally. Our research showed that the lower economic classes either consume from the tap, risking their health, or spend a disproportionate part of their income in buying water. Moreover, we noted that higher-income groups consume substantially more water than lower-income households.
Urban India turns nearly 80 per cent of its daily water into sewage. A rational water economy would treat grey water as an asset: Collect it separately, treat it to appropriate standards, and price it for non-potable uses that reflect its cost and value. This has a double effect of lowering freshwater demand and reducing the sewage that is released. But for grey water markets to be viable, freshwater pricing must be rational.
ULBs must undertake and publish full-cost accounting of their water operations, so that the embedded subsidy is visible and accountable. Equity goals must underpin tariff structures. Lifeline quantities per capita have to remain subsidised for all, while progressive pricing should discourage frivolous consumption.
A monsoon-based country like India cannot overcome water stress without getting the price of water right. The opportunity to build a circular urban water economy is here already. The price of water is not an economic question. In a water-scarce country, it is a question of justice.
The writer is director, Centre for Sustainable Development, Gokhale Institute of Politics and Economics, Pune
The price of water is not an economic question. In a water-scarce country, it is a question of justice. 
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