Kerala Water Authority (KWA) hopes to net nearly Rs. 250 crore annually from the proposed water tariff hike which is awaiting government approval.

The Authority is anticipating a deficit of Rs. 258 crore in the current year and this is likely to increase further with the commissioning of the JICA-funded drinking water project and other ongoing projects. The authority usually managed the deficit with grants from the government. However, the amount of grants has been remaining almost the same for the past two years while its production costs are going up.

The gap between average cost and average returns on water supplied was Rs. 2.11 a unit during 2009-10. This is projected to increase to Rs. 4.98 a unit this year with production cost increasing from Rs. 11.11 a unit in 2009-10 to Rs. 14.89 a unit. (The average revenue from a unit of water was Rs. 9 in 2009-10. It is expected to be Rs. 9.91 this year without increase in tariff.)

The Authority notes that if the gap persisted, capital works will suffer because of diversion of plant funds for meeting non-plan expenditure. Delays in execution of works will result in cost and time overrun. It could also lead to default in payment of power charges inviting penal charges and disconnection of supply. Inadequate allocation of funds for preventive maintenance would cause frequent interruption to water supply and high incidence of unaccounted water (owing to leakage).

It feels that the Authority had almost reached saturation stage in revenue recovery. The potential for collection this year from water charges was about Rs. 300 crore. The government grants expected was only of Rs. 155 crore whereas the total production cost would mount to Rs. 774 crore. There will be some Central grants and other income amounting to about Rs. 40 crore. It could also augment the revenue by reducing percentage of unaccounted water. But, that would help to cover only ten per cent of the deficit.

Asked about the Authority’s plan to have only moderate increase in tariffs for high end users (40 per cent for high end users including industrial users while the rates for domestic users are proposed to be increased by up to 150 per cent), Managing Director Ashok Singh said that the Authority did not want to lose its high end customers. A very high rate would result in their seeking alternate sources.

Mr. Singh said that the KWA faced large repayment commitments on its loans. Besides, it was paying Rs. 22.5 crore annually as loan guarantee commission to the State government. There was a proposal that the loans availed by the KWA from agencies such as JICA and LIC, which were routed through the government, might be converted into government equity, since no increase in grants was contemplated.