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Pricing Water In An Age Of Shortage

Pricing Water In An Age Of Shortage

Reporter ,  05-Feb-10

Experts have predicted that the next world war will be fought over control of the world’s most important asset – water. Clean drinking water is a challenge that governments the world over are facing even now, with a number of initiatives taking place like desalination, rainwater conservation and so on. But Asit Biswas who runs the Third World Center for Water Management says the looming water crisis is not about scarcity but about mismanagement. His solution is simple – Water has to have a price, anything that is free ceases to hold value in the eyes of the user.

Biswas and his think center, based out of Mexico City, advise governments on water management, as well as working with aid agencies and international foundations in the area of water conservation. According to statistics, 70% of water is used in agriculture, 16% in industry and 14% by households. A recent study shows that demand for water is likely to go up by 40% in the next 20 years, and in the developing countries by as much as 50%. The economies most dependent on water are those that have the ones with the lowest yielding farms, in India, China and sub-Saharan Africa. Even as demand for food increases, 30% of the world’s cereal production could be lost due to water shortage.

But all is not lost, says Biswas. Water, unlike oil, is a resource that can be recovered and can be reused over and over again. With improved technology, the cost of desalination has gone down, and coupled with the more efficient industrial processes of today, water conservation and reutilization makes sense. The main problem lies in the usage of water by countries in their domestic consumption. This is where the biggest problem lies. However, governments will never blame the situation on their ineptitude.

Biswas says there is a lobby of activists that insists water should be free, but he argues, food has been declared a fundamental right and yet people pay for it, so what stops people from paying for water? In fact, it is often the poor who pay the most for water, with the cost of water from private vendors in places like Mexico as much as 8 times what the wealthy in developed countries pay. Instead, Biswas suggests a tiered payment structure. Each household receives a fixed quota at a low rate, and pays in higher rates for every additional liter consumed. Only this kind of pricing would encourage people to consume and thus waste less.

Another aspect is the average level of unaccounted for water. The worldwide average is around 30%, but efficient water management in places like Phnom Penh has brought it down to 7%. The biggest problem is the political interference that affects efficient utilization. Biswas gives the example of India. In the 70s, to promote agriculture, India under the aegis of the World Bank gave free power to farmers. The result was that pumps were running 24 hours and the water table was depleted as wells kept getting deeper. And today, no farmer will pay for electricity. Instead, India should be looking at better food processing – freezing, canning or dehydrating. The penetration of these is less than 2% of the produce, while India loses almost 50% of its output in wastage due to the lack of processing.

Water, or any scarce good, will only be appreciated when it commands a price that is realistic to its availability. The sooner such a model is implemented, the more secure will it be for future generations to use.    

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