Market forces could play a role in India’s water security
PremiumWe should guide demand for water-efficient products in ways that serve a larger public purpose
Water and sanitation have been important areas of focus in recent years for the central and state governments in India. Notable work has been done in providing water tap connections and improved sanitation facilities. One area of rising importance is water security. Around 600 million Indians face high to extreme water stress, as per a Niti Aayog report. With increasing population pressure and industrialization as well as urbanization, our water consumption is bound to rise. By 2025, water demand for irrigation is expected to grow by 14%, for domestic needs by 40% and for industrial use it is projected to double in comparison with 2015.
One area where India needs to act is achieving higher efficiency in water usage. A Global Water Intelligence (GWI) study showed that water loss in India is almost at 50%, which means that one litre of water saved at the consumption point eliminates the need to supply several litres from the main storage, as distribution losses are high. Water preservation is, therefore, important for conserving water.
Increasing water usage efficiency has been tried by other water-stressed countries as well. Countries like Singapore and Australia have created a market for water-efficient goods. Australia adopted the Water Efficiency Labelling and Standards Scheme (WELS) in 2005 with the aim of reducing water consumption by promoting the use of products and technologies that save water. Products are given a ‘water efficiency rating’, which enables customers to use water efficiency as a criteria in their purchases. This rating system has been used for appliances and water-using products such as showers, certain tap equipment, flow controllers, urinals, dishwashers and washing machines.
Over the years, sales of higher star rating machines in Australia have increased. This scheme is estimated to have saved 70,000 million litres of water in 2013 and projected to save 204,000 million litres per annum—equivalent to more than three-quarters of Melbourne’s total annual residential water use—by 2030. In turn, reduced water usage has also decreased electricity or gas use by Australians. Combined, these are predicted to lead to Australian households saving a whopping $26.3 billion by 2030.
Singapore introduced its Mandatory Water Efficiency Management Practices (MWEMP) in 2015 for commercial markets. Large water users are required to submit details of their water consumption, business activity indicators and water efficiency plans to the Public Utilities Board (PUB). With this data, water efficiency benchmarks for different sectors are developed. The PUB then develops good case studies for designing, maintaining and operating water-efficient buildings and plants. Internationally, increasing water usage efficiency is gaining traction, with the International Standard for Organisation creating the Water Efficiency Labelling Programmes in 2022 and Water Efficiency Management Systems in 2019.
One Indian example to learn from is our market for energy-efficient goods where product ‘star ratings’ have been successfully deployed. Research shows that Indian customers are aware of these energy-efficiency ratings and largely prefer air-conditioners with higher star ratings. These work thanks to awareness around eco-friendliness, and a clear quantifiable monetary benefit. A 5-star AC can help save up to ₹900 in electricity charges a month as compared to a 1-star AC.
Thus, there is good scope and a dire need for the national and state governments to design initiatives to raise water-usage efficiency by using market methods to influence demand and supply. A water rating system can be adopted to measure the flow rate, litres per flush or litres per wash. These ratings need to be simple for businesses to implement and clear enough for customers to understand. Technologies that reduce water flow and wastage without inconveniencing the consumer, like aerated nozzles on taps, can be encouraged through mandatory rating labels.
However, water ratings systems are not enough. To create a market for water efficient goods, we require demand at the individual level to be measured and linked to a sufficient economic cost. This means that existing initiatives around installing water meters would need to be fast-tracked, along with mandates to pay for one’s own water consumption. Prices can be higher in water stressed areas to increase the incentive for saving water. When consumers realize that water-efficient goods save them money, such goods would naturally see demand rise. This will nudge manufacturers to produce more water-efficient goods. However, metering and charging for water are deeply contested issues of water policy. Creating the political will to take action on sustainable water usage is an uphill task that might require both community and political engagement.
Creating a market for water efficient goods would be difficult but highly beneficial in achieving water security. While we have seen some intent with the formation of a National Bureau of Water Use Efficiency being proposed in 2020, there is a long road ahead. Apart from navigating the political nature of water usage, a multi-year coordinated effort across customers, governments and businesses is required to create a successful market. While major reforms in the Indian economy were implemented in the face of a financial crisis, can we afford to wait for a water crisis to begin water reforms?
Siddharth Desai & Omkar Sathe are, respectively, joint managing director of Kishor Pumps and a partner at CPC Analytics
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