While the AAP’s focus on universal access to water is commendable, its economic plan for free water is not. While the AAP’s focus on universal access to water is commendable, its economic plan for free water is not.

The recently announced results of the Delhi election shocked everyone — probably even Arvind Kejriwal himself. The overwhelming mandate of 67 out of 70 seats has put immense pressure and responsibility on Kejriwal and the AAP to follow through with their promises. The Jan Lokpal Bill, full statehood to Delhi, free WiFi, 15 lakh CCTV cameras, free bijli-paani are just some of the populist promises contained in a 70-point manifesto.

Was the resounding AAP victory because of its populism or something else — especially the frustration and anger at the non-delivery of basic services for all residents, rich, poor and the middle class? Add the inefficient and corrupt practices followed by the MCD (BJP-ruled) and the hafta practices of Delhi Police, and you have a solid basis for booting out the old and drafting in the new. Therefore, while policies targeted at the poor are always welcome, they are reminiscent of the practices of old government (all puns intended), and not the new promised by the AAP. From the latter, we expect delivery and performance.

Of the 70-point programme, we intend to examine, in some detail, the “intellectual” and “economic” origins of one of the AAP’s defining policies — free water for all. Water is a necessity. Its demand is little influenced by price or income. While the AAP’s focus on universal access to water is commendable, its economic plan for free water is not.

The AAP policy of free “lifeline water” is the provision of 20 kilolitres (kl) of free water per month to every household with a metered connection. But, according to a 2013 CAG report, nearly 25 per cent of the households (8.3 lakh households) did not have access to piped water (see table). Unlikely that those without access to water were not poor; according to a poverty line that is 50 per cent above the Tendulkar poverty line, 25 per cent of the residents of Delhi are absolutely poor. And the AAP policy of free water does zilch to help these most needy residents at this point in time.

Among these water-free households, 6.2 lakh were provided water through tankers with an average per capita supply of only 3.82 litres per day. Moreover, 6.2 per cent of these households do not receive any water, through tankers or piped connections. But, like Marie Antoinette, these residents are supposed to drink tea from imaginary free water supplied to them by the AAP. Free water for the rich and the middle class, but not the poor?

But there are further problems with the AAP’s pro-poor (but in name only) water policy. Any additional consumption (over 20 kl) would result in the household having to pay for the entire amount of water consumed, that is, anyone consuming 20.1 kl would pay for 20.1 kl as opposed to the additional 0.1 kl. This is, in essence, an “infinite tax” policy, the likes of which has never been practised in the world, not even in the world of voodoo economics. Instead of reducing corruption, this policy will lead to greater corruption — households will have an incentive to tamper with meters to ensure that they show less consumption than the infinite tax level.

So, from where did the AAP get its idea of provision of free water? Extensive perusal of the literature does yield an example of a very distant but “similar” water policy. More than a decade ago, in 2000, President Thabo Mbeki of South Africa (SA) outlined the following water policy: All poor South Africans should receive 6 kl of water for free per month; for any additional consumption, the household would be charged for the entire amount. An infinite tax, yes — but a non-binding one.

Note that the SA limit of 6 kl is less than one-third of the AAP level (20 kl). Also, the SA policy was based on a household size of eight as opposed to five for the AAP. Converting these numbers into per person per day (pppd) values, SA’s policy mandated 25 litres pppd whereas the AAP’s policy is almost six times that value — 135 litres pppd. Most importantly, there was clear targeting of poor people in the SA policy. The AAP policy, on the other hand, targets the rich and results in a transfer of money from the larger size, poorer households to the smaller size, richer households (see table). The AAP policy is a “reverse Robin Hood” strategy , plain and simple (see ‘Kejriwal’s waterfront’, IE, January 4, 2014). So how is this policy any different from the ill-conceived and ill-fated “dole-economics” of the Congress-UPA?

Our suggestion is to scrap the free water policy for all and instead target poor localities and the localities with no access to piped water. Ideally, the poor should not have a problem paying for water, as they are currently paying exorbitant amounts to procure water from tankers. This targeting is one of the easiest to achieve, as poorer localities are already known and thus can be effortlessly directed through the water connection. Such targeting would be as straightforward as imposing a head tax, that is, impossible to avoid and impossible to arbitrate. Water is unlikely to be carried from poor localities to the rich. (Incidentally, the head tax is so named because if someone did not pay, then a simple medieval solution was, “off with their head”!).

If the AAP government is able to provide piped water connections to all, then that itself will be a big achievement. While Kejriwal has stated that “all group housing societies that are not connected with [the] DJB supply network shall be connected with the DJB water pipes within a month of formation of the AAP government”, it has to ensure the same for all of Delhi. And this will not be cheap. A statement by the AAP after the Delhi budget in 2014 said: “Even by the most conservative estimates, at least Rs 3,000 crore would be required to lay down the network for piped water in just some parts of the city.” With the free water policy as well, this amount will rise to approximately Rs 3,500 crore. That is, almost 10 per cent of the current budget in Delhi.

While there is no doubt that the AAP has chosen issues that are relevant to the people through its Delhi Dialogue series, it is not clear whether much research was carried out to design its policies. If it had, it would not be enunciating voodoo policies for problems that can be tackled in a straightforward manner. There is simply no need, political or economic, to provide free water. A basic question: what would the poor prefer — free or cheap water for two hours or water all day at a higher price or, equivalently, electricity 24/7 or two hours of electricity for half the price?

Along with its other promises (the more sensible ones), such as water accounting and quality monitoring, building community toilets, improving education and health infrastructure, adequate street lighting, the new AAP government will be in a severe financial crunch if doesn’t start prioritising on what policies are actually effective and will benefit Delhi in the long term (or at least in the next five years). Populism does not pay — it never does. Time for the AAP to start concentrating on delivery and performance. If it does, both the AAP and Delhi will benefit enormously.

Bhalla is co-author with Ankur Choudhary of the recently released book ‘Criconomics: Everything You Wanted to Know About ODI Cricket and More’. Prasanthi is an economist at Oxus Investments

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