BWSSB shows the way for India’s utilities

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The Bangalore utility’s financial reforms are helping it break the cycle of low revenues and low investment. GWI’s Rama Rastogi looks at the lessons for other Indian cities.

Financial reforms at Bangalore’s Water Supply and Sewerage Board (BWSSB) were recently recognised with a National Urban Water Award for “cost recovery through effective billing and collection”. The award reflects BWSSB’s achievement of increasing its resources to the point where they cover operation and maintenance expenses (the utility receives grants, but only for capital investments).

The city of Bangalore has 580,000 water connections for a population of close to 7.4 million. In common with other Indian utilities, BWSSB’s tariffs are decided by the state government, and are thus very much a political issue.

Difficulties in obtaining low-cost credit, divisive politics and constitutional restrictions on raising money from the stock market all serve to complicate the finances of Indian municipal utilities, which struggle with high operating ratios.

Inadequate service delivery leads to low collection of user fees and connection charges, which in turn leads to low revenues and thus low capital for investment in bettering services. The reforms undertaken by BWSSB are the first steps towards breaking this cycle – it has been able to increase its financial resources, enabling an investment in the automation of systems such as accounting processes.

“Administrative reforms have set the pace for the financial reforms at BWSSB”, executive engineer G.M. Shivaraju told GWI. As well as streamlining its accounting processes, the utility also worked on improving its relationship with the public. “The provision of spot billings and 24-hour automated payment kiosks has increased customer friendliness – and thus revenues paid,” added BWSSB chairman P.B. Ramamurthy. BWSSB is also gradually moving towards the adoption of international accounting standards to improve its credit ratings.

Reforms such as these have taken BWSSB’s collection efficiency from 70-80% in the 1990s to near 100% (see table), and according to chief administrative officer C.V. Prasad, the utility has saved an additional INR150 million ($3.2 million) a month through its efficiency drive.

Aside from revenue collection efficiency, unaccounted-for water (UFW) remains one of the biggest challenges for Indian utilities. Bangalore’s UFW stands at about 45%, mostly attributable to illegal connections and water usage through public standpipes (PSPs) in slums. “If the UFW comes down to 24-25%, our costs will go down substantially and we may break even at such a point,” said Prasad. The utility is planning to install 218 bulk flow meters to track water consumption.

There is also much scope for improvement across other cities. Hyderabad, Delhi, Bangalore and Nagpur all suffer from UFW levels in the region of 40%, while cities such as Chandigarh, Mumbai, Chennai and Jamshedpur have more acceptable UFW levels of between 15% and 25%. Here again, computerisation can help – BWSSB has used a Geographical Information System (GIS) since 2002, which details water supply, sewerage networks and consumers spread over 290 square kilometres, helping to track breakdowns, maintenance and project works efficiently.

Ultimately, utilities will have to find more ways of raising money. One option is to raise municipal bonds: so far, nine Indian cities have issued ‘munis’, with interest rates ranging from 5.5% to 11%. In addition, while international financial institutions such as the ADB, the World Bank and JICA have been willing in the past to provide loans at rates of less than 2%, the amounts have not been sufficient to break the cycle of low revenues and low investment.

S. Chary, a professor at the Administrative Staff College of India (ASCI), says that BWSSB’s success in establishing billing and collection best practices is one that needs to be followed by other utilities. “ASCI will facilitate the sharing of this learning between municipalities in roundtable sessions soon”, he told GWI.