In India, managing the current demand and planning for future water demand in urban areas is becoming a major challenge for urban water supply authorities. According to current figures by the World Health Organisation, 10% in urban areas in India still do not have access to improved water supply.

Major supply and demand related factors such as water scarcity due to depletion and degradation of water resources, irregular rainfall patterns, increasing demand among the rich in urban areas, low willingness to pay for poor quality supply, scarcity of budgetary resources and other institutional and political factors have posed challenges to managing water resources .

Informal water markets in India

The paper titled 'Informal water markets and willingness to pay for water: A case study of the urban poor in Chennai City, India' published in the International Journal of Water Resources Development, informs that this gap in water supply has led to the emergence of private water markets in India. However, these continue to be largely informal in nature with no proper monitoring or control by regulatory agencies.

Informal markets are also characterised by inequality in supply, poor quality of water and exploitation of groundwater causing a negative impact on other users. Though they are expanding rapidly in urban areas in developing countries, adequate attention has not yet been paid to the relationship between informal water markets and the urban poor. These markets include various types of service providers such as tanker trucks as well as small suppliers that deliver water in plastic cans, bottles, sachets, etc to a large number of consumers. These small suppliers have expanded their activities in Chennai, creating a huge market for drinking water in recent years.

Individual consumers buy water sold in sachets and bottles, while households buy can water from the small suppliers. Although a number of households from upper and middle income locations have been found to purchase can water, there is no authentic information about how many households in poor locations do this in Chennai and also on the contribution that the can water sector makes in meeting the drinking water requirements at the household level in low income households.

The paper describes the findings of a study that analysed the role of informal water markets in fulfilling the water needs of the low income households in Chennai. 302 randomly selected households from ward 155 of Zone 10 in the city were interviewed.

Findings of the study

• Households collected water from five different sources namely public taps, hand pumps, individual house connections, their own borewells and private vendors.
• In the case of individual house connections, the supply lines ended up in an underground sump constructed within the premises of the household from which water was pumped through a motor pump to an overhead tank. The sump acted as a storage device and minimised any reduction in water use arising from irregular supply.
• Households with their own borewells used groundwater only for those activities that did not need high quality water since the groundwater in the area was brackish because of seawater intrusion.
• A large percentage of the households depended on public sources for their water needs while 49% of these also purchased water from private vendors to meet their drinking water needs.
• A significant number of households obtained their supply from more than one source. For example, some of the households collecting water from public taps also purchased water from private vendors, or got water from individual connections, handpumps as well as their own borewells.
• The highest income category had the lowest level of per capita water available per day. This was because high income households bought larger quantities of water from private vendors rather than collecting 'poor quality' water from public sources.
• Although water supplied through public taps and hand pumps was ‘free’ for which users made no payment to the government, households had to pay some amount on a regular basis to rent seekers (usually, water distributors at the street level, and local officials seeking bribes from the beneficiaries of public water supply) to ensure a continuous and adequate supply of water. This payment was purely informal. In certain locations, agents collected bribes from users and transferred them to the rent seekers while in other locations, households themselves collected the bribe and handed it over to the rent seekers.
• On average, the households spend 2.76% of their monthly income on water while those purchasing water from private vendors spent 5.55% of their income on private water, and a total of 6.23% of their income on all sources of water besides opportunity costs in terms of time spent collecting water from public sources.
• On average, a household used 317 litres of water per month, mostly for drinking.
• A high proportion of respondents were however found to be unwilling to pay for an improved water scheme in the area.

The study ends by arguing that government agencies need to make adequate efforts to improve the public water supply and come up with a tariff policy which can enhance not only household accountability but also the social welfare of low income households. Regulating the informal water markets and monitoring their functions is also important until public supplies are improved so that they can play a supplementary role in meeting the water needs of the urban poor.