How to regulate the water sector

Many countries have established an independent water regulatory authority (WRA) and a decentralized water management system, with the government acting as a coordinator.

An ideal framework of independent regulation minimizes political interference in the sector, ensures technical expertise and efficiency, and ensures a level playing field for private actors.

In India, several policy initiatives have been undertaken in recent years to introduce independent regulation in the water sector. The National Water Policy (NWP) 2012 strongly encourages the creation of “autonomous” water regulatory bodies for fair water pricing and cost recovery.

14. The Finance Commission (2015) also recommended that states should consider establishing statutory water regulators so that prices for water for domestic purposes, irrigation and other uses can be set independently and in a reasonable manner.

Maharashtra is the first state to enact the Water Regulatory Authority Act in 2005, followed by 11 other states – Arunachal Pradesh (2006), Uttar Pradesh (2008), Andhra Pradesh (2009), Jammu and Kashmir (2010 ), Kerala (by Ordinance, 2012), Gujarat (after notification, 2012), Punjab (2020), Haryana (2020), Telangana (2009), Uttarakhand (2013) and Jharkhand (2014).

Unfortunately, only four states – Maharashtra, Haryana, Punjab and J&K – have a water regulatory authority.

Legal framework

In each independent regulation, the Water Regulatory Authority (WRA) should perform basic functions, recommendation and advisory functions.

Table 1 shows that there is no uniformity in the legislative framework across states. Moreover, there is no model central legislation in the water sector as we have seen in the electricity sector. There is no consensus among states even on the model regulatory framework developed by the erstwhile Planning Commission (2011).

As a result, there is no uniform approach to adopting water regulatory frameworks in India, and each state has independently enacted WRA legislation. There is also no transparent process for selecting WRA members in individual states. The position of chairman of the WRA is dominated by bureaucracy.

Minimal attention was given to ensuring transparency of the regulatory process, accountability of the regulator and facilitating participation of water sector stakeholders.

States have also failed to adopt many of the basic functions of independent regulation in the water sector. These include: protecting consumer interests, setting safety standards, resolving disputes and disagreements between interested parties, promoting competition, promoting savings in the provision of water and sewage services, and establishing rules regarding the terms of concessions.

The current regulatory framework also does not strike a balance between a ‘market-based’ approach and ‘government social engagement’.

Action program

The adoption of non-uniform regulations regulating water management by various countries shows that there is a need to adopt a draft model law in this area. The Center should build a consensus to develop a model bill after due consultations with key water sector players, including states and other stakeholders.

Secondly, the model bill should define the various functions of the WRA and also deal with its autonomy, accountability, powers and relationship with the government; in the case of autonomy, there should be provisions on the transparent selection of regulators, the qualification and disqualification of members, the commercial employment of members, the term of office of members, the reappointment of members, the transparent removal of members, the power to employ the best experts by the regulator and the existence of a Regulatory Fund. There should be a National Water Resources Board, the highest policy-making body, whose policy functions should relate to the overall management of the water sector.

Third, once the model regulatory framework has been agreed at all levels, including the state level, there is a need to enact central legislation before its adoption by states. Since water is a state subject, the development of central legislation will require reference to Art. 249 or 252 of the Constitution for consideration by the Parliament.

Fourth, a high degree of political commitment at all levels is needed to ensure the success of independent regulation in the water sector.

The author is Distinguished Fellow of Energy and Resources Institute (TERI) and former Secretary, Union Ministry of Water Resources