A thesis submitted in partial fulfillment of the requirements for the degree of Master of Science, School of Environment, Resources and Development

Thesis (M. Sc.) - Asian Institute of Technology, 1996

Increasing urbanisation and resulting environmental degradation in the Third World cities has drawn attention of policy makers, researchers, academicians and all those concerned, to look for alternative approaches for management of cities. Effective utilization of regulatory and economic instruments has emerged as one of the approaches to address the growing problem of environmental degradation in cities. This study explores the applications of regulatory and economic instruments in key urban service sector of water supply for the city of Delhi. Although there has been continuous augmentation of water supply in Delhi, the spatial variations in availability of water across the city continues. Poor quality and limited availability of water along with inadequate sewerage facilities have affected the health of residents in many pruts of the city. The investigation of this study shows the inequitable distribution of water supply spatially across the city. This combined with the inadequate sewage and wastewater treatment facilities are seriously affecting the health of the citizens of Delhi. Because of increasing pressure of population and economic activities, the demand of water has always been more than the supply. The situation is even worse with sewerage facilities. The resulting situation leaves a large section of the urban dwellers deprived of these basic services. This has forced many citizens of Delhi to make their own ru1·angements to ensure a minimum level of service at a considerable cost. To understand these arrangements and identify the related expenditures, a primary survey was conducted in eight selected localities, which represent different income groups, of South Delhi. The study presents such a:r,rangements and investments made by the individual households of different income groups to maintain an affordable quality of these services. The health impacts of the .existing water supply and sewerage services and associated expenditures in the surveyed localities ru·e also documented. Taking the expenditure on these rurnngements and the impact of the quality of water supply and sewerage facilities on the health, an estimation of average monthly expenditure is made. Based on these estimates, it is shown that the actual cost of these services is much higher than what the citizens pay to the Delhi Water Supply and Sewage Disposal Unde1taking. These individual investments reflect the households' capacity to invest in maintaining an affordable level of these services. Such investments, thus, show the opportunities that exist but have remained untapped so far because of ineffective use of regulatory and economic instruments. The study identifies key potential areas where the regulatory and economic instruments can be applied for better provision and management of these services. It suggests applications of a mix of regulatory (permits and licenses) and economic instruments (user charges and subsidies). The proposed instruments and problems envisaged in their implementation are also discussed.