Water Tariff, Arrears and a Proposed Rate Cut
Ganeshpura Gram Panchayat runs a piped drinking-water scheme with 640 domestic connections. The monthly tariff fixed by the panchayat is ₹60 for a half-inch connection, ₹90 for three-quarter-inch and ₹140 for one inch. At present 400 connections are half-inch, 180 are three-quarter-inch and 60 are one inch. The panchayat's records show that 20 per cent of the connections in each category are in arrears of four months - that is, four monthly bills remain unpaid, the latest bill being one month old. The panchayat's rules provide a simple penalty of 2 per cent per month on each unpaid monthly bill, counted from its due date. The annual operation and maintenance cost of the scheme - pump electricity, two operators' wages, repairs and chlorination - is ₹5,28,000. In the last financial year the panchayat could actually collect only 78 per cent of the total annual demand. The Sarpanch wants to know whether the tariff can be reduced by 10 per cent this year.
1. Compute the monthly and annual water demand of the scheme, showing category-wise figures.
Read the worked answer
Monthly demand by category
- Half-inch: 400 × ₹60 = ₹24,000
- Three-quarter-inch: 180 × ₹90 = ₹16,200
- One inch: 60 × ₹140 = ₹8,400
- Total monthly demand = ₹48,600
Check the connection count: 400 + 180 + 60 = 640, which matches the register.
Annual demand: ₹48,600 × 12 = ₹5,83,200.
Category shares: half-inch connections are 62.5 per cent of connections but contribute ₹24,000 of ₹48,600, i.e. about 49.4 per cent of demand; one-inch connections are 9.4 per cent of connections but contribute 17.3 per cent of demand.
That distribution matters for the Sarpanch's question: a flat 10 per cent cut on all slabs gives the largest rupee relief to the 60 one-inch consumers, who already pay the most, and the smallest to the 400 half-inch consumers, who are the majority. Any decision on the tariff should therefore be taken slab-wise, not as a uniform percentage.
2. Compute the principal arrears and the penalty recoverable from the defaulting connections.
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Defaulters at 20 per cent of each category
- Half-inch: 80 connections × ₹60 = ₹4,800 per month
- Three-quarter-inch: 36 × ₹90 = ₹3,240 per month
- One inch: 12 × ₹140 = ₹1,680 per month
- Total defaulting demand = ₹9,720 per month
Principal arrears for four months: ₹9,720 × 4 = ₹38,880.
Penalty: each month's bill carries 2 per cent per month from its due date. The four unpaid bills are respectively 4, 3, 2 and 1 month old, so the bill-months of delay are 4 + 3 + 2 + 1 = 10. Bill-months = ₹9,720 × 10 = ₹97,200; penalty = 2% of ₹97,200 = ₹1,944.
Total recoverable: ₹38,880 + ₹1,944 = ₹40,824.
Note the trap: applying 2 per cent to the whole ₹38,880 for four months (₹3,110) overstates the penalty, because the newer bills have not been outstanding for four months. Penalty must be computed bill by bill.
3. Using the figures, advise the Sarpanch on the proposed 10 per cent cut and on what the panchayat should do instead.
Read the worked answer
Present position: demand ₹5,83,200; collection at 78 per cent = ₹4,54,896; O&M cost ₹5,28,000; deficit = ₹73,104, i.e. about 13.8 per cent of cost. The scheme is already running at a loss.
Effect of a 10 per cent cut: demand falls to ₹5,24,880. At the same 78 per cent collection, receipts fall to ₹4,09,406, and the deficit widens to ₹1,18,594 - a 62 per cent jump in the gap. The cut is not affordable.
Breakeven point today: ₹5,28,000 ÷ ₹5,83,200 = 90.5 per cent collection efficiency. So the answer is collection, not tariff.
What the panchayat should do:
- Issue demand notices and a 15-day final reminder to the 128 defaulters, with the penalty figure stated.
- Adopt doorstep or hamlet-level collection camps, since default is spread evenly across categories and is probably a habit rather than an inability to pay.
- Report recovery to the general body monthly and publish a defaulter list before any disconnection.
- Protect small consumers: if relief is given, give it on the half-inch slab, and recover it from the one-inch slab, not by a flat cut.