Water sector in India:

Overview and focus areas

for the future
PanIIT Conclave 2010

kpmg.com/in

India, home to 16 percent of the worlds population, has only

2.5 percent of the worlds land area and 4 percent of the worlds
water resources at its disposal. Precipitation in the form of rain
and snowfall provide over 4,000 trillion liters of fresh water to
India1. Most of this freshwater returns to the seas and ocean via
the many large rivers flowing across the subcontinent. A portion
of this water is absorbed by the soil and is stored in underground
aquifers. A much smaller percentage is stored in inland water
bodies both natural (lakes and ponds) and man-made (tanks and
reservoirs). Of the 1,869 trillion liters of water reserves, only an
estimated 1,122 trillion liters can be exploited due to topographic
constraints and distribution effects2. The demand for water has
been increasing at a high pace in the past few decades. The
current consumption in the country is approximately 581 trillion
liters with irrigation requirements accounting for a staggering 89
percent followed by domestic use at 7 percent and industrial use
at 4 percent3.

Critical Issues in India

Graph 1: Demand vs. supply curve in India
1600
1400

billion cubic meter

Burgeoning demand for water

Demand in the country is projected to
very soon overtake the availability of
water. In some regions of the country, it
has already happened. Graph 1 shows
the likely trend of growth in demand.
The rapid increase in population,
urbanization and industrialization has
led to a significant increase in water
requirement. In the next decade the
demand in water is expected to grow
by 20 percent, fueled primarily by the
industrial requirements which are
projected to double from 23.2 trillion
liters at present to 47 trillion liters.
Domestic demand is expected to grow
by 40 percent from 41 to 55 trillion
liters while irrigation will require only
14 percent more ten years hence, 592
trillion liters up from 517 trillion liters
currently4.

1200
1000
800
600
400
200
0
1988-92

1998-022
Wate r S upply

010E

2025E

2050E

Wate r De ma nd

Source: Standing Sub-committee of Ministry of Water Resources, Development

Alternatives, KPMG Analysis

1 Technology Mission Plan Document Union Ministry of Science & Technology

2 Ministry of Water Resources, Development Alternatives
3 NCIWRD, Report of the Working Group on Water Resources for the XIth Five Year Plan, KPMG Analysis
4 NCIWRD, Ministry of Water Resources, KPMG Analysis

2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

The per capita availability of water has

significantly come down and is likely to
come down further with the growing
population and demand. As per the
Ministry of Water Resources per capita
water availability in 2025 and 2050 is
estimated to come down by almost 36
percent and 60 percent respectively of
the 2001 levels.

Graph 2: Per capita water availability in India

2000

Actu al

6000

Fo re cast

1500
4000
1000
2000
500

0
1951

1955

19912

2001

025

2050

Percapita wate r availabilit y (cub ic met er s)

Popu lation (Millio n)
Source: KPMG Analysis of data from Census of India, Ministry of Water Resources, Development Alternatives

2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

On an absolute basis, countries are

defined water stressed when annual
water supplies drop below 1,700 m3/
person; and water scarce below 1,000
m3/person. A country is defined as
suffering high relative water stress if
demand is greater than 40 percent of
the renewable water supply5. India
has been constantly fairing low on the
twin measures of water deficiency
absolute standard as well as the relative
standard.
Over the coming years the demand
situation is projected to become worse.
Life for the average city dweller in India
would become a lot tougher. Water
supply for the average citizen could drop
from an average of 105 liters to only 65
liters a day with a large section of the
population having no access to potable
water at all.
Regional disparities
There is a regional disparity in availability
of water across the country due to
uneven rainfall.
Most Indian cities, including Chennai
and Mumbai, depend on rainfall for
their yearly water supply. Chennai has
been suffering from water shortage for
decades. The requirement for the city
and the adjacent areas is around 1,470
million liters per day, which includes
commercial and industrial demand.
But the city gets a daily supply of only
600 million liters per day from sources
such as lakes and reservoirs, which are
dependent on the erratic monsoon.
The city has recently inaugurated a
desalination plant, adding 100 million
liters of reclaimed water to the citys
drinking supply daily.
Groundwater depletion and
contamination
Irrational use has led to higher
groundwater consumption than
recharge. Groundwater levels have
reduced drastically in the last 60 years.
Of all the 5723 blocks assessed across
India by the Central Ground Water
Authority, 839 have been found to be

over-exploited, 226 are classified as

critical, while 550 are under the semicritical tag. Thus, around about 29
percent of Indias ground water blocks
are considered to be in need of very
careful and judicious use henceforth7.
Inefficiencies in usage and supply
Irrigation water usage across the
country is inefficient. As per figures
released by the Union Government in
1999, India had an irrigation efficiency of
~36 percent in 1993-1994 and projected
that efficiency would have to increase
to 60 percent by 2050 to bring a balance
in the demand and supply of water. A
model of water demand and supply for
118 countries accounting for 93 percent
of the worlds population developed by
the International Water Management
Institute (IWMI), shows that a 50
percent increase in demand of water
by 2025 can be met by increasing the
effectiveness of irrigation8.
Domestic and industrial usage of water
is also inefficient and one of the key
reasons for this is the lack of economic
pricing of water. Governments have
largely desisted from pricing water
at its real cost. The unrealistically low
prices tend to encourage overuse and
wastage.
Unaccounted-for water (UFW) is high
due to several reasons including old
water systems and poor maintenance,
illegal connections, leakage, and lack of
proper mapping of distribution system.
Average unaccounted for water in
India is pegged at almost 32 percent9.
The Confederation of Indian Industry
(CII) estimates that the typical Indian
municipal water utility has the potential
to improve water pumping system
efficiency by 25 per cent thereby
increasing efficiency of supply10.
Water accounting provides support
to sustainable and economic water
markets. To this end, the creation of a
robust water accounting framework is
integral to successful implementation of
a water policy.

5 Samuel T. L. Larsen. Lack of Freshwater Throughout the World

6 Chennai Water Desalination Limited: www.chennaidesal.info
7 Central Ground Water Authority
8 International Water Management Institute (IWMI)
9 2007 Data Book of Water Utilities in India
10 Alliance to Save Energy, USA. Municipal Water and Energy Efficiency Projects in India

2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Large investment requirement

Investment in urban water supply and
sanitation has increased during the first
decade of the 21st century, driven by
increased central government grants
made available under Jawaharlal Nehru
National Urban Renewal Mission and
funding from development agencies
such as ADB, World Bank and JICA11. The
11th Five-year plan (20072012) foresees
investments of INR 127,025 crore (USD
28.6 billion) for urban water supply and
sanitation, including urban drainage and
solid waste management.
However, overall investment required
in the sector is estimated to be INR
620,000 crore (USD 129 billion). India
currently spends about 6 percent of its
GDP on infrastructure, less than several
countries in Asia, and nearly half of the
11 percent invested by China. While
private sector interest in the sector has
increased, critical barriers such as poorly
written contracting documentation,
large timelines to project award and suboptimal risk sharing exist.

11 ADB: www.adb.org/India/main.asp; World Bank: go.worldbank.

org/E9RO7F96W0; JICA: www.jica.go.jp/india/english/activities/

2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Key Imperatives for various stakeholders

in the water sector
The reliability, financial sustainability
and affordability of water supply and
wastewater treatment services need
urgent improvement. It is important
that key steps are taken by various
stakeholders to improve the situation
Key imperatives for the central
government:
To modify the National Water
Policy to emphasize re-use of
treated wastewater and reduction
in groundwater usage. This is
especially relevant for sectors like
agriculture that consume over 80
percent of fresh water supplies.
Expand funding for water source
development, sewerage networks
and sewerage treatment plants
under schemes like JNNURM
Increase technical assistance grants
for capacity building of Urban Local
Bodies to manage Public Private
Partnership Projects
Increase technical assistance grants
for ULBs to set up sewage treatment
facilities
Increase technical assistance
grants to ULBs for loss reduction,
sewage treatment and recycling and
groundwater recharge projects.
Key imperatives for state
governments:
Define roles and responsibilities of
each entity in the sector
Create regulatory institutions to
oversee the management of water
resources and pricing of bulk water
Initiate reforms of Urban Local
Bodies to diversify revenue sources,
improve creditworthiness, facilitate
operational autonomy, improve
technical capabilities
Improve information sharing of
state-wide water resources among
agencies responsible for planning
regional development

Support ULBs in developing robust

water supply and wastewater
treatment project structures to
attract private investment.
Key imperatives for urban local
bodies:
Upgrade planning capacity within
local bodies by increasing number of
planners, environmental engineers

(e.g.: Free distribution of water

testing kits, separation of organic
and inorganic wastes, use of a dual
flush system)
Engage with the construction
industry on designing projects for
wastewater re-use.
Key imperatives for agricultural
users:

Initiate gradual increase in water

tariffs to ensure optimum utilization
of water resources

Main contribution is to invest in

water-use efficiency enhancing
technologies such as drip irrigation

Develop plans for expanding sewage

collection networks and building
sewage treatment plants

Organized farmers federations

could initiate industrial wastewater
re-use projects in areas with
industrial activity and declining water
availability. Similar initiatives could
be taken up by farmers groups in
city outskirts.

Explore alternative technologies

for sewage treatment like Soil
Biotechnology based systems and
Reed-based systems
Lobby to increase water and
sewerage tariffs to pay for capacity
expansions. Reorganize subsidy
system to ensure subsidies reach
the poor via targeted, area-based
subsidies instead of general
subsidies
Cut non revenue water by fixing
leaks, monitoring water supply
quantity and quality.
Key Imperatives for technology
companies:
Engage with government agencies
to create policy frameworks that
support growth of water reuse,
wastewater treatment and
standards

Key imperatives for industrial users:

While several industries have
initiated zero-discharge projects in
their factories/plants, many others
continue to discharge effluents
without treatment. Self-monitoring
and regulation must become the
norm for industries that aspire to
grow as environmental sustainability
and corporate social responsibility
are key pillars of differentiation
among global firms
Industry Associations like CII
and ASSOCHAM must facilitate
dissemination of best practices in
water and wastewater management.

Invest in research and development

for technologies (through
investments in pilot projects) and
commercial models suited to the
Indian cities, towns and rural areas
Run awareness campaigns targeted
at households to monitor water
quality, conserve water and provide
education on managing household
waste to lower costs of treatment

2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Contacts
Vikram Utamsingh
Executive Director and
Head of Markets
e-Mail: [email protected]
Tel: +91 22 3090 2320
Ramesh Srinivas
Executive Director
Business Performance Services
e-Mail: [email protected]
Tel: +91 80 3065 4300
kpmg.com/in

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