The Kerala Water Authority has instituted reforms to enhance revenue, not through a tariff increase, but through a range of interventions encompassing legislation, internal and external communication strategies, redefinition of roles and responsibilities, and customer focused services. These interventions resulted in a perceptible increase in revenues, and in the reduction of arrears.
Kerala, with an area of 38,863 sq km, constituting 1.18% of the country’s land area, is wedged between the Arabian Sea to the west and the Western Ghats to its east. It has a population of 31.8 million, with a decadal growth rate of 9.42%. The Kerala Water Authority (KWA) was created on 1 March 1984, with the primary objective of water supply and waste-water collection and disposal statewide. The KWA has three sources of income: revenue collection, non-plan grants from the government as subsidy, and share debit from capital works.
During the early 1990s, KWA began experiencing a severe resource crunch for several reasons. Tariffs had not been revised periodically to match the increasing cost of production and operation & maintenance (O&M). The Government of Kerala (GoK) had passed on budget grants as loans to KWA for the execution of water supply schemes. The revenue due from the local bodies had not been paid due to many reasons. KWA had started diverting capital funds towards operating expenses due to the additional responsibility of repayment of institutional loans with interest. This resulted in defaulting on the payment of power charges to the Electricity Board.

The KWA had not utilised the central government grants for Accelerated Rural Water Supply Programme (ARWSP). Its arrears on account of non-payment of power charges totalled Rs. 774 crores, and it was defaulting on repayment of loan/interest. As a result of these developments, the drinking water sector was in jeopardy. There was an absence of integrated development, resulting in duplication of investments and efforts, and KWA was unable to maintain the water-supply schemes.
To address the situation, the KWA took a number of measures to improve revenue collection. The KWA decided to fix revenue targets based on the quantity of water supplied to each division, which is computed based on physical and non-physical losses. This step was followed by an extensive communication strategy throughout the state, at all levels of the organisation. A detailed order was issued outlining the responsibilities of each officer for revenue collection, and an internal audit team was entrusted to report the failures, if any. Norms were laid for meter readers, and surcharges were levied on non-functioning meters. This led to considerable reduction in the number of non-functioning meters. A monthly progress review was put in place.

The KWA issued appreciation letters for well-performing divisions, and issued strictures to divisions that did not achieve their targets. The Minister For Water Resources took up the responsibility of reviewing revenue collection personally. To recover arrears from non-domestic consumers, a one-time settlement was offered in 2005–06 and 2006–07. Pending arrear cases were settled, allowing considerable reduction in the penal interest. In addition, 14 district-level adalats (courts/forums) were made available for all consumers to settle pending cases related to arrears.
The state government agreed to the financial reconstruction of the KWA. Loans were converted into an interest-free fund, and diversion of capital funds for revenue purposes was averted after 2004–05. Central government funds were fully drawn and utilised. Arrears in power charges were settled on a one-time basis, and payment of current dues began from 1 April 2008. The state government also offered reduction in power charges. The KWA adhered to timely payment of contractors’ bills, which resulted in capital works becoming economical. Water tariffs were rationalised, and the state government approved a major package of Rs. 750 crore for the completion of the ongoing water supply schemes. The KWA paid pay-revision arrears without any support from the state government. Having undertaken these measures, the KWA reduced its accumulated losses by Rs. 1,006 crores.

The KWA introduced a one-time settlement system for non-domestic consumers, including a partial waiving of penal interest, which greatly helped generate resources. It also introduced an employee initiative — Consumer Employee Friendship (CEF), to promote better interface between consumers and employees. The KWA became the first water authority in India to introduce a Management Information System (MIS) to improve its functioning and efficiency.

The entire set of initiatives were implemented in-house by utilising existing staff and without incurring any additional cost except for publicity through the media. The KWA management is confident that the costs incurred towards computerisation initiatives are worthwhile, as these investments resulted in securing long-term benefits relating to project monitoring, employee information, financial accounting etc.

Revenue collection has gone up from Rs. 88.55 crore (2003–04) to Rs. 122.46 crore (2007–08), and collection efficiency has improved from 82.4% to 98.7%. Revenue increased by 37%, even though the number of connections increased by only 16%. The growth in revenue was achieved without revision of tariffs. The KWA’s arrears decreased by 8.9% in 2006–07. Through the adalats, KWA has settled around 4,300 pending revenue cases. A key non-financial outcome has been the change in mindset of the KWA employees. Employees started experiencing a sense of belonging to the organisation, and are prepared for major changes like change management, restructuring of the organisation, and e-governance.

Revenue Collection (Rs. in Crore)
Pre-reforms Post-reforms

Year	Collection	Year	Collection
2003 – 04	88.55	2004 – 05	112.06 (85.68% increase)
2002 – 03	77.89	2005 – 06	106.04
2001 – 02	71.29	2006 – 07	121.29
2000 – 01	60.35	2007 – 08	122.46 (102% increase)

Though the reforms were initiated as a crisis response, the situation was also used as an opportunity to institutionalize reforms across the organization through a series of interventions. The sense of belonging among the employees of KWA has been a key factor behind the success of the reform initiative. The involvement of political representatives in periodic reviews, and appreciation at the district level has given impetus to the process and worked as an incentive for employees to improve their performance. Interaction with consumers during the one-time settlement enabled feedback, and has helped KWA understand the perspective of consumers.

Due to its relatively low cost and high benefits (both in terms of revenues and finances), this improvement program is highly sustainable. The reforms were implemented across the state, and there has been active involvement of all stakeholders, from ministers to meter readers. The institutionalised activities include effective legislation, effective internal and external communication for buy-in, redefinition of roles and responsibilities, simplification of procedures, use of ICT and IT for efficiency, piloting efforts in customer-centred services, better collaboration with other departments like Local Self Government, and initiatives in water conservation. A unique aspect of these reforms is that they were achieved without any increase in tariffs.

For further details, contact:

Mr. V. K. Girijavallabhan
Accounts Member, Kerala Water Authority
Vellayembalam, Thiruvananthapuram