Addressing Urban Water and Sanitation Challenges: Investment, Infrastructure, and Policy

India’s cities are growing faster than the pipes beneath them. By 2050, an additional 416 million people are expected to live in India’s cities, putting enormous strain on water and sanitation systems that are already stretched thin. Despite flagship missions like Swachh Bharat, AMRUT, and Jal Jeevan, most urban residents still receive water for only a few hours a day, and a large share of wastewater flows back into rivers untreated. The roots of this crisis lie in three connected problems: how much we invest, who builds and runs the systems, and how we price and manage the water that flows through them.

The investment and infrastructure gap
Why money alone has not fixed the problem
The wastewater side of the equation
The case for public-private partnerships
The Chandrapur model
Other PPP experiments
Water pricing: the unfinished reform
What good tariff design looks like
Cross-subsidies and the urban poor
Community management and decentralization
What community management still needs
Stitching it together

The investment and infrastructure gap

The most basic problem is money, and how it is spent. The World Bank estimates that urban water infrastructure alone will require about $150 billion over the next 15 years, on top of investments needed for storage, irrigation, and flood management. Yet the sector remains heavily dependent on government transfers, and the funds that do flow in often produce less than expected.

A telling example: between 2005 and 2010, around Rs 50,000 crore (about US$7 billion) was invested in water and sanitation under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), but little is known about how much that money actually improved service levels in cities. New pipes were laid, treatment plants were built, but reliable 24×7 supply remained the exception rather than the norm.

Why money alone has not fixed the problem

Three issues turn investment into wasted concrete. First, there is a heavy bias toward construction over service quality. As the World Bank notes, infrastructure coverage has expanded but service quality varies widely, with many households receiving water for only a few hours a day. A tap that runs for two hours is not the same as a tap that works.

Second, the institutional setup is fragmented. Urban water supply is a state subject, but the centre sets sector-wide policies, while operations and maintenance fall on Urban Local Bodies (ULBs) that are usually understaffed and short on technical expertise. In Rajasthan, for instance, three different departments handle infrastructure, canals and dams, and rural sanitation, making integrated planning an exercise in coordination across multiple silos.

Third, political will tends to focus on visible inauguration ceremonies rather than the unglamorous work of leak detection, billing reform, and treatment plant upkeep. The result is what experts call “unaccounted-for water” – pipes that leak, meters that don’t work, and connections that are never billed. In many Indian cities, unaccounted-for water runs as high as 40 to 50 percent, against an acceptable level of about 15 percent. Half the water a city pays to pump never reaches a paying customer.

The wastewater side of the equation

Sanitation infrastructure tells a similar story. According to the Centre for Science and Environment, only about 28% of urban wastewater in India is treated, while the rest flows untreated back into nature. The Swachh Bharat Mission built over 100 million household toilets and 230,000 community and public toilets between 2014 and 2019, but treating what flows out of those toilets has not kept pace. As one urban sanitation expert at the National Institute of Urban Affairs put it, India generates more wastewater than it can treat.

The case for public-private partnerships

Faced with this gap between needs and capacity, governments have increasingly turned to public-private partnerships (PPPs). The logic is simple: ULBs lack the technical staff, capital, and management discipline to run modern utilities, while private operators bring efficiency, technology, and accountability for performance. The Government of India defines a PPP as a partnership between a public sector entity and a private sector entity for the creation or management of infrastructure for public purpose for a specified period on commercial terms.

PPP arrangements range from light-touch management contracts to full concession agreements where the private operator finances, builds, and runs the system for two or three decades. The Asian Development Bank has supported Maharashtra in developing toolkits to help cities choose the right structure, including viability assessments, viability gap funding, and risk allocation between the public entity and the private operator.

The Chandrapur model

Maharashtra’s Chandrapur scheme is one of the most cited examples in urban water PPP literature. The water supply scheme was handed over to the Chandrapur Municipal Council in 1998, but the council had neither technical staff nor sanctioned posts to run it, and was struggling with maintenance, electricity bills, and equipment purchases. In 2002, the general body passed a resolution to explore privatization, and a special-purpose vehicle was eventually set up to manage the scheme. The contract committed the operator to maintaining an average water supply level of 100 litres per capita per day, regularising illegal connections, and using high-quality metering and information systems.

What makes Chandrapur interesting is also what makes it cautionary. Researchers have noted that out of seven distribution-network PPP projects studied, only the Chandrapur project was operational, with the private party continuing to run the scheme despite losses. Other projects in Khandwa, Aurangabad, and elsewhere either stalled or faced suspension. The lesson is that PPPs can deliver efficiency and service quality, but they need realistic tariffs, strong contracts, and a ULB capable of being a real partner – not a hollow counterparty.

Other PPP experiments

Maharashtra has also experimented with PPPs in Nagpur and Aurangabad, while Karnataka’s Urban Water Sector Improvement Project (KUWASIP) achieved continuous 24×7 water supply in pilot zones of Hubli-Dharwad, Belgaum, and Gulbarga, a milestone for Indian cities. Surat’s common biomedical waste treatment facility, set up on a build-own-operate-transfer basis, services nearly 2,000 health care units in and around the city. These cases show that PPPs work best when the scope is well-defined, performance is measurable, and political backing is consistent across election cycles.

Water pricing: the unfinished reform

None of this works without honest pricing. Water in Indian cities has historically been treated as a near-free public good, with a token charge that bears no relation to the cost of treating and pumping it. According to service-level benchmarking data, only 67.2 percent of the cost is recovered by sampled utilities, leaving them financially unsustainable and dependent on state bailouts.

What good tariff design looks like

A well-designed urban water tariff should recover three things: the cost of consumption, the cost of access to the network, and the cost of keeping that option available. It should also encourage conservation. Researchers argue that consumption-based tariffs should form the basis of charging, while flat rates should be discouraged because they remove any incentive to save water.

But pricing reform is politically toxic. Raising tariffs is seen as anti-poor, and many state governments have been reluctant to touch the issue. The smarter approach is a tiered or block tariff: a low or free “lifeline” block that covers basic needs for a family, followed by progressively higher rates for higher consumption. The Observer Research Foundation has argued that an optimal tariff design strikes a balance between revenue generation, affordability, demand management, and equity, recognising that no single structure can deliver all of these at once.

Cross-subsidies and the urban poor

A common worry is that pricing will hurt low-income households. In practice, the opposite is often true. Poor households without piped connections frequently pay tanker operators and informal vendors several times the official tariff for inferior water. A formal connection with a metered tariff – even one that rises with consumption – is usually cheaper and safer. The Bangalore Water Supply and Sewerage Board illustrates the cost of getting this wrong: the utility faces around 30% water loss due to leakage from outdated infrastructure, and its financial fragility limits what it can offer to the poorest neighbourhoods.

Community management and decentralization

Big pipes and big tariffs cannot solve every problem. At the neighbourhood level, decentralized and community-based management often works better than top-down planning. The 74th Constitutional Amendment of 1992 was supposed to push exactly this kind of devolution, transferring major responsibilities to urban local bodies and forcing them to look for alternative modes of resource mobilisation. Three decades later, the shift is still incomplete.

Practical models do exist. Self-managed water user groups, residents’ welfare associations that maintain community tanks and rainwater harvesting structures, and self-help groups operating integrated sanitation units in Tamil Nadu show how communities can take on operations and maintenance when given the responsibility and the tools. Bengaluru’s water board has set up 14 treatment plants for wastewater recycling and reuse, with a total capacity of 721 MLD, while Surat reuses treated wastewater for non-potable industrial applications. These hybrid approaches – decentralised plants embedded in the larger municipal system – reduce distribution losses and let cities respond to local conditions.

What community management still needs

For decentralized management to work, three things have to be in place. ULBs must have enough trained technical staff to support community-level operators rather than dump responsibility on them. Communities need transparent information about water quality, billing, and grievances. And state-level regulators must enforce service standards so that no neighbourhood is left behind because it lacks political clout. As the World Bank notes, water agencies at all levels need to be professionally managed and made accountable, with regulatory capacity strengthened especially at the basin and state levels.

Stitching it together

India’s urban water and sanitation crisis is not a single problem with a single fix. Investment without management discipline produces idle infrastructure. PPPs without political backing and realistic tariffs collapse into legal disputes. Pricing reform without protection for the poor invites a backlash. Community management without state support becomes a way of offloading responsibility. The cities that are making genuine progress – pilot zones in Hubli-Dharwad, parts of Nagpur, treatment networks in Surat – combine all four: capital investment, performance-linked partnerships, transparent pricing, and engaged local governance. The pieces exist. The challenge for the next decade is to assemble them at scale.

What do you think? Should urban water tariffs in India move decisively toward full cost recovery, even if that means higher bills for the middle class, in exchange for reliable 24×7 supply? And in your own city, do you trust a private operator, your municipal corporation, or a residents’ association more to deliver water that is safe, affordable, and on time?

References

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Addressing Urban Water and Sanitation Challenges: Investment, Infrastructure, and Policy

Table of Contents

The investment and infrastructure gap 🔗

Why money alone has not fixed the problem 🔗

The wastewater side of the equation 🔗

The case for public-private partnerships 🔗

The Chandrapur model 🔗

Other PPP experiments 🔗

Water pricing: the unfinished reform 🔗

What good tariff design looks like 🔗

Cross-subsidies and the urban poor 🔗

Community management and decentralization 🔗

What community management still needs 🔗

Stitching it together 🔗