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How do you price water?

PIRAMAL FOUNDATION
March 01, 2018

Water is a basic human right. We all need it to live. In India, a firm cultural belief is that water must be given free of charge. So how do you sell water? Is it even moral to do so?

 

 

Sarvajal thinks yes.

 

 

 

Our water is priced at less than US$0.01 per litre or 30paisa per litre. This costs less than a cup of chai tea. As a result, this makes us the most affordable safe water solution in most of these communities.

Of course, there is still an argument that water is a basic human right and therefore shouldn’t be priced at all. This is the route of most traditional charities. However, as these charities soon find out, when the external funding runs dry the project dies with it. Instead, by pricing the water at an affordable low cost we ensure the long-term accessibility and affordability of the resource. It has the added benefit of making our customers value the water as a commoditized resource. This leads to better conservation and less water waste since customers are not using the water to feed their cattle or bathe in (both of which happened in Sarvajal’s early days, before our priced model).

Indeed, in providing the service we are actually saving our customers an average of Rs. 337 (87% compared to the control) household medical expenses per month. In certain communities, household savings are in the thousands of rupees! This is directly attributable to the health benefits of clean drinking water and is an important part of Sarvajal’s value-add. In explaining this to our customers we often draw the comparison to an insurance payment: you pay a small, regular amount to ensure that there are fewer cripplingly large medical expenses sporadically.

However, we are aware that by pricing our water we are excluding the most disenfranchised who cannot afford even our low price. According to national data, 30% of Indians live below poverty line. Sarvajal assumes that people living Below the Poverty Line (BPL) cannot afford to pay for water, no matter what the price. This is why we also operate CSR and charitable schemes that place our water solutions in schools, hospitals or target communities where we provide the water on a subsidized basis or free of charge. In these cases, the operational costs are offset by the sponsoring organization or through regular commercial operations in attached communities. Furthermore, the fact that our ATMs are smart-card enabled means that we can do targeted subsidies for BPL families! These subsidies are pay to play- meaning no money get’s wasted beyond what is directly used by the BPL family on the safe water. Our hope is that by eliminating incidences of waterborne disease, we can help families mitigate crippling medical costs and free up resources saved for other basic development needs. In this way, Sarvajal hopes to pursue our missions of providing affordable, safe water to all members of the community.

Alessandra is a Business Development Associate Fellow at Piramal Sarvajal.

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