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Smart Cities and Thoughts for Karnataka

Karnataka held its annual global investors meet last week. On its sidelines, Rajya Sabha MP Dr Rajeev Gowda launched Resurgent Karnataka, a publication by Raintree Media. I shared my thoughts on smart cities and urban governance with them. Full text below.

Q1. How, why and when will Indian businesses invest in making cities smart? What policies should the government adopt to facilitate the creation of the right investment climate for private investment in building smart cities? What are the business models being used to monetise investments and what is the customer value proposition? How will Return on Investment be measured and will a holistic approach being taken to measure value creation?

Pavan: Indian businesses will invest in making cities smart when the government provides public goods, ensures the rule of law and is faithful to contracts. Often, contracts signed by Indian municipal authorities are not upheld, and government authorities change their mind at will, making it exceedingly hard for businesses to work alongside governments with integrity. City governments should also modernise land titles, property tax records and make it easy for private entities to do business in the city – reducing the time it takes to get electricity and water connections, construction permits and more. When the private sector finds that cities do not add to business uncertainties and could actually lower them, then the investment will flow into the cities steadily.

Q2. Apart from private investment, are there other innovative financial instruments that could be adopted in funding a city’s transition to smartness? What is the value and the source of funding for the smart city projects? What business structures may have to be established e.g. PPP, JVs?

Pavan: It is a myth that Indian municipalities are poor. All Indian municipalities have numerous assets at their disposal – including land and properties that are at various stages of development. Municipal corporations do not do accrual-based accounting and have asset registers of differing qualities. Most municipal budgets are not even audited regularly. Thus, they have a weak understanding of the assets at their disposal and liabilities they have to manage.

A smart city is one that professionalises its accounts, and uses innovative means to extract sustainable incomes from their assets. For example, if a 2-storey government building sits on prime land, a smart city government is one that gets a 15 storey building built and leases out the other 13 floors of real estate. A smart city is one that professionally manages its advertisement and property tax revenues by using technology and intelligent contracting.

A smart city is also one that pursues economic development explicitly, works towards attracting businesses and job creators with dedicated staff to do so. While this is not a financial instrument per se, it certainly can be an innovative way to increase city finances.

Q3. Do cities in India have a vision, clear objectives and quantifiable targets (KPIs)? More importantly, how will citizens get ‘smart’ in adopting technology? When and what will prompt this behavioural change and how long will this process take? What is the role of traditional and social media in promoting smartliving?

Pavan: We often say that cities are the nation’s engines of economic growth. However, in India have no idea how well these engines are doing – what their horsepower is, how many pistons they have, how efficiently they run, and more. To truly understand how well our cities are doing, India needs to start measuring city or metropolitan-level GDP. Cities are also natural units of economic activity, and with some effort India can start measuring GDP yearly for all million-plus cities. All high income countries – including China and other Southeast Asian countries today measure city GDPs.

In order for India to sustain an 8 percent GDP growth, Indian city GDPs need to be growing at 20 percent or more per year. By understanding how well each of our cities do year on year, policymakers and the public will get a better handle on how our cities are doing, and what public and private inputs are transforming into meaningful outcomes. Measuring GDP along with other standard parameters like municipal finances and service delivery levels are vital to the health and development of India’s cities.

Citizens will become ‘smart’ in adopting technology the moment it makes sense for them to do so. While governments might complain that citizens are not using technology efficiently to communicate with government, the reality is that citizens have rapidly adapted to shopping online on e-commerce stores, using mobile payments and e-wallets for transactions, taxi-aggregators for transport and more. If governments start delivering better services through tech and mobile-enabled means, then citizens will start using them quickly.

Q4. How can medium-sized cities in Karnataka (Shimoga, Belgaum, Mangalore, Davangere, Hubli) achieve ‘smartness’ in the areas of Governance, Economy, Mobility, Environment and Living? What smart city services will be developed? What are the proposed benefits resulting from the services?

Pavan: Medium-sized cities in Karnataka have a great opportunity in avoiding many of the problems that a megapolis like Bangalore already suffers from. ‘Smart’ ideas can be more readily implemented in medium-sized cities – be it developing a complete digital ‘road history’ of all works that take place above and below city roads; or a professional GIS-linked property-tax system; a forward-looking FSI or building height-restriction policy and more.

Karnataka has performed poorly compared to its neighbours Tamil Nadu, Maharashtra and Andhra Pradesh when it comes to developing multiple centres for urban growth. After Bangalore, other Karnataka cities are still around 1 million people or less in population. The development of industries that create thousands of jobs is vital to developing new centres of growth – rather than focusing primarily on IT.

Q5. What were the regulatory market conditions in Europe (international best practices) that fuelled innovation, technology transfer and largely promoted indigenous manufacturing of affordable smart technology? What are the key legal and regulatory policies that have had a material impact (positive/negative) on the development of pilot projects? Can these be replicated in India under P.M Modi’s ‘Make in India’ initiative? What is the future for smart ICT? How can Indian companies successfully navigate the ‘valley of death’ phenomenon /seed funding constraints?

Pavan: India’s smart cities mission should look to the Charter cities concept that has been championed by the economist Paul Romer. The idea of charter cities is to create a ‘policy window’ for select charter cities – where they can experiment with local rules and laws that are not encumbered by complex regulation that usually exists in other parts of the state or the country. Karnataka’s urban governance laws require significant reform – from allowing private buses to formally recognising the role of taxi aggregators to having functional ward committees and more. Such reform can take a long time, and partial reforms can often show limited outcomes. Charter cities are like the opposite of SEZs – where instead of a tax break, these areas get a break from some of the laws that can pose an impediment to the development of smart cities. And thus they get a chance to develop new laws and rules and test them out.

The smell test for such rules is asking yourself whether the state would be better off if the laws in the charter cities were to be universalised across the state.

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In Mint: Let India’s urban poor pay for good water

I write in Mint this week on how thinking along the lines of micro finance principles can change how we approach water pricing. Instead of an ideological stand on keeping water free, it’s better to ask how we can make clean water cheaper and more affordable for urban India’s most deprived.

In microfinance, people also acknowledge that it costs more to lend to the poor. When most people have to take a big loan from a bank, they have a steady income to show. They have a credit history. They also have assets they can pledge as surety, in case they default on the loan. The poorest of the poor don’t have salaries to showcase. They don’t have assets to pledge. The risk of defaulting on a loan is higher, and it is humane that they be allowed to default when the circumstances are dire. By allowing microfinance institutions to charge higher interest rates, the policies allow them to service these needs.

Similarly, the costs of supplying water for a city’s poor can be high. People often don’t have address proofs or any proofs of legal residence, making installing water connections harder. Getting even basic piping to reach the heart of a slum is not always cheap, given that there is hardly any road space to dig up. Maintaining pipes is even tougher. Installing and maintaining water meters is difficult, thereby making bill collection costlier.

It is highly disingenuous to ignore all these real issues and shout for a right to free water.The better approach is to ask, “how can we make water cheaper for the poorest?” And that line of thinking can birth an entirely new range of solutions.

Read the full article at Live Mint, February 13, 2015.

Live Mint e-Paper - Mint - 14 Feb 2015 - Page #11 Pavan Srinath

 

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A Tale of Two Cities

The tale of Bangalore and Chennai’s growth is also the story of Karnataka and Tamil Nadu’s urbanisation.

The Indian growth story has included two actors in the past two decades, Bangalore and Chennai. Along with their parent states of Karnataka and Tamil Nadu, they have been the face of Indian progress, on everything from software to manufacturing to higher education.

Bangalore and Chennai are quite distinct from one another, and this post traces the differences in their urbanisation and their respective roles in their states. Chennai (formerly Madras) was designated as one of four ‘metro’ cities in India from independence, having been the capital of a British presidency before then. Bangalore was a more modest state capital. Till the mid-1980s, Bangalore was almost  two decades behind Chennai in its total population size*. Bangalore has since seen more rapid growth, and in 2011 the city was only a couple of lakh people smaller than Chennai.

BangalorevsChennai1

It is tempting to view population growth as a competition between two cities, but cities urbanise within the context of their states. While both Karnataka and Tamil Nadu are among India’s more urbanised states, but it is here that Tamil Nadu leaves Karnataka far behind. Tamil Nadu is the most urbanised large state in India, with almost half its population living in cities. For context, the Indian average of urbanisation is just one third. In Karnataka, about 38 per cent of its population lives in cities and towns.

Urbanisation and the successful movement of large numbers of people out of agriculture is key to prosperity for Indians, so it pays to examine what Tamil Nadu got right.

One feature of Tamil Nadu’s success is its lack of dependence on Chennai for all its urban growth. In 1991, Chennai was about 30 per cent of urban Tamil Nadu. The state’s largest spurt of urbanisation came between 1991 and 2001, increasing by over 10 percentage points. Most of this growth came from outside Chennai, with Chennai’s share of the state’s urban population steadily declining since 1991.

BangalorevsChennai2

Much of the urban growth in Tamil Naducame from the reclassification of land and the setting up of town panchayats after the 74th amendment to the constitution was enacted. A lot of it also came from other large cities springing up. Today, Coimbatore, Madurai, Trichy and likely Tiruppur all house million+ people each.

Karnataka’s urbanisation, on the other hand, continues to be led by Bangalore. The primacy of Bangalore in the state is paramount, with Hubli-Dharwad and Mysore having a population of barely a million each. Bangalore was over 35 per cent of urban Karnataka in 2011.

Not just that, but almost half of the urban growth in Karnataka came from Bangalore’s growth between 2001 and 2011. In comparison, only about a fifth of Tamil Nadu’s urban growth came from Chennai in the same decade.

BangalorevsChennai3

This stark difference can perhaps be explained by extensive industrial growth in Tamil Nadu, which is conspicuous in its absence in its neighbouring state. From the city of Hosur giving competition to areas on the far side of the TN-Karnataka border to bustling ports trying to compete with Sri Lanka’s, Tamil Nadu has been more successful in providing an alternative to agriculture for large numbers of its people. Kerala’s urban spurt last decade appears to be similar, with habitations becoming larger and denser, as well as more people leaving agriculture as a profession. When and whether this can happen in Karnataka is an open question.

For now, Karnataka and its politics are still frequently dominated by agrarian concerns. The Western Ghats continue to pose a formidable barrier to the development of the state’s ports, with its largest port Mangalore competing with larger ports at Mumbai, Kochi and Goa. Connectivity – perhaps in the form of all-weather roads and tracks across the Western Ghats and high volume ports – may be just be the most potent driver of urbanisation in the state.

As the Karnataka government is trying to figure out how to split the Bangalore city corporation into more manageable pieces, more people should start reflecting on how to get more centres of urban growth going in the state.

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*This is the population of the entire urban agglomeration. Since the Bangalore Municipal Corporation became the Bruhat Bangalore Municipal Corporation in 2006, all urban areas around Bangalore (with the exception of small census towns and Electronic City) have been governed under one municipal authority. Chennai, on the other hand has a metropolitan corporation that is co-terminal with the Chennai district and houses a little over half of the people in the Chennai urban agglomeration. Several other city councils and town councils govern the rest of it.

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A Long Overdue Hike in Bangalore’s Water Prices

The Bangalore Water Supply and Sewerage Board (BWSSB) recently hiked its water tariff, a move that was long overdue.  I am quoted in Citizen Matters on why this hike is a good move.

The hike in BWSSB’s water tariff is a welcome development that was long overdue. BWSBB has been a national leader in the professional delivery of water supply and sewerage services, and it is no accident that Bangalore has the largest number of metered water connections in the country.

Water is an increasingly scarce resource in the 21st century, and pricing it at its highest marginal cost is essential to conserving this vanishing resource. While we talk about excessive or misdirected LPG and petrol subsidies, the water subsidy that even the most prosperous Bangalore receives is much higher.

The higher price of water will also spur more people to do rainwater harvesting and efficient use of water. We must also recognise that people pay many times more for water tankers – a small increase in BWSSB tariffs could in fact reduce overall water cost for the city’s residents.
[Citizen Matters: Should Bengalureans be grateful for BWSSB’s water rates? 11 November 2014]

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Liberalising Medical Education in India

I spoke on liberalising medical education in India, on the health panel at the Takshashila-Hudson conference on ‘Shaping India’s Growth Agenda: Implications for the World.’

We need a lot more doctors in India than we are currently producing and the stranglehold of the Medical Council of India on college education needs to be done away with.

A companion opinion piece to this video will be published soon.

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The Growth of Bangalore

The city of Bangalore grew from about 5.7 million people in 2001 to 8.7 million in 2011. Earlier, the official city area was 226 square kilometres under the erstwhile Bangalore Mahanagara Palike (BMP) which expanded to 716 square kilometres in 2007 with the creation of Bruhat Bangalore Mahanagara Palike.

However, these area numbers only reflect the official administrative boundaries, and are not always reflective of the organic growth of cities in various directions. Below are two land use images from ISRO’s Bhuvan portal of Bangalore from 2005-06 and 2011-12. Built-up area in the region is marked in red.

Bangalore 2005-06

Source: Bhuvan

Source: Bhuvan

In the period of five years, Bangalore has grown in area mostly only on the southeastern side. It has grown considerably along Hosur road, forming a continuum between the city, spanning Electronics City until the edge of the state boundary. The bulk of the rest of the growth has happened along the southeastern section of the outer ring road.

We can rail against ‘unplanned’ growth all we want, but this misses the point that people and companies are essentially free agents who move to places conducive to their requirements. Urban planning in India often centers around rigid control in things like land use, where the state has little capacity to enforce anything, and gets subverted. If instead urban planning favours nudges and incentives (the setting up of electronic city in Bangalore in the late ’70s is a great examples of the latter) then it might have a better chance of working. Official actions are largely unresponsive to the housing needs of incoming migrants and increasing wealth of our cities’ residents. “Irregular” colonies and housing but spring to meet the legitimate need.

Besides, as Karthik Shashidhar finds, Bangalore’s fastest population growth rates were actually in the 1940s and 1970s.

This was a part of my lecture on an ‘Introduction to the Bangalore Municipal Ecosystem’ to B.CLIP students on December 7, 2013.

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Politics begins at home

We spend a lot of time talking about national politics in India, with the general elections in 2014 being a subject of conversations for well over a year now. Conversations on state level politics take up the remainder of our time. In contrast, many of the problems that we face on a day to day basis are municipal in nature: be it the lack of good roads and public transport, unreliable power supply, unsafe drinking water or garbage that lines our streets.

Who becomes your next corporator or local council member is perhaps as important as who becomes the next prime minister of India, but a curious inversion of interests means that we care a lot more about the latter than the former. When municipal elections took place in Karnataka earlier this year, much of the analysis and debate was about what the results meant for the soon-to-come state assembly elections. Who became corporators, won control of municipal councils and what they planned to do for their towns and cities remained a distant afterthought in most of our minds.

Cities are also complex systems that require sophistication and professional input. To improve Bangalore’s roads, for example, needs our elected representatives to ensure multiple things. The roads need a high quality of construction and functioning drains that clear the roads of stagnant water. The roads also need a well-planned traffic network accompanied by a good backbone of public transport. We also need better systems of coordination for what roads get dug up and when, along with a schedule of work that is sensitive to the monsoon.  All this cannot happen without trained and motivated elected representatives, who manage existing public employees like engineers, planners and administrators.

The popular understanding that our cities are poor is also quite mistaken. Indian cities are rich in assets and in vibrancy, and this is evident in how Bangalore and others have grown rapidly in the last decade. It is due to mismanagement and neglect that we are unable to extract value from municipal assets. This mismanagement makes it difficult to finance urban infrastructure and public services, and again requires well-trained leadership to reverse the trend.

Bangalore has woken up to the reality that things cannot continue the way they have been, so far. Agitations from the past few years have proved that. While performance of elected representatives has been underwhelming, there is a dawning realization that the supply of good politics does not grow on trees. In a democracy, people are governed no better than they deserve. We need better political engagement by citizens to change this – with more people voting, more good people entering politics and by financial contributions in the support of good candidates. If we want ‘black money’ to leave politics, it is time that some honest, well-earned money enters to replace it.

India being a young country also provides an incredible opportunity where a large number of youth will be coming of voting age in the next few years. How well they engage with city politics and governance can determine the future of Bangalore and other cities.

Beyond corruption and vested interests, urban governance needs the management of multiple stakeholders with interests that are often at odds with each other. The ability to persuade a diverse set of people for the betterment of a neighbourhood, a ward or a city is in short supply. Managing a city also needs astute application of economic reasoning, where an unpriced good like free parking or free water can turn out to be enormously expensive, all things considered.

Big cities like New York or London have famous mayors who have the ability to transform their cities. There is no reason why Bangalore’s leaders cannot reach a similar position in the next 10 years.

Disclosure: I am a part of the Takshashila Institution’s team that is developing the curriculum for Bangalore Political Action Committee (B.PAC)’s Civic Leadership Incubation Programme (B.CLIP), a non-partisan initiative that seeks to train professionals and aspiring civic leaders to enter city governance and politics.

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What right to whose water?

I write in Citizen Matters today about the futility of any right to water legislation:

(T)he provision of clean, adequate water to Bangalore’s residents has numerous challenges: resource management, administrative reform, infrastructure provision, financing and payment for scarce resources.

Will a legally enforceable right to water improve its provision in the city? Maybe a little, at the margin – in those few cases where accountability can be pinned to someone.

However, will the move for a right to water come with huge opportunity costs? Almost certainly. Each of the challenges listed above requires significant expenditure of political capital, it needs able leadership that can inspire sufficient trust in the city’s residents to walk them through the myriad challenges. Like the RTE, a right may come backed with funds from the union and state governments for adequate water provision, but again, the latter provision may be better achieved by forgoing the right and focusing instead on the attendant reforms.

Thanks to India’s overburdened courts, we have lost the right to justice while pursuing the right to education, food and more. No system can work if even 10 percent of the people have to approach the court for redressal. Rights are relevant when defaults are rare, possibly malicious and are within the capacity of the judicial system to enforce. Water supply provision hardly meets this criterion.

Spending public time and political capital on a morally superior right instead of a genuine effort at reforms is counterproductive. While pursuing the right to water, the chance at its universal provision may be lost.
[Citizen Matters, 25 July 2013]

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Hybrid buses: An exercise in vanity environmentalism

Missed opportunities outweigh any gains hybrid buses make in terms of  fuel efficiency.

In a move that has been in the making for several months, the Ministry of Urban Development has decided to fund the roll-out of hybrid buses as a part of JnNURM:

The urban development ministry plans to fund hybrid buses — that use a combination of electric battery and diesel engine — as part of the next lot of buses under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM).

During the budget session, finance minister P. Chidambaram had announced that the Centre would fund 10,000 buses under the mission. The ministry has not put a cap on the number of hybrid buses, as it will depend on proposals coming from states, but officials said they may not exceed 50.

While normal low-floor buses cost between Rs 60 lakh and Rs 70 lakh, hybrid buses — which are more fuel-efficient than normal buses — cost around Rs 1.25 crore.

The urban development ministry had proposed that there should be additional financial assistance for hybrid buses.“We had suggested that since hybrid buses are expensive but at the same time we want to promote them for their fuel efficiency, we should give state governments 10 per cent additional financial assistance,” said a senior official.

However, last week, the expenditure finance committee, while sanctioning Rs 4,900 crore for the project, rejected the idea of additional monetary help. [The Telegraph]

At first glance, this looks like a good pro-environment move, where switching to fuel-efficient hybrid buses reduces both carbon emissions and urban air pollution. Though the buses cost almost two times what other modern low floor buses cost, it feels justified because of the fuel savings incurred.

Clean air in urban India is a quickly disappearing public good. Just like we feel the need to purify water before its use, commuters in cars effectively purify and control their air through air conditioning before breathing it in. But are hybrid buses in any way a solution to this problem? In foreign cities with widespread public transport, hybrid buses may indeed be the solution. If we assume that the share of public transport in city commutes is mostly saturated, for every regular bus that can be replaced with a low-emission hybrid, the city reduces its overall pollution.

This is hardly the case in India as public transport’s share in intracity travel is far from optimal! Most of our cities do not have metros or commuter rail, and have to rely solely on city buses, private buses and “share-autorickshaws” as modes of public transport. The environmental gain in Indian cities comes from people switching from cars and personal vehicles into public buses. So while a hybrid bus might be low on emissions, the opportunity lost because of its purchase is the acquisition of an extra regular bus – which would have taken more private vehicles off the road. If 50 hybrid buses could be replaced by 100 regular buses, the transport service might spend more on fuel and have higher emissions, but the city as a whole will spend less. Investing our scarce financial resources in hybrid buses is not a very environmentally friendly move.

City buses in India

The chart above (Source: *, **) shows you some quick numbers on buses in India and Karnataka. The first three cities have other modes of public transport that coexist with buses (commuter trains and metros). However, as the graph shows – even the best performing cities have too few buses for our public transport to be saturated.

The Jawaharlal Nehru National Urban Renewal Mission has been India’s flagship programme to finance urban infrastructure and catalyse urban reforms since 2005. It is noteworthy that the acquisition of buses was not a valid item of expenditure under the mission for the first four years. It was in 2009 that under a union stimulus package, the Ministry of Urban Development decided to finance the procurement of about 10,000 high tech buses, to ‘transform city bus transport in India‘.

It is beyond the scope of this blog post to evaluate whether bus acquisition and deployment served Keynesian ends, but the move was politically astute and was fairly well received. The JnNURM labeled buses on Indian (and Bangalorean) roads today are the most visible output of the mission. The move to deploy high quality buses with low floors, pneumatic doors, good suspension and comfort was also a welcome one. By providing a means of public transport that is on par with cars on comfort and safety, these Volvos and Tata Marcopolos were likely able to get more cars off the road than regular buses. In cities like Bangalore, these high-end buses have appropriately priced tickets, are profitable and are even able to subsidise other bus fares.

In the mean time, many bus manufacturers have come out with hybrid buses, including Tata Motors with a CNG-hybrid. Tempting as they may appear, policymakers in the urban development ministry have to seriously consider whether these are necessary – or an exercise in vanity. As the Telegraph article points out, the ministry correctly ruled out the provision of extra assistance for hybrid buses. However, even giving an identical percentage of assistance is too much – as it can buy two regular buses in its stead.

Good public transport has several outcomes that benefit cities: less air pollution; reduction in congestion and in travel time; and also an opportunity for social mixing. This blog strongly believes in the single-minded pursuit of better public transport in Indian cities – but alas, hybrid buses are an expensive and unnecessary detour from that road.

Note. 40 buses per lakh population appears to be a subjective norm fixed by the JnNURM. One World Bank initiative recommends between 50 and 120 buses per lakh population. That said, these are but useful guidelines to follow. What matters most are outcomes – and among them, the public share of total city transport, a control of travel time with urban growth and an overal reduction in urban air pollution.

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How much is Water Supply subsidised in Bangalore?

Continuing from yesterday’s post about introducing crisis pricing of water in Bangalore, here’s the real picture of how water gets subsidised for all residents of the city who receive municipal supply.

Subsidised Water in Bangalore

It turns out that a family of five using the national norm for urban water supply – 135 litres per person per day (LPCD) receives a whopping subsidy of Rs. 9,500 a year! A household using 200 litres per person per day in the city – quite common – receives an even higher subsidy Rs. 13,790 a year! Compare this to the LPG subsidy that the same households will receive: it clocks in at a much lower Rs. 2,800 a year (at Rs. 320 subsidy per cylinder of LPG and 9 cylinders per year). While LPG subsidies need to be reduced and its prices rationalised, I’ll leave it to the readers to see how much air time each issue has received thus far.

As the chart shows, even the maximum price of water levied is lower than the operational costs, so the more profligate a consumer, the higher the subsidy they receive. And this is a rather conservative estimate – one that does not include how the city’s sewerage is also subsidised, nor the heavy capital costs that go into building the infrastructure for the city’s water supply.

And we wonder why we have a crisis around water almost everywhere in the country.

Water tariffs from the BWSSB are available here, and this is the source of the operational cost of  water provision in Bangalore.

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