Thursday, February 26, 2015

Pricing blunder, but a political masterstroke!

According to UNDP statistics, average daily water consumption per capita in India stands at ~130 liters. At an average household size of 4.51, monthly household water consumption in India is around 17,500 liters.



AAP's Delhi government recently announced 20,000 liters of FREE water per household per month for the residents of Delhi. This is almost 15% higher than the national average consumption.

The gift of FREE 20,000 liters of water per household per month on one side is certainly very appealing to the masses, but let's understand how harmful such a move is. There are essentially three issues to consider:

  1. Natural resources are scarce, and world wide countries are focusing on ways to reduce their consumption. To control misuse of limited natural resources, governments should look at putting penalty on misuse. Giving a free allowance, which is 15% higher than the average usage is nothing but permission to waste.
  2. When politicians win elections by a landslide on such promises, it will motivate other politicians to use same or similar approaches. Essentially making the entire system hollow. Such approaches are nothing but bribery and should be punishable under the court of law.
  3. It's always easy to lower down the prices than to raise it. Giving away water for FREE is easy, but reversing this move would now be a nightmare for any political party now, including AAP.
  4. When the entire focus is concentrated on giving away huge amount of water for FREE, essentially the focus is on quantity. The focus and efforts that are required to be put on quality will take a hit. People need both better quality and reasonable quantity of water. Lopsided approach is a lose-lose situation.
When people can afford to spend Rs. +50 for a bottle of beer, Rs. +30 for a bottle of Pepsi, and Rs. 200 for a spirited evening, what are we trying to do here Mr. AK?