Factors affecting operation and maintenance cost recovery of urban water supply: An evidence from an eastern Indian states

• Published date: 01 May 2022
• Author: Tapasi Mohanty,Himanshu Sekhar Rout
• Date: 01 May 2022
• DOI: http://doi.org/10.1002/pa.2459

ACADEMIC PAPER

Factors affecting operation and maintenance cost recovery of

urban water supply: An evidence from an eastern Indian states

Tapasi Mohanty

1

| Himanshu Sekhar Rout

2

1

Department of Analytical and Applied

Economics, Utkal University, Bhubaneswar,

India

2

RUSA Centre of Excellence in Public Policy

and Governance, Utkal University,

Bhubaneswar, India

Correspondence

Himanshu Sekhar Rout, RUSA Centre of

Excellence in Public Policy and Governance,

Utkal University, Vani Vihar, Bhubaneswar

751004, Odisha, India.

Email: hsrout@utkaluniversity.ac.in

Poor recovery of operation and maintenance (O&M) cost is a major hindrance to

urban water supply sustainability. Water supply sustainability requires at least full

O&M cost recovery from user charges. The objective of the study is to analyze the

operational and service delivery factors for the Urban Local Bodies (ULBs) of Odisha,

and determine factors affecting O&M cost recovery. This study has used a cross-

section of pooled data of 300 observations from 2014–17. Descriptive statistics and

multiple regressions with bootstrapping have been used to analyze the factors affect-

ing cost recovery. This study found that energy cost constitutes the highest share

followed by establishment cost, repair, and replacement cost and chemical cost.

Domestic connection being the maximum connection share (i.e., 97.6%) contributes

only 54.1% of revenue. The remaining 45.9% of revenue comes from 2.4% of the

connections. Industrial connection has the lowest connection rate (i.e., 0.1%) but con-

tributes the highest (17.4%). The cost on energy, repair, and replacement is inversely

related and found to be statistically significant factor for cost recovery; whereas

number of domestic connections, presence of industrial connection in the ULBs and

per capita rate of supply are the statistically significant factors having direct relation

with cost recovery.

1|INTRODUCTION

Poor operation and maintenance (O&M) cost recovery is one of the

major challenges in the process of sustainable water supply provision.

A sustainable water supply system is one that will meet the present

requirement of adequate quantity of water with desirable quality for a

given need without compromising the future ability to provide this

capacity and quality. Water supply will be sustainable only if it pro-

motes efficiencies in both demand and supply sides. On the demand

side, the adoption of efficient technology and willingness to save

water reduces water consumption. On the supply side, it is fundamen-

tal to enhance O&M capabilities of water utilities, reduce non-

revenue water (NRW), leakages, energy use, as well as improve the

capacity of the workforce to understand and operate the system. It is

also necessary to ensure cost recovery through a fair tariff system and

intelligent investment planning (IWI News, n.d.). The capital cost of

water utilities is usually financed by the government, In the mean situ-

ation, the cost recovery refers to coverage of O&M cost (Dalhuisen,

Groot, Rodenburg, & Nijkamp, 2002; Gupta, 2011). Cost recovery is

an essential part of sustainable water supply. Water supply sustain-

ability requires at least the full recovery of O&M cost from user

charges.

Continuous O&M of the infrastructure is an essential part of

uninterrupted water supply provision. “Operation involves activities

necessary to deliver the service while maintenance involves activities

that keep the system in good operating condition. Operation includes

monitoring the system state, running the system, and enforcing poli-

cies and procedures. Maintenance entails condition assessment, ser-

vicing repair, and replacement of the system components.”The cost

on O&M is an essential part to provide long-term service at a mini-

mum cost (Zyl, 2014). The development of a system that enables con-

tinuous water supply and limits water supply intermittency remains a

challenge. Poor governance is one of the causes of supply intermit-

tency (Simukonda, Farmani, & Butler, 2018). The study from Ireland

shows that the water policies and management strategy consider

water as free good and renewable resource. Despite their small

Received: 24 August 2020 Revised: 1 September 2020 Accepted: 2 September 2020

DOI: 10.1002/pa.2459

J Public Affairs. 2022;22:e2459. wileyonlinelibrary.com/journal/pa © 2020 John Wiley & Sons Ltd 1of12

https://doi.org/10.1002/pa.2459