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Governance & AccountabilityPublic Finance Reports PUBLIC SERVICE DELIVERY

Study on User Charges to Meet Public Expenditure on Services

15 Jan 2011


Author: Arundhuti Gupta, Sriharini Narayanan, Sandeep MS

Funding Partner: Expenditure Reforms Commission (ERC), Govt. of Karnataka

Abstract

This paper examines the principal rationale behind the levy of user charges, while also providing insights into factors and issues to be taken into consideration while framing a user charge policy. The paper primarily examines the user charge practices in Karnataka’s Urban Water Supply department, Irrigation department and Roads department. The research conducted as part of this paper is part of a larger review of the GoK’s programme implementation efficiency, and serves as a suggestion for optimising the same.

The results of this study find significant under-pricing of water for the current tariff at the time, with only the highest consumption category charged at the approximate average cost of producing a kilolitre of water for urban areas. In other areas, we find that water departments lose a large portion of their revenue from non-functioning meters and poor collection rates. Some of the broader recommendations made in this paper suggest reforms like the formation of detailed government and department level policies on the levying of user charges, tariff authorities and regular revisions, scientific and econometric methods for calculating cross-subsidies, and the establishment of independent regulatory authorities to ensure that the provision of services does not get diluted by electoral politics.

CBPS. (2011). Study on user charges to meet public expenditure on services. Bengaluru, India: Centre for Budget and Policy Studies.

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