View: How urban primacy assumed importance in Sitharaman’s Budget speech


Finance minister Nirmala Sitharaman, in her maiden Budget speech, rightly said that “rapid urbanisation is an opportunity rather than a challenge”. Her Budget also provides a roadmap for water, housing and infrastructure. Bengaluru and Chennai are currently reeling under a water crisis, even as Mumbai is inundated with rainwater.

As economist Jeffrey Williamson argued three decades ago, a city uses its least expensive sources of water first. Then, as the city grows, it becomes increasingly more expensive for the city to take water from distant sources.

Hence, in such circumstances, using the average cost of water for pricing underestimates the cost of water production in the future for any city. So, marginal cost pricing of water is much recommended. In the 1850s, the river Vrishabhavathi, lakes and ponds were enough to satisfy Bengaluru’s water requirements. In the 1880s, water from tanks such as Dharmambudhi, Sankey, Ulsoor and Sampangi were tapped.


A decade later, since citizens started to complain of water shortage, water from the Heseraghatta reservoir on the Arkavathy river several kilometres away was used. In 1914, another reservoir, Thippagondanahalli, was built on the Arkavathy river to supply water to the continuously growing city.

By the 1960s, the Cauvery was identified as the new water source for the city. Since then, various stages of commissioning projects have been supplying water, to the extent of 1,450 million litres daily, as of 2019. But this is inadequate. To tackle this crisis, the Karnataka government recently decided to draw water from the Sharavathi river about 250 km away.

In a recent study, we found several cities such as Jaipur underpricing their water, compared with the marginal cost of its supply. Only Bengaluru was charging more than the marginal cost.

Cities such as Chennai and Bengaluru can conserve their water, reuse wastewater for non-potable purposes, use rainwater harvesting more effectively, and check the spread of the water mafia, making water accessible to the common man at an affordable price, without excessive subsidisation. Only efficient marginal cost pricing of water can ensure its equitable distribution, whereby the marginal cost price paid by better-off consumers cross-subsidises those who can’t afford to pay.

Water for every household by 2024, as promised by the FM in her Budget, is attainable only if water is conserved, reused and priced appropriately. According to Sitharaman’s Budget speech, about 95% of all the country’s cities have declared themselves — note, not ‘certified’ — ‘open-defecation free’, with more than 45,000 public toilets (whether functional or not) having been uploaded on Google maps, and about one crore citizens having downloaded the Swachhata app. But the success of all sanitation-related goals relates crucially to the availability of water.

On the housing front, the Budget has recognised that current rental laws are archaic and need to be updated. These laws, which govern rents charged to tenants by landlords, may seem to protect the tenants. But, in reality, they stifle renovation, rehabilitation and release of housing by landlords, which, in turn, restricts the supply of rental housing to tenants who are typically young migrants.

Schemes such as Bharatmala, Sagarmala and UDAN (Ude Desh ka Aam Nagrik) are bridging the gap between rural and urban India by improving transport infrastructure. If true, then urban primacy — defined as the ratio of the largest city’s population to that of the second-largest city — should ideally decline.

Urban primacy in most states has actually increased from an average of 2.5 in 1991 to nearly 3.0 in 2011, implying that the typical Indian city became three times as large as the second biggest city in its respective state in 2011, from being only 2.5 times larger 20 years earlier.

During 1991-2011, however, Bengaluru’s urban primacy increased steeply from 4 to 8.9. Hence, states like Karnataka need greater highway and infrastructure networks to help reduce Bengaluru’s urban primacy.

One hopes, during her tenure, Sitharaman becomes the first finance minister to truly recognise the importance of cities, the vulnerability of its residents who are short of water and affordable housing, and makes the right policy push and implementation to improve their livelihoods.

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