Karachi has money for water. Here's how KWSC can actually earn it.

Karachi has money for water. Here's how KWSC can actually earn it.

Karachi has a strange water economy. Households across the city spend heavily to obtain water. Yet the Karachi Water & Sewerage Corporation, the utility that brings freshwater from hundreds of kilometres away, energises it, cleans it and then rations it across the city, cannot generate enough revenue to cover its operational costs. As any Karachiite will testify, the city is not short of money being spent on water. The problem is that much of this money flows towards tankers, reverse osmosis plants, pumps, boreholes and storage tanks, while KWSC remains strapped for cash. In Essa Nagri, KWSC is upgrading the water supply and sewerage infrastructure by installing 32,050 feet of new pipelines with the help of a loan from the World Bank and Asian Infrastructure Investment Bank. Photo: Athar Hussain The consequences extend beyond the system. This past year, the Government of Sindh provided KWSC with more than Rs17 billion in subsidy to help cover its operational costs. For reference, that is more than twice the total annual budget of the University of Karachi, Sindh’s largest. Every rupee spent to sustain an underperforming water system is a rupee unavailable for expanding universities, improving hospitals or addressing other urgent public needs. Reliable water is an essential public service and deserves public support, but persistent subsidies at this scale are simply not sustainable. Who gets water and who pays? Before any reforms are made, it is important to understand who the KWSC customers are. The figure below separates households according to whether they receive piped water, receive a bill and make a payment. What emerges is not one type of customer or one cause of lost revenue, but several distinct problems that require very different responses. At the heart of this paradox is a broken relationship between water, billing and payment. Our recent studies (here and here) investigate how KWSC could increase revenue in a largely unmetered city without worsening the already unequal financial burden that obtaining water places on households. Based on a geographically representative survey of nearly 1,000 households across Karachi (conducted in 2021-2022), we show why the answer cannot be reduced to simply raising tariffs or pursuing customers who refuse to pay. This chart reveals exactly why the utility struggles with revenue, showing that KWSC’s billing system is almost completely detached from who actually receives water. The blue segment represents the relationship that should ordinarily exist between a utility and its customers: households receive water, receive a bill and pay it. Ideally, most of the figure would be blue. Instead, it reveals several very different customer relationships, each reflecting a different challenge for KWSC. The households shown in black are conventional defaulters. They receive both water and a bill but do not pay. They present a legitimate enforcement and revenue-recovery problem. But the remaining groups complicate any simple narrative about Karachiites refusing to pay. The beige segment consists of households that receive water but are never billed. They benefit from the system without contributing to its revenues, but cannot automatically be treated as deliberate free riders when KWSC has not established a formal billing relationship with them. Those in red receive bills but no water and withhold payment, an understandable response to being charged for a service they do not receive. Most counterintuitive are the households in yellow: they continue paying their bills despite receiving no water. For some, these payments preserve documentary evidence of their tenure and for others it’s a requirement if they want to sell their plot. It is a measure of how thoroughly dysfunction has been normalised in Karachi that this arrangement barely seems remarkable. Households continue paying for water they do not receive because refusing to do so might be an even bigger problem down the road. The scale of this billing gap is substantial. Only 58 per cent of households with piped connections in our study reported receiving a monthly bill. Roughly one-third of connected households received water without being billed, making them one of the largest customer groups in the figure. Increasing tariffs or pursuing existing defaulters cannot recover money from households that remain outside the billing system altogether. Before asking existing customers to pay more, KWSC has considerable scope to bring the households it already serves into the formal billing system. The blocky, stepped red line represents the rigid water bills—showing how everyone gets stuck on the same flat rates. The smooth blue line represents actual household spending power, which varies widely across the population. The gap between the two shows the inequality: the bills (red) aren’t adapting to the people (blue). Karachiites are already paying The mismatch between what KWSC collects and what Karachiites spend becomes even clearer when we compare utility bills with households’ total water costs. Figure 2 shows the distribution of both across the households in our survey. The red curve shows the distribution of monthly KWSC bills actually paid by households. The median bill (at the time of the survey) was only Rs241. Its step-like shape also reveals how concentrated the existing tariff is: nearly two-thirds of surveyed properties fall within the first two tariff brackets. That means that households with very different incomes and property values pay the same water bill. Clearly, living in a 1500 sq ft flat in Clifton is different from living in a 1500 sq ft flat in Baldia. The blue curve shows households’ total monthly water expenditure, including the KWSC bill and spending on tankers, pumps, boreholes, storage and filtered drinking water. The median was Rs2,119, nearly nine times the median utility bill. Karachiites are therefore already paying heavily for water, but much of that expenditure goes towards compensating for deficiencies in the public system rather than supporting it. Any tariff reform must consequently be judged not only by what appears on the KWSC bill, but by what households spend to meet their complete water needs. What are possible alternatives? How, then, can KWSC recover more revenue without making an already unequal water economy worse? The conventional answer would be to install meters and charge households for the water they consume. But universal metering is expensive and designed for 24/7 water supply. Traditional meters can produce unreliable readings under Karachi’s spotty and unreliable water supply. Until KWSC has the technical and financial capacity for reliable volumetric billing, it will need to continue relying largely on fixed tariffs based on property characteristics. The existing tariff uses plot size, dwelling type and number of floors as proxies for a household’s ability to pay. But these characteristics cannot differentiate between properties in vastly different economic circumstances (i.e. the Clifton vs Baldia example). We therefore linked our household survey with the Federal Board of Revenue’s property-valuation schedule for Karachi. The schedule assigns official values per square foot according to neighbourhood and property type. By combining these rates with each surveyed household’s location, dwelling type and covered area, we estimated the value of its property. To our knowledge, this is the first study to link FBR property valuations with household-level water data in Karachi. Households in Essa Nagri cluster around a central space and share underground tanks. Photo: Athar Hussain We then built two models using household observed behaviour. The first estimated the likelihood that a household receiving a bill would pay it, accounting for factors including the tariff, household circumstances and satisfaction with water pressure and quality. The second used machine learning to estimate how much each household would spend on tankers, RO water and other alternatives to piped supply. Combining the two allowed us to examine how different reforms might affect both KWSC’s revenue and the total amount households spend obtaining water. We compared three tariff systems. The first retained KWSC’s existing property-size tariff. The second adjusted existing bills according to assessed property value, shifting more of the burden towards higher-value properties and away from lower-value ones. The third applied a large uniform increase designed to maximise expected revenue. Each tariff was tested under two conditions: current billing and service practices, and a scenario in which all connected households received a monthly bill and satisfactory water availability, pressure and quality. This produced six reform combinations. These are conditional simulations, not forecasts of what will certainly happen. The improved-service scenarios do not estimate the cost or practical difficulty of upgrading Karachi’s water network. We are simply using the relationships observed in our survey to estimate how household payment and expenditure might change if billing and service improved. The clearest result was also the simplest: KWSC does not need to begin by raising prices. The models predict that without any tariff increases, simply ensuring every connected household received a bill and satisfactory service would nearly double the revenue the utility currently generates. At the same time, households would spend about 20% less on water overall because they would not need to rely as heavily on tankers and other expensive alternatives. KWSC does not need to begin by raising prices. Just ensuring every connected household gets its bill and decent service, would double revenue. Households would spend 20% less because they would not need tankers. Changing how bills are calculated before fixing billing and service, by contrast, could backfire. If KWSC introduced property-value-based bills under present conditions, its revenue could fall by roughly one-quarter. But once households received regular bills and better service, the models predict that the property-value-based bills would perform much better: KWSC collects more revenue, households spend less overall, and a greater share of the bill shifts towards those living in more expensive neighborhoods. The models also show that while simply raising the tariffs would generate higher potential revenue, even with universal billing and improved service, the utility would only recover around half of the revenue theoretically available under the much higher tariff. Household total water expenditure would also increase and this burden would fall disproportionately on poorer households. There is a key lesson here about sequencing. KWSC should first bring connected households into the billing system, then pair revenue recovery with visible service improvements, and only subsequently redesign tariffs to reflect differences in ability to pay. Raising or changing tariffs before fixing billing and service risks increasing non-payment and worsening the burden on households already poorly served by the system. Restoring the bargain The simulations reinforce a more basic point: expanding the billing system will not be enough on its own. A bill is part of an implicit bargain between a utility and its customers. The utility provides a service, the customer is charged for it, and payment sustains the system that makes the service possible. When water arrives infrequently, at inadequate pressure or in visibly poor quality, that bargain begins to lose its legitimacy. Non-payment then becomes more than a problem of weak enforcement. It can also be a response to the quality, or complete absence, of the service being billed. Our findings bear this out. Most households that received a bill paid it, but payment was considerably more likely when households also received water and were satisfied with its pressure and quality. This does not excuse conventional defaulters who receive water and a bill but choose not to pay. KWSC has every reason to pursue payment from them. It does, however, show why a uniform recovery campaign is unlikely to work. A household refusing to pay for a functioning service presents an enforcement problem. One withholding payment after months of dry taps presents a service problem. Treating the two as equivalent may raise demands for payment, but it will do little to rebuild either revenue or public confidence. The assumption that Karachiites are simply unwilling to pay for water is also difficult to reconcile with what households already spend when piped water falls short. They purchase expensive tanker water, buy drinking water from RO plants, operate pumps and boreholes, and invest in storage simply to make an unreliable system usable. As Figure 2 showed, the median household’s total monthly water expenditure was nearly nine times the median KWSC bill. Karachi’s water is therefore not free. Much of what households pay simply goes towards compensating for deficiencies in the public system. Photo: Athar Hussain This creates a vicious cycle. Weak billing and poor payment constrain KWSC’s revenues, limiting its ability to provide reliable service. Poor service, in turn, weakens customers’ willingness to pay and forces them to spend more on private alternatives. The worse the public system performs, the more household spending is diverted away from it, leaving the utility with even fewer resources to improve. Households also told us that they would be willing to pay more for meaningful improvements in water pressure, quality and reliability. Such survey responses should be interpreted cautiously. Stating a willingness to pay is easier than actually paying a higher bill each month. Yet this finding is consistent with what households already spend on water and with their observed payment behaviour. Karachiites appear willing to pay when that produces a tangible benefit. More reliable public water could therefore redirect some of the money currently spent coping with poor service towards sustaining and improving the system itself. Breaking this cycle begins by recognising that different customer groups require different responses. Households receiving water without a bill need to be identified, registered and brought into the billing system. Those receiving both water and bills but refusing to pay require stronger enforcement. Households being billed despite prolonged non-supply need a credible mechanism through which service failures can be reported, verified and addressed. A single revenue-recovery campaign cannot resolve problems arising from such fundamentally different relationships with the utility. This will require KWSC to develop an accurate customer registry and connect it more closely with information about service delivery. That is no small task in a city where formal and informal connections have accumulated over decades and customer records have not always kept pace with rapid urban growth. But it is difficult to imagine a financially viable utility that does not reliably know whom it serves, whether they receive water, whether they are billed and whether they pay. The order of reform matters. KWSC should first bring connected households into the billing system and pair revenue recovery with visible service improvements. Once those foundations are in place, tariff redesigns can help distribute bills more closely according to households’ ability to pay. Any such reform would still need safeguards for low-income households. Large across-the-board increases may promise impressive revenues on paper, but they risk worsening non-payment and placing the greatest burden on those least able to afford it. KWSC’s financial difficulties are real, and households that receive water must contribute towards the cost of providing it. But the objective should not be to produce the largest possible bill. It should be to finance a more reliable public service while reducing what Karachiites spend on water overall. A functioning water system rests on a straightforward bargain: the utility supplies water, sends an accurate and fair bill, and expects its customers to pay. Restoring that bargain is how Karachi can begin to escape a cycle in which residents pay too much for water while the utility responsible for supplying it collects too little.