Council on Energy, Environment and Water Integrated | International | Independent
Context: Indian cities are expected to face extreme water crises by 2050, underscoring the urgent need to find viable alternatives to freshwater.
CEEW Analysis: India’s treated used water economy represents a USD 26–35 billion opportunity to reclaim domestic sewage as well as generate employment and increase economic growth.
Recommendation: The long-term sustainability of the water management sector can be ensured by pricing freshwater rationally, leveraging municipal bonds, and attracting private partners to scale reuse.
The 30th Conference of the Parties (COP30) at the UN Climate Summit in Belém concluded last month with two key objectives shaping outcomes: transforming pledges into tangible climate action, as upheld in the Mutirão Decision, and securing reliable finance to bridge the implementation gap, as committed in the Belém Package. For India, the fight against climate change is inextricably linked to water security. As per a 2024 study by the Council on Energy, Environment and Water (CEEW), three-fourths of Indian districts are already vulnerable to water-related disasters, making adaptation a national imperative. While international dialogue focuses on securing financial flows, it is equally urgent to build domestic financial systems to support adaptation and water security, beginning with our growing cities.
By 2050, the Ministry of Housing and Urban Affairs estimates that half of India's population will reside in cities, many of which will face water scarcity. While cities account for more than 60 per cent of India's GDP, many are struggling under debilitating water crises—having either too much, too little, or too polluted water. Surat, for instance, faces threats from coastal, riverine, and pluvial flooding, compounded by sea-level rise. In the south, Chennai grapples not only with rising flood risks but also with physical and economic water scarcity.
For urban centres to continue driving national growth, India must move beyond conventional freshwater sources and adopt a circular approach to water management. Reusing treated wastewater—more accurately termed Treated Used Water (TUW)—for industrial, commercial, agricultural, and municipal uses offers a viable alternative to freshwater, serving as both a resilience strategy and an economic opportunity. The global used water sector (municipal and industrial) can unlock USD 340 billion in investments and save up to 25 per cent of municipal freshwater withdrawals through reuse and recycling over the next 14 years. India, generating six per cent of the world's total sewage, is uniquely positioned to capitalise on this. It is estimated that India’s TUW circular economy offers a combined economic opportunity and market potential of over USD 26–35 billion in the next two decades, driving jobs, growth, and sustainability.
Several cities are already leading by example, showing that circular water practices can be both effective and economically viable. Surat, Bengaluru, and Chennai have established TUW reuse practices within industrial clusters, apartment complexes, and for water body recharge to enhance urban water security.
Drawing lessons from these pioneering cities, we recommend three pathways for cities to ensure the long-term sustainability of their water management sectors.
The scarcity principle in pricing theory states that the price of goods must reflect their availability. However, despite freshwater being a scarce resource, it is largely treated as a free or low-cost input in India. With some of the lowest water tariffs globally, this underpricing in India, coupled with poorly targeted subsidies, promotes waste, discourages efficiency, and hinders utilities' ability to invest in reuse infrastructure.
The crucial first step towards circularity is for cities to set freshwater tariffs that better represent the true economic cost of the resource, based on its availability, accessibility, and affordability. This will generate the necessary price signals for alternative water supply sources such as TUW. Once freshwater pricing is rationalised, utilities can gradually introduce TUW tariffs guided by the principles of cost recovery, equity, and environmental sustainability, while strictly adhering to quality and quantity standards.
An ideal tariff structure should attract potential bulk users. In rapidly growing cities, industrial and commercial consumers, with high water demand and greater purchasing power, form the most viable market for TUW. For instance, Bengaluru and Surat are using water pricing as a tool to create demand for TUW. Industrial consumers in Bengaluru receive secondary TUW at INR 25/KL, significantly lower than the freshwater tariff of INR 90/KL. Simultaneously, the city is also experimenting with TUW reuse in water-scarce peri-urban areas to supply agriculture with a reliable alternative source of water at no additional cost to farmers. Surat, similarly, supplies tertiary-TUW to industries at a competitive price of INR 36/KL compared to the freshwater price of INR 39/KL and generates substantial revenue through the sale of TUW.
Municipal bonds are a key mechanism to access upfront capital for used water treatment and reuse infrastructure. Nearly 50 per cent of all municipal bonds (by value) in India have historically financed water and sewerage systems. While issuances have been sporadic, early tailwinds are promising. A 2025 CEEW report states that 50 bonds worth INR ~7,000 crore, half of which have been targeted towards the sewerage, water and drainage sector, were issued by FY25, with at least 10 more worth INR ~1,000 crore in the pipeline for FY26, potentially making it a record year for annual issuance by SEBI.
However, at a systemic scale, the vicious cycle of weak municipal finances, low creditworthiness, and limited ability to borrow persists. Issuing bonds can help break this cycle by mobilising capital and nudging urban local bodies to improve transparency and fiscal discipline. A concerted push is required at the state level for greater issuance. This can be supported by:
Ghaziabad recently established a 40 ML/day advanced tertiary treatment plant that supplies TUW to 1,400 industrial units across the city, by issuing India’s first green municipal bond. Such a city offers a replicable model for achieving financial discipline and successfully securing municipal bonds to finance infrastructure critical to India's green growth trajectory.
Scaling TUW reuse requires more than just public funding. Large-scale participation from the private sector, such as industrial associations, real estate developers, discoms, and wastewater treatment technology providers, is essential to achieve cost efficiency, innovation, and operational excellence, as seen in the case of the renewable energy and road sector.
The arrangement between Chennai Petroleum Corporation Limited (CPCL) and the Chennai Metropolitan Water Supply and Sewerage Board (CMWSSB) is a successful example. CPCL receives regular piped TUW from CMWSSB, which it further treats for industrial use, thereby replacing the need for freshwater. This shared-risk model, combined with competitive pricing and co-development, shows how TUW can be scaled sustainably.
To further expand such models, city planning documents, like master plans and city-specific reuse plans, need to identify bulk TUW users, mandate offtake, and integrate private players. Successful business models must also be adapted to local contexts and be provided incentives for industry participation.
Urban India stands at a tipping point. Water scarcity threatens not just households but also the economic engines driving growth. By treating wastewater reuse as a part of a value chain rather than a municipal service expense, cities can shift toward long-term sustainability. Indian cities can turn one of their biggest environmental challenges into a multi-billion-dollar opportunity and secure a water-resilient urban future.
Ayushi Kashyap and Amlan Bibhudatta are Research Analysts at the Council on Energy, Electricity and Water (CEEW). Send your comments to [email protected]
