Improving Revenue Recovery

HMWSSB streamlines its billing and collection process

The Hyderabad Metropolitan Water Supply and Sewerage Board (HMWSSB) serves around 0.83 million customers in Andhra Pradesh. It is responsible for the supply of potable water, as well as the planning, construction, management, and operations and maintenance (O&M) of the water supply system in Greater Hyderabad and surrounding areas.

Poor billing and collection practices have contributed to the board’s inability to recover costs, adding to its difficulties in providing citizens with adequate services and operating and maintaining infrastructure facilities in a proper manner. The low revenue collections have also hurt HMWSSB’s creditworthiness and affected its ability to raise funds for various capacity augmentation projects.

To address these issues, HMWSSB has been implementing various initiatives for streamlining the billing process and increasing the efficiency of bill collection. These include SMS alerts for bills and water supply timings, the development of a bill monitoring system for monitoring and processing bills submitted by various HMWSSB offices, and outsourcing the billing mechanism. These initiatives have been undertaken to make the board’s billing system more transparent.

Background

Hyderabad’s current water demand is estimated to be 732 million litres per day (mld). Against this, HMWSSB supplies 882.4 mld of potable water through a pipeline network of 8,964 km.

HMWSSB taps both surface and ground water sources for meeting water requirements. It primarily draws water from surface water sources like the Osman Sagar lake on the Musi river, the Himayat Sagar lake on the Esi river, and from the Manjira and Krishna rivers. Meanwhile, groundwater sources are tapped with the use of wells, tubewells and hand pumps.

At present, about 95 per cent of the city has piped water connections, while borewells and tankers cater to the remaining. Despite having adequate water supply at its disposal, the civic agency is affected by two main issues. To begin with, the non-revenue water (NRW) component of the water supply stands at 35 per cent as against the benchmark of 20 per cent set by the government. Water theft through illegal connections and leakages in the pipeline network contribute to this percentage. A massive cost revenue gap has developed due to the high NRW, outstanding bill payments and uneconomical tariffs. The board’s revenue fluctuates between Rs 9.6 billion and Rs 10 billion, while its operational costs alone are Rs 9.7 billion.

The cost-revenue mismatch is pushing the board towards bankruptcy and causing an operational deficit of about Rs 20 million every month. One of the biggest hindrances in its efforts to be self-sufficient is the rising cost of electricity. At present, HMWSSB is charged industrial power rates despite 96 per cent of its customer base being domestic, including slum dwellers. Mounting power bills pose a major threat to its solvency as its electricity bill forms 55 per cent of its expenditure.

The cost of electricity is projected to increase further when the board starts supplying water from the Krishna water supply project (Phase III) and the Godavari water supply project (Phase I). With the commencement of both projects, the total cost escalation will be more than Rs 30 million. The Krishna water supply project, which will be run on a trial basis, will alone cause an increase of Rs 6 million every month. Although the Telangana government’s recent budget allocation of Rs 1 billion to the board could provide temporary respite, it will still be a while before self-sufficiency is achieved.

The existence of NRW mandates the adoption of advanced methods of metering and bill collection, apart from the need to reduce leakages in supply as they lead to the wastage of treated water and loss of revenue. In order to address the leakage issue, HMWSSB has introduced an online leakage detection mechanism.

Revenue collection and management

In an attempt to improve revenue collection and promote transparency in its operations, HMWSSB has undertaken and planned several IT initiatives, including a bill monitoring system, an online bill payment system and SMS bill alerts.

In August 2006, it shifted from a biannual bill generation system to a monthly billing system. The entire process was outsourced to three private companies: Sriramulu Reddy & Company, Excel Business Solutions, and Bhavani & Company. This system is similar to the one adopted by Andhra Pradesh Central Power Distribution Company Limited.

HMWSSB also revised its tariff rates in 2011 and adopted the telescopic (or progressive) tariff system, which is applicable to all categories of consumers. Under the new system, the rates increase as consumption rises above a basic minimum level. The board also revised the tariff rates for commercial and industrial users in 2014, doubling these charges across all slabs.

In addition to the previously mentioned measures, the board has launched many schemes for recovering long-standing arrears. In 2014, it introduced the interest waiver scheme for customers with arrears above Rs 10,000. At present, the total magnitude of unpaid bills is roughly Rs 10 billion, of which Rs 1 billion is owed by government agencies. If these dues are paid, a major chunk of the financial burden on HMWSSB will be eased.

Online payment

In 2009, the board introduced the spot billing and collection mechanism with the objective of reducing customer servicing costs. Under the new system, the meter reading staff was to be equipped with automated meter reading (AMR) machines capable of generating bills and collecting payments on the spot. HMWSSB outsourced the bill collection mechanism to private companies and hired nearly 800 meter readers from private consultancies.

Though this system has been in place since 2009, the board found some irregularities due to the ineffectiveness of meter readers in issuing water bills or collecting tariffs from customers. A number of meter readers were reportedly not remitting the money they collected to the water board offices or accounts. In addition, bills were not issued to all customers, leading to revenue losses of around Rs 200 million per month.

Prior to the introduction of this system, meter readers were required to maintain meter reading books that contained information on individual consumers. But as the customer base grew in size, it was not feasible to maintain these records. This was the reason the board introduced spot billing and collection through AMR machines that are managed online. UK-based Callippus Solutions built a turnkey solution for HMWSSB that included spot billing, collection and server-side solutions for the day-to-day reporting of management information systems.

The spot billing machines are fully integrated with the board’s central servers to facilitate online monitoring and viewing of revenue collection information. Transactions carried out on the handheld terminal (point of sale) are sent to the server using GSM or GPRS technology. If the network is not available for a brief period, transactions are queued for delivery. The device continuously attempts to recover a GPRS connection and deliver transactions till the queue has emptied completely. It also has the capability of generating outstanding bills for the past several years. The embedded device software has been developed using C/C++ language and the server-side solution is built on ASP.NET technology.

The initiative has been implemented at a cost of Rs 0.5 million, leading to a large increase in revenue, in addition to savings. It resulted in savings of Rs 1.5 million in terms of reduced operations and manpower costs and Rs 0.2 million per month through the elimination of transaction costs of Rs 5 for each transaction to third-party collection agencies like e-Seva and AP Online. By targeting customers that were not forthcoming with payments, the spot billing mechanism assisted the board in increasing bill collections from 24 per cent to 46 per cent of the total customer base in the year it was introduced.

SMS alerts

Under this system, customers can register their mobile numbers with the board through numerous channels and then receive water bills via SMS. In order to make the bill collection mechanism more transparent, HMWSSB sends the meter reader’s name and mobile number to the consumer in an SMS, along with bill alerts. In July 2015, the board started a pilot project that involved sending SMS alerts to customers to inform them of water supply timings. Customers receive SMS alerts on their registered mobile numbers the moment a lineman opens the valve and releases water to a particular area. This effort is aimed at reducing the inconvenience of customers who are unaware of the water supply timings in their area.

Bill monitoring system

The board introduced the bill monitoring system (BMS) in an attempt to enhance accountability and reduce the dependence on manual cheques. This helped monitor and process the bills submitted by various HMWSSB offices to the finance wing. Following the adoption of BMS, tracking work sanctions, material supply, completion of work and bill payments have become considerably easy. The new automated system has effectively reduced manual work and improved transparency in bill processing. It allows the capturing of bill information, the generation of reference tokens and the provision of real-time bill status at each hierarchy while also updating it via SMS alerts to the concerned agency or HMWSSB office. The board also allows consumers to generate and download water bills from its website.

Outsourcing the billing mechanism

In July 2015, HMWSSB invited expressions of interest from private players with the aim of outsourcing the entire billing process, including bill collection; the manufacture, supply, fixing and comprehensive five-year maintenance of district metering area meters and domestic meters; the cost of fittings and jointing materials; as well as the construction of meter chambers with a locking arrangement.

By delegating these duties, the board expects a fall in unmetered connections and rise in revenues due to a reduction in the percentage of NRW in its total water supply. If successfully implemented, the new system will lead to revenue growth and help the board become financially independent.

Conclusion

The initiatives taken by the board have assisted in bringing more customers under the billing umbrella, thereby streamlining its billing mechanism and increasing revenue collection. With the recent decision to outsource operations in this area, HMWSSB will be able to reduce its NRW component due to the increase in the number of metered connections across the city. The new system is also expected to significantly reduce O&M expenditure and improve operational efficiency.

Going forward, the revenue gains resulting from these initiatives are expected to help the board take up more development projects. The positive results will also encourage other water utilities to take up similar projects for improving financial performance.

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