The Economics of Water


Yesterday, I was watching a business program and was very surprised when the guest pointed out that water bottling companies pay $2.25 for a million litres of water. The same water is bottled and sold to customers costing between $.16 per litre if bought in bulk or as much as $2.5 for a high end brand named bottle in retail. Apparently, this is not a new issue. This controversy surfaced in 2015, click here.

In my earlier post on Water, I had mentioned concern about our cavalier attitude towards water as a resouce. Digging deeper, I now find that we are indeed mismanaging the resource even more than I originally thought. The mismanagement is a result of unrelated policies.

Domestic consumption: As a first time swimming pool owner, I discovered that you cannot fill your pool with tap water. Reason being that the utility bill uses a multiplier on your usage to account for costs of drainage. Domestic consumers pay way more than what commercial bottlers pay but that is because of the investment in filtration and pipeline network. However, when it comes to commercial bottlers, they seem to pay no drainage charges.

Marketing:Bottled water is marketed effectively while tap water in comparison is an understated commodity. In these times when Uber can trump taxis and become a multi-national overnight because of the fact that it is app driven, the importance of product image and positioning cannot be understated.

It is also hard to fathom why a generation of people would need the government to educate them about the socioeconomic benefits of drinking tap water. Anyway, now the situation is that many house holds are buying water at a cost that is much higher than what they would pay for a liter of gas. This is based on the fact that most bottled water purchases are done in retail in small bottles. So to put it plainly, the government delivers water on demand into your house for pennies but you want to walk over to the convenience store and pay a couple of dollars to buy bottled water! There are times when I have found pop priced cheaper than bottled water.

With decreased use of tap water, the economy of scale that makes it inexpensive will be lost and future of tap water seems to be more expensive. This plays into the rationale of bottled water sales in the future. This is the reason why we should support water in order to support the concept of water as a fundamental human right rather than for those that can afford. Here is a great article that talks in detail about this issue.

Pricing logic:The province does not want to get into the slippery slope of selling water to companies so it charges an access fee instead. There is no reason why this access charge need not be higher given that across the world many cities have a dry aquifer and water is at a premium.

To generate a liter of gasoline, there is a lot of work done. Prospecting, drilling, transporting, refining, distribution overheads etc. With regards to the bottled water, it is taken directly from the aquifer and the processing and bottling process is mostly automated. So if we look at the selling price of bottled water, it does not make much sense.

Defense:The bottled water company says that it does not touch the lakes that supply water but instead it takes water only from the aquifer. Some how, this kind of seems to imply that lake water appears out of no where and has nothing to do with the aquifer.

On my part, our household never bought bottled water and hopefully would never have to. It is important that you educate yourself on this matter and take a stand. If you want a future where water is no longer a fundamental human right, go ahead and but the next bottle. After all we live in a free country.

Filed under:

Water, Jeopardize

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