India, June 3 -- The Delhi government's announcement that a waiver scheme for pending water bills is in the offing is widely at odds with what would be considered the ideal policy for water-stressed regions such as the national capital. With the government promising to cut unpaid domestic water bills by up to 90%, the waiver would run into thousands of crores given the outstanding bills stood at over Rs. 5,000 crore in 2023. There are several problems with this proposal.

First, there is an issue of moral hazard. The previous AAP government, too, had mooted a "one-time settlement" scheme though it never got implemented. It resurfaced as a poll issue before the Delhi assembly elections earlier this year - a clear sign that parties perceive...