44376 THE INDIA'S WATER ECONOMY INDIA'S WATER ECONOMY Bracing for a Turbulent Future WORLD BRACING FOR A TURBULENT FUTURE India faces an unsure water future. Unless fresh policies are adopted and implemented to make water BANK development and management sustainable, India will have neither the means to maintain and build new infrastructure, nor the water required for its survival. This report focuses on two basic issues--the major water-related challenges facing India, and the critical measures required to address them. It calls for a reinvigorated set of public water institutions to sustain water development and management in India. The study: NDIAI 'S · examines the evolution of water management in India W · describes the achievements of the past ATER · analyses the challenges ahead ECONOMY · suggests ways of evolving a sustainable water management system Drawing heavily on background documents by eminent Indian practitioners and policy analysts, John Briscoe · R.P.S. Malik it explores various options of managing the transition from past practices in a principled and BRACING pragmatic manner. The report will be essential for practitioners in the fields of water management, development, and FOR economics. It may prove useful for policymakers, government agencies, NGOs, journalists, and general readers interested in India's water economy. A TURBULENT John Briscoe is currently World Bank Country Director for Brazil. Previously, he was Senior Water Advisor with responsibility for the Bank's water portfolio both globally and in South Asia. R.P.S. Malik currently works with the Agricultural Economics Research Centre, University of Delhi. He FUTURE has written extensively on water-related issues. Earlier, he worked for The World Bank, World Resources Institute, and Afro-Asian Rural Reconstruction Organization. THE WORLD BANK 1 ISBN 019568319-6 4 9 7 8 01 9 5 6 8 31 9 6 www.oup.com THE WORLD BANK 2 INDIA'S WATER ECONOMY INDIA'S WATER ECONOMY BRACING FOR A TURBULENT FUTURE John Briscoe R.P.S. Malik THE WORLD BANK 1 Agriculture and Rural Development Unit South Asia Region 1 YMCA Library Building, Jai Singh Road, New Delhi 110001 Oxford University Press is a department of the University of Oxford. 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ISBN-13: 978-0-19-568333-2 ISBN-10: 0-19-568333-1 Tyeset in Sabon in 10/14 by InoSoft Systems, Noida 201 301 Printed at Published by Manzar Khan, Oxford University Press YMCA Library Building, Jai Singh Road, New Delhi 110 001 ACKNOWLEDGEMENTS This report has benefited greatly from formal reviews and comments from external reviewers (Suresh Prabhu, Peter Rogers, Ramaswamy Iyer, George Varughese, Tushaar Shah, Maria Saleth, Vijay Vyas, Ramesh Bhatia, and Nirmal Mohanty) and World Bank staff (Sumir Lal, Sanjay Pahuja, Sunil Khosla, R.S.Pathak,PrabirJoardar,GrantMilne,ConnieBernard,MartienvanNieuwkop,GajanPathmanathan, DinaUmali-Deininger,ManuelContijoch,KarinKemper,JavierZuleta,SrinivasRajagopalan,Harshadeep Rao, Keith Pitman, and Alain Locussol). As usual, not all reviewers agreed with all that is written in the report (nor did the authors agree with all that was suggested by the reviewers!). The product is entirely the responsibility of the authors and should not be attributed to the reviewers. The report was discussed with the Government of India but does not necessarily bear its approval for all its contents, especially where the Bank has stated its judgments, opinions or policy recommendations. The title for this report is stolen--with kind permission from Tushaar Shah--from that of the 2005 annual meeting of the IWMI-Tata Water Program, one of the many fora at which the ideas in this Report werediscussedandrefined.TheIWMIgraciouslyhelpedwiththeproductionofthebasinmaps.Jacqueline Julian of the World Bank provided excellent assistance. Generous support was provided by the Bank Netherlands Water Partnership Program. CURRENCY EQUIVALENTS Currency unit = Indian rupee US$1= Rs. 45.50 FISCAL YEAR April 1­March 31 ABBREVIATIONS AND ACRONYMS CAS ­ Country Assistance Strategy CII ­ Confederation of Indian Industry CWC ­ Central Water Commission DJB ­ Delhi Jal Board DVC ­ Damodar Valley Corporation FICCI ­ Federation of Indian Chambers of Commerce and Industry IMT ­ Irrigation Management Transfer IPCC ­ Intergovernmental Panel on Climate Change IWMI ­ International Water Management Institute NWDA ­ National Water Development Authority PIM ­ Participatory Irrigation Management TISCO ­ Tata Iron and Steel Company TVA ­ Tennessee Valley Authority WUA ­ Water Users Association Vice President : Praful Patel Country Director : Michael Carter Sector Director : Constance Bernard Sector Manager : Adolfo Brizzi Task Manager : John Briscoe INDIA'SWATERECONOMY TABLE OF CONTENTS PREFACE EXECUTIVE SUMMARY 1. THE HUGE ACHIEVEMENTS OF WATER DEVELOPMENT AND MANAGEMENT IN INDIA The Era of Large Investments in Major Infrastructure 1 The Era of Groundwater Exploitation 7 2. CURRENT AND LOOMING CHALLENGES Adjusting to the Needs of a Changing Society 12 Adjusting to Scarcity and Greater Variability 15 Dealing with Growing Conflicts 20 Maintaining and Renewing Existing Infrastructure 26 Building Infrastructure in Under-served Areas and for Under-served Public Purposes 30 3. AN INVIGORATED INDIAN WATER STATE FOR THE 21ST CENTURY A State in Disrepute 39 The Central Institutional Challenges in Building `the new Indian water state' 40 Instruments, not Organizational Forms, are Key 41 Stimulating Competition in and for the Market of Water Supply Services 43 Empowering Users by Giving them Clear, Enforceable Water Entitlements 46 Ending the Culture of Secrecy and Making Transparency the Rule 53 Introducing Incentive-based, Participatory Regulation of Services and Water resources 54 Putting the Sector on a Sound Financial Footing 55 Investing Heavily in Human Resource Development 58 Ensuring that Local People are the First Beneficiaries of Major Water Projects 59 Making the Environment a High Priority 60 4. PRINCIPLED PRAGMATISM AND `RULES FOR REFORMERS' Rule #1: Water is Different 63 Rule #2: Initiate Reform where there is a Powerful Need and Demonstrated Demand for Change 63 Rule #3: Involve those Affected, and Address their Concerns with Effective, UnderstandableInformation 65 Contents Rule #4: Reform is Dialectic, not Mechanical 67 Rule #5: It's Implementation, Stupid 68 Rule #6: Develop a Sequenced, Prioritized List of Reforms 68 Rule #7: Be Patient and Persistent 68 Rule #8: Pick the Low-hanging Fruit First--Nothing Succeeds like Success 69 Rule #9: Keep your Eye on the Ball--don't let the Best become the Enemy of the Good 69 Rule #10: There are no Silver Bullets 70 Rule #11: Don't throw the Baby out with the Bathwater 71 Rule #12: Reforms must Provide Returns for the Politicians who are Willing to make Changes 72 5. THE EVOLVING ROLE OF THE WORLD BANK What the Bank has Done in the Past 73 The Bank's New Water Strategy 76 The 2004 World Bank Country Assistance Strategy for India 76 The Ongoing Evolution of Bank Engagement in the Water Sector in India 78 viii FIGURESANDBOXES FIGURES Figure 1: Rates of return on investment on infrastructure and mana gement of water resources xvii Figure 2: The evolving role of the citizen and the state in water management in India xxi Figure 3: The changing composition and level of World Bank lending for water in India xxiii Figure 1.1: British water engineers who are revered as saints in southern India 2 Figure 1.2: Output on irrigated and unirrigated farmland 2 Figure 1.3: Percentage of irrigated area by farm size 4 Figure 1.4: Average number of days of employment for adult casual laborers each month 4 Figure 1.5: The effect of Nagarjunasagar irrigation on per capita income 5 Figure 1.6: The effect of irrigation and Green Revolution on income in Tamil Nadu 5 Figure 1.7: The effect of Bhakra Dam on different social groups 5 Figure 1.8: Income gains from directly and indirectly impacted sectors--Bhakra Dam 6 Figure 1.9: How irrigation reduces poverty in India 6 Figure 1.10: Electrification and rural poverty by state 6 Figure 1.11: Economic growth and poverty reduction--the global relationship 6 Figure 1.12: The decline in poverty in India, 1973­2000 7 Figure 1.13: The evolution of forms of irrigation in India, 1950­2000 7 Figure 1.14: Electricity tariffs and generation cost in different states 8 Figure 1.15: Level of groundwater development by basin 8 Figure 1.16: Increase in electricity consumption for agriculture 9 Figure 1.17: Electricity subsidy to agriculture as percentage of gross fiscal deficit, 2000­01 10 Figure 1.18: Farm input subsidies in Gujarat 10 Figure 1.19: The precarious state of groundwater in Tamil Nadu 11 Figure 2.1: Rates of return on investment on infrastructure and management of water resources 12 Figure 2.2: Employment generation by crop 13 Figure 2.3: Total and sectoral water use in 2020 under two management scenarios 14 Figure 2.4: Differences in income in Tamil Nadu in 2020--flexible compared to fixed water allocations 15 Figure 2.5: Utilizable water, demand, and residual which is available but not used 15 Figure 2.6: `Unused' surface water and groundwater 16 Figure 2.7: Simulated effects of deglaciation on Himalayan river flows over 10 decades 16 ix Figures and Boxes Figure 2.8: Change in South Asia summer rainfall predicted by 10 General Circulation climate models 17 Figure 2.9: Predicted change in number of rainy days from the `decreased rainfall' IPCC model 17 Figure 2.10: Predicted change in rainfall intensity (in mm per day) from the `decreased rainfall' IPCC model 18 Figure 2.11: Area flooded has been relatively stable 18 Figure 2.12: Areas subject to flooding are vulnerable to climate change 18 Figure 2.13: Running out of groundwater 19 Figure 2.14: Chief Ministers of Karnataka and Tamil Nadu resolving the conflict over the waters of the Cauvery River 23 Figure 2.15: Water entitlements in the Vaigai Basin 24 Figure 2.16: The demise of the Bharatpur Bird Sanctuary 26 Figure 2.17: The stock of major water infrastructure (large dams in this case) is aging 27 Figure 2.18: The financing of water services in India 28 Figure 2.19: Depleting India's infrastructure stock 29 Figure 2.20: Storage per capita in different semi-arid countries 30 Figure 2.21: Days of average flow which reservoirs in semi-arid countries can store in different basins 30 Figure 2.22: The development of economically-feasible hydropower potential in India in the international context 31 Figure 2.23: Status of hydropower development in different regions 31 Figure 2.24: Environmental and social indicators for hydropower dams 32 Figure 2.25: The declining role of hydropower in India 32 Figure 2.26a:Flows in billions of cubic meters per year in the major river basins of India 33 Figure 2.26b:The number of days of average flow that can be stored in different river basins in India 33 Figure 2.27: Possible inter-basin water transfers 33 Figure 2.28: The poverty-reducing impact of irrigation is declining 34 Figure 2.29: Allocations to major water infrastructure are declining 35 Figure 2.30: Subsidies to water-related sectors 35 Figure 2.31: Yamuna River dissolved oxygen 37 Figure 2.32: Yamuna River quality­­fecal coliforms 37 Figure 3.1: The desired evolution of functions and actors 41 Figure 3.2: The basis for sound irrigation service provision 43 Figure 3.3: Typical public and private roles in the provision of infrastructure 45 Figure 3.4: Cost and quantity of raw water from different sources for Chennai 48 Figure 3.5: Pakistan Punjab canal entitlements from the 1991 Water Accord 52 Figure 3.6: Participants in modern regulation 55 Figure 3.7: From low-level to high-level equilibrium in Conakry 57 Figure 3.8: How social and economic performance of dams has improved globally 59 Figure 3.9: The `Kuznets Curve' for environmental quality 60 x Figures and Boxes Figure 4.1: Impact of eliminating electricity subsidies on marginal farmers in Haryana 70 Figure 5.1: The decline and changing composition of World Bank lending for water in India 74 Figure 5.2: The `global' Poll results for South Asia, showing that infrastructure and education were the two areas which were of high development priority, and priority for the World Bank 75 Figure 5.3: Development priorities and comparative advantage of the World Bank 77 Figure 5.4: World Bank re-engagement with water in India 77 BOXES Box 2.1: Water environment challenges­­the case of the Yamuna River around Delhi 36 Box 3.1: Incipient water trading around Chennai 48 Box 3.2: Water entitlements are the principal mechanism for ensuring efficiency, sustainability, and voluntary reallocation of water 49 Box 3.3: The Maharashtra Water Resources Regulatory Authority Act of 2005 50 Box 3.4: Towards a transparent water entitlement regime in Punjab, Pakistan 52 xi PREFACE This report was motivated by two ideas. First, an important element of the World Bank's 2003 Water Resources Strategy was to translate the general principles governing Bank engagement in the water sector into `Country Water Resource Assistance Strategies' which were tailored to the requirements of specific countries. Second, the 2004 World Bank Country Assistance Strategy (CAS) for India signaled a major increase in Bank lending for water (including water resources, irrigation, water, sanitation, and hydropower). In discussions with the Ministry of Water Resources and the Planning Commission of the Government of India, it was agreed that the Bank would undertake a study of the strategic challenges facing the water sector in India, and provide more specificity than the CAS on what the `trademark' ideas would be for the Bank's lending and non-lending activities in India. The Bank commissioned the following background papers by prominent Indian practitioners and policy analysts: · The evolution of national policies and programs (Mr. A.D. Mohile, former Chair, Central Water Commission) · The evolution of water development and management: the perspective of the Planning Commis- sion (Mr. A Sekhar, Adviser, Planning Commission) · The evolution and performance of World Bank work on water in India (Dr. R.P.S. Malik, University of Delhi) · Water and growth (Professor Ramesh Bhatia, Institute of Economic Growth, University of Delhi) · Water and poverty (Dr. R.P.S. Malik, University of Delhi) · Water and environmental sustainability (Mr. George Varughese, Development Alternatives) · Water and energy (Professor Ramesh Bhatia, Institute of Economic Growth, University of Delhi) · Pricing and financing (Professor Sebastian Morris, Indian Institute of Management Ahmedabad) · Water rights and entitlements (Dr. Maria Saleth, International Water Management Institute, Colombo) · Accountable institutions (Dr. Tushaar Shah, International Institute of Water Management, Anand) · Moving to scale (Dr. Nirmal Mohanty, Infrastructure Finance Development Corporation) · The political economy of change (Professor V.S. Vyas, Institute of Development Studies, Jaipur) Preface The process included a number of consultations. In a Bank-hosted multi-stakeholder consultation in August 2004, the idea of the study was presented, and inputs on substance and process were made by about 50 individuals from the Union Government, Planning Commission, state governments, the private sector, financial institutions, urban water supply utilities, NGOs, academics, professional associations, chambers of industry, bilateral and multilateral aid agencies, and UN agencies. The same individuals were invited to a final consultation on the draft report, held in New Delhi in October 2005. Drafts of the main ideas of the report were also discussed at seminars held by the Confederation of Indian Industry, the Federation of Indian Chambers of Commerce and Industry, the World Wildlife Fund, the International Water Management Institute (IWMI), and the Planning Commission of the Government of India. In January 2005, the Ministry of Water Resources hosted a major consultation on `Challenges for Water Development and Management in India and Future Strategies', which was addressed by the Ministers and Secretaries of Finance and Water Resources, the Member for Water and Power of the Planning Commission, and the World Bank Country Director for India. The focus of the consultation was on the emerging themes from the Bank's study, the views of the Union and state governments, and the implications for World Bank involvement in water in India. xiv EXECUTIVE SUMMARY India faces a turbulent water future. The current Over the past 150 India has reaped great water development and management system is not years, India has benefits from its sustainable: unless dramatic changes are made-- made large invest- investments in water and made soon--in the way in which government ments in large-scale infrastructure manages water, India will have neither the cash to water infrastructure, maintain and build new infrastructure, nor the much of which brings water to previously water- water required for the economy and for people. scarce areas. This has resulted in a dramatic eco- nomic shift, with once-arid areas becoming the This Report examines the evolution of the man- centers of economic growth, while the historically agement of India's waters, describes the achieve- well-wateredareashaveseenmuchslowerprogress. mentsofthepast,andtheloomingsetofchallenges. For the most part, the results of this `hydraulic The Report suggests what changes should be con- infrastructureplatform'havebeenspectacularboth sidered and how to manage the transition from nationally (through the production of foodgrains `the ways of the past' to `the ways of the future' in and electricity, for example) and regionally (where a principled but pragmatic manner. It draws such projects have generated large direct and heavily on a set of 12 background documents by equallylargeindirecteconomicbenefits).Thepoor eminent Indian practitioners and policy analysts, have benefited hugely from such investments. The and addresses two basic questions: incidence of poverty in irrigated districts is one- third of that in unirrigated districts. · What are the major water development and management challenges facing India? ThereareregionsofIndiathatcanbenefitgreatly · What are the critical measures to be taken from increased in- India needs a lot more to address these? vestment in water in- water infrastructure frastructure, of all India has a highly seasonal pattern of rainfall, scales. India can still store only relatively small with50percentofpre- quantities of its fickle rainfall. Whereas arid rich Much human ingenuity cipitation falling in countries (such as the United States and Australia) is required to sustain just 15 days and over have built over 5000 cubic meters of water storage life and society in 90 percent of river percapita,andmiddle-incomecountrieslikeSouth India's highly variable flowsinjust4months. Africa, Mexico, Morocco, and China can store climate Throughout history, about 1000 cubic meters per capita, India's dams people have adapted to this variability by either can store only 200 cubic meters per person. India living along river banks or by careful husbanding can store only about 30 days of rainfall, compared and management of water. Until the 19th century, to 900 days in major river basins in arid areas of most of this management was at the community developed countries. A compounding factor is that level, relying on a plethora of imaginative and there is every indication that the need for storage then-effective methods for harvesting rainwater in will grow because global climate change is going tanks and small underground storages. to have major impacts in India--there is likely to xv Executive Summary be rapid glacial melting in coming decades in the Globalexperience India's development of western Himalayas, and increased variability of showsthatthereturns water infrastructure has rainfall in large parts of the subcontinent. toinvestmentsinwa- not been accompanied terinfrastructureand by an improvement in A review of India's hydropower infrastructure management follow the governance of water reveals a similar picture: whereas industrialized the broad outlines resources and water countriesharnessover80percentoftheireconomi- shown in Figure 1. services cally-viable hydropower potential, in India the During the first, de- figure is only 20 percent, despite the fact that the velopment stage, the challenges were predomi- Indian electricity system is in desperate need of nantly engineering in nature. In India, Sir Arthur peaking power and despite the fact that Hima- Cotton and other pioneering engineers were wor- layan hydropower sites are, from social and envi- shipped as saints, and dams became `the temples ronmental perspectives, among the most benign in of modern India'. The very success of this enter- the world. Especially in the water-rich northeast of prise, as in other societies and for other issues, the country, water can be transformed from a curse carried the seeds of its own downfall. As an infra- to a blessing only if major investments are made structureplatformwasbuilt,the`Type2'and`Type in water infrastructure (in conjunction with `soft' 3' challenges of maintenance, operation, and man- adaptive measures for living more intelligently agement started to emerge. The uni-functional with floods). Recognizing this, the Prime Minister (`build') and uni-disciplinary (`engineering') bu- has recently called for the establishment of `a TVA reaucracy adopted the command-and-control phi- (TennesseeValleyAuthority)fortheBrahmaputra', losophy of the early decades of independence, which would combine major water infrastructure seeing users as subjects rather than partners or with modern management approaches to make clients.TheIndianstatewaterapparatusstillshows water a stimulus for growth. In many parts of the little interest in the key issues of the management country there are also substantial returns from stage--participation, incentives, water entitle- investments in smaller-scale, community-level ments, transparency, entry of the private sector, water storage infrastructure (such as tanks, check competition, accountability, financing, and envi- dams,andlocalwaterrechargesystems).Andthere ronmental quality. are massive needs for investment in water supply systems for growing cities and for underserved Evidence abounds Much of the infrastruc- rural populations. of the inability of the ture is crumbling state water machinery The problems of a developing India, however, to address even the problems of the provision of are not limited to providing adequate quantities of public irrigation and water supply services. User water. Growing populations, cities, and industries charges are negligible, resulting in lack of ac- are putting great stress on the aquatic environ- countability and insufficient generation of revenue ment. Many rivers--even very large ones--have even for operations and maintenance. The gap turned into fetid sewers. India's cities and indus- between tariff and value of irrigation and water tries need to use water more effectively, and there supply services has fueled endemic corruption. will have to be massive investments in sewers and Staffing levels are 10 times international norms, wastewater treatment plants. and most public funds are now spent feeding the xvi Executive Summary Figure 1: Rates of return on investment on side' there are ultimately only two sources of fi- infrastructure and management of nancing--tax revenues and user charges. The bud- water resources getary allocations to the water sector is falling, as are payments by users. The net result is a large and growing `financial gap', which can only be met by a combination of methods which include greater allocations of budgetary resources, more efficient use of those resources, and greater contributions from water users. This decline in the People have shown quality of public irri- great ingenuity in gation and water sup- `working around' a Source: World Bank, China Country Water Resources ply services would Assistance Strategy 2002. poorly governed water normally be expected system to produce social un- rest and political pressure. But to the (temporary) administrative machinery, not maintaining the rescue of Indian society came a simple and re- stockofinfrastructureorprovidingservices.There markable transformational technology--the is an enormous backlog of deferred maintenance. tubewell. With large areas of India having sub- The implicit philosophy has been aptly described1 stantial and easily-accessible aquifers, people were as `Build-Neglect-Rebuild'. This problem is seri- able to ignore the inconvenience of poorly func- ous in its own right, but it also means that public tioning public systems and become self-reliant financing is not available for the vital tasks of using groundwater. In many ways, this `era of the providing new irrigation, water supply, and waste- individual coping strategies' has been remarkably water infrastructure to serve growing populations successful. and the unserved poor. Most recent irrigation and water supply projects assisted by the World Bank, · Irrigators have either drilled individual for example, have not financed new infrastruc- tubewells or relied on others' tubewells (giv- ture, but the rehabilitation of poorly maintained ing rise to elaborate informal water mar- systems. kets). This has happened on a massive scale, with20milliontubewellsnowinstalled,and The sector is facing a major financing gap. The groundwater now accounting for over 50 real financial needs There is a major percent of irrigated area. of the sector are financial resources gap growing--tomeetthe · Theurbanmiddleclasshavelearnedtomake costs of rehabilitating the existing stock of infra- do with irregular, unpredictable, and often structure and to build new infrastructure. These polluted public water services. They have needs are amplified by the fact that large propor- developed coping strategies which include tions of recurrent budgets are spent on personnel, investments in household storage, not on real maintenance, and on electricity, irriga- purchasing of bottled water for drinking, tion, and water supply subsidies. On the `supply installation of household water purification 1 Nirmal Mohanty, `Moving to scale', Background Paper for this Report, 2005. xvii Executive Summary systems, purchase of water from vendors, · that the environmental debts (including and, like their rural counterparts, private vanishing wetlands and polluted rivers and wells to tap the groundwater. Although the aquifers) do not seriously constrain human costs are high--six times higher than the activity; and average payment to the utility in Delhi, for · that the financial liabilities inherent in these example--this works for the middle class. systems can continue growing indefinitely. Around80percentofdomesticwatersupply in India now comes from groundwater. In already-large and rapidly-growing segments · The situation of the poor in urban areas is oftheeconomyandinmanyofthemostproductive far worse. They are powerless and therefore regions of the Indian economy, this self- provision at the end of the line when the inevitable model is no longer sustainable. The National rationing takes place, and they cannot af- Commission on Water of 1999 has shown that ford to make the same coping investments overall water balances are precarious, that crisis as the middle class. They depend heavily on situations already exist in a number of basins, and water vendors, most of which are, again, that by 2050 demands will exceed all available supplied by groundwater, and provide wa- sources of supply. Already about 15 percent of all ter of very high cost. aquifers are in critical condition, a number which will grow to 60 percent in the next 25 years unless · Industry, too, has coped by self-providing, there is change. About 15 percent of India's food is mostly from groundwater. Where aquifers being produced using non-renewable, `mined', are either not available or exhausted, in- groundwater. Since aquifer depletion is dustries resort to very-high cost `captive' concentrated in many of the most populated and alternatives(includingreverseosmosistreat- economicallyproductiveareas,thepotentialsocial mentofwastewateranddesalination)tokeep andeconomicconsequencesof`continuedmuddling their factories running. through' are huge. In many ways, this private, self-provision strat- At the same time, Changes in demands egy has been a suc- Indian society is Complacency--`we can and in climate require a cess, and has changing in many muddle through'--is a flexible and adaptive underpinned spec- profound ways. In- dangerous illusion, in water sector tacular gains in agri- dustries and cities light of scarcity, cultural production (which both require water and produce wastes) are groundwater depletion, and the rise of thou- growing rapidly. Rural life is changing, with more and environmental sands of towns and thanhalfofthepeopleinruralPunjabandHaryana degradation cities. This has bred no longer engaged in agriculture. And agriculture an attitude among many--political leaders, indus- itself is evolving. In a growing number of areas, trialists, irrigators, and common people--that `we high-value crops are now displacing low-value have muddled through okay, and we will continue foodgrains, farmers are investing heavily in drip to muddle through'. This is a dangerous compla- irrigation, and there are even travel agencies spe- cency, because it is based on three erroneous as- cializing in `agro-tourism', so that farmers can see sumptions: how their contemporaries manage with less water inIsraelandotherplaces.Asincomesrise--100,000 · that there is limitless groundwater; people are joining the middle class every day!-- xviii Executive Summary people are becoming more concerned with envi- rainwater harvesting scheme) which will `solve ronmental quality. The net effect is that the de- the supply problem'. What is becoming increas- mands for and on water resources are changing ingly apparent is that in the growing number of substantially, with the effects especially acute in areas where water is already scarce, it is a zero the high-growth regions, most of which are water- sum game. These schemes increasingly solve one scarce. person'sproblemattheexpenseofsomeone`down- stream'.Onthemorethornyissueswheretradeoffs Confronted with this reality of limited supplies, cannot be avoided, the usual response of the state and growing and changing demands, the need is water apparatus has been to hope it rains and, obviously for a management framework which failing that play for time. (`Passing it to the Su- stimulates efficiency and which facilitates volun- preme Court' has become a standard modus oper- tary transfer of water as societal needs change. andi for water matters, where the administration The traditional command-and-control and con- cannot muster the necessary imagination or politi- struction instruments of the Union and State water cal will to act.) Where inter-state Tribunal awards bureaucraciesaddressneitheroftheseimperatives. have been made, they have not helped much. They The economic and social costs of rigidity are have taken years to complete, have not followed large--a World Bank study of Tamil Nadu, for global good practice, and have stimulated states example, shows that if a flexible water allocation tofocustheirattentionon`gettingmorewaternext system was adopted, the State economy in 2020 time', rather than on effective use of what they would be 20 percent larger than under the current, have. The results have been serious economic and rigid, allocation procedures. A central element of fiscal damage. (For example, 18 percent of Maharashtra's fiscal deficit is to pay for the con- a new approach must be that users have well- struction of dams whose primary purpose is to lay defined entitlements to water. The broader mes- claims for water from the Krishna in the next Tri- sages are that the economic ideas of the 1991 eco- bunal Award.) In addition, there are no effective nomic reforms must be drilled down from the mechanisms for enforcing awards or preventing regulatory and financial sectors into the real sec- unilateral action or even exit by dissatisfied states. tors (including the water sector) if India is to have The lack of modern, fair, and enforceable inter- sustainable economic growth, and that the role of state water compacts has also stymied sensible the Indian water state must change from that of inter-state `win-win' water cooperation. builder and controller to creator of an enabling environment,andfacilitatoroftheactionsofwater As in all other federal countries, these issues are users, large and small. complex and political. India has some good mod- els for proceeding--in its own treaties with An important manifestation of the break-down PakistanontheIndusandBangladeshontheGanga; on the current system Water conflicts are and in the experience of other arid federal coun- is the growing inci- becoming endemic at tries. Dealing with these issues is the single most dence and severity of all levels important task facing the Union Ministry of Water water conflicts--be- Resources. Recent statements by national political tween states, between cities and farmers, between leaders show growing awareness of the problem. industry and villagers, between farmers and the The Finance Minister has warned about `a grow- environment, and within irrigated areas. The state ing set of little civil wars over water', and the has generally responded by proposing new supply Minister of Water Resources notes wryly that he is schemes (a new dam, a desalination plant, or a really `the Minister of Water Conflicts'. xix Executive Summary India needs a re-invigorated set of public water There are two main corollaries to this diagno- institutions, which are built on the following im- sis. First, that a major push is needed--by govern- peratives: ment and by users working together--to bring abstractions from groundwater in line with re- · focusing on developing a set of instruments charge. While traditional technologies such as (including water en- Towards a `new water rainwater harvesting and tanks can play an impor- titlements,contracts state' at the Union and tant local role, they also create new and addi- between providers State levels tional demands which often clash with existing and users, and pric- uses, and they sustain the wishful thinking that ing) and incentives which govern the use of supply-side options (both large and small scale) water; are what will `solve the problem'. The simple fact · stimulating competition in and for the mar- is that in many parts of India demand will have to ket for irrigation, water, and sanitation ser- be brought down to match sustainable supply. vices; Global experience shows that this difficult and essential task will require a partnership between · empowering users by giving them clear, en- users and government--to form empowered aqui- forceable water entitlements; fer user associations; to formalize water entitle- ments which are consistent with the sustainable · ending the culture of secrecy and making yield of the aquifer; to develop transparent infor- transparency the rule; mation and decision support systems. So far the · introducing incentive-based, participatory approach of the water apparatus has been to pro- regulation of services and water resources; mulgate laws and policies, most of which are not implemented.Hereanapproachwhichbeginswith · putting the sector on a sound financial foot- acknowledgement of and respect for the private ing; interests of individual farmers will be far more successful than approaches which resort to com- · investing heavily in the development of a mand and control, or ones which are based on a new generation of multi-disciplinary water communitarian ideal. The longer this adjustment resource professionals; takes place, the more costly and difficult it · making the environment a high priority; becomes. · making local people the first beneficiaries Second, the end of the era of massive expansion of major water projects. in groundwater use is going to demand greater reliance on surface water supply systems. This is India is rapidly approaching the end of an era going to require recuperation of the large stock of in which society could `get by' despite the fact that dilapidated infrastructure and large-scale invest- government (a) has performed poorly where it has ment in public infrastructure of all scales (for pro- engaged (in service delivery), and (b) has aban- vision and distribution of surface water supplies, doned major areas where government engagement but also for treatment of wastewater). And it is is critical (such as groundwater management, con- going to require a dramatic transformation in the flict resolution, establishing and managing water way in which public water services are provided to entitlements, and the financing of public goods farmers, households, and industries, in which the such as flood control and wastewater treatment). watchwords are water entitlement, financial xx Executive Summary sustainability, accountability, competition, regu- tion for use in managing and monitoring the re- lation, and entry of alternatives to government source and services; stimulating competition provision, including cooperatives and the private among providers through benchmarking and the sector. entry of private sector and cooperative providers; regulating both the resource and services; and fi- India faces this challenge with many assets and nancing true public goods, such as flood control some liabilities. The assets include citizens, com- and wastewater treatment. Figure 2 provides a munities, and a private sector who have shown schematic sense of the necessary `next stage' in the immense ingenuity and creativity, attributes which evolution of water management in India. are critical for the new era of water management. The major liability is a public water sector which In the eyes of Starting to move from rests on the laurels of an admirable past, but is not many--including here to there--the politi- equipped to deal with the central tasks which only several of the very cal economy of reform the government can--developing an enabling le- experienced Indians gal and regulatory framework; putting into place who wrote background papers for this report--the entitlement and pricing practices which will pro- idea of such a modern, accountable `Indian water vide incentives for efficient, sustainable, and flex- system' is a fantasy, given the dismal performance ible use of water; forming partnerships with of the Indian state on water matters in recent de- communities for participatory management of riv- cades and the broader challenges of governance. ers and aquifers; providing transparent informa- Others point to `the hollowing out of the Indian Figure 2: The evolving role of the citizen and the state in water management in India of Citizens Intensity involvement The State 1850 1970 2005 2025 Some state works, but The era of massive Declining public An era in which the most citizens survived state irrigation funding, and massive state needs to play a along rivers, by local works, with a de- individual invest- major role in surface rainwater harvesting cline in traditional ments in tubewells water provision and in and from rainfed agri- water management the regulation of culture by citizens groundwater xxi Executive Summary state ... the growing middle-class exit from public · Be patient, persistent, and pragmatic. services ... and the inability to grapple with the many long-term challenges facing the country'.2 · Ensure that reforms provide returns to poli- ticians who are willing to make changes. The glass is, of course, always half empty. But it is half full too. There are some important signs In a national that the need for change is being understood, there How the World Bank workshop to discuss are political leaders who are starting to grapple might be a more effective this Report, the Min- withtheserealities,andthereareafewstateswhich development partner istry of Finance de- are taking the important first steps down this long scribed what the Government of India expects of and winding road. the World Bank in the water sector. The World Bank is expected to finance projects which couple India is fortunate, too, in that it is not the first country in the world to face this (daunting) set of high-return investment with reform processes, and which bring knowledge about international good challenges. The experiences of other countries practice to bear on the water challenges facing suggest that there are a set of `rules for reformers' in undertaking such a transition. These rules India. With this guidance, what is it that the World Bank can do to be a better partner to India on include: water? · Initiate reform where there is a powerful need and demonstrated demand for change. The India Country Assistance Strategy of 2004 outlines the broad features of Bank involvement · Involve those affected, and address their with India over the next 4 years. This includes: concerns with effective, understandable in- formation. · lending, which will simultaneously address investments, reforms, and knowledge, · If everything is a priority, nothing is a pri- transfer; ority--develop a prioritized, sequenced list of reforms. · a large increase--see Figure 3--in lending forwater-relatedsectors(includingwaterre- · Pick the low-hanging fruit first--nothing sources management, irrigation, hydro- succeeds like success. power,andwatersupplyandsanitation),with aggregate lending for these sectors set to rise · Keep your eye on the ball--don't let the best from $200 million to $800 million a year; become the enemy of the good. · a willingness to consider financing high- · Be aware that there are no silver bullets. returninfrastructurethatcanbebuilttorea- · Don'tthrowthebabyoutwiththebathwater. sonablesocialandenvironmentalstandards; · Treat reform as a dialectic, not mechanical, · clear `guidelines' for engagement with each process. water-related sector. · Understand that all water is local and each The CAS is a living document, with elabora- place is different--one size will not fit all. tions and adjustments emerging as needs and 2 Devesh Kapur, `India's Promise?', Harvard, July­August 2005. xxii Executive Summary Figure 3: The changing composition bal best practice content of Bank-financed activi- and level of World Bank lending ties. This will mean greater emphasis on `instru- for water in India ments' that stimulate efficiency, accountability, and flexibility (such as water entitlements, infor- Irrigation Urban Rural Hydro Water Resources mation, regulation, competition, and pricing). It 3500 will also mean greater attention to the `hidden groundwater economy'. It will mean more atten- 3000 tion on building capacity in the public sector. It 2500 will mean being `principled and pragmatic', fol- lowing the `rules for reformers' outlined earlier. 2000 In its internal workings, the Bank will also give 1500 more explicit attention to ensuring better cross- 1000 sectoral collaboration within the Bank on water resources and to better integration of the Bank's 500 lending and knowledge services--so that there is 0 more explicit learning from projects, and that 1993­98 1999­2004 2005­08 analytic work feeds back into the design of Bank- financed projects. And the Bank will recruit staff perceptions evolve. Consistent with the guidance and consultants who have hands-on knowledge in from the Ministry of Finance, the Bank will focus translating reform principles into results on the more sharply on the institutional reform and glo- ground. xxiii CHAPTER1 THE HUGE ACHIEVEMENTS OF WATER DEVELOPMENT AND MANAGEMENT IN INDIA India has a highly seasonal pattern of rainfall, As analyzed in Deepak Lal's economic history of with 50 percent of precipitation falling in just 15 India,4 the British understood that the marginal days and over 90 percent of river flows occurring returns to water development were higher in re- in just four months. Throughout history, people gions of relatively low rainfall than in the higher have adapted to this variability by either living rainfallareas,andthusemphasizedhydraulicworks along river banks or by careful husbanding and which would `make the deserts bloom'.5 The re- management of water. Thousands of minor irriga- sultswerespectacular.TheGodavariBarrage,built tion tanks were constructed in the 5th century AD in the mid-19th century, transformed the famine- by the Cheras, Cholas, and Pandyans.1 Most of wracked districts of the Godavari Delta into a this management was at the community level, granary (and the builder of the Barrage, Sir Arthur relying on a plethora of imaginative and then- Cotton, into a saint whose image is revered effectivemethodsforharvestingrainwaterintanks throughout coastal Andhra Pradesh--Figure 1.1). and small underground storages. But even in an- And the Periyar Dam, a major turn-of-the-century cienttimes,Indiahadconstructedsomemajorwater inter-basin transfer scheme which sustains agricul- infrastructure. Small storage reservoirs were con- tural productivity in the Vaigai Basin in Tamil structed before the Mauryan era around 300 BC2 Nadu to this day, brought similar fame to another and the Grand Anicut across the Cauvery River British engineer, the equally-evocatively named was built in the 2nd century AD. The Western Colonel John Pennyquick (Figure 1.1, too.) `In re- Yamuna Canal was built in the 14th century AD.3 cent years, portraits and statues featuring During the Mughal era (16th through 19th centu- Pennyquick's ramrod posture ... have rapidly ries) large-scale, run-of-the-river schemes and proliferatedthroughouttheregion,lendingarather inundation canals were constructed. surprising tint to a Tamil monumental landscape peopled otherwise by film stars and political lead- The Era of Large Investments in ers ... Pennyquick (is venerated) as the very sym- MajorInfrastructure bol of attentive and effective government'.6 With British rule came the systematic and large- After Independence, the Government of India scale development of water infrastructure in India. gave high priority to the construction of major 1 A.D. Mohile, `The evolution of national policies and programs', Background Paper for this Report, 2005. 2 A. Sekhar, `The evolution of water development and management: the perspective of the Planning Commission', Background Paper for this Report, 2005. 3 A.D. Mohile, `The evolution of national policies and programs', Background Paper for this Report, 2005. 4 Deepak Lal, Cultural Stability and Economic Stagnation: India 1500 BC ­ 1980 AD. 5 In the evocative phrase of Arthur Maass and Raymond L. Anderson, And the Desert Shall Rejoice: Conflict, Growth, and Justice in Arid Environments, MIT Press, 1978. 6 Anand Pandian, `An ode to an engineer', in The Penguin Book of Water Writings, ed. Amita Baviskar, Penguin India, 2003. India's Water Economy Figure 1.1: British water engineers who hydropower are the `direct benefits', which in turn are revered as saints in southern India generate both inter-industry linkage impacts, and consumption-induced impacts on the regional and national economy. Water released from a multipurpose dam provides irrigation that results intheincreasedoutputofagriculturalcommodities. Changesintheoutputofthesecommoditiesrequire inputs from other sectors such as seeds, fertilizers, pumpsets, diesel engines, electric motors, tractors, fuels,andelectricity.Furthermore,increasedoutput of some agricultural commodities encourages Statue of Sir Arthur Statue of Col. John Cotton in the Godavari Pennyquick in setting up of food processing (sugar factories, oil Delta, Andhra Pradesh Madurai, Tamil mills, rice mills, bakeries, etc.) and other industrial Nadu units. Similarly, hydropower produced from a multipurpose dam provides electricity for water infrastructure. Today, India has a capacity households in urban and rural areas and for to store about 200 billion cubic meters of water, a increased output of industrial products (including gross irrigated area of about 90 million hectares, fertilizers, chemicals, and machinery). Changes in and an installed hydropower capacity of about the output of these industrial commodities require 30,000 megawatts (MW).7 inputs from other sectors such as steel, energy, and chemicals.Thus,bothincreasedoutputofelectricity These investments transformed the economic and social development of India (as docu- mented in detail in the background papers Figure 1.2: Output on irrigated and on `Water and Growth' by Ramesh Bhatia, unirrigated farmland and`WaterandPovertyReduction'byR.P.S. Malik). Most obviously and directly, as- Irrigated Unirrigated sured supplies of water meant that crop 8000 yields on irrigated land were consistently 7000 much higher than yields from rainfed agri- 6000 hectare culture (Figure 1.2), providing the basis for 5000 the achievement of national food security per 4000 and associated affordability of food. Many 3000 of the large dams also provided the under- Rupees2000 1000 pinnings for Indian industrial growth and groundwater irrigation, with hydropower accounting for over half of India's installed Bihar Orissa Nadu Pradesh Gujarat Pradesh Punjab Pradesh generation capacity in the 1960s. Haryana Karnataka Rajasthan Maharashtra amilT Uttar Importantasthesedirecteffectsare,they Andhra Madhya tell only part of the story of the impact of Source: Bhatia, 2005. major infrastructure. The irrigation and 7 A.D. Mohile, `The evolution of national policies and programs', Background Paper for this Report, 2005. 2 The Huge Achievements of Water Development and Management in India and irrigation from a dam result in significant did, indeed, serve to transform this region. For backward linkages (i.e. demand for higher input every 100 rupees of direct benefits, Bhakra gener- supplies)andforwardlinkages(i.e.providinginputs ated 90 rupees of indirect benefits for the regional for further processing). In addition, as incomes economy and ripples well beyond the region. rise, there is a further feedback loop deriving from increased demands for goods and services. Several important studies have examined the deeper, transforming role of the provision of water There have been two major studies in India infrastructure in India. In a classic study in the which have examined these indirect impacts. A 1970s, the eminent economist K.N. Raj examined study by the International Food Policy Research the interaction of `infrastructural', `human', and Institute of the impact of the Green Revolution in `financial'capital,bycomparingthefateofPunjabi the North Arcot region of Tamil Nadu8 showed and Gurkha military retirees. Both groups had that: similar `human' and `financial' capital, but re- turned to radically different settings in terms of · the multiplier was large--each rupee in- `infrastructural capital'. Whereas the Gurkha vet- crease in value added in agriculture stimu- erans invested in jewelry (with little effect on their lated an additional rupee of value added in society), the Punjabis invested in pumps and seeds, the region's non-farm economy; whichprovidedthefuelforrapideconomicgrowth. · about half of the indirect income gain was More recently, Pritchett10 has examined the cir- due to agriculture's demands for inputs and cumstances under which investments in education marketing and processing services, and the provideeconomicreturns.InIndia,theresultswere rest due to increased consumer demands as striking--in districts where there was agricultural a consequence of higher incomes; transformation (viz. irrigated districts) the returns · the multipliers for basic productive infra- to five years of education were 32 percent, whereas structure were much higher than for social in unirrigated rural districts there were no eco- spending and other sectors. nomic returns to primary education. A recent, major study9 by Ramesh Bhatia and How then, do such investments stack up in a Ravinder Malik has used an input-output model new era, in which attention to poverty reduction is combined with a social accounting matrix for much more overt and explicit? As noted by in the Punjab to make a similar assessment of the impact background paper by Malik,11 `such investments of the Bhakra Dam, which was conceived of as a have generally been justified for realizing broad- cornerstone of the development of Northwest In- based growth, for increasing agricultural produc- dia and which irrigates 7 million hectares and tion and achieving food security, for increased provides2800MWofhydropower.Thestudyfound hydropower generation, for making drinking wa- that the direct benefits were higher than antici- ter available to rural and urban areas ... not as pated when the dam was built and that the dam poverty-reducing strategies per se ....' Such invest- 8 Peter Hazell and C. Ramasamy, The Green Revolution Reconsidered: The Impact of High Yielding Varieties in South India, Baltimore, Md.: The John Hopkins University Press, 1991. 9 Ramesh Bhatia and R.P.S. Malik, `Indirect Economic Impacts of Bhakra Dam' in Ramesh Bhatia, Monica Scatasta, Rita Cestti, and R.P.S. Malik, Indirect Economic Impacts of Dams, (2 vols.), The World Bank, Washington DC (forthcoming 2006). 10 Lant Pritchett, `Where has all the education gone', World Bank Economic Review, vol. 15, no. 3, pp. 367­91. 3 India's Water Economy ments in major water infrastructure have Figure 1.4: Average number of days of employment been criticized (including, by the Opera- for adult casual laborers each month tions Evaluation Department of the World Bank12)onequityconsiderations:`theben- efits of development are reaped by rela- tively better-off landowning households andnon-land-holdingandpoorhouseholds are left out'. Fortunately, there is a large literature in India on the distributional aspects of such projects, a literature which reveals a quite different reality. Thefirstimportantfactisthat(asshown in Figure 1.3) irrigation in India is not dominated by `big landlords'. More importantly, the central factor is not who gets the water, but how that water Source: Chambers, 1988. transforms the demand for inputs, most strikingly labor (which is provided primarily by the landless and marginal farmers). The funda- has meant higher and much more stable employ- mental driver is that the demand for agricultural ment, with the poor as the major beneficiaries. labor is 50 percent to 100 percent higher on irri- gated land.13 As Robert Chambers14 has shown There have also been numerous analyses at the through village-level work (Figure 1.4), irrigation project level, showing similar results. Figure 1.5, for example, compares the actual situation Figure 1.3: Percentage of irrigated area of farmers and agricultural laborers within by farm size the massive Nagarjunasagar Project on the Krishna River with that of similar groups Canals Tanks Tubewells who did not get water from the scheme. It 40 shows that `the poor'--small and marginal 30 farmersandagriculturallaborers--benefited area proportionately about as much as did large of 20 farmers. % 10 Two recent, much more sophisticated 0 Large Medium Semi- Small Marginal analyses (which used input-output matrices medium andSocialAccountingMatrixmethods)have Source: Malik, 2005. shownsimilarresults.Thestudy(Figure1.6), 11 R.P.S. Malik, `Water and poverty', Background Paper for this Report, 2005. 12 J. Peliekaan, `India: Evaluating Bank Assistance for Poverty Reduction', The World Bank Operations Evaluation Department, Washington DC, 2002. 13 Ramesh Bhatia, `Water and Growth', Background Paper for this Report, 2005. 4 The Huge Achievements of Water Development and Management in India Figure 1.5: The effect of Nagarjunasagar Figure 1.7: The effect of Bhakra Dam irrigation on per capita income on different social groups 80 % change of income of different types of households with and without Bhakra Dam 70 80 irrigation 60 60 to 50 due 40 40 30 20 income in 20 0 10 Land- Agr Rural Rural Urban owner Labor Non-Agr others increase 0 % Large Medium Small Marginal Agr Source: Bhatia, 2005. farmers farmers farmers farmers Laborers Source: Malik, 2005. The major study (Figure 1.7) by Bhatia and colleagues of the effect of Bhakra,16 again shows bytheInternationalFoodPolicyResearchInstitute that the rural poor have benefited hugely from the of the impact of the Green Revolution in the North project. (And this analysis, being confined to the Arcot region of Tamil Nadu,15 showed that the regional economy, does not include the benefits for biggest winners were the landless whose incomes theverypoormillionseasonalmigrantsfromBihar, increased by 125 percent as a result of the large or the urban poor who benefited from lower food increase in demand for their labor. prices.) Figure 1.8, from the same study, shows that it was the indirect effects which had the major impact on urban areas (and therefore on Figure 1.6: The effect of irrigation and Green urban poverty reduction). Revolution on income in Tamil Nadu Finally, all these effects show up strongly at the national level. Figure 1.917 shows the 150 results of an analysis of the association between poverty and levels of irrigation in 100 54 national sample survey regions. In irri- 1973­83 gated districts, the prevalence of poverty is 50 about one-third of that in unirrigated rural increase % districts. 0 Large farmers Small farmers Non-irriga- Landless Non-ag with irrigation with irrigation ting farmers households Similarly, the relationship between elec- Source: Hazell et al, 1991. tricity availability (much of which came 14 Robert Chambers, Managing Canal Irrigation, New Delhi, 1998. 15 Peter Hazell and C. Ramasamy, The Green Revolution Reconsidered: The Impact of High Yielding Varieties in South India, Baltimore, Md.: The John Hopkins University Press, 1991. 16 Ramesh Bhatia and R.P.S. Malik, `Indirect Economic Impacts of Bhakra Dam' in Ramesh Bhatia, Monica Scatasta, Rita Cestti, and R.P.S. Malik, Indirect Economic Impacts of Dams, (2 vols.), The World Bank, Washington DC (forthcoming 2006). 5 India's Water Economy Figure 1.8: Income gains from directly and signed to provide a platform for regional and na- indirectly impacted sectors--Bhakra Dam tional economic growth, has been an important platform for the remarkable reduction in poverty Direct Impacts Indirect Impacts in India (Figure 1.12). 100% So, at the end of the day, it is less material (a) 80% whether such projects are justified in terms of 60% poverty reduction, or (b) whether the primary re- 40% cipients of the `first-round benefits' are those with 20% 0% Figure 1.10: Electrification and rural Self Agr Labor- Non Agr- Others- Urban Employed- Rural Rural Rural poverty by state Rural Source: Malik, 2005. Figure 1.9: How irrigation reduces poverty in India line 70 60 poverty 50 Source: Malik, 2005. 40 below 30 Figure 1.11: Economic growth and poverty 20 reduction--the global relationship 10 population of 0 % <10% 10% to 20% to 30% to >50% y = 1.0734 × 1.7687 20% 30% 50% R2 = 0.8846 % of cropped area which is irrigated Source: Rao 1988, in World Bank 1991. income outline) capita from hydropower) and poverty is strong % (per in (Figure 1.10). Log Overall global analyses show a very close rela- tionship between economic growth and poverty reduction(Figure1.11).InthecaseofIndia,growth Growth Rate Log did not generate more inequality.18 And it is abun- (per capita income) dantly clear that major water infrastructure, de- Source: Dollar and de Kraay, World Bank 2002. 17 World Bank, Indian Irrigation Sector Review, 1991. 18 Francois Bourgignon, Chief Economist of the World Bank, `High growth has not generated more inequality, says 6 The Huge Achievements of Water Development and Management in India Figure 1.12: The decline in poverty in groundwater table and reducing the severity of India , 1973­2000 waterlogging and salinity. Third, modest new modular well and pump technologies became 1973­74 1993­94 1999­2000 widely available, as did subsidized credit. Fourth, farmers realized that groundwater was abundant, below 60 especiallyinthelargealluvialbasins.Fifth,farmers line realized they could apply water `just in time' from 40 groundwater sources, something which was not 20 possible in the institutionally-complex and population poverty of increasingly corruption-ridden canal systems. 0 % Rural Urban Combined The result was an extraordinary `quiet revolu- Source: Malik, 2005. tion', in which, beginning around 1960, ground- water irrigation developed at an explosive rate (as land.Becausetherecordisoverwhelminglyclear-- shown in Figure 1.13), while tank irrigation al- investments in water infrastructure in India have mostdisappearedandsurfacewaterirrigationgrew resulted in massive reduction in poverty, and it is much more slowly. actually the poor and landless who have been the biggest beneficiaries--the appropriate metaphor Over time, two other pressures developed. Irrigators who used tubewells argued that they is not `trickle down' but `a rising tide lifts (almost) were disadvantaged relative to those who received all boats'. virtually free canal water. In Uttar Pradesh, for The Era of Groundwater Exploitation example (where electricity charges are relatively high, as shown in Figure 1.14), irrigating a hectare The 1960s was a turning point in India's agricul- of wheat during the rabi season would cost about turaldevelopment.TheGreenRevolutionprovided Rs 2,800 from groundwater, whereas farmers pay great benefits to those who could adopt new seeds only about Rs 70 per hectare--about 2 percent of and fertilizers--for which water control was an thecostofpumpingforcanalirrigation.19Politicians essential pre-condition. responded,andsoontherewasawidespreadculture Largeinvestmentsinsurfacewaterprojectswere Figure 1.13: The evolution of forms of undertaken to provide assured water supply to a irrigation in India, 1950­2000 larger number of farmers. Starting in the 1960s, however, a couple of critical changes took place. First, electricity supply expanded in rural areas (itself often linked to water, since hydropower providedover50percentofinstalledcapacityuntil the mid-1960s). Second, in areas where waterlogging and salinity were growing problems (such as parts of Punjab), it was realized that encouragementofgroundwaterpumpingprovided an effective mechanism for lowering the Source: Bhatia, 2005. WB', Financial Express, January 2004. 7 India's Water Economy Figure 1.14: Electricity tariffs and generation cost the area irrigated by canals. in different states The fact is that groundwater now pro- Tariff Cost vides for about 70 percent of the irrigated UP area,andabout80percentofdomesticwater. West Bengal As emphasized in the background paper by Tushaar Shah,20 `we need to recognize that Maharashtra self-provision of water is the best indicator Gujarat of the failure of public water supply sys- All India tems. Tubewells proliferate in canal com- Karnataka mands because public irrigation managers are unable to deliver irrigation on demand. Bihar Urbanhouseholdswanttheirownboreholes MP becausemunicipalserviceisinadequateand Tamil Nadu unreliable'. Figure 1.15 shows the propor- tion of groundwater potential which is de- Punjab veloped in each of the major river basins of 0 50 100 150 200 250 300 350 400 India. Paise per kwh Source: Bhatia, 2005. As discussed elsewhere in this report, the poor quality of public infrastructure is a pervasive problem in India. Studies throughout of `free or nearly free' electricity for irrigators (see Figure 1.14). Figure 1.15: Level of groundwater Simultaneously, the reliability of canal water development by basin supplies deteriorated, as systems were not main- tained and as corruption became more widespread and the historic allocation systems such as `warabandi' and `shejpali' no longer functioned as effectively. This, too, motivated farmers to turn to groundwater. In large areas, a primary function of surface water systems evolved into `involuntary' recharge of groundwater. In East and West Punjab it is estimated that 50 percent and 80 percent, respectively,ofgroundwaterisrecycledcanalwater. > 10% Over the last two decades, 84 percent of the 10­30% 30­50% total addition to net irrigated area came from > 50% groundwater, and only 16 percent from canals. Thus, as shown in Figure 1.13, at present the net area irrigated by private tubewells is about double Source: Tyagi data--GIS work, courtesy of IWMI. 19 Ramesh Bhatia, `Water and energy', Background Paper for this Report, 2005. 8 The Huge Achievements of Water Development and Management in India the world21 have shown that where industries have inthemostproductiveagriculturalandurbanareas to self-provide, costs of production go up sharply, of the economy. There are, more specifically, two competitiveness is reduced, and economic growth major sustainability challenges. is dampened. The self-provision of water supplies is just one manifestation of a far broader break- First is the contentious issue of the energy sub- down of public infrastructure in India. A recent22 sidies,andtheirinexorableincrease(astheamount survey shows that 60 percent of Indian manufac- of electricity used in agriculture grew, as shown in turing entities have captive power generating Figure 1.16) to farmers for groundwater irriga- units--a figure which is just 16 percent for China, tion.Estimationoftherealeconomicvalueofthese 17 percent for Brazil, and 42 percent for Pakistan. subsidies is a cottage industry. Some see it as the fundamental problem facing the electricity sector. This groundwater revolution brought immense According to the Planning Commission,23 while benefits to India, playing a major role in the theagriculturesectoraccountsfornearlyone-third `irrigation/rural development/poverty reduction' of the sales of the State Electricity Boards, the achievements. That said, it is increasingly clear revenues from farmers account for only 3 percent that the groundwater revolution has run its course of the total revenue. Others (as described in the Figure 1.16: Increase in electricity consumption for agriculture Electricity consumption for agriculture 300000 Electricity consumption total (MKwh) 200000 100000 0 1980­81 1981­82 1982­83 1983­84 1984­85 1985­86 1986­87 1987­88 1988­89 1989­90 1990­91 1991­92 1992­93 1993­94 1994­95 1995­96 1996­97 2000­01 2002­03 2003­04 1999­2000 Source: A.C. Tyagi, `State of India's Water', www.thirdworldwatercentre.org. 20 Tushaar Shah, `Accountable institutions', Background Paper for this Report, 2005. 21 Kyu Sik Lee, `Costs of infrastructure deficiencies in manufacturing in Indonesia, Nigeria and Thailand', Policy Research Working Paper WPS1604, The World Bank, 1996. 22 Omkar Goswami, `The urgent need for infrastructure', The Economic Times, Delhi, 25 April 2005. 9 India's Water Economy background paper by Bhatia24) have a different Figure 1.17: Electricity subsidy to agriculture view,pointingoutthatsimplisticestimatesvastly as percentage of gross fiscal deficit , 2000­01 overestimate the value of electricity subsidies to Bihar agriculture. This is so because first, the large West Bengal transmission and distribution losses (colloqui- UP (Power Corp.) ally known as `theft and dacoity') are routinely counted as free supplies to farmers. And second, Maharashtra because the supplies to farmers are, in fact, off Punjab peak and highly unreliable and thus do not cost Tamil Nadu the electricity system anything like the marginal Rajasthan (Transco) or average cost of supply. The estimates of the Karnataka total annual cost to the economy of subsidized Andhra Pradesh power to farmers vary by a factor of 4. The Gujarat World Bank estimates that subsidies to farmers account for about 10 percent of the total cost of Haryana supply, or about Rs 240 billion a year.25 This is Madhy Pradesh equivalent to about 25 percent of India's fiscal 0% 20% 40% 60% 80% 100% deficit and two and a half times the annual ex- Source: Bhatia, 2005. penditure on canal irrigation,26 with large im- pacts on fiscal deficits at the state level, as shown in Figure 1.17. levels many of the most highly productive locali- ties are already under severe groundwater stress. And, it is clear that things are getting worse, not For example, in Punjab groundwater in about 60 better, in most states, in part driven by the deeper percent of blocks is either already being, or very and deeper depths from which farmers have to near to being, overdrawn, while for Haryana and pump water. In Gujarat, for example (as shown in Tamil Nadu the figure is already around 40 per- Figure 1.18), electricity subsidies now dwarf other forms of farm input subsidies, and are Figure 1.18: Farm input subsidies in Gujarat equivalent to 20 percent of state agricultural domestic product.27 Second is the sustainability of the resource it- self. Average figures of water availability show that the annual replenishable groundwater re- sources of India amount to about 430 billion cubic meters (bcm), and that net withdrawals amounttoabout160bcmperyear.Therewould, therefore, appear to be little problem `on aver- age'. But in fact, all water issues are local is- sues, and averages flatter to deceive. At local 23 Ramesh Bhatia, `Water and energy', Background Paper for this Report, 2005. 24 ibid. 25 ibid. 26 ibid. 10 The Huge Achievements of Water Development and Management in India cent. Figure 1.1928 gives a sense of how grave the or critical, a number which is expected to reach 60 situation is for the state of Tamil Nadu. In percent in just 25 years time (Sekhar, background Rajasthan,theproportionofover-exploitedblocks document). has risen from 17 percent to 60 percent over the Bad as each of these situations--electricity sub- last seven years. For the country as a whole, about 14 percent of all blocks are either over-exploited sidies, and plummeting groundwater tables--are, the combination is lethal. Sooner or later, abstrac- tions are going to have to come into balance with Figure 1.19: The precarious state of the sustainable yield of an aquifer. If this happens groundwater in Tamil Nadu when the groundwater table is, say, at 5 meters, then use of the sustainable yield of the aquifer couldproceedwithmodestpumpingcosts.If,how- ever, abstractions come into balance with sustain- 37 able yield and the depth is, say, 150 meters, then 10 this makes irrigation impossible without large and permanent energy subsidies. 27 26 This is a grave situation, the implications of which form the heart of the water challenges fac- Source: Mitra, 2005. ing India in coming decades and which frames the central themes of this report. 27 Gujarat, Agricultural Development for Growth and Poverty Reduction, World Bank, 2005 (draft). 28 Smita Misra, `Groundwater Challenges for Rural Water Supply in Tamil Nadu', powerpoint presentation to South Asia Water Day, World Bank, February 2005. 11 India's Water Economy CHAPTER2 CURRENT AND LOOMING CHALLENGES Implicit in the discussion in the previous chapter Adjusting to the Needs of a was the notion that the emerging water challenges Changing Society which India has to face are quite different from those which it has faced in the past. In the words It is broadly recognized that India is currently in of the Planning Commission (Sekhar, background the early stages of a profound demographic, so- paper): `Policies and practices have to come to cial, and economic transition. The proportion of grips with this basic fact--to face the future and the population which is urban has doubled over not the past'. In exploring what some of these the last 30 years (and is now about 30 percent); challenges might be, it is useful to consider the agriculture now accounts for only about 25 per- experience of water transitions in other countries. cent of GDP; and the economy has been growing As part of a similar exercise which was done re- at around 7 percent a year. cently with the Government of China, Figure 2.1 Life in rural areas is already in the process of is instructive. It suggests that the focus on the pro- large-scale change, particularly in the higher- vision of infrastructure has to, in various ways in productivity areas. In parts of Maharashtra, for different parts of India, be supplemented by more example, the transition to high-value agriculture effective management of that infrastructure and of is already underway for some time, with major the underlying water resource base. implications for the use of technology, including water technology. Where a decade ago there was just one lonely company providing drip irrigation Figure 2.1: Rates of return on investment techno-logy, the market is expanding very fast, on infrastructure and management of with half a dozen such suppliers now in water resources Maharashtra alone. While state extension services stagnate, the private sector is meeting the rapidly- growing demand: the original supplier of drip irrigation technology in the region is now a major one-stop-shop for farmers, providing not only equipment but training on a large scale. And there is now a travel agency in Pune which specializes in`agro-tourism',organizingstudytoursforprivate farmers to go to Israel and other countries to learn about the latest in `precision agriculture'.1 Source: World Bank, China Country Water Resources Assistance Strategy, 2002. With these developments, a remarkable change is coming in the way Indian agriculture is viewed. 1 Pravan K. Varma, Being Indian, Penguin, 2004. 12 Current and Looming Challenges Rather than being seen as a dead-end and poverty Figure 2.2: Employment generation trap, new visions of Indian agriculture are emerg- by crop ing. For example, one of India's telecom moghuls2 Rainfed Irrigated has said: `to my mind, the next big wave--which will be bigger than telecoms or outsourcing--is in 300 agriculture. India's strength lies in its huge area of 250 arable land, with great weather conditions. For hectare 200 three, four, or five months Europe doesn't grow a per fig--but we can grow anything. I want to connect 150 India's farms to the world.... I believe an Indian days 100 farmer's income can jump from Rs 5000 per acre 50 to Rs 20,000 straight away, just by moving away Person 0 from rice and wheat ... tomatoes sell for just Rs 2 Rice a kilogram at the farm gate in India, and more Crop Jowar Bajra Wheat Pulses Cotton Spices than 50 times that on the shelves of UK supermar- Oilseeds Groundnut kets.' These shifts from low-value to high-value Fodder agriculture have profound implications for the Source: Bhatia, 2005. demand for labor and therefore for the wellbeing of the poor. Figure 2.2 shows the dramatic differ- their income from manufacturing or services, not ences in direct labor demand between staples and from farming; in the successful farming states of many cash crops. Punjab and Haryana already over half of all rural households have escaped agriculture altogether, In many parts of the country (including the and `the best way to escape poverty is to escape Communist Party-ruled West Bengal3) `contract agriculture'.6 farming' is becoming increasingly important, and shows great promise (as it has in other countries4) These transformations are, of course, happen- as a mechanism for bringing unified packages of ing organically on a massive scale--in coming technology, services, and marketing, in making years close to 100,000 people a day will enter the the transition to high-valued agriculture, and in middle class.7 Many of these people will live in lifting large numbers of people--both those who revitalized rural areas, but many will inevitably stay in agriculture and those who move into the live in towns and cities. associated service sectors--out of poverty. These changes have profound implications for The Financial Times5 has captured the essence the ways in which water needs to be allocated and of the changes underway in rural areas: more than used. It is essential that the availability of water a third of India's rural households already derive doesnotconstrainthedevelopmentofnewtypesof 2 John Riding, `Heard it on the grapevine--Sunil Mittal made his billions by bringing phones to India. For his next project, the entrepreneur aims to connect his country's food producers to the rest of the world', Financial Times, 5 February 2005. 3 `Marx or McKinsey', Indian Express, 18 April 2005. 4 For example Brazil, as documented in World Bank Water Resources Sector Strategy 2003. 5 Edward Luce, `Cure for India's rural woes lies in ability to escape the farm: Old family plots are withering as a new report highlights exodus to cities and to manufacturing jobs', Financial Times, 7 December 2004. 6 Ibid. 7 Pravan K. Varma, Being Indian, Penguin, 2004. 13 India's Water Economy economic activity in new places. And here there is shortages on industrial choices. In a drought dur- a serious mismatch between the water ideology of ing the 1990s, for example, major chemical and the past in India--one that operates on a paternal fertilizer plants outside of Chennai were closed for system of command-and-control, with little trans- six months9 because they could not get water; and parencyandlittleaccountability--andtherequire- it is clear that decisions on the location of indus- ments of the present and future. As summarized by tries in the state is being affected by water avail- V.S. Vyas (background paper): `With increase in ability.10 population and changes in lifestyle, the gap be- tween water demand and supply is getting aggra- The results of the study are striking, suggesting that if flexible rather than rigid water allocation vated, leading to disputes among various users'. procedures were adopted: As a part of this report, the World Bank, work- 1. Water use would be dramatically different: ing with a group of eminent Indian scholars, un- dertook a major analytic study to examine the · total water use would be 15 percent lower economic impact of flexible rather than rigid wa- (Figure 2.3); terallocationpracticesinTamilNadu8wherethere · abstractions from aquifers (which are al- is already strong evidence of the effect of water ready under great stress in the state) would be 25 percent less; Figure 2.3: Total and sectoral water use in · water use in agriculture would be sharply 2020 under two management scenarios reduced, while water for industry and urban uses would increase substantially Fixed Allocation Scenario (Figure 2.3). Flexible Allocation Scenario 2. Economic performance, too, would be quite 40 different (Figure 2.4): 30 year · state income in 2020 would be 20 percent per 20 higher; BMC 10 · urban household incomes would be 15 per- cent to 20 percent higher for all four catego- 0 ries included; use uses etc. sector · there would be small losses in income for water domestic industry uses, agriculture in in families who remained self-employed far- in otalT mers and for laborers who stayed as agri- Use Use Ecological Use cultural workers, but rural incomes would Livestock Source: Bhatia et al, 2005. be 15 percent to 20 percent higher for self- employed and non-agricultural labor. 8 Ramesh Bhatia, John Briscoe, Ravinder Paul Singh Malik, Lindy Miller, Smita Misra, Harshadeep Rao, and K.S. Palinasami, `Water in the Economy of Tamil Nadu: Flexible water allocation policies offer a way out of water- induced economic stagnation, and will be good for the environment and the poor', World Bank, New Delhi, October 2004. 9 John Briscoe, `Raw Water Supplies for Chennai', World Bank, Back to office report, 1996. 10 `SIMA for allotment of additional land for Textile Processing Park', Business Standard, 25 April 2005. 14 Current and Looming Challenges Figure 2.4: Differences in income in Tamil the required human resources, and focuses pri- Nadu in 2020--flexible compared to fixed marily on adding infrastructure, not improving water allocations services. 30% Adjusting to Scarcity and Greater 25% Variability 20% In 1999, the National Commission on Water12 15% assessed the overall availability of water, the 10% likely demands, and the implied `water available 5% for future use' (Figures 2.5 and 2.6). 0% These figures are a stark and unequivocal por- -5% labor rural salary labor urban trayal of a country about to enter an era of severe labor agriculture All All households water scarcity. And there are a host of realities Other wage households in Self-employed Casual which make the situation far worse than depicted non-agricultural R3: Other U1: U3: Other in Figures 2.5 and 2.6. Regular Agricultural R5: U4: U2: R2: Self-employed First, water is not a national issue, but an Self-employed R4: intenselylocalone.Aggregatesthusconcealmuch more severe situations in many localities (and R1: less severe ones in others). Already 15 percent of Source: Bhatia et al, 2005. aquifers are in critical condition, a number which The writing, then, is on the wall: India is chang- Figure 2.5: Utilizable water, demand, and ing very fast, and there are great environmental residual which is available but not used and economic benefits from transforming the Available Demand Utilizable Indian water economy into one that is far more 1400 flexible and adaptive. 1200 As this transition takes place, the development annum 1000 of a vital and efficient urban water supply and per 800 sanitation sector is a major challenge. A compan- 600 ion report by the World Bank11 examines the chal- 400 lenges that India faces in meeting the millennial kilometers ? development goals. A succinct summary is that 200 India's water and sanitation sector is woefully ill- Cubic 0 1997 2010 2025 2050 equipped to meet this growing challenge. The sec- tor has no identity, is bankrupt, is not developing Source: National Commission on Water, 1999. 11 Alain Locussol, `Halving by 2015 the Proportion of the People in India without Sustainable Access to Safe Drinking Water and Basic Sanitation', World Bank, 2005 (draft report). 12 `The Report of the National Commission for Integrated Water Resources Development', Ministry of Water Resources, New Delhi, 1999. 15 India's Water Economy Figure 2.6: `Unused' surface water and is projected to increase to a frightening 60 percent groundwater by the year 2030. Second, in its deliberations the National Com- Surface water Groundwater mission on Water gave little attention to environ- 600 mentalrealitiesandneeds.13It,therefore,implicitly annum 500 assumedthatthequantumofavailablewaterwould per 400 be constant, despite the fact that ever-larger 300 stretches of rivers in India are becoming so pol- luted that their water can be used for fewer and 200 fewer uses and the quality of water in an increas- kilometers 100 ? ing number of aquifers is being similarly degraded 0 Cubic by human use and saline intrusion.14 1997 2010 2025 2050 Third, there are strong indications that climate Source: National Commission on Water, 1999. change is likely to affect India in a number of Figure 2.7: Simulated effects of deglaciation on Himalayan river flows over 10 decades Source: Gwyn Rees et al, 2005. 13A.D. Mohile, `The evolution of national policies and programs', Background Paper for this Report, 2005. 14George Varughese, `Water and environmental sustainability', Background Paper for this Report, 2005. 16 Current and Looming Challenges ways. There is little uncertainty about some of Figure 2.8: Change in South Asia summer these impacts. rainfall predicted by 10 General Circulation climate models As global temperatures continue to rise, this will affect the `water banks' (glaciers) which are a 30 (%) prominent part of the Himalayan water systems. 25 While there is clear evidence of deglaciation across 20 the whole of the Himalayas, the effect on river 15 flows is likely to be substantially different in dif- precipitation ferent areas,15 as shown in figure 2.7. 10 in 5 In the eastern Himalayas, high levels of snow- 0 fall appear to retard glacial retreat, and runoff Change 1 2 3 4 5 6 7 8 9 Model generated in the non-glaciated areas rapidly less- Source: IPCC, 2004 (personal communication from ens the downstream impacts (see, for example, the Robert Watson). modest impacts on the Brahmaputra, before the river disgorges from the Tibetan Plateau into The IPCC has used a regional model (curiously Arunachal Pradesh). In the west, as illustrated by based on the one global model which showed re- the Indus, where precipitation is lower and the duced precipitation) to explore possible changes in volume of snow at high elevations does not protect the number of rainy days and in extreme rainfall. theglaciersinthehotsummermonths,deglaciation This model predicted a decrease in the number of is more rapid (see Skardu, for example, where rainy days (Figure 2.9) but substantial increases in there are large increases in flows for the next half- extreme precipitation events (Figure 2.10). century, followed by upto 50 percent reductions from contemporary levels of runoff), and the im- Figure 2.9: Predicted change in number of pacts are felt for a considerable distance down- rainy days from the `decreased rainfall' stream(withIndusflowspredictedtobearound30 IPCC model percent less in the northern plains of Pakistan). In the Ganges there would be large impacts of de- glaciation in the mountains (see Haridwar in Figure 2.7), effects which are mitigated by non- glacial forms of runoff in the plains (as illustrated for Allahabad in Figure 2.7). Deglaciation is, of course, not the only way in which climate change is likely to affect the avail- ability and timing of runoff in the subcontinent. The Intergovernmental Panel on Climate Change (IPCC) uses 10 General Circulation models, 9 of whichprojectthatprecipitationduringthesummer Source: IPCC, 2004 (personal communication from Robert Watson). monsoon will increase substantially (Figure 2.8). 15 Gwyn Rees and David Collins, `An assessment of the potential impacts of deg-laciation on the water resources of the Himalayas', Draft Report, HR Wallingford, April 2004. 17 India's Water Economy Figure 2.10: Predicted change in rainfall Figure 2.12: Areas subject to flooding are intensity (in mm per day) from the vulnerable to climate change `decreased rainfall' IPCC model Source: A.C.Tyagi, `State of India's Water', Source: IPCC, 2004 (personal communication from www.thirdworldwatercentre.org. Robert Watson). What does seem likely is that climate change · There are major regions, including many of will increase the variability of already highly- the most highly productive agricultural and variable rainfall patterns, requiring greater in- industrial regions of India, where water vestments in managing both scarcity and floods. scarcity is already a fact of life (illustrated with increasing frequency in cartoons in · The area affected by flooding, which has Indian newspapers, such as Figure 2.13, by not changed systematically in decades (Fig- Binay Sinha in Business Standard). ure 2.11) is likely to increase substantially since many of the flood-prone areas (Fig- · Waterscarcityisgoingtobecomewidespread ure 2.12) will be affected by changes in in India in a future which is, given the fact glacial behavior and precipitation in the that changing water use habits takes de- Himalayas. cades to effect, just around the corner. Figure 2.11: Area flooded has been relatively stable Area affected by floods (mha) 20 18 16 14 area(mha) 12 10 8 6 Flooded 4 2 0 1953 1955 1957 1956 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 Source: A.C.Tyagi, `State of India's Water', www.thirdworldwatercentre.org. 18 Current and Looming Challenges Figure 2.13: Running out of groundwater water reservoirs, in projects small (like local rainwater harvesting) and big (such as large dams). In so doing, however, there is a need for concomitant adoption of quite different development and management strategies.Inadditiontoexpandingirrigated area (the principal justification for most projects), care needs to be taken to safe- guard existing downstream uses, and atten- tion also needs to be paid for improving the reliability of supplying existing demands and for meeting historically deprived envi- ronmental uses. · The melting of the glaciers offers India a Source: Cartoon by Binay Sinha, courtesy of Business window of opportunity, first, to make pro- Standard. ductive use of this `windfall', but also to understand that this window should be used · Deglaciation is going to result in inadvert- to prepare for the very hard days, with sub- ent `mining' of the water banks of the stantial flow reductions in the Himalayan Himalayas. This will lead to a runoff wind- region, which lie ahead. fall for a few decades, to be followed by major, permanent, reductions in runoff. · While the exact shape of the future climate regime is uncertain, it is very likely that · Climate change is likely to substantially in- there will be greater variability--both of crease overall monsoonal rainfall in India, droughts and floods. As was shown in a but this is likely to be poorly distributed in detailed examination by the National At- the sense that much of the additional rain- mospheric and Oceans Administration of fall will probably be in high-intensity storm US water practices, the best preparation for events. managing unpredictable future changes is to put in place a water resource infrastruc- What, then, are the implications of these tureandmanagementsystemwhichisdriven changes? Despite the many uncertainties, they in- to a much greater degree by knowledge (in- clude: cludingbutnotlimitedtohydrologicknowl- edge), and which is designed and operated · A need for large investments in water stor- to be much more flexible and adaptive. age. As described earlier, India actually has relatively little capacity to store water. For · Flooding, which already affects large areas example, whereas there is about 900 days of ofthepoorestpartsofIndia(includingBihar storage capacity on the Colorado and and the Northeast), has yet to be effectively Murray-Darling Rivers, there is only about addressed. The standard response in India 30daysofstoragecapacityinmostofIndia's has been to build embankments and to ad- riverbasins.Accordingly,majorinvestments vocate the construction of large dams and need to be made to increase capacity to store embankments as the solutions to the prob- water, in both surface water and ground- lem. India is only now starting to explore 19 India's Water Economy the combinations of `hard' interventions (to Dealing with Growing Conflicts protect high-value infrastructure) and `soft' interventions (smart adaptation to living Conflicts over water are so ancient that the idea is with floods, including changing land use incorporated into language: the word `rivals' is patterns and cropping patterns, and con- derived from the Latin `rivalis', meaning `the one struction of emergency shelters for people using the same stream as another'.20 In the sub- and animals), which have been used to con- continent, too, there is a long history of water siderable effect in countries as diverse as the conflicts. The origin of Buddhism is related to a United States16 and Bangladesh,17 and are water dispute between the kingdoms of Shakya globally-accepted best practices. and Koliya. Prince Siddharth tried to resolve this by negotiation and compromise, but failed. The · With respect to scarcity, there is a pervasive Peoples' Assembly of Shakya declared war on complacency--`wehavemuddledthoughup Koliya and asked Siddharth to leave the state.21 to now and we will find a way to muddle through in the future'--on the part of many So conflicts over water are not new, either in the in government and citizens. This has been world or in India. But there is no question that the compoundedbytherecentperception(which incidence and severity of conflicts has increased is likely to be temporary) that `the Indian sharply in recent times. Over the past year, the economy is no longer dependent on the va- Union Minister of Water Resources has remarked garies of the monsoon'.18 This muddling that `I really am not Minister of Water Resources through has worked because it has been but Minister of Water Conflicts', and the Union possible for farmers, city-dwellers and in- Finance Minister has noted a `growing set of small dustries to `exit'19 from unsatisfactory pub- civil wars' over water at all levels in Indian licsupplysystemsbytappingonce-abundant society.22 groundwater. But now the well is running dry, and with it the exit option is becoming It is useful to unbundle this growing set of con- tenuous in more and more parts of the coun- flicts, from the international down to the local try. The challenges, to which we return later level. in this report, are: to greatly improve the robustness and flexibility of water resource Conflicts at the International Level management systems; to improve the flex- ibility and quality of service provided by At the international level, India has been a party the major public water supply and irriga- to several water treaties which are widely consid- tion systems; and to develop government/ ered to be global good practice. Most notable, of citizen partnerships for managing ground- course, is the Indus Treaty of 1960 which allocates water in a sustainable manner. the waters of the Indus, Jhelum, and Chenab to 16Barbara A. Miller, A. Whitlock, and R.C. Hughes, `Flood Management--the TVA experience', TVA, Oak Ridge, 1998. 17Ainun Nishat, powerpoint presentation on Flood Management in Bangladesh, World Bank Water Week 2005. 18`Growth surge: No longer a gamble on the monsoon', The Economic Times, March 2005. 19Albert O. Hirschman, Exit Voice and Loyalty: Responses to Decline in Firms, Organizations, and States, Harvard University Press, 1971. 20The Oxford Dictionary of English Etymology. 21M.A. Chitale, `The fight for water', ICID, New Delhi, 1997. 22`Water Ministry seeks World Bank funding for reforms', The Hindu, 13 January 2005. 20 Current and Looming Challenges Pakistan (while allowing run-of-the-river hydro of inter-state rivers: Entry 56, List I states that on the headwaters before the rivers enter Paki- `Regulation and development of inter-state rivers stan), and the waters of the Ravi, Beas, and Sutlej and river valleys to the extent to which such regu- to India. The central feature of the Indus Treaty is lation and development under the control of the that the rights (and obligations) of both parties are Union is declared by law to be expedient in the unambiguously defined. This clarity and the per- public interest.' In the words of the Planning Com- manence of the assignment of rights has meant mission:26 `The Central Government has not so far that the two countries have concentrated most of exercised this authority ... (and) ... inter-state con- their attention on using what is theirs effectively, flicts over water sharing have been the bane of ratherthanhagglingovertheirentitlements.23Simi- water resources development in the country. Tri- larly important is the Ganga Water Treaty be- bunals have been constituted in the past for tween India and Bangladesh of 1986, which once Narmada, Godavari, and Krishna. Tribunals for again rests on an agreed-upon allocation of low Cauvery, Ravi-Beas, and Krishna (second Tribu- flows among the parties and in which seasoned nal) are presently engaged in adjudication. bilateral diplomats were able to find an `accept- Although time limits have now been prescribed for able second-best' solution for both parties.24 A Tribunals, still the adjudication process is a long somewhat different but equally interesting case is drawn affair. Tribunal decisions are interpreted that of `benefit-sharing' arrangements for devel- differently by co-basin states and this again leads opment of the hydropower resources of Bhutan,25 to disputes in the operation of the Award.' And in which has shown the way for mutually beneficial the words of the former Chair of the Central Water development between India and its smaller Hima- Commission:27 `Various alternate doctrines based layan neighbors. In the international arena, then, on, say the riparian principle, the chronology of India has forged a number of examples of good use, the principle of causing no harm to the down- practice; now there is a need to modernize some stream entities, on the contribution of the state to elements of these treaties (especially the conflict the basin waters, as also those based on the prin- resolution mechanisms) and to put into place more ciple of equitable distribution are available in the such agreements on the substantial number of riv- literature about international water law. These ers where agreement between India and her neigh- are cited during the process of negotiations or bors has not been reached. adjudication, with each party normally preferring the doctrine which serves its interest. Apart from Conflicts at the Inter-state Level the doctrines, there are many other common contentious issues, which are often discussed, but At the next level down, among the states of the about which no agreed guidelines are available in Indian Union, the situation is much less satisfac- India.' tory. The issue is pervasive, since 90 percent of the land area of India is drained by inter-state rivers. This anarchic situation means that in most cases Under the Constitution, authority is conferred on there is no clarity about who can use what amount the Union Government with respect to regulation of water. And when there are awards, they are 23 N.D. Gulhati, Indus Waters Treaty: An Exercise in International Mediation, Allied Publishers, New Delhi, 1973. 24 Tariq Karim, `The Bangladesh-India Treaty on Sharing of the Ganges Waters', Bangladesh High Commission, Pretoria, November 1997. 25 Jeremy Berkhof, `Hydropower in Bhutan and Nepal: Why the Difference?', 2003 (draft paper). 26 A. Sekhar, `The evolution of water development and management: the perspective of the Planning Commission', Background Paper for this Report, 2005. 27 A.D. Mohile, `The evolution of national policies and programs', Background Paper for this Report, 2005. 21 India's Water Economy incompletely specified and have no accompany- heavily on the Maharashtra Krishna Valley Cor- ing enforcement mechanisms. Unilateral actions poration to create storage capacity to get prior are the norm, with the instructions of the Tribu- appropriation rights to Krishna water; because if nalsandeventheSupremeCourtroutinelyflouted. it did not do so, its share in Krishna awarded by the (As noted by Maria Saleth:28`as a point of contrast Krishna Water Dispute Tribunal would have been with these inter-state squabbles, one notes a high subject to revision. Interest and equity payments degree of respect and stability of water-sharing forthesedamsaccountedfor17percentofthestate provisions in international water treaties'.) The fiscal deficit in 2003/4.' consequences are wide-ranging and serious. Second,iseconomicwasteindownstreamstates. There are major political consequences. There The Government of Tamil Nadu does not make is a high level of vitriol in the endemic clashes investments in improving water efficiency in the between states on inter-state water issues. In some water-starved lower Cauvery Basin, because it cases, inter-state water disputes have contributed perceives that any demonstration of greater effi- to terrorist and secessionist movements.29 Because ciency would weaken its bargaining power anything can be claimed in inter-state waters, poli- vis-à-vis Karnataka during the next Cauvery Tri- ticians raise the specter of such `popular responses' bunal award. when justifying non-compliance with water agree- ments. And the very basis of a federal state are put Third, are the foregone opportunities for win- into question (as in the case of the 2004 unilateral win projects between states. During the vigorous abrogation by Punjab of all water-sharing agree- debate in 2004 on inter-basin transfers (`linking ments with other states).30 rivers'), a major obstacle to translating any sen- sible projects into practice was that of state water And there are major economic consequences. entitlements. A reported interaction between the The lack of clear, permanent allocations means Chair of the Task Force on Linking Rivers and that states often spend more time and resources LalooPrasadYadav,showedtheonlywayinwhich over `securing our future rights' than they do to `surplus states' would agree to share water with using what is theirs. Three cases illustrate this `deficit states': `Laloo warned that not a glass of general point. waterwillbeallowedtobedivertedfromtheGanga basin. A few days later, however, the de facto ruler First, is economic waste in an upstream state, as of Bihar declared that water was like oil--if the described by Nirmal Mohanty:31 `The problem of right price was offered, he may be ready to sell'.32 poorly established property rights in the tribunal awards ... has encouraged states to secure inter- And finally, there are major environmental con- state claims to the headwaters of rivers by build- sequences. Indian water managers continue to ing large dams regardless of the financial and perceive of any water not directly used for human environmentalconsequences,andimpactondown- purposestobe`wastage'.Asdescribedbytheformer stream states. Maharashtra, for example, spent Chair of the Central Water Commission:33 `The 28 Maria Saleth, `Water rights and entitlements', Background Paper for this Report, 2005. 29 `Terrorism will be back if verdict goes against Punjab in SYL row', The Times of India, 27 July 2004. 30 Maria Saleth, `Water rights and entitlements', Background Paper for this Report, 2005. 31 Nirmal Mohanty, `Moving to scale', Background Paper for this Report, 2005. 32 Himanshu Thakkar, `Flood of nonsense: How to manufacture consensus for river-linking', Himal, 16 August 2003, p. 27. 33 A.D. Mohile, `The evolution of national policies and programs', Background Paper for this Report, 2005. 22 Current and Looming Challenges need to balance the use of water with its deliberate Figure 2.14: Chief Ministers of Karnataka non-use in order to maintain environmental bal- and Tamil Nadu resolving the conflict over ance of the riverine, estuarine, and the coastal the waters of the Cauvery River ecosystems is negated (in at least parts of the 2002 National Water Policy)'. Given the lack of speci- fication of states' water entitlements, this means that any water releases to estuaries, for example, would be the basis for other states to claim `wast- age' and therefore an appeal to reduce the share of the offending state. The lack of Union Government action on inter- state waters has become a subject on which the government is widely ridiculed, sometimes even by the government itself. The Union Secretary of Water Resources wonders34 how it is that, 50 years afterthepassingoftheRiverBoardsAct,theUnion Source: Courtesy of The Hindu, 2003. Government has not once used that Act to deal with inter-state river development. The Chief Min- ister of Tamil Nadu describes the Cauvery River even within single-state basins. The Vaigai Basin Authority35 as `a toothless wonder'. Sunita Narain in Tamil Nadu was a beneficiary of the century- of the Centre for Science and the Environment old Periyar scheme, whereby part of the water of sums up the situation as follows:36 `In the political the western flowing Periyar River in Kerala was minefield of river disputes, the government ... just diverted by the revered Colonel Pennyquick over watches, waits for God to bring rain and tempo- the Western Ghats to the Vaigai Basin in Tamil rary relief, or scurries about for a new appease- Nadu (Figure 2.15). ment package. All in all, it makes a farce of the issue staring it in the face: how the country is to Periyar water was used to establish major canal commands in the lower Vaigai Basin. In the 1960s, live and share its now-scarce water resources.' the Vaigai Dam was built to harness the natural And, as always, cartoonists (Figure 2.14, showing the Chief Ministers of Karnataka and Tamil Nadu flow of the Vaigai. It was immediately apparent to those who had benefited from the Periyar water discussing water sharing on the Cauvery) cut to the that this posed a threat to their water entitlements. quick. Accordingly and quite remarkably, the authorities Conflicts between Upstream and Down- at the Vaigai Dam keep two sets of books--one of stream Riparians in Intra-state Rivers which records the inflows and releases of Periyar water (which is of high reliability) and the other As scarcity becomes a fact so there is growing whichrecordstheinflowsandreleasesofthemuch- conflict between existing and new users of water, less-reliable Vaigai River water. Over the years, 34 D.V. Duggal at Ministry of Water Resources, Workshop on River Basin Management , New Delhi, 27 January 2004. 35 Jayalalitha in The Hindu, August 2003. 36 Sunita Narain, `The drought within', Business Standard, New Delhi, 3 August 2004. 23 India's Water Economy Figure 2.15: Water entitlements in the Vaigai Basin creeping expropriation of water rights. In 1934, the Madras High Court, in the case of Setharama lingam vs. Ananda Padayachi37`asserts that in case the lower riparian feels that there has been an ac- tual decrease in the supply of water to him he has a cause for action'. But because water accounts are not kept and there are no formal entitlements, the de facto law of water here (as elsewhere in India) is `what the state gives, the state may take away (without informing you)'. Conflicts between Communities and however, there has been an ineluctable increase in the State the dams in the basin. Each of these has been built to provide water to a new command area. For A major phenomenon of the last five years has example, the Sothuparai Reservoir in the headwa- been an explosion in community-based projects ters was recently built (with World Bank funding) for `rainwater harvesting' schemes, which involve to the delight of farmers in the couple of thousand rehabilitating and building small check dams and hectares served by the dam. But the waters of the tanks, and household groundwater recharge struc- Vaigai Basin were, if accounts were kept, already tures, with over $150 million a year spent on such fully allocated. This was, in short, nothing more projects in recent years.38 The initial impetus was than a project (of considerable cost) which added from the Sukhomajri project in Punjab, with a host little to overall water availability, but simply of other celebrated and less celebrated community robbed downstream Peter to pay upstream Paul. projects, and a substantial number of large-scale, state-sponsored projects (including the multi-state While the basics of water balances apparently World Bank-financed Shivalik Hills project and elude many of the state water engineers, they do large state-financed projects in Andhra Pradesh not elude the downstream farmers. At a meeting of andTamilNadu).Theperformanceofsuchprojects the incipient `Vaigai River basin committee' in varies widely. Objective evaluations show that Madurai this was the main topic of conversation, performance is mixed (with only 10 of 27 Hill with one downstream farmer (dubbed `the water Resource Management Societies functioning in lawyer of the basin') making a cogent (and widely- Haryana,39 for example, and only 40 percent in understood) presentation on water balances and Maharashtra,40andotherevaluationsshowingonly 37 Chattrapati Singh, `Water Rights in India', Water Law in India, pp 8­30. 38 Sudhirender Sharma, `Rainwater harvesting has yet to protect India from drought', Waterlines, vol. 21, no. 4, April 2002 (also published in Water Policy (8), February 2006). 39 Arya, Swaran Lata and J.S.Samra, `Revisiting Watershed Management Institutions in Haryana Shivaliks, India', Chandigarh: Central Soil and Water Conservation Research and Training Institute, 2001, and Kerr John, Ganesh Pangare, V.K.Pangare, and P.J.George, `An evaluation of Dryland Watershed Development Project in India', EPTD Discussion Paper 68, International Food Policy Research Institute, Washington DC, 2000. 40 R.P.S. Malik, `Water and poverty', Background Paper for this Report, 2005, and Kerr John, Ganesh Pangare, V.K.Pangare, and P.J.George, `An evaluation of Dryland Watershed Development Project in India', EPTD Discussion Paper 68, International Food Policy Research Institute, Washington DC, 2000. 24 Current and Looming Challenges 25 percent or even 15 percent of such projects TheGhanaNationalParkinBharatpurisIndia's successful41). most famous bird sanctuary and a Ramsar wet- land. (Like many such sites, it has a checkered Virtuallybydefinition,theseprojects`takehold' history. The wetland is entirely artificial, having only in areas where water is already very scarce. been created by a Maharaja who liked shooting And in all cases communities will only partici- birds in very large numbers but who later had a pate, reasonably, if they can use the water, prima- conversion and turned it into a sanctuary for hun- rily to irrigate their crops. This means that the dreds of species of endemic and migratory birds, rainwater harvesting schemes have two impacts-- including Siberian cranes.) Water for the wetland increased storage of water, and increased use of is provided by a canal from a dam which is also water. Since there are already very low outflows used by irrigators. In recent years, competition for from most of the highly-stressed basins, this means water has heated up. The competition in this area that the net additional storage is probably small. has been exacerbated by the new claims arising The result, in zero-sum cases, is that the new uses from the Laava ka Baas Dam, a `rainwater har- mean yet another set of additional claims on lim- vesting structure', constructed in the catchment. ited water, claims which are honored only by re- Existing farmers claim that they have been ducing the availability for some anonymous squeezed by this and other abstractions and by downstream user. drought, and have refused to allow releases of water for the Bharatpur Sanctuary. As can be seen This has led to conflicts between the state and in Figure 2.16, the previously lush and teeming the communities. Tarun Bharat Sangh is a rainwa- wetland has been turned into a cattle pasture, leav- terharvestingNGOledbythecharismaticRajendra ing the migratory birds to the vagaries of unpro- Singh. In one well-publicized incident, commu- tected wetlands and threatening a flourishing local nity activities led to the revival of a local stream, tourism industry. the water of which was then claimed by the state, which,undertheIndianEasementActsof1882has The point is that in an increasing number of the sole right to collect, retain, and distribute sur- cases new entitlements (sometimes large, some- face water.42 So not only does the state claim the times each small in themselves but substantial in right to take away that which it has given, but it aggregate) adversely affect existing users. In an also exercises the right to take away that which it increasing number of cases there are vigilant `wa- has not given (but owns anyway). ter accountants' downstream who know exactly what is happening and can see the results before Conflicts between Farmers and the their eyes. Without a framework for allocating Environment entitlements and mediating claims, conflicts are inevitable and growing. As water allocation in particular basins approxi- mates a zero-sum game, without rules and institu- Conflicts within Irrigation Projects tions for managing who gets what, conflicts are inevitable. In an increasing number of cases this Finally, there are an increasing number of serious pits farmers against nature. disputes among farmers within canal commands. 41 Sudhirender Sharma, `Watersheds', Waterlines, 2004. 42 The National Commission for Integrated Water Resources Development, Ministry of Water Resources, New Delhi, 1999. 25 India's Water Economy Figure 2.16: The demise of the Bharatpur Bird was lack of clarity and certainty about Sanctuary entitlements. Vijay Vyas45 has summarized the situ- ation well: `It will be infinitely better to avoidconflictsituationsratherthanseek mechanismsforconflictresolution.Two preconditions for minimizing conflicts at the local level are: clear definition of usufructory rights, and dependable esti- mates of the water availability over time and over space. If the usufructory rights are clearly defined they can be used as an explicit provision in formal or infor- mal contracts among different water After--a cattle pasture users and among water users and water providers. Ambiguity in proprietary Before--India's rights is at the root of several disputes.' greatest bird sanctuary Maintaining and Renewing Existing An important recent case is that of the Indira Infrastructure Gandhi Canal in Rajasthan43 (the major project for using the substantial quantity of waters allo- India has a large stock of hydraulic infrastructure: cated to Rajasthan under the Indus Water Treaty). since 1960, the Union Government has invested of The farmers, in the first half of the project to be the order of $120 billion in water resources and completed, were allowed to share the water for the irrigation,46 with the approved outlays for irriga- wholeprojectonatemporarybasis,withthiswater tion alone in the Tenth Plan being $10 billion for to be gradually reduced to their design share as the irrigation and $1 billion for flood control.47 As other command areas were completed. But this described earlier, the services provided by this fact was either communicated informally to the infrastructure are critical for economic growth. farmers or not communicated at all. They thus But the services are only forthcoming if this enor- became accustomed to having plenty of water and mous asset--which is now aging, as illustrated in planted water-intensive crops.44 When the time Figure 2.17--is maintained and replaced. And the came for them to reduce their water to the origi- evidence is palpable that this is not happening. nally envisaged amount, they perceived this as `confiscation'andrevolted.Fourfarmerswerekilled No state in India has a modern Asset Manage- in the summer of 2004. Once again, the core issue ment Plan, and thus there are no reliable estimates 43 `Three farmers killed, thirty hurt in police firing', The Indian Express, 27 October 2004. 44 V.S. Vyas, `Principled pragmatism, or the political economy of change', Background Paper for this Report, 2005. 45 Ibid. 46 G.T.K. Pitman, OED, `India: World Bank Assistance for Water Resources Management', 2002. Bank investment has been about 10 percent of India's investment, and the Bank has invested $12 billion since 1960. 47 A. Sekhar, `The evolution of water development and management: the perspective of the Planning Commission', Background Paper for this Report, 2005. 26 Current and Looming Challenges tortion is that the public agencies which provide Figure 2.17: The stock of major water these services are hugely over-staffed. Mumbai infrastructure (large dams in this Municipal Water Corporation, for example, has case) is aging about 35 workers per thousand connections, 1400 whereas well-functioning utilities have about 3 1200 workers per thousand connections. And the UP 1000 Irrigation Department employs an astonishing 800 110,000 people. The politics of these public enter- dams prises is such that salaries have the first call on 600 of revenues--in Haryana, for example, 83 percent of 400 the allocation for irrigation operation and main- 200 tenance goes to paying salaries.49 Number 0 yrs yrs yrs yrs yrs yrs yrs The second distortion is that revenue collection than than 50 50 40 30 20 10 Under 100 is low and declining. Gross recoveries as a propor- to to to to to Less More tion of working expenses declined from 85 percent 40 30 20 10 100 construction Age in 1975 to 42 percent in 198850 and to 35 percent Source: A.C.Tyagi, `State of India's Water', (for a sample of states) in 1998.51 www.thirdworldwatercentre.org. The result of this pattern of declining revenues and rising personnel costs is a pattern illustrated of the cost of replacing and maintaining this infra- schematically in Figure 2.18. In a financially-well- structure. From international experience, a typi- structured irrigation system (such as that in Aus- cal figure--assuming regular maintenance--of tralia), users pay for efficient operations and replacement and maintenance is about 3 percent maintenance and for the replacement costs of the of the value of the capital stock of water infrastruc- assets which provide their services. The govern- ture.48 This would imply that the cost of replace- ment pays (reluctantly!) the interest on debt accu- ment and maintenance of India's stock of water mulated in the past. The system (see part (a) on resource and irrigation infrastructure would be Figure 2.18) is clean and the incentives right (for about $4 billion a year, which is about twice the the users to demand efficient operations and main- annual capital budget in the Five Year Plan. It is tenance (O and M), and replacement only of essen- abundantly clear that not more than a tiny fraction tial assets and that at least cost). The typical Indian of this is actually being spent on asset mainte- system is much more complex (see part (b) on Fig- nance and replacement. ure 2.18). First, there is an extra `block of pay- ment' to be made for the extra costs incurred by There are a series of distortions which are lead- having large numbers of unnecessary workers. ing to the erosion of this asset base. The first dis- Second, the user payments represent only a small 48 The Australian experience shows that the average `renewals annuity', which includes the cost of both replacement and operations and maintenance, `is about 3 percent to 4 percent for older, and 2 percent to 3 percent for newer assets'. Personal communication, Golbourn Murray Water and the Murray Darling Basin Commission, 2005. 49 A. Sekhar, `The evolution of water development and management: the perspective of the Planning Commission', Background Paper for this Report, 2005. 50 R.P.S. Malik, `Water and poverty', Background Paper for this Report, 2005. 51 A. Sekhar, `The evolution of water development and management: the perspective of the Planning Commission', Background Paper for this Report, 2005. 27 India's Water Economy Figure 2.18: The financing of water services in India enue-generating hydropower fa- cilities, the situation is generally much more satisfactory than for the irrigation dams which are totally at the mercy of budgetary financing. And it means that much of what masquerades as `investment' is, in fact, a belated attempt to rehabili- tate the crumbling infrastructure, both for irrigation and for munici- pal water supplies. (Most World Bank `investments' in water infra- structure are, in fact, not invest- ment in new infrastructure, but an attempt to make some inroads into the huge liabilities from deferred maintenance,whilesimultaneously Source: The World Bank. aiming at modernization of the in- frastructure and developing insti- fraction of the total money available for O and M tutional and financial practices which will help (including salaries). Most of the O and M alloca- break out of this vicious cycle.) The contrast be- tions are from the budget (that is, paid for by all tween globally-accepted good maintenance-and- taxpayers), but these amounts typically do not replacement practice and that of the systems in cover what is required for O and M, leaving an India--accurately described by Nirmal Mohanty52 unfilled `deficit' for O and M. At the top end the as `Build-Neglect-Rebuild'--is represented sche- interest on past investments is paid for by taxpay- matically in Figure 2.18. ers. What this means is that there is a yawning gap, paid for neither by users nor taxpayers. This Two examples illustrate how serious the situa- means that O and M is not done adequately and-- tion has become. In the 1980s, the Government of since it is last in the queue--there is no investment Tamil Nadu paid for the construction of a canal in replacing aging assets. from the Krishna River in Andhra Pradesh to bring water to Chennai. Twenty years after construc- There is no doubt that only a very tiny fraction tion, and as a result of the usual practice of de- of this required expenditure for rehabilitation is ferred maintenance, the canal was in very bad actually being made. The end result is the famil- shape. Since the state was unable to pay for reha- iar sight for virtually all water infrastructure in bilitation, the rehabilitation had to be `priva- most parts of India--crumbling, rusting, leaking tized'--it was left to the religious leader Sai Baba dams, canals, and pipes. The situation is serious to pay for the rehabilitation of the canal. And, in evenforinfrastructurewherefailurewouldbecata- a recent national meeting on water, the CEO of strophic, such as large dams. Where these are rev- India's biggest pump manufacturer told of his bit- 52 Nirmal Mohanty, `Moving to scale', Background Paper for this Report, 2005. 28 Current and Looming Challenges tersweet view of the burgeon- Figure 2.19: Depleting India's infrastructure stock ing number of lift irrigation schemes. The state of Maharashtra had bought 34 large pump sets from his com- pany. `I was, of course, quite pleased by this for our business. But I am also a taxpayer, and when I know that just 2 of these 34 pump sets are actually func- tioning it breaks my heart.'53 Again it is instructive (Fig- ure 2.19) to compare reason- able global practice with that in India. In the `good practice' case, the stock of infrastructure grows fast in `Stage 1' (refer- ring back to the `Stages' illus- trated in Figure 1) and then tails Source: The World Bank. off in Stages 2 and 3. But as this stock grows, so the financial demands for nance and replacement gaps widen still further. maintaining and replacing this stock increase. In The end result is that people, supposedly being the Indian case--arguably in Stage 2--the stock served by public irrigation and water supply ser- is still growing, but the finance available for main- vices, vote with their feet (or, more accurately, taining and replacing that stock has fallen rather with their tubewells) so that they have alternative than risen. sources of supply. In the context of social services, it has been Later in the report, we look at some ways of estimated that no more than 15 percent of alloca- trying to approach the difficult but vital challenge tions actually end up being delivered to those for of moving from a vicious to a virtuous cycle. There whom the funds were intended. While the parallel is no silver bullet for this--it will need dramatic is not precise, and numbers are not available, it is increases in the efficiency of the providers of the clear that the infrastructure system is similarly public services, it will require `transition plans' so leading to hugely ineffective application of re- that improved services can induce greater confi- sources. Much of what is built is not being main- dence in the services and willingness to pay for tained, and that which does still function, delivers them, and it will require recognition of a simple services of a low quality. This, in turn, reinforces financial fact. In the words of Rakesh Mohan: the vicious cycle--users who are receiving such `... ture--from taxes or from user charges. As long poor services reasonably refuse to pay, meaning as India is not prepared to do either or both of that revenues decline still further and the mainte- these, there is no hope for building and maintain- 53 Mr. Kirloskar, CEO of Kirloskar at FICCI seminar on Linking Rivers, New Delhi, 2004. 29 India's Water Economy ing the infrastructure necessary for a more produc- A different perspective is the quantum of water tive economy.'54 that can be stored as a proportion of average river runoff. In the Colorado River Basin and in Building Infrastructure in Under- Australia's Murray-Darling Basin this figure is 900 served Areas and for Under-served days; in South Africa's Orange River Basin it is Public Purposes 350 days; but overall, India can store just 50 days of average runoff, with wide variations--from 220 In addition to the major financial challenge of days in the Krishna to just 2 days in the rehabilitating and maintaining its stock of water Brahmaputra/Barak Basin (Figures 2.21). infrastructure, India also has to make major in- vestments in additional water infrastructure. The A complementary perspective is that of the de- need for these new investments can be seen from gree to which India has utilized its substantial several perspectives. hydropower resources. Again, international com- parisons are useful--Figure 2.22 shows that rich Looking at India in a global context, the coun- countries have developed about 80 percent of their try has remarkably small stocks of water infra- structure. As shown in Figure 2.20, the amount of Figure 2.21: Days of average flow which water storage capacity in India is very low for a reservoirs in semi-arid countries can semi-arid country--whereas the United States and store in different basins Australia have capacity to store over 5000 cubic 1000 meters for every citizen, China 2500 cubic meters per capita, and Morocco and South Africa 500 800 cubic meters per capita, India's storage capacity 600 amounts to just 200 cubic meters per capita. 400 200 Figure 2.20: Storage per capita in different 0 semi-arid countries Orange Ganga Indus 6000 Krishna Cauvery Colorado Narmada capita 5000 Brahmaputra per Murray-Darling 4000 Source: The World Bank. 3000 meters 2000 economically-viable hydroelectric potential. Cubic1000 India has substantial economically-viable hydro- 0 power potential, but has developed only about 25 percent of this potential. USA China Spain India Australia Morocco Pakistan Ethiopia Most of India's hydropower potential is in the Source: ICOLD database. Himalayas (Figure 2.23), an area which has many 54 Rakesh Mohan, then Deputy Governor of the Reserve Bank of India, at the Mumbai RBI Conference on Infrastructure, 2004. 30 Current and Looming Challenges Figure 2.22: The development of decade it has become clear that the availability economically-feasible hydropower potential of electricity is emerging as a serious constraint in India in international context to Indian economic growth. Given the particu- larimportanceofpeakingpower(aunitofwhich is estimated to be worth about four times the value of a unit of base load55), India has appro- priatelyembarkedonanacceleratedhydropower development program. The accelerated hydropower program has brought to the fore two serious water resource challenges, which have yet to be effectively ad- dressed. Many of the world's most successful river basin development programs--ranging Source: The World Bank. from the legendary Tennessee Valley Authority of the 1930s56 to the present-day Yangtze Basin Figure 2.23: Status of hydropower developmentproject57--havereliedonhydropower development in different regions to generate the resources necessary to fund `public goods', such as navigation and flood control. (The 40000 Three Gorges Dam, for example, is operated as a 30000 flood control dam, at an opportunity cost of a 20000 massive $1.5 billion a year in foregone power Megawatt10000 revenues.) While there is a history of successful 0 multipurpose projects in India (including the n Bhakra Dam discussed earlier), the Government of ester North India now does not have an enabling framework W Eastern Eastern Northern Southern which facilitates the same socially-optimal out- Source: Ministry of Power, 1998. comes. In the Brahmaputra Basin, for example, there are large benefits from multipurpose storage of the world's most environmentally and socially projects that are being foregone58 because power benign sites for hydropower (Figure 2.24). companies are licensed to develop `power-only' projects, which are typically run-of-the-river Figure 2.25 shows how the level of hydropower projects with few flood control or navigation ben- has fallen relative to other sources. (Over the past efits. This difficulty is exacerbated by the fact that 6 years, installed hydropower capacity has in- `host states' get very large royalties (12 percent of creased by about 8500 MW, raising the percentage gross power sales) from hydropower sales. This is of hydro to 26 percent in 2005.) Over the past best illustrated by considering the situation with 55 Ramesh Bhatia, `Water and energy', Background Paper for this Report, 2005. 56 B. Barbara, A. Miller, A. Whitlock, and R.C. Hughes, `Flood Management--the TVA experience', TVA, Oak Ridge, 1998. 57 Qiu Zhongen of the Changjiang Water Resources Commission titled `Study on the Comprehensive economic Benefits of the Three Gorges Project', presented at the UN Conference on Hydropower and Sustainable Development, October 2004. 58 George Varughese, Waters of Hope, Oxford and IBH Publishing, New Delhi, 1999. 31 India's Water Economy Figure 2.24: Environmental and social indicators gettinggoodmultipurposeoutcomesfromsuch for hydropower dams development opportunities. As described earlier, while overall levels of reservoir capacity in India are low in interna- tional terms, there is wide variation. Figures 2.26a and 2.26b show, for each Indian basin, the annual flows and the number of days of flow that can be stored in reservoirs. Noting that there are sharply diminishing additional yield from a unit of storage once there is substantial reservoir capacity,59 these figures suggest: Source: The World Bank. · that there is little value to additional stor- age in most of the peninsular river basins, (the Cauvery, Krishna, and Godavari) and projects in Arunachal Pradesh. The Government in the Narmada and Tapi; of Arunachal Pradesh gives no weight to flood control and navigation benefits (which would ben- · there are likely to be a number of attrac- efit the much larger populations in downstream tive possibilities for storing water in some Assam) and gives high weight to any submergence of the `low storage basins' (including es- (which would displace people in Arunachal). The pecially the Brahmaputra, Ganga, Union Government has not found a formula for Brahmani, and Subarnarekha, as well as the west-flowing rivers south of the Tapi and, to a lesser degree, the Mahanadi Figure 2.25: The declining role of hydropower in India and Godavari). The idea of `linking rivers' has sur- faced several times in India's history. In 1984, the National Water Develop- ment Authority (NWDA) was set up to identify appropriate inter-basin trans- fers and to undertake feasibility stud- iesforthese.Figure2.27showsthelinks being considered by the NWDA. The idea of these inter-basin trans- fershasprovokedmuchdiscussionand controversy in India. On the one hand, the idea seems obvious to most lay people who observe annual cycles of Source: National Commission on Water. simultaneous drought in some parts of 59 Walter Langbein, `Water Yield and Reservoir Storage in the United States', USGS Circular, Washington DC, 1959. 32 Current and Looming Challenges Figure 2.26a: Flows in billions of cubic Figure 2.26b: The number of days of meters per year in the major river basins average flow that can be stored in of India different river basins in India < 5 days 30­70days < 20 70­100days 20­50 100­150days 50­100 150­200days 100­250 200­250days >250 Source: GIS presentation by IWMI. Source: GIS presentation by IWMI. the country and floods in others. On the other hand, there are many legitimate (and some less legitimate) causes for concern. The legitimate Figure 2.27: Possible inter-basin water concerns are that each `link' needs to be evaluated transfers not just from an engineering perspective but from economic, financial, environmental, social, and political perspectives. The politics are important both domestically and internationally. Domesti- cally, because such links could only materialize if there are willing `givers'(who would need to be compensated) as well as `takers' (who would need to compensate). And internationally, because such inter-basintransferswouldaffectneighboringcoun- tries, who would necessarily have to be consulted and have their concerns taken into account. The less legitimate concerns are those which consider any inter-basin transfers to be `un- natu- ral' and even `causing mutation in the DNA of rivers'! In fact, many arid countries have invested in major inter-basin transfers. In South Africa, for example, 7 of the 9 provinces get more than 50 Source: NWDA. percent of their water from inter-basin transfers.60 60 Thinus Basson, Department of Water Affairs and Forestry, Pretoria, personal communication. 33 India's Water Economy And India itself has benefited from a substantial Figure 2.28: The poverty-reducing impact number of beneficial inter-basin transfers (some of irrigation is declining old, like the Periyar project and some more recent How much percentage of the poor is reduced when such as the Bhakra-Beas system). The Linking there is a 1 percent increase in the proportion of Rivers Task Force headed by Suresh Prabhu, MP, cropped area which is irrigated functioned in a refreshingly different manner from 0.6 the normal, `behind-closed-doors' approach taken 0.5 to water issues in India. There were dozens of 0.4 public hearings and much public debate. Unfor- 0.3 tunately, the quality of this debate was compro- 0.2 mised because, despite numerous assurances to the contrary, the NWDA has never made public 0.1 (with one recent exception) the feasibility studies 0 which it says exist. 1983 1973­77 1977­78 1987­88 1993­94 Thereremainsverysubstantial`unfinishedbusi- 1999­2000 ness' in the provision of irrigation and water and Source: Analysis of 14 states by Dr. R.P.S. Malik, sanitation services, too. 2005. Noting that there were a large number of irri- While the returns to new irrigation investments gation projects which had been started and not are declining (Figure 2.28), it is clear that govern- completed (some for 50 years!), and that there ment will still need to make very substantial in- vestments in new irrigation in coming decades. were other situations where headworks were con- The `India Water Vision 2025'62 estimated that structed but command area development was in- government would need to invest about Rs 80 bil- complete, the Union Government wisely gave and lion a year for irrigation for the next 20 years. gives high priority to the completion of that which has already been started. The Accelerated Irriga- As shown in Figure 2.29, the proportion of plan tion Benefits Program is designed to complete expenditures allocated to these sectors has been projects which would eventually serve 10 million fallingovertime,withtheNinthPlanallocationsto hectares, with about 2 million hectares completed irrigation and flood control being about Rs 80 bil- to date. It will take about $10 billion to complete lion a year.63 The Tenth Plan, however, represents this program.61 Similarly, the Command Area a large increase, with annual allocations averaging Development and Water Management Program is about Rs 170 billion a year.64 In addition to these designed to complete distribution services in an- allocations, the water-related sectors absorb sub- other 10 million hectares. stantial sums of hidden subsidies (Figure 2.30). 61 A. Sekhar, `The evolution of water development and management: the perspective of the Planning Commission', Background Paper for this Report, 2005. Gives the data: up until March 2003, Rs 85 + Rs 30 = Rs 115 billion had been spent to create 2 million hectares of irrigated area. Unit cost is thus about Rs 60,000 per hectare. The remaining 8 million hectares would therefore be expected to cost roughly Rs 480 billion, or roughly $10 billion. 62 India Water Partnership and Institute For Human Development, `India Water Vision 2025', IHD, 2000. 63 A. Sekhar, `The evolution of water development and management: the perspective of the Planning Commission', Background Paper for this Report, 2005. 64 Ibid. 34 Current and Looming Challenges Figure 2.29: Allocations to major water infrastructure percent in urban areas. These num- are declining bers are probably a better indica- tion of the infrastructure that has been built than the services that are actually provided65--there are large numbers who do not have adequate services. The large subsidies, justi- fied in the name of the poor, in fact benefit those who get water (people who can exert influence on rationed supplies, and are therefore not the poor)andthosewhousealotofwater (the middle class and rich). The pri- mary immediate challenges for the water and sanitation sector are to extend services to the unserved, to improve the quality of services to Source: Bhatia, 2005. thosewhoarenominallyserved,and to do this through utilities which are Figure 2.30: Subsidies to water-related sectors efficientandaccountable.Mostoftherev- 20 enues for these services are going to have to come from users, because (as discussed 15 later) the urban authorities are going to total have to invest massive amounts of public of 10 money in the sewerage systems needed to % 5 clean up the polluted rivers. 0 Agriculture, IrrigationEnergy IndustryElementary TransporSecondaryMedicalOther General W SocialHousingOther The India Water Vision has estimated ater that it will require about $1.6 billion a Education Supply W Subsidies year for the next 25 years, if all are to be & & t & Economic elfar Rural Flood MineralsEducation EducationPublic provided with water supply services, and & e & about $0.8 billion a year for household Development Control Health ServicesSanitationNutrition sanitation. Finally, it is obvious that there are huge financial needs for addressing the water Source: Morris, 2005. environment. There is no systemic study of what the aggregate `needs' are, or what the pri- On the water supply and sanitation side, offi- orities are. And there are only very patchy data-- cial figures show coverage with water supply to be thereportoftheNationalCommissiononIntegrated 94 percent in rural areas and 90 percent in urban Water Resources Management, for example, does areas, and sanitation 24 percent in rural and 62 not give a single piece of hard data on water qual- 65 Smita Misra, World Bank, personal communication 35 India's Water Economy ity. The magnitude of the organizational and fi- In summary, the water sector in India faces a nancial challenge for dealing with the major issue massive financial challenge. The annual require- of river pollution is illustrated in a brilliant recent ments for rehabilitating the existing infrastructure study by the Centre for Science and the Environ- probablyamountstoRs200billion.TheIndiaWater ment66of the Yamuna Action Plan (see Box 2.1). Vision projects need new investments--with very modestallowancesforsewagetreatment--ofabout The Yamuna case shows the dismal and deterio- Rs 180 billion a year.67 Annual allocations in the rating state of one of India's major and most sa- recent past have varied between Rs 90 and Rs 170 cred rivers. It also shows the scale of the billion a year.68 At the same time, there are heavy organizational, planning, and financial effort re- (and reasonable) demands for public investments quired to even make a dent in the problem, and suggests both the importance and limitations of a inotherinfrastructure.Itisestimated,forexample, litigation-based approach to dealing with these that the investments needed in roads, ports, rail- issues. It does show that there is a rising awareness ways, airports, and telecoms for the next decade about the importance of environmental issues, and will average Rs 2000 billion a year, and that the a growing willingness to use financial and other governmentwillbeabouttofinance,atmost,around tools to address these. two-thirdsofthis.69 Box 2.1: Water environment challenges--the case of the Yamuna River around Delhi There are several bits of `good news'. First, that India has such competence in the environmental watchdog sector that produces first-rate analyses, such as this piece on the Yamuna, and gets it into the public domain and to the attention of politicians, the courts, and the government. Second, that over the past 15 years the Supreme Court has played an active role in pushing for greater attention to environmental issues, not least on the Yamuna. Third, that in some instances at least--and the Yamuna Action Plan is one of these--the government, with the support of donors (the Government of Japan, in this case), are investing heavily in environmental improvement projects, with about Rs 1500 crore invested in the Yamuna Action Plan (about Rs 600 crore of which were invested in Delhi). There is, however, `bad news', too, and lots of it.70 First, is the fact that this important start has barely scratched the surface of what is needed. Repairing the plumbing that feeds into sewage treatment plants is a huge and very difficult task. A large portion of the 5600 kilometers of sewers are silted or settled, with only an estimated 15 percent of the 130 kilometers of trunk sewers in order. And the 17 sewage treatment plants have a capacity to treat only about half of the sewage produced, which in turn covers only about 60 percent of the population of Delhi. Second, are the problems of operation--only about 60 percent of the capacity of the existing treatment plants is actually used. The end result is that less than 20 percent of the pollution load into the river is actually 66 Sunita Narain and Suresh Babu, `The political economy of defecation', Down to Earth, 30 April 2005, pp. 22­ 33. 67 A.D. Mohile, `The evolution of national policies and programs', Background Paper for this Report, 2005. 68 A. Sekhar, `The evolution of water development and management: the perspective of the Planning Commission', Background Paper for this Report, 2005. 69 Omkar Goswami, `The urgent need for infrastructure', The Economic Times, Delhi, 25 April 2005. 70 The Sarkaria Commission, in A. Sekhar, `The evolution of water development and management: the perspective of the Planning Commission', Background Paper for this Report, 2005. 36 Current and Looming Challenges treated. Since the BOD load on the river has more than doubled in the last 10 years, it is no surprise that conditions in the 22-kilometer stretch of the Yamuna around Delhi have gone from terrible to appalling. As shown in Figures B2.1 and B2.2, the river is dead (there is no dissolved oxygen in the water), and there are more than 10 million fecal coliforms per 100 ml, a level over 10,000 times what is considered a threshold for `bathable water'. Third, there are questions about the implementability of the rulings of the Supreme Court. In 1985, the court ordered Figure B2.1: Yamuna River dissolved oxygen 1996­2003: Levels of Dissolved Oxygen (DO) have drastically reduced, even in the cleaner stretches Himalayan stretch 16 Upper liter Eutrophicated stretch stretch Diluted 11.7 stretch per 12 stretch 8.14 8 4.9 Delhi 6.1 4 milligram Minumum for bathing in 0 DO U/S D/S U/S D/S Palla UDI canal ajewalaT Sonepat Etawah Juhika Kalanaur Mazawali Agra Agra Agra Batteshwar Nizamuddin Mathura Mathura Auraiya Source: CSE, 2005. Figure B2.2: Yamuna River quality--fecal coliforms 1996­2002: Levels of fecal coliform increased all round, indicating greater bacterial contamination Himalayan stretch Upper Delhi Eutrophicated stretch 100,000,000 Diluted stretch stretch 10,000,000 stretch 1,000,000 ml 100,000 20,400 11,850 10,000 100 9,062,22 1,000 752.5 Desirable for bathing per 100 0 mpn U/S D/S U/S D/S Paila UDI canal ajewalaT Sonepat Etawah Juhika Kalanaur Mazawali Agra Agra Agra Batteshwar Nizamuddin Mathura Mathura 1996 2002 Auraiya Source: CSE, 2005. 37 India's Water Economy the construction of Common Effluent Treatment Plants to treat 190 mld of industrial sewage; 20 years later, only 53 mld can be treated. In 2001, the Supreme Court ordered the government to ensure a level of dissolved oxygen of 4 parts per million within 2 years; today, the level of dissolved oxygen is zero. In 1992, the Supreme Court heard a plea to ensure that all of the waters of the Yamuna could not be diverted before it reached Delhi-- the `minimum flow case', `is still on'. The lessons are that judicial activism can not and should not be a substitute for effective government action. 38 CHAPTER3 AN INVIGORATED INDIAN WATER STATE FOR THE 21st CENTURY A State in Disrepute address these problems; however, the policies have not been translated into action'. Some experienced As described in detail in chapter 2, India faces a commentators have argued that reform of govern- daunting set of water-related challenges. There is ment machinery for managing water in India is a still much new infrastructure to be built, but by far hopeless case. Tushaar Shah4 suggests that, `in themostimportantandseriouschallengesarethose designing water governance strategies for India, it of management--of existing infrastructure, and of seems sensible (in the intermediate run) to take the the water resources itself. And here there is a major `nature of the state' as given ... rather than assume problem--governmentsatboththeUnionandstate that the nature of the state will change to resolve levels remain focused, in the words of the Planning water sector problems'. Commission `on the problems of the past', and (with a few notable and partial exceptions) are yet This disconnect between problem/pronounce- to even initiate a discussion of the changes which ment and practice has led to widespread loss of are necessary to confront the urgent and major legitimacy and credibility of the state apparatus new challenges of water management in India. for water development and management. This is evident most obviously in the fact that most citi- Astheproblemswiththecurrentsystembecome zens have come to rely on informal mechanisms more clear and serious, numerous high-level com- for getting the water they need to grow their crops missions have been appointed over the past 15 and for their household needs. It is patent in every years--among others to examine Union responsi- encounter between the state and citizens on water bilities on inter-state rivers,1 pricing,2 and dealing matters, and it is expressed acerbically every day with integrated water management3--and new in the press--`(government) makes a farce of the national and state policies have been promulgated. issue staring it in the face: how the country is to In many cases the recommendations are sensible, live and share its now-scarce water resources'5-- but in most instances the commissions come and and in the numerous water-related cartoons. go, the policies are promulgated, and the machine grinds on unchanged. In the words of a major To an observer who has interacted with India Government of India/World Bank review in 1998: over the last 30 years, the greatest and most prom- `in recent years there has been realization and ising change has been that the standard response to policy pronouncements regarding the need to any discussion of reforms has changed from `well 1 The Sarkaria Commission , in A. Sekhar, `The evolution of water development and management: the perspective of the Planning Commission', Background Paper for this Report, 2005. 2 Vaidyanathan Committee, Report of the Committee on Pricing of Irrigation Water, Planning Commission, New Delhi, 1992. 3 The National Committee on Integrated Water Resources Management, 1999. 4 Tushaar Shah, `Accountable institutions', Background Paper for this Report, 2005. 5 Sunita Narain, `The drought within', Business Standard, New Delhi, 3 August 2004. India's Water Economy that cannot work here, because India is such a cially sustainable way), and (b) only the state can special case' to `why not?'. Regrettably, much of perform, but about which it does little (including, the water bureaucracy of India still lives in the `not clarifying who has an entitlement to use water at here' rather than the `why not?' world. all levels, from the inter-state to the canal distribu- tary; regulating groundwater; providing public To a large degree, this crisis of the water state goods including flood protection and sewerage is a reflection of the general set of challenges treatment). facing the government in a rapidly evolving In- dia. A recent book, Governance, by a prominent Chapter2alsodescribesthecopingmechanisms minister in the last Union Government states the whichfarmers,households,andindustryhavedev- general case: eloped to `work around' a poorly functioning pub- lic water sector, and how these `exit options' are `Themalaiseaffectsalltheinstitutionsofstate.... becoming less and less feasible as resources--and The malaise is well known to those in the system, especially groundwater, which has been the `safety too.Proposalsforreformingthatsystemareadopted valve'--become scarce. from time to time and decrees go out to implement If it were easy to change the way in which the the measures `in a time-bound manner'. But in state performs, this would have been done some every case the proposal is put through the same time ago. There is ample evidence that changes in mill ... and ground to dust.... Mere announce- organizational arrangements within the existing ments amounted to reform.... (many) spelled a system of incentives is akin to shuffling the deck of major advance ... but now actual governance has chairs on the Titanic, and will make no difference. to be changed ... and the way to reform the system For this reason this report will not examine propo- is not to tinker with this procedure or that institu- sitions such as the much-discussed one of `creating tion, but to jettison the function, to hack away the a single Union Ministry which will deal with all limbwheneverthisispossible....Continuetotrans- water issues', because such a change would make fer functions and power from the state structure to little fundamental difference in the way in which society. A leaner machine, like a leaner body, will the state operates. then be easier to improve. For we need to improve the state (because) there are several tasks that only The only way in which change will take place the state can discharge'.6 is if reform-minded political leaders shift the bal- ance of power between the state machinery on the The Central Institutional Challenges one hand, and users (farmers, citizens, industries) in Building `the new Indian water on the other. The state needs to surrender those state' tasks which it does not need to perform to others, and develop the capacity to do the many things Water management is one of these `several tasks which only the state can do. Figure 3.1 gives a which only the state can discharge'. Chapter 2 of schematic representation of how the Indian water this report describes a wide range of tasks which sector looks `now', and a vision of how, on the (a) the state currently undertakes and performs basis of what works in well-performing water sec- poorly (maintain stocks of infrastructure and tors in other countries, it might look `then', after ensure that they provide good services in a finan- the needed changes. 6 Arun Shourie, Governance and the Sclerosis that has set in, Rupa & Co, New Delhi, 2004, p. 21. 40 An Invigorated Indian Water State for the 21st Century Figure 3.1: The desired evolution of functions and actors THEN NOW ofservices provision sector 1. Public private by the suppliers 2. Servicesnon-govt & other 3. Informal provision of services ofpublic goods 4. Public provision 5. Enabling environment functionsnot performed 6.A functioning enabling environment The main features of the changes are: Keeping this desired evolution in mind, and building on the analysis presented in chap- 1. that the public sector will continue to have ter 2, this section describes some of the criti- an important role in providing irrigation cal changes which can get this reform and water supply services but; started, discusses some of the areas in which 2. this will now be in competition with a large progress is being made in India, shows what and vibrant non-governmental sector--in- changes other countries faced with similar cluding the private sector, NGOs and coop- challenges have made and how they have eratives--for provision of formal irrigation managed the process, and offers some `rules and water supply services; for reformers' who are part of this change process. 3. as service provided by this mixed service sector improves, large numbers of people Instruments, not Organizational will move from the informal, self-providing, Forms, are Key water economy into the formal service sector; Discussions about `water strategy' in India are typically dominated by `we need to spend more on 4. the public sector will play an expanded role flood control, or on rehabilitating tanks, or link- in the financing and provision of public ing rivers, or on rainwater harvesting or on de- services (such as flood control and sewage salination', with the answers usually depending treatment); on the regional experience of the minister or bu- 5. the government will develop a set of laws, reaucrat who is leading the discussion. In some policies, capacities, and organizations for instances, these are supplemented by extensive sets defining and delivering an enabling envi- of recommendations of a very specific nature-- ronment, with special emphasis on the what crops should be grown where, how tariffs establishmentandmanagementofwateren- should be manipulated to achieve a host of objec- titlements, and the regulation of services. tives. The nature of these discussions reflects, in 41 India's Water Economy the words of the former Chair of the Central Water perennial favorites being Participatory Irrigation Commission, a view of water that is embedded in Management (PIM)and a single ministry covering the command-and-control view of the economy.7 all water (for water resource management). The The dialog within the water sector, with some perspective of this report is that the primary em- important exceptions, has not adjusted to either phasis for institutional reform should be, in the the broad liberalizing economic changes initiated words of Nobel Laureate Douglass North,9`on the in the Indian economy in 1991, and has not inter- rules of the game' that shape behavior. That is, the nalized the lessons from water management re- primary focus should be on instruments, rather forms throughout the world. than organizational forms. (Organizations do, of course, matter. For example, all well-functioning These discussions have seldom involved an as- water systems separate the providers of services sessmentoftheincentiveswhichgiverisetopresent from the overall water resources management performance and what must be done to change authority. But this is something that is much more those incentives (and thus behavior). The member about the instruments that govern the relation- of the Planning Commission who is responsible for ships between regulator and user, than it is about water and power has said it well: `... it is the new names and separation of cadres, the issues absence of sound incentives which is the funda- which too often occupy center stage in discussions mental problem facing water management in In- of Indian water reforms.) Accordingly, this section dia'.8 What would such an incentive-based describeseachofthecentralinstrumentsthatwould approach to water reform in India involve? form part of an institutional package of reforms, stressing continuously that this is an integrated Most fundamentally it would involve, as sug- package in which the whole is more than the sum gested in Figure 3.1, a major change in the role of of the parts. the state. The government would allow others (in- cluding the private sector) to compete for the right Consider, for example, the issue of irrigation to supply water and irrigation services, while the services. In his excellent book on the political government would turn its attention to the financ- economy of water in peninsular India, David ing (and in some cases the delivery) of flood con- Mosse10describes the necessary set of interlocking trol, sewage treatment, and other public goods and changes well: `Since irrigation involves wider would have as its central task the development and hydraulic systems which are beyond the control of implementationofanintegratedpackageofinstru- WUAsandwhichinevitablyrenderthemdependent ments--entitlements, pricing, regulation--which upon the state, farmers organizations have little wouldstructuretherelationshipsamongwaterusers chance of surviving as independent self-managed so that water is used efficiently, and environmental social organizations. The next step therefore does and financial sustainability is assured. not lie in knowing how to organize farmers organizations ... but how to overhaul the Many discussions of water reform in India (and administrative system so that the state irrigation elsewhere) focus on organizational issues--the departments and farmers can be bound into 7 A.D. Mohile, `The evolution of national policies and programs', Background Paper for this Report, 2005. 8 Kirit Parikh, at the Ministry of Water Resources National Meeting with the States, New Delhi, 2004. 9 Douglass C. North, `Economic Performance Through Time', Nobel Prize Lecture, 9 December 1993, in Nobel Lectures, Economics 1991­1995, Torsten Persson, World Scientific Publishing Co., Singapore, 1997. 10 David Mosse, The Rule of Water: Statecraft, Ecology, and Collective Action in South India, Oxford University Press, New Delhi, 2003. 42 An Invigorated Indian Water State for the 21st Century productive relations. PIM cannot become a reality irrigation and water supply services is the most nor can it become self-sustaining without the damning testimony to the failure of the govern- restructuring of state irrigation departments.... ment-dominated formal service provider model. What is striking in India's IMT/PIM programs is There are a couple of exceptions--TISCO in how little attention is given to water rights. The Jamshedpur,12 for many years, and recently the government's rights to water are unchallenged, textile town of Tirapur in Tamil Nadu--where while its obligations to deliver water to WUAs is industry has such a dominant presence in a par- rarely legally binding ...'. In short, as illustrated ticular town, that it has simply taken over the in Figure 3.2, a sound irrigation service model responsibility for providing water supply services requires mutually-reinforcing changes in all three to households. In these cases, service quality has `legs of the stool'. improved substantially. But they have largely been seen as anomalies rather than models on which to build. The situation in India remains one in which Figure 3.2: The basis for sound irrigation public monopolies face no competition either `in serviceprovision the market', or `for the market' (where head-to- head competition is not possible). Theoneover-ridinglessonfromtheglobalrevo- lution in the provision of public services is that competition matters. In some cases competition `in the market' is possible. For example, it is tech- nically quite conceivable, in the large irrigation systems, to unbundle the bulk and distribution functions and then have a variety of forms--coop- eratives, the private sector--for providing distri- bution services to farmers. As has happened elsewhere (in the airlines and telecoms sectors in India, for example, and in a plethora of public services around the world) such changes would Stimulating Competition in and for unleash a chain of healthy systemic changes which the Market of Water Supply Services would transform the business of the provision of public services. First, it would require a clear con- As described in chapter 2, the provision of formal tract between the bulk provider (the Irrigation De- irrigation and water supply services in India is the partment) and the non-governmental provider virtual exclusive monopoly of government agen- which would define the rights and responsibilities cies, which do not provide services to many--es- (for water and for payments) of both parties. (Such pecially the poor--and provide poor quality a contract between the Delhi Jal Board and the services to those who do have access. As Tushaar private operator of the Sonia Vihar water treat- Shah11 has noted, the large-scale self-provision of ment plant in Delhi, shows this process at work. 11 Tushaar Shah, `Accountable institutions', Background Paper for this Report, 2005. 12 R. Bhatia, R. Kumar, S.Misra, and N. Robins, `Full Cost Pricing of Water--Options and Impacts: A Case Study of the Impacts of Moving to Full Cost Pricing on Freshwater Demand, Recycling and Conservation at the Tata Steel Company, Jamshedpur, India, UNIDO-IIED, 2000, (draft) 43 India's Water Economy Delhi Jal Board is responsible for ensuring the sures--for the first time--on public providers to bulk water supply for the plant, and pays a fine of improve their performance. (This latter factor has, Rs 50,000 a day if the bulk supply is not provided. arguably, been the single biggest advantage of the This has led to the DJB making unusually ener- introduction of the private sector in other coun- getic efforts to ensure provision of bulk water sup- tries. In the US, for example, public water utilities plyfortheplant13and,coincidentallyforthepeople have improved, in large part, as described in a tobeserved.Thatsaid,theseeffortsremainfraught study by the US National Academy of Sciences,17 with the usual problems arising from lack of clar- `because if public utilities did not improve they ityaboutwaterentitlements--onedaytheGovern- would be taken over by the private sector'.) ment of Uttar Pradesh says it is committed to supplying water to Delhi, the next day the situa- Until quite recently, it was assumed that the tion has changed,14 with the fate of water supply to private sector could play a role in the provision of oneoftheworld'slargestcitiesdependingonshort- formal water services in cities and towns, but that term political haggling.) Second, it would require this would never happen in irrigation. Indeed, the a clear contract between provider and those who mix of public and private financing for the provi- receive services (probably Water Users Associa- sion of services does vary widely for different types tions in most irrigation cases). The absence of such of infrastructure (Figure 3.3). contracts is one of the major reasons why the monopoly-providers remain unaccountable to But recent developments have shown that while users,andinformationremainssopoorandopaque. most canal irrigation services will remain in pub- As always, discretion and lack of accountability is lic hands for the foreseeable future, the private the handmaiden to corruption. (In Klitgaard's15 sector can play the same stimulating, competitive famous equation `corruption = monopoly + discre- role that it plays in water supply. Pakistan is con- tion ­ accountability'.) The Vaidyanathan Com- sidering experimenting with `professional man- mission on the Pricing of Irrigation Water16 puts agement' contracts, whereby a canal command this clearly in the Indian context: `... the discre- would be given under management contract to a tionary powers of the bureaucracy ... provided by private sector operator who would operate under the existing system are powerful reasons for the licensetoprovidefarmers'organizationswiththeir functionaries to oppose any change which reduces water entitlements. In other countries--Chile and their power and enhances the role of user in deci- Morocco--for example, the authorities have gone sion-making'. Third, it would require that costs furtherandgivenout`reverseconcessions'whereby are `revealed', as also the distinction between le- private operators operate public irrigation sys- gitimate costs and those--such as massive over- tems, with the `winning operator' being the one staffing--which should not be passed on to users. that requires the smallest subsidy to provide the Fourth, the entry of private and other non-govern- services.Therearemanyadvantagesofsuch delega- mental providers would naturally lead to com- tion to the private sector, and it is an approach parisons between the costs and quality of services which has worked well in other sectors--such as provided by different providers, and thus pres- highways--in India, as described by Nirmal 13 `Delhi seeks Uttaranchal Water', Asian Age, Delhi, 23 April 2005. 14 `Day after, UP turns tap off, on', Hindustan Times, 17 June 2005. 15 Robert Klitgaard, Controlling Corruption, Berkeley and Las Angeles: University of California Press, 1988. 16 Report of the Committee on Pricing of Irrigation Water, Planning Commission, New Delhi, 1992. 17 National Research Council, `Privatization of Water Services in the United States: An Assessment of Issues and Experience', Washington DC, 2002. 44 An Invigorated Indian Water State for the 21st Century Figure 3.3: Typical public and private roles in the provision of infrastructure Public Private Run of the river hydro Multipurpose dams Thermal power generation Solid waste Sewerage/Sanitation Bulk water supply Gas pipelines Bus transport Rural electrification Passenger trains Telecoms Rural water Roads Metro Rail freights Rural roads Urban water supply Canal irrigation Groundwater irrigation Mohanty18andSebastianMorris.19Theseandother fund called `Compra de Esgoto' (or `buying treated `special purpose vehicles' were being explored as sewage'), whereby municipalities are paid for the part of the work of the now-disbanded Task Force production of treated sewage, not for the construc- on Linking Rivers. Important as such innovations tion of treatment plants. The program is working are, it is important to realize that they do not well, and producing much better outputs than the create something out of nothing and that the basic traditional `pay for inputs' approach. financialarithmeticremainsthatrevenuesstillhave Sebastian Morris21has described in detail some to come from either users or taxpayers. of these possibilities and their advantages, and Nirmal Mohanty22 describes how such arrange- Similarly, in the historically-public business of ments have performed well where they have been wastewater treatment, there is much innovation tried in India (for example, with annuity contracts taking place. In relatively advanced developing in the National Highways Development Program). countries, typically less than 25 percent of sewage And Vijay Vyas23 notes that the model of having treatment plants actually function.20 Three years `bulk water provided to private parties who can ago, the Federal Government in Brazil took an retailittoactualusershasworkedwellwithcoope- innovative approach to this problem. It set up a rative institutions'. 18 Mohanty, Background paper for this Report. 19 Morris, Background paper for this Report. 20 World Bank, `The Environment and Development', The World Development Report, Washington DC, 1992. 21 Sebastian Morris, `Pricing and financing', Background Paper for this Report, 2005. 22 Nirmal Mohanty, `Moving to scale', Background Paper for this Report, 2005. 23 V.S. Vyas, `Principled pragmatism, or the political economy of change', Background Paper for this Report, 2005. 45 India's Water Economy As described by Sekhar,24 in recent years there Mexico City,28 to form their own irrigation ser- has been a lot of discussion about `benchmarking' vices companies, thus ensuring that their expertise in irrigation services, worldwide and in India. The is put to work, that resistance to the change is InternationalCommissiononIrrigationandDrain- reduced, and even that this helps retrench a heavily age and others have developed a useful set of prac- over-staffed state? How should auditing of perfor- tical tools for `benchmarking' of irrigation mance and flows of water and money be done so services,25 and the Asian Development Bank has that audits are trusted by all? How does one write produced similarly important material for com- enforceable contracts `up'(between the service paring the performance of water utilities across provider and the government), and `down' (be- Asia.26 The common reaction to these materials tweentheservicedepartmentandtheusers)?Noth- has been for the public utilities to see these as ing like this has been done in India, but some states technical inputs to be considered by the engineers which are working with the World Bank--includ- of the agencies when considering if and how they ing Maharashtra and UP--are now considering might change their modus operandi. such experiments. It is essential that these efforts be given high priority and supported with the nec- Thismissesthecentralvalueofsuchtools,which essary technical assistance and capacity building is to expose monopolies to forms of `comparative support. competition', and in which public discussion and transparency are as important as the technical in- Empowering Users by giving them formation. In some cases, technical benchmarking Clear, Enforceable Water information has been supplemented by `account- Entitlements ability'scorecardsinwhichusersaredirectlyasked their perception of critical service issues. These Chapter 2 argued that the absence of clear, en- have been done by the Public Accountability Cen- forceable water entitlements at all levels is at the terinBangalore.27TheIrrigationDepartment,which root of many of the service shortcomings, water participated in this experiment, saw this initiative use inefficiency, corruption, financial problems, as a threat and refused to cooperate in disseminat- andconflictswhichplaguethewatersectorinIndia. ing the information or in extending the idea. In a definitive legal review of water rights in The stimulation of `competition in the irriga- India, Chattrapati Singh29 provides an elegant tion distribution market' is of high priority. It will overview of the history and politics of water rights require a lot of technical assistance from profes- in India. Singh notes that `... right over water has sionals from countries who have done this (with existed in all ancient laws, including our own Australia being a `best practice' case). Important dharasastras and the Islamic laws ...'. He notes questions include: How does one ensure a level that `the pre-capitalist customary conceptions of playing field? How might workers in the Irriga- group rights have competed with a parallel set of tion Departments be encouraged, as was done in post-capitalist individual rights', and that the vari- 24 A. Sekhar, `The evolution of water development and management: the perspective of the Planning Commission', Background Paper for this Report, 2005. 25 ICID and others benchmarking. 26 Asian Development Bank, Utilities Data Book, Manila, 2003. 27 Public Affairs Centre, `Towards user report cards on irrigation services: Learning from a pilot project in India', Bangalore, December 2002. 28 Manuel Contijoch, personal communication. 29 Chattrapati Singh, `Water Rights in India', Water Law in India. 46 An Invigorated Indian Water State for the 21st Century ous 19th century irrigation and canal acts `impli- tion to the establishment of initial entitlements is citly recognize individual rights in granting that to recognize de facto existing rights, making ad- the government will grant compensation for dam- justments where the sum of existing uses exceeds age done in respect of any right to water'. sustainable use (which is the case in many aqui- fers). As described by Maria Saleth,34 the usual In India, there are excellent cases of clear en- mechanism is for users to apply, within a specified titlements at the international level (the Indus and period, for a formal entitlement or license, based Ganga Treaties). In India, as in all parts of the on proof of their water use over the preceding 5 world where water is scarce, informal water mar- years. Licenses are generally waived for small kets have arisen, in which those who have (im- abstractions for meeting immediate domestic uses. plicit) rights sell water to those who need it. Once established, such entitlements give rise to Movingtowardsaformalwaterentitlementsys- a series of fundamental and healthy changes. First, tem first requires clarifying that water is publicly those requiring additional water (such as high- ownedandthatawaterentitlementisusufructory-- value agriculture and people living in growing it is a right to use, not a right to own water.30 As cities) will frequently be able to meet their needs stated by Chattrapati Singh: `... the only kind of by acquiring the entitlements of those who are rights that can become operative for anyone are using water for low-value purposes. (As described usufructory rights, that is right to use water. The in Box 3.1, there is an important recent example of real question is who has what kind of right to such `trades' in India. In 2003, 70 percent of all use water, and what corresponding duties water used by the city of Chennai was leased from attached to it.' the wells of nearby farmers.) In all cases, including in India, the ownership Second,therearestrongincentivesforlow-value of water resides, and must continue to reside, with water users to voluntarily `forebear' from use, the state. The essence of the change to a formal making reallocation both politically attractive and system is that water entitlements (of individuals practical. For example, in the pioneering water- and communities, including traditional users) are shed management project in Sukhomajri, initial separated from land rights (although land rights, entitlements were distributed to all in the village, along with traditional rights of non-landholders31 giving people a valued new asset. Many of the would logically be the major factor in the poor later chose to cash in their entitlements by assignment of the original rights32), and then en- sellingthemtolandownerswhocouldputthewater joy the same legal certainty as land and other to better use. property rights. Third, the establishment of formal water en- Experience throughout the world33 has shown titlements gives rise to strong pressures for im- that, after lengthy debates about entrenching ex- proving the data required to manage the resource. isting privileges, the only politically-feasible solu- And fourth, this reduces the pressures of a `race to 30 World Bank, Water Resources Strategy 2003, Washington DC. 31 Chattrapati Singh, `Water Rights in India', Water Law in India. 32 Ibid. 33 Maria Saleth, `Water rights and entitlements', Background Paper for this Report, 2005, and John Briscoe, `Managing water as an economic good: Rules for reformers', Water Supply, 15 (4), 1997. 34 Maria Saleth, `Water rights and entitlements', Background Paper for this Report, 2005. 47 India's Water Economy Box 3.1: Incipient water trading around Chennai The city of Chennai suffers from chronic and severe water shortages. In the past it has meant that major industries (fertilizer and chemical factories) have closed for months because of water shortages. And it has meant, and means, that people in this city have learned to live with small amounts of water for a few hours a day. The standard coping strategy--sinking household tubewells--became ineffective as water tables dropped and as salt water from the sea intruded into the aquifer under the city. There were a number of different proposals for augmenting the meager supplies of water to the city (in addition to strenuous efforts to repair leaks, and more generally improve the quality of the utility--Metrowater--and its infrastructure). In 1996, Metrowater and the World Bank did an assessment of the feasible alternatives for supplying additional bulk water to the city. The major sources being considered by the city were the Veeranum Tank (which required the construction of a 250 kilometer pipeline) and desalination, both of which were very expensive, especially relative to the domestic tariff of Rs 2 per cubic meter. But what was striking was that, while the city suffered from water shortages, there were large areas growing paddy just north of the city, using water from the AK aquifer. A detailed prior hydrogeological study indicated that the sustainable yield of the aquifer was very large, and back-of-the-envelope calculations showed that the water would cost the city just a small fraction of the cost of water from any other source, as shown in Figure 3.4. `This is all well and good,' explained the Metrowater officials, but `that water is used by farmers, who are a strong lobby and who will not permit us to take their water' (showing, incidentally that the ubiquitous Indian Figure 3.4: Cost and quantity of raw water from different sources for Chennai 55 50 Recycled sewage Desalination 40 for of sea water meter industry 35 cubic 30 per 25 upeesr, 20 Existing Veeranum water 15 sources Tank of 10 Chembaram- Palar Cost bakkam aquifer 10 Tank AK Krishna Aquifer 5 supply 0 0 1000 2000 mld 0 100 200 300 400 500 600 700 800 900 1000 MCM/year Quantity of raw water 48 An Invigorated Indian Water State for the 21st Century policy of `priority for drinking water then agriculture' was impossible to implement in practice). `But what if you bought the water from the farmers,' they were asked. `No, our farmers are very wedded to growing paddy, they would not be interested in giving up their water ...'. The seed of this idea was, nevertheless, planted, and in 2003, 70 percent of the raw water for the city came from buying water from farmers in the AK aquifer! `Did the farmers react unfavorably as you thought?' Metrowater was asked. `The farmers are not happy,' was the reply. `Why?' `Because all the farmers want to sell their water, and we cannot buy from all of them!' was the reply. There is both good news and bad news in this story. The good news is that the experience unequivocally showed that farmers were quite willing to accept `forbearance payments' to desist from irrigated crops, when they got more money that way than from planting water-guzzling crops like paddy. And in this is one of the very rare cases where a ban on additional wells is actually enforced. However, there is a darker side to the story, too. Eight years ago, Metrowater had funding for a major study which would look both at the hydrogeology (how much water could the aquifer yield on a sustainable basis?) and at institutions (how to set up formal water entitlements which would add up to the sustainable yield and which could be leased or sold to the city?). As is standard for Indian water institutions, Metrowater showed little interest in the second, which has not yet been done. In fact, they did worse--they pumped far more from the wells than could be sustained over time, and did nothing to put in place arrangements to safeguard the aquifer. the bottom', since those who have entitlements theless, the last 10 years have seen enormous have a powerful interest in the sustainability of the progress globally in the use of formal water resource base. This is not to suggest that there is entitlements--with well-functioning systems now unanimity on the concept of water entitlements, working in Australia, Chile, Mexico, Argentina, for some see this as an unhealthy commodification and South Africa. (Box 3.2, from Australia, pro- of public goods. Nor is it meant to imply that it is vides a particularly clear description of the central simple to introduce entitlements-based systems for but quite different roles of water entitlements and a fugitive resource with deep cultural implications pricing in sustainable water management.) It is inadministrativelyweakenvironmentsandinones noteworthy that all such established systems are in which there are millions of small users. None- working, often after initial adjustments, and are BOX 3.2: Water entitlements are the principal mechanism for ensuring efficiency, sustainability, and voluntary reallocation of water Letter to the Editor (Unpublished), The Economist, July 2003: Your special survey on water (`Priceless', 19 July) embodies in its title a prejudice that experience from the real world rarely justifies. You refer specifically to the experience of the Murray-Darling (M-D) basin. In the M-D, water use is constrained to equal the sustainable supply through a complex system of water rights, defined in terms of volumes and security of supply. In this drought year--the worst for more than a century-- many users are receiving less than 16 percent of their `normal' entitlement, and that restriction is enforced entirely through the water rights system--not through pricing mechanisms. 49 India's Water Economy Formally codifying these property rights--in systems that were already well managed and orderly; where customers were educated and accustomed to following rules; and allocation rules were already broadly in place and enforced--took a number of decades. Once this process was complete, it was possible to introduce a system of trading in these codified property rights, allowing managers the flexibility to better manage their enterprises (in some areas last year as much as 80 percent of water delivered was traded). The water rights system also provides the basis for improved environmental management. The parallel system of charging for water services in the M-D is quite separate from the sale and purchases of water rights, and exists to ensure that the income of water supply agencies is adequate to cover ongoing maintenance and projected major capital replacements. Three lessons may be drawn from this successful achievement of sustainable financial management and sustainable resource use: First, the primary means of balancing supply and demand for water resources is definition of water rights consistent with available supply. This is the approach followed in Australia, Israel, the US, and elsewhere. Second, defining water rights is contentious and difficult at the best of times. Where water is already over-allocated so that `tail enders' often get no water, or fresh aquifers are consistently overdrawn to meet current demand, defining and enforcing sustainable water rights is an enormous political and social challenge. This is the case in many water-short developing countries. Third, the primary role of water pricing in irrigation is not to balance supply and demand, but rather to achieve sustainable financing. Implying, as the Economist article does, that pricing water has a central role in achieving the required resource balance is to grossly mislead policymakers facing the challenge of reducing water consumption to a level consistent with long term availability and proper environmental management. The solution inevitably requires stable and well specified access rights to water, institutions with the capacity to manage the water access regime, and appropriate water pricing to ensure the long term operation of the infrastructure. Don Blackmore, Chief Executive, Murray-Darling Basin Commission, Australia. Chris Perry, Professor, Economics of Irrigation, Cranfield University, UK. Box 3.3: The Maharashtra Water Resources Regulatory Authority Act of 200535 As described in the background paper by Maria Saleth: `The creation of water entitlements system is at the heart of the MWRRA bill. The bill clarifies the legal issues and contemplates the establishment of the institutional arrangements needed for the distribution, enforcement, and monitoring of the entitlements. While the establish- ment of individual and transferable water entitlements is the long term strategy, the bill adopts a politically and administratively pragmatic intermediate strategy of establishing bulk water entitlements for entities such as water user organizations, urban and rural water supply agencies, and industries. Notably, water entitlements are not ownership rights but only usufructory rights defined in volumetric sense. Such entitlements cover both surface and sub-surface water sources. The water quota implied in the water entitlements can be transferred, sold, and bartered either in part or in full. Water entitlements also carry with them the correlated duties including payments, efficientuse,andqualitymaintenance.Thebulkwaterentitlementswillbedefinedandimplementedwithinabasin and sub-basin framework. While the MWRRA will allocate bulk rights, the basin organizations and user organizations at lower level will have responsibility in the day-to-day monitoring and enforcement. Adequate provisions are also made for resolving conflicts and grievances both at the local and regional levels.' 35 Maria Saleth, `Water rights and entitlements', Background Paper for this Report, 2005. 50 An Invigorated Indian Water State for the 21st Century performing well. In none of the countries that have wars'36 over water. This is an issue on which the adopted such systems is there any thought to re- Union Government should be taking aggressive turning to the previous government-managed allo- leadership,since,inthewordsofChattrapatiSingh cation procedures. `to make the state accountable and make water use equitable for all, a number of amendments In India, there are pressures at all levels for are required in the Easement Act, the Irrigation clarity and formalization of entitlements to use an laws, Panchayat and Municipal Corporation laws, ever-scarcer resource. This ranges from the local Water Supply Acts and other laws related to level (villagers who have stored rainwater in water'.37 Far from doing this, the position of the Rajasthan,anddownstreamirrigatorsintheVaigai Union Government is to actively discourage public Basin, for instance, as described in chapter 2) to discussion of water entitlements, `because it is theinternationallevel(betweenIndiaanditsneigh- too sensitive'. bors, for example). One of the great transformations in India over After years of academic discussion of water the past 15 years is that there are large areas of the entitlements, there has recently been an important economy in which the response to new ideas is no development, since the state of Maharashtra has, longer `no, that will not work in India' and is after years of study and extensive consultations rather`whynot?'.Butinthegovernment-dominated with community and all political parties, passed water sector, this change of perspective is partial (in April 2005) the Maharashtra Water Resources at best and most new ideas are rejected as `this is Regulatory Authority Act, the heart of which is the okay for advanced economies, but cannot be done creation and management of a water entitlement here'. In this context, it is instructive to note that system (Box 3.3). Chinaisnowcommittedtoputtinginplaceasystem of water entitlements,38 and to see that in The issue of water entitlements is a sensitive neighboringPakistanPunjababetter-definedwater and controversial one, in India and elsewhere. The entitlements system has been in place since 1991 at experiencedIndianconsultantswhocontributedto both the provincial and canal command levels, this report--several of whom served or serve in and that, as described in Box 3.4, the federal and highpositionsintheUnionGovernment--consider provincial governments are moving to make the this issue to be central, and one that has to be implementation of this water entitlement system addressed and resolved. And every discussion with more transparent and verified. users comes back to the pervasive question of lack of clarity of who has the right to use what water. One of the many virtues of an entitlement sys- tem is that, once started, it induces a strong de- There is no issue more central for the effective mand from users for better measurement, managementofwaterinIndia,andmoreimportant transparency, regulation, and information--issues in reducing what the Finance Minister has which are an integral part of `the water instrument described as the `growing number of little civil package' and to which we now turn our attention. 36 `Water Ministry seeks World Bank funding for reforms', The Hindu, 13 January 2005. 37 Chattrapati Singh, `Water Rights in India', Water Law in India. 38 Wang Shucheng, Minister of Water Resources, People's Republic of China, `Promote Sustainable Social and Economic Development with Sustainable Utilization of Water Resources', Address at the Ministerial Conference of the 3rd World Water Forum, 22 March 2003, Kyoto. 51 India's Water Economy Box 3.4: Towards a transparent water entitlement regime in Punjab, Pakistan The Indus Waters Treaty shows very clearly that a well-defined set of entitlements, which are monitored by both stakeholders, and which have clear enforcement mechanisms, can provide a high (not perfect) level of trust, even when the parties involved have literally gone to war several times. The IWT is a great example of how `good fences make good neighbors'. Within Pakistan the issue of provincial water entitlements is, as in India, a controversial issue. In 1991, Pakistan's four provinces concluded a `Water Accord' which allocates the waters of the Indus Basin, and defines the way in which additional assured water will be shared. There have been important deficiencies in the trans- parency with which the Accord has been implemented, deficiencies which Pakistan is now moving to overcome. A very important element of the Accord is that it formalized the entitlements at the intra-provincial level. Consider the case of Punjab as an example. The allocations to the 24 canal commands are specified for 10-daily periods in both the kharif and rabi seasons in the annex to the Accord, based on the historic allocations for a five-year period in the late 1970s (Figure 3.5).39The administrators of the allocation system in Punjab apparently respect these, for the most part. The Irrigation Department keeps detailed records of the entitlements for each season, of the amounts of water actually delivered, and of the `balances' for each canal command. (For example, as can be seen in the first few entries for the current season, a number of canal commands did not wish to receive their full shares, but they get `credit' for this, and can use these saved amounts later in the season.) This system is very close to something that would be ideal. The one big missing piece is the transparent, verified, implemen- tation of the allocations, a direction in which Punjab is now committed to move. Table 3.5: Pakistan Punjab canal entitlements from the 1991 Water Accord 10-day seasonal system wise adjusted allocations (excluding flood flows & future storages) Punjab-Kharif Period F.I.C. MR CBOC S.Y.C S.V.C Taimmu Panjnao Thal Taunsa Dabc Greater Total INT (Upper) (Lower) Thal Noo% Cs APR 1. 24.2 0.1 1.8 8.3 3.9 2.9 4.3 6.0 4.9 1.3 2.6 60.3 2. 24.7 0.3 1.8 10.8 3.7 3.4 5.1 6.4 4.3 0.18 3.4 64.7 3. 28.1 1.1 2.0 13.3 5.5 5.5 7.3 6.4 7.9 0.5 4.9 82.5 MAY 1. 30.1 1.3 2.1 16.0 8.0 5.9 7.6 6.6 10.0 0.7 5.4 93.7 2. 30.8 2.0 2.1 17.2 8.7 6.1 9.0 6.8 11.5 1.1 5.5 100.8 3. 31.6 2.4 2.2 18.1 9.2 6.3 9.5 6.8 11.9 1.3 5.5 104.8 JUN 1. 32.3 2.6 2.3 18.5 9.4 6.6 10.5 6.8 13.0 1.7 504 109.1 2. 33.2 3.6 2.2 18.7 9.7 6.7 10.4 6.9 13.5 1.8 5.5 112.2 3. 34.0 4.0 2.2 19.2 9.6 6.7 10.7 6.7 14.0 1.8 5.7 114.6 JUL 1. 32.7 5.4 2.2 19.2 9.9 6.6 10.4 6.6 14.3 1.7 5.8 114.8 2. 29.6 5.0 2.0 17.9 8.7 5.7 0.0 6.3 12.5 1.7 9.1 104.4 3. 27.8 6.1 1.8 16.8 8.7 5.1 9.6 5.8 11.8 1.8 4.7 100.0 AUG 1. 28.2 5.8 1.7 17.4 8.2 5.3 9.6 6.0 11.5 1.8 4.8 100.3 2. 31.5 6.1 1.8 19.3 9.3 6.3 10.6 6.3 11.3 1.8 5.4 109.7 3. 34.6 4.9 2.0 20.6 10.1 6.8 11.1 6.6 13.9 1.8 5.9 118.3 SEP 1 33.9 4.4 2.1 21.0 10.0 6.8 11.1 6.8 14.4 1.8 5.9 118.2 2. 33.9 3.7 2.1 20.6 9.8 6.8 10.8 6.8 14.0 1.8 5.8 116.1 3. 33.1 2.3 2.2 19.6 9.9 6.9 11.0 6.8 13.0 1.8 5.5 112.0 Total Maf 11.18 1.24 0.74 6.31 3.07 2.15 3.40 2.37 4.19 0.55 1.87 37.07 Source: Government of Pakistan, 1991. 39 Indus River System Authority, `Apportionment of Waters of Indus River System between the Provinces of Pakistan: Agreement 1991 (A chronological expose)', undated. 52 An Invigorated Indian Water State for the 21st Century Ending the Culture of Secrecy and fairs is illustrated by the most highly-discussed Making Transparency the Rule water issue in recent years in India--that of `link- ing rivers'. The NWDA had been studying pos- A central feature of modern water management in sible inter-basin transfers since 1984. Those who a liberalized economy and democratic environ- championed the idea, and the many who had res- ment is that of openness and transparency. In most ervations, quite reasonably requested to be shown countriesnowallrelevantinformation--hydrologi- the data, the analysis, and the plans. Despite 20 cal, performance, planning--is available publicly, years of study, none of the data were made avail- on the web and in real time. Representative web able. This denial of information naturally leads to sitesshowthisclearly:TVAintheUS(www.tva.gov), suspicion about `secret plans', and about incom- the Murray-Darling Basin Commission in Austra- petence and poor performance hiding behind the lia (www.mdbc.gov.au), the Ministry of Water and mantra of `national security'. Forestry in South Africa (www.dwaf.gov.za), the National Water Agency in Brazil Recently, there has been some modest progress. (www.ana.gov.br), to cite just a few examples. Now the `linking rivers' web site does have the feasibility study for one of the proposed links (the Despite being one of the world's IT centers (and Ken-Betwa link) online (www.riverlinks.nic.in). thus having immense capacity), India has been Under the National Hydrology Project `... the slow and uneven in adapting to this changed infor- Hydrology Information System data is currently mation environment. It remains very difficult for generally accessible to the user community, ex- a user to even find out what data might be avail- cept in situations where data is considered sensi- able--the web site for the Ministry of Water Re- tive and higher-level authorization is required.'41 sources (http://wrmin.nic.in) does not provide any `Generally available' is a relative term--a Google disaggregated or real-time hydrologic informa- search turns up no reference to these data on the tion. After much diligent enquiry, a persistent and web, and requests have to be made in writing to connected user is directed to a web site set up by the government. the Central Water Commission under the World Bank-funded National Hydrology Project In other areas, Indian practice is changing--as (www.india-water.com). And then, even a user illustrated by Indian Railways. To someone famil- with a high-speed connection and moderate skills, iar with the drama of getting tickets on Indian finds it impossible to located what data are actu- Railways in the past, the current system was un- ally available and how to get them. The situation imaginable. Now reservations can be made easily for state governments is the same, even for the online, in which tickets are delivered to Delhi ad- leading IT states (http://waterresources.kar.nic.in, dresses within 12 hours, and in which electronic and http://www.aponline.gov.in). refunds take place in a week. If other democratic countries (who also have neighbors with whom In India, the `hydrologic data secrecy' culture they share water, and several of whom have fed- has changed slowly in recent decades, even by eral structures with complex inter-state water standards of the subcontinent.40 The state of af- matters) can make all water data--including hy- 40 An interesting illustration of this relates to a Ph.D. thesis done on the process of negotiating the Indus Water Treaty. Pakistan gave the researcher access to their archives; India refused such permission. Undula Alam, `Water Rationality: Mediating the Indus Waters Treaty', Ph.D. dissertation, Durham University, 1998. 41 Implementation Completion Review, National Hydrology Project, World Bank, 2004. 53 India's Water Economy drological data, reservoir status and operation, service sector will increasingly be characterized water deliveries, budgets, costs, agency perfor- by contracts between (public and private) provid- mance, etc.--easily accessible in a user-friendly ers on the one hand, and users on the other. These format on the web in real time, why can this not be contracts will describe the rights and responsibili- done in India? It is obviously not a question of ties of the two parties, in terms of both water and capability, but one of will and attitude. There is no money. A key requirement, therefore, is that gov- doubt that this change would stimulate a chain ernment develop regulatory capacity for balanc- reaction of accountability, participation, and ing the disparate interests of the providers, the demand for more and better data which would users, and the government itself (as shown in Fig- transform the culture of water management in the ure 3.6). There is now growing experience in India country. with independent regulation (in the telecommuni- cations and electricity sectors). The Maharashtra Finally, there is a powerful feedback loop be- Water Resources Regulatory Authority is an im- tween data availability, quality, and support for portant first step towards building such capacity. data collection activities. Global experience shows that hydrology data systems will be maintained It will take some years and a process of trial and only when there are users who can get easy access error to find the right forms for such regulation, to the information, who find the data they need in especially in a sector in which the notion of con- a user-friendly way, and who then become pres- tracts, competition, and transparency have been sure groups on government to commit the neces- almost entirely absent. It is critical to take a learn- sary funding to the data collection activities. ing approach to this, and not see the first signs of Making this change is a central objective of the difficulties as a reason to go back to `the old ways'. follow-onWorldBank-supportedNationalHydrol- ogy Project. On the second great challenge--groundwater management--the issue of regulation is also very Introducing Incentive-based, important. Global experience shows that moving Participatory Regulation of Services from an anarchic groundwater management sys- and Water Resources tem to one where there is a balance between ab- stractionsandrechargeisaverydifficultone,which This report has made clear that in the future there is less than perfect even in very good governance will be two primary challenges facing the Indian environments. Experience also shows that com- water sector--first, to improve the quality and mand-and-control type of approaches--`prohibit- coverage of formal public water supply and irriga- ingmoreabstractions'--simplydonotwork,again tion services, and second, to regulate the use of even in relatively easy environments.42 The essen- groundwater. In both cases, the government has to tialingredientsof`theleastunsuccessfulapproach' play a significantly different role from that which are clear.43 Groundwater management requires: a it currently plays. On the provider side the govern- legal framework which constrains the rights of ment has to corporatize the government-run ser- people to pump as much water as they wish from vice providers, and allow the entry of private and their land; the separation of land rights and water cooperative service providers. This means that the entitlements, with the latter usually based on his- 42 Stephen E. White and David E. Kromm, `Local groundwater management effectiveness in the Colorado and Kansas Ogallala Region', Natural Resources Journal, vol. 35, 1995. 43 Karin Kemper and John Briscoe, Mexico: Policy Options for Aquifer Stabilization, World Bank, 1999. 54 An Invigorated Indian Water State for the 21st Century Figure 3.6: Participants in modern Putting the Sector on a Sound regulation Financial Footing As described in chapter 2, the `water sector' in Indiaisinseverefinancialdistress.NirmalMohanty has aptly described the prevailing model as `Build- Neglect-Rebuild'. There is an enormous liability from deferred maintenance. And the stock is such that even, once rehabilitated, the annual require- ment for maintenance and rehabilitation would be about equal to all public funds currently invested. But then there are also major new needs--for pro- viding services to those who do not have services, for meeting the needs of a growing population and economy, and for the massive investments needed to meet the `debt to the aquatic environment'. torical use; strong government presence to give legal backing for the development of participatory In addressing this issue, there are some `red aquifer management associations, and to provide herrings' which have to be addressed. First, al- the decision-support systems which enable aquifer though the massive distortions in the pricing of associations to monitor their resource; and, above water services are justified `in the name of the all, clarity that the primary responsibility for the poor', it is, paradoxically, the poor who are the maintenance of the resource on which they depend major victims of these distortions. And, as pointed is with those who have entitlements to use water out by Vaidyanathan,45it was `in the era of redis- from a particular aquifer. tribution(from1964onwards)thatpricesbeganto get out of line with costs'. There are many difficult technical details to be worked out--for example, the tradeoff between Rajiv Gandhi famously said that no more than hydrological reality (which would suggest large 15 percent of the benefits of public distribution aquifer associations in the many extensive aqui- programs actually reached the beneficiaries, a fig- fers) and the transactions costs of including large ure which is believed to have changed little. In the numbersofsmallfarmers(whicharguesforsmaller case of water subsidies this is probably true, too, associations). Experience in other very large aqui- because the subsidies go where the water goes, and fers (such as the Ogallala aquifer which runs from this is to those who can manipulate the system and Minnesota to Texas and in Mexico) shows that it get access. Those without power--the poor--are is perfectly practical to chop a single aquifer up rationed out of the system. Far more equitable, as into a large number of `semi-independent' aquifers described by Sebastian Morris,46 would be a sys- which are run by a reasonable number of users.44 tem which provides subsidies to people, not pro- In this case, it is very important that the best does viders, along the lines of the `water stamps' not become the enemy of the good! program in Chile. In this program, the poor are 44 Stephen E. White and David E. Kromm, `Local groundwater management effectiveness in the Colorado and Kansas Ogallala Region', Natural Resources Journal, vol. 35, 1995. 45 A. Vaidyanathan, `Managing Water', Economic and Political Weekly, Mumbai, January 2004. 46 Sebastian Morris, `Pricing and financing', Background Paper for this Report, 2005. 55 India's Water Economy givenvouchersforthepurchaseofwater,forwhich · `thediscretionarypowersofthebureaucracy all pay the tariff required to cover operation, main- and the attendant opportunities for "rent- tenance, and capital costs. seeking behavior" provided by the existing system are powerful reasons for the func- Thedisconnectbetweenpricesandcostsinduces tionaries to oppose any change which re- very large overall economic costs. As pointed out duces their power ...' by Sebastian Morris,47 `price based subsidization has the major infirmity that it robs prices of their So what can be done to start the arduous but crucial role ... of informing investment and input central process of arresting the rot and putting the choices and the direction of technical change'. water sector in India back on track? Morris48 also points out that `arbitrage of the dif- ference between tariffs and willingness to pay' is First, is a realization that there is no such thing the fundamental source of the endemic corruption as free lunch. There are only two sources of rev- in these services. enue to pay for the (rising) costs of these services-- taxesorusercharges.Ifgovernmentsarenotwilling Again, there is a massive and growing gulf be- to raise either of these then, as emphasized by tween principles, policy statements, and practice. Rakesh Mohan,49 there is simply no way forward. The 1991 report of the Vaidyanathan Commission For the foreseeable future, there will be need to on Irrigation Pricing lays out most of the critical budget support (taxpayers' money) for irrigation. issues: But it is also obvious that user charges simply must · `much of the information which is crucial be increased, for a host of reasons. That said, it is for a proper assessment of the performance clear that starting with the idea of increasing of irrigation systems is hardly even com- charges (for bad services provided by corrupt and piled regularly, much less analyzed'; inefficient agencies) will quite reasonably be re- sisted. For this reason, the idea of bringing tariffs · `the all-round deterioration in the financial into balance with costs must be the third leg of a performance of irrigation projects is stark triangle in which the first two legs must be `im- and nearly universal'; prove services first', and `provide those services in · `itisdifficulttoacceptthecaseforsubsidizing an efficient and accountable manner'. `You will such a user-oriented (sector) as irrigation'; pay for the costs of those services' can come only after the first two have been clearly done and are · `the government is not in a position to sus- so perceived by users. Figure 3.7 gives an interest- tain subsidies on irrigation on the present ing example of how this was done in an urban scale'; water project in Africa. Providing subsidies for the · `it is not possible to determine how much of `transition costs' for moving a low-level to a high- the implicit subsidy is attributable to ineffi- level equilibrium (the triangle in the figure) is what ciency and how much really benefits farm- the UnionGovernment,theWorldBank,andother ers because of the underpricing of water'; agencies should be supporting. 47 Ibid. 48 Ibid. 49 Rakesh Mohan, then Deputy Governor of the Reserve Bank of India, at the Mumbai RBI Conference on Infrastructure, 2004. 56 An Invigorated Indian Water State for the 21st Century A particular challenge in India is that house- rely on the piped distribution system. At the very holds have made such large personal investments least, this requires that information on improve- in `coping with poor public services'. This has not ments, and the savings this brings in the short run worked badly--a middle-class family in any of the (lower electricity costs) and medium run (no re- major cities actually gets water 24 hours a day, placement of equipment for coping) needs to be even though the water from the utility comes for made clear and communicated effectively. It also just an hour or two. Middle-class families have means that the time span for bringing tariffs in line done this by making large investments to cope. But with costs needs to be tailored to this reality. the existence of these `sunk costs' poses a particu- lar challenge, because these users would actually An additional factor that needs to be factored benefit little in the short run from more reliable into the design of tariff reform is the fact that the supplies. This means that, again in the short run, status quo is quite satisfactory to many in the pub- they would oppose higher user charges, even if lic agencies who profit from the discretion which service quality improved (as is evident in Delhi in they exercise. This is (see the last quote from the 2005). They would only become supporters in the Vaidyanathan Commission) a central, perhaps the mediumrunwhentheyunderstandthattheydonot central challenge for a progressive government. need to replace their assets (their pump, overhead As David Mosse notes in his book on water man- tanks, and water filters) because they could now agement in Tamil Nadu:50 `Only the rare engineer supports PIM. Most consider it a fad that should wear itself out in time ... with fear for the loss of gratuitous incomes should farm- Figure 3.7: From low-level to high-level ersbegintofunctionindependent equilibrium in Conakry of the irrigation department.' Theanti-reformrhetoricof`in- creased tariffs will hurt the poor' and `this will cost jobs' have been honed to a fine art, and have the strong support of some political parties. There is no easy answer to this issue, but it is clear what some of the elements that need to be addressed are. On the `carrot' side, there are creative ways of providing new opportunities for those in the public sector agen- cies to participate in a new ser- vice arrangement. As was done in a successful process in Mexico City, public workers were given training, capital, and preferential 50 David Mosse, The Rule of Water: Statecraft, Ecology, and Collective Action in South India, Oxford University Press, New Delhi, 2003. 57 India's Water Economy access in setting up firms who could compete for 40 years back, but it is not well adapted to the contracts which were handed over to the private new challenges. sector. On the `stick' side, the government itself is complicit in, and even the architect of the present The major reason why this is so is, of course, the arrangement, and is unlikely to be an effective set of incentives which stultify individuals in the change agent. What is needed, as described ear- publicwaterorganizationsofIndiatoday.ThePlan- lier, is to bring as much as possible `into the light ningCommission53hasdescribedsomeofthethings of day'--Who has entitlements to the water? What that need to change: `The approach of the govern- is the contract between the provider and the user? ment is normally hierarchical rather than func- Whatarethepenaltiesfornon-performance?What tional,andthelackofdueimportancetoprofessional is the performance of the different providers? and functional aspects tends to blur responsibili- ties and inhibits specialization. Inter-disciplinary Finally, it is important to note that, as Sebastian teamwork, which is so essential in the water sector Morris51 has aptly noted: `the issues of pricing, is absent. The links between academic institutions subsidies,waterrights,andfinancing(andhemight andwatersectorpersonnelarepoor,withtheresult have added inefficiency, lack of accountability, that the academicians are kept away from impor- and corruption) are deeply interlinked'. An illus- tant practical issues and problems, and water tration of this is that, as described earlier, the lack managers are not exposed to latest technologies.' of definition of entitlement to Krishna River water To this list could be added another stark contrast has led to ill-advised investments in Maharashtra with many other developing countries. The water which contribute to about 18 percent of the fiscal professionals of India, with few exceptions, have deficit of the state.52 had no protracted exposure to modern water man- Investing Heavily in Human agementpracticesinothercountries,eitherthrough Resource Development education,post-graduatetraining,workexperience, or even study tours. The weltanschauung of the Indiahasalongandjustly-proudtraditionofbuild- Indian water sector is parochial. ing and managing some of the largest and most complexhydraulicengineeringworksoftheworld. Unquestionably, the change in the way in which AndIndia,justifiably,takesgreatprideintheworld government water organizations function is at the standing of some of its institutions of technical heart of the needed water reforms in India. And as education. these organizations evolve, they will need quite different types of water professionals. Vijay Vyas54 Yet the fact is that, compared with all devel- notes: `Till recently water management was iden- oped and middle-income countries, India has tified with irrigation management, and within not developed the human resources necessary irrigation department, irrigation engineers domi- to meet the water needs of a growing and chang- nated in controlling and supervising water re- ing country. The mindset of the state bureau- sources. Even now, the role of other disciplines is cracies is one that may have been appropriate not fully appreciated.' 51 Sebastian Morris, `Pricing and financing', Background Paper for this Report, 2005. 52 Nirmal Mohanty, `Moving to scale', Background Paper for this Report, 2005. 53 A. Sekhar, `The evolution of water development and management: the perspective of the Planning Commission', Background Paper for this Report, 2005. 54 V.S. Vyas, `Principled pragmatism, or the political economy of change', Background Paper for this Report, 2005. 58 An Invigorated Indian Water State for the 21st Century As with most other statements on a country so India remains a country in which there are se- complex and large, this is not exactly true. In the rious issues about how affected people--many of 1970s, there was a substantial Ford Foundation- whom are from Scheduled Tribes--are dealt with funded program managed by the Harvard Water in major infrastructure projects. There has been Program and involving Indian water professionals considerable progress, especially by modernizing from some of the elite institutions (such as the hydropower companies, but there is still a long CWC) and universities (including Roorkee, the way to go before practice in India can compare Delhi University Institute for Economic Growth, favorably to practice in, say, China, where re- and the IITs). A substantial and impressive cadre settlement is considered to be `a development op- of multi-disciplinary Indian professionals was portunity' rather than a cost.56 trained and returned to India. They describe, 30 yearslater,55agreatpersonalexperiencethatsome- Much of the major water infrastructure which how died upon their return. The factors appear to will be built in India in coming decades includes be complex. There are `pull' factors, including the hydropower. Hydropower projects generate large spectacular opportunities in IT which most of the best students cannot resist. And there are `push' Figure 3.8: How social and economic factors, because bright students do not want to be performance of dams has condemned to a lifetime stuck in antiquated gov- improved globally ernment institutions. 100 Anticipating ecosystem impacts Whatever the cause, the bottom line is that a 80 Information disclosure central part of any reform program would be a Participation by affected people massive investment in improving the quality and 60 % diversity of professionals engaged in the water in 40 sector. 20 Ensuring that Local People are the First Beneficiaries of Major Water 0 Projects <1950 1950s 1960s 1970s 1980s 1990s Source: World Commission on Dams, 2000. The era in which major water infrastructure was built in India was one in which the hegemonic idea was that the adverse effects on affected people was revenues, and in most cases the number of people a price that had to be paid for the progress of the to be resettled by hydropower projects in India majority. In the intervening decades this tradeoff will be relatively small (Figure 2.29). It is there- has proved to be false, on both ethical and practi- fore a doable task, with few difficult tradeoffs, to cal grounds. As shown by World Commission on ensure that local people are major beneficiaries of Dams(Figure3.8),therehavebeenmajorimprove- such projects. This is not only ethically the right ments in the ways in which affected people partici- thing to do, but it means that costly delays in pate in and are affected by major water projects. project implementation can be avoided. 55Conversations with Professor Chaturvedi of IIT Delhi, Professor Ramaseshan of IIT Kanpur, and Professor Bhatia of the Institute of Economic Growth. 56Operations Evaluations Department, Recent experiences with involuntary resettlement: Overview, Washington DC, 1998. 59 India's Water Economy This means that developers need to see the eco- challenges. Category One are issues of environ- nomic and social development of local communi- mental degradation that would improve dramati- ties to be as important as the technical aspects. cally if water were used and managed more Dam developers in India need to recruit and value effectively and efficiently; and Category Two are excellent community developers, just as they re- issues that require supplementary actions and re- cruit and value excellent engineers. sources. There are important issues of responsibility Twomessagescomeoutofthebackgroundpaper which need to be worked out between project de- on the environment by George Varughese.57 First, velopers and state governments (to whom non- if the recommendations discussed in earlier chap- statedeveloperspaymassiveroyaltiesof12percent ters of this report--water entitlements, water pric- of the gross value of the power generated). Prior to ing, accountable institutions, effective projectapproval,developersandstategovernments regulation--were implemented, the majority of must agree on who will finance and manage local water-related environmental problems in India development activities so that affected people be- would be ameliorated to a significant degree. Spe- come the first beneficiaries of such projects. cifically, this would mean an end to wasteful water use in both agriculture and urban areas, it would The bottom line is that these new hydropower mean reductions in mining of aquifers and the projects should be a big boost to local economies, consequent quality problems. It would also mean and that the aspiration of developers and host gov- shifting the focus of government attention away ernments should be to make such projects so at- from the traditional areas (of constructing and op- tractive to local people that communities compete erating water supply infrastructure) and `creating with each other to become `host communities' for fiscal space' for investing in environmental qual- such projects. ity and other public goods. Making the Environment a High Priority Figure 3.9: The `Kuznets Curve' for As demonstrated in this report, the pri- environmental quality mary water challenges facing the Union and state governments include: to dra- matically improve the quality of public irrigation and water supply services; to modernizethesystemsforallocatingand monitoring surface water and ground- water resources, and to improve the quality of the poor and deteriorating water-related environment. It is instructive to differentiate two Source: World Bank, 1992. different water-related environmental 57 George Varughese, `Water and environmental sustainability', Background Paper for this Report, 2005. 60 An Invigorated Indian Water State for the 21st Century An important area where mindsets have to environmentalquality.Asillustratedschematically change is that of instream flows. Any water flow- in Figure 3.9, in the early phases of development ing out of a river basin is still seen by many water there is typically a sharp decline in environmental engineers as `wastages'. But this is changing, with quality. As economic growth is sustained, how- the Government of Andhra Pradesh, for example, ever, societies place a higher value on environ- recognizingthatsomeflowintotheGodavariDelta mental quality, and they have more resources to is necessary for the preservation of the coastal spend on the environment. For many measures of zone and the fisheries on which substantial num- environmental quality there is then a slow but bers of people depend.58 steady climb out of the environmental abyss. The example of the Yamuna (in chapter 2) suggests that Global comparisons show that there is some- parts of India and for some measures of environ- thing like a `Kuznets Curve' for many indices of mental quality, the long climb is starting. 58 World Bank Water Resources Strategy, 2003. 61 India's Water Economy CHAPTER4 PRINCIPLED PRAGMATISM AND `RULES FOR REFORMERS' This report (and many other documents) make it tionwells,andAndhraPradesh'smorerecentland, clear that India has to make major changes in the water, and trees act.'; way in which it develops and manages its water resources, and that this process has to start soon. `[d] a bold reformist measure is introduced and enforced to produce desired outcomes. Examples Tushaar Shah1 has described several types of of this are rare; Chennai's groundwater law, which reform initiatives in India, all of which have `failed has begun to bite, is an example. Another is West to produce broad and deep changes'. They include: Bengal's enforcement of permits for new electri- city connections for irrigation wells. In Chennai's `[a] a reformist measure is proposed, discussed, case, extreme water scarcity has likely created and shelved. The draft Groundwater Regulation popular support for strong measures. In West bill is the case in point. It is tossing around for 35 Bengal's case, restrictions began to be enforced years; yet has found few takers because few politi- long before well irrigators organized into a power- cal leaders are willing to absorb the transaction ful political force.'; costs (including political costs) of seriously imple- menting it.'; `[e] finally, there are examples of reform ideas that refuse to die despite recurring evidence of `[b] a bold reformist measure is proposed, dis- their failure to deliver. Participatory Irrigation cussed, and diluted by removing all difficult-to- Management is one such; India has been trying implement elements, resulting in paper reform. farmer management for irrigation for nearly 150 India's Water Policy announcements of 1987 as years. While there are islands of excellence, there well as 2002 are good examples. Nothing in the isnoevidenceofWUAshavingproducedsustained way India's water sector functions has changed as performance improvements on a significant scale. a result of these.'; Similar communitarian models have dominated for decades institutional discourse in culture and `[c] a bold reformist measure is proposed, dis- capturefishery,watershedmanagement,and water cussed, and launched but cold-stored in the face of supplysystems.Countlessstudiesshowthatfisher- popular opposition or insurmountable difficulties men cooperatives are almost always fronts for in implementation. Efforts by many Chief Minis- contractors, that watershed associations seldom ters to meter electricity supply to tubewell irriga- maintain structures after funding runs out.' tion during recent years is a good example. So are Maharashtra's 10-year-old law to protect drinking Review of similar water reform efforts through- water wells from groundwater overdraft by irriga- out the world suggests that the guiding mantra 1 Tushaar Shah, `Accountable institutions', Background Paper for this Report, 2005. 62 Principled Pragmatism and `Rules for Reformers' must be `principled pragmatism'.2 `Principled', from reforms in many other areas of public service because principles matter a lot. And `pragmatic', provision. What it does mean is that there has to becauseprinciplescanonlybetranslatedintoprac- be a particular emphasis on public discussion and tice by following a step-by-step, persistent process on addressing the many concerns which people which `fits' with the local culture, people, and legitimately have about water. environment. This chapter reflects on some of the lessons of `principled pragmatism' in water reform Rule #2: Initiate Reform where there processeselsewhere,3 andfromreformprocessesin is a Powerful Need and other sectors in India. They are presented in the Demonstrated Demand for Change form of `rules' (really suggestions) which a reform- ing government might keep in mind. Habits of water management and use, and the organizationsandpracticesinvolved,haveevolved Rule #1: Water is Different over time and have, at some time, `fitted' the par- ticular prevalent economic, social, and environ- There is much that aspiring water reformers can mental circumstances. Change is not easy or learnfromreformsinothersectors--suchaspower, welcomed, unless there is a very strong need for it. telecommunications, and transport. But it is also Abstract and idealized statements (such as `river true that water is, and is perceived to be, different basin management' or `integrated water resources from these other `created' sectors in many funda- management', the mantra of the international mental ways. The resource economist Kenneth community in recent years) have some resonance Boulding's ode to water4 captures many of these with professionals, but do not constitute a reason distinctions very well. for organizations and people to change the way water is managed. Water is far from a simple commodity Water's a sociological oddity Because changes are difficult and often wrench- Water's a pasture for science to forage in ing, they will be undertaken only when there is a Water's a mark of our dubious origin powerful need and a demonstrated demand for Water's a link with a distant futurity change. Global experience5 shows that the impe- Water's a symbol of ritual purity tus for change is usually either a serious break- Water is politics, water's religion down in services, an environmental failure which Water is just about anyone's pigeon affects large numbers of people, or a fiscal crisis Water if frightening, water's endearing which makes the status quo untenable. Water's a lot more than mere engineering Water is tragical, water is comical Today, in India, there are a number of settings Water is far from the Pure Economical. where there is a powerful need and demonstrated demand for change, and which are, accordingly, This specialness does not mean that reform is the areas where reformers should put their initial impossible, or that water reformers cannot learn efforts. These include: 2 World Bank, Water Resources Sector Strategy, Washington DC, 2003. 3 John Briscoe, `Managing water as an economic good: Rules for reformers', Water Supply 15 (4), 1997, supplemented by the observations of many people and politicians who have led reform processes around the world. Reference: Hague session. 4 Kenneth Boulding, `The Economist and the Engineer', Economics and Public Policy in Water Resources Devel- opment, ed. S.C. Smith and E.N. Castle, Iowa State University Press, 1964, pp. 82­92. 5 John Briscoe, `Managing water as an economic good: Rules for reformers', Water Supply 15 (4), 1997. 63 India's Water Economy · Cities, where individual households are fac- · Fiscal constraints will, sooner or later, con- ing greater and greater difficulties in mak- stitute a heavy pressure to improve the fi- ing their `coping strategies' work, because nancialperformanceofpublicirrigationand the groundwater option is no longer ten- water supply systems, both of which are able. The case of Chennai (described in Box major sources of red ink. This will force 3.1) is such a case, where the political pres- cities to look for lower-cost sources of sup- sures are great and the state government is ply--calculations by the Hyderabad Metro being forced to confront the systemic issues. Water Supply and Sewerage Board, for in- In some cases these responses are of the `sil- stance, show that the city could buy water ver bullet' variety (for example, hoping that from farmers in the Singur area at less than institutional changes can be avoided by get- half of what it would cost to bring water ting someone else--Union Government, as from Nagarjunasagar on the river Krishna. always--to pay for the very costly desalina- · Industries in areas where water availability tion and thus resolve the problem6). But it is is a serious constraint. It is a commonplace increasingly clear that Chennai has to seek in India that the availability and quality of a range of new sources of supply, as well as infrastructure is one of the major threats to greatly improve the functioning of the dis- the continued health of the Indian economy. tribution system within the city. It is, there- InthewordsoftheFinanceMinister:`India's fore, not surprising that Chennai emerges in most glaring deficit is its infrastructure defi- several places in this report--in establish- cit.'8 Until recently, `infrastructure' meant ing incipient `water markets' for the volun- ports, railways, roads, and electricity. Now tary transfer of water from farmers to the there is a palpable sense that water is join- city; in `purchasing' water from the neigh- ing this list, with the two major industrial boring state of Andhra Pradesh (albeit, in associations--FICCI and the CII--both be- suchapoorly-specifiedcontractthatthecity coming very active on water issues. Indus- seldom gets the water); in mobilizing new try leaders have a major role to play in forms of finance (from the Sai Baba philan- local politics, and can become powerful thropic foundation); and in pushing for new voices pushing for improved water manage- formsofinter-stateagreementsonwater(in- ment at the local level. An example of this cluding `river linking'). The number of cit- is the path-breaking takeover by the textile ies and towns falling into similar industry of the Tirapur urban water supply circumstances (including the metropolitan in Tamil Nadu.9 area around Delhi, where the groundwater table is falling almost a meter a year7) is · Agricultural areas, where water security is growing rapidly, and the political pressure of high importance. Agrarian India is un- to find new institutional arrangements dergoing a quiet but rapid revolution--con- to meet their needs is similarly strong. tract farming is happening in many places, Dealing with urban bulk water issues is thus high-value crops are displacing food grains, an opportunity for reform in water and aquaculture is increasing. In each case, allocation practices. the importance of a predictable supply of 6Shantanu Sharma, `Who will bear the cost of water', The Economic Times, 20 November 2004. 7`Water Crisis hits Gurgaon', The Times of India, 29 April 2005. 8Edward Luce, `Modest dream is crucial for future', Financial Times, 22 March 2005. 9Nirmal Mohanty, `Moving to scale', Background Paper for this Report, 2005. 64 Principled Pragmatism and `Rules for Reformers' water becomes vital. There has been a rapid tion become central elements for any reform pro- uptake of drip irrigation and other new cess. What would this mean in India? technologies, but these `exit options' will not be sufficient, and there will be pressures First, there is a general tendency for govern- to allow water to move more flexibly and ment-led discussions of water policy to take place voluntarily from low-value to high-value among water professionals, the vast majority of uses. As Maria Saleth10 details in his back- whom are engineers, and most of whom have little ground paper, much of this now takes place exposure to changing global good practice. This in informal water markets but as agricul- community of practice is still (see the discussion in tural production moves to scale there will Chapter 2) very much a part of the `this will not be pressures to formalize such relationships. work in India' school of thought, one which still Again, this is an important area where there thinks in terms of command and control (Mohile, will be demand for changes in water man- backgroundpaper12)andwhichtendstolookback- agement practices. ward, not forward (Sekhar, background paper13). This means that discussions of reform are often The key message is that there are many win- severely truncated, and often quite at odds with dows of opportunity opening up for water reforms the reality on the ground. To take just one ex- which will constitute specific, practical solutions ample: the engineers of Chennai Metrowater were to local problems. It is these which will show what emphaticthatfarmerswouldneverleasetheirwater can be done, and will, by producing tangible re- to the city because it is `against their culture'; once sults, constitute a pressure on, and example for, the trading was started the farmers were, indeed, others to follow. The centrality of `demonstration' unhappy, because almost all farmers wanted to has been well stated in a similar context: `We don't trade some of their water (and the city could not need the Government of India to transform every buy from all). aspect of Indian infrastructure,' says Ratan Tata, head of the Tata companies which comprise India's Second, there is often an attitude by the gov- largest private-sector group. `All you need is for a ernment that `there should not be discussion of private company to take over one airport and then issues of water entitlements or water reforms be- show by results what everyone else is missing.'11 cause these are too sensitive'. And when there is a forum for discussion it is exactly these issues Rule #3: Involve those Affected, and which people want to discuss, because they are Address their Concerns with sensitive and central. Effective, Understandable Information Things are, however, changing. The process followed by Suresh Prabhu, the Chairman of the People are, for good reasons, always apprehensive (now-disbanded)TaskForceonLinkingRiverswas about changes which will be thrust upon them. a model of open communication in many respects. And when it involves something as sensitive as Prabhu held literally hundreds of public meetings water, communication, discussion, and informa- throughout the country to apprise people of what 10 Maria Saleth, `Water rights and entitlements', Background Paper for this Report, 2005. 11 Edward Luce, `Modest dream is crucial for future', Financial Times, 22 March 2005. 12 A.D. Mohile, `The evolution of national policies and programs', Background Paper for this Report, 2005. 13 A. Sekhar, `The evolution of water development and management: the perspective of the Planning Commission', Background Paper for this Report, 2005. 65 India's Water Economy was at stake, and to listen to their concerns and get irrigation systems--a compact in which users their suggestions. This led to enormous amount of have clear entitlements, in which they pay for public discussion, not just of linking rivers, but of reliable services provided by accountable, trans- virtually all the major challenges facing the water parent, and efficient suppliers. Irrigators must sector in India. It put some of the most critical also understand that with limited resources and issues--like the need for a new, modern approach growing cities and industries, there must be trans- to state water rights in a federal system--on the fers of water from the farm to the city. They must front burner. (The major caveat was that the ma- understand that many countries have developed chinery of government was not equipped to do its mechanisms for this to happen in a way that part, and the process suffered from the paucity of such transfers are transparent, voluntary, and to material available to both the task force and the the mutual benefit of both parties. They must public on the specifics of what was being pro- understand that if such mechanisms are not put posed, and the results of the 20 years of work that into place, then these transfers will happen by the NWDA had undertaken on this subject.) stealth, without any compensation. There is a palpable sense of a looming water Suchacampaignwouldneedtoengagetheurban crisis in India, and an opportunity and need for the middle class, who have `exited' from public water Union Government to undertake a major, multi- supply systems by self-provision. They need to stakeholder dialog-cum-campaign. understand that with massive urban growth and rapid aquifer depletion, these `coping strategies' Such a campaign would need to engage farmers will not work for much longer. They need to real- with the hydrological reality of the aquifers that ize that they will, as do people in all large cities they currently rely on. Farmers know that suicides of the world, rely on effective, accountable pro- are increasing because, even with massive elec- viders of public water services. They also need to tricity subsidies, increasingly larger numbers of understand that there are large demands for tax farmers simply cannot afford to drill deeper. They revenues for true public services (such as cleaning need to know that there is simply no alternative to up the rivers which have turned into sewers in all adjusting aggregate abstractions to the level of the cities of India), and that they must be willing sustainable yield. They need to know that other to pay for water supply services (provided, of countries have made such transitions, often re- course, the provider is efficient and accountable). markably, with positive economic outcomes. They need to understand the combination of govern- Such a campaign must engage industry, so ment regulation, user involvement, and packages that it understands that the standard industrial of `virtuous subsidies' that could reasonably sub- response (of `captive generation of water', mostly stitute for the vicious subsidies that are driving by groundwater pumping, but also increasingly their aquifers (and them) to ruin. They need to be through expensive recycling and desalination) informed that formal water entitlements would is inherently limited. Industrialists must exert notharmthem,butprovidethemwithassetswhich they currently do not possess. their considerable pressure on government for putting in place systems--which work well in Irrigators must realize that in the future sur- many countries--whereby they can purchase the face supply systems--now so discredited--must water they need from willing sellers (often farm- again play a central role. This means that there ers) for whom the value of water is much lower must be a new social compact for public surface than it is for the industry. 66 Principled Pragmatism and `Rules for Reformers' Such a campaign must engage the leadership by the year 2100. As for so many other reasons, of state governments. They must be made to re- this requires the establishment of a water manage- alize that there is an alternative to the current ment system which is flexible and robust. anarchic inter-state system. They must be pre- sented with the data on the huge costs which this Rule #4: Reform is Dialectic, not systemimposesonallparties(upstreamanddown- Mechanical stream alike) and must come to understand that there is an alternative for sharing waters (and Ideas like `river basin planning' and `integrated sometimes sharing benefits) that works well in water resources management' have sound concep- developed arid federal countries and which has tual roots, and appeal to technicians, many of worked well in India's international water trea- whom perceive implementation of these ideas as ties with Pakistan and Bangladesh. the path towards better water management. Useful as they are, in the words of the Operations Evalu- Finally, and pulling all these strands together, ations Department of the World Bank, `progress such a campaign must engage national political takes place more through "unbalanced" develop- leadership, again with complacency as the great- ment than comprehensive planning approaches'.15 est enemy. A common commentary on India's AsKarlMarx(hadheaddressedthesubject!)might economy was, in the memorable words of a Fi- have said it: water reform is a dialectic, not nance Minister, `every budget is a gamble on the mechanical, process. monsoon'.14 A feature of India's recent economic growth was captured in a newspaper headline stat- Improvements in water management occur ing that `India's economy is no longer a gamble on when there are tensions (between users, between the monsoons', noting that India's growth in the users and the environment, between the water bad monsoon year of 2004­05 had been reduced agencies and the finance ministries) which can no only by about 2 percent (to 6 percent overall longer be accommodated within the existing in- growth). Political leaders must be aware that this stitutional arrangements. But reforms do not lead may be a brief and temporary escape from hydro- to `mukti' (liberation for ever)--they simply mean logical constraints, and that unless the economy is that `lower-order tensions' are replaced by higher- put on a sustainable water platform, the `water order tensions. brake' on the economy--working through the in- dustrial, agricultural, and urban economies as Again, Tamil Nadu provides a useful illustra- discussedearlier--willbecomeendemicratherthan tion. State-wide approaches to water reform have sporadic. The urgency of this transformation is built some important building blocks, but have accentuated by the likely effects of climate change. made few contributions to actually resolving spe- The best projections suggest, for example, that in cific problems. These general reforms therefore the western Himalayas, where precipitation and lack legitimacy and `demonstration power'. But snow deposition are relatively low, glaciers are when the textile manufacturers of Tirapur actu- particularly vulnerable and are likely to result in ally resolve the problem of their own water ser- a runoff `windfall' during the next couple of de- vice, this has a powerful demonstration effect. It cades, followed by flow reductions which may be does not mean that `water problems in Tirapur are oftheorderof20percentfortheGangaatHaridwar now over', but it means that as the issue of getting 14 Alexander Frater, Chasing the Monsoon: A Modern Pilgrimage through India, Henry Holt, London, 1987. 15 Operations Evaluations Department, Bridging Troubled Waters, World Bank, Washington DC, 2002. 67 India's Water Economy water delivered to industries and households is recent water commission for an advanced state in largely resolved, the focus will inevitably and India came up with a set of over 340 `recommen- appropriately shift to the `higher-order' problems dations',rangingfrommajorlegalchangestowhat of ensuring adequate supplies of bulk water and of crop should be grown in what district. Similarly, dealing with water pollution from the town and a major 1998 World Bank report on the water industries. sector in India18 made 170 recommendations, all presumably to be done simultaneously. Rule #5: It's Implementation, Stupid A relevant example of a principled but prag- Lawrence Summers has observed16 that the great matic approach to sequencing relates to that of distinction between developing countries which `cost recovery' for irrigation services. Cost recov- have progressed over the last 30 years and those ery is, of course, an appropriate aspiration, but it that have stagnated is not the ability to formulate is almost never the place to start. Farmers will not perfect policies, but the ability to translate reason- and should not, pay for the costs of poor services able policies into actions on the ground. Para- which are delivered by inefficient and corrupt phrasing Bill Clinton's famous election mantra, agencies. The first step must be to address the `it's implementation, stupid'. issuesofaccountabilityandefficiency(asdescribed earlier in this report). Once services are improved And so it is with water in India and elsewhere-- and there is trust in the service provider, then tariff policies and recommendations abound, some very increases to bring revenues in line with costs. As good (such as the recommendations of the 1991 shown in Figure 3.6 on the urban water supply VaidyanathanCommission).ButasTushaarShah17 example in Guinea, Africa, public funding will has emphasized, what matters is identifying im- generally be necessary, on a declining basis, to provements that can actually be implemented. `finance the transition'. Rule #6: Develop a Sequenced, Rule #7: Be Patient and Persistent Prioritized List of Reforms Water reform processes are never short, decisive Any journey requires a knowledge of the destina- affairs. A review of the experience of rich coun- tion and a road map for getting there. However, tries by the OECD19 shows that progress in water the journey itself is taken step by step. And so it is reforms takes place over decades, not years, and with water reforms--there must be a long-term that even the most advanced of countries is only vision, but immediate attention must be on putting about half-way towards the ideal forms of water first things first--to sequencing and prioritization. management described in declarations of intent by The practice of (aborted) water reform by govern- the countries themselves and by the international ment agencies in India (reinforced by some of its community.20 In the case of a vast, federal demo- external supporters) has often been to make every- craticcountrylikeIndia,asdescribedbytheDeputy thing (and therefore nothing) a priority. A major Chairman of the Planning Commission,21 `plural- 16 Lawrence Summers in `Practitioners of Development' series at the World Bank, www.worldbank.org. 17 Tushaar Shah, `Accountable institutions', Background Paper for this Report, 2005. 18 Keith Oblitas, India Water Resources Management Sector Review, Report 18356 IN, Washington DC, 1998. 19 OECD, `Water management: Performance and challenges in OECD countries', Paris, 1998. 20 The International Conference on Water and the Environment, Dublin, www.wmo.org and the World Bank Water Resources Management Policy Paper, Washington DC, 1993. 21 Montek Ahluwalia, `Practitioners in Development', World Bank, 2004. 68 Principled Pragmatism and `Rules for Reformers' istic and highly participatory processes force one tionofWaterUsersAssociationsinAndhraPradesh to gradualism....' in recent years, gains which were appreciated by visiting Haryana farmers who found in the AP Rule #8: Pick the Low-hanging Fruit `success' some inspiration for similar efforts in First--Nothing Succeeds like their home state.23 Success On the central but complex issue of water en- The world over, citizens are either concerned or titlements, the embryonic experience in Chennai skeptical about announcements of `reform', with (Box 3.1) was a relatively `low hanging fruit'. So some advocating abolition of the word from the too would the use of water entitlements to resolve public policy lexicon. `By casting their agendas as the water conflicts afflicting the Bharatpur Bird reforms, political advocates don't aim to stimu- Sanctuary. If and when these and other `easy cases' late debate and discussion. They aim to suppress mature, they will provide a beacon for tackling the it. They aim to stigmatize adversaries as nasty, bigger and more difficult challenges of water wrong-headed,selfish,ormisinformed.Thetrouble entitlements. is that as a society, we need debates over principles and practicality. All reforms are not desirable, at Rule #9: Keep your Eye on the Ball-- least not to everyone.'22 Don't let the Best become the Enemy of the Good The corollary is that public support will only build if there are visible, tangible results from the Almost any progress is progress worth making, changes which are advocated. The key is `show whether or not it measures up to some abstract me'. global notion of `excellent'. The idea that practice can go from terrible to perfect in one fell swoop is It certainly can help to show opinion leaders one that is attractive to outsiders and is sometimes thatthesechangeshavebeeneffectedinothercoun- adopted by financial agencies (so-called Volvo tries. The formation of the famous French River instead of Volkswagen standards24). But it fits Basinmanagementsysteminthe1960swasstrongly poorly with the one-step-at-a-time gradualism influenced by the successful experience of the which characterizes water reforms everywhere. Ruhrverband,establishedinneighboringGermany in 1916. And the political leaders of the water Consider the case of subsidies for electricity for reform process in Brazil ascribe high importance groundwater. There is no doubt that this is a prob- to a study tour of Mexico and Colorado at a criti- lem which must be addressed, and that the longer cal time. But there is nothing like demonstration it takes to address the deeper the groundwater, the on home territory. And, since changes are always greater the subsidies and the more difficult it will difficult, it is imperative to start changes where be to find a way back. But the fact is that farmers conditions are propitious--where there is a real are now so heavily dependent on electricity subsi- demand for change, where there are champions, dies that drastic elimination of these would simply and where it is possible to show results. For ex- put many farmers out of business (see Figure 4.1), ample, there were real gains from the organiza- and, for this reason, is politically not feasible. The 22 Robert Samuelson, `Reform ain't what it used it be', The Washington Post, 5 June 2004. 23 World Bank, `Making Services Work for Poor People', World Development Report, Washington DC, 2004. 24 Sebastian Mallaby, The World's Banker, Penguin, 2004. 69 India's Water Economy taskmustbetoaddressthisissueonmultiplefronts, our entire overall situation.... the basis of this which in this case would include an improvement agreement is realism and pragmatism....'26 in the quality of electricity, the appropriate pric- ing of the low-opportunity-cost electricity which Rule #10: There are no Silver Bullets farmers use, and the introduction of a set of `virtu- ous subsidies' (as was done in Mexico, for ex- The challenges which India faces in water man- ample, in refurbishing inefficient equipment and agement are environmentally, socially, and tech- for adoption of water-efficient technologies) as nically complex. There is a justifiable, human electricity subsidies are reduced. fantasy that there is a single `silver bullet' which will `solve the problem'. Today, in some parts of A good example of `the best is the enemy of the the India water establishment, there is still faith good'ruleatworkisthejustly-famousIndusTreaty, that the old remedy--more dams, and variants of which has, since its inception, had its detractors in this--will solve all water problems and should be bothIndiaandPakistanas`notfair'.25Confronting given near-exclusive priority. In situations where the Pakistani detractors of the Treaty, Ayub Khan this remedy is patently impractical, there are a gave advice which is relevant for all would-be host of other `supply side' solutions ranging from water reformers: `... very often the best is the en- high-tech (cloud seeding and desalination) to low- emy of the good and in this case we have accepted tech (rainwater harvesting and desilting of ancient the good after careful and realistic appreciation of tanks), most of which have an important niche but are falsely marketed as `the solution'. Figure 4.1: Impact of eliminating Take the case of `restoration of traditional wa- electricity subsidies on marginal ter bodies'. There is a great attraction to the no- farmers in Haryana tion that rediscovery of `Dying Wisdom' (the title 250% of a book27 by Anil Agarwal and Sunita Narain of 213% the Delhi Centre for Science and the Environment) 200% will provide the cures to the water ills that afflict 150% 110% modern India. There is a large and active move- 100% 75% ment which sees community `rainwater harvest- 50% 35% ing' as the solution, everywhere and for almost all 0% problems. Deeper investigations show that it is 0% cost cost not quite so. David Mosse's detailed anthropo- ­50% cost cost variable income income logical investigation28 into the social ecology of ­100% Total the tanks of southern India draw a much more farm farm ­150% Total Electricity irrigation irrigation complex picture, showing that the tanks were in Net ­154% ­200% Total Gross steep decline long before the advent of canal irri- gation (the ostensible cause of the loss of tradi- Source: Bhatia, 2005. tional wisdom) and that they were a solution well 25 N.D. Gulhati, Indus Waters Treaty: An Exercise in International Mediation, Allied Publishers, New Delhi, 1973. 26 Undula Alam, `Water Rationality: Mediating the Indus Waters Treaty', Ph.D. dissertation, Durham University, 1998, p. 340. 27 Anil Agarwal and Sunita Narain, Dying Wisdom, Earthscan, 1997. 28 David Mosse, The Rule of Water: Statecraft, Ecology, and Collective Action in South India, Oxford University Press, 2003. 70 Principled Pragmatism and `Rules for Reformers' suited to a particular demographic and social situ- Rule #11: Don't throw the Baby out ation which has long gone. Similarly, objective with the Bathwater evaluations (described earlier) of watershed man- A corollary of the previous rule is that there is a agement efforts in India show some, but rather tendency when the silver bullet does not work limited, success. Applying the powerful words of (mixing metaphors badly) to throw the baby out Judith Tendler29 from another context (the analy- with the bathwater. Dams (or rainwater harvest- sis of social funds): `The reason for (their) popular- ing or tank restoration) are propagated with mis- ity ... relates to their effectiveness as a powerful sionary zeal, and when they do not deliver "development narrative". In environments with communities to the promised land, they are stig- great ambiguity as to cause and effect, such nar- matized and it is argued that they should no longer ratives offer convincing and simple explanations be part of the `toolkit'. for the causes of certain problems and provide appealingly straightforward blueprints for action. Take the example of dams. There is an ener- Because of their power as narrative, these accounts getic and resourceful anti-dam lobby in India. are rather invulnerable to empirical evidence that Spurred by legitimate issues of inadequate resettle- challenges their accuracy'. ment, these groups--with their message magnified by Arundhati Roy's powerful prose30--have iden- The point is not that these community-based tified dams as one of the ultimate evils in the world. efforts have no role to play--they do, and an im- There is, in their minds, no dam which should ever portant one at that in some circumstances. The have been built in India--even Bhakra,31 which as point here is that they can never be a `silver bullet' described earlier, has been shown to have brought in an increasingly urbanized and industrial soci- such massive benefits to the people of northwest ety which needs a host of different kinds of actions. India and beyond. Take another example, that of Water Users What is clear is that the most effective responses Associations. The idea of WUAs transforming to the water challenges in India are going to vary irrigation services has been and is, a powerful and very widely and are going to require a host of persistentone,despitemountingandlong-standing interventions, of different scales. As suggested by evidence that reality is a bit more complicated. `Stagesofwaterdevelopment'inFigure1,themajor The Vaidyanathan Commission of 1991, for instrument is not going to be infrastructure alone, example, reports that `there is a general consensus but management supported by both old and new that efforts to actually organize farmers' groups types of infrastructure. `Management' is going to and make them participate have not really made mean systemic sets of legislation, capacity build- much of an impact'. Similar evidence from around ing, organizational change, and the use of entitle- the world notwithstanding, the idea has had ment, pricing, and regulatory instruments. And it remarkable staying power in the global water is not going to be the task of the government alone, community, again, `because of their power as but concerted and reinforcing actions by a host of narrative, these accounts are rather invulnerable stakeholders. But that there were a silver bullet! to empirical evidence'. 29 Judith Tendler, `Why are Social Funds so Popular?', Local Dynamics in an Era of Globalization, ed. Shahid Yusuf, World Bank, Washington DC, 2000. 30 Arundhati Roy, The Common Good, Modern Library, 1999. 31 `Punjab's prosperity not linked to Bhakra', The Hindu, 19 April 2005. 71 India's Water Economy For some, the case is clear: the idea of WUAs is `good thing' by sufficient numbers of people who partly a cruel trick played so that the more diffi- will consider voting for the politician champion- cult issues--of real reform of the irrigation agen- ing the reform. cies--can be avoided. But the fact is that organized farmers do play a role in all successful irrigation There are two important riders to this `rule'. schemes throughout the world, but only as part of First, it is often quite difficult to judge how actions a set of reinforcing instruments, which always relating to water are being received by citizens. include water entitlements and accountable ser- For example, anyone reading the English language vice delivery agencies. The WUAs should not be newspapersofIndiawouldperceivethattheSardar thrown out with the bathwater, but propagated as Sarovar Project on the river Narmada is almost part of an overall reform package. The distinction universally opposed. However, a detailed analy- between necessary and sufficient conditions for sisofpresscoveragebySussexUniversity33showed progress is a vital one. that the picture was considerably more nuanced: `Environmental debate in India is governed by the Rule #12: Reforms must Provide language in which it is presented and understood. Returns for the Politicians who are The message coming out of India, most likely to be Willing to make Changes heard by the developed world, comes out of its English language media, representing just 2 per- Politicians may not be the most revered figures in centofthepopulation.Thiselitegrouphasadapted India (or elsewhere), but it is they who are `in the a pro-environment stance and is more likely to game', who are elected to make crucial tradeoffs, protest against new dams.... But inside India, the and who have the critical role as judges and cham- far bigger local language media representing the pions of reform. A discussion with politicians who vast majority and poorer sections of society are have led water-related reforms throughout the expressing the heart-felt cry for development'. world32found general agreement in a `rule' articu- lated by Digvijay Singh, then Chief Minister of Second and related, is the fact that on any re- Madhya Pradesh: `If it is to work, water reform form proposal there will be a cacophony of voices. must be good politics'. There is evidence that this MontekAhluwalia34hasdescribedthiswell:`Some- was, indeed, the case for community-based water- times I feel as if there's a completely false assump- shedmanagementprojectsforMr.SinghinMadhya tion that if only you talk to everybody you will get Pradesh. And the intensive formation of WUAs in an agreement. Only on a very boring issue or in a Andhra Pradesh was certainly politically useful to very boring country would you find that. To my Mr. Chandrababu Naidu (former Chief Minister mind the debate ... Does not eliminate the need for of Andhra Pradesh), because farmers perceived political risk ... At the end the government has to this to be a reform which moved in the right take the risk....' In short, while all voices must be direction. heard, much greater weight must be given to the voices of those who have responsibility and face The bottom line is that an essential element of the voters, and less weight to those who are self- any reform program is that it must be viewed as a appointed or who represent small special interests. 32 World Water Forum, Hague, 2000. 33 Graham Chapman, Keval Kumar, Caroline Fraser, and Ivor Gaber, Environmentalism and the Mass Media: The North-South Divide, Routledge, 1997. 34 Montek Ahluwalia, `Practitioners in Development', World Bank, 2004. 72 CHAPTER5 THE EVOLVING ROLE OF THE WORLD BANK What the Bank has Done in the Past (In fact not a single river basin authority has been established under the 1956 River Boards Act.) The World Bank has been involved in the water sector in India for 50 years and has lent about $14 In many ways, the Damodar Valley Project pre- billion for water projects in India.1 The very first saged half a century of Bank experience with water Bank-financedproject,theDamodarValleyProject, development and management in India, an expe- approved in 1954, was inspired by the TVA model, rience in which the defining quality is the contrast and aimed at building water infrastructure and betweenloftyaspirationsandmodestachievements. institutions which would provide a springboard for economic growth and poverty reduction in a Paraphrasing Akhter Hameed Khan, the great poor region. Pakistanireformer,3itmightbesaidthattheBank's involvement in water in India has been one in FromtheBank'sperspective,thiswas(andwould which the Bank `has chased the rainbow of well- be today) an ideal project--it was a vehicle for functioninginstitutionsanddreadedthenightmare bringing the best ideas from other countries and of further institutional decay.... and that only the adapting them to India; it was a combination of boldest among us can say that we may not be infrastructure and institutional developments. similarly engaged tomorrow'. There were very clear benefits. The project did Over the last 5 years there have been two major finance infrastructure which has provided power, reviews, one by the Bank in the context of the new flood protection, and irrigation services to the re- Water Strategy4 and one by the Operations Evalu- gion. And the project was instrumental in the for- ation Department. In both cases, the reviews in- mationoftheDamodarValleyCorporation(DVC) cluded major consultations with a wide variety of in the 1950s. stakeholders in India. Since these earlier reports have been published, and the results presented in But there were failures, too. The DVC turned detail in the background paper by Malik, in this out to be quite different from the TVA, with states report it is necessary only to summarize the main clawing back major activities and the DVC ending messages and lessons. up as basically a power generation company with little responsibility for water management.2 And First, there are different perspectives about the there was no demonstration effect, with no other influence of the World Bank on the water sector in riverbasinorganizationfollowingtheDVCmodel. India. On the one hand there is the view that since 1 Operations Evaluations Department, Bridging Troubled Waters, World Bank, Washington DC, 2002. 2 Albert Hirschman, Development Projects Observed, Brookings Institute, Washington DC, 1970. 3 Akhter Hameed Khan, `A History of the Food Problem', The Agricultural Development Council, 1973. 4 World Bank, `External Views on the World Bank's Water Strategy', www.worldbank.org/water, Washington DC, 2003. India's Water Economy the Bank accounts for only between 6 percent Figure 5.1: The decline and changing (Sekhar, background paper) and 10 percent5 of composition of World Bank lending what is spent in the water sector in India, the Bank for water in India is a minor actor. On the other hand, since most of Irrigation Urban Rural the water expenditure by the Union and state Hydro Water Resources governments in India is for fixed costs (especially 1800 personnel), the Bank funds a much larger portion 1600 of discretionary expenditure and of new invest- 1400 ments.AndtheBankhasbeen,andcontinuestobe, 1200 by far the biggest external donor, accounting for 1000 72 percent of donor lending and grants for water.6 millions 800 Where there is general agreement is that, as it US$ 600 shouldbe,theUnionandstategovernmentsarethe ones who determine what will happen and how it 400 will happen. The Bank's role is necessarily and 200 properly one of trying to put ideas on the table, to 0 1993­98 1999­2004 be a partner to efforts at improving performance. Thisisanimportantrole,butnecessarilyandprop- Source: Malik, 2005. erly control is in the hands of the elected govern- ments at the national and state levels. resources project, with the only increases being in theuncontentiousareaofruralwatersupply.There Second, mirroring a similar pattern for World was great dissatisfaction among government offi- Banklendingworldwide,7therewasasharpdecline cials in India who believed, as did developing (Figure 5.1) in the proportion of lending going to countriesthroughouttheworld,8thattheBankwas water projects--from 25 percent in the early 1990s walking away from the area where the needs were to about half that amount over the last 5 years. great (infrastructure) and where the Bank had a strong comparative advantage, namely in address- There was also a marked shift in Bank lending ingcomplex,difficultissuessuchaswaterresources (see Figure 5.1) out of complex areas which were developmentandmanagement.Asubsequentmajor perceived to be `reputationally risky' for the Bank `global poll' of opinion-makers throughout the (especially in the light of the controversies sur- world reaffirmed (see Figure 5.2 for South Asia) rounding the Bank's engagement with the Sardar that this is where countries perceived the greatest Sarovar Project). There was no lending for hydro- need, and the strongest case for World Bank in- power (with the last project financed by the Bank volvement. being approved in 1987, the 1500 MW run of the river Nathpa Jhakri Project on the Sutlej River). Third, these reviews, earlier major analytic There were sharp reductions in lending for irriga- assessmentsbytheWorldBankin19919and199810 tion, urban water supply, and stand-alone water and the assessment in the 12 background papers by 5 Operations Evaluations Department, Bridging Troubled Waters, World Bank, Washington DC, 2002. 6 Ibid. 7 World Bank, Water Resources Sector Strategy, Washington DC, 2003. 8 World Bank, `External Views on the World Bank's Water Strategy', www.worldbank.org/water, Washington DC, 2003. 9 World Bank, India Irrigation Sector Review, Washington DC, 1991. 10 Keith Oblitas, India Water Resources Management Sector Review, Report 18356 IN, Washington DC, 1998. 74 The Evolving Role of The World Bank eminent Indian professionals, have concluded that · `For fiscal reform to succeed, sooner or later the infrastructure constructed with Bank funding stategovernmentsmustaddressreducingthe has made major contributions to India's food secu- size of public sector agencies and ensuring rity, energy production, and urban development, good governance that allows the private but that all efforts at improving institutional per- sector, including users groups, to take a formance have been only modestly successful, at greater stake in water planning and man- best. A few quotes from the latest OED report give agement.' the flavor: b) of recommendations by the Bank that speci- a) of persistent institutional shortcomings: fied large numbers of priorities and did not focus on a practical reform path: · `... performance of completed Bank water projects has been unsatisfactory because of · `The Bank's 1998 review lays out a very over-optimistic appraisal.' ambitious and detailed agenda that ... con- tainsmorethan80nationalandintersectoral · `... the states' unwillingness to tackle insti- recommendations aimed at the central and tutional and financial reform ...' state governments, and more than 170 for · `... much still remains to be done on deve- the main subsectors.' loping sustainable mechanisms for water al- · `... institutions and practices that have location and management ...' remained unchanged for decades are to be · `... sooner or later state governments must tackled and changed quickly--an approach address subsidy issues and right-size public to institutional reforms that flies in the face sector agencies to increase efficiency.' ofinstitutionalrealitiesandthepoliticalwill such as they exist in India today.' Figure 5.2: The `global poll' results for South Asia, · `The Bank risks spreading its re- showing that infrastructure and education were the two sources too thinly to be effective. areas which were of high development priority, and A more selective and incremental priority for the World Bank approach to key policy and insti- tutional reforms might be more productive.' c) of a slow movement away from a normative approach to one which focuses on incentives and the po- litical economy of change: · `The 1998 review found that little had changed since 1991: "in re- cent years there has been realiza- tion and policy pronouncements regardingtheneedtoaddressthese problems; however, the policies have not been translated into action."' 75 India's Water Economy · `Therehasbeenheadwayonreformofwater vate financing, while meeting environmen- institutionsinthefewreformiststateswhere tal and social standards. there is political will to change after de- · The World Bank will re-engage with high- cades of malaise--but in some, the reforms reward/high-risk hydraulic infrastructure, appear to be cosmetic.' using a more effective business model. · `The missing element is how to identify and · The Bank's water assistance must be tai- promote incentives that will lead to sustain- lored to country circumstances and be con- able and effective reform. Only then can the critical next step be achieved: agreeing on sistent with the overarching Country Assistance Strategies. the three to five short- to medium-term pri- orities on which to focus efforts.' The 2004 World Bank Country The Bank's New Water Strategy Assistance Strategy for India In parallel with these reviews of World Bank en- The World Bank has recently commissioned major gagement in water in India, and influenced by surveys of opinion leaders to help identify areas them, the World Bank developed a new Water whichwereofhighdevelopmentpriorityandwhere Strategy, which was approved by the Board of the the Bank was perceived as having a comparative Bank in 2003, and set a new direction for Bank advantage. Confirming the results of the `global engagement in water throughout the world. The poll' discussed earlier, these surveys (Figure 5.3 main messages of the 2003 Water Strategy are: shows the South Asian poll of 2005; the Indian poll of2004producedverysimilarresults)againshowed · Water resources management and develop- the areas associated with water to be of high pri- ment is central to sustainable growth and ority and high Bank effectiveness. poverty reduction and therefore of central importancetothemissionoftheWorldBank. In September 2004, the Government of India and the World Bank finalized a Country Assis- · Most developing countries need to be active tance Strategy, the `contract' which spells out in- both in management and development of dicative Bank lending for the period 2004­08. The water resources infrastructure. CAS represents a dramatic change in the Bank's engagement with water (Figure 5.4), with overall · The main management challenge is not a water lending predicted to rise from about $700 vision of integrated water resources man- million over the previous 4 years to about $3200 agement, but a `pragmatic but principled' million in the next 4 years. As shown in Figure 5.4, approach that respects principles of effi- too, there are major changes in composition, with ciency, equity, and sustainability, but rec- the Bank expecting to sharply increase irrigation ognizes that water resources management and water resources lending, and re-engaging with is intensely political, and that reform re- large hydropower projects. quires the articulation of prioritized, se- quenced,practical,andpatientinterventions. The 2004 CAS makes two other important stra- · The World Bank needs to assist countries in tegic shifts which affect water. In the last CAS developing and maintaining appropriate period the Bank focused heavily on `reforming stocks of well-performing hydraulic infra- states' which were mostly in the south and mostly structure, and in mobilizing public and pri- among the better-off and better-governed. (In this 76 The Evolving Role of The World Bank Figure 5.3: Development priorities and comparative advantage of the World Bank 3.5 Bank good, but issue not Bank good and issue is 3.4 perceived to be a priority a priority Infrastructure 3.3 Private Sector! 3.2 ·Education Gender Disparities! ·Water Resource Development ·Energy Sector 3.1 ·Economic Growth 3.0 Regulatory Framework! ! Natural Resources · Access to Health Services effectiveness Management · Reduce Poverty 2.9 Urban Quality of Life! Protect the Poor! · Safeguarding against Corruption Mean Decentralization Transparency in Governance 2.8 · Rural Quality of Life ! Policies ! Accountability in Public Sector! Public Funds 2.7 2.6 Bank not good, and issue not Bank not so good on perceived to be a priority priority issues 2.5 3.6 3.7 3.8 3.9 4.0 4.1 4.2 4.3 4.4 Mean importance Asked on a scale of 1­5; 1 being not important at all/not effective at all, 5 being very important/very effective. Source: World Bank South Asia Client Survey, 2005. Figure 5.4: World Bank re-engagement percent of the population.) Now the Government with water in India and the Bank have agreed that the Bank will re- engage more intensively with the poorer states Irrigation Urban Rural Hydro Water Resources (where needs are greater but governance is also 3500 worse). This adjustment is understandable, but it 3000 also implies even greater difficulties for the insti- 2500 tutional reform agenda which lies at the heart of 2000 Bank engagement. This is so because it is unreal- millions 1500 istic to expect water governance to be good when US$ overall governance is poor; and thus, it is likely 1000 that the already-difficult task of reforming water 500 governance (which has not been very successful 0 1993­98 1999­2004 2005­08 even in the `advanced states') will become more Source: Malik, 2005. difficult. In the current CAS, then `rules of engage- ment' for different sectors have replaced `focused period about 50 percent of Bank water lending states' as the primary filter which will determine went to the southern states, who contain only 20 whether or not the Bank engages. The `rules of 77 India's Water Economy engagement' for the various water-related sectors The Ongoing Evolution of Bank are as follows: Engagement in the Water Sector in India · irrigation: de-linking irrigation services and water resources management, reforming As part of the process involved in developing this irrigation agencies, strengthening cost re- report, the Ministry of Water Resources held two covery, regulation, beneficiary participa- major consultations with the Ministry of Finance tion, increased productivity of water, water and other Union Ministries, and with state gov- entitlements; ernments, to discuss the evolving role of the Bank. The second of these consultations culminated in · urban water and sanitation: utility reform, a set of agreed `recommendations'.11 There was improving services to the poor, and private strong endorsement of the re-engagement of the sector participation; Bank in the full range of water-related issues, including the big and the complex. There was · ruralwaterandsanitation:continuedemand agreement that the government needed to comple- responsive approach, moving from pilots to ment its traditional focus on infrastructure with a scale through Centrally Funded Schemes growing emphasis on management. It was agreed (SWAPs); that the Bank needed to continue to emphasize · hydropower: one element in an overall en- institutional reform, and much discussion (and differing views) of some of the key instruments ergy program; Bank will engage with hydro such as water entitlements and user charges. It that has limited environmental and social was agreed that the Bank would consider a vari- impacts; ety of capital investments (in flood control, tank · waterresources:developinginformationsys- rehabilitation, completion of irrigation projects, tems, rehabilitating and modernizing ma- recharge, etc.) in the context of state projects, jor infrastructure, watershed management, with the critical test being the economic and water rights, capacity building. social returns to such investments. Finally, two comments by senior Government The analysis in this report suggests that these of India officials at recent consultations held by `filters' are generally appropriate, with minor the Government of India capture much of the es- adjustments. The first adjustment would be to de- sence of this report. emphasise some of the recommendations on or- ganizational form (such as de-linking agencies The Member of the Planning Commission re- responsibleforirrigationandwaterresourcesman- sponsible for water and energy stated: `when we agement) and putting greater emphasis on (a) in- do address management problems we still think struments, including entitlements, contracts only in terms of instruments of command and betweenprovidersandusers,transparentmonitor- control, not in terms of incentives that affect the ing and benchmarking, and regulation, and (b) on behavior of users, and the instruments-- charting sequenced, prioritized paths for making usufructory rights, prices, compensation--that pragmatic improvements. affect this behavior.'12 11 Ministry of Water Resources, `Recommendations of the National Workshop on Challenges of water develop- ment and management in India and future strategies', New Delhi, 13­14 January 2005. 12 Kirit Parikh at the Ministry of Water Resources National Meeting with the States, New Delhi, 2004. 78 The Evolving Role of The World Bank And the Secretary of Finance stated: `the gov- TheseseniorGovernmentofIndiaofficialscap- ernmentwillrequestBankinvolvementonlywhere tured well the essence of this report--of the chal- the Bank adds value by bringing new knowledge lenges awaiting India as it faces an uncertain and contributing to reform processes'. water future, and the World Bank as it tries to be the best partner that it can be. 79