[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...

REIMAGINING INDIA
has a religious ghat and temple could be
sold for industrial or other purposes? In
fact, this raises another serious issue –
who would be entitled to sell such a
right? For a market to operate there
have to be tradable commodities and
some understanding of ‘ownership’. But
can what is essentially a community resource
– like a river, lake or rainwater
– can such an entity be subjected to a
market regime?
It is because of these very important
externalities and social and human aspects
that water, and in particular the
sectoral allocation of water needs to be
outside the market system. This is the
reason why the priorities for allocation
of water between sectors are prescribed
by policy rather than left to the market.
The Water Policy of the Government of
India, approved in 2002, specifies in its
Clause 5 that
“In the planning and operation of systems,
water allocation priorities should
be broadly as follows:
• Drinking water
• Irrigation
• Hydro-power
• Ecology
• Agro-industries and non-agricultural
industries
• Navigation and other uses.”
Several states too have developed their
own policies which also lay down these
priorities. A market based inter-sectoral
allocation of water is inherently in contradiction
to the allocation based on
criteria of social and environmental
need and equity. This is all the more so
in a country like India where there is
vast inequity in the distribution of income
and where conservation of ecology
is not a luxury but rather a necessity as
it supports the livelihoods of millions.
Last, but not the least, is that by definition,
a market based system allocates
resources to those who have purchasing
power. This not only means that the poor
will be disadvantaged, but that there is
a real danger of concentration of (water)
recourses in the hands of the economically
powerful. There are very few places
where such a market based allocation
of water has been tried out. Chile is one
such country where this system was put
in place in the early 1980s. Indeed, the
World Bank is using Chile as a model to
justify the implementation of this in India.
But the Bank’s own study (which it
seems to have ignored) says 10 :
“According to some reports, the establishment
of tradable water rights in Chile
has encouraged efficient agricultural use
and increased agricultural productivity
per unit of water… Recent reports indicate,
however, that the model encountered
problems as well as successes….
Although benefits have accrued, significant
negative impacts have been felt by
farmers unfamiliar with legal processes
or lacking the money to participate in
markets for water (the poor). Significant
conflicts have also emerged between different
groups of users, and many social
and environmental externalities have yet
to be addressed….”
And 11 :
“The main disadvantage, or risk, of
the new system is monopolisation of water
rights. A couple of power companies
and a single individual have been accused
of accumulating some 70 percent
of all water rights in Chile”
This clearly shows how real the danger
of the monopolisation of the resource
are when it is left to market forces, as
well as the inability of market forces to
handle social, ecological and equity related
externalities.
Intra-Sector Marketisation
The same issues come up in context of
market based operations within a sector
like bringing in private players for service
delivery of irrigation or urban waters, or
transforming these sectors into purely
commercial operations. There is massive
evidence from all over the world that this
has led to very serious impacts on the
economically poor sections of the society.
This is well documented and a subject
in its own right, so we may only mention
a few things here 12 .
The reforms package of full cost recovery,
elimination of subsidies, disconnections
on non-payment (often due to unaffordability),
privatisation and so on may
remove ‘economic ‘distortions’ and lead
to better financial sustainability – the two
major arguments for the justification of
reforms– but this is at the cost of social
responsibility. Where this package has
been implemented, tariffs have often shot
up, and the poor have been disconnected
as they have been unable to pay the high
price for water. For example, in Guinea,
on privatisation of the water supply, water
rates shot up 6-7 times, and more than
10,000 connections, one-third of the total,
were disconnected due to non-payment.
Access of the poor to water has
been the first casualty in many cases of
water sector privatisation and reforms.
Farmers in India are already caught in
a vicious economic pincer grip of rising
prices of inputs and lack of commensurate
prices for their products. Rising water
tariffs in the irrigation sector – a sure
consequence of marketisation - are like-
50 THE IIPM THINK TANK