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

MORE MARKETS, LESS GOVERNMENT
Figure-3: Bar Graph Showing Percentage Change In Utilisable Groundwater Reserves In Gujarat
Percentage Change in total utilisable
groundwater (%)
90
70
50
30
10
-10
-30
-50
Ahmedabad
Amreli
Banaskantha
Baroda
Bhavnagar
Bharuch
Valsad
Dangs
1984-1991
Districts
Gandhinagar
Jamnagar
Junagadh
Kheda
Kutch
Panchmahals
Rajkot
Sabarkantha
Surat
1991-1997 1984-1997
Surendranagar
Mehsana
Gujarat
Source: Narmada and Water Resource Department, 1984, 1991 and 1997
over time.
Government of Gujarat (1999) has projected
the demand and supply of water
resources in the state for 2010 and 2025.
Table 3 is evident of the fact that in the
year 2010 as well as in 2025, South Gujarat
will be the surplus region for water while
North Gujarat, Saurashtra and Kachchh
will be water deficient region. The shortage
is expected to increase in both the regions
from 35 percent in 2010 to 83 percent
in 2025 in the case of North Gujarat. This
growth in demand has not been matched
by an increase in supply. The problem is
compounded by pollution of water, which
has reduced its suitability for various uses.
At the same time, in traditionally water
intensive sectors of the economy such as
agriculture, costs of irrigation have increased
significantly. Under these circumstances,
it is more important than ever
before to use water efficiently. It is also
necessary to anticipate and address intersectoral
conflicts over allocation and use
of water. The standard approach so far has
been to advocate reform of water pricing
across sectors to reflect the scarcity value
of water. This advocacy is based on theoretical
and empirical evidence on the need
and desirability of such reforms including
willing-to-pay studies. Nevertheless, major
users of water (particularly of irrigation
water) have resisted these reforms so far.
Water Markets
In this context, economic theory tells us
that markets increase economic efficiency
by allocating resources to their most valuable
uses. In other words, if certain conditions
are met, markets provide the correct
incentives and lead to efficient resource
use. Therefore, one way to change the incentives
so that water users support the
reallocation of water and to achieving a
more efficient allocation of water is
through water markets. These allow water
users to buy and sell water, thus changing
the whole incentive structure and breaking
the logjam of water pricing reforms – when
water users can gain from reallocation,
they would be willing to sell water or pay a
higher price for new supplies. This paper
explores the role of water markets, particularly
in the context of India’s water supply
and sanitation sector.
Apart from water markets there already
In Gujarat, the per capita availability will decline to 910
cubic meters in 2010 and to 800 cubic meters in 2025.
The corresponding fi gures for India are much higher, 150
cubic meters in 2010 and 1500 cubic meters in 2025
exist numerous non-market mechanisms
for allocating water in most countries.
These usufructuary rights to water have
evolved either explicitly through laws and
regulations or implicitly through conventions.
These water rights are generally
based on one of three systems: first-come,
first-served allocation (also known as
prior appropriation rights), allocation
based on proximity to flows (or riparian
THE INDIA ECONOMY REVIEW
97