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Is India Ripe for Integrated Water Resources Management?

Water scarcity has emerged, especially during the past decade, as an important theme in discussions on India's future. Global discourse suggests that India, and other developing countries in Asia and Africa, can respond to water scarcity - and the resultant water poverty facing their people - by embracing integrated water resources management, a package of best practices for improved management of water resources with strong emphasis on direct demand-side management. This paper addresses five questions about the IWRM paradigm with respect to India: (1) Is water poverty of countries caused by their water scarcity? (2) Would embracing IWRM help alleviate India's water poverty? (3) Is implementing IWRM feasible in India in today's context? (4) Has implementing IWRM helped counter water scarcity and poverty in other countries with a development context comparable to Indiaâ??s? And, finally, (5) What should be the priorities and roadmap for improving the working of the water sector in India? The paper reviews recent evidence from around the world to analyse these questions and concludes with a discussion of implications for water sector reform discussions in India.

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Is India Ripe for Integrated Water Resources Management? Fitting Water Policy to National Development Context

Water scarcity has emerged, especially during the past decade, as an important theme in discussions on India’s future. Global discourse suggests that India, and other developing countries in Asia and Africa, can respond to water scarcity – and the resultant water poverty facing their people – by embracing integrated water resources management, a package of best practices for improved management of water resources with strong emphasis on direct demand-side management. This paper addresses five questions about the IWRM paradigm with respect to India: (1) Is water poverty of countries caused by their water scarcity? (2) Would embracing IWRM help alleviate India’s water poverty? (3) Is implementing IWRM feasible in India in today’s context? (4) Has implementing IWRM helped counter water scarcity and poverty in other countries with a development context comparable to India’s? And, finally, (5) What should be the priorities and roadmap for improving the working of the water sector in India? The paper reviews recent evidence from around the world to analyse these questions and concludes with a discussion of implications for water sector reform discussions in India.

TUSHAAR SHAH, BARBARA VAN KOPPEN

I Responses to Water Scarcity

W
ater scarcity has emerged, especially during the past decade, as an important theme in discussions on India’s socio-economic future. Indeed, by 2025, by many accounts, much of India is expected to be part of the one-third of the world destined to face absolute water scarcity [Seckler, Barker and Amarasinghe 1999; Cosgrove 2003; Cosgrove and Rijsberman 2000; Rosegrant Kai and Cline 2002]. The intensification of water scarcity is expected to play out in myriad different ways with variegated consequences. A major implication will be the deepening of “water poverty”, a phrase used to indicate difficulty people face in securing adequate and reliable access to water for productive and consumptive uses. A related concern is also the deterioration of water environment, reflected in drying up of wetlands, deterioration in water quality and desertification.

Global discussions over the past decade have resulted in a variety of viewpoints about how best developing countries can cope with this imminent condition. At one extreme, researchers suggest that crying need is for honing even more than in the past the social capacity of communities and societies to adapt to water scarcity [Ohlsson and Turton 1999; Wolfe and Brooks 2003]. However, a more widely shared view is the urgent need to make a transition from water resource development mode – in which countries like India have been steeped since 1830s when Arthur Cotton rebuilt the grand anicut on Cauvery – to water resource management mode by embracing Integrated Water Resources Management (IWRM).

At one level, the IWRM is a philosophy. The Global Water Partnership (2000), for instance, defines it as “a process which promotes coordinated development and management of water, land and related resources, in order to maximise the resultant economic and social welfare in an equitable manner without compromising the sustainability of vital ecosystems”. This is hard to find fault with. However, at operational level, the IWRM even though fuzzy [Biswas 2004] is centrally about integrated and direct management of sectoral and aggregate water demand, something which is absent in most developing countries. As distinct from the supply-side focus of public policy action in water sector – of governments as well as donors – on “developing” the resource by investing in infrastructure, the IWRM discussions emphasise the need to embrace demand-side management. In many low-income Asian and African countries where it has been aggressively promoted by international agencies in recent years, the “IWRM package” has basically included a clutch of following instruments:

  • A national water policy so that there is a cohesive, wellunderstood normative framework to guide all players in the sector;
  • A water law and regulatory framework for coordinated action for sustainable water resources management;
  • Index of Water Access

    Figure 1: Relationship between Water Access and PPP Adj GNP Per Caput

    25

    20

    15

    10

    5

    0 0 20 40 60 80 100 120 140 160

    = = y = 0.102x + 5.727 R2 = 0.6838

    147 Countries in Ascending Order of Their GNP Per Capita (PPP Adj)

  • Recognition of the river basin as the unit of water and land resources planning and management and creation of river basin organisations in place of territorial/functional departments;
  • Treating water as an economic good by pricing water resource as well as services, especially outside lifeline uses, to reflect its scarcity value so that it is efficiently used and allocated to high value uses;
  • Creation of water rights, preferably tradable, by instituting a system of water withdrawal permits;
  • Participatory water resource management with involvement of women so that “water becomes everybody’s business”.
  • In dozens of developing countries, adopting IWRM has essentially meant implementing variations of the above package. In Sri Lanka, for instance, the latest draft water policy and water law provided for establishing state ownership of all water, the institution of water use rights through withdrawal permits, pricing of water in all uses, transferable water permits to encourage trade in water rights, replacement of existing water organisations by river basin organisations [Samad 2005]. Embracing the above, it is implied in the IWRM discourse, will help alleviate water poverty by improving access to water and minimising environmental ill-effects associated with current patterns of water resources development in developing countries like India [Lawrence, Meigh and Sullivan 2003]. Among several things, the IWRM involves working to improve the potency and effectiveness of three pillars of the water institutional framework: water policies, water laws and water administration in managing the water affairs of a society through a new emphasis on direct water demand management [see, e g, Bandaragoda and Firdausi 1992; Merrey 1996; Fredericksen and Vissia 1998; Holmes 2000; Saleth 2004; Saleth and Dinar 2004].

    This new class of concerns has put on the backburner an earlier class of yet-to-be-resolved concerns about the limitations of “supply-side initiatives” with which India and many other developing countries struggled during the 1970s through the early 1990s. These had to do centrally with the need for and the efficiency of appropriate water infrastructure and services, promoting their financial and social sustainability, improving the performance of irrigation, and water supply and sanitation projects along several dimensions and at multiple levels: techno-economic efficiency; cost recovery; spatial and social equity in access to project benefits; investment in operations and maintenance (O and M), and so on. There were major issues of institutional reforms in public irrigation projects as well as rural and urban water supply and sanitation projects with emphasis shifting back and forth between reforming the bureaucracy to userparticipatory management to public-private partnerships. In these discussions, the focus of analysis and action was squarely at the level of the user, community or a project; and the concerns of researchers and practitioners were about techno-economic efficiency, equity, socio-economic and environmental sustainability of infrastructure investments. Even before these issues have begun to get resolved, the IWRM paradigm has begun to shift the locus of policy discussions from improving water infrastructure and services at community and project levels to improving the management of water resources at the level of river basins.

    II Water Poverty and Economic Development: International Evidence

    A critical implicit assumption underlying the IWRM discourse is that water poverty – reflecting lack of access to water for productive and consumptive needs for communities – is a result of the water scarcity and the failure of water institutions and policies to counter it. If this is, indeed the case, then, embracing IWRM can be a big answer to water poverty of nations. But is this really the case?

    The Water Poverty Index (WPI) covering 147 countries published by researchers from Keele University and Centre for Ecology and Hydrology, Wallingford, UK in 2003 provides a ready-made global data base to explore the relationship between water poverty and water scarcity [Lawrence, Meigh and Sullivan 2003; Sullivan and Meigh 2003].1 Like the global discussions, the authors of WPI too subscribe to the “water-scarcitydetermining-water-poverty” hypothesis when they say their aim was to “express an interdisciplinary measure which… indicates the degree to which water scarcity impacts on human populations” [Lawrence, Meigh and Sullivan 2003]. But is this hypothesis borne out by global database painstakingly compiled by the WPI authors themselves? A regression of WPI run on water resources per capita of the 147 countries suggests no direct relationship between the two (Table 1). It might be argued that the real indicator of water poverty is “Water Access Poverty (WAP)” sub-component of the WPI suggestive of the levels of “water welfare” achieved. However, the correlation between WAP index and water resource endowments too was found low. For nearly every level of per capita water resource endowments, we find countries which are at the bottom as well as top of the WAP index. A least-square line fitted to WAP index and per capita water resource endowment of countries turns out to be virtually flat, suggesting no relationship of quantitative significance between water endowments of nations and the water welfare of their citizens. Laos, Nicaragua, Cambodia, Bangladesh, Sierra Leon have much higher per capita water endowments compared to Egypt, Saudi Arabia, UK and Mauritius; yet the former are far more “Water Access Poor” than the latter.

    Further analyses show that while water availability has little relationship with overall socio-economic development; the WAP index is strongly related to the Human Development Index (HDI). The higher the HDI of a country, lower the water poverty, regardless of a country’s water endowments. Figure 1 tests – and finds strong support for – an even bolder hypothesis; and suggests that WAP is strongly and positively related to per capita GDP (adjusted for purchasing power parity (ppp)).

    In exploring the relationship between the quality of environment and levels of economic development, researchers have already postulated and tested the “Environmental Kuznet’s Curve” which would suggest that as countries begin from low levels of economic development, the quality of their environment first declines as intensive economic growth uses natural resources as “factors of production” [Bhattarai and Hammig 2001]. However, as levels of living improve, growing demand for “environmental amenity” generates pressures to seek avenues for economic growth that are light in the demands they make on scarce natural resources

    – what Gliek (2002) calls “soft water path”. If this were true, an index of environmental quality would show an inverted U relationship with levels of economic growth. Figure 2, which plots the Index of Water Environment against ppp-adjusted GDP per capita of the 147 countries lends support to the Kuznet’s Curve hypothesis for water environment as well (note: the higher the value of the index, lower the quality of water environment). It suggests that as levels of material well-being improve for a majority of a country’s people, the need for clean water environment becomes a concern for the majority rather than just the environment groups, governments and international donors.

    Table 1 summarises the results of multiple regression results that underpin our discussions in the above paragraphs. The data set for 147 countries used is the one compiled by Lawrence, Meigh and Sullivan (2003). The regressions use the WPI and component indices as dependent variables; HDI as well as pppadjusted GDP are from UNDP 2003. Figures in round brackets below B-coefficients are standardised B-coefficients and represent the relative significance of included explanatory variables in explaining the variations in the dependent variable. Figures in square brackets are values of the t-ratio; for the sample size of 147, any value of t-ratio above 2.0 is significant.

    In regressions 1 and 2, besides HDI and GDP respectively, water resource endowment is statistically significant and has a large standardised B-coefficient, likely because water resource endowment is a component of WPI. In regressions 3 and 4, where WAP – the true measure of water welfare of a country – is the dependent variable, however, water resource endowment variable turns insignificant and its standardised B-coefficients are very small, too. These suggest that water resource endowments have no relationship with the water poverty of nations. In these regressions, HDI and GDP per capita emerge as the key determinants of Water Access Poverty with large t-ratios as well as standardised B-coefficients. Regression 5 suggests resource availability as well as GDP that are significant determinants of water environment; but the overall fit of this regression improves greatly (as suggested by the increase in R2 in regression 6 when the squared value of GDP is added; it emerges as highly significant, turns GDP coefficient into a negative value thus suggesting better fit for a U-shaped relationship shown in Figure 2.

    III IWRM in an Informal Water Economy

    There is a need to unpack this apparently neat relationship between water poverty and overall economic growth. Many people find it hard to accept these results because it apparently leads them to conclude that low-income countries like India have little or no scope to improve their water resources management; and that economic growth is the only path for them to reduce their water poverty. A more logical conclusion to draw from this analysis is that, in order to be effective, water resource management strategies of nations have to be context-specific; and the defining aspect of the context that matters is the position of a country in the evolutionary process of economic development rather than its water resource endowment [World Bank 2005]. This analysis raises questions about the usefulness of the one-size-fits-all frameworks – such as the IWRM paradigm – that dominate global discussions about how can developing countries put their water sectors in order. Use of economic pricing and withdrawal permits to encourage efficient allocation and use of water, transforming irrigation bureaucracies into river basin organisations for Integrated River Basin Management, enforcing laws to regulate groundwater pumping and controlling non-point pollution of aquifers are some of the stock policy reforms that are commonly recommended because these help orderly functioning of water economies in industrialised countries; however, evidence is mounting that many of these reforms are unimplementable in developing countries.

    The constraint developing countries run into in implementing these arises from the highly informal nature of their water economies; and this has nothing to do with their water scarcity or abundance but has everything to do with their being at early stages of overall economic development. By definition, an informal economy is that part of the economy that remains outside formal mechanisms of governance – law, policy and administration [Fiege 1990]. Incorporation of informal economies into what economic historian Douglass North (1990) called the “modern transactions sector” occurs gradually as part of overall processes of economic growth. Until substantial proportion of a sectoral

    Table 1: Determinants of Water Poverty of Countries

    Dependent Intercept B-Coefficient for Variable Index of Human Index of Square of R2 Water Develop-GDP/ GDP Per Resource ment Capita Capita Availability Index (PPP in

    (0-20) (0 to 1) Adjusted (US $) in ‘000 US $) (0 to 1)

    1 Water poverty 17.761 1.086 43.283 0.842 index (12.261) (0.433) (0.796) (0-100) [13.048] [24.022]

    2 Water poverty 20.646 1.205 39.574 0.788 index [12.765] (0.482) (0.764) (0-100) [12.508] [23.65]

    3 Index of -3.491 0.037 24.307 0.754 access to [-3.743] (0.029) (0.867) water (0-20) [0.691] [20.95] (WAP index)

    4 Index of -1.862 0.103 22.22 0.691 access to [-1.845] (0.080) (0.831) water (0-20) [1.721] [17.863) (WAP index)

    5 Index of 7.215 0.138 3.804 0.227 water [12.331] (0.292) (0.388) environment [3.962] [5.273] (0-20)

    6 Index of 15.09 0.149 -23.778 21.638 0.387 water [10.806] (0.314) (-2.425) (2.842) environment [4.773] [-5.191] [6.082] (0-20)

    Figure 2: Relationship between Water Environment Index andPPP Adjusted GNP Per Caput

    18 16 14 12 10 8 6 4 2 0 Water Environment Index = -= y = 0.0005x2 – 0.0518x + 11.346 R2 = 0.2935 0 20 40 60 80 100 120 140 160

    Countries in Ascending Order of PPP Adj GNP

    economy gets formalised, it would be well-nigh impossible to bring it meaningfully within the ambit of formal structures of direct governance. In the context of developing countries like India, paradigms like IWRM – advocating direct demand management – are then fundamentally at odds with the highly informal nature of their water economies.

    Take the case of India. India’s Tenth Five-Year Plan document claims that protected water supply2 covers 95 per cent of the country’s rural habitations; yet a large nationwide survey in 1998 that reached out to some 1,30,000 rural and urban households showed a different picture [NSSO 1999a: report 449]. Nearly 80 per cent of India’s rural households surveyed self-supply their domestic water requirements – from domestic or irrigation wells, tanks, ponds, streams, etc – and are not in contact with any service provider or public or community agency in the formal sector. For urban households, the opposite holds with over 75 per cent of the households “connected” – which suggests that as India urbanises, the growing proportions of its population would come into contact with formal water service providers. Comparing the data across states suggests that in poorer states like Bihar and Uttar Pradesh, all or most rural households self-supply their domestic water, whereas in somewhat better-off states such as Haryana, Punjab and Goa, domestic water supply gets increasingly “formalised”, suggesting that even rural households begin getting connected to some public water supply system as village economies grow, regardless of water resource endowments. The IWMI-Tata studies in six Indian cities during 2003 showed that economically strong households were much more likely to be connected to public water supply systems and poorer ones either self-supply or rely on informal sector service providers [Londhe et al 2004].

    The picture with irrigation is no different. Many researchers have shown that although under the control of government bureaucracies, at the grassroot levels, India’s canal systems are barely functioning anarchies, with informal institutional arrangements ruling the roost. Even if we assume that farmers served with irrigation by canals are in some sense connected to the “formal water economy”, the National Sample Survey of 2002 [NSSO 2003] of 4,646 villages throughout India showed that government canals have increasingly lost out in relative share of irrigators: over 80 per cent of sample villages used irrigation mostly from wells but also from tanks, and streams without being connected with, or under direct administrative influence of, either the irrigation bureaucracy or any other formal agency. This is a village-level data; but much other evidence can be adduced from household level surveys in support of the fact that there is a great deal more irrigation going on in India than is acknowledged; and over 4/5th of this is in the informal sector. Similar impression emerges about the ownership and management of village water infrastructure. The NSS 54th round of survey [NSSO 1999b, report 452:46] in 1998 of 78,990 rural households in 5,110 villages throughout India suggests that 90 per cent of water infrastructural assets used by survey households was selfmanaged (and owned) by households; only around 10 per cent was owned and/or managed by government or local community organisations.

    This predominantly informal nature of India’s water economy raises questions about the reach of the “three pillars” of water governance: water policy, law and administration. It also raises questions not so much about the need for but about the practicality of implementing water pricing, basin level water allocation and water legislation in the Indian context. How to collect a water service price or a water resource fee or use river basin agencies to allocate water amongst sectors and users if by far the majority of users self-provide their water needs without being connected to any formal agency? Likewise, how does any administration effectively enforce a groundwater law if 20 million farming households owning irrigation wells are strongly opposed to it, and the rest are indifferent or weakly opposed to it, especially when the administration is an instrument of a state that styles itself as a democratic welfare state?

    IV IWRM Experience in Asia and Africa: Lessons for India

    It is not surprising then that IWRM type policy interventions that many governments in Asia and Africa have adopted under the influence of global water discourse have produced doubtful outcomes, besides deflecting them from addressing here-andnow supply-side issues in their water economies. During the past decade, the government of Sri Lanka has made two bold but abortive attempts to push through IWRM-style reforms in the water sector. The latest draft water policy and water law provided for: (a) establishing state ownership of all water; (b) institution of water use rights through withdrawal permits; (c) pricing of water in all uses; (d) transferable water permits to encourage trade in water rights; (e) replacement of existing water organisations by river basin organisations – in sum, copybook IWRM reforms. The media and civil society however took to the turf bitterly opposing the very logic underlying the proposed reforms [Samad 2005]. The government withdrew the reforms in a hurry; however, little thought was given to how exactly would their provisions be implemented had the new water policy and law got passed.

    Many south-east Asian countries – notably, Thailand, Indonesia and Vietnam – however, faced no such opposition from media and civil society and swiftly passed water laws that incorporated key IWRM instruments including formation of river basin organisations, registration of water users and issue of withdrawal permits as a mechanism for creating tradable water rights, participatory management of irrigation systems through service contracts between agencies and users, and so on [Molle 2005]. Molle, however, found little match between the reality of the water economies of these countries and the reforms borne out of “a global water discourse largely driven by international organisations”. His review of the experience with IWRM in Mekong led him to emphasise “a gap between formal and statecentred initiatives and reality on the ground, which proceeds at a different pace. Lessons learned elsewhere are certainly important but cannot be adopted indiscriminately and must not be allowed to crowd out the emergence of endogenous and condition-specific solutions”. In brief, the IWRM came unstuck.

    Similar feeling was echoed in a recent African Water Law workshop about donor-induced IWRM style water policy reforms in many African countries [Shah and van Koppen 2005]. With the onset of the 1990s, many African countries took to IWRM wholesale. Almost everywhere, thinking about improving the functioning of the water economy involved little effort to fit policy reforms to the local reality. Almost everywhere, water reforms: (a) declared water as a state property; (b) instituted water withdrawal permits; (c) made water pricing mandatory for all but domestic uses; and (d) led to the formation of river basin organisations with water allocation mandate in water economies where the bulk of the water diverted is (and most of the water users are) in the informal sector with little or no direct contact with formal water agencies.

    Institutional reforms take a long time to sink and produce desired impacts; in Africa, however, evidence is already piling to suggest that the IWRM reforms seem to have done little to improve anything; instead, they created undue tension, hassle and in extreme cases, dispossession of the poor. In particular, the workshop identified four problems: (a) the aims that the water reforms seemed designed to achieve did not reflect the current water sector priorities of the countries as viewed by national policy-makers, civil society and citizens; (b) reforms touched only a small formalised segment of the water economy and a tiny proportion of water use and users; as a result, their impacts on the water sector were neither deep nor broad; (c) however, they posed threatened disintegration of customary laws and institutions evolved and used by communities; these are never ideal, but they are time-tested, robust and perform their basic functions well; and (d) they also created serious distortions, threatened dispossession of large numbers of poor, and created new vested interests; these potentially deleterious impacts were limited only by the fact that almost everywhere reforms failed to stick, laws remained largely unenforced, water prices remained uncollected.

    What, then, went wrong with Africa’s and Mekong countries’ water reforms? Several things, it seems. Many countries just copied laws made elsewhere, just as several states in India have blindly copied Andhra Pradesh’s law on participatory irrigation management, and Pakistan Punjab has copied the water law of the state of Colorado in the US. In Africa too, countries did a “copy and paste”, for example, of parts of the South African National Water Act. Without consultation, public participation, and a serious attempt to fit reforms to the context, the impact of these reforms was bound to be negative if at all. And now, Ghana is having second thoughts on its reform strategy and going back to the drawing board.

    In Africa, as in some Asian countries like Sri Lanka, international agencies and global thinking rather than analysis of local context and need has had a powerful influence on the design of water sector reforms. Tanzania is a case in point; its 1991 water policy identified water development and provision as a key national policy goal and argued for more water storage creation. However, creating new storage and infrastructure was anathema to international donors; so Tanzania ended up doing what donors would support: stock textbook IWRM, which included state ownership of water resources, water withdrawal permits, water tax, legal institutional reform, river basin organisations, water user associations (WUAs), but no attempt to get what its people need most, more and better-managed infrastructure. Tanzanians all along had plans to build storages but were secretive about it for the fear of donor reprimand. In implementing the first phase of the IWRM project, however, the leadership figured that reforms could not deliver what Tanzania’s rural communities need badly, i e, better domestic water supply systems, improved irrigation water control and better hydraulic infrastructure rather than water withdrawal permits, water pricing and catchment organisations.

    The only African country where water reforms have produced semblance of improved governance of water resources is South Africa, which has emerged as a model, exemplifying IWRM type water sector reforms in an emerging economy context. South Africa is interesting because of its first-world-third-world duality. In terms of income inequality, South Africa is next only to Brazil. South Africa’s 54 per cent of water use is in agriculture; and 95 per cent of its farm lands are owned by a small minority of white commercial farmers. In the Olifants, one of South Africa’s most developed basins, 95 per cent of rural water resources is used by only 0.5 per cent of the population, white commercial farmers. The Gini coefficient for rural water use is as high as 0.96 [Cullis and Van Koppen 2005].

    South Africa’s ground-breaking water law (chapter 4 of the Act: Section 21) specifies following uses and brings them within its IWRM mandate: (a) taking water from a water resource;

    (b) storing water; (c) engaging in a stream-flow reduction activity, such as forestry; (d) control activities, e g, irrigating with wastewater; (e) discharging of wastewater into a water source through a pipe, canal, etc.

    All those using water for the above purposes have to register, pay water use charge and a water resource management charge. South Africa has all of 62,000 authorised, billable water users (or registered primary diverters) that account for 11 billion m3 of water allocation for commercial agriculture, five billion m3 for industry and municipal uses, and nine billion m3 for forestry. The government of South Africa generates around two billion rand/year (USD 0.35 billion/year) as income from water tariffs. Managing these 62,000 users has been far from easy: it is difficult to ascertain actual volumes used; some users did not register and some registered use could be unlawful under existing water law. Many commercial farmers have extended their irrigated areas unlawfully, posing they are using their water allocation more efficiently. A critical issue for officials is whether to rely on voluntary compliance or evolve a system of policing.

    Interestingly, however, the South African IWRM leaves 95 per cent of its people out of its ambit. All of 2.3 billion m3 – about 10 per cent – of total water use is allocated to the so-called schedule-1 users, mostly rural black South Africans, who include some 18 million primary diverters of water for domestic use, irrigating tiny food plots and small vegetable gardens. Their water use is neither subject to licences nor billable. If anything, everyone agrees, the crying need is to increase the access to and

    Figure 3: Transformation of Informal Water Economies in Response to Overall Economic Growth

    Stage I: Completely Informal Stage II: Largely Informal Stage III: Formalising Stage IV: Highly Formal Water Industry
    Per cent of water users in the formal sector <5 per cent 5-35 per cent 35-75 per cent 75-95 per cent
    Examples Sub-Saharan Africa India, Pakistan, Bangladesh Mexico, Thailand, Turkey, Eastern China USA, Canada, Western Europe, Australia
    Dominant mode of water service provision Self-supply and informalmutual-help community Partial public provisioning but self-supply dominates Private-public provisioning; attempts to improve serviceand manage the resource Rise of modern water industry;high intermediation; self-supply disappears
    Human, technical, financial resources used by water sector Per cent of total water use self-supplied Rural population as per cent of total Monetary cost of domestic water as per cent of per caput income Financial cost of water service provision
    Concerns of the governments Infrastructure creation in welfare mode Infrastructure and water services, especially in urban areas Infrastructure and service in towns and villages; cost recovery; resource protection Integrated mgt of water infrastructure, service and resource; resource protection
    Institutional arrangements Self-help; mutual help and feudal institutions dominate Informal markets; mutual help and community management institutions Organised service providers; self-supply declines; informal institutions decline in significance Self-supply disappears; all users get served by modern water industry.

    productive use of water by these users; yet the entire edifice of IWRM practices is unable to meet this need.

    Not that South Africans are not trying; but they have just begun reforms in black South Africa and find the going tough. Eighteen million rural South Africans, de facto still partially ruled by 800 chiefs and 13,000 village headmen with their customary law and traditional institutions constitute a diffuse informal water economy where self or community provision galore. Under the National Water Policy of 1997 and Water Act of 1998, South Africa was to be covered by 19 catchment management agencies (CMAs). Only two fledgling CMAs have been formed so far with a far more modest role than was originally envisaged. Moreover, for the five poorest water management areas it is increasingly recognised that a CMA will never be financially viable at all, and could become, at best, business units within government. The formation of CMAs, turning over of small-holder irrigation systems to water user associations, promotion of appropriate technologies – central to improving the lives of the vast majority of South Africans – remain major challenges that the country’s water reforms are yet to begin to meet. These are also the challenges facing India, Bangladesh, Nepal and numerous poor countries. The IWRM is working in European South Africa, but the African South Africa has to begin at the beginning.

    The lesson India needs to learn from the experience of all these countries is centrally about the gap between the precept and practice of IWRM. There can be little questioning the basic IWRM premises such as that water should be priced to reflect its scarcity value, that it is best managed at basin level, that reform of property rights will promote its efficient and sustainable use. The question is how to make these stick in water economies that are predominantly informal. All the evidence we have suggests that these work best where: (a) primary water diverters are large, body corporates and few in number; (b) most water users are supplied by organised service providers; and (c) capital accumulation in terms of infrastructure creation is already high.

    In contrast, the IWRM-style demand management reforms would fail to stick where: (a) most of the country’s households are primary water diverters; (b) most self-supply their water requirements directly from natural source; and (c) capital accumulation in water infrastructure is very low.

    All in all, the IWRM paradigm neither responds to the priorities of the poor in poor countries, nor does it resonate with their ground conditions which make implementing water pricing, reform of property rights, allocating water at basin level work. The key factor often ignored is the number of primary diverters of water from nature. In rich countries, these are often just a very small number of body corporates – water companies, utilities, municipalities, cooperatives – who serve the water needs of all users that are no longer primary diverters. In low-income countries with high level of income inequality such as Brazil and South Africa, the IWRM works well in the rich, modern, formal segment of the water economy but can actually leave the poor worse off by destroying their traditional institutional arrangements while replacing them by poorly functioning modern ones. In most other low income countries where a majority of users are obliged to self-provide their water because of absent or poorly developed water infrastructure, the IWRM deflects attention of policymakers in these countries from what ought to be their key priority

    – which is to deliver improved and better managed water infrastructure and services.

    A core value of IWRM is people’s participation in water resources management: its popular slogan “make water everybody’s business” is illustrative. In reality, in countries like India, the fact that diverting water from natural water bodies is everybody’s business makes IWRM impossible to implement. A condition necessary and sufficient for effective implementation of IWRM type demand management is that diversion of water from nature is the business of relatively few, large users and service providers who can be brought within the ambit of public policy with relative ease.

    Contrast the informal water economy of a typical Indian district with the highly formalised water economy of a typical European country, such as say Switzerland [Luis-Manso 2005]. Seventy per cent of Switzerland’s population is urban; the country is facing continuous reduction in industrial workers and farmers. 15-20 per cent of the Swiss population was linked to public water supply as far back as in the 18th century, more than India’s is now; today, 98 per cent of the Swiss population is linked to public water supply networks and 95 per cent is connected with wastewater treatment facilities. At US $ 468, per capita water bill the Swiss pay annually is higher than the per capita total income of Bangladesh. All its water users are served by a network of municipal, corporate, cooperative water service providers. It has stringent laws and regulations about water abstraction from any water body which can be done only through formal concessions. However, these concessions are held only by a small number of formal service providing public agencies; as a result, their enforcement entails little transaction costs. It is not surprising that the IWRM instruments work perfectly in such a highly formalised water economy.

    V A Model of the Evolution of a Water Economy

    Water institutions that exist or can be externally catalysed in a country depend, besides several other factors, on the stage of formalisation of its water economy which in turn depends upon the overall economic evolution of that country. Figure 3 presents a clutch of empirically verifiable hypotheses – a set of iron laws of economic development3 – about how the economic organisation of a country’s water economy metamorphoses in response to economic growth and the transformation of society that comes in its wake. Regardless of its water endowments, as a low-income economy climbs up the economic ladder, the organisation of its water economy undergoes a transformation in tandem with the transformation of the society as a whole. The foremost driver of this transformation is urbanisation and occupational diversification. As the proportion of rural and agrarian population declines, agricultural water demand eases. With urbanisation and economic growth, self-provision of water is increasingly replaced by service providers. In poor economies, implicit costs of water acquisition – in the form of labour spent in fetching water – are high, especially for the poor; with economic growth, labour costs decline but monetary cost of buying water service increases. In affluent countries, scientific and economic resources devoted by the society per km3 of water diverted are much higher than in poorer countries.

    Along with these changes, water institutions too undergo profound change. In very poor societies, self-provision of water by households is ubiquitous; in much of Africa, we do not find local, informal markets even for pump irrigation services that are widespread in South Asia. Countries at somewhat higher level of economic growth witness limited local specialisation in water services provision in an informal manner. As economies growth still further, local specialisation – and informal institutions associated with these – disappear as large, professionally-run corporates take over the role of procurement, processing and retailing of water. Thus, informal water institutions we find in India, Pakistan and Bangladesh – such as, say, pump irrigation markets, urban tanker water markets – are unlikely to be found in Australia or Spain because those countries have outlived the need for these by creating specialised water institutions at a higher level that their citizens need and can now afford. Likewise, water institutions that are standard in industrialised countries – high net worth water companies managing a city’s water supply system

    – would not begin to work until Dhaka as a water service market evolved, at least, to Manila’s or Jakarta’s level.4

    For much the same reasons, it is difficult to find a country in, say sub-Saharan Africa with a modern water industry of the kind we find in a European country. South Africa may be the exception that proves this rule: white South Africa – inhabiting its towns or operating large, commercial farms in the countryside – is served by what approximates a modern, formalised water sector. However, the former homelands, where half of South Africans live, are served by a water economy even more informal than India’s.

    We have so far discussed IWRM paradigm’s errors of commission. However, its major effort of omission is that it offers no guidance on what to do with a plethora of water institutions that developing countries already have. The here-and-now challenge of water governance in low income countries like India is one of understanding and working with groundswells of spontaneous institutional formations which have emerged and sustained to create value for water users. Informal, decentralised pump irrigation markets today serve one-third of India’s gross irrigated areas [Mukherjee 2005], as much as the share of all public irrigation projects. There is a booming culture fishery in the making in small common property ponds and tanks throughout India providing livelihoods and improving nutrition of millions of rural households. New technologies and stocking material created the potential for a boom; however, it is the myriad changes that have occurred in the institutional arrangements for leasing of small water bodies that have energised this boom. Where state governments dogmatically adhered to the communitarian ideal, the boom has remained muted; where they have adopted an entrepreneur-friendly approach, the culture fishery economy has boomed. In the famous Sardar Sarovar Project on river Narmada, planners had planned that the government would build lined minors going up to each village service area (VSA) commanding 200-600 ha; a WUA will build sub-minors and distribution network within each VSA by mobilising local resources. As it has turned out, planners proposed; and farmers have disposed.

    Figure 4: Matrix of Perceived Pay-offs and Transaction Costs

    i l l i l • Pump irrigation markets • Entrepreneurial culture fishery • Proactive power supply management to control groundwater draft • Groundwater recharge movement High Pay-Offs
    Low Transaction ved Costs High
    Percei • Groundwater law
    i• Metering tubewells
    ’• WUA’s in canal projects
    • Water rights thru’ permits
    • Water allocation at basin
    Low level

    Of the 1100 odd VSAs so far covered, not one has a WUA that built the distribution system. However, this has not stopped irrigation in the SSP command; thousands of farmers have invested in diesel pumps and rubber pipes; pump irrigation markets have sprung up everywhere. According to some, this is certainly not the best solution; planners do not like this irrigation anarchy; but then farmers do not like to lose precious farm land and invest own funds for building a distribution system [Talati and Shah 2004]. Groundwater depletion is one of the most complex challenges India’s people and water policy-makers face. However, the responses of the IWRM theoreticians have tended to differ from those of the people who are at the receiving end: the former think primarily in terms of ways to reduce groundwater draft through laws and regulations; people have steered clear of demand restriction but have instead mobilised local resources to increase supply. Rural communities in western India – notably, Saurashtra and eastern Rajasthan – have taken to water harvesting and decentralised groundwater recharge in a big way as a mass movement. In southern states, there is a growing tendency to convert irrigation tanks into percolation tanks by sealing the sluice gates of tanks.

    Developing countries like India are then confronted with a policy dilemma of whether to pursue an unachievable ideal – such as the IWRM – or to work with what they have. Recent discussions in the field of New Institutional Economics (NIE) help us explore this dilemma because it addresses the question: “why economies fail to undertake the appropriate activities if they had a high pay-off” (North 1990). India’s water sector is replete with situations where appropriate activities can potentially generate a high pay-off and yet fail to get undertaken. An institutional change creates a “structure” of pay-offs with gains varying across different groups of agents, and therefore, inviting different ‘intensities’ of responses. A small group of agents each threatened with large loss may put up a stiff resistance to a change that is beneficial for the society as a whole, and vice versa. In NIE, transaction costs are seen to include: (a) costs of search and information; (b) costs of negotiation, bargaining and contracting; and (c) costs of policing and enforcement of contracts, property rights, rules and laws. For a policy or institutional intervention, all these three increase directly with the number of agents involved as well as the strength of their preference for or against the intervention. All the three costs come into play in determining the “implementation efficacy” of an institutional intervention because each depends on the number of agents involved in a transaction, which in an informal water economy is large.

    Figure 4 illustrates what this means for the emerging institutional fabric in India’s water sector. A great deal of what policymakers and researchers consider desirable institutional change

    – such as making and enforcing groundwater regulation, metering farm electricity connections, instituting participatory irrigation management, reforming water rights all of which would be part of the IWRM package – are extremely difficult to implement on the ground because the transaction costs of doing so are high for implementers and pay-offs are low, even negative, for the water users. In contrast, a plethora of institutional arrangements in the informal sector address various priorities of users, offering them high pay-offs and entailing low transaction costs; yet the state is largely oblivious, even suspicious, of them.

    VI Summary and Conclusion

    Indian water policy discussions are deeply, often unduly, influenced by emerging global discourse on how developing countries can put their water sectors in order. Key premises of the current global discourse are: (a) as demand for water increases, “water poverty” deepens in countries facing water scarcity;

    (b) embracing a clutch of direct demand management practices and policies, commonly referred to as Integrated Water Resources Management, can help us mitigate water poverty and confront water scarcity. Quintessentially, this paper is a challenge to these premises. We adduced cross-country evidence to show that water poverty of countries has little to do with scarcity of water endowments, but everything to do with the growth and maturity of a country’s economy. We also reviewed the experience of donor-induced IWRM in Asia and Africa which suggests that these initiatives have done little good, and even some harm in many of these countries. The most significant impression that emerges is that, wherever these are tried, the IWRM-style reforms have come unstuck. Implementing water pricing and water withdrawal permits has proved administratively challenging; renaming territorial agencies into river basin organisations had failed to result in water management at river basin level.

    The chief reason is that in predominantly informal water economies of poor countries, majority of water users depend either on self-provision of water or local informal institutional arrangements. Making direct demand management work in such situations is close to impossible. The IWRM paradigm of direct demand management is not wrong, but it is infeasible in informal water economies. The rise of a class of intermediaries between users and natural sources of water – in the shape of water service providers – is a precondition to meaningful demand management.

    The water policy challenge in India then is eschewing initiatives that are unimplementable – such as enforcing water withdrawal permits, groundwater rights, metering tubewells. Instead, we should base policy on a comprehensive understanding of how the water economy actually functions, complete with myriad institutional arrangements communities have devised to serve their own ends. We must pay close attention to understand what works on the ground and what does not; and devise indirect policy instruments to entice or compel private institutional arrangements to serve public policy goals.

    Finally, the IWRM paradigm must not be allowed to obfuscate India’s key priorities for years to come, which is making good, sensible investments in improving water infrastructure and services; and making these investments work. We also need to bear in mind that as the world’s largest user of groundwater, India’s water economy has a unique dynamic of its own which demands a unique strategic response. Finally, as India urbanises and gets richer, highly formalised segments must emerge especially in cities; direct demand management of the IWRM variety is the ideal framework for managing these formal segments, and we should vigorously pursue IWRM in these formal segments of our water economy.

    m

    Email: t.shah@cgiar.org BvanKoppen@cgiar.org

    Notes

    1 The approach and methodology used by these researchers were similar to those used for computing the Human Development Index (HDI) [UNDP 2000]. The index was constructed by combining five component indices that cover water resource endowments, access to water, human capacity, water use efficiency, and quality of water environment. Each of the five component indices was given equal weight to generate the Water Poverty Index that takes values in the range of 0 and 100, the higher the value, lower the water poverty.

    2 Which presumably means water supply through a local community-based or municipal body that takes some responsibility of quality.

    3 Scott Roselle used this phrase recently to refer to the unexceptionable tendency of agricultural population ratios of countries to fall as their economies grow. But I think this also applies to other responses to economic development as outlined in Figure 1.

    4 If recent accounts of the travails facing global water companies like Vivendi and Thames Water who are forced to wind up even in these increasingly affluent east Asian cities is any guide, we must conclude that south Asian cities have a long way to go before they can afford water supply systems of European or North American quality (see, The Economist, August 15-21, 2004).

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