ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Transboundary Disputes: Politics and Litigation Play Havoc

The conflict over sharing of the Beas, Ravi and Sutlej waters began in 1966, when Haryana was carved out of Punjab and the new state demanded a share under the Punjab Reorganisation Act, which itself is not recognised by Punjab. Despite numerous interventions by the centre and the Supreme Court, the Sutlej Yamuna canal remains incomplete and a general stalemate prevails. In the midst of this controversy, the main issues facing farmers in the two states remain unanswered â?? that of inefficient irrigation policies and practices and increasing cultivation of water intensive crops like paddy and sugar cane.

Equity, Access Allocation: Conflict in the Bhavani

An increase in population, unplanned expansion in the command area of the river Bhavani in Tamil Nadu and the growing domestic and industrial demand for water have intensified competition among water users in the river basin.

Water Quality: Pollution through Aqua Culture

After the richer locals leased land/water from the poor cooperatives in the 1970s in Kolleru in Andhra Pradesh, the land has remained in the name of poor "beneficiaries", while the real fisherfolk work on meagre wages. Ironically, those legally entitled to the benefits have been reduced to wage earners on their own land/water; the rich have not only taken over all the cooperative societies, but have also started illegal encroachments.

Micro-Level Disputes: Gravity Dam in Trouble

The case of the effort to build a small dam in Bhulaveda in Paschim Midnapur district of West Bengal shows that in struggles between government agencies and local self-government, the losers are often the villagers themselves.

Micro-Level Disputes: Failure of Community Institutions

This case study focuses on a group of eight villages in Pathargama block of Godda district of Jharkhand, highlighting water use conflicts between and within villages and the failure of community institutions in dealing with them. The outcomes of these conflicts were the depreciation of the resource base, flash floods and fragmentation, and weakening of traditional institutions. The situation can be resolved by augmenting the resource base and focusing on strengthening village institutions.

'Million Revolts' in the Making

Water conflicts in India have now percolated to every level. They are aggravated by the relative paucity of frameworks, policies and mechanisms to govern use of water resources. This collection of articles, part of a larger compendium, is an attempt to offer analyses of different aspects of water conflicts that plague India today. These conflicts, scale and nature, range over contending uses for water, issues of ensuring equity and allocation, water quality, problems of sand mining, dams and the displacement they bring in their wake, trans-border conflicts, problems associated with privatisation as well as the various micro-level conflicts currently raging across the country. Effective conflict resolution calls for a consensual, multi-stakeholder effort from the grassroots upwards.

Dams and Displacement: When Multiple Conflicts Overlap

The Haribad minor irrigation project in Madhya Pradesh is to be built on the boundary of the two villages of Haribad and Sakad on the Kundi river. The project will largely benefit Haribad, while the tribal people of Sakad will lose their land. This is a brief account of the multiple conflicts that have arisen.

Measuring Fiscal Performance of States

An alternative approach of measuring the fiscal discipline of states by preparing a composite index (Fiscal Performance Index) out of eight fiscal indicators is attempted in this paper. It is argued that although the Eleventh and Twelfth Finance Commissions fully recognised the importance of different fiscal parameters, like the composition of government expenditure, sources and pattern of government finances, the magnitude of debt, subsidies and interest burden, the measure of fiscal discipline, adopted by them is based on only one indicator. The Fiscal Self Reliance and Improvement Index constructed by the TFC that considers the 'change' in a single indicator is narrowly based, unstable and biased against the better fiscal performers. The suggested FPI, on the other hand, is multi-dimensional, more stable, just towards better performers and also useful for state level policy-making. The empirical analysis suggests the large inter-state variations in the level of FPI and almost continuous fiscal deterioration during the post-reform years.

Twelfth Finance Commission and Restructuring of State Government Debt: A Note

The Twelfth Finance Commission's proposed plan for restructuring the debt of state governments contains stringent conditions that probably violate the basic tenets of fiscal federalism. Macroeconomic norms dictated by global finance capital could not obviously be reconciled with the requirements of economic democracy.

Approach and Recommendations

The Twelfth Finance Commission has recommended a scheme of fiscal transfers that can serve the objectives of equity and efficiency within a framework of fiscal consolidation. The effort needed to achieve fiscal consolidation must be seen as the joint responsibility of the central and state governments. For achieving vertical and horizontal balance, consistent with the responsibilities of the two levels of governments in respect of providing public and merit goods and services, both the centre and the states need to raise the levels of revenues relative to their respective revenue bases, exercise restraint in undertaking unwarranted expenditure commitments and prioritise expenditures.

Balancing Stability, Equity and Efficiency

The prevailing fiscal environment is demanding and much was expected of the Twelfth Finance Commission's award in not only ensuring a fair share of resources between the centre and states and among the states inter se, but also in altering the incentive structure to promote fiscal discipline. Like its predecessors, the TFC did not make any drastic changes in total statutory transfers and worked around tax devolution and grants so that the centre's outgo was not substantially increased and equalisation was broadly similar to the past. Although the forecast of revenues and non-plan revenue expenditure has been seasoned with some norms, the incentive structure of the main recommendations remains unaltered. It is not certain whether they would be strong enough to induce the states to reduce revenue deficits.

Equity and Consistency Properties of TFC Recommendations

This paper examines three aspects of the Twelfth Finance Commission recommendations. First, it looks at the most urgent issue for states, the FRBM legislation which they must enact if they are to qualify for the interest rate reduction on debt owed to the centre. The required revenue deficit target of zero by 2008-09 is unambiguously clear but the fiscal deficit requirement is not. The parameter values underlying the fiscal deficit correction path could be valued by states very differently from those assigned in the TFC report. The second issue addressed in the paper is the complex and ambiguous set of conditionalities relating the debt write-offs in year t to the reduction in the revenue deficit in year (t-1) relative to (t-2). These conditionalities also carry a fiscal deficit cap which could be sharply inconsistent with a fiscal deficit correction path fully in conformity with that prescribed by the TFC. These issues are illustrated with simulations for a sample state. Finally, the paper examines the equity attributes of the tax devolution and non-tax grants prescribed by the TFC. The formula adopted for determining tax shares of states assigns a greater weightage to distribution-neutral factors, and so reverses the trend since the Sixth Finance Commission towards increasing weightage for redistributional factors. The non-tax grants do not show an inverse relationship with per capita GSDP. Together, these suggest that the TFC has chosen to move away from equity as a guiding principle for its statutory flows, but the report does not make plain why it has chosen to do so.

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