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Federalism and Water Management in India

Nirvikar Singh
Department of Economics University of California, Santa Cruz

Presentation for Federalism and Reform in Asia Project: 2010 Conference December 1-2, 2010
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Outline

Introduction Water Issues Federal Institutions Analytical Review Current Developments Conclusion

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Introduction

Indias potential water supply shortfall could be 50% of possible demand in 2030 80% of the projected shortfall will be manifested in agriculture Increased industrial and urban residential demand for water will need new infrastructure Climate change will be an additional challenge Water disputes and conflicts may increase in severity Governance institutions at all levels matter
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Water Issues

India has 16% of the worlds population, but only about 4% of the total available fresh water Per capita storage capacity is relatively low Many manifestations of a perceived crisis

Supply and access urban, rural, groundwater depletion, contamination Irrigation inadequate and inefficient investment, poor maintenance Quality industrial pollution, household sewage Floods Conflicts
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Water Marginal Cost Curve

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Economics of Water

Provision of infrastructure Maintenance of infrastructure Efficient pricing Regulation of externalities Incentive provision

Suggests system redesign is needed

Systemic, policy and behavioral barriers to innovation


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Federal Institutions

Constitutional republic with federal features

Center, states and local governments

Local water infrastructure a local government responsibility Water is in the State List Exception is regulation and development of inter-state rivers and river valleys

Requires parliament to legislate


Inter-state Water Disputes Act River Boards Act


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Federal Institutions
Water Resources Center Inter-state rivers All other Agriculture Procurement, PDS, CSS All other

State

Local

Local water infrastructure

Potential only
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Federal Institutions

Vertical coordination

International National Center-State State-Local Water resources Agriculture Water resources Environment Water resources Urban development

Horizontal coordination

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Analytical Review

Allocating property rights

Inherently conflictual zero sum game Three traditional positions


Harmon (upstream rights) History (historical use) Hobbes (contractual solutions) Coase theorem does not address distributional issue Coase result of separation of efficiency and allocation depends on absence of

Contracting and Coase


Wealth effects Transaction costs


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Analytical Review

Bargaining may better than markets

Small numbers Infrequent trading

Multiple layers of allocation mean multiple layers of bargaining


Inter-state agreements may benefit from intra-state improvements in allocation Local markets or user associations Investments without prior agreements on rights can be inefficient Noncooperative investments may be inefficient
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Investments affect the productivity of water

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Analytical Review

Delays in resolving inter-state disputes

In constituting tribunals In tribunals reaching decisions In notifying tribunal decisions


Level of authority of tribunals Political difficulties in enforcement

Enforcement issues

Limited role of National Water Resources Council (created 1983)

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Current Developments

National Water Mission (2009) Part of National Action Plan for Climate Change Five goals of NWM:

Comprehensive water data base in public domain and assessment of impact of climate change on water resource Promotion of citizen and state action for water conservation, augmentation and preservation Focused attention to over-exploited areas Increasing water use efficiency by 20% Promotion of basin level integrated water resources management

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Current Developments

NWM implementation

To be coordinated with national and state plans Proposes passage of state-level legislation Proposes capacity building at the level of local governments and local water user associations Proposes dedicated Mission secretariat Under MoWR Vertical two-tier, center and states Horizontal across ministries

Coordination proposals

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Current Developments

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Current Developments

More on NWM implementation

Possible incentives to state and local governments for implementing reforms in water management

Set of possible criteria for evaluation, including subsidy reduction and creation of new regulatory institutions

Local level

Main NWM document mentions engaging with local governments and water user associations Sub-committee reports prposed funding for WUAs, as well as a discussion of operational models and supporting legislative changes

Relative disconnect between national and state policies on the one hand, and local implementation on the other

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Current Developments

Richards and Singh (1996, 2002) proposals

Hierarchy of specialized water management associations from national to river basin down to local level Uniformly remove a set of decisions with respect to water sharing and use outside the general political orbit, without tilting power towards the center

Amendments to ISWD in 2002 have not solved political problems of inter-state river disputes

Constraint on institutional development is human capital more than money

Monetary investments required for improved efficiency are also not large in total
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Current Developments

Agriculture and water


Water-saving agricultural practices not part of the NWM funding framework Ministry of Agriculture efforts, but with relatively low allocations National Policy for Farmers and National Mission for Sustainable Agriculture are not detailed documents, nor are they coordinated with NWM

River-interlinking scaled back still issues of costbenefit, especially versus water-saving innovation Urban water infrastructure and use

JNNURM channels funds to municipal governments Need institutional development of these governments
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Conclusion

India faces severe but manageable challenges with respect to water resources, over the next two decades and beyond Government responses display beginnings of integrated approach to water management

Quality of analysis higher than in the past Still need prioritization and rigorous cost-benefit analysis Translating national policies and strategies into state and local action Coordination across ministries, particularly those responsible for agriculture and for water resources
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Challenges

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