India is confronting the harsh reality of water scarcity.
The annual decline in per capita water availability from 1486 m3 in 2021 to 1367 m3 by 2031 sets an alarming trajectory, falling below the current global average of approximately 5500 m3 and signalling a severe water scarcity challenge for the nation.
The growing population exacerbates the demand for water, affecting food, sanitation, and development needs. Worsening water pollution, climate change-induced droughts, and inadequate water resource management further strain water supply, particularly groundwater resources.
India’s reliance on monsoons for agriculture intensifies the pressure on water resources, with droughts increasing in frequency and projecting a worsening trend until 2049.
The agricultural sector, which employs 70 per cent of the population, is the primary water consumer but faces low water-use efficiency. Inefficient irrigation systems and overexploitation of groundwater aggravate the water stress.
India’s irrigation sector, consuming 80 per cent of total water, relies heavily on unsustainable groundwater extraction, driven by perverse subsidies and suboptimal water pricing.
Groundwater depletion at a rate of 0.3 metres annually poses a severe threat to the country’s water security. Recognising the urgency, the Ministry of Jal Shakti was established in 2019, implementing programs to enhance irrigation efficiency and promote optimal water resource utilisation.
However, with declining real prices, the existing water pricing system has led to inter-state conflicts — emphasising the need for a holistic approach to water pricing, considering the comprehensive values and ecosystem service losses associated with water diversion.
Ecosystem services and water valuation
Water allocation challenges arise from spatiotemporal differences in availability, requiring efficient management to allocate scarce resources among competing needs. Hence, a robust and inclusive water valuation technique is needed to enhance water governance processes.
Valuing water serves as an objective tool for decision-making, providing a quantified basis for ranking and prioritising projects in water-related infrastructure. Equitable and inclusive valuation aids the allocation of scarce resources, balancing efficiency, equity, and sustainability considerations for social optimality in consumption and production.
Water plays a pivotal role in providing ecosystem services, benefiting both people and the environment in various ways.
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India faces a severe water crisis driven by significant demand-supply gaps, inefficient water resource management, and climate change. Predictions indicate critical water shortages by 2050, highlighting the urgency for practical solutions.
Ecosystems like rivers, wetlands, and marine ecosystems offer goods such as clean water and fish, along with services like water purification and flood mitigation. Environmental flows, which allocate water to sustain ecosystems, are crucial for the well-being of these environments and the communities dependent on them.
Despite water’s importance in sustaining diverse ecosystems, there is a lack of detailed quantitative knowledge regarding the impacts of environmental changes on ecosystem structure and functions.
Examples include changes in biodiversity, water quality parameters, hydrological flow data, and the economic valuation of ecosystem services. Such data helps understand and manage the trade-offs between human activities and ecosystem health. However, recognising water’s contribution to ecosystem services remains an emerging research area.
The importance of integrating environmental sciences and economics for collaborative research efforts cannot be understated, and the need for a balance between equity and efficiency in water pricing must be emphasised.
Efficiency aims to optimise water allocation for maximum net benefit, while equity ensures fairness among economically diverse groups.
Differential pricing (higher for industrial use than domestic), market-based pricing, and output pricing (charging based on crop production) are possible strategies to achieve equity and efficiency in water allocation, recognising the challenges in objectively measuring fairness.
Pricing water in India
India faces a severe water crisis driven by significant demand-supply gaps, inefficient water resource management, and climate change. Predictions indicate critical water shortages by 2050, highlighting the urgency for practical solutions.
There is a disparity in irrigation water pricing across states, leading to low revenue collection. This is mainly attributed to low water taxes, infrequent charge revisions, and flaws in the revenue collection mechanism.
However, the regulatory body’s effectiveness is contingent on the establishment of a robust pricing mechanism.
A uniform and rigid water pricing system across India is highly required to accurately value and sustainably utilise the depleting resource. Currently, water pricing in India varies significantly across states, with many states setting nil to low water taxes and rarely revising charges.
This results in flawed revenue collection mechanisms and low revenue generation in the irrigation sector. Again, over utilisation of groundwater resources due to a focus on supply-side measures exacerbates the crisis, necessitating the immediate implementation of a stringent water tariff system nationwide.
The multifaceted water tariff design approach must balance revenue generation, efficiency, demand management, economic development, and public welfare.
The tariff-setting process should be transparent, ensuring equity, sustainability, and resource conservation. Forward-looking rates should consider environmental costs, align with government policies, and adapt to varying water supply characteristics.
The overarching goal is to address India’s water crisis through an integrated approach involving effective regulation, pricing mechanisms, and sustainable resource management.
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