THE WORLD BANK INDIA’S WATER ECONOMY Bracing for a Turbulent Future INDIA’S WATER ECONOMY India faces an unsure water future. Unless fresh policies are adopted and implemented to make water development and management sustainable, India will have neither the means to maintain and build BRACING FOR A TURBULENT FUTURE new infrastructure, nor the water required for its survival. This report focuses on two basic issues—the major water-related challenges facing India, and the critical measures required to address them. It calls for a reinvigorated set of public water institutions to sustain I water development and management in India. The study: ECONOMY WATER NDIA’S • examines the evolution of water management in India • describes the achievements of the past • analyses the challenges ahead • suggests ways of evolving a sustainable water management system Drawing heavily on background documents by eminent Indian practitioners and policy analysts, it explores various options of managing the transition from past practices in a principled and John Briscoe • R.P.S. Malik pragmatic manner. BRACING FOR A TURBULENT FUTURE The report will be essential for practitioners in the fields of water management, development, and economics. It may prove useful for policymakers, government agencies, NGOs, journalists, and general readers interested in India’s water economy. John Briscoe is currently World Bank Country Director for Brazil. Previously, he was Senior Water Advisor with responsibility for the Bank’s water portfolio both globally and in South Asia. R.P.S. Malik currently works with the Agricultural Economics Research Centre, University of Delhi. He has written extensively on water-related issues. Earlier, he worked for The World Bank, World Resources Institute, and Afro-Asian Rural Reconstruction Organization. THE WORLD BANK ISBN 019568319-6 1 4 9 780195 683196 www.oup.com THE WORLD BANK 2 INDIA’S WATER ECONOMY INDIA’S WATER ECONOMY BRACING FOR A TURBULENT FUTURE John Briscoe R.P.S. Malik THE WORLD BANK Agriculture and Rural Development Unit 1 South Asia Region 1 YMCA Library Building, Jai Singh Road, New Delhi 110001 Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide in Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries Published in India By Oxford University Press, New Delhi © 2006 The World Bank, 1818 H Street, NW, Washington, DC 20433 First published in India 2006 All rights reserved. The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank of the governments they represent. The material in this work is copyrighted. 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The boundaries, colours, denominations, and other information shown on any map in this work do not imply any judgement on the part of the World Bank concerning the legal status of any territory or the endorsement of the acceptance of such boundaries. ISBN-13: 978-0-19-568333-2 ISBN-10: 0-19-568333-1 Tyeset in Sabon in 10/14 by InoSoft Systems, Noida 201 301 Printed at Published by Manzar Khan, Oxford University Press YMCA Library Building, Jai Singh Road, New Delhi 110 001 ACKNOWLEDGEMENTS This report has benefited greatly from formal reviews and comments from external reviewers (Suresh Prabhu, Peter Rogers, Ramaswamy Iyer, George Varughese, Tushaar Shah, Maria Saleth, Vijay Vyas, Ramesh Bhatia, and Nirmal Mohanty) and World Bank staff (Sumir Lal, Sanjay Pahuja, Sunil Khosla, R.S. Pathak, Prabir Joardar, Grant Milne, Connie Bernard, Martien van Nieuwkop, Gajan Pathmanathan, Dina Umali-Deininger, Manuel Contijoch, Karin Kemper, Javier Zuleta, Srinivas Rajagopalan, Harshadeep Rao, Keith Pitman, and Alain Locussol). As usual, not all reviewers agreed with all that is written in the report (nor did the authors agree with all that was suggested by the reviewers!). The product is entirely the responsibility of the authors and should not be attributed to the reviewers. The report was discussed with the Government of India but does not necessarily bear its approval for all its contents, especially where the Bank has stated its judgments, opinions or policy recommendations. The title for this report is stolen—with kind permission from Tushaar Shah—from that of the 2005 annual meeting of the IWMI-Tata Water Program, one of the many fora at which the ideas in this Report were discussed and refined. The IWMI graciously helped with the production of the basin maps. Jacqueline Julian of the World Bank provided excellent assistance. Generous support was provided by the Bank Netherlands Water Partnership Program. CURRENCY EQUIVALENTS Currency unit = Indian rupee US$1= Rs. 45.50 FISCAL YEAR April 1–March 31 ABBREVIATIONS AND ACRONYMS CAS – Country Assistance Strategy CII – Confederation of Indian Industry CWC – Central Water Commission DJB – Delhi Jal Board DVC – Damodar Valley Corporation FICCI – Federation of Indian Chambers of Commerce and Industry IMT – Irrigation Management Transfer IPCC – Intergovernmental Panel on Climate Change IWMI – International Water Management Institute NWDA – National Water Development Authority PIM – Participatory Irrigation Management TISCO – Tata Iron and Steel Company TVA – Tennessee Valley Authority WUA – Water Users Association Vice President : Praful Patel Country Director : Michael Carter Sector Director : Constance Bernard Sector Manager : Adolfo Brizzi Task Manager : John Briscoe INDIA’S WATER ECONOMY TABLE OF CONTENTS PREFACE EXECUTIVE SUMMARY 1. THE HUGE ACHIEVEMENTS OF WATER DEVELOPMENT AND MANAGEMENT IN INDIA The Era of Large Investments in Major Infrastructure 1 The Era of Groundwater Exploitation 7 2. CURRENT AND LOOMING CHALLENGES Adjusting to the Needs of a Changing Society 12 Adjusting to Scarcity and Greater Variability 15 Dealing with Growing Conflicts 20 Maintaining and Renewing Existing Infrastructure 26 Building Infrastructure in Under-served Areas and for Under-served Public Purposes 30 3. AN INVIGORATED INDIAN WATER STATE FOR THE 21ST CENTURY A State in Disrepute 39 The Central Institutional Challenges in Building ‘the new Indian water state’ 40 Instruments, not Organizational Forms, are Key 41 Stimulating Competition in and for the Market of Water Supply Services 43 Empowering Users by Giving them Clear, Enforceable Water Entitlements 46 Ending the Culture of Secrecy and Making Transparency the Rule 53 Introducing Incentive-based, Participatory Regulation of Services and Water resources 54 Putting the Sector on a Sound Financial Footing 55 Investing Heavily in Human Resource Development 58 Ensuring that Local People are the First Beneficiaries of Major Water Projects 59 Making the Environment a High Priority 60 4. PRINCIPLED PRAGMATISM AND ‘RULES FOR REFORMERS’ Rule #1: Water is Different 63 Rule #2: Initiate Reform where there is a Powerful Need and Demonstrated Demand for Change 63 Rule #3: Involve those Affected, and Address their Concerns with Effective, Understandable Information 65 Contents Rule #4: Reform is Dialectic, not Mechanical 67 Rule #5: It’s Implementation, Stupid 68 Rule #6: Develop a Sequenced, Prioritized List of Reforms 68 Rule #7: Be Patient and Persistent 68 Rule #8: Pick the Low-hanging Fruit First—Nothing Succeeds like Success 69 Rule #9: Keep your Eye on the Ball—don’t let the Best become the Enemy of the Good 69 Rule #10: There are no Silver Bullets 70 Rule #11: Don’t throw the Baby out with the Bathwater 71 Rule #12: Reforms must Provide Returns for the Politicians who are Willing to make Changes 72 5. THE EVOLVING ROLE OF THE WORLD BANK What the Bank has Done in the Past 73 The Bank’s New Water Strategy 76 The 2004 World Bank Country Assistance Strategy for India 76 The Ongoing Evolution of Bank Engagement in the Water Sector in India 78 viii FIGURES AND BOXES FIGURES Figure 1: Rates of return on investment on infrastructure and mana gement of water resources xvii Figure 2: The evolving role of the citizen and the state in water management in India xxi Figure 3: The changing composition and level of World Bank lending for water in India xxiii Figure 1.1: British water engineers who are revered as saints in southern India 2 Figure 1.2: Output on irrigated and unirrigated farmland 2 Figure 1.3: Percentage of irrigated area by farm size 4 Figure