Water and Communities: Access, Usage and Institutions

Hanan JacobyDevelopment Research Group

Outline

• Productive benefits of irrigation in India

• Defining terms: Efficiency and equity in water allocation

• Surface (canal) irrigation

• Groundwater

Irrigation and its benefits in India• Most of recent increase in irrigated area due to

groundwater. For every hectare irrigated by surface water, about two are now irrigated by groundwater.

• Irrigation, or rather irrigation potential, is strongly positively associated with cropping intensity, farm revenue, and land values.

• Evidence from plot-level NSS data on land values 40% higher land productivity with surface irrigation (comparing land values on irrigated and non-irrigated plots only in villages with surface irrigation and no groundwater exploitation).

(a) Proportion irrigated (b) River density

(c) Groundwater potential (d) Land value/hectare

(b) River density

(e) Net revenue/hectare (‘02-’03) (f) Cropping intensity

Land values in IE

• Farmer reported land values are a potentially useful tool for impact evaluation, reflecting the long-run value of productive characteristics such as infrastructure.

• Changes in permanent income and distributional effects can be imputed directly from estimated changes in land values (based on household landholdings).

Water Allocation: Efficiency vs. Distribution

• Efficient allocation: Maximizes net benefits of resource to society, including nonagricultural

uses.Equalizes marginal net benefits across users Short-run marginal cost takes irrigation infrastructure as given; in long-

run includes cost of infrastructure. For groundwater, insofar as it is exhaustible, efficiency also involves

choosing optimal rate of extraction over time. • Distribution

Efficient allocations are not necessarily ‘equitable’. Since water = wealth, water allocation is necessarily political.

Governments often pursue conflicting distributional objectives (pro-landowner vs. pro-poor)

Geography of a Canal System

Power, Corruption, and Theft• Powerful landowners can organize large-scale water diversions and

canal breaches. At the tertiary level, farmers can tamper with watercourse outlets to increase discharge (perhaps by bribing official).

• Tail-enders at obvious disadvantage b/c of greater conveyance losses and higher costs of monitoring upstream users. But, are landowners in the tail reaches actually poor relative to landless households in the head reaches?

• Efficiency of theft: Depends on complimentarity between irrigation and other assets. Corruption may act as a ‘shadow’ market officials sell water to highest bidder.

• Equity: Depends on organization of production (e.g., tenancy). Can water theft be ‘pro-poor’?

Canal Irrigation Management: The Role of Government

• Public economics rationalization: Irrigation water is not itself a pure public good, being both rivalrous and excludable. Canal maintenance is a public good, in a sense.

• Why not private management? Demsetz argument: Auction off water rights to the firm that will supply it at lowest price? Efficient water allocation using price mechanism.

• Problem with privatizing/pricing irrigation service: Too ‘transparent’—delinks resource allocation and political clout. With uniform pricing, difficult to implement cross-subsidy for the poor (although vouchers could work) Gov. provision appears to be about control of distribution.

Water Allocation Mechanisms• Bureaucratic – inflexible, nonresponsive, poor

service/maintenance, prone to corruption• WUAs and PIM

Theory: Build large scale water distribution system from externally initiated users groups. WUAs help resolve coordination problems at watercourse level

Reality: Absent an explicit assignment of property rights to the WUAs, they can do little to affect water allocations. Within watercourses, self-organized farmer groups manage free-rider problems; feasible cooperation already achieved (see Ostrom, et al).

• Market mechanisms (e.g., WC level canal water trading on Indus basin). Need for pilots and impact evaluation!

Economic Features of Groundwater• Heterogeneous hydro-geology.• Exhaustible resource (when not recharged)• Aquifers are common property• Landowner has unlimited right to groundwater beneath.• In SAR, typically many landowners over a single aquifer.• The cost of accessing groundwater—i.e., boring a well—is

large, discrete, and irreversible Access restricted to landowners with sufficient wealth.

• Groundwater is costly to transport due to conveyance costs markets are localized and hence pricing not necessarily competitive inefficient allocation.

Groundwater Crisis?

• Can be difficult to distinguish long run trend in water table from transitory effects due to rainfall (i.e., successive years of poor recharge).

• Secular rise in well ownership has been a boon to farmers in non-command areas, but first-adopters were wealthier and now they have incentive to restrict entry of poorer farmers.

• Climate change: increase in water demand, but increase in rainfall greater recharge.

Tragedies of the Commons• Strategic externality: Groundwater not bankable for any one

extractor “use it or lose it”• Stock externality: exploitation lowers water-table, raising

pumping costs for all extractors.• Buffer-stock externality: less groundwater available

increases income risk for everyone.• Congestion externality: spacing wells close together reduces

draft per well. Interference is local effect (< 300m) vs. aquifer-wide.

• How important are each of these? How big are the associated social costs?

Groundwater and Electricity• Power subsidies can further distort groundwater extraction

away from social optimum. But subsidies are usually coupled with rationing . Rationing reduces over-exploitation for a given number of wells but increases incentive to drill so as to capture free power.

• Political economy: Power subsidy is a transfer to wealthier well-owners, but also a compensation to those who do not benefit from free canal irrigation.

• Voltage fluctuations lead to pump burnouts scope for providing fewer hours of electricity/day but with greater reliability.

Regulation vs. Institutions• Well permits with spacing restrictions to limit

interference. Little incentive to apply; no enforcement.• Coasian bargaining regulatory regime matters for well

spacing insofar as transactions costs are high. (e.g., water/well sharing prevalent among brothers)

• Micro-basin management: coordinate groundwater use in basin so that draft ≤ recharge. How to get compliance?

• APFAMGS: Participatory hydrology monitoring, crop water budgeting. What is the value of information? Rigorous impact evaluation would be welcome!