Water scarcity and climatic change in India: the need for water demand and supply management

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1 This article was downloaded by: [Rathinasamy Saleth] On: 04 July 2011, At: 03:00 Publisher: Taylor & Francis Informa Ltd Registered in England and Wales Registered Number: Registered office: Mortimer House, Mortimer Street, London W1T 3JH, UK Hydrological Sciences Journal Publication details, including instructions for authors and subscription information: Water scarcity and climatic change in India: the need for water demand and supply management Rathinasamy Maria Saleth a a Madras Institute of Development Studies, 79-II Main Road, Gandhi Nagar, Chennai, , India Available online: 04 Jul 2011 To cite this article: Rathinasamy Maria Saleth (2011): Water scarcity and climatic change in India: the need for water demand and supply management, Hydrological Sciences Journal, 56:4, To link to this article: PLEASE SCROLL DOWN FOR ARTICLE Full terms and conditions of use: This article may be used for research, teaching and private study purposes. Any substantial or systematic reproduction, re-distribution, re-selling, loan, sub-licensing, systematic supply or distribution in any form to anyone is expressly forbidden. The publisher does not give any warranty express or implied or make any representation that the contents will be complete or accurate or up to date. The accuracy of any instructions, formulae and drug doses should be independently verified with primary sources. The publisher shall not be liable for any loss, actions, claims, proceedings, demand or costs or damages whatsoever or howsoever caused arising directly or indirectly in connection with or arising out of the use of this material.

2 Hydrological Sciences Journal Journal des Sciences Hydrologiques, 56(4) 2011 Special issue: Water Crisis: From Conflict to Cooperation 671 Water scarcity and climatic change in India: the need for water demand and supply management Rathinasamy Maria Saleth Madras Institute of Development Studies, 79-II Main Road, Gandhi Nagar, Chennai , India Received 13 June 2010; accepted 20 October 2010; open for discussion until 1 December 2011 Citation Saleth, R. M. (2011) Water scarcity and climatic change in India: the need for water demand and supply management. Hydrol. Sci. J. 56(4), Abstract Against the discussion on the rationale and scope for water demand and supply management in India, this paper provides a brief overview of the status and effectiveness, as well as the technical, institutional and financial requirements of six demand management options (i.e. water pricing, water markets, water rights, energy regulations, water saving technologies, and user and community organizations) and one supply management option (involving the implementation of the National River Linking Project, NRLP). The paper then develops a framework that captures the analytics of water demand management in terms of both the impact pathways of and operational linkages among the options and their underlying institutions. Using this framework, the paper outlines a strategy for water demand management that can exploit well the inherent synergies among the options, and also align them well with the underlying institutional structure and its environment. Similarly, based on an analysis of the NRLP, the paper also indicates the strategy for implementing the NRLP and thereby promoting water supply management within the financial, institutional and political constraints. The paper concludes with the policy implications for water demand and supply management in India. Key words climate change; India; institutions; National River Linking Project; water demand management; water scarcity; water supply management Pénurie d eau et changement climatique en Inde: nécessité d une gestion de la demande et de l offre en eau Résumé Dans le débat sur la justification et la portée de la gestion de la demande et de l offre en eau en Inde, cet article fournit un bref aperçu de l état, de l efficacité et des exigences techniques, institutionnelles et financières des six options de gestion de la demande (i.e. la tarification de l eau, les marchés de l eau, les droits de l eau, la réglementation de l énergie, les technologies d économie d eau, et les organisations d usagers et communautaires) et d une option de gestion de l offre (impliquant la mise en œuvre du projet National River Linking, NRLP). L article développe ensuite un cadre qui conceptualise l analyse de la gestion de la demande en eau en termes de voies d impact et de liens opérationnels entre les options et leurs institutions sous-jacentes. En utilisant ce cadre, le document expose une stratégie pour la gestion de la demande en eau qui peut valoriser les synergies qui existent entre les options et les aligner avec la structure institutionnelle sous-jacente et son environnement. De même, sur la base d une analyse du NRLP, l article indique également la stratégie pour l implémentation du NRLP, faisant ainsi la promotion de la gestion de l offre en eau sous contraintes financières, institutionnelles et politiques. L article conclut avec les implications politiques de la gestion de la demande et de l offre en eau en Inde. Mots clefs changement climatique; Inde; institutions; National River Linking Project; gestion de la demande en eau; rareté de l eau; gestion de l offre en eau INTRODUCTION Water scarcity and conflicts are the symptoms of an increasing gap between water demand and supply. These symptoms, which are already visible in a few regions around India, are soon to assume a national proportion and may become permanent feature of the water sector in the country, unless suitable policies are adopted quickly to manage water demand and supply at different levels. Water demand is growing fast due to a rapid population growth and economic activity, but water supply is not growing at the same ISSN print/issn online 2011 IAHS Press doi: /

3 672 Rathinasamy Maria Saleth rate because of serious financial and physical limits for supply augmentation. Water resources developed at present amount to about 680 km 3, which constitutes 61% of the utilizable potential of 1122 km 3. However, it is difficult to add supply beyond this level due to heavy costs, environmental concerns and interstate water conflicts. In contrast, the total demand for water is projected to reach km 3 by 2025 and km 3 by 2050 (Ministry of Water Resources, 2000). Recent research studies predict that, if the demand supply gap continues to increase, nine basins that have over four-fifths of the total water use in India will face physical water scarcity by 2050 (see Amarasinghe et al., 2007a). For a heavily populated, monsoon-dependent and rural-based country, such as India, water scarcity of this magnitude will not only lead to serious water conflicts among sectors and regions, but also have a devastating effect on the food and livelihood fronts. Given the water demand and supply prospects for India, the usual approaches, involving water development based on the creation of additional water storages and water allocation based on sectoral and regional demand, cannot be an exclusive basis for managing water scarcity and water conflicts. A durable strategy calls for the simultaneous promotion of both water demand and supply management options. There is a need for a large-scale promotion of demand management options, particularly in the irrigation sector, having over four-fifths of water withdrawals but showing just 40% use efficiency (Amarasinghe et al., 2007b). These demand management options include six of the most important water allocation and management tools, such as water pricing, water markets, water rights systems, energy tariff and supply regulations, water saving technologies, and user- and community-based organizations. Similarly, given the natural, technical and financial limits for water supply management options, such as the construction of new dams, the expansion of in situ water use, water harvesting, water recycling and desalinization, there is an urgent need for a more durable and future-oriented approach, involving the creation of a national water grid through the implementation of the National River Linking Project (NRLP). This paper aims to provide the rationale, scope, requirements and potential for these demand and supply management options as solutions to the water scarcity and water conflict problems facing India. The overall aim of this paper is to discuss how the current water scarcity and the future impact of projected climatic change underline the need for promoting water demand and supply management in India. Its specific objectives are to: (a) set the rationale and scope for water demand management; (b) provide a short overview of the status and effectiveness of, and the technical and institutional requirements for, different water demand management options; (c) indicate the key differences and common features emerging from the practical experiences of these demand management options; (d) present an analytical framework that can capture both the impact pathways of, and the operational linkages among, the demand management options and their underlying institutions; (e) discuss how water scarcity and climate change provide justification for the supply management option involving the implementation of the NRLP; (f) discuss the costs, benefits and other issues related to the NRLP; and (g) conclude with an outline of a generic strategy for water demand and supply management within the technical, financial, institutional and political constraints evident in India. As to the scope and focus, although there are a variety of demand management options, we consider only six options herein: water pricing, water markets, water rights, energy regulations, water saving technologies, and user and community-based organizations. The review of the status, effectiveness and requirements of these demand management options is also brief, and confined particularly to the irrigation sector, which accounts for over 80% of the total water use in India. However, the general implications, especially those related to their operational linkages and institutional requirements, can be relevant to the nonirrigation context as well. Similarly, among the supply management options, the paper focuses mainly on the national water grid planned under the NRLP. Finally, the paper is structured, more or less, in line with the listed set of objectives. WATER DEMAND MANAGEMENT: LOGIC AND FOCUS Although the adoption of water demand management options is rather limited and slow in India at present, there is an inevitable need for their massive application in the future, especially in the irrigation sector and in the basins where physical water scarcity is already widespread. However, the demand management policy requires a heavy investment and radical adjustments in institutions and infrastructures, and faces serious political resistance from farmers. The

4 Water scarcity and climatic change in India 673 political resistance comes from the misperception that the demand management policy is synonymous with a large-scale re-allocation of water away from irrigated agriculture. Yet, in reality, the policy actually aims to set right the basic conditions for a long-term improvement in the efficiency and productivity of irrigated agriculture. Water re-allocation will occur not through a simple physical diversion within a commandand-control framework, but rather through an overall improvement in use efficiency and productivity of water, especially within a voluntary and compensation-based exchange framework. As to their focus and coverage, some of the demand management options are context-specific, whereas others are applicable in a more generic context. For instance, water pricing is applicable mainly in canal regions, whereas energy regulations are confined mainly to groundwater areas. This is also true for water markets and water saving technologies, as they occur mostly in groundwater regions. The water saving technologies using micro-irrigation, such as sprinklers and drips, are rare in canal and other surface water-based areas. However, water saving technologies involving crop choice and farm practices (e.g. tillage and land-levelling practices, and intensive cultivation methods) are applicable in both canal and groundwater regions. Nevertheless, the options of water rights and user and community organizations are relevant for both canal and groundwater regions. Similarly, some of the options are more direct and immediate in their impacts on water demand, whereas others have only indirect and gradual effects. For instance, water rights and water saving technologies have more direct effects on water demand, while the options involving user organizations and energy regulations have only indirect effects. Notably, the six options considered in this study also differ considerably in terms of the practical and political economy conditions necessary for their effective adoption and implementation. On this count, water rights are the most difficult, followed by water pricing and energy regulations. In contrast, water markets and user organizations are relatively easier to adopt, although they face implementation and regulation challenges. However, water saving technologies, though politically benign, require favourable agronomic conditions, as well as credit and technical supports. The adoption context, investment need, impact gestation and political feasibility are the key factors determining the relative scale of adoption and impact of the different demand management options. Water scarcity logic The changing physical and economic realities of the water sector provide a strong rationale for promoting water demand management. For instance, the total water withdrawal for all uses at the national level represents only 61% of the utilizable water resources potential in India. However, as can be seen in Table 1, even at this level of water use, many important basins are already facing physical water scarcity (i.e. water withdrawal exceeding 60% of the potentially utilizable resource). Other basins, though they have the scope for additional water resource development, are facing economic and financial scarcity. Economic and financial scarcity refers to the condition in which water resources, even when they are available for development on technical and economic grounds, cannot be developed due to the enormity of investment required, and the inability of the state(s) to mobilize investment of that magnitude. As a result, most basins in India are expected to suffer from physical or economic and financial scarcity by 2050, if not before. These scarcity-prone basins account for threefifths of the country and also include the agriculturally most important basins, such as the Indus, Ganges (or Ganga), Cauvery and Krishna basins, which together account for ha, representing two-thirds of the total irrigated area under all basins. As a result, the physical and economic water scarcity in these basins will have serious ramifications not just in terms of food, income and livelihood, but also in social and political spheres. The efficiency logic As can be seen in Table 1, the irrigation sector accounts for 89% of the total water withdrawals at the national level, with a similar dominance also being evident in the case of most basins. However, the actual consumptive use the portion that is actually used for the net evapotranspiration of crops is only 41% at the national level, but varies from 12 to 59% across the basins, depending, obviously, on crop and land-use patterns, as well as on the variations in project- and farm-level irrigation efficiency. The difference between the consumptive use and the total water withdrawal provides a physical basis for the potential for efficiency gains and water savings that can be achieved with water demand management. This constitutes real water saving, capable of releasing substantial amounts of water for use elsewhere in other sectors and regions. By separating water-use

5 674 Rathinasamy Maria Saleth Table 1 Water withdrawal by use, source and basin in the year 2000 (source: Amarasinghe et al., 2007b). River basin 1 Water withdrawal: NET 4 as % Total 2 (km 3 ) Share of potentially utilizable resources 3 (%) Share of irrigation (%) of irrigation withdrawal (%) Gross irrigated area: Total ( 10 6 ha) GW share (%) GW abstraction ratio 5 (%) Indus Ganges Brahmaputra Barak Subarnarekha Brahmani-Baitarani Mahanadi Godavari Krishna Pennar Cauvery Tapi Narmada Mahi Sabarmati WFR WRF EFR EFR All basins See Fig. 2 for the map showing the major river systems of India. 2 Total includes withdrawals for irrigation, domestic and industrial sectors. 3 Figures >100% also include recycling. 4 NET is the net evapotranspiration of all irrigated crops. 5 GW: groundwater; the GW abstraction ratio relates total groundwater withdrawals to the total groundwater recharge and return flows. 6 WFR1: west flowing rivers of Kutch, Saurashtra and Luni; WFR2: west flowing rivers from Tapi to Kanyakumari; EFR1: east flowing rivers between Mahanadi and Pennar; and EFR2: east flowing rivers between Pennar and Kanyakumari. efficiency at the field level from that at the basin level, a distinction is made between real and paper water saving (see Seckler, 1996). The former releases water for use outside the basin, whereas the latter does not lead to any water release because the saved water from field-use efficiency is either lost to the system due to evaporation and drainage, or re-used within the basin. Since water saving is reckoned here in terms of net evapotranspiration, and calculated at the macro level, it relates actually to the real, and not the paper, water savings. Admittedly, it will not be possible to realize the entire water saving potential for various physical, technical, economic and institutional reasons, but it is certainly possible to achieve, say, a 20 40% of this potential with the proper targeting of basins and regions for concerted demand management policies and investments. Because there is greater technical control over the volume and use, there is greater scope for realizing water savings in groundwater areas than in surface water regions. Notably, in groundwater areas, where irrigation efficiency is already higher than in canal areas, further efficiency improvements are possible, and that is mainly through demand management policies and related changes in water institutions. In contrast, efficiency improvements in canal regions mostly require investments and technologies for a massive re-design of water conveyance and delivery networks, although subsequent institutional changes, such as pricing policy reforms, water rights systems and user organizations, are also essential to enhance and sustain the efficiency gains. As a result, efficiency gains are relatively more immediate in groundwater regions and would also involve relatively smaller public investment in physical structures. Taken with the dominant share of groundwater in total irrigation (i.e. 60%), this makes it possible to realize the overall irrigation efficiency targets with a greater attention on highly productive groundwater areas, particularly those with severe depletion problems. Improvements in irrigation efficiency, besides their immediate impacts on farm productivity, will also have direct effects on irrigation water demand. As shown in Table 2, if the irrigation efficiency in canal regions is raised from its current level of 40 50%, and that in groundwater areas is raised from its

6 Water scarcity and climatic change in India 675 Table 2 Irrigation efficiency and water demand scenarios (in km 3 ) (source: Amarasinghe et al., 2007a). Source 2000 (actual) Groundwater efficiency (with surface water efficiency of 50%) Groundwater efficiency (with surface water efficiency of 60%) 75% 80% 85% 75% 80% 85% Surface water Groundwater Total present level of 60 80%, the future irrigation demand, even with larger irrigated area, will not exceed its present level. However, if the canal irrigation efficiency is also raised by an additional 10%, i.e. to 60%, the total irrigation demand will decline by 43 km 3.In addition, if groundwater irrigation efficiency is raised concurrently by an additional 5%, i.e. to 85%, then the total irrigation demand will decline by as much as 63 km 3 (Amarasinghe et al., 2007b). Notably, this reduced irrigation demand, which represents the total water savings from improved irrigation efficiency, is close to the total non-irrigation demand of 79 km 3 in the year In a sense, this represents the true magnitude of the potential for water savings that currently exists in the agricultural sector alone. This potential can be realized gradually with the implementation of demand management strategies. Food supply logic There is also a food supply and productivity-based logic for promoting water demand management, especially in the irrigation sector. For instance, given its current level of food consumption and projected population of around 1.6 billion, India is expected to have a food demand of about t about twice the present food production by 2050 (Amarasinghe et al., 2007a,b). Unless an increase in use efficiency and water productivity is achieved, meeting this food demand would require the extension of irrigation to an additional area of ha. Such an expanded irrigation is not easy to achieve, because of the obvious limits for adding new supplies and the increasing claims of non-irrigation needs. Still stronger argument for water demand management comes from the pervasiveness of water-use inefficiency found in the irrigation sector itself, which actually represents the hidden irrigation potential to be realized. Simple estimates suggest that, if it is possible to raise wateruse efficiency by 10 20% over a five-year period, the irrigation sector can release up to ha worth of water for additional irrigation (Saleth, 1996; Planning Commission, 2002). That is, demand management is also a supply augmentation option. STATUS OF WATER DEMAND MANAGEMENT OPTIONS IN INDIA Before dealing with the analytics of impact pathways and the institutional underpinning of demand management options, it is instructive to provide a brief overview of each of them, particularly to highlight their status, ability and scope in the Indian context. A more detailed review of each of the six water demand management options is given in Saleth (2009). To begin with, the ability of water pricing to influence water use is severely limited, both by the nature and level of prevailing water rates and by the absence of supportive institutional and technical conditions (e.g. volumetric delivery, water rights, enforcement systems). Current water rates are tuned more to cost recovery than to the influence of water use. Despite their cost recovery focus, the water rates were able to cover no more than 20% of costs in most states. As water rates are low and charged as fixed payments in terms of area, crop and season, they fail to create enough incentive to encourage water-use efficiency. Although water rates in groundwater areas are relatively higher, they are also related more to average pumping costs than to water productivity (see Saleth, 1996). While it is technically possible to design water rates that can influence water-use decisions, such rates will be too high to be politically acceptable and too difficult to be practically adoptable, especially given the food security and equity implications. Under this condition, it is unrealistic to expect the present water

7 676 Rathinasamy Maria Saleth pricing policy to play the economic role of water allocation. Although pricing policy is ineffective, supply regulations are effective in raising water-use efficiency. For instance, in the Krishna Delta, in the state of Andhra Pradesh, farmers received 40% less than the normal supply during the drought of Interestingly, not only did they manage well with this lower supply, but they also realized a 20% improvement in yield (see Ratna Reddy, 2009). As to the impacts of informal and localized water markets in groundwater and tank areas, Palanisami (2009) concluded that they contribute to use efficiency and equity, but they also have notable negative effects in terms of aquifer depletion. While they have net positive effects, the size of such effects is rather small. The estimates of the area served or influenced by water markets vary widely from 15 to 50% of the national irrigated area. As these markets operate without any volumetric limits or other regulatory framework, there is only a very small incentive for use efficiency or water saving. Hence, as a demand management option, water markets can be considered to have only a marginal impact under the present conditions. For water rights to be effective and enduring as an institutional system for managing water in general and irrigation in particular, the first step is to convert the abstract legal notion of water rights into an operationally applicable volumetric framework (Narain, 2009). Since effectively enforced water rights provide physical limits for individual water use, they can generate powerful incentives for water-use efficiency. While the creation of water rights systems is difficult for a diverse country like India, there are vast institutional potentials for creating such systems, both by building on existing rudimentary systems and by creating new ones in select areas (see Saleth, 2007; Narain, 2009). The rudimentary water rights systems include the Shejpali (Water Roster), Pani Panchayats (Water Councils), and Warabandi (time- and turn-based water allocation) systems. Water rights are based on time under Warabandi, on flow-based volume under Shejpali,and on irrigation needs under Pani Panchayats. Notably, both the time- and volume-based water rights are linked to farm size, as they are determined in proportion to land owned or operated. But, in the Pani Panchayat system, the rights are based on water shares, which are defined not by land but by family size. Notably, in the Pani Panchayat system, even the landless have water shares, which they can sell implicitly through share-cropping arrangements with land owners requiring additional water (see Saleth, 2007). Energy regulations, covering both the price and the supply of energy sources used for irrigation purposes, can significantly influence water withdrawal and use, especially in groundwater regions. Evaluating energy regulations as a demand management option, Malik (2009) concluded that much depends on their intrinsic nature and enforcement, as well as a number of farm and region-specific factors, such as farm size, well depth, crop pattern, water selling, and the groundwater hydrogeology itself. Energy regulations with a relatively higher and metered tariff can be more effective as compared to those involving only fixed and flat rates. Similarly, direct supply regulations involving fixed supply hours will be more effective in controlling groundwater withdrawals as compared to those involving energy prices, regardless of their levels and structure. This is so, provided farmers do not have multiple wells, resort to the illegal use of power, or substitute or complement electric and diesel energy sources. The water-saving technologies cover not only those involved in irrigation application (drip, sprinkler and micro irrigation), but also those related to farm practices, such as water-saving crops, crop spacing, use of plastics, and deficit irrigation. Unlike the other options, this option has both a direct and an immediate effect on water consumption in irrigation. The water-saving technologies can raise irrigation water-use efficiency from 60% (sprinkler) to 90% (drip); they can save water by 48 67%, energy costs by 44 67%, and labour costs by 29 60% (Narayanamoorthy, 2009). Their private benefit cost ratio, which depends on productivity and crop prices, is also impressive, ranging from 1.41 for coconut to for grapes (Narayanamoorthy, 2009). Notably, their social benefits in terms of water and energy conservation are also significant (Dhawan, 2000). Sprinkler and drip systems are scale neutral, and also economically viable for as many as 80 crops (Narayanamoorthy, 1997; Kumar et al., 2004). Despite this, the total area under these technologies in India is not more than ha; furthermore, over 85% of this area is confined to only four states: Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh (Narayanamoorthy, 2009). The low area coverage is also a problem for water-saving farm practices. User and community organizations cover both the formal water user associations (WUAs), and those

8 Water scarcity and climatic change in India 677 under the informal and semi-formal water allocation systems, such as the Shejpali, Pani Panchayats and Warabandi. While the former two systems are observed in the states of Maharashtra and parts of Orissa, the latter operate mainly in the states of Punjab, Haryana and parts of Uttar Pradesh. As a demand management option, these organizations can contribute to water savings through groupor community-based incentives for water allocation and management. Their actual contribution, however, depends on their area coverage and operational effectiveness. Despite them being promoted since the 1960s, registered WUAs in India amount to only about , covering an area of about ha (Palanisami & Paramasivam, 2000). However, these figures cover neither those created since 2000, especially in Maharashtra and Uttar Pradesh, nor the informal and semi-formal systems. While Warabandi covers most of the canal areas in the northwestern parts of India, there are no clear national-level estimates for the number and area coverage of the other informal systems. However, there are estimates for the state of Orissa, where there were Pani Panchayats,coveringanareaof ha as of 2002 (Ratna Reddy, 2009). In any event, the total area covered by all forms of user and community organizations can be no more than ha. Notably, unlike the formal WUAs, their informal counterparts are more effective, thanks to their informal and rudimentary system of volumetric and individual-specific water rights (Narain, 2009; Ratna Reddy, 2009; Venkata Reddy, 2009). In this respect, it is important to note that the current policy of Maharashtra to introduce bulk water rights at the distributary level and involve WUAs to retail water is likely to strengthen the kind of institutional role of WUAs that is needed for irrigation demand management. This fact demonstrates the central role of a water rights system in strengthening the demand management role of user and community organizations. In fact, there is a two-way linkage between water rights and user organizations, because an efficient water rights system is also predicated on the existence of an effective user organization. This is an interesting case of structural and operational linkages among demand management options. THE INSTITUTIONAL ECOLOGY OF WATER DEMAND MANAGEMENT The review of demand management options suggests that their actual effects on water saving and water-use efficiency are meagre, and too thinly spread, to have any major impact on local and regional water demand. The main problems limiting their impact are their low area coverage and lack of operational effectiveness, both of which are due to the lack of concerted policies and supporting institutions. Despite the differences in the nature, mechanics and gestation period of their impacts, the options have fundamental operational and institutional linkages among them. Operationally, they are not independent, but interlinked due to mutual influence. There are also intrinsic linkages among the institutions, which support each of these options. Adequate understanding of these linkages is vital for designing an effective strategy for water demand management that can strategically exploit these linkages so as to enhance the individual and collective performance of the options. To see this more formally, we can use Fig. 1, depicting the analytics as well as the institutional ecology of water demand management options and their joint impact on sectoral and economic goals. It is instructive to note a few key aspects of Fig. 1. First, water demand management options and their linkages are considered only in the context of the irrigation sector. Second, the institutions and their linkages noted for each of the options are not exhaustive but only illustrative; this is also true for the impact pathways identified in both the sectoral and macroeconomic contexts. Third, since the institutions and their linkages taken together form the institutional ecology of demand management, Fig. 1 does capture the institutional structure. But, the institutional environment of demand management, as defined by the interactive roles of hydrological, demographic, social, economic and political factors, though not explicitly specified, actually operates beneath the entire system in Fig. 1. From the perspective of water demand management strategy, the elements defining the institutional environment are the exogenous factors, whereas the elements forming the institutional structure are the endogenous factors. Despite its limited coverage, Fig. 1 is able to place irrigation demand management both in the strategic context of the water and agricultural institutions and in the larger context of sectoral and economic goals. As can be seen, there are five analytically distinct but operationally linked segments. The first segment shows the sequential linkages among demand management options, where the options that form the necessary conditions for other options and those having the most intense linkages with others are shown. The next segment captures the joint

9 678 Rathinasamy Maria Saleth Supportive Institutions Supply/ Service Quality Well-Based Regulations Water Transfer Policy Sectoral Markets/ Payments Environment Water Supply Benefits Legal and Policy Reforms DEMAND MANAGEMENT OPTIONS Water Pricing Energy Regulations IRRIGATION EFFECTS Water Saving Non-Ag Water Transfer User Organizations Water Rights/Quota Irrigation Efficiency SECTORIAL & ECONOMIC EFFECTS Local Water Markets Water Saving Technology Expanded Irrigation Output / Productivity Gains Collective Action Incentives Volumetric Delivery/ Conveyance System/ Brokering/ Conflict Resolution Technology Costs/Credit Policy Farm Inputs/ Extension Prices/ Markets/ Trade Food, Income, Livelihood Benefits Fig. 1 The institutional ecology of water demand management: impact pathways and institutions (source: Saleth & Amarasinghe, 2009). effects of these options on the irrigation sector, where the water savings induced through an improved irrigation efficiency lead to either/both an expanded irrigation with existing supply or/and an increased water savings. The third segment shows the sectoral and economy-wide consequences of the initial effects on the irrigation sector, which are captured first in terms of increased water transfers and higher agricultural output and productivity, and converted finally in terms of food, livelihood, water supply and environmental benefits. The remaining two segments relate to the institutional dimension of demand management and cover, respectively, the immediate institutional structure and the fundamental institutional environment. Figure 1 highlights several important points. While all demand management options are important, the sequential linkages among them suggest that some are obviously more important than others. This is either due to their role of being the necessary conditions for others (e.g. user and community organizations), or due to the extent of linkages with others (e.g. water rights system). The options also differ in terms of the nature and magnitude of their impacts on irrigation efficiency and, hence, on water saving and productivity. For instance, the direct effects of user organizations, water pricing and energy regulations will be neither immediate nor substantial, partly because of longer gestation period and partly because their ultimate efficiency effects depend on the effects of related options, and on the existence and effectiveness of supportive institutions. However, water-saving technologies will yield more direct and immediate efficiency benefits, though the extent of such benefits depends on their scale and coverage. Obviously, the options also differ in terms of the institutional, technical and political requirements for their adoption and implementation. For instance, while it is easy to create user organizations, it is more difficult to create the necessary conditions, such as the creation of incentives, for collective action and the establishment of volumetric delivery, water quotas and conveyance networks. Thus, the ability of an option to influence irrigation demand depends not just on how efficiently it is designed and implemented, but also on how well it is aligned with other options and how effective are the supportive institutional and technical conditions. Considering the fact that institutions, including water institutions, are defined by the interactive roles of legal, policy and organizational aspects (Bromley, 1989; Ostrom, 1990; Saleth & Dinar, 2004), all options, except water saving technology, can also be viewed as institutions in themselves. In this sense,

10 Water scarcity and climatic change in India 679 the linkages among user organizations, water rights, water markets, water pricing and energy regulations are actually part of the larger institutional setting of water demand management. There are also institutional underpinnings both in the functional linkages among the options and in the structural linkages within the supportive institutional structure. The institutional structure for demand management covers not only the institutions that are directly related to individual options, but also those related to farm input and extension systems, agricultural markets, agricultural pricing, and trade policies and investment policies. It is important to note that current pricing, procurement and trade policies favouring crops such as rice and sugarcane lead to considerable distortions in cropping pattern and, hence, agricultural water demand. Obviously, a basic change in these policies as well as a redesign in water infrastructure to support demand-based water release in canal areas are necessary to underpin an effective water demand management strategy. In this context, responsive farm input and extension systems, favourable market and price conditions and well-planned investments in volumetric delivery networks, system improvement and user organizations are vital for the performance of demand management options. Since these sectoral and macro-economic policies affect the returns to farm-level water saving initiatives, they determine the levels of economic incentives and technical scope for the adoption and extension of demand management options. From an impact perspective, the overall performance of a demand management strategy depends on the way it is designed and implemented. The strategy has to be designed in such a way as to exploit well the functional and structural linkages among the options and also benefit from the synergies of the sectoral and macro-economic policies. For instance, the efficiency and equity benefits of water markets can be increased manifold when such markets operate within a volumetric water rights system and are also supported well by user-based management and enforcement mechanisms. New institutions and expanded roles for existing institutions can also emerge in the interface of water rights, water markets and local organizations. They relate not only to the conflict resolution roles of user and community organizations, but also to the water brokering and water delivery-related technical activities that are expected to thrive under mature institutional conditions. Likewise, water pricing policy can be more effective both in cost recovery and in water allocation, if it is combined with volumetric delivery and user-based allocation. Similar results can also be expected with other options, when they are aligned well with their counterparts. As we contrast the present status of demand management policy and the ideal demand management approach postulated in Fig. 1, we can identify several key points useful for the design and implementation of an effective water demand management strategy. The functional linkages and the institutional character of the demand management options clearly underline the need for the strategy to treat these options as an interrelated configuration functioning within an institutional structure, characterized by the overall legal, policy and organizational factors. Since the changing economic, technological and resource conditions will tend to alter the political and institutional prospects for demand management, it is important to align the policy for it to benefit from the potential synergies from institutional environment as well. Given such an overall character and thrust of the strategy, the next step is to create the technical conditions and strengthen the institutions necessary for supporting the operation of the demand management options. The technical conditions include, for instance, the modernization of water delivery system, introduction of volumetric allocation and installation of water and energy meters. Similarly, the institutional conditions include, among others, the development of a public trust framework for the joint role of users, officials, state and communities, the creation of a separate but an embedded structure of sectoral, regional and user-level water rights within the overall supply limits and the establishment of negotiation and conflict resolution mechanisms at different levels (see Saleth, 2007). As can be seen from Fig. 1, there are sequential linkages both among the demand management options and among the institutions. For instance, user and community-based organizations remain the basis for the operation of water rights, water markets and water pricing (and also for energy regulations). Similarly, water rights are critical for the effective functioning of water markets and could also provide the incentives for the application of water saving technologies and improve the effectiveness of energy regulations. Since user organizations are the foundation for the emergence and operation of other institutions, and since they do not involve much political opposition, they should receive top priority from the long-run perspective. But, in the short-run, the promotion of water saving technologies with the immediate and direct impact should receive priority.

11 680 Rathinasamy Maria Saleth Since the establishment of water rights system involves major legal, technical, and political challenges, the focus here should be mainly on the creation of the basic conditions for its emergence, such as the modernization of water delivery systems and the introduction of volumetric allocation. Along with their roles in facilitating the eventual introduction of water rights system, these conditions will also have direct roles in improving the effectiveness of water pricing. Besides these ways of sequencing and prioritizing demand management options and their institutional components, there are also instances for packaging programs, such as the system modernization to be combined with management transfer and improved supply reliability and service quality to be accompanied by higher water rates. Since the design principles involving sequencing, prioritizing, and packaging work on the sequential linkages and path-dependent nature of institutions, they help to reduce the transaction costs of creating each of the subsequent institutions. Also, in view of the institutional ecology principle, when a critical set of institutions is put in place, other institutions or new roles for existing institutions can emerge on their own or with little investment. For instance, when volumetric allocation is introduced, it is possible to negotiate limits for water withdrawals, which can eventually lead to the emergence of water quota systems. Similarly, when water rights are in place, real water markets operating within a water quota system can emerge. With these emergent institutions, the roles of user organizations will also expand considerably to include new functions, such as monitoring and enforcement, negotiation and conflict resolution, and brokering and facilitation of water markets. More importantly, all these institutional changes will tend to expand the application of demand management options and reinforce their effectiveness and impacts on water allocation and use. WATER SUPPLY MANAGEMENT: RATIONALE AND SCOPE Although water demand management strategy can lead to additional water supply, thanks to its efficiency impacts and water saving effects, it will not be sufficient to completely solve the problem of water scarcity. As a result, there is also an indispensable need for an effective strategy for water supply management. This is particularly so in the context of projected climatic change, which is expected to have a major impact on the temporal and spatial patterns of water availability. The existing approaches to supply management, such as the creation of additional storages, water harvesting, water re-use, and desalination, though useful and important, cannot be that effective in countering the drought flood syndrome associated with the changing regional and temporal patterns of rainfall and water availability. For adapting the water sector both to its prevailing demand supply gap and to the expected impacts of projected climatic change, what is needed is rather a radical rethinking in the whole approach to supply management. Two approaches require immediate policy attention. The first approach involves the revival and rehabilitation of the small and large tanks as storage mechanisms for capturing local water flows. This approach is particularly important in the peninsular parts of India, where tank systems play a major role both in meeting irrigation and drinking water needs and in serving as groundwater recharge systems. The other approach that can provide a more durable solution to the present and future water problems at the national level involves the creation of a national water grid that can utilize fully the available water potential, minimize the impacts of the drought flood syndrome, and create a balance in regional water supplies. Obviously, the rationale for this new supply management approach comes both from the increasing water supply gap and from the anticipated impacts of climatic change on the current and future water demand and supply. Water supply gap Although India has a total annual precipitation of 4000 km 3, due to runoff, evaporation, and in situ use by the ecosystem, water availability for human purposes is only 1869 km 3, representing just 47% of the total precipitation. Not all the water available for development can actually be utilized in view of the insurmountable physical and environmental constraints. As a result, only 60% of the available water, i.e km 3, is utilizable under current economic and technological conditions. At present, the actually utilized water is only 680 km 3, representing just 61% of the utilizable water resources. Since there are still substantial resources to be developed, one could be tempted to think that water scarcity may not be that serious. Unfortunately, this is not the case, because of the disproportionate increase in water demand expected in the near future (see Table 3). According to the National Commission on Integrated Water Resources Development (GOI, 1999), water demand

12 Water scarcity and climatic change in India 681 Table 3 Projected water demand for India: 2025 and 2050 (source: GOI, 1999). Use category Year 2025: Year 2050: Low High % Low High % Irrigation Domestic Industry Power Inland navigation Environment ecology Evaporation loss Total is projected to increase by 15 24% by 2025 and by 43 74% by Notably, the water demand projected for 2050 under a high population growth and high economic development scenario is 1180 km 3, which is greater than the ultimate water resources potential of 1122 km 3. Clearly, there is an urgent need to bridge the water demand supply gap by enhancing the utilization of the water in situ in the rain-fed regions, as well as the water that is currently lost in runoff in various river systems. Water impact of projected climatic change Since 1900, global temperatures have risen by 0.7 C and are continuing to rise at an estimated rate of 0.2 C per decade. If left unchecked, this implies global warming of at least 1.4 C by the end this century (IPCC, 2007). A warmer climate means that the water or hydrological cycle will be accelerated, creating major disturbances in the temporal and regional patterns of rainfall and water availability. Thus, water is the main medium through which almost all the impacts of climate change will be felt (Stern, 2008). According to the Millennium Ecosystem Assessment (2005), climate change may already be causing longterm shifts in seasonal weather patterns and in runoff production that defines renewable freshwater. In view of the risk and uncertainty as to the availability of water over time and space, current water management infrastructure and water institutions will not be adequate to cope effectively with the impacts of projected climatic change. For India, where groundwater depletion and water pollution have already assumed serious proportions, the impacts of climate change on temperature and rainfall will add further pressure on water availability and use. Table 4 shows the past and projected impacts of climatic change on rainfall under different levels of temperature. Although the rising temperature observed in India during the past 100 years has not shown any effect on rainfall pattern at the national level, there are significant variations at the regional level (Mall et al., 2006). For instance, in the Indo- Gangetic region, the mean summer rainfall over its western parts shows an increasing trend (170 mm over 100 years), but the same in the central and eastern parts of that region shows a declining trend (5 50 mm over 100 years). Notably, a westward shift in rainfall activity has been observed over the past 100 years in the Indo-Gangetic region. In terms of summer monsoon rainfall, the northeast and northwest regions of India experienced a variation between 6 and 8%, whereas the west coast and central peninsula experienced a 10 12% increase in rainfall (Mall et al., 2006). There is likely to be a general reduction in runoff level in most river basins of India, with the exception of those relying on the Himalayan system. Since evaporation is expected to increase throughout India, there will be major pressure on available water, especially during the non-monsoon periods. With varying runoff and increasing evaporation, net recharge is expected to get reduced, affecting also the groundwater levels in many regions in India. NATIONAL RIVER LINKING PROJECT: SUPPLY MANAGEMENT ROLE The idea behind the National River Linking Project (NRLP), popularly known as the Garland Scheme, has been proposed for a long time. The original idea of this project came first from Sir C. P. Ramaswamy Aiyar in 1926 and, then, from Dr K. L. Rao in 1970, and Captain Dastur in Under its National Perspective Plan, the Union Ministry of Water Resources transformed the idea into a plan for the creation of a national water grid by transferring surplus waters from the Ganges and the Brahmaputra to the water-deficit regions in central and southern India. The National Water Development Agency (NWDA) was established in 1982, specifically for the purpose of identifying various river links and to conduct feasibility studies of such links. The NWDA has identified 30 links 16 for the Peninsular rivers and 14 for the Himalayan rivers (see Fig. 2). The feasibility reports covering the socio-economic, environmental and hydrogeological impacts for some of these links are already available, and others are being prepared by NWDA in collaboration with various research and technical bodies in India. The National Commission on Integrated Water Resources