Tradable water permits in Indian context

Abstract

Water is a very precious natural resource and an essential need for all the living organisms on this planet. In last few decades a lot of factors have led to increased demands on water resources. This needs to be managed carefully. The economic value of water if tapped judiciously will reap rich dividends in future. There are various ways and means of managing water resources, Economic instruments one of them. Economic instruments tap the economic value of the resource and help the appropriate use of the resource by charging by its market value. Tradable permits is one good mechanism of implementing these instruments. Legislation in India at present is not equipped to handle the various issues related to water management. There needs to be a comprehensive study on the way water is managed in India. The water cess charged to users is not in line with the cost of water today in India. Compared to other countries the charges are quite less. The French Model of water management talks about the decentralization of the system with the crucial point that all the users pay for the pollution. The pricing of water is done to reflect all the costs incurred in providing water to users. Users who take preventive actions of water treatment are rewarded by deduction in water taxes. TMDL (Total Maximum Daily Load) in USA, provides a good way of implementing economic instruments by putting a cap on the usage and pollution of water bodies. This also facilitates trade of water permits which is helpful in preserving the water resources. The policies for water management in New Zealand provide us with the example of practical implementation of tradable permits as an economic instrument. Good policies and systems will attract private investment in water. There have been water funds which have been performing well and are a good example of private investment. Also, setting up of water exchanges will help involve general public in water resources management.