FINANCING WATER RESOURCE MANAGEMENT IN INDIA

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1 FINANCING WATER RESOURCE MANAGEMENT IN Governance INDIA Federal country - resources and responsibilities are shared between Central and State governments Union MoWR is responsible for development, conservation and management of water as a national resource Water being a State subject, the State Governments have primary responsibility for use and control of this resource Institutional Set up Surface water resources development in India is dominantly in the public sector Ground water development is predominantly in the Private sector - done by individual farmers Given that irrigation is the major user of water in the country, most of the efforts directed at development and management of water resources emanate principally from the needs of water requirement for agriculture

2 Allocation of public financial resources Sharing of responsibilities and financial resources between Centre and States. Financial allocations between Centre and States and between different ministries are done through a detailed, iterative and inclusive process in which Planning Commission plays the pivotal role The Planning Commission sets up various Working Groups. Within the overall objectives set for the FYP, and taking in to consideration various inter-sectoral and sector specific issues, the WGs project realistic and realizable financial and physical targets giving due emphasis to development activities, management practices and research and development efforts The PC then finalizes the plan allocations for different Ministries in which the budget support component is clearly specified Expenditure Estimates are prepared by different Ministries and discussed with MOF. MOF depending upon resource availability fixes a ceiling of funds available and the expenditure statements are revised. Through a process of iterations between the revenue receipts and expenditure and PC the budget for different ministries is fixed

3 Illustration The Overall Outlay for Water Resources for the Eleventh Five Year Plan ( ) Allocation Billion Rs State Plan 1821 (78.4) State sector Schemes i.e. AIBP and 470 (20.2) Others Central Plan 32 (1.4) Total 2323 (100.0) Funds Requirement for Urban Basic Services ( ) Sub Sector Billion Rs Urban Water Supply 537 (41) Urban Sewerage and Sewage Treatment 532 (41) Urban Drainage 202(6) Solid Waste Management 22 (2) MIS 0.8(0) R& D nad PHE Training 1(0) Total 1292 (100) Proposed Flow of Funds for Meeting the Funds Requirement ( ) Source of Funding Billion Rs Central Sector Outlay 700 (54) State Sector Outlay 350(27) Institutional Financing 100(8) Assistance from External Support Agencies 100(8) FDI and Private Sector 42(3) Total 1292(100)

4 Public Investments in Water Resources Current and Cumulative levels of Public Capital Outlay and Working Expenses in the Water Sector in India (Percentages) (MoWR) Sector/ Scheme Capital Outlay Working Expenses (WE) Irrigation and Multipurpose Projects Current ( ) Figures in parentheses denote Billion Rs Other sources of public investments : MoRD, MoEF, MoA, MoUA etc Total (Capital+WE) Cumulative Current ( ) Current ( ) Minor Irrigation Schemes, Soil and Water Conservation Schemes and Area Development Programmes Drainage Projects Flood Control and Erosion Projects Total 100(119) 100(1188) 100 (129) 100(248) $ 6 Bn Appx

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6 Irrigation and Multipurpose River Valley Projects: Shifts in Allocation of Working Expenses Amongst Different Components (Percent) Year Directio n and Admn Machinery and Equipment Maintenanc e and Repair Training Research Survey and Investiga tion Suspense Other Expendi ture Total WE (24522) (27902) (31621) (36298) (43524) (48185) (54456) (62579) (72154) (79802) (87624) (82497)

7 Cost Recovery - Percent Recovery of Working Expenses Through Gross Revenue Years Irrigation and Multipurpose Projects Minor Irrigation Schemes, Soil and Water Conservation Schemes and Area Development Programmes Rural Water Supply Schemes Urban Water Supply Schemes Subsidies on supply of electricity for irrigation pumping in India are estimated to be Rs 264 billion during

8 Scope for Improved Allocations of Public Financial Resources Economic, social, regional, sectoral and political trade offs involved in allocating a given amount of financial resources between creating new infrastructure, form of infrastructure (large-small, single vs multipurpose), differential level of upkeep of existing infrastructure, rehabilitation of existing unproductive infrastructure, improved management. What could be an optimal mix? Priorities in allocations of public funds amongst various water components, besides other factors, also takes in to consideration the priorities for allocation of water in to different water using sectors. In India the priorities as defined by NWP are : drinking water, irrigation, hydropower, ecology, industries and navigation. An attempt was made to quantify the economic impacts of rigid versus flexible water allocation policies in Tamil Nadu. The results obtained suggest that significant economic gains occur from shifting from command and control policies to more flexible policies. The impacts of reallocation however will depend on the local conditions prevailing

9 Wrapping up India faces a turbulent water future The current water development and management system is not sustainable: unless dramatic changes are made and made soon -- in the way in which government manages water The budgetary allocations to the water sector are falling, as are payments by users. The net result is a large and growing financial gap, which can only be met by a combination of methods which include greater allocations of budgetary resources, more efficient use of these resources, and greater contributions from water users. This has to be supplemented by innovative financing solutions.