Water Markets for Sharing Limited Water

Abstract

Due to increasing rate of irrigation well failure and increasing investment requirement in sinking and operating irrigation wells, the ownership and operation of such irrigation wells is with those who can afford the risky and bulky investments. Thus, ownership of modern irrigation wells is skewed towards large farmers. In Indo-Gangetic plains, skewness in owning irrigation wells is lower than that in hard rock areas (HRAs) of southern peninsula where water table is low, requiring higher initial investment (Shah, Indian J Agric Econo, 46(3):335–348, 1991). Another reason for skewed ownership of irrigation wells is the skewness in distribution of holdings and fragmentation. A farmer must have captive irrigable command area of a certain minimum size to earn a decent return on investment. In addition, the norm of the isolation distance especially while applying for institutional loan for drilling of irrigation well/s has to be followed. However a cursory look at the data indicates that in India 66% of wells are with marginal and small farmers and in Karnataka around 50% of them are with them. Nevertheless, water markets which result in water sharing do bring their equity contribution since those marginal and small farmers who can neither face the risk of well failure nor can invest in well irrigation will greatly be benefited from water sharing endeavors. The norm of isolation distance does not distinguish between early and latecomers to irrigation and the brunt of well failure falls on the late coming small and marginal farmers to groundwater irrigation. Even with such norms, the well failure rate is increasing unabated. In this chapter, contribution of water market to equity and efficiency is highlighted and discussed. Considering increasing rate of well failure, small and marginal farmers find it prohibitive to drill new well/s and hence water market serves the equity purpose, serving the cause of poor farmers who cannot afford to drill new well. In addition, farmers selling groundwater for irrigation as well as the ones who buy water, will be more efficient than the farmers who are not involved in marketing/selling/buying, as farmers realize the marginal return from water sold/water bought and will use their water more efficiently than farmers who are using the water for cultivating crops.