FINANCING WATER RESOURCE MANAGEMENT IN

INDIA
Governance
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
 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
 Illustration
The Overall Outlay for Water Resources for the Eleventh Five Year Plan (2007-12)
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 (2007-12)
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 (2007-12)

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)
 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 Total

(WE) (Capital+WE)
Current Cumulative Current (2002-03) Current (2002-
(2002-03) 03)
Irrigation and 85 81 69 77
Multipurpose Projects
Minor Irrigation Schemes, 11 13 26 19
Soil and Water
Conservation Schemes and
Area Development
Programmes
Drainage Projects 1 2 1 1
Flood Control and Erosion 3 4 4 3
Projects
Total 100(119) 100(1188) 100 (129) 100(248) $ 6 Bn
Appx
• Figures in parentheses denote Billion Rs
• Other sources of public investments : MoRD, MoEF, MoA, MoUA etc
 Irrigation and Multipurpose River Valley Projects: Shifts in Allocation of
Working Expenses Amongst Different Components (Percent)

Year Directio Machinery Maintenanc Training Research Survey Suspense Other Total WE
n and and e and and Expendi
Admn Equipment Repair Investiga ture
tion

1990-91 8.77 0.31 49.28 0.42 0.71 1.25 0.68 38.59 100(24522)
1991-92 7.76 0.65 49.20 0.35 0.77 1.23 0.90 39.13 100(27902)
1992-93 8.12 0.75 49.44 0.39 0.85 1.24 0.34 38.86 100(31621)
1993-94 8.14 0.62 47.00 0.33 0.74 1.18 0.26 41.73 100(36298)
1994-95 7.85 0.63 44.62 0.32 0.69 1.04 0.50 44.35 100(43524)
1995-96 8.82 0.65 46.22 0.21 0.71 1.19 0.52 41.69 100(48185)
1996-97 8.68 0.54 45.24 0.23 0.66 1.16 0.15 43.35 100(54456)
1997-98 13.64 0.54 40.69 0.18 0.70 1.06 0.19 43.01 100(62579)
1998-99 12.88 0.54 36.38 0.16 0.67 0.98 0.06 48.32 100(72154)
1999-00 14.63 0.52 37.16 0.19 0.68 1.08 0.01 45.74 100(79802)
2000-01 11.34 0.45 38.66 0.24 0.59 0.87 -0.08 47.94 100(87624)
2001-02 16.93 0.44 34.27 0.15 0.65 0.87 0.08 46.60 100(82497)
 Cost Recovery - Percent Recovery of Working Expenses
Through Gross Revenue

Years Irrigation and Minor Irrigation Schemes, Rural Water Urban Water
Multipurpose Soil and Water Supply Schemes Supply Schemes
Projects Conservation Schemes
and Area Development
Programmes

1976-77 92.9 11.5 3.0 51.1

1980-81 45.8 5.5 1.5 34.5
1985-86 46.0 6.4 1.1 16.9
1990-91 9.1 2.6 1.7 16.8
1995-96 10.3 3.6 1.4 15.7
2000-01 8.6 3.1 3.3 7.6
2001-02 7.9 2.9 2.3 16.6
2002-03 8.9 3.1 3.0 17.8
Subsidies on supply of electricity for irrigation pumping in India are estimated to be Rs
264 billion during 2000-01
 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
 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.