Governance of Informal Water Economies

A Framework for Study of Water Governance in the Indo-Gangetic Basin

Tushaar Shah and R.P.S.MalikIWMI

Understanding water governance

• Water governance is viewed as the sum total of processes, mechanisms, systems and structures that a State evolves and puts into place in order

to shape and direct its water economy to conform to its near and long term goals.

Institutional Environment and Institutional Arrangement

•The concern on institutional analysis has generally focussed on water law, water policy and water administration- often referred to as the three pillars of institutional analysis

•If institutional change is about how societies adapt to new demands, its study needs to go beyond what government bureaucracies, international agencies and legal/regulatory systems do; people, businesses, civil society institutions, religions and social movements – all these must be covered in the ambit of institutional analysis.

•We therefore distinguish between Institutional Environment (IE) and Institutional Arrangements (IA)

Formal and Informal Institutions• There is another way in which this classification of

institutions in to IE and IA has been looked at : ‘formal’ and ‘informal’ institutions

• The main difference between the two types of institutions lies in the basis of attainment of powers and the nature of authority wielded.

• The formal institutions derive power by the virtue of the state and formal rule of law, the informal ones acquire power through customary influences and beliefs

Self-supply predominates service providers dominate

Water institutions are local, water institutions are few, formal,fragmented, informal legal bodies

Vast numbers of tiny, primary very few, but large primary diverters Water diverters from nature of water from rivers, lakes

Intermediation in water services Very high degree ofLow or absent intermediation in water provision

Water is scarce but free.. Water is aplenty but it costs money..

Water is everybody’s Water is the business of an Business organized industry.

Informal Formal

This transformation is driven by the ‘iron laws’

of economic development of nations.

How informal can a poor country water economy be is suggested by a large sample survey of households in India..

• As a country, urbanizes, its water economy formalizes..• As rural areas become richer, they depend more on organized water

service providers for domestic water..

Figure % of Urban households dependent on alternative sources for drinking water requirements (NSSO 1999: report 449)

0

10

20

30

40

50

60

70

80

Tap Handpumps,tubewell, well

Riverm canal,Srping, tank

% o

f a s

ampl

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313

23 h

h

1988 (44th rd.) (5)

1993 (49th rd.) (6)

1998 (54th rd.) (7)

Figure % of Rural Households Dependent on Alternate Sources for Drinking water requirements (NSSO 1999: report 449)

0

10

20

30

40

50

60

70

80

90

Tap Handpumps,tubewell, well

River,canal,spring, tank

% o

f a

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ple

of 7

8990

hh

1988 (44th rd.) (2)

1993 (49th rd.) (3)

1998 (54th rd.) (4)

A similar survey of irrigation in India showed that over 80% of India’s villages have irrigation..but less than 10 percent depend on public

irrigation systems; the rest operate in an informal irrigation economy, outside the reach of the public system..

Figure % of villages dependent on alternative irrigation sources: Survey of 4646 villages (NSSO 2003-report 487)

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% of survey villages with no irrigation source % of survey villages with canals as main source

Villages with groundwater as the main source % Villages dependent on other sources

% of India's Gross Cropped area

Economic Growth and Water Governance

Poor Rich

Nature of the water economy

Highly informal; state’s direct outreach limited

Highly formal; state’s direct reach deep and broad

Objectives of water governance

Livelihoods; economic growth

Sustainable NRM;Environment; Green Growth

Nature of water governance

Indirect; reactive; people-centred

Direct; proactive; resource centered

The nature of water institutions existing in a given region/ nation at any given point in time depend critically upon the level of formalization of its water economy;

by formalization, we mean the proportion of the economy that comes under the ambit of direct regulatory influence of the IE

Stages of formalization

Stage I:Completely informal

Stage II:Highly informal

Stage III:Formalizing

Stage IV:Highly formal water industry

% of users in the formal sector

<5% 5-35% 35-75% 75-95%

Examples Sub-Saharan Africa South Asia Mexico, Thailand, Eastern China

Europe, North America, Japan

Dominant mode of water service provision

Self-supply & mutual help institutions

Self-supply dominates; partial public provision

Private-public provisioning; service improvement

Modern water industry; self-supply disappears

Concerns of the Governments

Infrastructure creation in Welfare Mode

Infrastructure and Water services,

Infrastructure and service; Cost recovery;

Integrated mgt. of water infrastructure, service and resource;

Farm population as % of total

% of water use self-supplied

Human, technical & financial

investment/m3 of water diverted

Economic cost of water service

provision

% of water use in agriculture

Forward linkages to output markets

Improved Livelihood

Access

Economics Institutions

Backward linkages to input markets

Physical and social setting

Externalities (e.g., socio-economic, environmental and health)

Forward linkages to output markets

Improved Livelihood

Access

Economics Institutions

Backward linkages to input markets

Physical and social setting

Externalities (e.g., socio-economic, environmental and health)

DirectInstruments of Water

Governance

Indirect instruments:e.g., power subsidies

Indirect instruments:

e.g., Gujarat’s recharge program

Indirect instruments:

Fixing Procurement

policy

Indirect instruments e.g.,

subsidizing arsenic filters

Water Institutions in IGB• Indo-Gangetic Basin (IGB) water sector exhibits a large variety of

informal institutions which co-exist with formal institutions.

• Much information is however not known about the extent, nature and intensity of involvement of formal and informal institutions within different regions in IGB as also within a given region over different tiers of resource management.

• There is also a lack of clear understanding on the complex inter-relationships between the formal and informal institutions, their relative strengths, weaknesses and efficacy under varying resource availability and other underlying conditions, their impacts in promoting sustainable use of resources and contribution to pro poor growth and economic development

• The lack of an analytical framework to investigate and answer some of these questions has hindered comprehensive analysis of issues related to water governance in the region.

• The paper has attempted to develop a framework for analysis of water governance in the IGB.

Agricultural water use segment

RuralHousehold segment

Urban water supply segment

Industrial water segment

0.0 % of total water diversions used by

1 Level of formalization of water economy

1.1 % of water use self-supplied by users themselves

1.2 % of water use supplied by informal service providers

1.3 % of water use supplied by formal service providers-private or public

1.4 % of water users who self-supply their water needs

1.5 % of water users supplied by informal service providers

1.6 % of water users supplied by formal service providers-private or public

2.0 Effectiveness of direct intervention by water administration

2.1 Breadth of the presence of water administration

2.2 Depth of the presence of water administration

3.0 Promotional effectiveness of public systems

3.1 Quality of formal water service provider institutions promoted outside the public system (PPP; Co-op’s)

3.2 % of users reached by these

3.3 % of water use influenced by these

An inventory of indicators of levels of formalization of water institutions

Agricultural water use segment

Rural Household segment

Urban water supply segment

Industrial water segment

4.0 Regulatory effectiveness of public systems

4.1 Quality and sufficiency of legal and regulatory provisions

4.2 Quality and rigor of enforcement

5.0 Effectiveness of the use of direct economic instruments (prices, taxes, subsidies) for water governance

5.1 Water resource fee is established by law

5.2 Water resource fee is vigorously collected

5.3 Water service fee is established by law

5.4 Water service fee is vigorously collected

5.5 Rationing is used as a demand-management tool

5.6 Effectiveness of rationing as demand-management tool

6.0 Effectiveness of indirect policy instruments for managing the water economy

6.1 Indirect tools to manage water demand

6.2 Indirect tools to augment water availability

6.3 Indirect tools to manage externalities

Governance toolbox Un-governed Under-governed

Moderately governed

Intensively governed

Polities Bihar, India Maharashtra, India

Hebei, China The Netherlands

1 To what extent is the water economy (in terms of volumes of water and number of water users) formalized?

10-20% of users and volumes

40-45% Of volumes; 70-75% of users

60-65% of volumes; 80% of users

95%

2 What is the ‘ambit’ of the water administration? How much of the water economy—volumes and users—does it encompass?

Very small; <10%

1/3rd 4/5th Full

*****

3 How effective have been the public systems in promoting institutional arrangements in the formal economy? Or formalize informal IAs?

* ** *** *****

4 How effective and far-reaching is the regulatory power of the public system in the water economy?

0 ** **** *****

5 How extensive is the use of economic instruments—prices, taxes, subsidies—to manage the water economy in keeping with policy goals?

0 *** *** *****

6 What kind of indirect tools are used outside the water economy to produce desired impact within it?

0 * * No need

Thank you