DEMOCRATIC DECENTRALISATION IN INDIA AND THE MANAGEMENT OF GROUNDWATER – AN INTERSTATE ANALYSIS: 1980-2000
Hariprasad.C.G[1]
Dipankar Sengupta[2]
Abstract:
Many renewable resources are intergenerational common pools, exploited by one generation after another. The case of groundwater among other natural resources is particularly interesting because important aquifers are large in geographic scope and its users are many. The problem with groundwater has been basically regarded as the ‘common pool problem’ which begins with the simple idea of the efficient intertemporal allocation of resources which requires that any decision on the current rate of use takes into account the entailments for future supplies and future demands. The critical issue facing the groundwater aquifer today is that the rate of groundwater extraction exceeding long term recharge rate, resulting in rapidly declining groundwater levels in many areas. The groundwater stock may increase due to natural and artificial recharge, but recharge is usually small relation to the capacity of groundwater aquifer, and so often its variability is not a significant consideration in the allocation decision. Secondly few private agents have any incentive to invest in artificial recharge as the benefits from such investment cannot be appropriated by the investor. All private agents whose holdings lie above the aquifer benefit form artificial recharge while only one may invest in such a scheme.
This paper attempts to understand the implications of democratic decentralization specifically in the context of India in resolving the problem of over-extraction of ground water. Over-extraction can be prevented by two ways- one is to increase supply (by schemes like rainwater harvesting) and the other is to control demand. We ask whether Indian states that are decentralized with empowered local self-governments in the form of effective village councils can take meaningful steps in increasing supply and controlling demand as compared to a state that is centralized polity. Can the local self government internalize the problem of externalities (as it appears to constituent individuals acting in isolation) to arrive at a solution that is sustainable in the long run? Can public participation though the village assembly and other decision making structures ensure that problems like free-riding are curbed and optimal investment in recharge facilities are made? Case studies show that this may be so.
Here we try to understand the nature of optimal allocation of groundwater in dynamic programming framework as explicitly analyzed in Neher. P.A (Natural Resource Economics – Conservation and Exploitation). Also we try to understand the nature of stock variable (Groundwater) and control variable (either Extraction or Efforts to extract and augment) and accordingly the government’s (assumed to be the sole owner) role in the sustainable development of groundwater resources. The objective function of the sole owner is to maximize net benefit with respect to Dynamic Constraint, given the conditions of Maximum Principle and Port-folio Balance. For the sustainable development of groundwater resources, monitoring groundwater extraction becomes foremost task of the government. However, actual extraction follows the individual profit maximization impulses of cultivators and it may be expected that actual results will diverge form the predictions of the theoretical one. We ask what happens when the form of government changes and its size becomes smaller. Does it move towards or diverge from the theoretically derived path of sustainable consumption?
In our experiment we try to explore the nature and causes of extraction. While we rely on case studies, we also use an empirical model to explain the causes of depletion for the policy suggestions as well as for forms of governance. The model is tested using interstate analysis of the Indian Economy from 1980s to 2000. Since the model constitutes pooled (Time Series & Cross Section) data across states over the years, Panel Regression Analysis has been performed and results indicate support for the thesis that decentralized Indian states are better at conserving groundwater than centralized states.
Key Words: Groundwater, Extraction, Depletion, Interstate Analysis.
“If man is movement water is history, If man is a people water is the world, If man is alive water is life”
-Jose Manuel Serrat
El Hombre y el Agua
1Introduction
Many Renewable Natural Resources are in general common property, exploited by many people at a time. The case of groundwater among other renewable natural resources is particularly interesting because aquifers are large in geographic scope. As a consequence, it creates two types of problem, namely, first, to establish property rights over its use and secondly, to determine the efficient rate of exploitation for the aquifer as a whole.
As far as the first problem is concerned, while an aquifer is shared by many ‘land holders’ where over land rights are legally quite well defined, the share of aquifer underlying each land holding cannot be ascertained. Because of its very nature, the withdrawal of water by any land-holder results in a loss of water for the adjoining land-holder.
The absence of property rights as discussed above makes it difficult to treat the optimal ground water exploitation as a sole-ownership problem discussed in most text books. In fact, given the rate of regeneration, the optimal rate of exploitation can be defined only for the entire aquifers, that is, taking all the individuals as one unit. While this problem is simple, the thorny issue that involves with this is how to allocate the optimal rate for each individual. Unequal land-holdings may create the problem even more acute.
Further, assuming equitable land-holding, it may be possible to allocate certain rate of withdrawal for each land-holder but then the main problem would then be how to implement such a policy. In a situation where community participation is existing, it may be simpler to monitor the use of such a resource. However, in the absence of such participation, it may be impossible to find a monitoring agency to exercise such a policy.
This paper is an attempt to analyze the major determinants of ground water exploitation in India. The critical issue facing the groundwater aquifers today is that the rate of water withdrawals exceeding the long-term recharge rate, resulting in rapidly declining groundwater levels in many areas[3]. As a renewable but exhaustible resource, ground water follows a typical path of accumulation and unless a well planned exploitation is followed, aquifers will be pushed to dangerous low levels[4]. The case of ground water, among other natural resources, is particularly interesting because important aquifers are large in geographic scope and its users are many. The unregulated extraction[5] rate will be ‘too high’ if it results in the water table drawn down ‘too low’, causing extraction costs to be ‘too high’. Over the years, due to indiscriminate extraction of ground water[6] in most of the states in India, water tables have been depleted to a dangerously low level in many places. Depletion of an aquifer has three chief economic effects[7]. First, an aquifer can become ‘extinct’ through overuse if its geology is such that water channels that feed the aquifer can collapse as water table goes down and in consequence the aquifers eventually become dry. Second, water in the ground is “money in the bank” for use in periods of drought when local rains fail and surface water courses dry up. Third, it is that extraction costs rise as the water table falls[8]. Even if the social benefit of the water exceeds extraction cost, the latter will be economically excessive under an uncontrolled regime. The purpose of the aquifer management is to control these costs and optimize water use over time. Depleting ground water levels pose threat of salinity and further it can be an environmental catastrophe as it disturbs the hydrological cycle[9].
In this context it is pertinent to ask, does democratic decentralization affect ground water depletion? Is there any reason to expect that decentralized polities/administrations manage their common property resources better than centralized ones? Specifically in the case of Indian states are empowered Village Councils or Panchayat Raj Institutions (PRIs) in a position to solve the problem of property rights when it comes to ground water with its implications on water extraction, augmenting ground water supplies and thus affecting ground water depletion? Can PRIs internalize the externalities associated with ground water to arrive at more sustainable practices. This the is the question that the paper intends to answer.
The paper argues that those states of India which have a long record of practicing democratic decentralization through institutions like the PRIs which are empowered financially and to which elections have been regularly been held are better equipped to foster sustainable development practices than centralized ones. For the purposes of our study the rate of ground water depletion is a measure of the unsustainability of development. Thus this paper intends to show that ground water depletion and the spread of PRIs is negatively linked.
We organize the paper in the following way: In Section 2, we discuss as to why the process of democratic decentralization affects ground water depletion. This is followed by a series of case studies where various studies are analysed at some length to marshal arguments that link decentralised administrations with lower rate if ground water depletion. In section 4 theoretical arguments followed by case studies that link democratic decentralization are analysed. In Section 5 we discuss the meaning of optimal rate of ground water harvesting in a sole-ownership model framework. In Section 6, we discuss the key factors determining ground water extraction which would lay grounds for our empirical studies. In Section 7, we set up the basic model of our regression analysis in the context of the Indian economy. In Section 8, we discuss our major empirical findings. In Section 9, we draw some broad conclusions and major policy suggestions for sustainable development of ground water resources.
2Democratic Decentralization and Management of Ground Water Resources- Some Theoretical Arguments
What is the economic argument for asserting that decentralization is linked to reduced ground water depletion? A case for this linkage is based on grounds of economic efficiency and sustainability and may be made on the same grounds on which von Hayek [10] defended the market economy vis-à-vis the planned economy. A centralized plan for sustainable development (in this case sustainable ground water management) is less likely to succeed than decentralized planning where the responsibility of executing this task is entrusted to the local self-governments, in the case of India to Panchayat Raj Institutions.
In so far as one of the role of the state is to provide public goods like infrastructure where externalities are involved (ground water management certainly qualifying), a theory may be advanced. It must be recognised that most economies are not homogenous entities. There is a wide variation among various regions and localities within regions. Consequently, economic infrastructure that has to be created is not always standardized or uniform. Planning for sustainable ground water management in a non-uniform environment, especially when local economic activity is especially affected by local factors requires the collection of relevant data - available locally - and then processing this data into information. Ideally, it should be this information that is the basis of planning for certain kinds of infrastructure. This is also true (indeed especially so) for agriculture and a host of agro-industries. To that extent infrastructure required to support that industry/economic activity in a sustainable manner will be peculiar to the locality as its nature and quantum will depend on local conditions. Thus that potion of infrastructure will be best planned, executed and managed by the members of the locality itself. The reasons are simple. The members of the locality or their representatives being first hand observers of local conditions should know the best way to create an appropriate supporting local infrastructure and should be able to do so in the most economical manner. Indeed, for projects relating to watershed management, local self-governing bodies can mobilise free labour (by suitable innovation as regards distribution of benefits) from its citizens, which in the context of South Asia usually means unutilised labour.
If, on the other hand, the central government is entrusted with the responsibility of providing all infrastructural requirements, then it has to collect information from all the localities, aggregate this information and process it to arrive at a plan to provide infrastructural support. This is obviously a monumental task and one that is not easily accomplished. Additionally, in the process of aggregating information, it is likely that some information of value will be lost. To that extent the plan created will be faulty/sub-optimal. Furthermore, given the magnitude of this exercise it is also likely that the lag between the perception of the problem and action will be larger. Fourthly the possibility is that the link between local public good requirement and a local solution will be broken. While local demands will be aggregated, the solution that is proposed will be a centralised one. Take the case of the construction of a multi-purpose irrigation dam to cater to the needs of a large number of people spread over a large area distributed into various localities. This solution, while at times the only and perhaps the best solution, may not always be so. For one, the capital costs of such projects are very high. Secondly, they can take a long time to complete. Thirdly, it has a tendency to submerge the most fertile areas and thus the most populated areas and displace a section of people `for the greater common good.’ However in the absence of effective decentralization, the solution like the one above will be the only solution. Before discussing the effect of the redistribution of powers, a look at the public goods requirements of the Indian economy integrating with the global economy is useful.
What are the public goods that the Indian economy requires now that it has decided to integrate with the world economy? Obviously the public goods that must now be provided must supplement the strengths of the Indian economy. Given the fact that India is a labour surplus economy, this means that public goods provided must be those that amplify the strengths of those sectors of the economy that are labour-intensive. This covers agriculture and labour-intensive manufactures like apparel/garment manufacture. In the future it could also include assembly of electronic goods, that is the labour intensive component of manufacture of electronic goods. The latter sector generally is comprised of small firms[11] that have a tendency to agglomerate/localize in a particular region. For an economy the size of India, these regions will possibly spread all over the country, with different regions supporting different clusters of industries.
However, whether agriculture or industry, both these sectors have a set of common public good requirements. But the prime requirement for agriculture is water. Apart from civic requirements, water is needed for irrigation and has industrial uses and water supply must be predictable and regular. Now provision of water is, by and large, in the domain of the state and the central governments and logically so as the usual mode of meeting requirements on a mass scale is met by the construction of large dams which is beyond the capacity of local civic authorities, be it urban or rural. However, such projects are highly capital-intensive projects and not without their share of controversies, not the least because of doubts over their long run cost-effectiveness. The alternative is to go in for decentralised solutions but one that depends on local participation, like roof top/rainwater harvesting. Given their nature they are best administered by the local civic authorities like the PRIs. If these schemes are successful, then not only are significant savings effected, the conflict between agriculture and industry over electricity can also be lessened. This is because if the experience of the Tarun Bharat Sangh (see below) is anything to go by, the rise in the water table reduces power consumed in pumping water to the fields. It must be pointed out that the implementation of a successful water management scheme has other significant fallouts- one of them being lower power requirements from agriculture which can only mean more and cheaper power for industry as SEBs with a lower financial burden will be able to invest more in power generation as well as maintenance of existing infrastructure. This will lead to a lowering of costs as well as a removal of an infrastructural bottleneck. Additionally moneys saved by the state due the substitution of the capital-intensive water supply project can be spent on transport and ports to lower transportation costs and add to competitiveness.
3Democratic Decentralization and Sustainable Development: Actual Performance
Does Democratic Decentralization actually lead to practices that are sustainable? The literature on this subject is not very encouraging although it must be qualified that there is not much literature that explicitly looks at democratic decentralization and ground water extraction. There is literature that looks at the effect of democratic decentralization on the nature of public investment. An example of this is Rosensweig and Foster[12] who report ( based on a study of 250 villages in India) that the replacement of local/traditional methods of village administration with democratization has the effect of changing the nature of expenditure from irrigation projects (preferred by the rich peasants who had hitherto been de facto rulers through the village headman) in favour of road building (favoured by the poor as it increases employment). Expenditure on education also receives a boost. They also report that fiscal decentralization not only boosts local governments’ incomes but also lowers the cost of public investments. But the consequence for overall economic growth seem to be limited.