One of the most vexatious issues concerning irrigation among Indian states is pricing of water and its recovery from its users. Most states, which have embarked on large irrigation projects, are now reeling under the burden of debts incurred on these projects. The returns on investments are insignificant and grossly insufficient to even service the debts leave alone repaying them. Many projects are lying incomplete making the task of recovery on the investments even more difficult.
In India, the problem has been accentuated by the fact that most irrigation projects, till recently, were implemented by public funds. There was little or no incentive to build or institutionalise a regulatory framework. Water rights, except in case of inter-state projects, were seldom exercised. However, the creation of separate institutions for enhancing borrowing powers and raising funds brought to light the mismanagement in handling these projects. It is only now when the finances of the states are being put to severe test, that the governments are looking at ways and means of resolving the imbroglio.
It is, therefore, imperative to find some innovative ways of funding these projects. Palming off the unfinished projects to private sector and allowing them to operate the same on BOT/BOO basis may not be easy. The private sector is unlikely to participate in the ventures unless a proper framework is worked out for pricing and recovery. Fears of a strong backlash from users towards any measures aimed at enforcing compliance deter the policy-makers from framing suitable steps. However, like any other sector a climate conducive for fostering investments has to be created. Policies aimed at not just management of water used for irrigation but policies for sustainable management of water resources have to be framed.
It is not that the problem is new. Way back in the mid-1980's the Planning Commission constituted a Committee on Pricing of Irrigation Water under the Chairmanship of Dr A. Vaidyanathan, former Planning Commission member, to review the existing structure of water rates, suggest norms for fixing water rates so as to cover O&M expenses, and part of the capital cost. The report, submitted in September 1992, mooted that water rates should be treated as users' charge and not as a tax and recommended that full cost recovery (O&M plus interest plus depreciation) from users should be the eventual goal. This was proposed to be done in phases and linked with the improved functioning of the project. An important point made by the committee was that the revision of water rates should not be viewed merely as a means of raising revenue but must be accompanied by concrete measures to provide a better, cheaper and improved quality of service. A subsequent report prepared by a separate committee of a group of officers under the chairmanship of Secretary, Planning Commission, was prepared in 1994. This report mooted transfer of management of irrigation to farmers and setting up of irrigation and water pricing boards by all the states.
However, being a politically sensitive issue, the action by the state governments in implementing this report has been slow. It is only now that the magnitude of the problem is being felt. And states are realising the need to adopt a new approach. An approach which includes increasing awareness through education, involvement of users, participation of local bodies and framing laws for ensuring compliance.