Hyderabad: Just like oil, gold and grain, water is now being treated as a commodity. During December 2020, in the middle of the pandemic, water officially became a traded commodity on the stock market in California. Trading under HQH20, spot market closed at $489 for acre-foot, which is equal to 13 lakh litres.
Is this price high? Low. How that compares to India or specifically with Hyderabad.
Water is private already private resource.
Contrary to public perception, water was private property for long time. There are trade and people who needed paid a price, in-kind or in cash. Water, historically was also a private property on which Governments of the day collected tax and people entered agreements and engaged in conflicts over its sharing in one form or other. Water basically gave rise to civilisation.
Globally, ownership of water, other than in the public lands, fall broadly under three categories.
A) Rule of Capture, where a landowner has un-restricted-regulated right to extract water below his land and store and use as much as on his land. This is regardless of consequences to the adjacent private or Government lands and or prior users. This is what pretty much India follows. It is free for all, and whoever can dig deep or store. India this even extends to divert that water outside of lands through transport, sell to others and convert to other uses.
B) The second one is called Riparian rights, where a private landowner gets its fixed quota of water-based what is below the ground, recharge capacity etc. The allocation could also be dynamic with changing resource quantity and quality etc. This at least restricts, un-controlled access to the landowner and by default at least protects other nearby land owners including Government lands. California follows this rule.
C) The third one is called reasonable use, which makes users liable for the damage to other previous users. This is bit complex and often ends in courts, but this gives collective responsibility for not using the resources unsustainable way. This also requires the sophisticated and transparent legal and or regulatory system to correct whenever required based on legal litigations.
So broadly, India, by and large, follow Rule of capture, which is the freest and open rights, without any restrictions or regard for the damage to other private user or Government use. Landowners pretty much do as they like, dig as they deep as they can, extract as much as they can without any responsibility or liability to other users- previous or future. Use it for any purpose whatsoever, including selling water for cash or kind. On top
of it, some private users can also put holes on the common property, or Government lands such as rivers and use the water for private use and or sell to highest bidder. So water is a private property without any regulation. Therefore, trading in the stock market probably should be least of our concern, So India should focus on the water trading which is going on not virtually, even physically.
Surface water, public ownership and private use
Let us look at the public water resources. Legally, rivers and the water flown within those rivers is public resource. This resources is mostly allocated to agriculture, to farmers, which is private enterprise, but for public good. It is difficult to actually separate and demarcate the ground water and surface water. Therefore extraction of ground water by private players, largely farmers, did impact significantly on the surface flows during the critical season. Most of our rivers are dammed, diverted. Almost 80% water of public water is allocated for irrigation for private use, and close to 9% is for domestic and drinking and rest is for industry and other uses. So while surface water may be public but water use is private and often for economic again.
Most inefficient use of irrigation water
Most of surface water from rivers by damming, diverting is supplied to irrigation. About --- billion cu.m of water is used by irrigation. This is considered as common good for food security therefore supplied, free to farmers. Today, Governments year after year invests in construction of irrigation projects often complex lift irrigation schemes at great cost. This is to increase the supply with view that that supply of water improve the production and productivity of grain. In the process, many irrigation projects reached a stage, the cost of water delivery, just operation and maintance costs, far exceed the total out put of crops. Actually water is being supplied at great cost only to get far less returns. In many cases, if farmers were to be given option of getting the cost of water delivery in lie of water actually being delivered, most farmers opt for the cash. On top of it, that excessive production of grain need to be purchased by further spending on minimum support price Since water is free at least that is what the perception, there is no incentive or mechanism to use that water optimal or productive way. Therefore often the cost of water delivery, not taking into consideration of capital costs, even the operational and maintenance costs which incurred year after year, far exceed the entire production grain in certain projects. Therefore water as an input, which is considered as, free is one of the most expensive to the taxpayers. Probably if water is priced, as commodity, we might be able to use it more efficiently. If tradable permits are introduced, which is common many countries, Indian farmers actually better off trading water permits than growing grain. At least that will give the true value of the crops our producing. Still with water tradable permits, India will be able to grow crops for its food security.
Water is being purchased for drinking.
In the domestic water sector, Water is being purchased every day, most of the people, both in urban and rural in India
Let us take rural areas in two Telugu states and the drinking water situation. Most of the village now have water treatment plants. Even assuming that half of the households purchasing water for drinking by spending Rs. 10 a day. In AP and Telangana, the most conservative estimate of drinking water market on daily basis is close to Rs.10 cr. This is in addition to whatever the Government spending on infrastructure. This spending is just last mile, from treatment plants to the households. So close to Rs.3600 crores of water market in just two Telugu states alone. So water is being sold and purchased for basic needs by people today on daily basis. Water market exists at rural areas and last person in this country is buying water for drinking on daily basis. So water trade is there at grassroots of our society on day today basis.
Water on stock market.
Coming back to the water trading, under NQH20 on the NASDAQ Veles California water index, currently traded at $489 per acre-foot. One acre foot of water is equal to 12,33,500litres of water. This is about Rs.30 per 1000 litres of water. Is this high or low? Let us compare with water sales through truck by our GHMC, the greater Hyderabad Municipalitywater supply. Hyderabad residents can book on line for water supply from Rs.500to Rs.1000 per truck with the capacity of 5000 litres. If we order GHMC to deliver, one acre foot of water, 1223.5 cu.m of water, it would cost from Rs.125,000 to Rs.250,000. This is approximately about 3.4 times to 7 times more than the water being traded in California. So our water trade seem to be more profitable than water being traded in USA.
Even water which is being supplied through pipes is expensive. Hyderabad Metro Water supply production of water cost has increased from Rs.14.40 / 1000 litres in 2002 to Rs.25.50 in 2011 to Rs.43.50 in 2014. That means the cost of producing (means bringing water and treating and supplying to the houses, not including the capital costs of projects and notional cost of water itself) has increased 3 times in 12 years. That means almost every 4 years it is increasing 100%. Projecting the same, in 2020, the cost might have reached at least around Rs.80 per thousand litres. This is about 2.6 times the cost of water traded in California. So even our tap water, is more expensive to the Government than the water traded in California.
READ: 'Teesta water deal signficant in protecting India's interests'
What is this all means to water and water trade?
Water is being sold in India. In the bottles, through canals, through pipes. On daily basis water is being purchased by people- at domestic, for Industry and for other use. There is trade at farmer level, at city level, at rural level. Those costs are just transport, treatment, and disposal costs, which are called operation and maintance costs. All these costs which now Indian users are paying do not include the cost of water in itself. There are ways and means to estimate the value of water and put a price for it. Doing so and adding to the cost might lead water being used much more productive way and true value of water may be appreciated to full extent.
What can be done?
Last three decades, phenomenal breakthroughs- conceptual, technological, and operational have happened in the water management across the world. Some of the innovations contributed immensely to supply, treat, and re-use water which was not seen earlier. There are proven agricultural methods which improve yields by 25% while reducing 30% water. At the same time, our Governments are embarking on most expensive irrigation projects with billions of investments which are questionable and will not stand any reasonable scrutiny of economic. India needs to do four things :
A) it should focus on reducing water significantly to irrigation while producing more crops, there are proven methods, country should invest. It should move from number of acres irrigated to productivity per cu.m of water.
B) our domestic water supply systems can be made efficient with significant reduction in waste of water, efficiency in delivery, and treating the water for re-use. This requires specific national targets which can be measured.
C) move away from this concept of free water for all towards more sustainable water management, which reflects true cost of water to end-users.
D) India need to focus on demand-side management of water than focusing on supply
E) the water pollution is major issue, polluted water not only has immense implications to health, but it has huge cost on the overall economy and welfare of the people. Treating water at the source, by the users should be the focus, not doing so should lead to punitive actions. All this requires appropriate water management systems and institutions. We are not focusing on that, instead still focusing on discarded ways and doing the more the same.
Instead of raising alarm about the water trade on stock market in the USA, probably we should be more concerned about the "free water” we think we are getting. Our free water is the most expensive in the world. Expensive to the economy, society and our ecosystems on which we depend. For this most expensive free water, rich are paying through higher taxes and poor are paying even more through lost opportunities of education, health, employment. Our Governments in the name of free water, are constructing more expensive, more reckless and even more damaging projects, diverting precious money away from more pressing and urgent needs. Our free water is costing nation with jobs, health, long term debt and of course climate change. It is time, we focus on water management by producing more grain, more jobs, better health, better return for unit of water.
