University of Pennsylvania
Dept. of Earth and Environmental Science in conjunction with Dept. of Political Science
Reversing the Political-Economic Feedback Loop in
India’s Inter-State Water Disputes:
Federal Decentering, Water’s Economic Value, Electoral Incentive and
Potential for Local Water Auctions in the Disputed Cauvery Basin
Mike McCullough
Thesis 2013
Advised by Dr. David Zetland, Wageningen University, Amsterdam
In consultation with Dr. Brendan O’Leary, University of Pennsylvania
Overseen by Dr. Robert Giegengack and Dr. Ed Doheny, University of Pennsylvania
1
Abstract
Like many of India’s inter-state rivers, the Cauvery is locked in a contentious dispute
between co-riparian basin states. The Cauvery Dispute is more contentious, longer-running, and
more intractable than other river disputes. This study explains the intensity and intractability of
the Cauvery Dispute using a feedback loop, in which political incentives derived from economic
demands for water, prolong and intensify the dispute, while also making associated water
shortages more likely. Institutional economics, common pool resource management theory, and
theories of collective action for institutional reform provide a guide for understanding the
feedback loop and reversing it. These fields inform an examination of developments in modern
India’s federal political system, which have combined with the increasing economic value of
water to make the dispute unmanageable under the existing legal-political arbitration framework.
At the core of the conflict are incentives, institutions, and the direct and indirect causal
relationships between and among them. To date, many proposals and all efforts to resolve the
dispute have not taken incentives and their institutional surroundings into account. Collective
action to economize water at the local level and to build trust at the interstate level can reverse
the feedback loop. Auctions provide an effective institutional tool for allocating water fairly and
efficiently. Experimental simulations of an All-in-Auction (AiA), derived by water economist,
David Zetland (2013), provide evidence of the conflict dampening effects provided by such
institutional arrangements. Tests of a Buy-Sell One Round Auction (ORA), which was
developed over the course of this study and which mirrors principals developed by auction
economist Lawrence Ausubel (2004), provide further evidence that water transactions at local
levels can efficiently distribute water among competing users simply, clearly, and with minimal
conflict and resistance.
2
Table of Contents
I. Preface and Acknowledgments
II. Statement of the Problem—Presumptions and Questions
III. Scope of Study
IV. Introduction
V. Background & Critical Review of Literature
VI. Federal Decentering
VII. Political-Economic Feedback Loop
VIII. Cauvery Dispute
IX. Reversing the Feedback Loop
X. Auctions for Water—Theory and Simulation
XI. Conclusion
3
“We may utilize the gifts of nature just as we choose, but in her books, the
debts are always equal to the credits.”—Mohandas Gandhi
I. Preface and Acknowledgments:1
This study began in the backseat of a 1950s-style “Hindustan Ambassador” cab, winding
through the nighttime streets of Calcutta. In 2011, I traveled to South Asia to research water
management challenges as part of a team from the University of Pennsylvania's Earth and
Environmental Science (EES) Department and the Institute for Global Environmental Leadership
(IGEL) at Penn's Wharton School. Over lunch with faculty members at the Indian Institute of
Management (IIM) Calcutta one afternoon, Prof. Jayanta Bandyopadhyay, an expert in
Integrated Water Resource Management (IWRM), listened to my ideas and shared suggestions.
Foremost among them was for me to visit his former doctoral pupil, Nilanjan Ghosh who had
recently finished a dissertation on the economic drivers of river basin disputes in the western
United States and South India. He was leaving town the next day to return to his home in
Mumbai, and I would be on a packed flight home to the US the following week. Armed with
rupees, an address written on a cafeteria napkin and no working knowledge of Bengali or Hindi,
I set out to meet Dr. Ghosh that evening.
By creeping taxi, taking what was undoubtedly the long way, through the city’s vast
garment and textile district, I was offered an ideal-type perspective on Indian economic and
social life. In seemingly chaotic and densely-peopled scenes, individuals swarmed the many
stalls and stations, bartering and trading, rupees for goods, goods for goods, for mutual benefit.
The scene was choked with smog, garbage piled in the streets, and raw sewage glistened in open
sewers under orange electric lights. Despite the problematic externalities generated by this
garment market, putting resources to good use without a planned system of mandates or political
intervention was no problem.2
That evening Dr. Ghosh and I discussed our research and ideas about water in India’s
federal system. We looked for common areas of interest. Ghosh's work focused on agricultural
economics with water as an input. It sought to delink federal inter-state water dispute in the
Cauvery and Colorado Basins from quantity of water supply. More precisely, his research bore
out that, left unchecked, ever-increasing demand would certainly lead to conflict, while
continuously augmenting supply would never satisfy demand. His work on the economics of the
Cauvery Dispute discounted institutions, political actors and their incentives, a gap he was aware
of as an enthusiastic and published scholar of institutional economics. He encouraged me to
look at the research, popularized by Elinor and Vince Ostrom, also known as the Bloomington
School (after the University of Indiana, Bloomington), which examined collective action and
institutional design related to common pool resource (CPR) management. Ironically I went to
India to discover research coming out of an interdisciplinary workshop in Indiana.
A frontal assault on the literature of CPR management, collective action, institutional
analysis and design (IAD) frameworks and polycentric governance revealed that the field was
long on both theory and empirical observation, but short on transferable prescriptions.
1
All sources referred to in preface are cited in following sections.
In retrospect, the experience was likely similar to Paul Ehrlich’s formative episode, also in a Calcutta taxi, that
inspired him to write the classic and controversial book Population Bomb. My initial questions were not the same as
Ehrlich’s and this study is only tangentially related to the Neo-Malthusian strand of literature, which Ehrlich’s work
dominates.
2
4
According to her obituary in The Economist, “No panaceas!” was Elinor Ostrom’s creed, a
mantra ever-present in her work and that of her colleagues. With its focus on case-by-case,
small-scale solutions, and with some practitioners even questioning applicability of collective
action solutions to river basin-scale problems, I began to doubt whether the field had anything to
offer federal India’s contested river basins.
Yet the ideological similarities between federal theory and theories of collective action,
participatory management and polycentric governance associated with the Bloomington School
were too apparent to dismiss. Federalism seeks to center a degree of power at more localized
levels through the designation of separate and shared competencies, the latter being co-managed
by federal constituent partners. Likewise the institutional and economic theories associated with
the Bloomington School generally dismiss the necessity or desirability of centralized hierarchical
systems of management in favor of institutions structured around partnerships and transactions
between resource users.
The success and failures of federal systems implemented as a means of conflict
regulation seemed to offer an instructive analog for collective action and participatory
management’s prospects at reducing conflict over contested resources. Federations often fail in
the presence of conflict between deeply divided communities, but so do other mechanisms of
conflict regulation. That federations sometimes hold together fractious cultural communities,
attenuate historic conflict, and promote economic growth and security is maybe a more important
point. Likewise, collective action efforts to reform or build institutions to better manage
common resources also fail regularly, and Ostrom and her colleagues devoted many papers to
identifying which conditions contribute to success and which to failure. Pre-existing conflict
makes collective action and participatory management institutions less likely to succeed;
however, these solutions may be the best or only option to promote more equitable, efficient and
sustainable use and allocation of resources. India has by most definitions successfully
implemented a pluralist federal system to help unite distinct cultural communities. Collective
action and participatory management has worked to better manage water and forest resources in
various places across the country. The question is how collective action institutional reform can
be implemented or scaled to attenuate political conflict occurring at the inter-state river basin
level.
While the Bloomington School provides a wide variety of useful ways of looking at
overarching and contextual systems that come to bear on resource management, it offers few
assertions as to whether common resources are to be allocated according to rules or transactions
or what specific combination of both. Reading popular literature and news stories on water
issues, authored by or strongly colored by the views of activists, I encountered a thinly veiled
animus towards capitalism, which defined markets not as a place where sellers and buyers went
to exchange goods, but rather as a system that primarily created “bads”3—negative externalities.
I also encountered a growing body of work, buoyed by successes in Chile, Australia, the western
US and Spain, about the usefulness of transferable water rights, traded in markets.
Working as a journalist at the sixth World Water Forum (WWF-6) in Marseilles in March
of 2012, I was eager to see this debate play out. Over Heinekens in the main hall of Marseilles’
sprawling conference grounds one evening, I talked with water economist, David Zetland.
Zetland presented a creative, flexible and pro-poor picture of the ways that markets could
allocate water. He suggested that water belonged to people, individuals, rather than to
Following James Buchanan’s (1970) “Public Goods and Public Bads” in Financing the Metropolis, ed. John
Crecine.
3
5
governments and was quick to draw a distinction between ‘the public’ and ‘the government.’
Democracy or no, government agents act according to incentives to maximize their gains when
controlling water resources. His pro-individual, pro-poor approach towards managing water was
refreshing.
India is bundled in contradictions. An oft-repeated saying of lecturers on India is that
anything said of India is true, while the inverse is also true. India is sometimes said to be a
nation of a billion entrepreneurs. On the other hand, the country is known for its ponderous
welfare programs, forged in country’s socialist beginnings, and for its ubiquitous bureaucrats.
The so-called ‘iron-frame’ of the Indian Civil Service, a vestige of British Imperial
administration, holds a politically rowdy and ethnically diverse nation together. Admiration for
India’s bureaucracy is tempered by stories of rampant corruption. In popular discourse, India is
now said to be in the age of the “Mafia Raj,” 4 in which public property and funds are controlled
by a criminalized nexus of politicians and thugs posing as businessmen. The contemporary era
was preceded by the “License Raj,” which referred India’s elaborate licensing and regulatory
schemes, and resultant regulatory capture of many industries and resources. Yet India has one of
the world’s most stridently free presses and a judiciary that is structurally and functionally very
independent. India’s democracy is sometimes said to be the developing world’s greatest success
story, while others point to Indian democracy as constituting a system of “structural violence,”
which creates enduring poverty and condemns millions to die of disease and malnourishment
every year. Even within the parameters of constitutional design, India’s first Prime Minister
Jawaharlal Nehru once remarked that “we are not against the conception of a federation…though
in any event there must be a great deal of unitary control,” a statement that is, by definition,
contradictory.
India’s is wrapped in contradictions because it is large and complex. John Godfrey Saxe
famously recast the Hindu parable of the blind men and the elephant:
It was six men of Indostan
To learning much inclined,
Who went to see the elephant
(Though all of them were blind),
That each by observation
Might satisfy his mind
(Saxe 1873: Stanza 1)
Six blind scholars go to learn about an elephant, but each seizing on different part of the animal
makes very different assertions about its nature. As later stanza’s make clear, the poem warns
against religious conflict, but it also provides an instructive message for scholars of India. India
is an elephant and its students are unable to grasp the ‘big picture’ to achieve to an accurate
understanding. The immense size and complexity of India make it difficult to understand and
accurately portray. Recasting the words of another 19th century poet, Walt Whitman: India
contradicts itself/ (It is large, it contains multitudes.)5. This does not give students of India a
pass, but rather stands as a challenge to them to look at all the pieces of the puzzle, across
Raj, which literally means “kingdom” or “royalty” in Hindu, is commonly used to refer to an oppressive or foreign
dominion when referencing various important epochs in Indian history. India has progressed from the Mughal Raj
of its medieval period, which followed the Muslim Invasions from the North that established the Mughal Empire.
The Company Raj and the British Raj of the colonial period eventually followed only to be replaced by the Licence
Raj. By contrast, the Gupta Empire in which most of North and Central India was governed and structured
according to Hindu beliefs is called the “India’s Golden Age.”
5
adapted from Leaves of Grass, “Song of Myself,”( Whitman: 1855)
4
6
various disciplines, and put together an accurate picture. This study takes that challenge
seriously.
I am indebted to Dr. Zetland for sharing his wealth of knowledge and endless enthusiasm
on the subject, to Dr. O’Leary for providing great insight into federal systems in divided
societies, to Prof. Laskowski for introducing me to the subject of water management and
facilitating many learning experiences, to Dr. Giegengack and Dr. Doheny for their guidance, to
Dr. McDowell for his patience, and to many in the fields of water governance, economics,
hydrology, and federal theory, including Dr. Kapur, Dr. Meinzen-Dick, Dr. Venkatachalam, Dr.
Bandyopadhyay, Dr. Ghosh, Dr. Shankar, Dr. Suan, and Dr. Bhattacharyya, who have taken time
to correspond or meet with me, listen to my ideas, and offer their help. I am also thankful to my
girlfriend, Amanda for her help as occasional research assistant, experimental subjectcoordinator, and sounding board. I would be remiss without expressing gratitude to my friends
who happily played the role of guinea pigs during the study’s auction simulations. I thank my
parents for their support.
7
II. Statement of the problem—presumptions and questions:
India faces a host of water problems, which have significant and immediate consequences
for the country’s people, institutions, economy and environment with the potential to create
greater negative impacts, if not constructively addressed. A key feature of these problems and
chief among them as problems in their own right are long-running, intensifying and seemingly
irresolvable inter-state water disputes between India’s federal constituent states. The dispute
over the shared water of South India’s Cauvery Basin is an example of such a dispute and stands
out as the longest-running, most complex and most contentious (Ferdin, et al. 2010: 35).
What are the causes and consequences of the on-going and increasingly intense legal and
political conflict over the Cauvery Basin’s inter-state waters? Why is the Cauvery Dispute more
intense and more intractable than other disputes? Why was the Cauvery Dispute more
manageable in the past? Why and in what way has the dispute intensified and become more
intractable? What are the immediate drivers and problematic consequences of the dispute? How
do these causes and consequences interrelate to perpetuate conflict? How might the Cauvery
Dispute and disputes like it be resolved or tempered, given the current state of India’s politics,
political, legal and governmental institutions, economy, society, and natural hydrological
systems?
8
III. Scope of study:
This study seeks to explicate intractable federal transboundary water conflict in the
Cauvery Basin using a feedback loop that ties political actions to electoral and economic
incentives. From a contextual standpoint, the study identifies the causes and symptoms of
macro-federal decentering in India’s political-governmental system, which have combined with
increasing economic value of water to make the dispute unmanageable under the existing
institutional framework. Political-institutional developments originating in cultural movements
in South India, particularly the state of Tamil Nadu, in the years following Indian independence
have magnified the effects of macro-federal changes on conflict over Cauvery Basin water. The
study carefully examines literature and theory from institutional economics, commons theory,
water management, and water governance. Political, economic, agricultural, and meteorological
developments in and around the Cauvery Basin are traced over time to test the validity of the
hypothesis and search out potential fixes.
Finally, the study proposes a mix of tools to attenuate conflict and increase the
productivity of water and water-related investment, thereby increasing the welfare of the basin.
The study explores the potential for collective action at the local level to clarify and redefine user
rights to water, laying the groundwork for formal trading of surface water through an auction
format detailed and superficially tested in this study. Formal auctions, run and constituted at the
local level would increase the productivity of irrigation water, promote conservation and
infrastructure improvement, and serve as a constructive outlet for economic incentive, thereby
reducing the political salience of the issue. During times of pronounced scarcity, tradable rights
over surface flows would allow farmers to aggregate water for maximum impact, and share the
costs of bad weather and a faulty political process for allocation. At the inter-state level,
collective action forums have had some effect in defusing political tension (Janakarajan 2003;
2009; Ghosh 2009; Iyer 2012). On the other hand, forum organizers and participants have
limited their effectiveness at building trust by limiting attendance to meetings in an effort to
arrive at a mutually-agreeable water sharing formula. However, organizers and participants have
not adopted the institutional tools that would allow them realign incentives in order to arrive at
such an agreement. Efforts at building a sense of shared community among agriculturalists in
the Cauvery Basin can do much to decrease political tension. Forums should focus on achieving
these ends or acknowledge economic incentives and adopt institutions that allow for a positivesum game orientation towards sharing water. Ultimately, if the monsoons fail, as they have
frequently, neither inter-state team-building exercises among farmers, nor local water markets
will do much to dampen conflict and financial distress. A waters futures market or water
banking program, will provide a way for farmers to hedge against the weather and relieve
uncertainty and pain created by drought. Water users in the Cauvery have been failed by a
political system incentivized by the outcomes of election cycles rather than by the outcomes of
water users in the basin under conditions of scarcity. The political system has actively
perpetuated a set of norms rooted in a mentality of abundant water. This study suggests that the
positive-sum game potentiated by market institutions can salve the negative effects of a
dysfunctional political process.
9
IV. Introduction:
India faces many water problems.6 These problems have the potential to derail its ascent
as an emerging global power, stunt economic growth, and condemn roughly one-sixth world’s
population to poverty, disease and premature death (Mohindru 2006; Anand 2007;
Bandyopadhyay 2008; The Economist 2008; Gupta 2012; The Wall Street Journal 2012). They
also threaten the institutional integrity of the Indian state (R. Rao 1988; Supreme Court of India
1990, 1991, 1993; 1997a; b; Iyer 1996; D'Souza 2001; Abraham 2002; Anand 2007: 140; Ghosh
2009). India’s water problems arise primarily from mismanagement of incentives amid
intensifying economic demand for water and changes in the country’s federal political system,
which have left the central government powerless to arbitrate disputes over inter-state water
allocation. The Cauvery Dispute stands out as particularly problematic in terms of intractability,
erosion to federal and judicial institutions, costs of conflict, and opportunity costs entailed in
continued mismanagement of water (Guhan 1993; Anand 2004; 2007; Iyer 2007; Ghosh 2009;
Ferdin, et al. 2010). The dispute provides an illustrative example of the way in which incentives,
channeled and translated by institutional arrangements, can create self-perpetuating conflict,
inefficient use and allocation of water, and underinvestment in water-related physical capital
(Briscoe and Malik 2006; Ferdin, et al 2010; Jamil, et al. 2012). Inter-state water disputes
(ISWD), particularly the Cauvery Dispute, are symptoms of water mismanagement as well as
causes of further mismanagement.
Water is an explosive issue in India and is managed in a highly politicized process (Iyer
2007). Maitra (2007) asserts that water “is considered to be one of the three most emotive issues
along with religion and language, [which] makes the issue of [inter-state] water disputes
susceptible to political interference” (221; see also, Tilotia 2010: 32). This is especially true in
the Cauvery Dispute where linguistic and cultural issues intertwine with the water dispute
(Anand 2007: 137-138). Historic center-state tensions embedded in India’s pluri-ethnic federal
design have created state-based party systems and squeezed out formerly dominant national
parties, once instrumental in ISWD resolution.7 Tamil Nadu is home to a strong Tamil and lowcaste nationalist movement, out of which powerful state-based parties came to dominate nearly
all electoral contests and play pivotal roles in central government coalitions starting in the 1960s.
Distinctive linguistic and cultural divides between the states further complicate efforts to resolve
disputes and foster cooperation. These cultural and political tensions enable politicians to exploit
water for electoral gains among urban and non-agricultural segments of the electorate (Anand
2007; Velayutham and Aram 2010), and make corrective governance solutions more difficult to
achieve (Ostrom 2009). State politicians manipulate economic uncertainty among farmers, while
also manipulating the inter-state dispute arbitration process for political gain (Janakarajan, in
6
Many commonly used terms take on new meaning when applied to the water management, for example the term
economic scarcity in water lingo has no relation to the notion of scarcity in economics. The term water problem
seems fairly apparent and is defined here as a prevailing condition when management, allocation, or use of water is
bad enough that it imposes hardship on individuals or creates problems in systems or processes, environmental,
economic or political, that require or have impact on water.
7
Many political scientists classify India a pluralist multi-national state, in which federated provinces reflect different
ethnic groups constituting the country’s population.
10
Warrier 2012). At the very least, politicians are compelled to take unyielding positions on the
issue as a matter of electoral necessity.8
Increasing economic competition for scarce water lies at the root of this political conflict.
Recent debates on water scarcity have shifted to water’s economic value (Young 1996; Briscoe
1997; Perry et al. 1997; Garn 1998; McNeil 1998; Rogers, et al. 1998; 2002; Turner, et al. 2004;
Zetland 2011). The UN’s Dublin Agreement codified this shift in thinking in 1992:
Water has an economic value…and should be recognized as an economic
good…Managing water as an economic good is an important way of achieving
efficient and equitable use, and of encouraging conservation and protection of
water resources (Principle No. 4, Dublin Statement on Water and Sustainable
Development 1992).
Bouhia (2001) points out that, “water is a primary input to every economic good, directly or
indirectly, and…water’s available quanity and quality affects output” (9). Roughly 90% of water
withdrawals in the basin go to agriculture (Amarasinghe 2003: 12), and water is the primary
constraint on growth and expansion of agriculture in the basin (Ghosh 2009). Rapid population
growth; government policy to promote rural economic development and subsidize water and
fertilizer; regional shifts in consumption to water-intensive rice; and rapid increases in the
regional market price of rice have combined to make water a scarce and valuable economic
commodity.
A variety of political, institutional, and judicial solutions have been proposed. Some
experts, politicians and judges even support a massive engineering project to interlink all of
India’s major rivers to deliver water to places with growing demand and dwindling supply, such
as the Cauvery Basin (Rao 1972; Tilotia 2010; Supreme Court of India 2012; The Hindu 2012;
Venkatesan 2012). These proposals are unfeasible and would be ineffective because of their
failure to address underlying economic incentives and systemic institutional failures.
Many institutional economists, especially those studying the interactions between natural
resource systems and users, have championed the need for collective action among users aimed
at adapting extant institutions or creating new ones. These institutional economists have also
identified the benefits of complex, multi-tiered, polycentric, and decentralized institutional
arrangements for managing complex resource systems such as watersheds. Collective action is
not a panacea and faces many limitations when it comes to managing river basins, most notably,
integrating the actors and actions of a sufficiently “decomposable” 9 institutional arrangement
(Kerr 2007); however, collective action to “economize”10 water locally coupled with ongoing
inter-state community building forums (Janakarajan 2003; 2013) may do much to reduce the
political salience of the dispute and promote fair and productive utilization of basin water.
Many scholars and experts have expounded upon the benefits that economic instruments
like water markets and market-based mechanisms, such as scarcity pricing, water banking and
waters futures markets (Venkatachalamm 2007; Gundimeda and Howe 2008; Ghosh 2009; 2010;
Nguyen 2011; Seligman 2011). India’s central government also advocates the need to treat
water as an economic good (GoI 2011; 2012) as do federal agricultural agencies (NAAS 2005).
However, a precondition for markets are clearly defined property rights over water use and good
8
Analysis of electoral incentives and imperatives is detailed later in this write-up. For anecdotal evidence, see, for
example, Business Standard (2013).
9
Following Herbert Simon who advocated a “nearly decomposable” organizational structure instead of a centralized
one (1996: 178).
10
Following Williamson’s (1998; 2000) “orders of economizing.”
11
contract governance (Williamson 2000; Bruns and Meinzen-Dick 2005; Zetland 2013p). The
central government is constitutionally constrained in creating institutions that would allow water
to trade between regions and across state-lines (Meinzen-Dick 2013). State governments and,
more precisely, state-level politicians have strong disincentives to take positions in favor of
creating such platforms with co-riparian states. However, India is unique in that its federal
structure has devolved powers to a third tier of federal bodies:11 federated village councils or
Panchayats and their urban counterparts, Urban Local Bodies (ULB). The constitution has
equipped Panchayats and ULBs with jurisdiction over local water management and compelled
state governments to devolve power (GoI Constitution 73rd and 74th Amendments [1993] to Part
IX; see, Upadhyay 2011). Such local bodies are logical starting points for water markets as are
irrigation units known as Water Users Associations (WUA). In the 1990s, India was able to
enact controversial economic liberalization reforms by devolving powers to the states, which
were, in turn, able to implement reforms in a less politically constrained environment with
greater scope to customize (Manor 1998). Manor contends that at the state-level “tensions are
largely quarantined…and some state governments have developed imaginative innovation in
economic policy” (ibid 21). A similar approach to economizing water resources, substituting
local bodies for states, may work.
Official water auctions could increase productivity, and promote infrastructure
improvement and water conservation, while reducing the political appeal of uncooperative water
disputes. The author proposes an “outside-politics” water auction, a sort of spot market, that
could take place before, after or during the inter-state legal-political process to allocate (or
failure to allocate) water. Auctions could occur on a regular basis corresponding to planting
seasons or be triggered by meteorological or legal-political events. Regardless, these auctions
should correspond with local norms regarding irrigation and commence only after an irrigation
district has clarified water use and a system for enforcement. The auctions would be
administered by Panchayats or, where politically and legally feasible, by Water User’s
Associations12. Water auctions would trade water with rights and rules determined by citizens of
the Panchayat or members of the WUA. The author analyzes and tests an All-in-Auction for
water (Zetland 2013) and a Buy-Sell One Round Auction (ORA) under conditions meant to
simulate meteorological conditions and jurisdictional scales. The auction simulations seek to
quantify and qualify auctions’ ability to increase productivity and decrease inter-group conflict.
11
Nigeria has a similar system.
Similar to irrigation districts in the United States.
1212
12
V. Background & Critical Review of Literature
A. Overview
B. Institutions, Institutional Economics, Abundance-Scarcity Conceptual Framework
1. Water and Institutions
2. Scarcity-Abundance Conceptual Framework
3. Institutions
4. Institutional Economics
a. Layered Institutions and Ordered Economizing
b. Governments, Markets, Rules, Contracts
c. Centralized and Decentralized (Public Choice Theory)
d. Managing the Commons (Bloomington School), Institutional Economics of
Common Resources
C. Institutional Economics of Water
1. Overview
2. Concurrent Development of Public Choice, Commons Theory with Watershed
Management
3. Collective Action for Cross-scale, Rule-based Participatory River Basin Management
and its Limitations
4. Nested Platforms for Cross-scale Organization of Collective Action
5. Collective Action to Property Rights, Laying the Groundwork for Markets
D. Background
1. Units and Measures
2. South Asian Number System
3. Water Management Terminology
E. Noisy Debate
1. Paradigm Debates
2. Fallacy of a “Global Water Crisis”
F. Legal Theory
1. Property Rights and User Rights
2. The United Nations
13
A. Overview
This study seeks to explicate federal transboundary water conflict in the Cauvery Basin
with a feedback loop that ties political actions to electoral and economic incentives. From a
contextual standpoint, the study identifies macro-federal changes in India’s politicalgovernmental system, which have combined with increasing economic value of water to make
the dispute unmanageable under the existing institutional framework. Further, it examines the
potential that formal auctions, run and constituted at the local level, might serve as a constructive
outlet for economic incentive, thus reducing the political salience and tension associated with the
issue. In the long-term, inequity, ecological degradation and economic inefficiency could be
attenuated if auctions were arranged in a nested framework, allowing inter-district transfers,
including inter-state transfers. Consequently the study draws on a wide range of literature,
including institutional economics, water governance and management, trans-boundary water
conflict, federalism, legal frameworks related to water allocation and rights, water resource
economics, and auction frameworks.
The literature informs the analysis of a variety of topics—river basin management, India
and its disputed basins, and South India’s Cauvery basin. These topics intersect with theoretical
and comparative studies across a spectrum, which moves from federal theory in the domain of
political science to market frameworks. The treatment of the subject can be visualized as a
matrix, moving from least specific and most empirical—federalism and WRM—to most specific
and most hypothetical—official, interlinking local water auctions in the Cauvery Basin.
Consistent among all theoretical nodes is the theme of decentralized and localized decisionmaking, whether regionally-centered in the case of federal arrangements or individualized
autonomy to reallocate resources according to prices in the framework of a market. These
decision-making structures are understood to channel and alter individuals’ incentives. The
study focuses on the ways in which these institutions shape the decision making process around
water, which is assumed to be primarily an economic commodity. The study, therefore, finds its
balancing point in institutional economics. Water’s classification as an economic commodity is
based here, empirically, on overwhelming share devoted to economic activity and, normatively,
on growing scarcity. Water is also integral to social and political systems, which shape the
decision making process.
Academic literature on water can be divided into studies of water in natural systems, and
studies related to water for human use and in human systems.13 This study focuses on the latter
group. The primary concerns about water for human use revolve around quantity, quality and
availability, as well as the systems and processes and that come to bear on these variables—
dictating which users get how much, when and who decides, based on what criteria (Blomquist
and Schlager 2008: vii). When water resources become scarce or polluted, these processes,
broadly covered by terms such as water governance, management, and allocation, become
critical and contentious. Critical because, while paradoxically under-valued, water is necessary
for a wide range of activities (Smith 2000 [1759]), and contentious because scarcity means that
many users will not get the water they demand.
13
The distinction between human use and human systems is not necessarily semantic—human use implies only
actors and actions related to a resource, whereas human systems implies rules systems, institutional arrangements or
built infrastructure related to that resource.
14
B. Institutions, Institutional Economics & Abundance-Scarcity Conceptual Framework
1. Water and institutions
The critical and contentious human systems and processes implicated in water
governance, management and allocation are institutions. Institutions matter when it comes to
human use of water (Meinzen-Dick 2007; Ostrom 2007a; Zetland 2011). Increasingly scholars
and experts acknowledge that institutions are the cause of water problems and that institutional
reform is the solution (ibid); however, institutions and institutional arrangements do not
necessarily change easily, quickly or in the ways reformers intend (Agrawal and Ribot 1999;
Wlliamson 2000; van Waarden 2002; Ostrom 2007b; Zetland 2011). Following Williamson
(2000), Zetland notes “Institutions can take many forms, from the resilient and resistant
institutions of culture, to the formal and informal practices of law, to the day-to-day interactions
of an evolving population” (2013: 1). Zetland and Weikard (forthcoming) echo one of the
foundational assumptions of institutional economics, that history creates institutions (see, Arrow
1987), but note that history is not destiny. Ideas and actions can change institutions that no
longer serve the needs of society and, importantly for water systems, institutional change
responds to changes of scarcity of resources (Ruttan 2001).
The changing relationship between human systems and water resources is key to the
centrality of institutions in water problems and possible solutions. The orientation of human
15
users to water resources has, in many regions around the globe, moved in an arc from scarcity to
abundance back to scarcity (Zetland 2011). However, the institutions, or at least the
assumptions, upon which the objectives and tasks14 of water institutions are based, have
remained largely unchanged: demand can and must be satisfied; augment supply accordingly.
These institutions facilitated the transition from scarcity to abundance and are hastening the
return of scarcity, while exacerbating the pain associated with this regression (ibid).
2. Scarcity-abundance conceptual framework
Any discussion of water use by human populations resides within a temporal and
developmental framework (Steward 1949; 1955; Wittfogel 1957). Water is either abundant or it
is scarce in a given place, at a given time, depending on user demands on available supply
(Zetland 2011: 19-20). When water is abundant, physical supply is effectively limitless, given 1)
the population of users; 2) the infrastructure in place to divert, deliver, store and treat water; 3)
the industrial (intensive) or agricultural (extensive) capacity to produce end goods with water
and the market demand to consume those goods; 4) and the institutions involved in allocation
and management (tangentially and directly).
Abundant water may become scarce when demand increases because i) populations
grow; ii) infrastructure deteriorates without new investment; iii) economies develop and require
more water as an intermediate good; iv) institutions grow corrupt or allocate water wastefully
(referred to as “lack of capacity” or “poor water governance” (Rogers and Hall 2003) by
analysts); or v) historic weather patterns change, reducing renewable annual supply or regularity
of recharge. Additionally, abundant water may become scarce when vi) industrial development
or excessive extraction/diversion of water pollutes supply. India has an intensively utilized
network of perennial rivers, many of which are affected by the water scarcity factors outlined
above.
3. Institutions
Institutions are complex, multi-layered, intertwined and difficult to change. They have
profound effects on the workings, successes, and failures of economies, societies, and managed
natural resource systems, such as river basins. Zetland (2011) notes that “most institutions are
difficult to describe [and] highly adapted to local conditions” (6). Hollingsworth and Müller
(2003) contend that many socio-economic scholars “assume that institutions are rules, norms,
habits, conventions, and values, and that these are among the major determinants of the social
world,” in short, they are “rules systems…[that] structure social interaction by specifying who
may participate in relationships, how participants should conduct themselves, and what the goals
of participants are…[T]hey influence who does what, when , where, and how” (83; see also,
Hodgson 2002). Scholars of socio-economics generally identify institutional arrangements as
markets, the state, associations, and networks (Hollingsworth and Müller 2002). Institutional
economist Douglas North (1991) maintains, “Institutions are the humanly devised constraints
that structure political, economic and social interaction. They consist of both informal
constraints…and formal rules…Throughout history, institutions have been devised by human
beings to create order and reduce uncertainty in exchange” (97). Ostrom (2005) contends that,
broadly defined, “institutions are the prescriptions that humans use to organize all forms of
repetitive and structured interactions including those within families, neighborhoods, markets,
firms, sports leagues, churches, private associations, and governments at all scales”(3). In the
same vein, McGinnis (2011), codifying the logic of the Bloomington School of Institutional
Analysis, defines institutions as “human-constructed constraints or opportunities within which
14
Following James Q. Wilsion (1989).
16
individual choices take place and which shape the consequences of their choices” (4). Following
Arrow (1974), who identified the crucial role of trust in enhancing transactional outcomes, many
authors classify trust relations as an important institutional form, particularly in informal contract
governance (Cooter 1997; Greif 1997: 239-40; Easter et al. 1999; Swallow et al. 2006: 364;
Ostrom 2009: 431). Hodgson (2002) and others (Williamson 2000; Zetland 2011) note that
institutions tend to order interactions and transactions, creating predictable patterns, thereby
reducing transaction costs. However, institutions can also raise transaction costs and inefficiency
(Zetland 2011: 6).
4. Institutional economics
Institutional economics examines how institutions shape actors and incentives, which in
turn, shape actions and outcomes. It also examines how actors may reshape institutions or
institutional arrangements to realign incentives, in turn, reshaping actions and outcomes. From a
WRM perspective, institutions create incentives that either increase or decrease the efficiency
and fairness of resource allocations (Ostrom 1965; 2007a).
a. Layered institutions and ordered economizing
Through the lens of institutional economics, institutions are stacked several layers deep
(Williamson 1998; Ostrom 2005; Zetland 2011). Zetland classifies four institutional layers
based on their fixedness and longevity15: culture and informal norms, which develop over
centuries; foundational documents such as constitutions, which are difficult to change and may
remain fixed for decades; rules and regulations, subject to political or bureaucratic modification
every few years; and personal choices about how to allocate resources in markets or
organizations, which are not fixed and change rapidly (2011: 6). Williamson (1998; 2000)
describes a similar system (see diagram), in which primary level institutions are socially
embedded. He notes that mores, traditions and religions play a large role (596). Level 1 is taken
“as given by most institutional economists” because change happens so slowly (ibid).
Institutional economist Douglass North famously questioned “What is it about informal
constraints that gives them such a pervasive influence upon the long-run…?”(1991: 111).
Smelser and Swedberg (1994: 18) distinguish different kinds of embededness—cognitive,
cultural, structural, and political. Williamson speculates that level 1 institutional inertial may
result from functional or symbolic values associated with primary institutions or pervasive
interlinkages with complementary institutions. He contends that these institutions “have a
lasting grip on the way a society conducts itself” (2000: 597). Consequently, many scholars
advocate wholesale incorporation of these institutions or special consideration for them in
institutional fixes for water problems, thus situating water management more locally and
structuring it in a more decentralized manner (Bruns and Meinzen-Dick 2005; Zetland 2011).
Level 2, the institutional environment, consists of formal rules, including property rights
(North 1991: 97). Williamson contends that formal rules create the opportunity for “first-order
economizing: get the formal rules of the game right” (2000: 598). Design instruments include
“the executive, legislative, judicial, and bureaucratic function of government as well as the
distribution of powers across different levels of government (federalism).” Property rights and
contract laws are defined and enforced (ibid). Coase and others advocated that to create a
functioning private-enterprise system, government must create property rights in resources and
an attendant legal system to define these rights and arbitrate disputes before stepping aside:
“when this is done, someone wishing to use a resource has to pay the owner…Chaos disappears;
and so does the government” (Coase 1959: 12). Markets then allocate resources to their highest
15
Institional economists use the term embededness.
17
value uses (Alchian 1961; Coase 1959; Demsetz 1967). Design choices about formal rules are
unarguably important to economic productivity (Coase 1992; North 1994; Olson 1996), but
nonetheless difficult to orchestrate under normal, peaceful circumstances (Williamson 2000).
Furthermore, definition and enforcement of such rights are not easy or costless (Williamson
2000: 599), requiring additional elaboration.
(Williamson 2000: 597; arrows
represent causal relationships; dotted arrows indicate feedback)
Moving beyond formal rules (property rights) to course of dealing (contractual relations),
introduces Williamson’s and Zetland’s third tier, namely governance. Contractual relations and
disputes are often managed privately by the parties involved, and a singular, universal law of
contract is neither feasible, nor empirically accurate (Summers 1969; MacNeil 1974). J. R.
Commons foreshadowed this development in institutional economics, defining the unit of
transaction as “the ultimate unit of activity, [which] must contain in itself the three principles of
conflict, mutuality, and order” (1932: 4). Transaction cost economics identifies governance as
18
the effort to craft order, mitigating conflict, so as to realize mutual gains (Williamson 2000: 599).
Transaction cost economics examines shaping a governance structure to align incentives and
examines how governance structure shape incentives and contractual relations in an ex post
sense. Second-order economizing—fine tuning governance—is realized at Level 3. Williamson
contends that “reorganization of transactions among governance structures is re-examined
periodically, on the order of a year to a decade, often at contract renewal or equipment renewal
intervals.” McGinnis (2011), following the Bloomington School, identifies governance as “the
process by which the repertoire of rules, norms, and strategies that guide behavior within a given
realm of policy interactions are formed, applied, interpreted, and reformed”(5). He defines
institutional development “as referring to the processes of dynamic changes of institutions as
well as changes in their effect over time” (4). Delving further into water literature, moving away
from economic theory, the Global Water Partnership (2002; 2003) defines water governance, in
a more static sense, as the “the range of political, social, economic and administrative systems
that are in place to develop and manage water resources, and the delivery of water services, at
different levels of society.” Neoclassical economic analyses operate within the fourth layer of
institutions, at which adjustments to prices and output occur continuously, according to marginal
analysis. Williamson categorizes this as 3rd order economizing: “get the marginal conditions
right” (2000: 597).
b. Governments, markets, rules, contracts
Within institutional economics, there is general consensus that governmental,
bureaucratic management of resources is an option of last resort. There is also consensus that
while rules are necessary, contracts, where they can be substituted for rules, are less costly and
more likely to create fair and efficient outcomes. Becker (1958), who demonstrated that the
costs of regulation often outweigh those of market externalities,16 followed by Coase (1964) and
Demsetz (1969), were among the first to take exception to the double standards used in “market
failure” literature, according to which markets are susceptible to calamity with far-reaching
consequences for society, while “omniscient, omnipotent, benevolent” governments (Dixit 1996:
8) reliably administer workable solutions. A core principle of Ostrom’s work is that evidence
contradicts the notion of the resource user as a rational egoist, a foundational concept in
contemporary policy analysis. “Government officials are implicitly depicted, on the other hand,
as seeking the more general public interest and capable of designing optimal policies,” laments
Ostrom (2007a: 33). The rational egoist used in conventional non-cooperative game theory is
not appropriate in dilemma settings in which actors communicate (ibid). Kreps (1999) points out
that “Markets and Hierarchies…translated into game theory [may constitute] a very poor
translation” (122).
Governments and their agents may be less adept and more self-serving when it comes to
creating fair and efficient means of using and allocating resources. Williamson (2000) notes that
added governance within a firm and especially within a government agency means added costs:
Moving from less to more complex governance entails introducing added security
features, reducing incentive intensity, and incurring added bureaucratic
costs…Additional mechanisms, to include the use of hierarchy to…decide
disputes by fiat, are introduced when transactions are removed from the market
and placed under unified ownership (the firm) [which] always come[s] at a
cost…The public bureau, in this scheme of things, can be thought of as the
16
Externalities are unreimbursed costs or unpaid benefits to tangential parties resulting from the actions or
transactions of others.
19
organization form of last resort: try spot markets, try incomplete long-term
contracts, try firms, try regulation, and reserve recourse to public bureaus for
when all else fails (603).
In fact, Ascher (1995) found that national government agencies have been notably
unsuccessful in their efforts to design effective and uniform sets of rules to regulate use
of resources. In the 1950s and 1960s, many developing countries nationalized all land
and water resources. Ostrom notes that “the institutional arrangements that local resource
users had devised to limit entry and use lost their legal standing. The national
governments that [self-]assigned these new and difficult tasks lacked adequate funds and
personnel to monitor the use of these resources” (2007a: 32). Resources, once governed
according to property institutions, reverted to de facto open-access. A perverse set of
incentives took hold when users realized that they would no longer benefit from their
own costly stewardship efforts (Arnold 1998; Arnold and Stewart 1991). Another
relevant real-world example is provided by Zetland (2013d) who demonstrates that water
managers in the largest utility in the US, structured as a cooperative with member
agencies, did not behave in a manner consistent with maximizing social welfare and were
more likely to act as free-riders than subjects in an experimental simulation. Zetland
notes that while some managers behaved cooperatively, twice as many behaved as freeriders (425).
Work by political scientists echoes these concerns about costs of moving from
transactions and contracts to government administration. In an exhaustive analysis of
government bureaucracies, Wilson (1989) explains that government bureaucracies succeed when
they clearly identify tasks and combine incentives, culture, and authority in a way well suited to
those tasks. However, Wilson catalogues a long list of failures, which he attributes to “the daily
incentives operating in the political world, [which] encourage a very different course of action”
(365). Equally discouraging are the dismissive attitudes of politicians towards effective
bureaucracies that succeed in practice, but whose operations may not mirror the well-intentioned
values of policy makers or, worse, fear on the part of politicians of bureaucratic independence,
which sets into motion a spiral of added policy constraints and bureaucratic resistance to change
(ibid).
Within the realm of public services, Wilson identifies two ways of improving delivery—
rules and contracts. He notes that while contracts offer a greater chance at successful outcomes,
“rules pervade government agencies because the institutions constraining the agencies—courts,
legislatures, executive staff—usually find the formulation and imposition of a rule to be more
rewarding” (363). He notes that rules can be crafted to describe a specific grievance, appearing
to be immediately responsive to the group bringing the grievance, producing electoral returns for
the policy-maker. Maver Bernstein (1955) famously pointed out that the reflexivness of rules
defining objectives and tasks for government agencies means that these agencies are often
retrospective, reactive and focused on short-term issues, rather than forward looking and
proactive. Rules increase the formal authority of executives and managers and as a consequence
these people often find them attractive (Wilson 1989: 363). Solomon (2010) and Fagan (2011),
like Wittfogel and Steward before, contend that since the beginning of major civilizations, water
has been allocated in a process that gives enormous power to politicians. Roger Bate (2002) and
Zetland (2010, 2011) point out that government monopoly of water resources allows politicians
to distribute water at low cost to supporters with high yielding political returns. Rules do not
need to be reconciled with one another by those crafting them, and therefore, the political
20
institutions employing them are not required to make painful decisions about winners and losers
when resource constraints come to bear (Wilson 1989). But in order to effect the intended
outcome rules must carefully align incentives. Salzman and Thompson identify the basic
challenge of crafting environmental regulation as “understanding the reward structures of parties
and then changing incentives so that environmental protection reinforces rather than collides
with the parties’ self-interest” (2010: 17-18)—A tall order. Ostrom challenges the foundational
belief in contemporary policy that designing rules to change incentives is a “simple analytical
task,” best reserved for objective analysts not specifically involved with the resource system in
question (2007a: 33). Following Campbell (1969), she contends that all public policies should
be considered experiments and that “all policy experiments have a positive probability of failing”
(ibid).
In cases where delivery of a service is controversial, as in the case of delivery of water
services, government actors are incentivized to “pretend that all preferences can be
accommodated simultaneously rather than to let markets allocate goods on the basis of the
strength of individual preferences. As a result, the evidence for the superiority of contracts often
falls on deaf ears” (Wilson 1989: 364). Within the world of water governance, this is identified
as ‘multiple priority disorder’ by Zetland (in McCullough 2012). This syndrome was
prominently on display at the most recent convening of the World Water Forum in 2012, where
policy-makers agreeably proposed contradictory agendas in the name of semantically identical,
but still undefinable goals (McCullough 2012). Within literature on water governance and
management, the need to accommodate ‘co-equal priorities’ leads to a sometimes vague lexicon
of terminology, where terms take on distinct and expansive meanings compared to their
semantically identical counterparts in economic and political science literature.
Contracts, defined as agreements about the terms of a transaction, are less attractive to
governments, according to Wilson (1989: 363), in part because of the uncertainty involved—
contracts may specify a desired outcome and leave procedures to the discretion of the contractor
or they may specify a service rendered and leave the outcome undetermined. Furthermore, a
contract must reconcile some major trade-offs between cost and quantity or between time and
money. Contracts often leave significant discretion in the hands of customers or lower-level
operators, decreasing the influence of policy makers (ibid). Wilson notes that efficiency gains
may not be the most important upside of contracts. Efficiency gains are sometimes difficult to
measure because of the vagueness of objectives such as “provide suitable housing” and
“educate”; however, contracts allow a wide range of possible outcomes tailored to individual
wants: “we can learn rather easily whether we’ve satisfied people, for the essence of the market
is the opportunity it affords people to vote with their feet” (364).
c. Centralized and decentralized (Public Choice Theory)
Institutional economists are united in the view that hierarchical forms of organization are
not superior to localized, decentralized forms. Ostrom (2007a) notes that empirical evidence
belies the assumption that organization itself requires central direction. However, institutional
economists of all stripes find it difficult to disposes contemporary policy analysts of this
assumption, because self-organized groups are, according to Ostrom (2007a: 33) “invisible to
those who cannot imagine organization without rules and regulations issued by a central
authority” (see also, Lansing 1991). Consensus on the costs of centralized bureaucratic
administration and the relative merits of decentralized, small and client-oriented organization
arose primarily from work authored in the 1960s by Herbert Simon (1964) Gordon Tullock
(1965), James Buchannan (1965), and James Coleman (1966a; b). This work challenged
21
fundamental tenants of public administration theory, first articulated by Woodrow Wilson
(1887). Wilson’s thesis, which launched a field of study, hinged on the distinction between
politics and administration (210)—where politics could differ radically from one regime to
another, all useful and efficient administration was based upon a hierarchically ordered system of
graded ranks subject to political direction by heads of departments at the center of government
(216).
Importantly Wilson’s theories followed those set out by public administration theory’s
progenitor, Thomas Hobbes’ Leviathan ([1651] 1962), which advocates that “the sovereign must
be the final arbiter in all matters of law, morals and religion, [and that] all chains of command
must ascend to him like a pyramid” (Peters 1962: 11). Hobbes’ fear of civil war, like the one he
witnessed engulfing England during his lifetime, led him to reject institutions created by
tradition, experience or trial and error: “The skill of making, and maintaining commonwealths
consisteth in certain rules, as doth arithmetic and geometry; not as tennis-play, on practice
only…” said Hobbes (in, Peters 1962: 12). Although Hobbes conceived of the state as a
construction, consisting of agreement, contract, institution and other manifestations of human
decision, he was unable to conceive of a sound institutional arrangement developing naturally or
operating with any degree of autonomy from centralized authority ([1651] 1962).
Following Hobbes, Wilson and disciples of public administration theory proposed that
technically trained civil servants “appoint[ed] into a perfected organization, with an appropriate
hierarchy and characteristic discipline” (ibid) would produce the “utmost possible efficiency and
at the least possible cost of…money [and] energy” (Wilson 1887: 197). According to L.D.
White (1926), the purpose of public administration was “management of men and material in the
accomplishment of the purposes of the state” (6). The Production Possibility Boundary (PPB)
analysis that grew out of this tradition assumes the omniscient perspective of an analyst who
knows the “will of the state,” which, in turn, is assumed to create outcomes that satisfy the
preferences of citizens (Ostrom and Ostrom 1971; Wildavsky 1966). Despite suffering a “crisis
of identity” (Waldo 1968) in the face of withering critiques from institutional economists in the
1960s and 1970s, most of public administration theory’s major tenants persist in literature and
implementation of institutional design.
Simon’s (1964) critique, Administrative Behavior along with the formation of the Public
Choice Society and associated journal edited by Tullock in 1967, gave rise to public choice
theory. Public choice dispenses with the notion of a single, optimal bureaucratic organizational
form, instead opting for a variety of smaller, decentralized, overlapping multi-organizational
arrangements, responsive to the costs of collective decision-making and collective action17 and
dependent upon citizen-clients (Ostrom and Ostrom 1971: 212). Simon argued that widely
accepted tenants of public administration science were logically incompatible and constituted
little more than “proverbs,” allowing analysts to pick and choose in order to justify any position.
Simon suggested that in constructing a theory of non-market decision making, the distinction
between facts and values was important. Individuals, bounded by the ordered rationality of an
organization, would consider both facts and values in choosing among alternative courses of
action. Furthermore, a bridge between theory and empirical study needed to be constructed so
that “theory could provide a guide to the design of ‘critical’ experiments…while experimental
study could provide a …corrective of theory” (44). Simon (1964) concluded that there was no
17
Collective action broadly refers to action by two or more agents to accomplomlish a collective purpose (Sandler
1992), and as a tool can be used to implement institutional fixes, incentive-based economic fixes or a combination of
both. The primary thrust of commons theory is using stakeholder forums to create collective action.
22
reason to assume that perfect hierarchical ordering would produce maximally efficient outcomes.
Other arrangements needed to be evaluated as well. According to Ostrom and Ostrom (1971)
public choice theory concerns the effect that different decision-making rules (institutions) have
on the production of public goods and services, the main analytical variables being “a model of
man, the type of event characterized as public goods and services, and decision structures” (205).
In public choice theory, the individual is assumed to be self-interested, in that he bases
choices on individualized preferences (Buchanan 1965); rational, with the ability to rank order
all known alternatives transitively (Boulding 1966); inclined to pursue maximizing strategies by
consistently choosing alternatives that will result in the greatest net benefit to himself (Wade and
Curry 1970). He is assumed to base action decisions on available information about the range of
alternative actions and the likelihood that an action will lead to a projected outcome (Radner
1970). In the absence of complete information he is expected to use hedging strategies and learn
through trial and error (Simon 1959; Stigler 1961; Thompson 1966). Ostrom and her colleagues
later reaffirmed Herbert Simon’s (1955) initial skepticism concluding, an “assumption that
individuals have complete information about all actions available to them, the likely strategies
that others will adopt, and the probabilities of specific consequences that will result from their
own choices, must be rejected in [many] settings” (Ostrom 2009: 20; see, Simon 1999).
However, this model of human behavior and rational choice is empirically supported in open
markets for private goods (Smith and Walker 1993; Satz and Ferejohn 1994) and it was helpful
in articulating a new logic of collective action (Buchanan and Tullock 1965) and in describing
the limitations of bureaucracies and likely patterns of behavior of individuals within them
(Tullock 1965).
Samuelson (1954; 1955) first distinguished public goods from private goods, in that pure
public goods are both nonexcludable—it is impossible to prevent those who have not paid for a
good from consuming it—and nonrival—whatever individual A consumes does not limit
consumption by other users (ibid).18 Albert Breton (1966) stressed the indivisibility of public
goods, which leads to their nonexcludability and therefore to potential difficulties with
ownership and transferability. Clean air, national security, a stable regulatory environment, and
public safety are examples of public goods and services. Provision of public goods and services
creates a set of collective action problems for self-interested, rational actors. Individuals will
seek to maximize their net welfare by utilizing public goods and services to the greatest extent
possible while contributing as little as possible to their provision or maintenance. Individuals
may withhold information about their honest preferences for a common good so they may avoid
paying after others propose the improvement. Distortion of information makes efficient and
useful provision more difficult and complicated (Musgrave 1959; Demsetz 1970). If voluntary
action is proposed, individuals may have incentive to hold-out and free-ride on those who take
action (Cunningham 1967). Mancur Olson’s The Logic of Collective Action (1965) concludes
that indivisibility and nonexcludability of public goods creates an incentive structure that deters
individuals from voluntarily organizing to provide for the larger group. Likewise Musgrave
(1939), Leoni (1957), and Burgess and Robinson (1969) conclude that individuals will
voluntarily organize for public interests only when they anticipate separable benefits greater than
their costs of participating. Given the disincentive for individuals to take action to provide a
“free lunch” to “free-riders” and the unlikelihood of full community participation, collective
18
Private goods, on the other hand, are excludable and rival. Buchanan (1965) and Vince and Elinor Ostrom (1977)
later distinguished club goods and common pool resources (CPR), respectively, as additional types of goods that
occupied intermediary positions in the spectrum between private and public goods.
23
action seems unlikely. This incentive calculus seems to necessitate centrally directed provision
of public goods via large public bureaucracies to maximize order and efficiency. However,
Ostrom and Ostrom point out “individuals do surmount the problems of collective inaction to
constitute enterprises which do not rely strictly upon the voluntary consent of all who are
affected” [sic] (1971: 207).
Buchanan and Tullock (1965) use the logic of constitutional formation as the foundation
for a method of collective action. Under their logic, public agencies are not bureaucratic units
providing services at the direction of politicians, but rather a means for allocating decisionmaking authority in order to provide goods in response to individual preferences in different
social contexts. Ostrom and Ostrom summarize, “A constitutional choice is simply a choice of
decision rules… for ordering the choices of future decision makers” (1971: 207). The only costs
to account for are (1) external costs—the future costs that decisions taken by the institution will
deviate from the individual framer’s preferences and impose costs on him, and (2) decisionmaking costs—in terms of expenditure of time, resources, and opportunity costs (Buchanan
1969). Both costs are mitigated or exaggerated by decision rules specifying the proportion of
individuals required to agree before undertaking future collective action (V. Ostrom 1968).
These potential costs are likely to have an inverse relationship, where a greater degree of
required unanimity results in higher decision-making costs; whereas a lower threshold of
agreement raises the likelihood of dissatisfied individuals required to go along despite their
objections.19 Ostrom and Ostrom (1971) note that external costs will be at their highest when
one central authority can decide for the whole. Reducing the size and scope of bureaucratic
organization would logically reduce both external and decision costs, enabling a higher
correspondence between preferences and services delivered at a lower cost. In strikingly
different types of analytical approaches to describe success and failure of different types of
bureaucratic organizations, institutional economists Coase (1937) and Tullock (1965) both
recognize limits to economies of scale. “No such limits were recognized in the traditional theory
of public administration,” note Ostrom and Ostrom (1971: 209). Tullock (1965) concludes that in
an effort to advance by pleasing superiors in the “perfected” hierarchical ladder, the ambitious
public employee will rationally forward favorable information; while suppressing unfavorable
information. Distortion will diminish control and generate projections that diverge from
outcomes. “Large-scale bureaucracies will, thus, become error prone and cumbersome in
adapting to rapidly changing conditions” (Ostrom and Ostrom 1971: 209).
Ostrom and Ostrom (1971) advocate public enterprise operated with substantial
autonomy at the local level with possible jurisdictional overlap to control for externalities.
Contrary to what public administration theory holds, empirical studies of jurisdictional overlap
reveal that this format may optimize efficiency and usefulness in outcomes (Hirsch 1964;
Williams 1966), for example, in public education (Dawson 1970; R. Barlow 1970; Holtman
1966), in the water sector (Bain et al. 1966; Schmid 1967; Weschler et al. 1968), or in policing
and public safety (Shoup 1964; E. Ostrom 1971). Even in the early stages of public choice
theory, institutional economists were advocating for market-based solutions to the cost problems
associated with public provision of certain goods and services (Buchanan 1968; V. Ostrom et al.
1961; V. Ostrom 1969). Where public bureaucracies are absolutely necessary, smaller
bureaucracies may be more efficient (less costly), and smaller, overlapping, and client-oriented
ones may provide more useful outcomes that more closely correspond with individuals’
19
In the context of federal organization, these arrangements are known as demos-enabling (lower threshold for
action) and demos-constraining (higher degree of unanimity required).
24
preferences, thereby recasting L.D. White’s (1926) formulation by managing “men and material
in the accomplishment of the purposes of [public welfare rather than] the state.”
d. Managing the commons (Bloomington School): institutional economics of natural resources
While there is general consensus among institutional economists and many political
scientists about the costs of large, centralized bureaucracies and the relative benefits of local,
decentralized systems; there are varying degrees of opinion about whether and when community
management is a viable option. This discussion becomes particularly relevant when considering
the maintenance of natural resource systems and natural resource goods. The nature of
institutions that govern the management and allocation of resources, whether contracts or rules,
communities or individuals, is an important topic (Zetland 2013p).
Adherents to institutional economic theory labeled New Institutional Economics (NIE),
which traces origins to the work of Freidrich Hayek (Williamson 2000: 600), often lean toward
neoclassical analyses and proposals. Paraphrasing the logic of property rights economics,
prominent in the 1960s, Williamson wryly hyperbolizes, “Once property rights have been
defined and their enforcement assured, the government steps aside. Resources are allocated to
their highest value as the marvel of the market works its wonders” (2000: 598). Hyperbole aside,
adherents of NIE developed an articulated literature on the governance of contractual relations
during the 1970s and have elaborated proposals to fit institutional circumstances. Property
rights, contracts and transactions within markets are their focus. Better technologies for
modeling resource systems and markets have made auctions and markets feasible options in
settings where they once were not. Raffensperger and his colleagues (Plagmann and
Raffensperger 2007; Raffensperger and Milke 2009), for example, use computer models to
match watershed conditions with maximally efficient auction prices in “smart markets” for
groundwater. Even modest technological advancements paired with institutional innovations can
create conditions for a market. A fisherman with a GPS and a shotgun can reasonably exclude
others from harvesting on a plot of ocean to which he has leased rights (Zetland 2012p). Arrow
(1971) points out that institutions themselves are “innovations…among [man’s] greatest” (1971:
224), while Fogel (1999) and Williamson (2000) stress that the profound importance of
technological innovation can and should work in tandem with institutional innovation.
There are also a number of scholars who favor individual ownership or community
management depending on the circumstances. Zetland (2011) makes clear community
management can provide fair and efficient outcomes as long as participatory management is
decentralized and local, the goal being to give individuals maximum stake in governing resource
decisions that affect their lives. Ruth Meinzen-Dick and her colleagues provide an interesting
bridge between neoclaclasical theory and participatory management, whereby collective action
can create property rights necessary for transactions, contracts and markets.
Commons and collective action literature, largely based in the logic of Elinor Ostrom’s
Bloomington School, focuses primarily on participatory and community management of natural
resource systems. In this genre of institutional economics, ‘collective action’ is not an insoluble
problem plaguing a would-be efficient market, but rather a solution to the difficulties associated
with sustaining a large ecological system and associated resource system (Ostrom 2007a). These
scholars seek to carve out middle ground between government administration and private
ownership, thereby offering an alternative to Garret Harding’s (1968) false choice between the
“tragedy of the commons” on the one hand and government control on the other for resource
systems that do not lend themselves to private ownership (Basurto and Ostrom 2009).
25
Elinor Ostrom was known as the “defender of the commons” (The Economist 2012). She
and her colleagues at the Workshop in Political Theory and Policy Analysis identified “common
pool resources” (CPR) as a category of goods that are both non-excludable and rivalrous. Their
high cost of excludability makes private ownership more complicated, while their subtractability
may lead to over-exploitation by self-serving users. In her 2009 Nobel address, Ostrom
lamented that a predominant focus of scholars in the mid-twentieth century was to “try to fit the
world into simple models and to criticize institutional arrangements that did not fit” (Ostrom
2009: 2). The world’s consumable goods and services, its people, and prescriptions for
management were divided into two categories: public and private (ibid). Yet as early as the
1960s, institutional economists were postulating an “intermediate continuum” (Ostrom and
Ostrom 1971: 206). Ayres and Kneese (1969), Buchanan and Stublebin (1962), Davis and
Winston (1962), and Misham (1967) examined externalities, which are not contained within
market transactions. Prior to that, Coase (1960) noted that externalities may be excludable, like
private goods or nonexcludable, like public goods. Buchanan (1965) distinguished club goods,
which are nonrivalrous, excludable goods provided to members of a private association and
withheld from nonmembers. Exclusion of nonmembers, in many cases, ensured abundance to
members and nonrivalry. 20
Based on empirical and theoretical research, Vince and Elinor Ostrom (1977) proposed
common-pool resources. In classifying CPRs, they took into account not just the relationship
between users, but also between users and the resource system: rivalry—two users competing
with one another—was replaced with subtractability—multiple users diminishing a resource pool
for themselves and other users. Subtractability, therefore, does not imply a necessarily
competitive orientation of co-users. With this development, individuals, institutions and
resource systems are taken into account (see, Ostrom 2007b).21 Both subtractability and
excludability exist on a continuum according to Ostrom and Ostrom (1977). CPRs are often
associated with large natural resource systems (Ostrom 2007a; Ostrom 2009) and may be
governed by many diverse property-rights systems (private property, government property,
communal property) or remain open access. They are normally used by multiple individuals and
generate finite quantities of resource units, where one person’s use subtracts from the quantity of
resource unites available to other users (Ostrom and Ostrom 1977). Most CPRs are large enough
that multiple users can make withdrawals from the system and efforts to excluded users are
costly (Blomquist and Ostrom 1985). Water in an aquifer can be an example of a CPR—it
diminishes as rival users make withdrawals from pumps that are privately owned and operated,
making exclusion difficult. A common grazing area for multiple herders’ flocks is a classic
example of a CPR (Hardin 1968; Basurto and Ostrom 2009). The plot can be overgrazed by
rival herders’ flocks, but common ownership and access of the plot makes excludability difficult.
Fisheries are an often-studied CPR (Gordon 1954; Scott 1955; Berks 1986; Schlager 1994;
Weinstein 2000; Acheson 2003; Basurto 2005, 2006; Basurto and Ostrom 2009). Stocks
obviously diminish as catch sizes increase, and a lack of clear property rights over fugitive22 fish
in open oceans makes excludability difficult.
20
In the context of water services, Zetland (2011) notes that a pipe distrobution system could be considered a club
good (19). Water appropriated by “First in Use” principle follows the logic of a club good in that it excludes new
users.
21
This is similar to public choice theory, except public goods are replaced with resource systems.
22
A fugitive resource is one that moves from one area to another and whos movement is difficult to control. The
flow of the Mississippi River represents a fugitive resource as do the movements of large fish in the open seas.
26
One of the foundational assumptions of Ostrom’s work was that the ability and act of
excluding from a resource—possession of private, transferable property rights—was not the only
type of property right and was not essential for appropriators to take responsibility for managing
a resource responsibly. As noted, excludability occurs on a continuum as do ownership rights
over CPRs. She and her colleagues found ‘bundles of rights’ related numerous user interactions
with the resource system through their field work (Ostrom 1990; Schlager and Ostrom 1992;
Schlager 1994; Grafton 2000; Ostrom 2007a), notably, access, harvesting, development of
biophysical structure, decision rules governing selection of excluded and included appropriators,
exclusion (Ostrom 2007a: 24). Importantly for efforts in institutional reform, Williamson’s
(2000) “1st order economizing,” resource users with the first four types of rights, but lacking the
right to exclude others, engage in robust institutional developments that has sustained natural
resource systems (Grafton 2000). Within Williamson’s (1998; 2000) framework, collective
action through oft-proposed stakeholder forums (Bruns, Ringler, and Meinzen-Dick 2005), might
be thought of as “0-order economizing”: getting the stakeholders relevant to L1 institutions to the
reform table in a manner that reflects their respective stake in the resource system and relevant
L1 institutions.
Broadening the scope of study to include participants without explicit ownership rights as
well as complex resource systems, in addition to institutions and individuals with excludable
property rights created complexity for Ostrom and her colleagues who were frustrated by many
of the models used (2007a: 25). Following Simon’s (1964) charge to integrate experimental
study and theory, Ostrom and her colleagues developed the institutional analysis and design
(IAD) framework to help organize multiple research modes (Kiser and Ostrom 1982; E. Ostrom
2005). IAD allows the researcher to “go back and forth between studying field setting, using
formal models and conducting experiments” (Ostrom 2007a: 25). McGinnis (2011: 1) claims a
broader applicability of IAD beyond CPR transaction systems:
The Institutional Analysis and Development (IAD) Framework encapsulates the
collective efforts of this intellectual community to understand the ways in which
institutions operate and change over time. The IAD framework assigns all
relevant explanatory factors and variables to categories and locates these
categories within a foundational structure of logical relationships.
The framework contains nested building blocks that can be analyzed in turn to understand
interaction and outcomes across a range of institutional and ecological settings. Ostrom (2009)
links IAD to earlier work on transactions by J.R. Commons ([1924] 1968) and work on human
behavior and incentives by Simon (1981, 1995). The core of the IAD framework is the “action
situation,” which is affected by external variables, including institutions or “rules-in-use” (see
diagram).
27
“Internal structure of an action situation” (Ostrom 2009; markups provide brief description of
major rule types)
The action situation is affected by external variables, namely:
1. Biophysical conditions
2. Attributes of a community, including history of interaction, heterogeneity of attributes,
knowledge and social capital
3. Rules-in-use governing actions of participants.
Feedback loops exist between the action situation and these variables, outcomes, and
interactions.
(Ostrom 2009)
Ostrom and her colleagues later expanded on the IAD framework, refining it for socialecological-systems (SES) (Anderies et al. 2004; Ostrom 2007b). Following earlier trends of
grouping the world into private and public, consumers and voters, Ostrom and her colleagues
lamented a persistent bent among social scientists and reformers for simple solutions to complex
problems (for example, Richard Epstein 1997). “Panaceas”—simple solutions applied in
“cookie-cutter” fashion to diverse institutional frameworks—often create more problems than
they solve, observe Ostrom and others (Mienzen-Dick 2007). Such panaceas ignore the
complexity and importance of Williamson’s (1998; 2000) L1 informal institutions and take for
28
granted diverse L2 and L3 institutions, as well as capital tied-up in assumptions and calculations
regarding transactions in L4. They also disregard important differences in resources systems.
Instead, the complexity in resource management and collective action problems needs to be
reflected in proposed solutions (Axelrod and Cohen 2001) and build on studies empirically welldocumented and theoretically sound studies of ecological systems, socioeconomic systems, and
linked social-ecological systems (Lee 1993; Levin 1995; 1999; Berkes et al. 2003; Carpenter and
Brock 2003). Calling for systems analyses to systems problems, Holling et al. (1998: 352)
opines:
Characteristically, these problems tend to be systems problems, where aspects of
behavior are complex and unpredictable and where causes, while at times
simples…, are always multiple. They are non-linear in nature, cross-scale in time
and in space, and have an evolutionary character. This is true for both natural
and social systems…with critical feedbacks across temporal and spatial scales.
In an attempt account for this complexity Ostrom and colleagues’ (Young 2006) SES framework
identifies nested attributes of a resource system (RS) and resource units (RU) it yields that jointly
affect users’ (U) incentives with a nested governance system (GS), which in turn, affect
interactions and outcomes over time. This action setting is framed by related social, economic,
and political settings (S) and related ecosystems (ECO).
“A Multitier Framework for Analyzing a Social-Ecological System” (straight arrows represent
direct causal links; red, curved arrows represent feedbacks) (Ostrom 2007b)
Ostrom’s (2007b) “multitier framework for analyzing a social ecological system” is
highly nested and decomposable. Each of the eight variables depicted in the diagramed
framework can be “unpacked and then further unpacked into multiple conceptual tiers” (7).
29
Second-Tier Variable in Framework for Analyzing an SES (Ostrom 2007b).
Using second-tier variables, Ostrom reframes Hardin’s (1968) “tragedy of the commons.”
Hardin assumed no governance system (no GS); no human investments to improve the resource
system (no RS4); mobile primary resource units, grazing animals are privately owned (RU6-a);
the number of users is large enough to reduce the long-term productivity of the resources system
(large U1); the resource users make decisions totally independently, without local leadership,
shared norms, or communication (no U5 or U6) (2007b: 12). This “unpacking” of Hardin’s
model reveals a very specific set of circumstances that would lead to tragedy. While researches
30
have repeatedly generated Hardin’s predictions in experiments (Ostrom et al. 1994; Casari and
Plott 2003; Janssen et al. 2006), she notes that “making one small change…[,] enabling subjects
to engage in face-face communication between decision round changes the decisions made so
that subjects approach socially optimal harvesting levels” (2007b: 12). Confirming Kreps (1999)
admonition, these experimental results, derived when participants communicate and create
impromptu norms and governance, are not predicted by game theory (Ostrom 2007b: 12).
C. Institutional Economics of River Basin Management
1. Overview
As noted above, water resource management (WRM) constitutes a field of its own;
watershed and river basin management represent a sub-category of this field.23 An institutional
economics approach to WRM, and more specifically, river basin management, represents a
further distillation. WRM theory and literature is dominated by traditional public policy analysis
and NGO project implementation. However, WRM challenges, and the arrangements
stakeholders have worked out amongst themselves contributed to the development of public
choice theory and commons management theory. Commons theory and new institutional
economic theory has, in turn, come to inform research and implementation of WRM solutions in
a major way. Development of an institutional economics literature in watershed management
has provided recommendations on identifying and creating appropriate conditions for
implementing market institutions for water transfers (Easter, et al. 1999; Bruns et al. 2005).
A rule-based user-governance model through collective action is constrained by
incongruities of scale between social organization and hydrological organization, as well as by
the complexities deriving from multiple resource systems with multiple user groups contained
within river basins. Cross-scale platforms, interlinking nested governance systems (for
example, Swallow et al. 2006) are difficult to arrange and come with high costs. Following
institutional economic theory, particularly transaction cost economics, contract governance
between nested user-governed management systems, particularly, transaction-oriented systems,
may come with lower costs and more clearly aligned incentives than pure rule-based
coordination.
2. Concurrent development of public choice and commons theory with watershed
management
Prior to the 1970s, state-run, large scale storage and irrigation projects were the dominant
paradigm in literature and project implementation (Holmes 1972; Reisner 1986; Anand 2007: 5;
Meinzen-Dick 2007: 15200; Schlager and Blomquist 2008: 32). This approach mirrored
observations by anthropologists Julian Steward (1955) and Karl Wittfogel (1957) that coercive,
centralized political control was necessary to mobilize the labor, financing and other resources to
construct and maintain large-scale hydraulic systems for ancient civilization, especially in semiarid climates in India and large parts of China. Advancements in engineering in the first half of
the twentieth century enabled the construction of massive dams and reservoirs, prompting what
Reisner (1986) refers to as the “hydraulic mission” to irrigate arid expanses in the mid-century
western United States, Australia and many developing countries.
By the 1970s, there was growing evidence that many large, state-run systems were
performing far short of projections (Reisner 1986; Uphoff 1986; Chambers 1988; Svedndsen and
23
Some authors link watershed-level management is related to integrated water resource management (IWRM)
(Bandyopadhyay 2009; Schlager and Blomquist 2008). Alternatives include management of discrete water
resources, such as streams, lakes, aquifers and wetlands (Schlager and Blomquist 2008: 28) or pure supplyaugmentation schemes enabled by large storage, irrigation and hydropower projects.
31
Meinzen-Dick 1997). These observations dovetailed with studies of water industry performance
in various regions of California in the 1960s, which revealed that multiple public and private
agencies had negotiated productive ways of managing and utilizing water resources at multiple
scales outside of an integrated, hierarchical system (V. Ostrom 1962; Weschler 1968; Warren
1966; E. Ostrom 1965). Empirical studies of farmer-managed irrigation systems in the
Philippines, Indonesia, Sri Lanka, India, and Nepal further challenged the notion that strong state
authority was necessary or sufficient to promote effective utilization and management of water
resources (Coward 1980; Uphoff 1986; Korten and Siy 1989). Studies of government run
irrigation in India revealed that, undirected, many farmers had organized themselves at lower
levels within the government administered schemes (Wade 1979; Chambers 1988). Researchers
found that smaller-scale, farmer-managed systems tend to perform better than large-scale
government irrigation (Levine 1980; Mehra 1981; Bromley 1982; Hilton 1992; Tang 1992).
Lam (1998) found in a study of over 100 irrigation systems in Nepal that yield and cropping
intensity of farmer-constructed irrigations systems of mud, rock, timbers and sticks significantly
out-performed government-built and operated systems of concrete and iron headworks.
Ruth Meinzen-Dick (2007) and others (Koorten and Siy 1989; Vermillion and Sagardoy
1999) contend that with the fiscal crisis of the 1990s, international donor entities and many
governments became more interested in increasing farmer involvement, as a means of reducing
costs, while addressing performance shortfalls. These approaches were politically feasible
because their pro-people theme made them logically appealing to many activists concerned with
the effects of globalization and economic liberalization in the wake of the Soviet Union’s
economic and political unraveling. Incidentally this development also coincided with the United
Nation’s “First International Decade of the World’s Indigenous Peoples,” so in as far as
participatory approaches incorporated or gave credence to traditional ecological knowledge
(TEK), they were ideologically compatible with the UN’s larger development agenda.
3. Collective action for cross-scale, rule-based participatory river basin management and its
limitations
The IAD Framework and the logic of commons theory provides a useful tool for
analyzing complicated watershed problems, in which political and economic institutions and
incentives intertwine with the watershed resource system; however, collective action to create
rule systems to solve basin-wide problems may not work. Kerr (2007) points out that most case
studies of collective action success in resource system management chronicle efforts at locallevels. The overwhelming majority of collective action literature on watersheds in India and
elsewhere focuses on village-level projects, while scant attention is paid to basin-level problems,
like those plaguing the Cauvery. Collective action to create norm and rule-based cooperative
management of river basins faces significant hurdles and is not the panacea that some scholars
and development workers seem to assume (Korten and Siy 1989; Vermillion and Sagardoy 1999;
Swallow et al. 2006; Meinzen-Dick 2007; Kerr 2007). Kerr (2007: 103-104) complains,
“although the watershed literature frequently cites studies of the commons to explain the need
for social organization efforts, it is conspicuously silent about the mismatch between
characteristics of watersheds and the factors believed to contribute to successful commons
management.” Piecemeal collective action initiatives organized at the village-level are unlikely
to correct basin-wide problems and may likely exacerbate these problems (Batchelor et al. 2003;
Calder et al. 2006; Kerr 2007). Three characteristics of river basins in India and elsewhere
challenge development, management, and governance: social organization centered at the
village-level, hydrological linkages integrating the basin’s different parts (catchments and
32
resource systems), and minimal organizational linkages between different resource users and
uses.
A watershed or catchment is a hydrological unit describing an area that drains to a
common point. Watersheds vary in size, ranging from small areas of a few hectares to massive
river basins, such as the Amazon or Mississippi Basins, which occupy large portions of their
respective continents. Small, micro-watersheds constitute components of larger watersheds,
which are nested components of increasingly large watersheds, aggregating to form a river basin
(Kerr 2007: 91). River basin management thus constitutes macro-scale watershed management.
Watershed management studies span the continuum from those analyzing areas as small as two
hectares (White and Runge 1995) to as large as 30,000 hectares (World Bank 2007).
Indian watershed projects began in the 1970s and 1980s with a highly technocratic
approach that failed to recognize the need to address the challenges of watershed governance.
This approach “ignor[ed] the optimal social unit [and] resulted in failure because projects could
not achieve effective watershed governance” (Kerr 2007: 104). The World Bank-supported Pilot
Project on Watershed Development operated at a vast scale of tens of thousands of hectares, with
little effort to organize inhabitants. The Model Watershed Program of the Indian Council of
Agricultural Research took a similar approach. The benefits of watershed development were
assumed to be self-evident and uncontroversial, but project managers learned that community
buy-in was important to success and difficult to attain when benefits were gradual, incremental,
and unevenly distributed (World Bank 2007).
Since the late 1980s, projects have taken a more participatory tact, focusing on social
organization. Indian NGOs including MYRADA in South India, Social Centre in Maharashtra,
and the Aga Khan Rural Support Program in Gujarat spearheaded this effort (Hinchcliffe et al.
1999; Farrington and Lobo 1997). These programs preselected for villages that demonstrated
strong organizational and local governance capacity, and for areas with topographies favorable to
water harvesting. Managers took watershed technology as straightforward by this point—the
real challenge was organizing communities to work cooperatively towards successful outcomes
(Fernandez 1994). All of the NGO projects worked at the village or sub-village watershed level
under close supervision (Kerr 2007: 101).
A new generation of government programs in the 1990s attempted to mimic the localized
successes of NGOs. Based on the experiences of MYRADA, the Ministry of Rural Development
radically redesigned its watershed projects, which subsequently became the model for all
government-led development in semiarid, unirrigated areas (Kerr 2007: 101). In addition to
being concentrated on participation at the village-level, projects endorsed indigenous practices.
The Integrated Watershed Development Project (IWDP) was inaugurated in 1990 with support
from the World Bank. This project drew on a proliferation of contemporaneous commons
literature. Authors such as Wade (1988) and Jodha(1992) influenced the project’s designers and
implementers. The IWDP still operated on a geographically expansive scale, covering
watersheds tens of thousands of hectares large, but these were divided into smaller
microwatersheds with distinguishable boundaries to encourage social organization. User
committees were established to represent different interest groups and given rule making powers.
Systems of graduated sanctions were established based on traditional institutions, and monitoring
systems were established. But Kerr and Pender (1996) contend that the new institutions were
sometimes established in name only, monitoring systems were not self-sustaining, and
inhabitants agreed to many principles and conditions merely to gain funds.
NGOs became eligible to implement government schemes, and government-NGO
33
collaboration sought to combine the technical expertise of government agencies with the
organizational skills of NGOs. The collaboration fostered notable success stories including the
Indo-German Watershed Development Programme (IGWDP) and the Adarsh Gaon Yajana
(AGY). The IGWDP fostered an irrigation-led boom in employment for local inhabitants, where
workers enjoyed an annual six month increase in the time they were able to secure work (9-10
months, up from 3-4 months) (World Resources Institute 2005). To be eligible, villages had to
demonstrate the capacity for collective action and agree to terms including group labor
(shramdan) and bans on water intensive crops, open grazing and tree-cutting in the upper
watershed, and alcohol (Kerr et al. 2002). Kerr (2007: 105) contends that since the 1990s,
the pendulum has swung in the opposite direction, and most projects operate at
the village level, disregarding hydrological linkages between microwatersheds.
Catchment closure has emerged in part by ignoring these linkages, and it shows
the need to address them by working at a macrowatershed scale. However, such
an approach is incompatible with the strategy made successful by [NGOs and
some government-NGO collaborations] of investing exclusively in separate
microwatersheds.
Success in river basin management has proved elusive. Managing river basins through collective
action and participatory governance is difficult, something that commons theory predicts based
on the physical and social characteristics of most basins.
Watersheds represent multiple ecosystems of various types, corresponding with multiple
natural resource systems, which each have multiple user groups sometimes with different uses
for identical resources. Resources systems, and consequently user groups, are connected through
hydrology, though not necessarily governance systems. Taken as a single system, a river basin
has high exclusion costs and high subtractability (Randall 1983; Kerr 2007).
Partly because of their many hydrological interlinkages, Blomquist and Schlager (2008)
enthusiastically embrace the watershed as the unit of hydrological management:
The watershed is considered the appropriate scale for organizing water resource
management because all water sources and uses within a watershed are
interrelated. Not only are the water resources in a watershed related to one
another, but they are intertwined with land and other natural resources.
Accordingly, the uses and conditions of any natural resource within a
watershed…very likely will…affect the others (28).
Kerr (2007) maintains that successful watershed development for conservation, productivity and
poverty alleviation in developing countries requires “the coordinated management of multiple
resources within a watershed, including forests, pastures, agricultural land, surface water and
groundwater, all linked through hydrology” (89). He notes that many of these resources are
often held in common, such as pasture, forests, ponds and groundwater, while others are
privately owned, such as agricultural land, some pasture land and forest, and captured runoff
water. Watersheds are complex multiple use commons in which interests must be balanced
within and across diverse interests groups (Steins and Edwards 1999). “Through…hydrological
linkages,” Kerr contends, “a watershed system is in fact a high exclusion cost, subtractable
environmental resource, in other words a common pool resource that faces typical commons
management problems” (2007: 90). Furthermore, multiple, conflicting uses mean that rule-based
management approaches may spread costs and benefits unevenly (Kerr 2007).
Watersheds are a useful hydrological unit, but do not represent a natural unit of human
social organization (Rhoads 1999; Swallow et al. 2001). Schlager and Blomquist concede,
34
“countless authors have observed [that] human communities have rarely been organized to
coincide with ecosystem boundaries or even the more visible boundaries of watersheds” (2008:
20). As a result, “achieving coordination often requires reconciling socially defined boundaries
like villages with physically defined boundaries like catchments…Organizing collective action
along strict hydrological boundaries is difficult” (Swallow et al. 2004: 1). This lack of
correspondence between hydrological interlinkages and social organization creates management
challenges, agrees Kerr (2007). Extant institutional structures correspond with important
communities and social boundaries. These are likely smaller than the watershed or straddle
watershed boundaries (Blomquist and Schlager 2008). Neither watershed organizations, nor
community decision-making institutions are likely to displace the other, “and reconciling them
adds further complexity to the task of institutional design”(20). Kerr (2007: 89) contends,
“Theories from commons research predict great difficulty in managing complex watersheds and
explain why success has been limited to isolated, actively facilitated microwatershed projects
with a focus on social organization.” In sum, collective action is feasible at local levels, where it
can account for embeded institutions; however, good hydrological management must account for
hydrological linkages that cover much larger areas.
Combining the work of Agrawal (2001), Wade (1988), Baland and Platteau (1996), and
Ostrom (1999) on the factors contributing to successful collective action for resource
management, Kerr (2007) found major disparities between favorable conditions and conditions
that characterize most watersheds in India and elsewhere.
Favorable resource system characteristics
(1) Small size
(2) Well-demarcated boundaries
(3) Low mobility
(4) Possibilities of storage of benefits from the resource
(5) Predictability
(6) Indicators of resource conditions available at reasonable costs
(7) Traceability of benefits from management intervention
(8) Feasibility of improving the resource
He notes that almost all of these attributes present problems because they rarely characterize
basin-level watershed management. Even where some conditions do appear favorable, mobility
of water leads to uneven distribution of costs and benefits. Many issues are mitigated by scaling
down the size of watershed (95).
Favorable group characteristics
(1) Small size
(2) Clearly defined boundaries
(3) Shared norms
(4) Trust
(5) Past successful/organizational experiences
(6) Appropriate leadership
(7) Interdependence among group members
(8) Homogeneity of interests
(9) Low levels of poverty
(10) Low discount rate
35
Most of these characteristics point to the advantages of working at the village level and the
difficulties of macro watershed management (96). (1), (3), (4), (5), (6), (7), (8), (9) pose
difficulties for river basins in India.
4. Nested platforms for cross-scale organization of collective action
Steins and Edwards (1999a; 1999b) developed the idea of a nested framework of forums,
or ‘platforms’ in an effort to move the literature beyond theoretical arguments about the
possibility of collective action towards methods of successful cross-scale application. Kerr
(2007) contends that nested platforms can be effectively applied to watershed management
because local collective action institutions at the micro-watershed level can merge to form
platforms at the macrowatershed level. Each platform helps advance management approaches
within and between parts of the river basin. The World Bank (2007) notes that very few
watershed programs in India operate this way, but the Bank has supported those that do.
Swallow, et al. (2006) highlight the need for institutions linking small-scale collective
action efforts to basin-wide management. The authors lay out a conceptual framework of a
watershed, which consists of three anthropocentric hydronomic zones—upland primary node,
midlands primary node, and lowland primary note—bounded by headwater ecosystems and
lowland ecosystems. Each primary node represents an action arena, or set of action arenas, in
which individual or collective action produces outcomes for downstream resource systems and
stakeholders. Secondary nodes link adjacent primary nodes (upland to midland and midland to
lowland) and serve as platforms for negotiation, conflict, and collective action among adjacent
water users. All nodes, and headwater and lowland ecosystems are connected by an overarching
tertiary institutional node, consisting of basin, national and international institutions governing
water, land and forest management. These institutions condition the actions within each node,
the downward flow of resources, and reverse flows of money upstream in exchange for selective
resource management that provides benefits to downstream stakeholders (365-366).
“Conceptual model of multiscale interactions in watershed units”
36
(Swallow, et al. 2006: 365)
Nested platforms are challenging to implement successfully. Kerr (2007) contends that
they are “quite complex and subtle, and it is easy to imagine difficulty in making them work
widely” (98). Ravnborg and Guerrero (1999) chronicle the workability of a nested platform
approach in the CIAT watershed project in Columbia, but their study also demonstrates that
workability depends on external assistance and having to coordinate among a limited number of
projects with few participants. Swallow, et al. (2006) warn that institutions built around local
norms and customs can have the unintended effect of reinforcing historic inequalities and
exclusion from the resource base. This is a frequently echoed concern about collective action
approaches; however, by interlinking and scaling-up collective action forums, these historic
social inequities can be magnified and counteract efforts to promote social equity. Inversely, the
overlapping nature of different action arenas in the framework allows well-connected actors to
“forum-shop,” by selecting the arena most likely to provide them with a favorable outcome (op
cit 269). While nested platforms provide a framework for coordinating collective action across a
basin resource system, the same factors contributing to and inhibiting successful decisionmaking still apply, such as shared norms, culture, trust and language, as well as shared interests.
Ultimately, both Kerr (2007) and Swallow et al. (2006) point out the need for mechanisms that
evenly spread costs and benefits and incentivize upstream action to create positive outcomes for
downstream stakeholders.24 In the terminology of transaction cost economics, consensus among
more diverse actors with more divergent interests entails higher costs. Centrally imposed
regulation and bureaucratically administered policy to coordinate nested platforms can diminish
the benefits of collective action and impose higher costs on actors, particularly upstream
stakeholders who are historically more disadvantaged (Bandyopadhyay 2009). Transactions
24
Swallow, et al. (2006) also advocate the need for regulation to effect upstream management changes.
37
between up-stream and downstream stakeholders, whether negotiated directly, coordinated
through nested forums, or facilitated by a public agency, offer an attractive compliment to rulebased collective action (Swallow, et al. 2006, ). Bruns et al. (2005: 301) conclude:
Water markets or water banking institutions can support more frequent
transactions, by decentralizing decisionmaking to those engaging in specific
transactions…transfers can contribute to economic gains from greater efficiency,
so that the productivity of water increases in value, while safeguards may help
mitigate adverse impacts on equity and the environment.
Rule-based, consensus-oriented collective action can do much to strengthen a watershed resource
base and resolve conflict, but it has limitations. Resource allocation via rules, whether imposed
by a central bureaucracy or a forum, without possibility to correct inefficiencies through market
transactions, can sharpen tensions between stakeholders and result in less than optimal use of
water (op cit 302). In order for transactions to occur, however, clearly defined, generally
accepted, and enforceable property rights must exist (Bruns et al. 2005).25
C. Collective action to property rights, laying the groundwork for markets
As an institutional economics literature for watersheds and other CPRs developed
through the 1990s, persistent inefficiencies in water use, combined with neoliberal reforms in
many donor agencies, led to an intensifying interest in market institutions for water (MeinzenDick 2007: 15202). Commons management literature demonstrated the need for userparticipation and incorporation of embeded social institutions for resource governance, but had
yet to address exactly how incentives could be realigned to foster efficiency and share the costs
and benefits of developing and using a common resource. In 1994, Rosengrant and Binswanger
published an influential article explaining the advantages of tradable water rights in terms of
creating incentives for efficiency. Among the factors contributing to successful implementation,
the authors list effective user groups to provide information and allow small farmers to take part,
as well as infrastructure to enable transfers, and governance to regulate third party impacts.
Studies of water markets in the western United States, Chile, and Australia’s Murray-Darling
basin demonstrated substantial gains from transfers (Hearne and Easter 1997), and showed that
markets could provide workable solutions to overallocation of basin water and associated
environmental problems (Haisman 2005). What each of these original cases share in common
are clearly defined and enforceable user rights to water (Hearne and Easter 1997; Haisman 2005;
Meinzen-Dick 2007). Clear property rights over water use are helpful for facilitating reverseflow transactions within watersheds. Following Coase (1959), such clarity is essential for water
transfers (Zetland 2012p). Bruns, et al. (2005) maintain that “transfers can only take place where
rights-holders can make credible commitments based on rights that can be defended against
infringement” (300). However, Williamson (2000: 599), points out that defining and enforcing
property rights is not easy or costless. Highlighting the case of water, Bruns, et al. (2005: 297)
agree noting that “areas know as examples of tradable rights…have each built on over a century
of experience with formal water rights systems.” Establishing property rights in resources can
take time and should take embeded cultural institutions into account (ibid).
25
There are two principal types of transactions that can occur in watersheds—payments for ecosystems services
(PES) and water transfers. Property rights are more important for transfers because transfers monetize a resource,
whereas PES monetize a service. Selling a resource held in common and freely available (high exclusion costs)
creates perverse incentives to exploit the resource system at the cost of fellow users and long-viability of the
resource system.
38
Collective action can play an important role in clarifying and transforming norms into
property rights (Bruns, et al. 2005). New Institutional Economic (NEI) theory, as described by
Williamson (2000), takes embedded norms as “given” (596). Much of institutional economics
focuses on contract governance and dispute resolution ex post defined property rights (Summers
1969; Macneil 1974; Williamson 2000). Some institutional economists in commons theory
(Meinzen-Dick, et al. 2002; Bruns, et al. 2005; Mwangi, et al. 2012) pay special attention to how
embedded institutions can be reshaped and on how they can be incorporated into a process for
establishing property rights and then regulating transfers. Adapting the terminology of
Williamson (2000), collective action in this case can be thought of as “zero-order economizing”:
giving representation in the institutional reform process to stakeholders in a manner
commensurate with their stake in the resource system as determined by embedded Level 1
institutions. That is, before formalizing “the rules of the game (property)…[and] the play of the
game (contract)” (599), collective action can ensure that all the players are on the field.
Property rights over water use also help protect availability of water for basic needs,
secure irrigation deliveries, increase urban water supplies, and enhance environmental flows
(Bruns et al. 2005). Bruns, et al. (2005), stress the importance of time and recommend a phased
approach starting with reform of water governance, then resolving tenure, before finally
regulating transfers of water rights. In other words, before property rights can even be assigned,
collective action must take place in order to establish consensus and clarify rules.
A rush to register rights and institute trading, can be an expensive mistake resulting in
expensive paper rights that are meaningless, disruption of existing institutions, and conflict
(Meinzen-Dick and Nkonya 2005; Abernethy 2005). Steenbergen and Shah (2003) call for
“rules before rights”—formal rights are useless unless rules governing access to water are
accepted and enforceable. Attempts to leap directly to tradable water rights have led to rejection
of water law reform efforts in Ecuador, Indonesia, Peru, Sri Lanka and Thailand (Gunatilake and
Gopalakrishnan 2002; Trawick 2003; Abernethy 2005). Recognizing and vesting rights in
existing users before facilitating transfers provides a politically feasible path, according to Bruns
and colleagues (2005).
Bruns and colleagues (2005) maintain that while potentially high-risk if instituted hastily,
market transfers of water have a singular ability to realign incentives:
the basic challenge in redesigning governance is to overcome problems of overuse
and underprovision, particularly free riding, which make everyone worse off, that
is, a negative-sum game…Clear allocation of rights emphasizes creating
conditions that assure coordinated action by multiple users, although they may
sharpen contention over dividing a fixed amount, that is, shifting to a zero-sum
game where one person’s gain is another’s loss. Transfers open up the opportunity
for mutual gains, cooperation that does not just divide a fixed pie but yields a
bigger pie to share, that is, positive-sum games (302).
The authors caution that attempts to institute transfers without well-defined rights are unlikely to
succeed. Additionally, trying to redefine rights without ways to gain acceptance and support
from major stakeholders is equally problematic. Water rights reform will be effective only if it
takes account of how transfers and rights depend on more basic governance institutions (302).
B. Background
1. Units and measures
39
Large volumes of water have a unique set of units and measures. Different sources use
different units, which can make comparison difficult. Three common mega-volumetric measures
are listed below with conversions.
Acre-foot (acft): volume require to cover one acre in a foot of water, used as an annual
measurement of flow rate, the planned annual water use for a US suburban family (WSJ 2011;
State of Montana).
325,851 gallons
.00004356 TMC
.00000123 cukm
Thousand Million Cubic Feet (TMC or Tmcft): (i.e. 1 billion cubic feet)
Commonly used in South Asian WRM literature, likely a derivative of the South Asian
numbering system (see below).
7.48051 billion gallons
22,956.841 acft
.283169 cukm
Cubic Kilometer (cukm):
264.1717 billion gallons
810,713.194 acft
3.5315399 TMC
Roughly 22,000 acft = 1 TMC; Roughly 35 TMC = 1 cukm
2. South Asian number system
The South Asian number system derives from the Vedic numbering system in which
numbers over 9,999 are written in two digit groups rather than the three-digit groups used in
most parts of the world. It is standard in India, Pakistan, Bangladesh, Nepal and Sri Lanka.
Lakh hundred-thousand (100,000)
Crore ten million (10,000,000)
3. Water management terminology
Water management involves storage, extraction, quality, flood protection and transfers.
Water management institutions, further, determine policies and investment to achieve objectives
related to these tasks. Water management institutions also play a role in allocating water among
sectors (World Bank Group 2006: 22). According to Swallow et al. (2006) water management is
“defined as the deliberate manipulation of quantity, quality and timing of water” (365). Kerr
(2007) defines watershed management as “managing hydrological relationships in a watershed,
which may involve protecting certain resources from degradation rather than making physical
investment in their productivity” (91). “Watershed development,” on the other hand, “refers to
programs with technical interventions (plant trees, building check dams, etc.) to raise the
productivity of certain resources and bring water resources under control” (ibid). Water service
institutions, on the other hand, may deliver water supply, sanitation, irrigation and hydropower
to consumers (ibid). The World Bank Group (2006) notes the difficulties that arise when
management institutions handle irrigation (22).
Broadly speaking there are three types of management analyses with corresponding
prescriptions: supply management analyses with engineered solutions; economic evaluations
with incentive-based solutions, which fall under the umbrella of demand management; and
legal and political science analyses with corresponding institutional solutions. Supply
40
management assumes rigidity of demand and flexibility of supply, and therefore seeks to
augment supply with engineered structures. Demand management assumes rigidity of supply
and flexibility of demand, and therefore seeks to curb demand through education, or markets and
pricing. Legal and political analyses assume rigidity of supply and demand, and trust in the
ability of institutional frameworks to correctly allocate water, through control of users and
supply.
In the face of water scarcity, political scientists tend to favor demand management
through regulation (Maitra 2007; Richards and Singh 2001; Iyer 2007; Biswas 2012; D’Souza
2002). Political scientists are trained at engineering institutional structures that manage and
balance divergent values and competing claims (Lasswell 1958; Schlager and Blomquist 2008).26
Political theorists and constitutional scholars understand the distribution and allocation of
decision-making authority, which they manage like a resource (Schlager and Blomquist 2008;
Lijphart 1996). With better institutions and more careful planning, political scientists who study
transboundary water conflict believe that shortage and conflict can be averted and water directed
to its most important and valuable uses. Likewise, human-rights and environmental activists also
favor government regulation to balance divergent values and competing claims over water
(Barlow 2012), usually with the conviction that their values and claims are superior to competing
claims and will therefore receive priority in a political process. They also promote education as
a means to curb demand. Economists also tend to favor demand-management; however,
economists believe that markets and pricing are the best ways to manage demand and to prevent
shortage and conflict.
Water analysts often differentiate between various types of water scarcity based on the
cause of scarcity. Physical scarcity or absolute scarcity denotes an insufficient quantity of water
to support current patters of use in a particular place. Economic scarcity27 is a term used by
water analysts to indicate that ample physical water could be made available, but only with
additional infrastructure – sufficient economic investment in infrastructure has not been made.
Political scarcity or “lack of capacity” means that institutions are corrupt and incapable or
inefficient at delivering water to users (IWRMI 2007).
The shift from effectively limitless supply to limited supply necessitates a major shift in
the way water is managed. Many experts advocate increasing the extent and intensity of water
management. The aim of increased water management is to direct water to human users and to
nature, making allocation choices—where water goes, to whom, for what purposes and in what
quantities—that reflect the values and needs of society and nature, while taking economic costs
and benefits into account. Those tasked with managing and allocating water face obvious
challenges derived from the complexity of the task and the inherent ambiguity of balancing
widely different subjective values with economic efficiency. Many experts suggest
participatory management or integrated management (integrated water resource
management, IWRM28). Both of these approaches typically seek to increase the number of
Lasswell (1958) famously described politics as “who get what, when, and how,” While Blomquist and Schlager
add, “who decides…and how” (2008: vii)
27
In contrast, scarcity in economic terminology refers to the condition when demand exceeds supply for a given
resource. In other words, the resource is no longer abundant.
28
Rogers and Hall (2003) claim, “the concept of integrated water resources management (IWRM) has been accepted
as a means to ensure quitable, ecnomically sound nad environmentally sustainable management of water resources
and provision of water services…defined by GWP as : a process which promotes the co-ordinated development and
management of water, land and related resources, in order to maximise the resultant economic and social welfare in
an eqitable manner without compromising he sustainability of vital eco-systems (GWP 2000).”
26
41
stakeholders involved in the management process and disperse decision-making authority to
more actors. However, some experts invoke participatory management as a way of localizing
water management while reducing the management processes’ bureaucratic and geographic
breadth. Proponents of IWRM often promote a management process that water appropriately
across different sectors of the economy. Inter-sectoral “nexuses,” such as the energy-water
nexus have become topics for publication and debate (Morrison 2012). Holistic water
management and basin-wide management theories promote the need for managers to consider
the entire hydrological cycle and the impacts of water allocation as they affect the entire basin
system (IWRMI 2007).
Some experts, particularly economists, favor introducing market forces to balance finite
renewable supply with growing demand. Though their suggestions often face political and civic
objections, economists suggest scarcity pricing and formal water markets and water auctions
(Bandyopadhyay 2009; Ghosh 2009). Additionally, jurisdictions sharing common water
resources may contract with one another for watershed services, such as water banking, where
the downstream riparian party foregoes water deliveries during certain periods, and “banks”
either the right to use the forgone water in the future, or saves it for someone else to use in
exchange for a fee or delivery in kind (Seligman 2011).
E. Noisy debate
1. Paradigm debates
Literature on water is vast and coded in the sense that divergent and overlapping
paradigms permeate a debate about governance, management and allocation. Some argue that, in
the context of water, ‘paradigm wars’ are more significant than conflict over physical water
(Shiva 2002). These paradigms arise because of the large number of stakeholders involved with
water. Stakeholders come to the subject with different ideological viewpoints. Despite differing
values, each stakeholder group wants to direct more water to its chosen purposes and exercise
control over the allocation process. Of pivotal importance are the roles of the state, the
individual and intermediary institutions in allocating water (Anand 2007).
Risking brutal oversimplification, it’s instructive to categorize stakeholders and their
preferred WRM approaches. Stakeholder groups include technocrats, activists, and economists.
Myriad systems for managing water exist, but three broad categories are technical interventions
(dams), market-based tools or markets, and collective action to create norm and rule-based usermanagement. Hierarchical control, true-cost accounting or natural capital accounting, and
localized “inclusive” management fit as sub-groups under each of the preceding categories
respectively. Economists, technocrats, and activists come in all stripes, but the chart below gives
an idea of their respective predilections for certain types of WRM techniques.
Dams
Technocrat

Activist

Economist

(centralized gov. control)
()
() (gov > corp or private
property owner control)
() (recognize alternatives to
supply augmentation)
privatization, market- 
based mechs


(true-cost, nat. capital
accounting)
()
()
()
Collective action



(localized, participatory
solutions)
()
()
() (assuming that
individuals have greater
42
ownership of their water and
management process)
One model of WRM focuses on large dams and engineering works to meet unsatisfied or
projected demand. This model, sometimes referred to as supply management, was the
predominant paradigm prior to the 1980s and the “watershed movement,” (Anand 2007: 5;
Blomquist and Schlager 2008: 27). Large hydraulic infrastructure significantly alters the
landscape and hydrology of the watershed and consequently requires coordination or centralized
control (Andand 2007). Anand (op cit) defines the debate as between proponents of large
projects on the basis of economies of scale, efficiency and cost-benefit analyses and opponents
on the grounds of social and environmental costs (Dreze et al. 1997; Bariskar 1998; Sing 1998;
Dwivedi 1999; McCully 2001). Protests against large dams reside in this strand of discourse.
Despite occasional advocacy for command-and-control solutions, human rights and
environmental activists oppose the building of large dams. An alternative characterization of this
paradigm debate is one between economic and anthropocentric values conflicting with ecocentric values. Anand (2007) uses charged, gender-centric terms in describing this paradigm
debate as between “‘a paradigm of masculinity’ with a fetish for control[ling]…nature through
large projects” (5) against small localized solutions. A recasting in the terminology of public
choice theory might describe the debate as between large projects that require centralized control
and disempower individuals versus localized projects, in which individuals retain a greater stake
in controlling their water resources. Market-oriented solutions might fit into this last category.
Another paradigm debate, according to Anand (2007) is between privatization and the
use of market-based approaches against those who find monetized transactions involving water
incongruous, alien, and representing a Nordocentric model of development and the forces of
globalization (Hauton 2002; Shiva 2002). Anand (2007) highlights increasing emphasis on the
potential and actual role of private sector and market institutions for WRM. A strong argument
for “unbundling the state’s role” in WRM was made by the World Bank in 1994 (World
Development Report 1994). Early discussion of privatization centered on water companies and
regulatory developments in Britain (Beesley 1997; 1998). Development experts focused on
groundwater markets in the Developing World (Bauer 1997; Shah and Ballabh 1997; Easter et al.
1999; Salman 1999; Dubash 2000; Bjornlund and Mckay 2002). Other reports focused on
privatizing water utilities (ECLAC 1998; Dumol 2000; Johnston and Wood 2001). Anand
(2007) points out that privatization in the water sector is much lower than in other infrastructure
sectors, notably transportation, communication and energy. According the privatization database
on the World Bank website, infrastructure proceeds accounted for 55% of all privatization
proceeds, with the water sector accounting for just 1% of this in 1990 and 3% in 2000, while
energy accounted for 50% and communications, 36% in 2000. Opponents of transaction- and
contract-based water management, tend to reject markets at an emotional level (Barlow in
McCullough 2012; Hauter, et. al 2011). Anand cautions, “the p-word…in relation to water raises
considerable anxiety among activists, and this needs to be recognized in policy discussion” (7).
Meinzen-Dick (2007) reinforces the point, lamenting, “Attempts to introduce formalized water
markets are often met with objection to the privatization and commercialization of water,
because of norms that water is a free good or a gift from god” (15202). According to Easter, et
al. (1999) the chief analytical criticism of markets and monetized transactions is that they favor
the wealthy and harm the poor; however, Saleth (1998) and Meinzen-Dick (1998) show that even
43
the poor benefit disproportionately from markets, a conclusion echoed by Zetland (2011b;
2011c).
2. Fallacy of a “global water crisis”
Labeling as “the global water crisis,” a diverse set of water problems, which are
widespread across the globe, but which vary greatly from one location to the next, implies a level
of causality and interconnectedness—similar to global economic issues or global climate
change—an implication that is misleading and unhelpful in pursuing workable solutions. While
commonalities exist between problems facing various watersheds and communities, the theory
and practice of analyzing and fixing water problems has been improved by a focus on basin-level
and local-level management as well as on incentives driving individual consumption.
Adequate supplies of fresh water have been critical in the successes and failures of
civilizations from the first agricultural societies more than 5,000 years ago to the industrialized
mega-cities of today (Brandes, Brooks and Gurman 2011; Anand 2007: 3; Diamond 2005; 2012;
Meinzen-Dick 2007). Societies have often faced water challenges; however, until recently,
concern about adequacy of water supply on a global scale did not exist (Brandes, Brooks, and
Gurman 2011).
The so-called “global water crisis” compels many conscientious citizens to shorten the
length of their showers, while well-meaning altruists roll up their sleeves and puncture the
developing world with bore holes for hand pumps. Inadequate water supply is now often
presumed to be a collective global crisis with consequences that will be universally felt.29 In
many circles, the globalness of a water crisis is a presumed fact, urgently compelling a timely
and coordinated response (see, for example, United Nations University – Institute for Water,
Environment and Health 2012 report, The Global Water Crisis: Addressing an Urgent Security
Issue).
Following the logic of Malthus and, later, Ehrlich, some scholars developed frameworks
that addressed water abundance and scarcity and the potential problems that might arise from the
later in terms of volume per capita. Citing Postel (1992; 1995) and Falkenmark (1997), PB
Anand laments, scholars “have used population projections to arrive at rather alarmist
conclusions that the problem of water scarcity will be a universal problem and not one limited to
a few countries” (2007: 4). Studies and initiatives from think tanks, major NGOs, and UN
organizations like the Food and Agriculture Organization (FAO), International Children’s
Education Foundation (UNICEPH), and the much publicized UN Millennium Development
Goals (MGDs) have provided useful data on problems common among many watersheds around
the world. While solutions and best management practices are sometimes scalable and
transferable from one setting to another, these studies and initiatives have created a prevalent
misconception about the relationship between global water supply and demand. Water-focused
and development-focused NGOs may find a message of universal crisis more compelling for
awareness-building and fundraising purposes. Environmental journalists and their editors may
favor titles proclaiming a global crisis in order to reach a broader readership (Morss 2013).
29
Widely accepted theories of anthropogenic climate change, which attribute changes in historic weather patterns to
green house gas emissions from people, present a shared global crisis. In these scenarios, individual as well as
globally coordinated action has impact on total emissions. Total emissions, in turn effect individuals and
communities across the globe. This presents a global collective action problem: for cumulative impact to register,
action must be coordinated at a global level so that reductions by one individual, community or region are not offset
by increased emissions from others. In the case of water, local action in one watershed may have no discernible
impact on another watershed. The hydrological ripple effect from actions altering the hydrology of one river basin
weaken across space and time, and are diminished by geophysical boundaries such as mountain chains and oceans.
44
Businesses hawking solutions may likewise find such a message useful for attracting investment
(Mathur, Philadelphia Startup League 2012). This message also dovetails nicely with climate
change initiatives -- policy makers and experts stress that global climate change is creating a
global water crisis by causing disruptions in historic patterns of precipitation (Adaptation Fund
2012).
Given the vast diversity of hydrological, economic and social elements entangled with
water use and watershed management around the world, potential disruption to weather created
by climate change is the most compelling argument supporting a global approach to analyzing
and treating the many water problems faced by communities and countries around the world.
However, such an argument reduces all water problems to a sub-set of climate change problems.
Many water problems cannot be satisfactorily explained by climate change, such as industrial
pollution or over-allocation of a river enjoying reliable annual flows consistent with historical
data. Climate remediation plans provide insufficient support to individuals affected by water
problems. Many workable solutions to water problems, such as institutional arrangements like
inter-state river basin commissions, do not fit logically under the umbrella of climate change
adaptation, especially when the problems eliciting the measures are demonstrably political,
rather than climate-related.
The presumed link between global water demand and supply creates potentially harmful
or unworkable efforts to solve the crisis. Policy makers and experts are drawn to presumed
panaceas that may not translate well between settings (Meinzen-Dick 2007; Brock and Carpenter
2007; Ostrom 2007; Zetland 2013). Ostrom (2007) laments “drastic simplifications of the
structure and process of ecological systems as well as of the relevant social system related to
these systems” in order to draw conclusions or implement optimal solutions. When the
“‘optimal’ solution fails…skepticism increases as to whether ‘any’ solution is possible given that
efforts to impose an optimal solution have not generated expected results” (4). Big engineering
projects, sometimes designed to move water between basins, incur large environmental, social,
political and financial costs at questionable returns (Reisner 1986; Zetland 2011).30 Furthermore,
centralized, large-scale policy solutions may lack flexibility, disrupt delicately balanced
institutional and political power relations, and disregard local management techniques, local
social capital and informal property rights (Bruns and Meinzen-Dick 2005). These efforts may
intensify and multiply cases of mismanagement at regional and local levels, in turn deepening a
crisis that spectators and commentators misunderstand or misrepresent as “global.”
A global water shortage may be more accurately described as mismanagement of water,
specifically demand for water, across many river basins around the globe. This refinement of
thinking as well as realization of the pitfalls associated with devising supposed panaceas—
building large storage and transfer projects within and between basins, and crafting centrally
controlled policy mechanisms—has led to a renewed focus on local and basin-level water
management, demand management through structured incentives, and local and polycentric
governance of water resources.
F. Legal Theory
1. Property rights and user rights
Recounting details of the US Dept. of Reclamation’s proposed Pacific Southwest Water Plan to redirect a portion
of the Columbia’s River’s water, Reisner (1986) opines, “in an economic sense, what the backers…were proposing
was unprecedented. It violated every principle of economics, even the fast and loose principals of reclamation
economics. [Given the revenue scheme proposed], the project could not possibly be paid back for hundreds of years
if ever” (279).
30
45
Doctrinal approaches to the fair allocation of river water vary, and reflect different legal
principles (Guhan 1993; Giordano and Worlf 2003). These doctrines include:
1) Absolute Sovereignty or ‘Harmon Doctrine’: An upper-riparian state claims the right
to use all water flowing through its territory however it sees fit. This theory was argued
by American Attorney General, Hudson Harmon in the dispute over the water of the Rio
Grande between Mexico and the US in 1985.
2) Absolute Territorial or Riverine Integrity: A lower-riparian state claims that their
right to the river’s natural flow is absolute. Territorial integrity of the state is understood
to include the natural flow of the river. Actions that impinge the natural flow impede the
sovereignty of the lower riparian and threaten its prescriptive usage right (see below) to
historic flows through the state.
3) Prescriptive Rights or ‘Prior Appropriation’: A riparian claims a right to water it has
historically used.
4) Equitable Apportionment: Riparians consider water to be a common resource that
should be equitably apportioned based on various and variable criteria reflecting fairness
and justice.
5) Basinwide Management or Economic Approach: A river basin should be considered a
single unit to be developed and managed with optimal economic efficiency in order to
maximize net social benefits (Anand 2004: 6).
Some authors classify legal rights over water as falling into three broad categories: historical
rights, Hobbesian rights defined by negotiations, and rights tied to sovereignty (Ghosh and
Bandyopadhyay 2009). From the list above, principle 3) fits with historical rights; principles
4) and 5) fit with Hobbesian rights; and principle 1) fists with sovereignty rights. Principle
2) absolute territorial or riverine integrity, combines elements of historical rights with rights
tied to sovereignty. Elements embedded in his principle sometimes overlap with principle 4)
equitable apportionment, and with environmental aspects of international law codified in the
Helsinki Rules of 1966 and the UN Convention on the Law of the Non-navigational Uses of
International Water Courses of 1997. Lower-riparians often develop before upland and
inland upper-riparians, for example, Tamil Nadu and Karnataka illustrate this pattern (Anand
2004; Bandyopadhyay 2009; Shankar 2011p). Consequently upper-riparians often invoke
claims of absolute sovereignty coupled with claims of equitable apportionment in order to
gain greater shares than those allotted by historical allocations.
2. The United Nations
Human rights to water have come to dominate constitutional and international legal rights
debates, particularly at the United Nations. Societies have gradually shifted their views and
management practices of water to reflect the economic value of water and adjust to population
growth, pollution, urbanization, and climate change (Vilcara and Karina 2009). Many societies
now treat water as a valuable, finite economic good rather than a limitless social commons. The
UN’s International Conference on Water and the Environment marked this important shift in
1992 through the Dublin Statement. The Agreement consisted of four complimentary principles
which describe water’s unique position at the nexus of social universal rights and economic
commodities. Water is finite, valuable, and essential to life, the environment, and economic
development. A participatory approach involving users, planners, and policy-makers at all levels
should be pursued. Women are the primary stakeholders in the developing Global South.
“Water has an economic value…and should be recognized as an economic good…Managing
46
water as an economic good is an important way of achieving efficient and equitable use, and of
encouraging conservation and protection of water resources” (Principle No. 4, Dublin Statement
on Water and Sustainable Development 1992). The Dublin Statement, a binding UN treaty,
emphasizes the economic value of water rather than its importance as a universal right. This
development, reflective of shifting realities in management practices, flew in the face of a
decades-long struggle by activists to have the right to water recognized in a binding UN
document (Zetland 2011, C). The human right to water was later recognized in 2010.
Ten years after the ratification of the Dublin Statement, controversial for its the UN
adopted an amendment to the ICESCR (International Covenant on Economic, Social and
Cultural Rights), known as General Comment 15, which states "The human right to water
entitles everyone to sufficient, safe, acceptable, physically accessible and affordable water for
personal and domestic uses…" (CESRC, GC 15, 2002). Eventually, on 28 July 2010, following
an intense negotiation, 122 countries formally acknowledged the "right to water" in a UN
General Assembly (GA) resolution (UN, A/64/L.63/REV.1, 2010).
47
VI. Federal Decentering
A. Overview
B. Water, Politics, and Federal Institutions
C. Water Management in India’s Federal System, Legal Constitutional Framework
1. Historical Development
2. Legal-Constitutional Elements
3. Other Considerations, Central Advisory Bodies
D. Federalism, Federal Political Systems, and Types of Federations
E. Federalism in India
1. Multinational Federation
2. Democracy
F. The Congress Party and It’s Decline
G. Dynamic Federalism in India through a Legal-Constitutional Lens
H. The Rise of Coalition Politics and State-Based Parties
I. Nationalist Mobilization and the Politics of Recognition
J. The Importance of Accommodation to Indian Nationhood
K. Recurring Separatist Movements
L. Democratic Success; the Endangered Spirit of Federalism in India
A. Overview: Federal Decentering—Macro-Federal and Historic Context of Dispute
India’s federal system has undergone a process of decentralization over the past three
decades, through which its federal government and the Congress party, once effectively
unchallenged in its electoral hegemony, lost power to state-based political parties and state
governments. Coalitions became increasing important to form national government starting in
the mid-1960s. After the 1989 general elections, increasingly fragile minority coalitions came to
control India’s parliament, where state-based parties have played a pivotal role (Economist 2008;
Arora 2000; Adeney and Tsebelis 2005). Additionally, fragile coalitions of national, state-based
and local political parties have come to dominate state-assemblies (Biswas 2012; Arora 2000).
State-based parties are increasingly powerful vis-à-vis Congress and the Bharatiya Janata Party
(BJP), India’s second largest national party,31 and state governments are increasingly powerful
vis-à-vis the federal government.
India’s constitutional federalism is the outcome of colonial legacy (D’Souza 2002). The
Indian Constitution’s treatment of water as a state competency is based on the Government of
India Act 1919, which moved both water and irrigation under the purview of provincial
governments (Anand 2004). Although the primary author of the Indian Constitution, B.R.
Ambedkar, envisioned nationalized waterways, the Princely States and Presidencies refused to
relinquish jurisdiction over the issue (Abraham 2002; Adeney 2007). However, Ambedkar did
attempt to create a parallel role for central government in managing water, especially resolving
inter-state disputes. With power centralized in a solidly institutionalized Congress Party,
supported by a country-wide party network, the center was able to effectively mediate disputes.
31
BJP emerged in the 1980s as the most prominent challenger to Congress at the national level
48
As the center’s power declined and the assertiveness of the states on issues technically under
their control increased, these disputes became more difficult to resolve.
B. Water politics and federal institutions
River basins and water resource management are both inherently political (Schlager and
Blomquist 2008: 2). The fundamental questions of politics—“who gets what, when, and how”
(Lasswell 1958)—are fundamental questions of resource management. River basins are both
physical and institutional landscapes. The differences between political boundaries and
watershed boundaries complicate many aspects of river basin management, and the existence of
multiple governments and organizations with different and sometimes overlapping jurisdictions
creates opportunities for uncoordinated action and hostility (Gautman 1976; Shah 1987; Schlager
and Blomquist 2008). Salzman and Thompson (2010) also note that mismatched political and
natural boundaries pose challenges of management authority. This is often expressed as a
problem with federalism itself: should local or national authorities control natural resource
management?
Locals are closer to the problems, often understand them better, and have to live
with the consequences of the environmental policy. At the same time, if the
problem is one of transboundary pollution, the locals don’t live with the
consequences of their pollution. Those downstream do (2010: 23).
Questions like the ones posed by Salzman and Thompson are the subject of intense debate.
Writing about US federalism in 1957, Ernest Englebert elucidated a problem that has continued
to pester federal political arrangements in the five decades since. According to Englebert, “No
other aspect of federalism is currently being subjected to more intensive public inquiry and
appraisal than the intergovernmental relationships of water resources development” (325). The
difficulties of federal water management in the United States have ebbed and flowed since
Englebert’s observation that “the complex aspects of federalism [are most] starkly presented in
water resources”(ibid). However, in India they have intensified from a matter of minor concern
to one that threatens the legitimacy of India’s federal institutions (Ghosh 2009; Iyer 2007).
C. Water management in India’s Federal System, Legal Constitutional Framework
India’s water management regime is situated squarely in the context of the county’s
dynamic federal system. India is a federation;32 meaning it has co-sovereign central and state
governments. Legally and functionally, water is a state-controlled issue. However, 85% of
India’s land mass lies within inter-state river basins,33 and nine of India’s 12 major rivers are
inter-state rivers (Maitra 2007). By another count, India has 14 major inter-state rivers and nine
medium-sized inter-state rivers (Jamil et al. 2012). Water management in India engages
neighboring states sharing the same basin, the federal government and, more recently, the federal
judiciary. Control over water resides at the state-level in both a constitutional-legal sense and a
32
Some political scientists argue that India is only nominally a federation because, from a constitutional standpoint,
power is highly centralized in the federal government; however, this thesis will demonstrate that India is
functionally a decentralized federation and is undergoing a process of federalization, which has complicated water
management and inter-state water dispute resolution. State control over water related issues since India’s
independence serves as further evidence of India’s bona fide federated status.
The Central Water Commission (CWC) defines “a major river basin” as those greater than 20,000 square
kilometers (7,722 square miles). See 2009-10 Annual Report, “India – Land and Water Resources: Facts.” The
CWC identifies 12 major basins: the Indus, Ganga-Brahmaputra-Barak, Sabardmati, Mahi, Narmada, Tapi,
Brahmani, Mahanadi, Godavari, Krishna, Pennar and Cauvery.
33
49
functional sense, setting up conflict over interstate water resources. The federal government and
federal judiciary system help arbitrate disputes.
1. Historical Development
Until the Government of India Act of 1919 (GoI 1919), all except minor irrigation
works34 were under the control of the Central Government and subject to the sanction of the
Secretary of State, appointed by the British Government. The Act of 1919 made irrigation a
provincial subject, while matters of inter-provincial concern or affecting the relations of a
province with any other territory were subject to legislation by the central legislature (Jamil et al.
2012). The GoI Act of 1935 drew attention explicitly to river disputes between one province and
another or between a province in British India and a Princely State. The provincial legislative
list included “water, that is to say water supplies, irrigation and canals, drainage and
embankment, water storage and water power” (GoI 1935).
Section 130 through 134 of the Government of India Act of 1935 (GoI 1935) allowed for
a province or princely state to complain to the Governor General if its water supply from a
natural source was adversely affected and interests harmed by the actions of another princely
state or province. The Governor General could appoint a commission to investigate the matter if
the harm seemed sufficient. After reviewing the report, the Governor General could act to
redress the grievance (Jamil et al. 2012). The current regulatory framework is a combination of
the provisions of GoI 1919 and GoI 1935.
2. Legal-Constitutional Elements
The Constitution of India was adopted and ratified in 1950. Initially, Articles 239-242 of
the Constitution of India reproduced the water governance arrangement in GOI Act 1935,
Sections 130-134; however, an amendment replaced these provisions, and Article 262 was
added. The relevant sections of the India Constitution are Entry 17 in the State List, Entry 56 in
the Union List, and Article 262 of the Constitution. Entry 17 in the State List makes water a
state issue, but Entry 56 in the Union List qualifies the states’ powers over water by empowering
the Union to legislate on inter-state rivers and river valleys to the extent that such control is
deemed expedient in the public interest by parliament (Jamil et. al. 2012). Article 262 gives
parliament the power to legislate over matters in Entry 56 on the Union List and bars the
Supreme Court from reviewing decisions made by parliament or inter-state river-water dispute
bodies. Control over water and inter-state water is shared by the states and the federal
government, but Parliament has significant control over inter-state water resources, insulated
from Supreme Court review. At the time of passage, these constitutional provisions were
intended as demos-enabling, allowing parliament to act with impunity without regard to a
dissenting minority or property rights, but when India’s large national parties and parliament are
increasingly beholden to regional and state-based parties, the center is unable to act.
Schedule VII, List II (State List), Entry 17:
“Water, that is to say, water supplies, irrigation and canals, drainage and
embankments, water storage and water power subject to the provisions of entry 56
of List I.”
Schedule VII, List I (Union List), Entry 56:
“Regulation and development of inter-State rivers and river valleys to the extent
to which such regulation and development under the control of the Union is
declared by Parliament by law to be expedient in the public interest.”
Schedule VII, List II (State List), other Relevant Entries:
34
Minor irrigation works were defined as those costing less than Rs 10 laks, or 1 million Indian Rupees.
50
Entry 6 includes sanitation. Entry 13, covering “communications” , includes “…bridges,
ferries, inland waterways and the traffic thereon subject to the provisions of List I and List III
with regard to such waterways…” Entry 14 includes agriculture. Entry 18 covers land: “[l]and,
that is to say, rights in or over land...” Entry 21 covers fisheries. Entry 46 covers “[t]axes on
agricultural income,” and Entry 47, 48, and 49 elaborate additional powers of the states to enact
taxes on agricultural income. Entry 53 grants states authority over “[t]axes on the consumption
or sale of electricity.”35 Entry 57 specifies that [t]axes on goods and passengers carried…on
inland waterways” are under the jurisdiction of state government.
Schedule VII, List I (Union List), other Relevant Entries:
“24. Shipping and navigation on inland waterways, declared by Parliament by law
to be national waterways, as regards mechanically propelled vessels; the rule of
the road on such waterways.”
“97. Any other matter not enumerated in List II or List III including any tax not
mentioned in either of those Lists.”
Residual powers rest with the federal government.
Schedule VII, List III (Concurrent List), Relevant Entries:
Entry 17 deals nominally with prevention of cruelty to animals; however, the entry
empowers states to manage wild lands. Subsection (A) specifies forests, and subsection (B)
provisions the protection of wildlife. Entry 32 provides for shared control over
“[s]hipping and navigation on inland waterways as regards mechanically
propelled vessels, and the rule of the road on such waterways, and the carriage of
passengers and goods on inland waterways subject to the provisions of List I with
respect to national waterways.”
And, importantly, Entry 38 specifies that electricity is a shared issue.
Article 262:
“262. Adjudication of disputes relating to waters of inter State rivers or river
valleys
1) Parliament may by law provide for the adjudication of any dispute or
complaint with respect to the use, distribution or control of the waters of, or
in, any inter-state river or river valley.
2) Notwithstanding anything in this Constitution, Parliament may by law
provide that neither the Supreme Court nor any other court shall exercise
jurisdiction in respect of any such dispute or complaint as is referred to in
clause (1).”
1956 was an important year for India. Parliament passed the States Reorganization Act,
which redrew state boundaries to reflect regionally concentrated language groups. A host of new
interstate river problems arose with the creation of new states and the revision of state lines.
Suddenly new states had a river in their territory and they had their own objectives and
management schemes. Consensus became much more difficult (Seligman 2011). In response,
Parliament enacted two laws under the provisions of Article 262: The River Boards Act of 1956
and the Inter-State Water Disputes Act of 1956. The first cooperative planning commissions
convened at the request of co-riparian states for purposes of conservation, control, optimum use
of water resources, promotion of schemes for irrigation, water supply, drainage, hydroelectric
power, flood control, navigation, reforestation, erosion, and pollution (Article 13; Seligman
35
Electricity is used by farmers to pump groundwater. The price of electricity is directly linked to groundwater
depletion. With the power to tax electricity, states are empowered with the ability to curb groundwater depletion.
51
2011: 28). The Inter-State Water Disputes Act allows States to file complaints with the central
government and request a special tribunal to adjudicate the dispute. Parliament has not made
much use of Article 262 (Iyer 1994). Though various river boards have been proposed, they
have not been created or else they have not been vested with significant managerial power;
rather, they have been granted only advisory powers (Richards and Singh 2001: 5).
3. Other Considerations, Central Advisory Bodies
Constitutionally, water is treated as a state subject. It is listed as Entry 17 on the State
List. However, the center is provided with the power to intervene on issues of inter-state river
development and attendant disputes between states, to the extent that Parliament has legislated to
give itself these powers under Entry 56 of the Union List. In 1956, the Union enacted the River
Boards Act and the Inter-State River Water Disputes Act (ISWD) for those issues between states
which could not be resolved through negotiations. Under ISWD, disputant states can request that
the center constitute a Tribunal to resolve the case. Minor steps by the center to address
pollution have been made in the 1970s.36 The National Water Development Agency (NWDA)
was formed as an autonomous body in 1982 to conduct studies and issue policy
recommendations on water management, but lacks any policy-making or enforcement power. In
a similar vein, the National Water Resources Council (NWRC) was formed in 1983, and in 1987
the body outlined the National Water Policy. This policy recommends some guidelines for water
development related to drinking, irrigation, power, navigation, and industry. However, the
policy does not address any specific dispute-resolution processes or institutions, nor does it
possess any policy-making or enforcement authority. The National Water Board (NWB) was
formed in 1990 with the Secretary of Ministry of Water Resources (MoWR) as chair. This board
and its chairman report their implementation suggestions to the NWRC.
D. Federalism, Federal Political Systems, and Types of Federations
Federalism is a political theory that advocates the normative benefits of combining joint
action with self-government (King 1982). Federal political systems are those political and
institutional arrangements that employ elements of both shared and self-rule (Elazar 1987).
Federation is a type of federal political system that employs specific institutions to balance
shared-rule with self-rule. Unlike unitary states, each section of this compound sovereign
system, both the shared federal and the self-ruling provincial, derives its authority from a
constitution rather than from another level of government.37 Each section also exercises authority
over at least some exclusive competencies. This delineation of separate and concurrent powers,
as specified by the written federal compact, is guaranteed and thus not unilaterally alterable by
either side. A federal supreme court usually acts as neutral arbiter in disputes among provincial
governments and between provincial and federal governments. Citizens directly elect some or
all members to each component section of the federation and each component deals directly with
citizens. The central legislature usually contains two chambers, one popularly representative and
the other representative of the territorial units of the federation—in theory, this results in the
intentional over-representation of smaller, less populous states and their interests (O’Leary 2005:
263; McGarry and O’Leary 1993: 32).
36
Entry 17A of Concurrent List: Water (Prevention & Control of Pollution) Act 1974, Water (Prevention & Control
of Pollution) Cess Act 1977.
37
Some federations such as India and Nigeria have an additional level of constitutionally codified federal village
councils known in India as Panchayats or Autonomous District Councils (ADC). In many federations, provincial
units also maintain separate constitutions of their own.
52
Types of Federations
A great deal of variety exists within the pantheon of federations. Federations vary in the
degree to which they centralize power in the federal government or delimit federal power,
reserving the bulk of decision-making authority for state governments. Federations also differ in
their origins. Federations originate following two patterns: federation may represent a ‘coming
together’ of extant territorial entities, or federation may be adopted as a means of ‘holding
together’ an extant polity by devolving co-sovereign powers to territorial units. Coming-together
federations differ from countries with diverse or diverging regionally-concentrated groups that
hold together by granted more autonomy to these groups as a means of satisfying their
aspirations of self-rule.
Multi-national federation often is proposed as a way of accommodating distinct
communities, which are frequently politically mobilized, sometimes with secessionist ambitions,
within the framework of a shared state, because it offers territorial and cultural autonomy to
regionally concentrated identity groups. Federations can be either national or multi-national.
National federations, while composed of two or more territorial units, seek to promote a single
national culture. Multinational federations, on the other hand, seek to institutionally recognize,
include, and empower multiple identities, often on a permanent basis. Proponents of multinational federation reject the integrationist and assimilationist goals pursued by national
federations (O’Leary 2001: 280). In multi-national federations, at least one of the territorial
component units of the state is controlled by an ethnic minority, which constitutes a local
majority.38
Much like multi-national federation, formal institutional power-sharing or
‘consociation’ employs a series of institutions to enable inclusive democracy and the protection
of group and individual rights in segmented societies. Loosely defined, consociation consists of
four basic principles—grand coalition comprised of political parties representing the major
segments in society,39 segmental autonomy, proportionality in political representation and
public-sector employment and funding, and minority veto (Lijphart 1977). Multi-national
federation can be viewed as a component of consociation, albeit a fundamental component
within which all other institutions operate.40 As noted by Lijphart (1979) there are strong
theoretical (and empirical) links between consociation and federation. The conceptual relation
between the two can be distilled—federalism describes a theory of governance that advocates a
combination of shared-rule and self-rule; consociation seeks to maximize the inclusiveness of
shared-rule and ensure autonomy in self-rule.41 In this sense consociation and multi-national
federalism are similar and complementary systems in terms of the outcomes they aim to achieve.
From an institutional standpoint, federalism and consociation correspond when the borders of
federal units align with cultural communities who seek political recognition, and when control of
Lijphart (1979) also discussed ‘corporate federalism’ in which the enfranchisement of a particular group is not
explicitly linked to territory.
39
otherwise know as cross-community executive power-sharing
40
The inverse could also be argued, that consociation can be used as a way of enhancing the objectives of genuine
shared- and self-rule envisioned by a pluralist federal compact.
41
Put another way, a consociationalist might ask of a federal system, ‘How shared is the shared-rule and how self is
the self-rule?’ Refinements in the literature on consociation have demonstrated the convergence of federalism and
consociation—Lijphart (2002) stresses that consociation’s primary components are power sharing (‘grand coalition’)
and autonomy (‘segmental autonomy’). Secondary characteristics, ‘proportionality’ and ‘minority veto’ can also be
characterized respectively as institutions aimed at enhancing the inclusiveness of shared-rule and protecting the
autonomy of self-rule.
38
53
federal units offers autonomy for these communities as well as the possibility of an increased
stake in decision-making at the federal level.
Pluralist federation aims to achieve a federal balance in which shared-rule is shared
between the distinct ethnic and cultural segments of society and self-rule is likewise exercised by
these distinct segments. O’Leary delineates three key ways in which pluralist federations differ
from integrative ones—they are decentralized, they operate with consensual modes of decisionmaking at the center, and they recognize ethnic and cultural segments in society through formal
institutions (2005: 52). These three features bring pluralist federation loosely in line with
consociational theory.42
E. Federalism and Democracy in India
1. Multi-national Federation in India
India thrives as a comparatively stable and convincingly durable democracy despite
challenging social and demographic conditions because it employs multi-national federation in
the pluralist vein and a degree of power-sharing to accommodate politically mobilized cultural
communities. Communal divisions are almost universally identified as a major source of strain
and potential conflict for a society and the institutions that govern it (Dahl 1998; Horowitz 1985;
Lijphart 1977). Genuinely representative and inclusive democracy is similarly elusive and
fragile, especially in the presence of socio-political and socio-economic stresses. It is also widely
regarded (within the Western Liberal tradition) as an integral criterion of legitimacy and
‘success’ for modern states. Another indicator of success might be ‘stability’ in the sense of
institutional continuity and territorial integrity, or ‘stability’ in the sense of social harmony (lack
of violence) maintained through a political system capable of accommodating aspirations of
mobilized communities, regulating communal tensions, administering rule of law, and protecting
guaranteed rights (to name a few).43
There is significant debate over the efficacy of trying to house multiple nationalisms
under a single state roof.44 Imbedded in definitions and prevailing notions of nation and state are
assumptions of the necessary correspondence between the two.45 J. S. Mill famously cast doubt
on the workability of multinational states, contending that representative institutions “are next to
impossible in a country made up of different nationalities”46 (1919: 120-121). Ernest Gellner, a
leading modern skeptic of the multinational state, emphasized that nationalism lay at the
42
Decentralization as combined with recognition of regional ethnic minorities offers segmental autonomy and the
possibility of veto. Consensual decision making at the center implies proportionality in representation and
government formation and grand coalition as well as the possibility of veto.
43
Adeney notes that in a democratic state, appropriate indicators of stability include a count of violent protests or
necessary deployment of force by the center in order to maintain ‘normality’ (2007:108). Authors such as O’Leary
(2001; McGarry and O’Leary 1993: 23) note that control is another method of ensuring stability. Though
segregationist control can co-exist with formal democracy, it is the contention of this essay, as well as authors just
referenced, that this means towards stability would not constitute ‘success’ in the context of modern poly-cultural
democratic states.
44
This was an unwitting, but appropriate recasting of Isaiah Berlin’s formulation that ‘nation making is like building
a political roof over one’s cultural head’ (in Ahuja and Varshney 2005: 254).
45
Paraphrasing the logic of the ‘nation state’, Linz, Stepan and Yadav (2007) lament, “wisdom holds that the
territorial boundaries of a state must coincide with the perceived cultural boundaries of a nation. Thus,…every state
must contain within itself one and not more than one culturally homogenous nation, that every state should be a
nation, and that every nation should be a state” (50).
46
Of particular interest to the Indian case with its 22 official languages (Bodo, Dogri, Maithili and Santhali being
added in 2003), is Mill’s contention that representative government cannot exist in a multilingual society.
Interestingly, Mill notes Switzerland’s anomalous success and discusses the possibility of multinational
confederations (1919: 121).
54
foundation of the modern state’s political legitimacy (Gellner 1964). Citing the primacy of
culture in defining territorial units, Gellner argued that “genuine cultural pluralism ceases to be
viable under current conditions” (Gellner 1983: 55), and that “in our age, many political systems
which combine …cultural pluralism with a persisting inequality between cultures…are doomed,
by virtue of their violation of the nationalist principle” (Gellner 1997: 276). However, as
Brendan O’Leary and others47 point out, “the persistence of liberal democratic polycultural or
multinational states, federal and/or consociational in format, suggests blatant disconfirmation”
(O’Leary 2001: 275). India stands as the most imposing of these disconfirmations.
India is often and aptly labeled the world’s most unlikely democracy: its multi-national
federation fosters robust democratic stability despite circumstances universally acknowledged as
obstacles for stable democracy—post-colonial democratizing transition, persistent regionalism,
rooted in complex social and cultural diversity, mass poverty, illiteracy, extreme regional
unevenness in development, and widespread inequality (Bhattacharyya 2005). Despite these
conditions India manages to hold together a population of well over one billion divided into
many thousand distinct (and oftentimes antagonistic) ethnic communities. In an era in which
post-colonial and post-Soviet successor states have continued to unravel and subdivide at an
alarming rate in the wake of bloody civil wars and political upheaval (Roeder 2005), India
manages to negotiate incongruities between demographic reality and the ideal of the modern
nation-state. India succeeds where other states have failed, in large part because of the multinational federation it employs.
Cultural and ethnic distinctions play a definitive role in political and governmental
institutions, most notably in defining federal units. Fifteen of India’s 28 states have non-Hindi
speaking language majorities, four Northeastern states contain majorities of non-Hindu TibetoBurman tribes, and five states contain non-Hindu religious populations large enough to constitute
local majorities. Most of these states were created in response to and continue to function after
violent mass-mobilization and/or organized secessionist war. Democracy and stability are far
from certain, given the political, social, and economic conditions facing India, yet organization
of states according to linguistic and ethnic criteria has convincingly attenuated ethnic tensions
rather than exacerbated them. Bhattacharyya argues, “the various federal institutional measures
allowing for the exercise of internal self-determination of collective identity whether linguistic,
or tribal, in India since the 1950s, has served to contain much of secessionism, and political
separatism, and thus to strengthen national unity, and cohesion” (2005:23). This pattern is very
much in line with Kohli’s ‘inverse U’ theory of ethnic conflict in developing democracies, in
which the state and mobilized ethnic groups negotiate a balance of power through conflict and
subsequent political negotiation to achieve a degree of genuine power sharing and
accommodation (1997: 326-26). However, as Kohli notes, recognition is often about economic
advancement.
2. Democracy
India is a democracy and a genuine federation, pluri-national in format. Democracy has
been minimally defined as requiring free and fair elections (Huntington 1991: 6) and maximally
defined as existence of human development and equality of economic outcome achieved through
democratic institutions (Sen 1999: 9-12). Clearly India falls solidly between these two markers
(Kohli 2001). Strident dismissals of Indian democracy generally lament shortcomings in human
development and economic equality (Roy 2009). Notably, many of these criticisms center on
water supply augmentation schemes, which displace large numbers of people and harm the
47
Foremost among them, Arend Lijphart, John McGarry, Al Stepan and Juan Linz
55
environment (ibid). India is remarkable among developing democracies in its tremendous voter
turnout despite poverty and high levels of illiteracy (Dahl 1998: 160; Hasan 2002: 6),48 in the
freedom of disaffected groups to publicly protest, and in its boisterously free press. However,
each of these three laudable characteristics of India’s democracy—high voter turnout among
society’s backward segments, public protest, and boisterous press—has made the resolution of
inter-state water conflicts more difficult.
F. The Congress Party and its Decline
‘The Congress System’ a term coined by Rajni Kothari in his seminal work, “The
Congress System in India,” (1964) describes a system of single-party dominance in a competitive
multi-party system through broad-based appeal and cooperative, consensus-style politics (Hassan
2002). The Congress Party (Indian National Congress, INC or just “Congress”) was India’s
predominant and hegemonic political organization from the time of Independence until the
beginning of its decline in the late 1970s. Congress obtained an absolute majority of seats in
parliament in the first four general elections: 1959, 1957, 1962 and 1967. Congress was unique
among the Third World parties in dominating a competitive multi-party system without coercion
(Kothari 1964).
Most accounts of the Congress party from 1947 to 1964 emphasize the role of the party’s
charismatic leader, Jawaharlal Nehru. Nehru directed the county’s efforts towards the
construction of a modernist India state, in which the government would assume charge of
economic development and nation building. Socialism, secularism, federalism and democracy
were key orientations of the early Congress Party (Corbridge 2000; Corbridge and Harriss 2000).
Nehru controlled Congress from 1951 and secured the party’s dominance for at least the next
three decades by developing and extensive party organization across India, accommodating a
diverse set of interests to create a large base of support, and developing relationships with other
parties to promote consensus style decision making (Hasan 2002). Dominance by a single party
coexisted with inter-party competition, but the opposition parties had little prospect of replacing
Congress, except in a few states. Patronage networks contributed to the party’s success as did a
vast party network. Money and networks helped Congress appeal to a vast middle ground of
interests and values. Internally, it was a grand coalition of major social and political forces, held
together by bonds forged in the independence movement. Ideologically, the party was centrist,
committed to democracy, minority rights, secularism, a centralized form of federalism, and
mixed economy (Kothari 1964). Institutionally, the Congress system was a hierarchical
organization radiating from central to the provincial, to district levels, each working in
consonance with the corresponding level of government (Adeney 2007). In other words,
Congress created a parallel system that mirrored the governmental system that it controlled. This
system began to crumble as the Congress electoral fortunes deteriorated after 1967.
Kohli (2004) stresses the “institutionalization of state authority in the Congress party as
the key element defining Indian politics in the 1950s. “India in the 1950s was a relatively well
institutionalized polity…manifest most strongly in a fairly well organized central state…in a
well-functioning national political party, which generally controlled the state” (283).
48
India is among the few democracies where the electoral turnout of the lower orders of society is well above that of
the most privileged sections (Yadav 2000). The voter turnout was between 55% and 64% in the eleven general
elections between 1962 and 1999 and has never fallen below 45% (Hasan 2002: 6). State assembly elections have
recorded similar levels of participation (Frankel 2000). Voting is not compulsory.
56
Congress’s deterioration was a symptom of democratization and institutionalization of
traditional power relations and demographic features present in Indian society. Party
competition with Congress and cooperation among the party’s opponents increased from 1967 to
1977. India began undergoing a process of federalization, starting at the state level. Opposition
parties formed coalition governments in several states. In each election, a group of state leaders,
popularly known as the “Syndicate”, assumed an important role in national politics (Hasan
2002). The 1960s is best thought of as a decade of transition during which the nationalist legacy
declined, political competition and challenges to the hegemony of the Congress Party increased
and a new type of populist polices system with nonconstitutional methods emerged under Indira
Gandhi’s rule.
The 1977 elections were the harbinger of a new era in India’s party system, creating a
new opening for opposition parties. The late 1970s began a period of acute instability in the
party system. By the time of Indira Gandhi’s assassination in 1984, the political landscape had
changed unequivocally. The legislative majorities won by the Congress under her leadership
were not used to implement the radical policy promises she made (Hasan 2002). Under both
Indira and Rajiv Gandhi, the organizational decline of the Congress was precipitous. Electoral
majorities, such as the record-breaking success in the 1984 elections in the wake of Indira
Gandhi’s assassination, coexisted with structural decay and party member decadence.
By the late 1980s there was a political vacuum in Indian politics. The Congress still
remained the only party able to command support in every region of the country, but its share of
the vote had declined dramatically. No long after, it lost its parliamentary majority. This
premier party, with nationalist orientation and a broad social base and a modicum of social base
began a steep decline.
Indira Gandhi’s centralizing drives coupled with her intense desire for personal power
and political manipulation were responsible for many of India’s problems. Under her regime, the
once robust Congress party’s roots wither and governance became less institutionalized, more
personalized and centralized (Kothari 1994; Manor 1983; Kohli 1994). The complex network
that Congress had built around every level of government across the country was starved as
power was centralized. Opposition parties began to step in to fill the void left by Congress’s
retreat to the center. Genuinely pluralist politics began to emerge in the late 1970s and early
1980s (ibid). Kohli (2004) argues that by the end of the 1980s, “The Congress Party as an
organization was largely destroyed.” Additionally he maintains that the civil service polices and
even the armed forces had become less professional and more politicized; parliament less
effective; and the autonomy of the judiciary reduced (283).
E. Dynamic Indian Federalism through a Legal-Constitutional Lens
India has moved from a near-unitary state to a decentralized federation in the past two
decades. In his 1936 presidential address the Congress,49 Nehru described India as “a
federation…[with] a great deal of unitary control” (reproduced in Zaidi and Zaidi 1980: 191).
Nehru’s comment appropriately described India at the time—under Congress Party rule, India
functioned as a unitary state despite elements of federation in its constitution. Nehru also
publicly expressed his desire for a unitary state, saying that a “one-unit federation would be
ideal” (Bondurant 1958: 56). Ronald Watts echoes Nehru’s assertion, albeit using more
49
Presidential Address to the Indian National Congress at Faizpur, 1936
57
legalistic terminology: “India may…be best described as a predominantly federal system with
some unitary features” (1966: 356). Austin noted the vehement opposition to formal and
informal power-sharing expressed by Congress party leadership after Independence (1966:118).
Although liberal consociational power-sharing theory had not been fully articulated by
constitutional scholars, Muslims and other minorities explicitly called for power-sharing
arrangements akin to the Swiss system, especially the Swiss joint-executive, a proposal which
Nehru “flatly rejected” (Austin 1966: 118, 123). Single-party dominance of the Indian system
has been cited as evidence of majoritarianism (O’Leary 2005: 88). Arora argues that the political
and constitutional reality that emerged after Partition was a “truncated India and the dominance
of a majoritarian centralist party” (2002: 504).
B.R. Ambedkar, Chair of the Drafting Committee of the constitution, explained that India
avoided the “tight mold of federation” to be “both unitary as well as federal according to the
requirements of time and circumstances.” He described the constitution as federal “inasmuch as
it establishes what may be called a dual polity [which]…will consist of the Union at the Centre
and the States at the periphery each endowed with sovereign powers to be exercised in the field
assigned to them by the Constitution” (in Austin 1966: 188). Here Ambedkar describes a
federation, in which states co-sovereign with the center exercise exclusive competencies
assigned by the constitution. He also acknowledges that India had features of a unitary state.
Ambedkar incorporated into the constitution an element of federation that has come to have a
great impact on water management. Changes relating to the balance of power between center
and states—notably the distribution of powers between the center and the states— require
ratification by half of the states as well as majorities in both houses of the parliament with twothirds present and voting (Adeney and Wyatt 2010: 88). Thus the states’ rights to manage water
are protected by federal elements in India’s constitution and cannot be legislated away without
the consent of half of the states and a majority of their representatives in Parliament.
Recommendations to move control over water from the domain of state competencies to those
powers handled concurrently by the Union and the states or exclusively by the Union face a
difficult process of ratification.
Pratap Mehta (2010) argues that a key principle in Ambedkar’s drafting of the
constitution was postponing or relegating to the states any matters too contentious or politically
toxic to be handled by the center. Like language, water was an emotive issue (Maitra 2007). In
order to incorporate the roughly 500 autonomous Princely States throughout the country, the
Constituent Assembly and Ambedkar left water to the states. Despite later legislative and
constitutional reform, not to mention the abolition of the Princely States during states
reorganization, water as a state-controlled issue remains an essential element of the federal
compact. This in large part explains the center’s unwillingness and inability to meddle in water
management and development in the states.
Though India functioned as a unitary state after independence, under Congress Party rule,
elements of Federation embedded in the country’s demographics and constitution set the stage
for a more robust federalism with greater state authority. In his exhaustive examination of Indian
federalism, Austin rejects Wheare’s “quasi-federal” label (1963: 28), instead describing the
Indian system as “co-operative federalism” that “produces a strong central government yet not
necessarily resulting in weak provincial governments” (Austin 1966: 186-7). Kothari observed
that although the center maintains “a major share in resources and all residual functions” the
constitution “simultaneously gave the states considerable powers and scope for maneuver”
58
(1970:91-92). Similar to the German system, the center is largely dependent on states to
implement legislation.
What has become clear over the decades is that the interplay between Indian
demographics, India politics, and its federal institutions fosters a dynamic system. India’s
federalism is changing from a political system that was often identified as “quasi-federal”
(Wheare 1963: 28) to one that is undoubtedly a federation. While this change has strengthened
India’s democracy (Arora 2002), it has led to the collapse of the systems that resolve interstate
water disputes.
H. The Rise of State-Based Parties and Coalition Politics at the Center
With growth of state-based parties since the 1980s, coalitions have bolstered the federal
character of the Indian system and increased consensual decision-making at the center.
Minority-ethnic parties play a larger role in decision making in Parliament. These same parties
prevent the center from imposing its agenda on their states’ interests. Since 1996, India has been
ruled at the center by coalitions of diverse regional, state-based, and ethnic parties, a shift
reflecting the growing regional focus of voters and their unwillingness to support recentralization
of power (Manor 1998: 22). The growth of state-based parties consolidated behind two major
demands during the period of Congress rule in the 1980s: the demand for less central
intervention in states’ affairs and the plea for more states’ participation at the center (Arora 2002:
518).
After failed attempts to form a durable government in 1996 and 1998, the Bharatiya
Janata Party (BJP) formed the National Democratic Alliance government (NDA), a broad
coalition, by greatly reducing the number of seats it contested and making alliances with smaller
ethnic and state-based parties. Arora describes the 1999 formation of the NDA as the advent of
‘electoral federalism’:
State parties, aggressively pursuing the developmental interests of their respective
states, joined hands with the BJP…For the first time, a major national party
pursued a comprehensive strategy of alliances and seat-sharing arrangements,
accepting to field fewer candidates in the bargain. Reviewing its strategy after the
elections, the BJP National Executive noted with satisfaction that the decision to
align with non-Congress regional parties had strengthened the federal character of
the national polity by making them important partners in the task of governance at
the national level (2002: 513).
Between the 1998 and 1999 elections, the BJP withdrew candidates from 80 contests in
exchange for coalition support from other, mostly state-based parties. The number of BJP seats
won held steady at 182, while the ranks of the NDA coalition swelled. The BJP also awarded
cabinet positions to coalition members. The first Vajpayee government awarded only one
cabinet post to a non-BJP member. The 1998 cabinet granted 8 cabinet positions out of a total of
21 to coalition partners, and the 1999 cabinet awarded 10 positions out of a total 25.50 In the
2004 election, the Congress, to its credit, copied the successful coalition model and managed to
oust the BJP.51 The success of the BJP in the late 1990s and early 2000s has less to do with the
ascendance of an exclusive Hindu nationalism and more to do with the growth of regional parties
relative to both the BJP and Congress. The total number of seats won by the five major parties
50
The first Vajpayee cabinet gave the industry ministership to Sursh Prbhakar, a member of the Shiv Sena, which
also espouses a Hindu nationalist agenda. Discounting members of Shiv Sena, the second and third cabinets
contained 7 and 8 coalition partner members or 33% and 32%, respectively (the size of the cabinet increased).
51
Congress has not awarded as many ministership posts to coalition partners.
59
(INC, BJP, Janata, CPI(M), CPI) has dropped consistently in every election since 1991. In the
2004 elections, their share amounted to roughly 63%, down from close to 90% in 1991. The
percentage of seats won by the leading party has also consistently dropped since the mid-1980s,
with Congress securing a mere 26.7% of seats in 2004, a new low for a leading party. (Congress
experienced a resurgence of support in the 2009 elections, which returned it to 1989 levels in
terms of seats) (Adeney and Wyatt 2010: 141).
Coalitions of regional ethnic parties provide an informal veto to pivotal minority
members of the coalition. Jayalalitha, a prominent coalition partner and member of the All India
Anna Dravida Munnetra Kazhagam (AIADMK) a Tamil Nadu-based political party, tested this
when she brought down the NDA coalition in 1999 by withdrawing support over a dispute
involving cabinet positions (Adeney and Wyatt 2010: 97, 134).52 Increasing the number of veto
players in government forces coalition leaders to moderate their policy positions after elections
in order to secure support from coalition members.
Central coalitions display a lack of cohesion. Arora (2002) laments apparent
unwillingness of ministers to subscribe to collective responsibility for cabinet decisions, often
disclaiming responsibility for decisions made at meetings they did not attend (517). Adeney
and Saez (2005) note that the diversity of the coalitions’ constraining action at the center – in a
call where winners and losers the center will not be able to act, which has the effect of protecting
minority groups and providing minority veto but also prevents resolution of zero-sum disputes
like the dispute over the Cauvery.
I. Nationalist Mobilization and the Politics of Recognition and Resources
India has used federalism to hold together a diverse collection of regionally-concentrated
groups while maintaining democratic rule. Kholi (2004) notes, “numerous territorially based
ethnic groups have demanded a greater share of power and wealth from the central Indian
state…most of these demands have been accommodated successfully” (281). Success, argues
Kholi, depends on the degree to which central authority is institutionalized and the willingness of
the ruling groups to share some power and resources with mobilized groups” (282). These relate
to water disputes. In states with a history of nationalist movements, center-state relations have
established a precedent of granting mobilized groups greater authority and more resources. Each
of these makes inter-state river disputes more difficult to resolve – the center has less authority to
mediate the dispute, the disputant states’ politicians expect preferential treatment in terms of
receiving resources.
The politics of recognition are often about acquiring greater resources. India uses government to
address past injustices and inequalities among segments (McMillan 2005). The constitution
provides preferential treatment to Scheduled Castes (SC), Scheduled Tribes (ST), and Other
Backward Classes (OBC), which are, as Ambedkar described, “nothing else but a collection of
certain castes” (Galanter 1978: 1816). Members of SCs and STs receive proportional
representation in national, state and local legislatures, proportional employment in government
agencies, including the civil services and the police force, and reserved seats in governmentfunded educational institutions. The constitution also empowers the federal and state
governments to provide unspecified benefits to OBCs. There is a hierarchy of recognized
languages in India (Brass 1994; Laitin 1989). Articles 345 and 347 provide for official
52
The NDA cooperated with the DMK in the ensuing election and the Tamil Nadu-based rival of the AIADMK was
awarded two cabinet positions in the new coalition. Adeney and Saez argue that Jayalalitha would have been
rewarded with a position in a new Congress-led coalition had Congress’s electoral prospects not been undermined
by the conflict in Kargil (2005: 7).
60
languages of the Union as listed on the 8th Schedule. 8th Schedule recognition specifies that all
official communication, documents, and entrance and civil service exams be spoken or printed in
the language, which becomes a third language in India’s ‘three-language formula’ (Hindi,
English and an 8th Schedule language) (Bhattacharyya 2005: 7). Knowledge of official
languages of the Union offers the best career prospects for jobs in the prestigious and powerful
All India Civil Services. Knowledge of the official languages of the states offers access to the
All India Civil Services as well as the vast pool of jobs controlled by the states. State-run
schools provide instruction in a third category of recognized “mother tongues.” State
governments are responsible for policies on education, land ownership, and taxation on land and
agricultural income, not to mention irrigation and water. They distribute jobs and other forms of
patronage, and distribute funds obtained as grants from the central government (Chandra 2005:
240-41). Thus, control of states by regionally based ethnic minorities provides significant power
and wealth.
Inter-state water disputes and water apportionment contradict the calculus of materiallydriven recognition politics. The reorganization of state lines, unsettles long-established interstate agreements over water allocation rights. For example, in 1956, the Madras Presidency
became Tamil Nadu; however, a part of Madras was ceded to Andhra Pradesh, calling to
question the validity of historic allocations based on the 1924 agreement (Anand 2007). Perhaps
a more striking example of the way in which federal reorganization has led to water conflict can
be seen in the Punjab Reorganisation Act of 1966, though which Haryana was carved out of
Punjab, setting off an intractable conflict over the Ravi-Beas waters. Iyer (2007) maintains, “this
is really a dispute relating to allocations of river waters made in pursuance of a reoganisation of
States” (99). He puzzles, “Does a part of the State lose its riparian character because of a
division of the state?” (ibid). That state lines are often drawn to better reflect the cultural and
ethnic geography of India, adds further tension to the resulting ISWDs and limits the scope for
resolution.
The organization of federal boundaries to correspond with ethnic communities is
recognized as a solidly consociational feature (Lijphart 1979; Adeney 2002). Ironically even
Donald Horowitz, an opponent of consociation, has acknowledged the importance of linguistic
organization of India’s states. His ‘dispersed ethnic system’ theory is based primarily on the
Indian case (1971: 117; 1985: 37-39, 615). Here Horowitz diverges from the standard federal
integrationist model of defeating “ethnic politicians” (through divide-and-rule tactics) by
dividing up their constituencies. Horowitz notes that within India’s homogeneous units, ethnic
politicians lack the fire power of an ethnic outsider to scapegoat; claims of ethnic exclusion,
extinction, or threat by the “other” lack genuine validity among co-ethnics who form a majority
and control their own state. Thus politicians are forced to resort to ‘secular’ platforms (Horowitz
1985: 617). In the case of water disputes, Horowitz’s “dispersion” theory is turned on its head.
On issues of inter-state resource sharing, the “other” is reintroduced, and the added institutional
barriers created by ethnic-federal states serve to reinforce “otherness.” What might otherwise be
a strictly technical issue of irrigation development acquires and ethnic dimension.
The “centrist equilibrium” of ethnic politics in India has been well documented and
variously explained (Rudolph and Rudolph 1987; Chandra 2005; Dahl 1998: 159-162; Manor
1996; Horowitz 1985: 37). And as James Manor notes, an abundance of so-called “fixers”
constitutes a powerful resource for the politics of bargaining in India (1998: 22).53 Indira
Gandhi’s mishandling of the Punjabi crisis is the most notable exception to the usual politics of
53
Manor describes “a veritable legion” of such political activists (1998:22).
61
bargaining, and an illustration of how important ethnic moderates are to the Indian system.54
According to Manor (ibid), the center employs a several-pronged approach to deal with
disaffected states, the first prong involves policy changes to address the source of conflict. The
second prong involves economic enticements. Manor (ibid) notes that economic assistance and
development packages are often offered even before negotiations with leadership of mobilized
communal movements. The center’s counter-insurgency strategy illustrates the readiness of the
Union to redirect disproportionate funds for development to states demanding greater autonomy
(Das Gupta 1997; Baruah 2009). As noted, in dealing with inter-state river disputes, the
finiteness of water, and the zero-sum nature of ISWD negotiations limit the center’s ability to
placate disputants. Furthermore, the presence of dispute can indefinitely delay water
development packages from the central government. Asokan (2009, in Ferdin, et al. 2010) points
out that projects funded by the center need to satisfy the requirements of the Central Water
Commission, which include cessation of conflict, while the Tribunal’s award stipulates that all
water development projects must be sanctioned by each of the four disputant parties (Ferdin et al.
2010).
J. The Importance of Accommodation to Indian Nationhood
India is not a nation-state in the Millsian or Gellnerian sense of sharing a common
culture, nor do Indians possess a shared understanding of what constitutes the nation. Ifran
Habib, a leading historian of India is explicit on this count: “Is then India a nation? We must
without hesitation answer in the negative. India is a country certainly; but it is not a nation
because it does not meet the requirements of either a common language or a common culture”
(1981: 31). Harihar Bhattacharyya describes two layers of nationhood in India—“ethnic which is
thick, and based deeply in culture, language, religion, tradition and social structure, and political,
or civic which is thin but hegemonic in intent.” The latter, which is entirely negotiable, is
premised upon its ability to accommodate the former, which is non-negotiable. India’s unity
rests upon a process of negotiation whereby the civic polity is able to grant autonomy to the
many thick ethnic nations around the country (2007: 55-56). Bhattacharyya’s description points
out the dangers that the civic, political nation and its federal institutions, such as the supreme
court, face when dealing with inter-state river disputes. Accommodating thick nations is as
much about resources as it is about recognition. Furthermore, issues of culture, tradition and
social structure intertwine with the livelihoods that water supports.
K. Recurring Separatist Movements
Separatist movements are the recurrent norm, not the exception. An acute sense of
loyalty to a particular region has often manifested itself in “antagonistic terms to that of the
nation, fuelled as it is by the sense of enduring deprivation due to long-term neglect in
development, and resource redistribution.” Regional movements routinely seek to challenge
“national unity and integrity” (Bhattacharyya 2005: 2). E.V. Naicker’s concept of Tamil
nationhood, for example, was defined entirely in its opposition to the pan-Indian nation
promoted by Congress leadership (Pandian 1999: 287-307; Manor 2001). Ephemeral
movements calling for separate nation states include the Dravidian movement in Tamil Nadu in
the 1940s through the 1960s, the Kahlistan movement in Punjab in the 1960s and 1980s, the
uprising in Kashmir, which intensified in the 1990s, numerous movements in Northeast India,
54
Indira Gandhi ignored the moderate Sikh-oriented Akali Dal party, opting instead to ally with extremist
secessionists in the hopes of undermining moderate opposition while creating crisis and then mining Hindu-Sikh
ethnic strife to the Congress’s electoral advantage (Manor 1998: 26-27; Kohli 1997: 337). Her plan led to violent
rioting and her eventual assassination by two of her Sikh bodyguards.
62
including the Mizo war, which ended in the late 1980s, and the on-going Bodo movement as well
as the Gorkaland struggle in northernmost portion of West Bengal. Most recently the so-called
Naxil Rebellion or Maoist leftist extremist movement, which has spread across much of rural
East and Central India, recruits from the Adivasi community and many of the rural low castes
(Roy 2009; Bhandari, Danekar and Choudhury 2010). These violent struggles represent sizable
communities that have chosen to challenge the Indian state for recognition and a greater share of
resources and authority.
L. Democratic Success; the Endangered “Spirit of Federalism” in India
Democratic India demonstrates the robust durability of pluri-national federation despite
circumstances universally acknowledged as obstacles for stable democracy—post-colonial
democratizing transition, persistent regionalism, rooted in complex social and cultural diversity,
mass poverty, illiteracy, extreme regional unevenness in development, and widespread inequality
(Bhattacharyya 2005). India has undergone a continuous process of decentralization and
federalization since the 1970’s to negotiate these challenges. Ahuja and Varshney (2005) note
that no constitutional amendment has altered the basic outlines of center-state relations
permanently in favor of the center. However, this same process of accommodation and
decentralization that has promoted stability and fostered the democratization of existing elements
in Indian society has also spawned an array of powerful state-based parties and assertive state
governments. Ambedkar’s provisions allowing a strong central government to mediate water
disputes between states (Abraham 2002) are now more a liability than an asset in managing
India’s inter-state river basins.
In his discussion on ‘why federations succeed’, Elazar uses India as his leading example.
Decentralized and accommodative federation manages to hold together a population of well over
one billion divided into over a thousand distinct (and oftentimes antagonistic) ethnic
communities in what is often and aptly labeled ‘the world’s most unlikely democracy.’
However, Elazar’s discussion of ‘federalism as a basis of political association” notes that,
successful federal systems are characterized…by their permeation with the spirit
of federalism as manifested in sharing through negotiation, mutual forbearance
and self-restraint in the pursuit of goals and a consideration of the system as well
as the substantive consequences of one’s acts (154).
Inter-state river disputes and the economic and electoral incentives that perpetuate them,
undermine an important element of successful federalism and threaten to tear the gauze
thin federal net that supports India’s many “thick nations.”
VII. Political-Economic Feedback Loop
Inter-state conflict over water resources is both a symptom of water mismanagement as
well as a cause of further mismanagement. In other words, water mismanagement and water
conflict are locked in a self-perpetuating cycle (Ferdin, Görlitz and Schwörer 2010).
Management of water in India is largely about managing conflicts that arise from uncoordinated
development and competing claims. In many disputed basins, most notably the Cauvery,
allocation of water resources to their most important and productive uses is made difficult by
persistent conflict, and any development that does commit to utilizing water resources is likely to
further enflame the dispute. In India, states are the primary builders and operators of hydraulic
infrastructure (Seligman 2011). States manage water and plan infrastructure without regard for
co-riparians’ plans (Jamil, Kumar, Ismail, Roy 2012; Maitra 2007). Delayed agreement leads to
ineffective, non-cooperative investment in dams, irrigation, agriculture and industry (ibid). The
arbitration process is slow, and binding arbitration does not exist (Maitra 2007; Gundimeda and
63
Howe 2008; Seligman 2011). Non-agreement, as in the case of the Cauvery55, leads to
inefficient levels of investment by non-agreeing states and diversion of scarce resources to
inefficient uses. This inefficiency has negative impacts on economic growth (ibid). Uncertainty
about the future actions of Tribunals and River Authorities complicates planned management of
water resources and financing (ibid).
At the same time as the Center’s involvement in water management and inter-state water
affairs was diminishing, the populations and economies in many regions were growing rapidly.
This was especially true in economically ascendant states like Tamil Nadu and Karnataka.
Meanwhile water-intensive agriculture in the Cauvery and elsewhere persisted or increased.
Contributing to increased water use was the advent of cheap chemical fertilizer accompanied by
a high-powered lobby in New Delhi (Ghosh 2012p). New high-yielding crop varietals, which
required more water accompanied fertilizer development, as did government programs to
distribute both (ibid). Subsidized electricity to agricultural areas, which allowed farmers to
pump ground water without affecting their marginal costs of production, lowered water tables,
affecting both surface and groundwater flows. In the case of Karnataka, a dietary shift from lowwater millet to water-intensive paddy (Ghosh and Bahndyapadyay 2009) also increased water
use and inter-state tension.
Demand for water has increased without commensurate adjustments in institutions that
would allow price to reflect increasing scarcity. Water use has increased in many places to
utilize all available surface water, while farmers deplete groundwater reserves rapidly. Seasonal
or chronic shortfalls have resulted. An economic indicator known as scarcity value is used as an
approximate metric of economic demand for water. Scarcity value measures value lost because
additional water was not available to bring idle land under cultivation. Using a Cobb-Douglas
production function, it calculates the difference between marginal product and marginal costs of
using water when a limited amount of water is available for production. Ghosh (2009) shows
that scarcity values for rice in the Cauvery Basin have been increasing since the 1980s; that
spikes in scarcity value have roughly corresponded with increased conflict; and that scarcity
values have not diminished in response to increased water inputs from heavy monsoons. He
concludes that continued supply augmentation will fail to meet rising demand and quell disputes;
the only solution is an economic one in which marginal costs are balanced with increasing
marginal products. In the absence of a market and without market mechanisms to curb demand
and create certainty, economic incentives manifest through political actors representing
constituents and disputant states. Politicians in states with high scarcity values of water, regular
spikes in scarcity values or seasonal shortfalls have an incentive and an imperative to address the
issue by promising additional water to farmers. This, in turn, leads to increasingly adversarial
politics at the inter-state / center-state level, fostering further non-cooperative and inefficient
management of water. As a result scarcity values increase.
55
The Ravi-Beas dispute represents another example.
64
The strategies of disputant parties depends on their location in the basin. In downstream
Tamil Nadu, politicians have an incentive to compete as the party best-able to deliver water.
They reaffirm the belief that farmers are being deprived a centuries old entitlement. In upstream
Karnataka, politicians have the ability to block water at the KRS Dam, so that farmers can divert
and use the water. Here, continuing impasse benefits their constituents, who they claim have an
entitlement to any water that passes through the state. Kanadan politicians unite across party
lines in opposition of proposed settlement (Venkatachalam 2013; Iyer 2007). As long as the
matter remains unsettled their constituents may use the water. Politicians in these settings will
seek to prolong negotiations and defy interim orders.
Disputants’ behavior is also driven by the institutional relationships between and within
political parties. Political actors are largely driven by electoral incentives and imperatives,
which are driven in large part by party-system dynamics. National parties who seek to control
government at the center have an incentive to avoid addressing water disputes because final
allocations of finite quantities of water create winners and losers, or a situation in which all
participants feel cheated, which threatens fragile coalition governments. Therefore, the
moderating party in the dispute, the central government, usually represented by the Prime
Minister, has little incentive to see an award given. In the Cauvery Dispute, the upstream
riparian, Karnataka, is governed by national parities, with control of state government alternating
65
between the BJP and Congress. Here incentives to prolong the dispute often align between the
mediator and the Chief Minister of Karnataka.
Tamil Nadu, however, is governed exclusively by state-based political parties, associated
with a former nationalist mobilization. National parties have little ability to reign in leaders
demanding more water. While, Tamilian disputants seek resolution of the dispute, they have a
strong disincentive to moderate their position, because it would leave them vulnerable to
outbidding by rival parties (Horowitz 1985, Rabushka and Shepsle 1972). Tamil parties often
play pivotal roles in central coalitions, and have brought down government coalitions before, so
the center still has an incentive to try to appease the state. In India state-based parties are often
enticed to moderate their position through concessions of greater wealth and power from the
center (Kholi 2004; Manor). However, the finiteness of the water being disputed puts limits on
the center’s ability to offer a greater share.
66
VIII. Cauvery Dispute
A. Overview
B. Major features
1. Basin Location, Area, Major Political Jurisdictions
2. River Course, Geography
3. Infrastructure
C. Volumes, Rainfall, Soil Types
D. Macro-federal context and timeline of the dispute
E. Economic incentives for conflict—increasing demand for water
1. Population
2. Minimum Support Price (MSP) and Farm Harvest Price (FHP) for Paddy
3. Non-diminishing Scarcity Value
a. Agriculture and Cropping Patterns
E. Electoral incentives for conflict—electoral calculus
F. Suitability of basin for water markets
67
(adapted from India-WRIS 2012)
A. Overview
The Cauvery Dispute is locked in a self-perpetuating feedback loop, in which economic
incentive and uncertainty drive political conflict, which in turn, results in heightened economic
demand for and uncertainty over water. This feedback loop was actualized in the mid-1960s as
negotiations over water sharing commenced ahead of the expiration of the 1924 agreement.
These negotiations coincided with the beginnings of a dramatic shift in Indian politics and party
institutions nationwide, which is broadly characterized as “decentering” and “federalization” by
68
some authors (Mawdsley 2002; Arora 2002) and as “a growing crisis of governability” by others
(Kohli 1997). Coincidentally, this shift was initially realized through a Tamil nationalist and
low-caste movement, the political-institutional and ethno-political vestiges of which continue to
weigh down dispute settlement and constructive inter-state water development. 56 Meanwhile, a
complimentary sea change in India’s political-economy was also occurring in the 1960s—a shift
that Rudolph and Rudolph (1987) famously describe as “command” to “demand politics.”
Agricultural reform and investment took center stage in the 1970s and onward (ibid) as farmers
became an important part of electoral strategy. At the same time, populations in the basin states
were exploding, similar to many other parts of India, while food shortages still threatened
through the late 1960s and early 1970s (ibid). Encouraged by funding from central development
programs, the states began uncoordinated development of water resources to feed the growing
demand for water. Instead of more efficient use of water, government programs encouraged less
efficient use at the ground level, and instead of fostering greater coordination in water related
development and investment, inter-state talks prompted uncooperative investment (Anand 2004).
Increasingly scarce water was administered by state politicians who reassured their constituents
of their rights to a fair share of the basin’s water and in their ability to wrest that share from their
political counterparts in the other state. Water grew more precious and the issue gained in
political stature when, for lack of any other means of securing water, a growing agricultural base,
sometimes joined by urbanites, lobbied for a greater share of the basin’s resources to meet their
growing needs. The bone of contention in the Cauvery Dispute is reallocating already fully
allocated resources away from Tamil Nadu in favor of Karnataka and other basin jurisdictions.
B. Background and major features
1. Basin location, area, major political jurisdictions
The Cauvery is a perennial rain-fed river approximately 802 km long with a total
catchment area of 81,155 sq. km, roughly 2.7% of the total area of the country (India-WRIS).
The basin at its widest point is 245 km across. It lies between 75°27’ to 79°54’ east longitudes
and 10°9’ to 13°30’ north latitudes, in South India. It is bounded by the Western Ghats
Mountains on the west, by the Eastern Ghats Mountains on the east and south and by ridges
separating it from the Krishna and Pennnar basins on the north (GoI India-WRIS). It flows in a
southeasterly direction from its origin in the Brahmagiri Range of the Western Ghats near South
India’s west coast to the Bay of Bengal, where it empties from the Thanjavur delta and India’s
southeastern coast.
The basin is shared by three states and one Union Territory. Karnataka and Tamil Nadu
are the principal states of the basin with Karnataka contributing 42% and Tamil Nadu 54% of the
basin’s total area. Three small portions of eastern Kerala lie within the basin, comprising 3.5%
of the basin’s area. The tail-end of the river flows through the Karaikkal region of Union
Territory Ponducherry.57
Basin State
Kerala
Karnataka
Catchment area (in sq km)
2,866
34,273
For more on how Tamil Nadu was able to shift from command to demand see…guy who gave the talk on red
tape…
57
Ponducherry is a small Union Territory (UT) on India’s southeastern coast. It’s capitol is Pondicherry.
56
69
Tamil Nadu
Karaikkal region of Ponducherry
Total
43,868
148
81,155
Cauvery basin states and catchment areas
(India-WRIS 2012; Ghosh 2009)
2. River Course, geography
The Cauvery originates from a spring at Talakaveri, a Hindu holy site associated with the
river. The site is in the Kodagu district of Karnataka, near Cherangala village in the Brahmagiri
Range of the Western Ghats. At 4,400 feet (1,341 m) above sea level, the Cauvery begins its
descent toward the Bay of Bengal (Ghosh 2009). Important tributaries include the Harangi, the
Hemavati, the Shimsha, the Arkavati, the Lakshmantirtha, the Kabbani, the Suvarnavati, the
Bhavani, the Noyil and the Amaravati. Along its 802-km course, the trickle grows in volume
and significance to become one of South India’s sacred rivers, the Kakshina Ganga, delivering
the lifeblood of southern India’s ancient societies and burgeoning modern day economies. It is a
significant subject of myth, folklore and literature for both the Kannada and Tamil cultures and a
major source of livelihood for both states. The river is culturally and economically important to
the peoples of both major states occupying the basin. Temples line the course of the river. Dams
and anicuts also dot the river providing storage and irrigation and hydroelectric power (ibid).
70
From its point of genesis in the Western Ghats, the stream meanders along rocky beds
under steep banks and a canopy of jungle vegetation. It passes through a narrow gorge and then
plummets roughly 20 m through the Chunchankatte rapids before widening to a flat shallow
course across the Mysore Plateau. Here a series of anicuts58 divert its flow. At
Krishnarajasagara Dam in Mysore district, the river is met by its two major tributaries, the
Hemavati and Lakshmanathirthat (Ghosh 2009: 84-85; Guhan 1993). The dam creates a 31-sqkm reservoir for irrigation. Before leaving Karnataka, the river parts twice, forming the sacred
islands of Srirangapatnam and Sivasamudram and then tumbles 98 m over a cliff at
Sivasamudram falls. A power station at the falls supplies hydroelectric power to Mysore,
Bangalore and the Kolar Gold Fields, more than 100 miles away (Ghosh 2009: 85).
The river crosses into Tamil Nadu at a series of twisted wild gorges until it reaches
Hogenakal Falls and flows through a straight, narrow gorge near Salem. At Salem, Mettur Dam,
1.6km across and 54 meters tall, creates the Stanley Reservoir, the basin’s largest at 155.4sq km.
Around the reservoir, which filled after the dam’s completion in the 1930s, an agricultural and
industrial boom-town grew from enhanced irrigation and hydroelectricity provided by the project
(Ghosh 2009: 86; Guhan 1993). Below the dam, the Cauvery splits to form Srirangam Island, a
major pilgrimage center, before entering the Thanjavur (Tanjore) delta region. The Thanjavur
district marks the beginning of the braided and extensively irrigated delta region of about 10,360
sq km. In this portion the river branches into many channels, and anicuts and irrigation canals
carry water for cultivation. The river finally empties into the Bay of Bengal. The only boats that
travel on the river or its tributaries are basketwork boats.
3. Infrastructure
The basin has a total live storage capacity (LSC) of 8,597.2 mcm with an additional
269.82 mcm of live storage under construction (India-WRIS 2012). There are four major dams
in Karnataka with a total LSC of 27061.1 cmc: Krishnaraj Sagar Dam (KRS) (1275.7 mcm),
Harangi Dam (228.6 mcm) on the Harangi tributary, Hemavathi Dam (926.8 mcm) on the
Hemavathi tributary, and Kabini Dam (275 cmc) on the Kabbani tributary. The KRS Dam and
the Hemavathi Dam both have irrigation projects. The Harangi and Kabini Dams together
generate 29 megawatts (MW) of hydroelectric power, 9 MW and 20 MW, respectively (ibid).
Tamil Nadu also has four major dams with an aggregate LSC of 3495.77 mcm: The
Mettur Dam (2647 mcm) on the Cauvery’s main course near the state line, the Glenmorgan
Forebay Dam (6.1 mcm) on the Pykara river, which feeds the Moyar River, which, in turn lets
into the Bhavani River where the Upper Bhavani Dam (85 mcm) and Lower Bhavani Dams
(757.67 mcm) are located. The Mettur, which forms the huge Stanley Reservoir, supplies the
Cauver-Mettur Irrigation Project, the Kattlai Irrigation Project, as well as 240 MW of power.
The Glenmorgan Forebay, the Upper Bhavani and the Lower Bhavani Dams together supply 846
MW.59 Additionally, the Lower Bhavani supplies irrigation for two projects (ibid). Smaller
projects account for the remaining 2395.33 cmc of LSC in the basin. In addition, Tamil Nadu’s
delta region also has two anicut systems.60 The Grand Anicut, also called the Kallanai Dam, was
built in the 2nd century A.D. and has been periodically renovated. The Lower Coleroon Anicut
An anicut is a low dam that regulates the flow for an irrigation system, often supplying series of “tanks,” which
are comparatively small, localized irrigation reserviors. Both reflect centuries old irrigation technology
characteristic of South India and Sri Lanka.
59
245.2 MW, 585 MW, and 16 MW, respectively
60
An anicut is a low dam that regulates the flow for an irrigation system, often supplying series of “tanks,” which
are comparatively small, localized irrigation reserviors. Both reflect centuries old irrigation technology
characteristic of South India and Sri Lanka.
58
71
was built later, in the 1830s and prevented the Grand Anicut from silting (Guhan 1993). The
Lower Coleroon system directs the flow of the Colerooon River, an offshoot of the Cauvery.
Neither has significant storage capacity; instead, each directs the flow the river across large
irrigation command areas.
State-wise, Karnataka leads all Indian states in storage capacity and number of large
dams with 229 large dams at a storage capacity of 34 bcm, roughly 15% of India’s total storage
capacity (Lok Sabha Starred Question No. 398, dated 16.12.2009). Furthermore, the state is
planning at least $5,652 million more storage, irrigation and hydroelectric infrastructure planned.
This planned expenditure ranks fourth among India’s states in terms of planned hydrological
infrastructure spending (Planning commission).
D. Volumes, rainfall, soil types
72
1. Volumes
Total annual renewable runoff is 21.4 cubic km (Central Water Commission 1998;
Ammarasinghe 2003; Ghosh 2009). Total utilizable water resources including ground water
stand at 27.8 cubic km (Amarasinghe 2003; Ghosh 2009). The historic flows of the river based
on data compiled by Guhan (1993) for the years 1934 to 1972 show the Cauvery with 670
TMCft per year at 75% dependability and 740 TMCft per year at 50% dependability. The claims
of the basins states, however, exceed 1,150 TMC ft in annual allocations (Anand 2004: 17).
(India-WRIS 2012)
(India-WRIS 2012)
2. Rainfall:
The basin receives rainfall primarily from South India’s two major monsoons—the
Southwest Monsoon (June-September) and the Northeast Monsoon (October-December). The
Southwest Monsoon feeds the Western Ghats, where the river originates in Karnataka.
The Northeast Monsoon feeds the river further downstream where it runs through Tamil Nadu
(Ghosh 2009: 88). Parts of the upper basin are shielded from the Southwest Monsoon—they fall
in a region known as the Ghats’ “rain-shadow” (Guhan 1993). The basin receives the most
rainfall in Kodagu district of Karnataka, where the river originates during the Southwest
Monsoon. A normal year in this district receives roughly 2,160 mm of rain between June and the
end of September (Ghosh 2009, Gov. of Karnataka dmc.kar.nic.in).
The river’s course can be broken into three distinct segments. The “beginning” of the
basin, containing the rivers point of origin flows through the Western Ghats and receives annual
rainfall of over 2,000 to 2,500 mm annually primarily from the South West monsoon (JuneSeptember). This section of the basin is in Karnataka. The middle section of the basin makes up
the bulk of its area and includes most of the length of the river. This section is shared by
73
Karnataka and Tamil Nadu. Rainfall in this section is between 700 and 1,000 mm. The final
section of the basin, the delta region is in Tamil Nadu and includes the districts of Thanjavur,
Tiruvarur and Nagapattinam, and to a smaller degree the Tiruchy. The average annual rainfall is
around 1,000mm in this section, mainly from the North East monsoon (October-December)
(Anand 2002: 16).
3. Soil types
Soils are important for inter-basin movements of water. Some soils runoff, while others
retain water and recharge groundwater. Soils vary in the basin depending on region. The
principle types are black, red, laterite, alluvial, forest, and mixed. Red soil occupies a large
74
portion of the basin. Following the run of the river, this type starts at the southern Karnataka
plateau (Mysore Plateau) and continues to the Coimbatore and Salem districts of Tamil Nadu
(MoWR 2004, Ghosh 2009: 91). Coimbatore has a fertile red clay type soil; however, the sandy
red soil in Mysore does not retain enough moisture to sustain a crop after the Southwest
Monsoon. Mysore does have loamy alluvium in some parts, which will grow after the Southwest
Monsoon. The Thiruchirapally and Thanjavur districts of the delta region also have loamy
alluvium. This type of soil is porous and retains moisture. The porous soils, primarily in Tamil
Nadu aid groundwater recharge; whereas the hard clay in Karnataka allows water to run off
(Guhan 1993; Ghosh 2009:91).
4. Agriculture and Irrigation
The majority of the basin’s land is used for agriculture. The GoI’s Water Resource
Information System (India-WRIS 2012) estimates that 53736.30sq km of the basin, roughly
66.21%, is used for agricultural activities and 4.09% is covered by streams, rivers and reservoirs.
Overall paddy is the principal crop in the basin (Ghosh 2009). The Karnataka portion of the
basin also grows sugarcane, ragi, and some irrigated dry crops. Tamil Nadu overwhelmingly
grows paddy (ibid).
Paddy is grown in three seasons. The exact months and durations of seasons vary
between districts and individual farmers may not farm all three seasons, but Ghosh (2009) points
75
out that the “three-crop” phenomenon is at the district-level, which creates water demand
throughout the year (Ghosh 2009: 90). The seasons are difficult to discern, but broadly they
coincide with the Southwest Monsoon (June-Sept), the Northeast Monsoon (Oct-Dec) and the
summer (April-July). Understanding growing seasons is helpful in understanding water demand
throughout the year. The Indian Department of Economics and Statistics (DOES) classifies
seasons by periods when farmers sow different varietals:
Sow:
August-November samba/thaladi/pishnam
December-March navarai/kodai
April-March kar/kuruvai/sornavari
Harvest:
Kuruvai – June-Sept or kharif
Thaladi – Oct-Jan or rabi
Sowing and harvesting patterns may have changed in recent decades, complicating
analysis. Even between farmers in the basin there is a lack of knowledge of cropping patterns
between farmers from different states. Janakarajan (2003), who initiated the collective action
dialogues between the two sides, notes that Karnataka farmers believe that the Thanjavur (delta)
farmers all grow three crops in a year using the Cauvery water; however, kuruvai, thaladi and
samba, are seasons not crops. Kuruvai and thaladi are short duration season, while the last,
samba, is a long duration season. “Given the available water (which never exceeds 8 month’
supply even in the best years), Tamilnadu farmers can grow either two short duration crops
(kuruvai and thaladi) or one long duration crop (samba).” Additionally, he notes that the lengths
of the seasons work out to 4, 4, and 6 months, making it impossible to grow three crops in a year
(Janakarajan 2003: 2).
Other misconceptions on the part of Karnataka farmers, according to Janakarajan, are that
the farmers of the delta in Tamil Nadu have plentiful groundwater and that they are not willing to
shift their crop pattern from paddy to less water intensive crops. Data from the Central
Groundwater Board show that groundwater development in the delta is over-exploited.
Furthermore, prior to the development of dams along the river, flooding and water logging in the
delta resulted in soil salinity to the point that paddy is the only crop suited for the delta region.
Annual crops like banana and oil seed are cultivated in the western part of the delta using canal
water supplemented by groundwater, where water logging is not an acute problem (Janakarajan
2003).
D. Macro-federal context and timeline of dispute
The history of the Cauvery Dispute and the timeline of events demonstrate that the legalinstitutional framework setup to both manage interstate water and mediate conflicts became less
effective as India became less centralized, moving from British Colonial administration in the
basin to federal states within the Indian Union under the “Congress System” to “federalized”
states in the era of coalition governments at the center. State-based parties, particularly in Tamil
Nadu have played a large role in these developments and have also further complicated the
process at home, in the basin. Karnataka, perennially the weaker state in terms of pivotal
influence at the center and, more recently, in terms of stability of ruling coalitions in the state
Assembly, has received less favorable terms and therefore has fewer options in the political
process. As a result, Karnataka has seen bloody riots, and the state’s government has taken
measures to avoid compliance.
76
The Cauvery Dispute is the longest-running and most contentious inter-state river dispute
in the country’s history (Gundimeda and Howe 2008). The legal-historical origins of the dispute
are two legal compacts made between the Princely State of Mysore and the British-administered
Madras Presidency. These agreements were concluded in 1892 and 1924. After Independence
and during the states reorganization, Mysore became Karnataka and most of Madras became
Tamil Nadu, with a small portion joining Andhra Pradesh.
In 1892 Madras was under British administration while Mysore was an autonomous
Princely State. Between 1831 and 1818, both Madras and Mysore were under British rule and a
master plan was prepared in support of continued irrigation projects in both states. Irrigation
development waned during and after the 1877 famine, but in 1881, when Mysore reverted to a
Princely State again, interest in irrigation was revived. Madras raised concerns about expansion
of irrigation in its upstream counterpart. In 1890 a conference was held with the objective of
laying down ground rules between the two states regarding irrigation development and water use.
The stated objective was to reach an agreement whereby upstream Mysore had freedom to
develop irrigation, while guaranteeing that downstream Madras would not be deprived of its
rights (Guhan 1993).61 With the help of the British administration, the states were able to reach
an agreement in 1892. According to the agreement, Mysore should not erect any new irrigation
reservoirs across the main river without the prior consent of Madras. When a new irrigation
scheme was proposed, all information about it had to be shared with Madras and Madras’
consent gained before work commenced. Madras was bound not to veto Mysore’s projects
unless they impinged on a prescriptive right already acquired and being utilized (Anand 2004:
18).
Both states adhered to the agreement between 1892 and 1901. During this time the states
shared information and coordinated development of irrigation works. Information flowed
between the two states and the Government of India (GoI). Mysore planned a large dam known
as the Kannambadi dam, which would go up in two stages. Madras consented to the first, but
wanted assurances that its interests would not be hurt by the 41 TMCft reservoir envisaged in the
second phase. Madras planned a dam known as the Cauvery-Mettur project. The two states
conducted talks and worked with the GoI to conclude an agreement in 1924.
Under the agreement, Madras consented to Mysore’s dam and up to 44TMCft of storage.
Mysore was required to regulate the discharges and ensure flow in amounts stipulated in the
agreement. Furthermore Mysore was allowed to expand irrigation by 110,000 acres. Similarly,
Madras agreed to limit new irrigation from the Mettur project to 301,000 acres. The 1924
agreement had a 50 year time horizon, at which point negotiations over apportionment could be
reopened (Anand 2004).
Negotiations began in the 1960s in anticipation of a new agreement being forged in 1974
(Maitra: 215). According to Guhan, there were 26 ministerial meetings between Karnataka and
Tamil Nadu about a new Cauvery agreement during 1968 to 1990 (1993: 29). Of these five were
bilateral, while 21 involved the Union Minister for irrigation in addition to representatives from
the disputant states. Between 1972 and 1990, there was substantial irrigation development and
changes in inter-state utilization patterns (Maitra: 216). Guhan (1993: 34) notes that progress
was made on the technical discussion during these meetings; however, a political settlement
eluded negotiators. Negotiators may well have been on the verge of a political settlement in the
Guhan specifies the objective as agreeing “…on principles of a modus vivendi, which would on the one hand
allow Mysore reasonable freedom in dealing with her irrigation works, and oht the other, give to Madras practical
security against injury to her interests.”
61
77
late 1970s. However, Guhan (ibid) contends that the results of the 1977 elections, in which
Congress received its first electoral defeat, “thwarted a golden opportunity to negotiate a
resolution through the mediation of the central government” (Maitra 2007: 216).
The 1977 General Election was the first in which Congress (Indian National Congress
Party or INC) did not control government in India. Congress had been losing control to some
state-based parties, especially those in Tamil Nadu during previous elections, but was able to
compensate by forming strategic alliances, notably with Tamil Nadu’s DMK. The DMK-INC
alliance was a crucial component of INC leader, Indira Gandhi’s victory in 1971. In 1977,
Congress teamed with a new ally in Tamil Nadu, the AIADMK (or “ADK”) and managed a
landslide victory in the state, despite losing in the country-wide election. After the election,
ADK defected and joined their rival Tamil party, DMK in forming a government with general
election victor and coalition leader, Janata. DMK continued to support Janata in 1979 and was
rewarded with 2 cabinet positions. Meanwhile Karnataka, long a stronghold of Congress, had
diminished influence at the center. After 1977 the center was ruled by a weak central coalition in
which Tamil Nadu’s major state parties held considerable sway. Karnataka had less sway at the
center. The rebalancing of power in favor of state-based parties, especially Tamil Nadu’s,
prevented a political resolution over the Cauvery Dispute because Tamil Nadu sought better
terms.
By the early 1980s stakeholder claims diverged. Kerala and Ponducherry entered the
negotiation, seeking additional water. Karnataka claimed 465 TMC ft; Kerala, 100 TMCft;
Ponducherry 10 TMCft. Tamil Nadu argued that the flows should be in accordance with the
1892 and 1924 agreements, which gave Tamil Nadu and Ponducherry 566 TMCft; Karnataka,
177 TMCft; and Kerala 5 TMCft. These allocation schemes differ widely and assume generous
annual flows.
In 1986, Tamil Nadu requested that the central government form a Tribunal under the
ISWD Act of 1956. The tribunal was formed in 1990 and passed its interim order in June 1991,
directing Karnataka to ensure that 205 TMCft was available to Tamil Nadu between June and
May of the following year (Maitra 2006). The Karnataka Legislative Assembly passed an
ordinance rejecting the validity of the award. The central government referred the matter to the
Supreme Court (Anand 2004). The Supreme Court asked the Tribunal to review the order. The
Tribunal upheld the order and the Central Government published it in the official Gazette. Riots
in Karnataka broke out killing 25 people, after which the Tribunal passed a clarifying order,
stating that if seasonal conditions required, the Tribunal would amend the interim order. In
1996, Karnataka opposed the Tribunals interim award, and threatened to boycott further
proceedings. Frantic negotiations between the prime minister and the states’ chief ministers
(governors) led to a compromise over the interim award (Maitra 2006).
In August of 1998, the federal Ministry of Water Resources constituted two institutions
as per ISWD Act: the Cauvery River Authority (CRA) and the Monitoring Committee. The
members of the CRA were the Prime Minister of India as Chair and chief ministers of the states
(state governors) as members. Its Purpose was to implement the interim award of the Tribunal,
and later, to implement the final award. The Monitoring Committee, on the other hand, consists
of federal and state civil servants and technocrats. Its purpose is to collect data and monitor the
implementation of the CRA’s decisions. In the case of difficulty, the Monitoring Committee is
to refer the matter to the CRA (Maitra 2008). The implementation of all orders of the Tribunal is
left at the discretion of the explicitly political CRA. The CRA’s design presumes a strong prime
minster and comparatively weak state Chief Ministers. Furthermore the scientific and technical
78
watchdog, the Monitoring Committee, takes orders from and refers problems back to the CRA.
This structure divests the Tribunal of significant authority by leaving all enforcement to the
political process. Under the Congress System, this format was effective; however, in the era of
coalition governments in parliament, it is ineffective.
Both institutions failed to implement the interim award drawing enormous amount of
criticism from all sides. In 2002, the Jayalalitha government of Tamil Nadu decided to boycott
the CRA and the Monitoring Committee. Instead, the state government petitioned the Supreme
Court, under Article 131, for a direction to the central government that it adopt a new scheme to
be submitted by Tamil Nadu, under Section 6A of the ISWD Act. “The CRA in its present form
does not possess any powers and it is unable to effectively implement the orders of the
Tribunal,” said an official statement of the prime minister’s cabinet (Maitra 2008). Karnataka
did not comply with any of the orders of the CRA or the recommendations of the monitoring
committee, the statement added. The Jayalalitha-led AIADMK (or just “ADK”) was consistently
critical of the “toothless” CRA since it was convened during the Tamil Nadu state government
formed by the DMK (Maitra 2008). The ADK campaigned on the issue of the water dispute by
promising to be a tougher negotiator in the process and boycott the process if Karnataka refused
to comply with the Tribunals awards.62 This follows a classic pattern of outbidding, common in
Tamil Nadu and other states with center-state tensions (Horowitz 1985). After losing control of
the state, the ADK was understandably reluctant to call for a more conciliatory approach to the
process.
The dispute resolution process has been plagued by political instability and excessive
politicization. Between 1968 and 1990 there were three chief ministers in Karnataka belonging
to three different political parties, while in Tamil Nadu, there were four chief ministers belonging
to two parties. There were two long periods of President’s Rule in Tamil Nadu, during which the
prime minister dissolved the state’s legislative assembly. The federal government saw six
changes of prime minister, spanning four political parties and eight different union ministers of
irrigation. Consecutive occasions when the same set of ministers from the same state and the
federal government met were rare. No attempt was made to generate technical options to share
the Cauvery waters. Engineers assigned to work on proposals were ensnared in party politics
(Maitra 2008: 217).
No consistent attempt was made by the central government to manage differences
between Tamil Nadu and Karnataka during the process. There was no binding arbitration. The
parties reverted to their threat points, leading to inefficient use of water and poor investments
affecting the use and storage of water (Singh xii).
In 2003 one the members of the tribunal died and the tribunal was reconstituted. In
February 2007, the Tribunal announced a unanimous verdict with allocation made in total
amounts based on an availability of 740 TMCft, (meaning that based on historical flow data the
award would be workable about one-half the time). The order allocates 30 TMCft to Kerala, 270
TMCft to Karnataka, 419 TMCft to Tamil Nadu, and 7 TMCft to Ponducherry. Ten TMCft are
reserved for environmental flows and 4 TMCft to maintain a positive flow into the sea (Maitra
2008: 217).
By granting in volumetric terms, instead of proportional terms, the Tribunal put a burden
on Karnataka, the upper-riparian state (Frontline 2007). The order specifies that Karnataka is to
release 192 TMCft to Tamil Nadu at Biligundlu on the state border where the Central Water
Commission has a gauging station (Frontline, February 23, 2007). The award makes no
62
Cabinet Decides to Boycott CRA,” The Hindu, June 21 2002
79
provision for dry years. Former Secretary for Ministry of Water Resources, Ramaswamy Iyer
lamented, “The Tribunal has left everything to the [Cauvery Management Board]. In other
words, the Tribunal has not performed its function. They should have [devised] a formula [for
distress sharing in dry years]” (ibid). After the award was announced, politics “took center
stage” according to Maitra, “with political parties in each state, especially Karnataka, exploring
alternatives for thwarting the implementation of the award” (2008: 217). Implementation
depended “entirely on the political acceptability” of the award in all basin states (ibid).
As widely reported in the Indian press,63 the disputant states, pursuing their political
agendas, mounted a two-pronged legal attack on the Tribunal’s decision. Both Karnataka and
Tamil Nadu filed “Revision Petitions” with the Tribunal, seeking clarification of its 2007 final
order. In addition, Karnataka and the other riparian states filed “Special Leave Petitions” with
the Supreme Court of India challenging the Tribunal’s final order. The Supreme Court accepted
the “Special Leave Petitions,” but indefinitely deferred consideration of the merits of the
petitions, which are still pending before the Supreme Court. In 2012, due to decreased monsoon
rainfall and low water flow in the Cauvery River, the political situation came to a head with
Karnataka refusing to follow the directions of the CRA and Cauvery Monitoring Committee
(CMC) concerning the release of additional Cauvery water to Tamil Nadu. Tamil Nadu sought
the intervention of the Supreme Court to force Karnataka to comply with the directions of the
CRA. The Supreme Court, in late 2012, issued directions to Karnataka to begin releasing
additional water to Tamil Nadu and also directed the central government to establish a time
frame within which it would provide notice of the final order of the Tribunal in the Gazette of
India.
On February 4, 2013, the Supreme Court ordered the Centre and the Water Resources
Ministry to provide formal notification of the February 5, 2007 final award of the Cauvery River
Disputes Tribunal. A February 19, 2013 “Notification” incorporating the February 5, 2007 order
was published in the Gazette on February 20, 2013. Clause I of the order says that it “shall come
into operation on the date of the publication of the decision of this Tribunal in the Official
Gazette”. However, the Water Resources Ministry apparently has not yet constituted the
Cauvery Management Board/Authority for implementation of the final order. The Supreme
Court’s February 4, 2013 Order also indicated that it was without prejudice to the pending
Special Leave Petitions that challenged the Tribunal’s final award and have not yet been ruled on
by the Supreme Court. The basin has not had an official water sharing scheme or agreement
since the 1924 agreement expired in the early 1970s.
There is a trend in all river water disputes in India. Once the states in the dispute fail to
reach an agreement, they refer it to the center. The center constitutes a tribunal under the ISWD
Act. But once any award, final or interim, is handed down from the Tribunal, politicians of the
state(s) who feel they have been treated fairly demand action from the Centre to implement the
award. Politicians who feel that their state’s interest have been damaged petition the Supreme
Court to throw out the award or return it to the Tribunal for reconsideration. Tribunal awards are
almost never implemented as issue is passes back and forth between the Centre and the Supreme
Court (Maitra 2008: 221). State politicians are able to keep the issue alive in this way.64
63
Various media reports and articles on file with the author
This trend has prompted some comparative political scholars (Seligman 2011) to suggest that a less activist
supreme court, as in the United States, might create a threat-point obliging disputant states to engage in cooperative
inter-state compacts, similar to those often used in the U.S.
64
80
Electoral incentives, especially in states with an entrenched process of political outbidding,
oblige politicians to pursue an antagonistic orientation towards the dispute resolution process.
E. Economic incentives for conflict—increasing economic demand for water
Economics considerations are an important factor behind water conflicts for three
reasons. First, when transboundary water disputes are examined closely, the primary driver in
the majority of cases is demand for water by competing economies (Ghosh and Bandyopadhyay
2009: 143). Second, an objective explanation of water conflicts is helpful to provide a suitable
institutional framework for their resolution. Finally, water is scarce and needs to be allocated
among competing ends, a task for which economics may provide helpful tools (Robins 32).
Changes in economic demand for a commodity are usually signaled by price increases or
decreases in that commodity; however, as many economists have noted, water is managed more
as a “political commodity” than as an economic commodity (Bandyopadhyay 2009; Zetland
2013). As a result, prices for raw water, where they are applied, do not reflect demand. The
market price for and cropping patterns of water-intensive rice crops, as well as growth of local
and regional populations, which seek to consume those crops all provide insight into to the
growing economic demand for water. The incentive to acquire more water constitutes a
powerful political force (Meinzen-Dick 2013p), which state-level officials in the Cauvery Basin
states are aptly able to exploit in the absence of market tools to acquire water and hedge against
failed monsoons (Ghosh 2010).
1. Population
As populations grow, demand for water rises—for agriculture, industry and household
use (Bruns and Meinzen-Dick 2005). Population is the primary determinant in regional
consumption of rice (Velam Stores Firm, et al. 2009b). Furthermore, commensurate population
growth in urban areas requires increased domestic water piped through failing infrastructure.
The river provides water for roughly 44 million inhabitants,65 a number that has grown rapidly in
recent decades.
BASIN POPULATION
1951
1961
1971
1981
1991
2001
2011
65
17,106,900
19,679,700
24,228,800
29,208,600
34,337,000
38,820,600
44,426,700
Figures derived from political district maps over time overlayed with basin maps. Areas are redistricted every ten
years according to the results of the census. Electoral maps are available on Wikapedia.com.
81
The total population residing in the basin stood at over 30 million in the late 1990s, with
a density of 389 persons/sq. km (UN 1998, Amarasinghe 2003, Ghosh 2009). Like most of India
most people live in rural areas. Ghosh (2009) estimates that the rural/urban ratio in the basin
mirrors the national figure of roughly 70% to 30%. Renewable per capita resources are 676
cubic meters/person. Potentially utilizable water resources are 878 cubic meters/person. Both
estimates put the basin in the category of chronic scarcity according to the Falkenmark indicator.
In the ten years between the 2001 census and the 2011 census, the population of Kanadans in the
Cauvery increased by 15.7%; Tamils increased 15.6%, and Keralans 4.9%.
82
Populations of the basins states have continued to grow, increasing the demand for
staples such as rice grown within the basin. Sometimes urban areas and industrial zones have
sought raw water as well (Tilotia 2010). The population in Tamil Nadu since the 1950s has
increased 139%. In Karnataka it has increased 215%. And in Kerala and Ponducherry the
populations have increased by 146% and 292%, respectively.
83
(Adapted from Office of the Registrar General of India, Ministry of Home Affairs & Economic Survey 2011-12.)
2. Minimum support price (MSP) and farm harvest price (FHP) for paddy
Growing rice has become increasingly profitable throughout India and even more so in
Karnataka and Tamil Nadu. Market prices for commodities rise and fall according to a variety of
factors, such as overall economic growth, costs of inputs, or international prices. However, the
positive differential between market price and MSP demonstrates an “above average demand”
for the commodity and controls for other factors. The FHP and its positive divergence from
MSP provide a useful indicator of economic demand for water in the basin states, particularly
among agriculturalists.
In the mid-1960s, agricultural producers became increasingly visible and audible in
national politics and policy (Rudolph and Rudolph 1987: 312). By the end of the 1970s, under
the newly-elected Janata Party, the agricultural sector took center stage as a “source of growth
and development in its own right” (Rudolph and Rudolph 1987: 330). The Agricultural Prices
Commission (APC) was set up in 1965 to advise the government on creating a balanced and
integrated price structure for agricultural commodities (Ali, et. al 2012). Through the end of the
1970s, the Commission’s primary focus was on maximizing production (ibid). In 1980, this
focus shifted to developing production patterns consistent with the overall needs of the economy
by balancing demand and supply of food grains (Acharya 1997).
The Commission, renamed the Commission for Agricultural Costs and Prices (CACP),
suggests annual Minimum Support Prices (MSP) for 25 agricultural crops, including paddy.
84
Under the plan, the government buys food grains at pre-set MSPs, and houses and distributes
them through the Public Distribution System (PDS). Some products are sold at subsidized prices
in “ration shops,” some are used for school meal programs and some are sold back onto the
market (Meinzen-Dick 2013). Farmers can sell on the market or sell to the government at fixed
prices. The MSPs are intended to set a floor, below which prices cannot fall, thus providing a
form of insurance to agricultural producers (Velan stores firm and Thiruppathi Mills Firm 2009).
With some notable exceptions (see, Ali, et al. 2012), the MSP for paddy is, by design, a
good indicator of market prices around the country. Singh, et al. (2002) contends that this policy
has favored food crops. As a result, large portions of good quality land have been shifted to
water-intensive paddy and wheat, creating a serious imbalance in the demand and supply of other
agricultural commodities (Chand 2003) and a spike in the demand for water.
While MSP has generally set the pace of price changes for staple commodities, Ali et al
(2012) note that in paddy “deficit states,” notably, Tamil Nadu, Karnataka, West Bengal, Bihar
and Assam, the price trended higher than the MSP because of high demand. Around 2000,
national food stocks reached an all-time high and the government started shedding excessive
stocks through increased allocation to states and subsidized exports. FHPs in West Bengal,
Bihar and Assam fell below MSPs. No such decline in market price was observed in Tamil
Nadu and Karnataka (234).
That market prices of paddy in Karnataka and Tamil Nadu have continually surpassed
MSPs is significant given the rapid rate of increase in MSP. In 1980 the MSP for paddy
(common) was ₹105/q. By 2009-2010 it had risen 804% to ₹980/q (average annual growth rate
of 7.73%). The MSP for paddy (fine quality) was first listed in 1990 at ₹215/q and increased
85
356% over 9 years to ₹980/q (average annual growth of 6.76%). The period of the 1990s
experienced a higher growth in paddy prices in part due to increased frequency of parliamentary
elections.66 MSPs appear to level-off slightly in the first half of the next decade before a sharp
upward trend in 2005-2006 (Ali et al. 2012).67
In Tamil Nadu, paddy FHPs were higher than MSP in 24 out of 28 years between 1980
and 2007 (inclusive),68 on average ₹35/q higher, a positive deviation of 11%. The period
between 1986 and 1989 saw noticeable positive divergences for the first time. The decade from
1980-1989 saw 10 positive divergences of FHP, averaging 22 points higher than the MSP and
trending 15% higher over the term. In the early to mid-1990s, Tamil Nadu’s FHPs trended more
closely to the MSP, but, as noted, MSPs were increasing rapidly during this period. Between
1990 and 1999, FHP was higher on seven occasions, trending 9% above MSP. After 1997, there
were marked positive divergences until 2004, with the greatest positive divergence between 2001
and 2003. FHP shot above MSP again in 2006-2007. Between 2000 and 2007, FHP was higher
than MSP in all but one year, the average of these positive divergences was ₹56 above MSP, a
10% positive divergence over the term.
Karnataka experienced even greater and more consistent market demand for rice above
the government-set MSPs. FHP exceeded MSP in every year between 1980 and 2007, trending
an average of ₹47 higher, a positive deviation of 17%. Marked noticeable divergences from
MSP began in 1982-1984. Then 1985 through the end of the decade also saw marked
divergences. From 1980 through 1989, the average positive divergence was ₹38. FHP trended
26% higher than MSP. In the first two years of the 1990s, FHP trended more closely to MSP,
after which noticeable positive divergences emerged again until 1993. Then 1994 marked the
beginning of a dramatic upward trend in FHP through the end of the decade, with which MSP
did not keep pace at all despite a fast rate of increase of its own. In the 1990s, FHP was on
average ₹71 higher than MSP, at one point, ₹114 higher. In the 2000s FHP trended more closely
to MSP, averaging ₹30 higher, a 5% positive divergence. Noticeable positive divergence
occurred in 2004-2005. Periods of significant overlap in “above average demand” for paddy in
the two states occurred in the late 1980s and the late 1990s.
Ali et al. contend that the MSP has outlived its utility and is being used more as a “political tool than an economic
instrument” (232).
67
All data from this section was taken from Ali et al. (2012)
68
All time spans listed in section are iclusive of front and end years.
66
86
(charts and graphs adapted from Ali, et al. 2012)
Ali, et al. (2012) obliquely imply that dramatic rises in FHP over time are in part due to
consistently rising government-set MSPs (236). Others (Meinzen-Dick 2013p) suggest that
associated policies, such as the National Rural Employment Guarantee Act (NEGRA) have a
large impact as well. Zetland (2013p) contends that illegal diversion from PDS combined with
rot in storage kills between 30-40%.
87
3. Non-diminishing Scarcity Value
a. Overview, definition, methodology for calculation
Scarcity value is an economic metric that roughly approximates “economic demand” for
water. Ghosh (2009) finds that scarcity value very roughly correlates with political disputes over
basin water in the Cauvery, and, more importantly, that increased flows do not diminish scarcity
value, rather they correspond with increasing scarcity value. Scarcity value is the “value loss
due to scarcity at the margin of production at a specific time” (Ghosh and Bandyopadhyay 2009).
In other words, scarcity value is the opportunity cost of not having an additional unit of water.
Bouhia (2001) similarly describes the “shadow price of water” as “how much the benefit being
maximized would increase if the constraint on water supply were relaxed by one unit” (41).
Ghosh (2009) calculates scarcity value as the delta between marginal costs and marginal
products at the total amount of water available to the agricultural system (a farm in the microsense or the agricultural sector of a state in the macro-sense). As a metric, it represents
unsatisfied demand when marginal costs are held artificially low (water is sold cheaply),
preventing marginal costs from reaching equilibrium with marginal product. Ghosh and
Bandyopadhyay (2009) maintain, “a dispute is expected to emerge at a specific time, if the
scarcity value of water is simultaneously high for [multiple] stakeholders” (143). It follows, that
a system has three ways to reduce scarcity value: allow marginal costs to rise to equilibrium with
marginal product at the amount of water in the system (raise the price of water); try to reduce
marginal product (flood the market with cheap produce from elsewhere, also called “virtual
water imports”); or increase the amount of water in the system (“supply augmentation schemes,”
i.e. dams and reservoirs, interlinking rivers).
Ghosh assumes a “purely economic” view of water scarcity and dispute, discounting
social-political-cultural elements. The scarcity value calculation assumes that
(1) Water is only as valuable as the economic return it yields. In line with Fisher (1995),
Ghosh (2009) assumes that the user’s primary interest in water arises from the value it generates
in the economy. Thus communities can be compensated for water loss through monetary
transfers or other means yielding the same or greater value as the water foregone.
(2) Water is substitutable. All other things (including water quality) remaining constant,
water from one source is substitutable with water from any other source.
(3) A “water scarce” economy is one in which scarcity of water constrains land use.
Additional land is available for cultivation; however, additional water is not. In the case of
South India, the quality of land not being used can vary without affecting scarcity value because
more agricultural production is needed to feed the increasing population.69 In a water scarce
economy, increases in water supply will lead to increases in cropped agricultural land (Ghosh
and Bandyopadhyay 2009: 145).
Scarcity value assumes water as the only input in the production process. Further, the
economy has a representative crop and the farmer intends to maximize his surplus return or
profit in terms of the input used. With the input being water, the tendency of the farmer is to use
water until his profit is maximized. Assuming a positive water scarcity value, this coincides with
all available water being used (Ghosh 2009).
The methodology for calculating scarcity value involves measuring the marginal product
and the marginal cost and obtaining their difference. To obtain marginal product, Ghosh (2009)
assumes a log-linear Cobb-Douglas production function, with the natural logarithm of production
as the dependent variable and the area as the explanatory. The marginal product of area in a
69
This reduces the need to consider Ricardian rents (Ghosh and Bandyopadhyaya 2009)
88
Cobb-Douglas production function is the product of the slope coefficient and the average
product. In the case of non-available data on water use, Ghosh estimated it from the area by
multiplying the crop-water requirement by the total areas sown. Agricultural water demand is
met not only by irrigation, but also by natural sources like rainfall, atmospheric moisture, and
soil moisture. In order to estimate water scarcity in a basin, all these factors are considered
(Ghosh 2009).
(Ghosh 2009: 79)
b. Scarcity Values in the Cauvery
Roughly 90% of the total water withdrawal in the basin is for agriculture (Amarasinghe
2003: 12). The Cauvery basin is a water scarce economy where an increase in crop acreage took
place with development in irrigation potential over time (Ghosh 2005; Guhan 1993). Ghosh
(2009) notes that what is alarming about the Cauvery case is that adding more water to system
has not decreased scarcity value; instead, scarcity value has been increasing.70 The dispute has
intensified between the two states as scarcity value has risen or held steady despite extra water.
Ghosh (2009) points out that water prices in the Cauvery are held to 1960’s levels. The
market demand for rice and other crops has risen dramatically with population increases, thus the
marginal product has risen dramatically; however, marginal costs remain similar to those in
70
While the is primarily a dispute about re-allocating fully allocated water, Ghosh estimates that for several years in
the 1990s and early 2000s, Monsoon rainfall was well above average, adding water to system. Groundwater mining
may also contribute to total amount of water in the system.
89
1960. With the marginal costs almost completely eliminated, no amount of additional water to
the system will satisfy unmet demand for water. Demand for water chases demand for rice and
other crops, but is not balanced by increasing costs for water, the primary input for producing
rice.
c. Conflict in the Cauvery as a Function of Scarcity Value
The year 1986-87 showed the highest annual scarcity value and lowest annual water use
for rice in Tamil Nadu. The state made a formal request to the central government in July of
1986, to form a tribunal under the ISWD Act of 1956. Tamil Nadu say the highest scarcity value
of the decade in 1988-89. This was high for all three crops and highest for kuruvai. Karnataka
also had a high scarcity value in 1989-90. Internal problems in the state arose. Farmers asked
for more water. Water slowly emerged as the prime political concern. The Supreme Court
ordered the central government to set up a tribunal. From 1991-92, scarcity value for the
summer crop in Karnataka increased substantially as compared with the previous decade. A high
scarcity value was also observed in Tamil Nadu in 1991-92, with the kuruvai having the greatest
effect. The Cauvery tribunal was convened in 1990. It passed an interim order, which let to
90
unrest and bloody riots in Karnataka against Tamil citizens of the state. Tamil Nadu moved to
court in 1992, after the occurrence off the high scarcity value in agriculture in 1991-92.
Protests at the farmer-level are usually touched off during the summer growing / kuruvai
planting season, 71 between June and September. Ferdin, et al. (2010) explain that farmers in
both states rely on the same water for their crops from June to September, after the southwest
monsoon has fed the headwaters and upland/midland reaches, but before the northeast monsoon
has watered the lowland and delta reaches in Tamil Nadu. Therefore the timing of Karnataka’s
release of water at the KRS dam is critical for Tamilian famers. Further complicating matters,
the farmers in Karnataka all grow their only paddy crop of the year during this period, which
coincides with Tamil Nadu’s kuruvai, the state’s most important crop and the only one in which
landless laborers can expect to get a share (Janakarajan 2013p).
Heavy use of shared monsoon water gives summer / kuruvai crop the highest scarcity
value during the year. During the decade analyzed by Ghosh, there was a 250% increase in
irrigation water use between June and September, but scarcity values did not decline. Ghosh
(2009) notes, “a non-declining scarcity value implies that the excess water demand component
(demand-supply) has not been responding to the increases in supply… [T]he more water is
moving into the field, the more is being required” [sic] (Ghosh 2009: 150).
71
Referring to Karnataka and Tamil Nadu, respectively
91
Using different terminology, Iyer (2007: 24) applies a similar logic in explain nondiminishing economic demand for water in the face of increasing supply:
the availability of canal water from major/medium projects leads to the adoption
of water-intensive cropping-patterns, creating demands for more water for more
irrigated agriculture of the same kind, [while]…both the efficiency of water use in
irrigated agriculture…and yields from irrigated agriculture are low by
international standards.
Apologizing for persistently low water irrigation charges, Iyer (ibid) echoes an oftrepeated logic (IWSWM 2011) applied to government administered services in India,
particularly water—low-quality and unreliable service frustrates efforts to increase charges; low
charges and lower recoveries accentuate revenue deficits; revenue deficits result in inadequate
budgetary allocations for operations and maintenance, which lead to poor service and general
decay of infrastructure. The problem with such an apology is that it could describe many
92
government services in many developing countries, which have improved or privatized services,
and begun collecting revenues sufficient to cover O&M and reflect scarcity of resources.
Institutions such as the World Bank and the Asia Development Bank were created to extend
loans to reverse just such so-called “vicious circle[s]” (Iyer op cit). India’s water development
projects have consistently frustrated World Bank officials because of pattern of build, neglect,
rebuild (Briscoe 2007). Insufficient funds and lack of willingness to pay (WTP) are not the
obstacles they are made out to be by many experts. Firstly, major/medium canal irrigation
systems create huge unreported flows of revenue state-level officials (Wade 1982; Duflo 2003).
In an important 1982 study, Robert Wade contends that rather than being a system “for
delivering a particular agricultural input” canal irrigation in South India can be considered “a
specific context of government action in the countryside” (287). Wade demonstrates that
irrigation is used by government administrators and politicians to raise “vast amounts of illicit
revenue from the distribution of water and contracts” and contributes to characteristic poor
performance of canal-irrigated agriculture in the region (287). Politics plays a role in
maintaining low water rates, and raising irrigation charges runs counter agricultural and rural
economic development policy persistent since the end of the 1970s (Rudolph and Rudolph
1987). Ghosh (2009) notes that attempts to raise water rates in the basin have been met by
farmer protests.
E. Electoral Incentives for Conflict
An analysis of legislative assembly districts in the basin reveals that the basin’s electoral
importance at the state-level is great and has increased over time. The author analyzed Tamil
Nadu State Assembly elections results from 1991, 1996, 2001, 2006, 2011 and Karnataka State
Assembly results from 1999, 2004 and 2013. The author quantified the total number of
constituencies from each state within the boundaries of the basin in the year of the election,72
basin constituencies as a percentage of total state constituencies, total number of seats that the
winning party secured within the basin, basin seats in government as a percentage of total seats
won by the majority party, the number of seats in the basin that the winning party stole from the
defeated incumbents, and stolen basins seats as a percentage of total stolen seats.
Current State Constituencies in the Basin
Year
State
2013
Tamil Nadu
Karnataka
Kerala
Constituencies in
Basin
84
59
5
Total
Constituencies
234
224
140
Percentage
35.9%
26.3%
3.7%
In his important analysis of the Cauvery Dispute, “Water and Identity: An Analysis of the
Cauvery River Water Dispute,” P.B. Anand (2004) analyzed the 1996 and 2001 state elections in
Tamil Nadu and the 1999 and 2004 state elections in Karnataka. Anand delineated basin from
non-basin state constituencies based on the parliamentary districts in which they fell. All state
assembly constituencies with in a “basin parliamentary district” were considered part of the
basin.
Anand concluded that winning a majority of districts within the basin correlates with
success in forming a winning coalition in the State Assembly in each state. Furthermore, his
72
The number of seats in the basin has risen over time because of redistricting and population growth.
93
analysis of electoral trends between Assembly elections suggests that opposition parties have
incentives to use the Cauvery Dispute to harass the ruling coalition and “steal” seats based on
water sharing politics (Anand 2004: 30). According to Anand’s calculations, the proportion of
Assembly districts in Tamil Nadu’s portion of the basin had increased over the years from 27%
in 1996 to 31% in 2001 (Anand 2004). “Thus,” Anand concluded, “it appears that the scope for
conciliatory stance for Tamil Nadu government may…be rather limited” (29). Anand analyzed
the electoral results between the 1996 state elections in which the DMK won and the 2001
elections in which the AIADMK (or “ADK”) wrested power from their incumbent rivals. He
concludes that “opposition parties may use the Cauvery Dispute to cause discomfort to the
government” (30). The ADK picked up 71 additional seats in the 2001 elections. The majority
of these were from the Cauvery Basin area. Between the 1996 and 2001 elections the proportion
of Cauvery seats among the ruling party increased in roughly lockstep with the proportion of
Cauvery seats as a percentage of state-wide seats, with proportion of ruling party from the Basin
increasing at a slightly greater rate, according to Anand’s calculations.
Similarly, Anand’s analysis showed that the basin region in Karnataka holds significant
political importance. Anand found that over one quarter of the state’s assembly constituencies
reside within the basin, up from just under one quarter in 1999 (Anand 2004). In the 1999
elections, INC formed a majority government with 132 seats. Thirty-two seats, roughly 24%,
were from districts within the basin. In 2004, INC formed a winning coalition with Janata Dal
(Secular) (JD(S)). The coalition consisted of 123 seats. Of these INC held 65, 19 of which
(29%) were from the Cauvery Basin. Of the 123 seats in the coalition 35% came from the
Cauvery Basin as compared with its total proportion of 25%. Significantly the total share of
Cauvery seats in government rose by 11%. Anand (2004) notes that in the two years preceding
the 2004 election, “almost all parties in Karnataka took a ‘hardline’ position with regard to
release of Cauvery waters…it does appear from the data…that such a hardline position may have
been electorally crucial” (Anand 2004: 28).
Using new data on the boundaries of the basin (GoI India-WRIS) to determining which
districts reside within the basin and which do not, the author analyzes an expanded set of state
election results. Despite discrepancies in data, the author’s conclusions mirror those of Anand:
the basin hold tremendous electoral importance for state parties in each of the states.
The relative importance of the basin as a proportion of total state constituencies in Tamil
Nadu has held steady over time at roughly 40%. Consequently the basin region and its issues
hold tremendous importance to political party leaders at the state-level in Tamil Nadu. A
political party and and/or its allies must win an absolute majority of seats outside the basin (at
between 72 and 75 seats), if they do not win a majority of the seats within. Since the 1996
94
election, the winning party in Tamil Nadu has picked up between 72% and 92% of the basin
seats. In the comparatively close election of 2006, the Cauvery constituencies were key to the
DMK’s success. Only 71 seats changed parties, 50 of these came from the basin.
The most recent elections in 2011 gives a revealing picture of the basin’s current political
importance. The winning AIADMK secured a total of 203 seats with 71 of these coming from
the Basin – 35% of government comes from the basin region. The AIADMK won roughly 85%
of the Basin’s constituencies. The losing DMK won only 13 of the basin’s seats, roughly 15%.
The Cauvery delta region was the only region in which the DMK was competitive. This region
is a traditional stronghold for the DMK. It is significant that the AIADMK won the majority of
seats in this region–13 of the delta’s 19. In the previous election DMK held 12 of the delta’s 19
seats. The AIADMK’s ability to steal seats from the DMK in delta region helped them win the
2011 contest. The DMK held the majority of seats in the basin prior to the election. The
majority of seats that the AIADMK took from DMK came from the basin area. Again, data from
Tamil Nadu’s 2011 state election demonstrates that the party that formed the government won an
overwhelming majority of seats from the Cauvery Basin. Furthermore, the ability to “flip” seats
in the basin was a large part of the winning party’s success.
Significantly, the analysis showed that electoral importance of the Basin rose in Karnataka since
1999. Currently 59 out of 224 of Karnataka’s constituencies lie in the Cauvery Basin, up from 56 in
1999. Since 1999, the victorious party has won an overwhelming majority of the basin’s seats. This
figure has increased over time from just under 60% in 1999 to just under 70% in the May elections of this
year.
95
Kerala has played a smaller role in the dispute. This owes to its reduced geographic and political
footprint in the basin.
The following graph shows the increases in percentage won of the winning party, which went on
to form a state government.
96
F. Suitability of basin for water markets
India is home to robust network of informal water markets. South India is no exception
(Venkatachalam: 2013). Bate (2002) estimated the gains from trading water across the whole of
India to be roughly $1.38 billion annually (7). Although trades were not officially sanctioned, in
regions and localities “where water had been traded agricultural incomes had increased by 40
percent due to greater control by farmers over their water supply” (Strosser: 1997). Based on
conversations with researchers at the Madras Institute for Development Studies (MIDS), the
author estimates that the value of these markets has increased significantly since the late-1990s
(Venkatachalam 2013; Janakarajan 2013). An issue with water markets is overcoming
endowment effect, i.e. finding sellers willing to accept (WTA) prices that buyers are willing to
pay (WTP) (Zetland 2013; Plott and Zeiler 2005). In a 2007 study, Venkatachalam found that
82% of farmers in Tamil Nadu’s water scarce Bhavani River Basin, which borders the Cauvery
Basin, were willing to participate in a formal water market (6). Furthermore, the study found
that the average WTP values of buyers exceed average WTA values of sellers, creating the
opportunity for a market exchange on water among 60% of the farmers across different canal
systems in the basin (2007: 1). The study estimated that trade among the farmers had the
potential to increase individual benefits and net productivity of the basin. The study found a
strong potential for markets both within and between canal systems in the basin (6).
Given that the Cauvery Basin in Tamil Nadu has comparably scarce water resources and
resides within the same political and market frameworks, results from Venkatachalam (2007)
could reasonably be applied to the Tamil Nadu portion of the Cauvery Basin. Because
Karnataka’s agricultural sector is expanding at a greater rate than Tamil Nadu’s (Ghosh 2009)
and because farmers perceive that the state has less leverage through the political process
(Shankar 2011), the findings from the Bhavani Basin may also apply to the Cauvery in
Karnataka.
G. Inter-state Forums
97
Interstate forums between representative farmers and activists from Karnataka and Tamil
Nadu, collectively known as the Cauvery Family, are a case in point that collective action is only
as effective as its ability to realign incentives. The forums have been successful in creating trust
between farmers in disputant basin states, diffusing tension, and potentially diminishing the
political incentive for state politicians to exploit the issue. However, conveners have neglected
to acknowledge the underlying economic incentives driving water consumption and have
adopted the same limited institutional tool kit used by the official legal-political arbitration
process. Furthermore forum conveners reduced the ability of forums to broker trust and
understanding by limiting participants to 18 representatives from each state (Janakarajan in
Warrier 2012). Presumably attendance is restricted to lower decision making costs in creating
and adopting a proposal for water sharing and water sharing during distress years, a task the
Cauvery Family has failed to achieve (Iyer 2012; Janakarajan in Warrier 2012).
Trust between user groups is essential for collective institutional reform and cooperative
management (Ostrom 2009), as well as for contract governance (Easter, et al. 1999; Greif 1997;
Cooter 1997), an indispensable element of water transfers. Many scholars have lamented that a
growing, deep-seated mistrust between the basin states’ farmers has devolved into ethnocentric
chauvinism, punctuated by outbreaks of violence during periods of drought and high scarcity
value (Janakarajan 2003; Iyer 1996; 2007; Ghosh 2009; Ferdin et al. 2010). Scholars of the
Cauvery Dispute agree that the basin is locked in intractable conflict. There is also agreement
that a variety of interrelated causal factors are driving the dispute (Ghosh 2011p; Kapur 2011p;
Janakarajan 2013p; Mienzen-Dick 2013p; Venkatachalam 2013p). As noted, expert opinion
diverges sharply on the topic of feasible and effective solutions; however, many experts from a
variety of disciplines agree that the forums set up to bring together farmers from Karnataka and
Tamil Nadu are helpful (Anand 2004; 2007; Iyer 2007; Ghosh and Bandyopadhyay 2009;
Meinzen-Dick 2013p). Iyer (2007a) contends,
good relations between the States at the people-to-people level are enormously
important, and nothing should be done to impair them. A particular responsibility
rest in this context on the farmers of Karnataka and Tamil Nadu who have been
meeting and fraternizing over the last three years under the auspices of MIDS
[Madras Institute of Development Studies]. They have built up a substantial fund
of goodwill and harmony during these years, and it is for them to ensure that the
spirit of understanding that prevails among them extends beyond them to the
larger community of which they are members (97).
Inter-state forums can do much to change the tone of debate and deter political opportunism.
Intermittent citizen dialogues in the Cauvery Basin began in 1992, convened by S.
Guhan, a professor at the Madras Institute of Development Studies (MIDS) and noted chronicler
of the early Cauvery Dispute (Anand 2004; Ghosh 2009). Drawing from previous experience
with collective forums to curb tannery pollution in Tamil Nadu’s Palar Basin, S. Janakarajan,
also from MIDS, reconstituted the forums in April 2003. Sixty farmers from Karnataka and 60
from Tamil Nadu, accompanied by various activists met in Chennai. “The first day farmers from
both side argued and shouted at each other,” recalls Janakarjan. We didn’t stop the arguments;
just let them release the steam. Both accused each other of cheating” (Janakarajan op cit: 1). By
the second day, participants had “cooled down” enough for a reasoned argument and shook
hands at the end of the day, which Janakarjan marks as a “great achievement,” (ibid) in the
history of Cauvery water development. In June of that year, organizers took the same 60 Tamil
farmers to meet their Kanadan counterparts in talks at Bengaluru in Karnataka. “A lot of
98
constructive suggestions…emerged” from this second round of talks, Janakarajan recounts (ibid).
In Bengaluru, the group of 120 plus accompanying activists selected a committee of 64 drawn
evenly between the two states, adopted the name Cauvery Family, and decided that only the
committee members would meet going forward. The membership of the committee was later
reduced to 36. Field trips allowed farmers to inspect the fields and irrigation works of their
counterparts, erasing misconceptions that Karnataka is a land of innumerable of irrigation
diversions and storage tanks and that Tamil Nadu’s delta is kept in a perpetual state of inundation
to produce three annual paddy crops. At one point, KS Puttannnaiah, a normally pugnacious
farmer and politician from Karnataka, was reduced to tears upon seeing desolate paddy fields in
the Thanjavur Delta (ibid: 2). Between 2003 and 2012, the committee met once or twice each
year. According to forum organizers many resolutions were passed in an effort to avoid conflict
and promote equitable sharing (ibid). The bone of contention, as always, remains sharing during
distress years, when one or both monsoons are weak. To this end the committee devised five
formulas, which were condensed and narrowed to two. The shape of a mutually agreeable plan
continues to elude the forum participants. When the droughts in 2011-2012 struck, politicianfarmers, such as Puttannaiah dropped out of discussions, pursuing a harder line on how much
water Karnataka should agree to release (ibid). When asked how open the farmers in the larger
Cauvery Family are to “give and take” in terms of voluntary sharing of scarce water, Janakarjan
contends that “when there is rainfall, the farmers of [Karnataka] immediately talk about giving
water to Tamil Nadu farmers. In 2010…when the chief minister [or Karnataka] reduced water
from KRS and Kabini [dams], it was the Cauvery Family members in Mysore and Mandya
[districts of Karnataka] who requested…release [of] water to Tamil Nadu” (3). However, the
Cauvery Family organizer is silent when it comes to reverse flows from Tamil Nadu to
Karnataka.
Forum organizers and participants have not used the meeting as a platform for
transactions and contracts between and among upstream and downstream stakeholders or as a
platform to create a system for this type of economic activity. Instead forum participants rely
solely on good will to cajole Kanadans to willingly release greater flows to Tamil Nadu (see,
Janakarajan in Warrier 2012). Conveners of the forums, principally S. Janakarajan and
colleagues the Tamil Nadu-based MIDS, adopt aspects of an extreme legal reasoning in
explaining fair allocation of water (see, ibid and Giordano and Wolf 2003). Citing “international
principles,” (3), presumably, The Helsinki Rules of 1966 and the UN Convention on the Law of
the Non-navigational Uses of International Water Courses (1997), Janakarajan (ibid) adopts a
thinly veiled legal terminology of absolute territorial / riverine integrity, in which the (lower)
riparian claims that their right to the river’s natural flow is absolute and linked to the territorial
integrity of the state (Anand 2004):
In legal terminology, a river is not owned by anybody...Karnataka seems to be
saying, we will not give you a drop of water because we don’t have enough water
for ourselves. It’s a bad argument. When a river starts in one place and flows
downstream, it passes through a huge distance. You cannot stop its flow (op cit).
Giordano and Wolf (2003) maintain that along with the principle of absolute sovereignty,
absolute territorial / riverine integrity constitute extreme legal principles, and Anand (2004)
points out that international principles, notably those listed above, advocate reasonable and
equitable use, and basinwide management approaches. According to Janakarajan, “in legal
99
terminology, a river is not owned by anybody… [and] only through legal mechanism can you
resolve the problem [sic]” (3).
Forum conveners correctly surmise that state politicians are prolonging the dispute, not
out of ineptitude, but because non-compromising positions yield electoral gains (ibid).
Janakarajan (ibid) remarks, “Politicians…do not want to resolve these conflicts because of
competitive politics” (3). In other words, the institutional system dedicated to resolving the
dispute provides an incentive for participants (politicians) to act in a way that ends up prolonging
an intensifying the dispute. Cauvery Family members, according to Janakarajan (ibid), naively
suggest that competitive politics can be stopped. He opines “the Cauvery Family members feel
that we have had enough of competitive politics…If government takes a firm decision, these
conflicts can be resolved easily” (3). India is often saved from the perverse incentives
occasionally generated by competitive democracy by a “centrist equilibrium,” (Rudolph and
Rudolph) variously explained by different authors (see, especially, Chandra 2005; Manor 1996;
2001) and a dynamic federal system (see, above). The efficacy of both, turns on their ability to
satisfy demands for a greater share of power and wealth (see, above). That is, institutions, either
by happenstance or design, channel and align incentives to reduce conflict. The problem with
the Indian Tribunal system for water dispute resolution, is that it does not realign incentives;
rather it promotes conflict, which in turn diminishes the overall wealth of water resources that
can be parceled between competing parties (Ferdin, et al. 2010). The World Bank, for example,
has indefinitely suspended a loan of ₹51 billion for modernization of the Cauvery Delta irrigation
systems (ibid). While lamenting the perverse motives of politicians, Janakarajan (op cit)
registers a curious complaint that seems to miss the point of collective action and disregard the
very institutionalized political incentives he and the Cauvery Family decry: “Even if we come
out with a solution, who will implement it? …Politicians are not willing to listen to us” (3).
As is often the case in institutions, the actors within have difficulty perceiving the
incentive structures motivating their actions. The conveners of the forum do not address the
underlying economic incentives driving consumption of water. Publicly cheered on by
prominent scholars (see for example, Iyer 2012), the Cauvery Family representatives are
attempting to work out a distress sharing formula where by farmers from Karnataka agree to
share the costs of drought by releasing water to downstream Tamil Nadu. So far they have failed
(ibid; Janakarajan op cit). This failure may derive from inability or unwillingness to adopt
institutions that would allow reverse flows (see, Swallow, et. al, summarized in section V). The
forums have adopted the same limited institutional tool set as the official dispute arbitration
process, limiting their ability to achieve a mutually agreeable outcome. In a wish-list concluding
an editorial in The Hindu newspaper (2012), Ramaswamy Iyer asks the Cauvery Family,
Please continue and accelerate your work, promote understanding and goodwill
and correct misperceptions in either State, and come up quickly with (a) minor
adjustments to make the Tribunal’s award acceptable to both States, and (b) a
formula or method for shortage-sharing in years of low flows…It will be noticed
that the appeal to the Cauvery Family has been put first in this list of
recommendations. That is an indication of the importance that I attach to that
impressive initiative. It must not be allowed to fail.
The Family has succeeded in building understanding and erasing misperceptions. Membership
should be broadened to further accomplish these ends. Unless the Family members adopt new
100
institutional tools that promote reverse flows of wealth, success in terms of reaching a mutually
agreeable deal on water sharing is unlikely to succeed. It may be that Tamilian claims of prior
appropriation take precedence over claims by Karnataka, in which case government force could
coerce Karnataka to comply; however, mutually agreeable terms cannot be reached without
realigning incentives of the basin states.
101
IX: Reversing the Political-Economic Feedback Loop
Water markets and market-mechanisms may provide tools useful for balancing finite
supply with growing demand. Although water markets and market mechanisms face political
obstacles, their introduction has the potential to manage demand for water, increase efficient use,
quiet inter-state disputes and raise the overall wealth and social welfare of the basin (Seligman
2011; Howe 2005; Gundimeda and Howe 2008).
The theory proposed by this study links changes in India’s federal political system with
economic growth to explain water shortages and conflicts. Additionally it links shortages with
India’s federal institutional design to explain why some inter-state water conflicts are more
intractable and intense. This study identifies specific political, institutional and economic
variables and shows that when combined in certain river basin settings, such as the Cauvery
basin, shortages and intractable inter-state conflicts occur.
With respect to the potential remedy of official water auctions, the author simulated an
modified All in Auction (AiA) for water, following Zetland (2013) in a multi-team scenario to
test the auction’s effects at reducing ISWD, improving basin efficiency of water use, and to test
the simulation’s affects at lowering resistance to using markets and auctions for water allocation.
The improvised version assumed the political and legal processes involved in allocating and
reallocating water would continue. It offered the auction as recourse for farmers to buy or sell
water after the legal-political process, during times of intense demand. While leaving an
adversarial legal-political allocation process intact is not ideal (Zetland 2012), a modified AiA
does introduce market forces into the water allocation process. Furthermore this scenario does
not strip state-level officials of their power to manage water, increasing the likelihood of
implementation.
Allowing markets to operate while legal-political disputes continue offers farmers
another means of obtaining water during periods of irrigation water shortfall or increased
scarcity. Water will be moved to more efficient uses, marginal costs will balance marginal
product, and scarcity values will decline. The issue will lose some political salience, especially
in the downstream state of Tamil Nadu, and politicians will soften their positions on inter-state
water sharing. Instituting after-politics water auctions introduces a feedback loop that counters
the political-economic feedback loop that drives mismanagement and conflict.
102
Based on the results of this simulation, the author concluded that role-play scenarios
could be helpful to ease the way for introduction of water markets in the Cauvery River Basin
and similar basins and that an improvised AiA may reduce conflict and increase efficiency.
Based on observations and participant feed-back, the author devised and later tested a one round
multi-bid auction that functions similarly to an AiA. The one round auction (ORA) on the
surface shares many characteristics of a traditional market or auction, making it easier for
participants to adopt and lowering participant resistance. Like the modified AiA, the ORA offers
recourse for farmers and other water users after water rights have been assigned, fairly or
unfairly, through a periodic or on-going legal-political process.
103
VIII. Auctions for water—theory and simulation
A. Overview
In order for humans to thrive in ecologically difficult environments, they must maintain
functional political processes (Gammage 2012; Ross 2011). Yet in India, the orientation of the
federal political process toward water is one of increasing dysfunction. Instead of promoting an
environment where stakeholders converge to negotiate shared and divergent values and create
frameworks through which the net value of water is maximized, and economic gains shared
across the basin, federal politics in India creates conflict and waste.
This study suggests that political solutions, following standing channels of institutional
development are infeasible and would not address the underlying economic driver of the
problem. Commentators who seek institutional solutions either wishfully believe that tinkering
with inter-state institutional processes will foster greater cooperation or that nationalizing the
issue would allow the center to authoritatively dictate resolutions. Neither path is
implementable; neither would work if implemented. Gundimeda and Howe (2008), Seligman
(2011); Bank (2002) and Ghosh (2009; 2010) each propose that an economic problem created by
water scarcity value has an economic solution. Seligman opines:
“The better approach is to rely on a system of cooperative mechanisms that allows States
to manage a river as if the infrastructure were owned by a single entity. Among the most
promising of these tools are transactions called ‘payments for watershed services’ where
one State pays another for enhanced flood control protection or where one utility leases
upstream reservoir storage in case of drought, or where one State ‘banks’…water with
another State to use later” (45).
Ghosh (2010) proposed the radical idea of a South Asian Water Future Exchange: “As rainfall
and water availability become uncertain, and water-related conflicts intensify, a futures market
for water seems to be the answer institutionally” (17). A restructuring of economic incentives to
counteract a primarily economics-driven conflict over water offers the best chances for success.
Zetland (2013a), provides a groundbreaking new auction model specifically designed for water.
This study simulated this model in an “outside politics” context and found that it had positive
impacts in terms of economic and social welfare gains as well as conflict reduction.
Additionally, based on feedback from participants and observations about the peculiarities of the
Cauvery basin and South India, the author derived and tested a separate auction model.73
B. Market Forces & Local Government Bodies
Introducing market forces into inter-state river basin disputes will help balance growing
demand with finite renewable supply. Additionally, it will promote economically efficient uses
of water and reduce conflicts and shortages. These market forces can be introduced via local
water auctions conducted within and/or between India’s local autonomous federal bodies, known
as Panchayats in rural and village settings, Urban Local Bodies (ULB) in cities, and
Autonomous District Councils (ADC) in tribal areas. Alternatively, water auctions may find an
equally appropriate home under the auspices of agricultural Water Users Associations (WUA),
empowered to manage local irrigation works and water allocation. Each body is legally
empowered to take actions to provide water and finance water infrastructure for the use of its
members (Upadhyay 2011). They are also legally empowered to transact with other entities
(ibid).
Dr. Lawrence Ausubel may have originated a similar model prior to the author’s. The author is investigating the
possibility that the design in not unique.
73
104
Water auctions could take place outside of the inter-state and state-level legal-political
process for water allocation, auctioning shares of water that citizens or groups received after the
process. Once shares of water for a particular season were determined and assigned, individual
members of these local government bodies could participate in water auctions to maximize value
of local water. After rights are Water users from multiple Panchayats or WUAs could participate
as individuals in the auction or the organizations could participate as collectives with other
organizations. A description of local federal bodies and WUAs and their suitability to participate
in water auctions follows later in the section. Currently, in Tamil Nadu canal water is distributed
to parcels based on their eligibility for either one or two seasons of paddy (Meinzen-Dick
2013p). Gates between the paddy field and the canal are opened and water floods in. There is
currently no legal provision that would permit trading (ibid), but also none that would prohibit it.
Even so, water rights are currently tied to land ownership. These rights would need to be
disentangled with buy-in from local communities and regulatory statutes (Easter, et al. 1999;
Meinzen-Dick 2013p).
“Outside politics auctions” will create a feedback mechanism that will reduce conflict
and politicization of water allocation while improving efficiency of water use. Introducing
auctions after the legal-political process has apportioned water, provides users with a way to
correct inefficiencies and make up for perceived unfairness in the political process. Because
scarcity value is based on opportunity cost, there is an inherent psychological and emotional
aspect (Ghosh 2009: 74).74 Water users can estimate the gains that one additional share of water
would bring, but under the current regime they have no formal, fair institutionalized process to
obtain it. When the specter of shortage is raised, emotions can run high – farmers have no way
to secure an essential input necessary for their livelihood. They may already be in debt and have
leans against their land or capital infrastructure. Politicians can easily exploit this fear. Instead
of working to secure an agreement with co-riparian states, political parties outbid one another on
the issue of inter-state disputes. They may accuse their rivals of ‘working with the enemy’ or
being ‘weak negotiators’ in the disputes (Velayutham and Aram 2010, Iyer 2007). This tendency
to “out-bid” one another is particularly strong in states with entrenched nationalist movements
(Horowitz 1985). By providing farmers and other water users with an additional way to acquire
water, they are no longer dependent (held hostage) by their political representatives. Tensions
may abate. Politicians will be less capable of exploiting water conflict for political support and
will emphasize other issues.
Auctions need not be inter-state in order to accomplish the goal of reducing conflict and
improving efficiency. Providing any outlet to obtain additional water will assuage economic
fears and dampen the effects of sensationalism. Water may still move from high-value uses to
low-value uses among users in the same state.
Electoral incentives are driving the conflict by capitalizing on economic fears. Because
electoral incentives, rather than economic ones are driving conflict, markets are unlikely to
increase political conflict – water is already a valuable commodity and those with the largest
stake in an auction are likely to be buyers rather than sellers. By providing a way for those with
poor lands to sell excess water, an auction is improving social welfare, as marginal lands most
likely correspond with poor communities. The results of simulations run by the author suggest
that markets will reduce inter- and intra-group tension.
Ghosh explains, “the high value of resources is primarily due to their scarcities. Scarcity is again a perceived or
relative concept. When certain communities feel that they need more a particular commodity or a resource, they
start valuing it highly.”
74
105
1. Panchayat Raj
In 1993, panchayats were recognized as distinct co-sovereign entities under the Indian
Constitution (73rd and 74th Amendments) with responsibility to administer “Drinking Water,”
“Water Management”, “Minor Irrigation”, and Watershed Development.” The amendments
also provisioned the creation of Urban Local Bodies (ULBs), which functioned similarly to their
rural panchayat counterparts. The 74th amendment specifies ULBs must be endowed “with such
powers and authority as may be necessary to enable them to function as institutions of selfgovernment…[including] Water supply for domestic, industrial and commercial purposes”
(Article 234W of Constitution of India). Although the 73rd and 74th Amendments required states
to come up with appropriate Panchayat Raj Acts, detailing meaningful democratic devolution of
functions, authority and funds, the Amendments make clear that devolution of power to local
bodies is obligatory and enforceable “Any weakening of the jurisdiction or control of the ULBs
in terms of vesting of their functions to outside bodies can be seen as violation of the letter and
spirit of the Constitution” (Upadhyay 2011: 59-60).75
2. Participatory Irrigation Management (PIM) & Water Users’ Associations (WUA)
Another emergent institution that could seize upon and benefit from an “outside politics”
water auctions are rural Water User Associations (WUA) (Lingappan 2013). Since 1997 a spate
of new state-level legislation has created organizations of farmers for the purposes of including
them in operations and maintenance of irrigation systems. Fifteen states now have WUA laws
Upadhyay (2011) including the three basin states of the Cauvery: Tamil Nadu passed the Tamil
Nadu Farmers’ Management of Irrigation System Act, 2000; Kerala passed the Kerala Irrigation
and Water Conservation Act, 2003; and Karnataka passed the Karnataka Irrigation Amendment
Act in 2003. Essentially these acts allow farmers to create self-governing irrigation districts.
They WUA are empowered to delineate every command area under each of the irrigation
systems “on a hydraulic basis which may be administratively viable” and declare it a water
users’ area. Every water users’ area is divided into territorial constituencies. The laws provide
for establishing democratically elected WUA for every area. Water users who are landowners in
the area are members (ibid). WUA have authority and responsibility to prepare and implement
an irrigation schedule each season; prepare a plan of maintenance, extension, improvement
renovation of the irrigation system; regulate the use of water among the various outlets under its
area of operation; maintain a register of landowners as published by the revenue department;
monitor the flow of water for irrigation; resolve disputes between members and water users in
the area of operation (Upadhyay: 62). Experts lament the lack of accountability the state has to
farmers and the lack of recourse offered to farmers if they do not receive irrigation water (Mosse
2003; Upadhyay). However, this makes WUA’s good candidates for water auctions because it
provides farmers with an alternative recourse. Easter (1998) and Bank (2002) note that water
markets and auctions help ensure that canals are maintained because canals transport purchased
water. Given the purpose of WUAs and PIM, water auctions are a logical outgrowth of WUAs.
As the Panchayat Raj is implemented and WUAs acquire more capacity, it is important
for India not to recreate the same situation within states as currently exists between them. Water
auctions may be a good way to avoid recreating conflict.
C. Auctions for Water
75
For a detailed discussion of the precedent established in Indian case law regarding interpretation of obligatory
versus discretionary constitutional language, see Upadhyay (2011: 60) on National Consumer’s Protection Samiti
and Anr v. State of Gujarat & Ors. 1994.
106
Water may be the least-traded commodity in the world (Zetland 2013: 78). In most
regions and countries around the world, water is diverted from streams and rivers or pumped
from aquifers for the same purposes as it has been for decades (ibid). Economists and
hydrologists warn that this pattern of quiet consistency will not prevail indefinitely. Increasing
scarcity—driven by increasing demand on steady or falling natural renewable supply—creates an
economic and social imperative to value water at levels that reflect its importance in domestic,
environmental and economic activities. Economists prefer market allocations of natural
resources to government command-and-control schemes with resources priced and “appropriate”
levels (Hayek 1945). Water allocation and valuation is subject to more command and control
manipulation than any other resource (Zetland 2013). Economists have long argued for water
markets to increase efficiency and social welfare (Zetland 2013; Milliman 1956; Vaux and
Howitt 1984; Rosengrant and Binswanger 1994; Holden and Thombani 1996; Zilbernan, et al.
2007).
Water economists favor auctions over bilateral negotiated trades or traditional markets
because auctions maximize the number of buyers and sellers by condensing trading into a
specified period of time (McAfeee and McMillan 1987; Milgrom 1987, Lu and McAfee, 1996,
Zetland 2013). Auctions are especially suited too water because simultaneous reallocation
promotes planning and deliver of water to users (Zetland 2013: 78). Auctions of water rights are
appropriate where there is a large and diverse pool of owners with many discreet units and
widely variable values for water. Another criteria is the need to demonstrate to non-participant
stakeholders (e.g. environmentalists) that water is being moved to its ‘highest and best uses.’
Additionally auctions are helpful when climate-induced or regulation-driven changes in water
supply necessitate reallocating less water among many claimants (Zetland 2013). Water auctions
generally face two challenges: too few sellers, known as participation effects, and inflated sale
prices, known as endowment effects.
D. All-in-Auction (AiA)
Zetland (2013) originated the All-in-Auction (AiA) and describes it as “a uniform price,
bid-only auction... designed to maximize liquidity and efficiency in water reallocation using two
features:
(1) All rights are for sale—minimizing participation effects.
(2) These rights go to high bidders—minimizing endowment effects” (78-80).
The AiA combines existing ideas from several auction designs to create a novel mechanism that
minimizes participation and endowment effects to more effectively reallocate water.
Bidders make m bids for n units of water, and m is greater than n when water is scarce.
Units of water, n, can vary over time, from one AiA to the next. Bids are ordered during the
auction, so that bidders see their successful bids and have the opportunity to enter more bids.
The auction ends when no participant wishes to enter additional bids (78-79). During the auction
and after it ends, bids are ranked in descending order. The top n bids (i.e. those bids that
correspond with a unit of water in the auction), are accepted as winning bids and a clearing
prices is set at the highest-rejected bid (i.e. the first losing bid or the n + 1th bid) (ibid).
AiAs increase efficiency and social welfare by reallocating water without harming water
rights holders. Owners of water must put all of their rights up for sale in the auction, but have a
straightforward mechanism of buying them back at no cost and with no risk of losing them.
AiAs can be used to allocate variable or diminished flows among traditional or new users. AiAs
work in the context of large organizations that distribute water among members, such as
107
irrigation districts. According to Zetland’s experimental sessions, AiAs reallocate more units of
a commodity with no less efficiency than traditional two-sided auctions.
Importantly, Zetland (2013) advises against planning and implementing AiAs that cross
“many political…boundaries due to problems with…third party impacts” (79). He advises AiAs
be set up in jurisdictionally bounded settings where users can “quantify individual rights to water
[and then] vote to implement an AiA among themselves. Water users in one area…with active
AiAs can then allow outside participation or connect with other AiAs.” (ibid). The following
simulations test a modified AiA’s effects on conflict and efficiency in a water scarce setting with
three jurisdictional boundaries, in order to determine whether and how it could be effectively
implemented in and across the Cauvery Basin.
E. Simulations
Literature on trans-boundary river basin conflicts supports the notion that markets,
specifically auctions are an effective way of increasing a basin’s economic productivity76 and
suggest that they may help reduce conflict (Bate 2002). The author ran a simulation of an AiA to
test its effects on conflict and economic efficiency in a multi-team scenario. Another purpose of
the simulation was to test whether simulating an AiA might increase a group’s willingness to
adopt an AiA or an alternate market tool to manage and allocate water. Researchers have begun
trying face-to-face role-play simulations that bring mixed groups of residents together to help
citizens envision what they might do to reduce climate change risks. Susskind and Paul (2013)
and Susskind and Rumore (2010) tested role play scenario games in three coastal Massachusetts
towns and with a large group of participants from a collection of coastal Maryland communities.
Importantly, participants included mayors and other public officials, agriculturalists and
representatives from a variety of other stakeholder groups. They found that games can increase
community members’ willingness to adopt new tools and participate in collective action
adaptation to risks posed by climate change. The author interviewed participants about their
willingness to accept an AiA or other market mechanism before and after the simulations.
The AiA described in the following section differs from Zetland’s (2013) in that it takes
place in a setting with unstable and highly variable water property rights. Water is first allocated
through a two-tiered political process. Consequently the AiA follows an adversarial and
sometimes arbitrary allocation process. One metric of the AiA’s effectiveness in this setting is
its ability to serve as an antidote to conflict and frustration at perceived unfairness. The AiA’s
effectiveness at providing an ameliorating effect was judged subjectively by the experimenter
and through post-simulation interviews with participants.
The author conducted simulations of an AiA in a three team scenario with teams of
different sizes and varied endowments of productive land.77 The teams were comprised of 3, 3,
and 2 participants and an arbiter or “judge” not associated with any team. Participants were told
that they were farmers in the simulation and each was given an artist’s pallet. The pallet was had
depressions, each of which represented a plot of land. Each depression contained a number from
1-11 written on tape attached to the bottom of the depression. The experimenter explained that
the number taped to the bottom represented the value of the plot when it was irrigated.
Unirrigated plots were worth 1 unit of value each. Plots labeled “1” were worth 1 unit of value
regardless of irrigation. During the course of the simulation, participants were given pebbles.
The experimenter explained that each pebble represented a unit of water sufficient to irrigate a
76
Citations listed in preceding text: Easter, Rosengrant and Dinnar 1999; Milliman 1956; Vaux and Howitt 1984;
Rosengrant and Binswanger 1994; Holden and Thombani 1996; Zilberman et al. 2007; McAfee and McMillan 1987.
77
The teams collectively had different levels of endowment also.
108
plot. All players had an equal number of plots (6) with varying values (1-11). Before the
simulation began, the experimenter selected a “judge” and each group agreed upon an
“allocations manager” (AM). In the event of a shortage, during which not enough water would
be available for all players to irrigate all productive plots (irrigated value ≥ 2), the AM would
petition the judge for water and the judge would decide how to allocate water between the teams.
The AM would then work collaboratively with team members to apportion water within the
team. Players were instructed to work with their team members to decide how water was to be
distributed amongst the group. Inter-team water transfers were prohibited after the judge
apportioned shares, as was the trade of land for water or promises.
Before the simulation began, participants ate and socialized with one another. They were
encouraged to get to know the other player on their team. An informal discussion between
participants followed about their views on water allocation methods and whether markets were
an appropriate tool.
Player
Player 1 (“Amanda”)
Player 2 (“Kyle”)
Player 3 (“Christina”)
Player 4 (“Ben”)
Player 5 (“Paul”)
Player 6 (“Keren”)
Player 7 (“Seth”)
Player 8 (“Erica”)
Views on Markets and Auctions
in Water Allocation
“Markets are a great way to provide good/services based on supply and
demand. Water markets are highly questionable since everyone has or
should have a right to water. I suppose a water market could help evenly
distribute, but how will lower income or poor families afford water?”
Liked markets, markets for natural resources
Had no strong opinions
“Markets are useful tools to create efficiency, but poor or uneducated people
are often unable to navigate them successfully. The poor are often cheated
by more savvy market players.” – Markets have no place in water allocation.
“Markets are useful, but must be carefully regulated to prevent unforeseen
consequences. Water might be too universally important to trade in a market
like stocks and bonds. Laws and regulations with strong enforcement must
prevail.” –Markets have a very limited role to play in water allocation.
No strong opinions
“Markets and ‘market-mechanisms’ are the domain of rich @$$#’s. I don’t
want a market running my water supply or dictating the price of what I buy at
the store unless I’m getting [expletive deleted] rich off it.” – Markets have no
place regulating nature, unless you want to cut me in on the profit.
No strong opinions
109
Teams & plot values:
Team “A”
Tamil Nadu
Individual Plot
Values
112245
2 4 7 7 10 10
112222
Team “A” Totals:
Player 1 (T1)
Player 2 (T2)
Player 3 (T3)
Individual Plot
Values
125555
5 5 5 5 6 10
Team “B” Totals:
Player 4 (Ke1)
Player 5 (Ke2)
Individual Plot
Values
112224
Player 6 (K1)
Player 7 (K2)
Player 8 (K3)
6 7 10 10 11 11
111222
Team “C” Totals:
K1
(Min Potential)
15
40
10
65
6
6
6
18
T3
Total Irrigated Value
Total Dry Value
(Max Potential)
(Min Potential)
23
36
59
6
6
12
Ke2
Ke1
Team “C”
Karnataka
Total Dry Value
(Max Potential)
T2
T1
Team “B”
Kerala
Total Irrigated Value
K2
Total Irrigated Value
Total Dry Value
(Max Potential)
(Min Potential)
12
55
9
76
6
6
6
18
K3
The simulation ran five times. The first run simulated a “surplus” year, and farmers and
factory owners were inundated. Every participant had enough water to supply every productive
plot. The second run simulated a drought period or “failed monsoon” season. The judge decided
110
how water was to be distributed between the three teams with input from the allocations
managers. The units of water were initially given to the AM. Internal discussions, arguments
and verbal contracts helped determine the division of water within the teams, but the Allocations
Manager had final authority to decide. The third, fourth and fifth run also simulated a drought
period; however, players were invited to participate in an All-in-Auction market (AiA).
The experimenter explained the structure of the market and showed video of a group of
English-speaking university students conducting a simulation of an AiA. The charts below show
the result from each run. Green numbers denote irrigated plots.
Run 1: Surplus year
Each team received 15 units of water. The units were given to the allocation manager
(AM) to distribute the water. Strategizing began before water was delivered.
KEY
# - watered plot of land with a value of the number shown
# - un-watered plot of land with a value of 1
RUN ONE: 15 UNITS OF WATER (Pebbles)
Team “A”
Individual Plot
Total Irrigated Value/
Tamil Nadu
Values
Max Irrigated Value
Player 1 (T1)
1 1 2 2 4 5
15/15
2 4 7 7 10 10
Player 2 (T2)
40/40
Player 3 (T3) - AM
1 1 2 2 2 2
10/10
Team “A” Totals:
65/65
Notes: The allocations manager,T3, gave the odd unit of water to T2 in order to maximize the team’s total value.
Team members indicated later that there was a strong sense of camaraderie when value potentials were being
reached.
RUN ONE: 15 UNITS OF WATER (Pebbles)
Team “B”
Individual Plot
Total Irrigated Value/
Kerala
Values
Max Irrigated Value
12 5 5 5 5
Player 4 (Ke1)
23/23
5
5
5
5
6
10
Player 5 (Ke2) – AM
36/36
Team “B” Totals:
59/59
Notes: Kerala had extra water, and Karnataka attempted to buy it even though they were already reaching their
max irrigated value. From the beginning, some teams attempted to test regulatory boundaries and create
informal, illegal markets.
Team “C”
Karnataka
RUN ONE: 15 UNITS OF WATER (Pebbles)
Individual Plot
Values
11 2 2 2 4
6 7 10 10 11 11
Total Irrigated Value/
Max Irrigated Value
Player 6 (K1) – AM
12/12
Player 7 (K2)
55/55
Player 8 (K3)
1 11 2 2 2
9/9
Team “C” Totals:
76/76
Notes: The allocations manager, K1, gave K2 six shares of water based on a prior personal relationship. The
productive value of K2’s plots validated the AM’s decision. Protests of K3 were assuaged because she was
able to maximize value of her plots. Despite internal conflict, Karnataka was still able to reach maximum
111
irrigated value.
Run 2: Drought Period / Failed Monsoon
In run two, the experimenter announced that there was a drought and gave 15 pebbles to
the judge to distribute. Teams’ Allocations Managers petitioned the judge for water based on the
needs of the team. The judge then disbursed the units of water to the AMs. Team members
strategized and traded water through informal markets based on IOUs and trades of hypothetical
future production in exchange for water.
KEY
# - watered plot of land with a value of the number shown
# - unwatered plot of land with a value of 1
Team “A”
Tamil Nadu
RUN TWO: 5 UNITS OF WATER (Pebbles)
Individual Plot
Values
11 2 2 4 5
2 4 7 7 10 10
1 1 2 2 22
Total Irrigated Value/
Max Irrigated Value
Player 1 (T1)
10/15
Player 2 (T2)
30/40
Player 3 (T3) – AM
7/10
47/65
Tamil Nadu Total Irrigated Value:
Notes: Tamil Nadu decided to continue to aim for the max net value for the team as a whole. T2 verbally
committed to “taking care of” T1 & T3 later on. T1 & T3 received 1 unit of water for the sake of “fairness” and
making some initial guaranteed profit that would not depend on a verbal contract.
RUN TWO: 6 UNITS OF WATER (Pebbles)
Team “B”
Individual Plot
Total Irrigated Value/
Kerala
Values
Max Irrigated Value
Player 4 (Ke1)
1 2 55 5 5
18/23
Player 5 (Ke2) - AM
5 5 5 5 6 10
24/36
56/59
Kerala Total Irrigated Value:
Notes: Kerala was still able to split the units of water evenly while achieving the max irrigated value with the
units of water given. A prior personal relationship between Ke1 and the judge may explain the team’s favorable
treatment.
RUN TWO: 4 UNITS OF WATER (Pebbles)
Individual Plot
Total Irrigated Value/
Values
Max Irrigated Value
Player 6 (K1) - AM
1 1 2 2 2 4
6/12
Player 7 (K2)
6 7 10 10 11 11
44/55
Player 8 (K3)
1 1 1 2 2 2
6/9
33/76
Karnataka Total Irrigated Value:
Notes: The allocations manager, K1, continued to give their significant other, K2 more shares, in this case all
shares, justifying the decision with K2’s high irrigated plot values. K3 expressed discontent at perceived
favoritism.
Team “C”
Karnataka
Run 3: AiA Introduced in Drought Period (1)
112
Run three also simulated a drought, but the All in Auction (AiA) was introduced. The
experimenter explained the AiA and participants watched a portion of a video of another AiA
simulation. A brief question and answer round followed. Fifteen units of water were available
for the entire basin in run 3. The experimenter gave 5 units of water to each allocations manager
and blank slips of paper to all the players. The blank paper was used for bid submissions.
Players were advised that the number of initial bets they placed should be based on the
number of units the player wanted to sell or number of plots the player wanted to irrigate. E.g., a
player wanting to sell 4 units of water would place 4 bets, and a player wanting to irrigate 3 plots
would place 3 bets. Additionally, the value of those bets should be based on the player’s
willingness to buy water at that price (i.e. the value the player attached to the water, regardless of
whether buying or selling.) After bets were placed the experimenter ordered bets from highest to
lowest. The top 15 bets (corresponding with the 15 units of water) were recorded. The
experimenter did not reveal the values of these bids. The 16th highest bid was announced as the
initial clearing price of water. Bids higher than this price were buyer’s bids and players who did
not bid higher than this price were sellers. Players were allowed to continue bidding for several
minutes. (This allowed players who wanted to buy water at a price higher than the clearing price
to place new bids and become buyers.)
KEY
# - watered plot of land with a value of the number shown
# - unwatered plot of land with a value of 1
AiA: All in Auction Process
RUN THREE: 5 UNITS OF WATER (Pebbles)
Team “A”
Tamil Nadu
Individual Plot
Values
Player 1 (T1)
Player 2 (T2)
Player 3 (T3) – AM
11 2 2 4 5
2 4 7 7 10 10
1 1 2222
Tamil Nadu Profit before AiA:
Value
before
AiA
10/15
15/40
9/10
Units of Water
“going in”
Participant’s
Objective / Strategy
1
1
3
to sell
to buy
to sell
34/65
Bids
Placed
Round 1*
10 10
11
567
Bids
Placed
Round 2
no bids
77777
345
*Unit of Water clearing price was 2 after round one
Notes: Tamil Nadu decided to distribute the units of water so everyone could participate in the market. The AM took extra water units. T2 was opposed to
the market, while players T1 and T3 were in favor.
Players T1 and T2 tried to manipulate the market based on assumptions derived from experiences with the informal market in the previous round.
Player T3 had an understanding of the market. She had the least valuable assets in the group and the most to gain from selling her shares of water. She
submitted bids around, but slightly higher than her estimation of the market price of water. Her goal in bidding was to set the market price of water by
registering the AiA’s “first losing bid.” She assumed that there would be at least 15 bids higher than 7 in the initial round of bidding, but reduced her risk by
submitting a spread with 5 and 6 bids.
AiA Results
Tamil Nadu
Units of Water
“coming out”
Breakdown
(values per plot)
Player 2 (T2)
1 1 2 2 4 5
- 4 4
T1 Total Profits: 1 1 1 1 0 1
Bought 5 units
2 4 7 7 10 10
Player 3 (T3) - AM
@ 4 each
44 4 4 4
T2 Total Profits: 1 0 3 3 6 6
Bought 2 units
1 1 2 2 2 2
Player 1 (T1)
Bought 2 units
@ 4 each
-
-
-
-
-
Plot Values
13
-8 (payment)
5/15
39
-20 (payment)
19/40
8
113
- @ 4 each
4 4
- T3 Total Profits: 1 1 1 1 2 2
Tamil Nadu Profit after AiA:
-8 (payment)
0/10
*33/65
*Slightly lower state production
Notes: The players tried to “play” the market with self-identified sellers trying to inflate the market price and self-identified buyers trying to deflate. They did
not discuss their bids with each other. Players thought that they could only bid as many times as they had shares of water.
KEY
# - watered plot of land with a value of the number shown
# - unwatered plot of land with a value of 1
AiA: All in Auction Process
RUN THREE: 5 UNITS OF WATER (Pebbles)
Team “B”
Kerala
Player 4 (Ke1)
Player 5 (Ke2) - AM
Value
before
AiA
14/23
24/36
Individual Plot
Values
1 2 5 5 5 5
5 5 5 5 6 10
Units of Water
“going in”
Participant’s
Objective / Strategy
2
3
to buy
to buy
Bids
Placed
Round 1*
5544
5 6 10 4 4 4
Bids
Placed
Round 2
no bids
no bids
38/59
*Unit of Water clearing price was 2 after round one
Kerala Value Profit AiA:
Notes: Water units were divided and the AM kept an extra unit. Kerala’s team members understood the AiA and played it correctly. This may owe to the
fact that Kerala was smaller than the other states, had less experience with informal markets and less antagonism between team members.
AiA Results
Kerala
Player 4 (Ke1)
Units of Water
“coming out”
Bought 2 units
@ 4 each
Breakdown
(values per plot)
1 2 5 5 5 5
-
-
44
Ke1 Total Profits: 1 1 1 1 1 1
Player 5 (Ke2) - AM
Bought 3 units
5 5 5 5 6 10
@ 4 each
4 -4 -4
T2 Total Profits: 1 1 1 1 2 6
Kerala Profit after AiA:
Plot Values
14
-8 (payment)
6/23
24
-12 (payment)
12/36
*18/59
*Lower state production
Notes: Kerala preferred run one where the size of their team caused a surplus and wished to sell their extra shares of water. That run produced only profits
with no extra costs. Discussions included a larger profit once others better understood the AiA. Players ignorantly increased the value of each water unit
while devastating their profits. A lower unit of water value will increase Kerala’s profits, and unseen payments are bribes would no longer be necessary
during a drought.
114
# - watered plot of land with a value of the number shown
# - unwatered plot of land with a value of 1
KEY
AiA: All in Auction Process
RUN THREE: 5 UNITS OF WATER (Pebbles)
Team “C”
Value
before
AiA
10/12
16/55
8/9
Individual Plot
Values
Karnataka
Player 6 (K1) – AM
Player 7 (K2)
Player 8 (K3)
1 1 2 2 2 4
6 7 10 10 11 11
1 1 1 2 2 2
Units of Water
“going in”
Participant’s
Objective / Strategy
2
1
2
to sell
to buy
to sell
Bids
Placed
Round 1*
10 11
4
2 21
Bids
Placed
Round 2
no bids
44444
no bids
Karnataka Profit before AiA:
34/76
*Unit of Water clearing price was 2 after round one
Notes: Karnataka decided to evenly distribute water to players with previously disadvantaged players receiving more shares of water. K3 asked questions
about the market and submitted two bids reflecting the value of the water she owned and an additional bid for the price at which she would buy one more
unit of water. She did not try to inflate the market price.
AiA Results
Units of Water
“coming out”
Karnataka
Player 1 (K1)
Breakdown
(values per plot)
1 1 2 22 4
- 4 4
K1 Total Profits: 1 1 1 1 -2 0
Sold 2 units
6 7 10 10 11 11
10
-8 (payment)
@ 4 each
4 4
K2 Total Profits: 1 1 1 1 5 5
Sold 2 units
1 1 1 2 2 2
+ +
@ 4 each
4 4
K3 Total Profits: 1 1 1 1 5 5
Karnataka Profit after AiA:
+8 (profit)
Bought 2 units
@ 4 each
Player 2 (K2)
+
Player 3 (K3) - AM
Plot Values
+
2/12
6
14/55
6
+8 (profit)
14/9
*30/76
*Lower state production
Notes: The total irrigated value was 2 points lower after the AiA, but K3 was able to double their maximum irrigated value during a drought while selling only
2 units of water. K1 was trying to “play” the market in a similar fashion to Tamil Nadu which resulted in K1 lowest results. K2 did not enjoy the AiA since it
employs a share the wealth system with clear rules instead of exploiting personal connections for free water to inflate their total irrigated value.
Round One Bids
11
10
9
8
7
6
5
Run 3 Bid Results
Round One Clearing
Price
Round Two Bids
(new bids shown in red)
K1
K1
T1 T1 Ke2 K1
T1 T1 Ke2 K1
T3
T3 T2 T2 T2 T2 T2
T3 Ke2
T3 Ke2
T3 Ke1 Ke1 Ke2
T3 Ke1 Ke1 Ke2 T3
Round Two
Clearing Price
115
4
3
2
1
Ke1 Ke1 Ke2 Ke2 Ke2 K2
Ke1 Ke2 Ke2 T3 K2 K2 K2 K2 K2
K3 K3
2
T2 T2 K3
4
K3 K3
T2 T2 K3
Run 4: AiA Drought Period Repeated (2)
Run four also simulated a drought, but the players were advised not to place bids higher
than their plots of land (i.e. the total productive capacity of their land). When entering the
auction it is unclear if participants will be buyer or sellers until after the first round of bids. The
experimenter explained that farmers with inefficient land should allow owners of productive
land, who typically want to buy to increase the clearance price based on their high value water
has for them. Fifteen units of water were available for the entire basin in run 4. The
experimenter gave 5 units of water to each allocations manager and blank slips of paper to all the
players. The allocations managers gave the players the same units as in the previous round.
KEY
# - watered plot of land with a value of the number shown
# - unwatered plot of land with a value of 1
AiA: All in Auction Process
RUN FOUR: 5 UNITS OF WATER (Pebbles)
Team “A”
Tamil Nadu
Value
before
AiA
10/15
15/40
9/10
Individual Plot
Values
Player 1 (T1)
Player 2 (T2)
Player 3 (T3) – AM
11 2 2 4 5
2 4 7 7 10 10
1 1 2222
Tamil Nadu Profit before AiA:
Units of Water
“going in”
Participant’s
Objective / Strategy
1
1
3
to sell
to buy
to sell
34/65
Bids
Placed
Round 1
4
4444
333
Bids
Placed
Round 2
no bids
no bids
no bids
*Unit of Water clearing price was 3 after round one
Notes: Tamil Nadu better understood the goal of the market after their attempts to “game” the market in run 3; however, they still tried to “game” the market.
Player T2 entered low bids in round one. He knew he could place higher bids during round two if the clearance price was at 4 or higher. Player T3 also
tried to play the market, and would not be able to afford buying back water if these bids became buyer bids. Player T3 was able to evaluate others’ plots
while discussing round 3 and estimated that the clearing price would exceed three.
AiA Results
Tamil Nadu
Player 1 (T1)
Player 2 (T2)
Player 3 (T3) - AM
Units of Water
“coming out”
Breakdown
(values per plot)
1 1 2 2 4 5
+
3
T1 Total Profits: 1 1 1 1 1 4
Bought 3 units
2 4 7 7 10 10
Sold 1 units
@ 3 each
- - @ 3 each
3 3 3
T2 Total Profits: 1 1 1 4 7 7
Sold 3 units
1 1 2 2 2 2
+ + +
@ 3 each
3 3 3
T3 Total Profits: 1 1 1 4 4 4
Tamil Nadu Profit after AiA:
Plot Values
6
+3 (profit)
9/15
30
-9 (payment)
21/40
6
+9 (profit)
15/10
45/65
116
AiA: All in Auction Process
RUN FOUR: 5 UNITS OF WATER (Pebbles)
Value
before
AiA
14/23
24/36
Individual Plot
Values
Team “B”
Kerala
Player 4 (Ke1)
Player 5 (Ke2) - AM
1 2 5 5 5 5
5 5 5 5 6 10
Kerala Profit before AiA:
Units of Water
“going in”
Participant’s
Objective / Strategy
2
3
to buy
to buy
38/59
Bids
Placed
Round 1
3333
444455
Bids
Placed
Round 2
no bids
no bids
*Unit of Water clearing price was 3 after round one
AiA Results
Units of Water
“coming out”
Kerala
Player 4 (Ke1)
Breakdown
(values per plot)
Bought 2 units
@ 3 each
Plot Values
22
-12 (payment)
1 2 5 5 5 5
-
- -
-
3333
Ke1 Total Profits: 1 1 2 2 2 2
Player 5 (Ke2) - AM
10/23
Bought 3 units
5 5 5 5 6 10
- @ 3 each
3 3 -3
T2 Total Profits: 1 1 1 2 3 7
Kerala Profit after AiA:
24
-9 (payment)
15/36
*25/59
*Lower state production
AiA: All in Auction Process
RUN FOUR: 5 UNITS OF WATER (Pebbles)
Team “C”
Karnataka
Player 6 (K1) – AM
Player 7 (K2)
Player 8 (K3)
Individual Plot
Values
1 1 2 2 2 4
6 7 10 10 11 11
1 1 1 2 2 2
Karnataka Profit before AiA:
Value
before
AiA
10/12
16/55
8/9
Units of Water
“going in”
Participant’s
Objective / Strategy
2
1
2
to sell
to buy
to sell
34/76
Bids
Placed
Round 1
12
555555
11
Bids
Placed
Round 2
no bids
44444
no bids
*Unit of Water clearing price was 3 after round one
AiA Results
Tamil Nadu
Player 1 (K1)
Player 2 (K2)
Units of Water
“coming out”
Breakdown
(values per plot)
1 1 2 2 2 4
+ +
3 3
K1 Total Profits: 1 1 1 1 4 4
Sold 2 units
6 7 10 10 11 11
6
+6 (profit)
@ 3 each
3 3
K2 Total Profits: 1 1 1 1 4 4
Sold 2 units
1 1 1 2 2 2
+ +
@ 3 each
3 3
+6 (profit)
Sold 2 units
@ 3 each
+
Player 3 (K3) - AM
Plot Values
+
12/12
6
12/55
6
+6 (profit)
117
K3 Total Profits: 1 1 1 1 4 4
Karnataka Profit after AiA:
12/9
*30/76
*Lower state production
Run 4 Bid Results
Round One Clearing
Price
Round One Bids
11
10
9
8
7
6
5
4
3
2
1
Round Two Bids
(new bids shown in red)
Ke2 Ke2 K2 K2 K2 K2 K2
Ke2 Ke2 K2 K2 K2 K2 K2 Ke1 Ke1 Ke1 Ke1
T1 T2 T2 T2 T2 Ke2 Ke2 Ke2 Ke2
T1 T2 T2 T2 T2 Ke2 Ke2 Ke2
T3 T3 T3 Ke1 Ke1 Ke1 Ke1
3
T3 T3 T3 Ke1 Ke1 Ke1 Ke1
K1
K1
K1 K3 K3
K1 K3 K3
Round Two
Clearing Price
3
Run 5: AiA in Drought Period Repeated (3)
Run five also simulated a drought, but the players were not allowed to place bets higher
than their plots of land. They were reminded that when entering the auction it is unclear if
farmers are buyer or sellers until after the first round of bids. Participants with inefficient land
should allow owners of very valuable land, who want to buy, to increase the clearance price.
Fifteen units of water were available for the entire basin in run 5. The experimenter gave 5 units
of water to each allocations manager and blank slips of paper to all the players. The allocations
managers (this time at the experimenter’s instruction) gave the players the same units of water as
in run 3. Minimizing variables allows the player/farmer to become familiar with the AiA
market.
KEY
# - watered plot of land with a value of the number shown
# - unwatered plot of land with a value of 1
AiA: All in Auction Process
RUN FIVE: 5 UNITS OF WATER (Pebbles)
Team “A”
Tamil Nadu
Player 1 (T1)
Player 2 (T2)
Player 3 (T3) – AM
Individual Plot
Values
11 2 2 4 5
2 4 7 7 10 10
1 1 2222
Tamil Nadu Profit before AiA:
Value
before
AiA
10/15
15/40
9/10
34/65
Units of Water
“going in”
Participant’s
Objective / Strategy
1
1
3
to sell
to buy
to sell
Bids
Placed
Round 1
33
35588
1111
Bids
Placed
Round 2
no bids
4
no bids
*Unit of Water clearing price was 2 after round one
Notes: Tamil Nadu better understood the goal of the market after their attempts to cheat the market fair, but they still tried to play the market. Player T2
entered low bids in round one. He knew he could place higher bids during round two if the clearance price was at 4 or higher. Player T3 also tried to play
the market, and would not be able to afford buying back water if these bids became buyer bids. Player T3 was able to evaluate other’s plots while
118
discussing round 3 and hopes that there are enough buyers to drive the clearance price over 3.
AiA Results
Tamil Nadu
Units of Water
“coming out”
Breakdown
(values per plot)
Plot Values
1 1 2 2 4 5
+
2
T1 Total Profits: 1 1 1 1 1 3
Bought 5 units
2 4 7 7 10 10
Player 1 (T1)
6
+2 (profit)
Sold 1 units
@ 2 each
Player 2 (T2)
39
-10 (payment)
@ 2 each
22 2 2 2
T2 Total Profits: 1 2 5 5 8 8
Sold 3 units
1 1 2 2 2 2
+ + +
@ 2 each
2 2 2
- -
Player 3 (T3) - AM
8/15
-
-
-
29/40
6
+6 (profit)
T3 Total Profits: 1 1 1 3 3 3
Tamil Nadu Profit after AiA:
AiA: All in Auction Process
RUN FIVE: 5 UNITS OF WATER (Pebbles)
Value
before
AiA
14/23
24/36
Individual Plot
Values
Team “B”
Kerala
Player 4 (Ke1)
Player 5 (Ke2) - AM
1 2 5 5 5 5
5 5 5 5 6 10
Kerala Profit before AiA:
12/10
42/65
Units of Water
“going in”
Participant’s
Objective / Strategy
2
3
to buy
to buy
38/59
Bids
Placed
Round 1
2222
333345
Bids
Placed
Round 2
no bids
no bids
*Unit of Water clearing price was 2 after round one
AiA Results
Units of Water
“coming out”
Kerala
Player 4 (Ke1)
Breakdown
(values per plot)
Sold 2 units
@ 2 each
6
+4 (profit)
1 2 5 5 5 5
+
Ke1 Total Profits:
Player 5 (Ke2) - AM
Plot Values
+
2 2
11 1 1 3 3
10/23
Bought 3 units
5 5 5 5 6 10
- @ 2 each
2 2 -2
T2 Total Profits: 1 1 1 3 4 8
24
-6 (payment)
18/36
*28/59
Kerala Profit after AiA:
*Lower state production
AiA: All in Auction Process
RUN FIVE: 5 UNITS OF WATER (Pebbles)
Team “C”
Karnataka
Individual Plot
Values
Value
before
AiA
Units of Water
“going in”
Participant’s
Objective / Strategy
Bids
Placed
Round 1
Bids
Placed
Round 2
119
Player 6 (K1) – AM
Player 7 (K2)
Player 8 (K3)
10/12
16/55
8/9
1 1 2 2 2 4
6 7 10 10 11 11
1 1 1 2 2 2
Karnataka Profit before AiA:
2
1
2
to sell
to buy
to sell
34/76
12
333333
11
11
444444
no bids
*Unit of Water clearing price was 2 after round one
AiA Results
Units of Water
“coming out”
Tamil Nadu
10/12
6 7 10 10 11 11
Bought 6 units
- @ 2 each
2 2 -2 -2 -2 -2
K2 Total Profits: 4 5 8 8 9 9
Sold 2 units
1 1 1 2 2 2
+ +
@ 2 each
2 2
K3 Total Profits: 1 1 1 1 3 3
Karnataka Profit after AiA:
Player 3 (K3) - AM
Run 5 Bid Results
Round One Clearing
Price
Round One Bids
Tamil Nadu
6
+4 (profit)
Sold 2 units
@ 2 each
Player 2 (K2)
2
1
Plot Values
1 1 2 2 2 4
+ +
2 2
K1 Total Profits: 1 1 1 1 3 3
Player 1 (K1)
11
10
9
8
7
6
5
4
3
Breakdown
(values per plot)
T2 T2 Ke2
T2 T2 Ke2 K2 K2 K2 K2 K2 K2 T2
Ke2
Ke2
T1 T1 T2 Ke2 Ke2 Ke2 Ke2 K2 K2 K2 K2
K2 K2 K2
Ke1 Ke1 Ke1 Ke1 K2
T1 T2 Ke2 Ke2 Ke2 K2 K2 K2 K2
Run One
Run Two
T1
15/15
40/40
10/10
10/15
30/40
7/10
T3
+6 (profit)
10/9
63/76
Round Two
Clearing Price
Ke1 Ke1 Ke1 Ke1 K2
2
T3 T3 T3 T3 K1 K3 K3 K1 K1
Players
T2
6
Round Two Bids
T2 T2
T3 T3 T3 T3 K1 K3 K3
43/55
(new bids shown in red)
T2 T2
2
55
-12 (payment)
Results Summary
Run Three
pre AiA
post AiA
10/15
5/15
19/40
15/40
9/10
0/10
Run Four
pre AiA
10/15
15/40
9/10
Run Five
post AiA
9/15
21/40
15/10
pre AiA
10/15
15/40
9/10
post AiA
8/15
29/40
12/10
120
Production Total
Profit Total
Kerala
Ke1
Ke2
Production Total
Profit Total
Karnataka
K1
K2
K3
Production Total
Basin
Profit Total
Production Total
Profit Total
65/65
65/65
23/23
36/36
59/59
59/59
12/12
55/55
9/9
76/76
76/76
200/200
200/200
KEY
47/65
47/65
18/23
24/36
42/59
42/59
6/12
44/55
6/9
56/76
56/76
145/200
145/200
34/65
34/65
14/23
24/36
38/59
38/59
10/12
16/55
8/9
34/76
34/76
106/200
106/200
60/65
24/65
6/23
12/36
20/59
18/59
2/12
14/55
14/9
22/76
30/76
104/200
81/200
34/65
34/65
14/23
24/36
38/59
38/59
10/12
16/55
8/9
34/76
34/76
106/200
106/200
42/65
45/65
10/23
15/36
46/59
25/59
12/12
12/55
12/9
18/76
36/76
106/200
106/200
34/65
34/65
14/23
24/36
38/59
38/59
10/12
16/55
8/9
34/76
34/76
106/200
106/200
51/65
49/65
10/23
18/36
30/59
28/59
10/12
43/55
10/9
67/76
63/76
148/200
140/200
Bold text depicts increased or equal value after AiA
Experimental Design Note
Decreasing the number of shares of water between runs 1 and 2 was intended primarily to
simulate growing demand. Because it was not possible to grow the size of the groups and
because simulating growing economic value of land or factories would have added complexity,
decreasing shares of water simulated all three relevant phenomena: a growing economy, a
growing population and/or a drought period.
Observations and Results
1)
Where participants perceived inefficiency, they immediately tried to correct it by creating
a market based on favors and IOUs or by simply giving away water that they could not use.
Tamil Nadu’s player T2 had highly productive assets while T1 & T3 had low-value assets. This
team created a hypothetical market in which players with low-value assets would give their water
to the player with high-value assets in exchange for a hypothetical share of his production. For
the most part, the natural inclination was for players to bargain with fellow team members. In
another instance a market bridged a team divide with Karnataka. The shares were not evenly
distributed before the market. K1 was confident that K2 share profits, but K3 didn’t not have a
previous personal relationship with K2 or K1. K3 thought the system was unfair and initially
was not sure why they were participating in the experiment. Situations drastically changed once
the AiA was introduced, and K3 doubled their max irrigated value during a drought.
2)
Even though the players had no monetary stake in the game, they had a strong sense of
justice and injustice. Past injustices in previous rounds affected decision making in future
rounds. Run 2 initially created a bonding experience for Tamil Nadu and Kerala as the teams
discussed their cases that were to be presented to the judge. They were creative and discussed
how growing cotton would promote the local economy, etc. That bond appeared to weaken for
Tamil Nadu once they divided the units of water internally.
3)
The logical way to play the AiA is for participants to submit bids of values equal to the
values of their highest value plots that they have water to irrigate. Farmers would be willing to
sell water for the same price that it would yield if they used it to irrigate – selling saves them the
trouble of working the land, while giving them the same return they would have realized had
they worked. Participants should logically submit additional bids at values slightly lower than
121
the irrigated values of additional plots for which they do not have water to irrigate. Assuming
they want to work these additional plots, farmers are losing money by leaving them unirrigated;
therefore, to earn a profit , they are willing to pay a price for water slightly less than the
productive irrigated value of that plot. Some players followed this strategy. Others did not
understand the market well enough.
4)
The only way to try to “cheat” the AiA is for a player to submit bids that are above the
clearing price (or anticipated clearing price) and that are also below the value of the lowest
winning bid. Because players are not able to see the values of winning bids in the AiA, they do
not know how high they can bid before exceeding the value of the lowest winning bid, and
consequently buying water at the inflated price at which they wanted to sell. Only one player
understood the market well enough to employ this strategy, probably owing to a series of
discussions she had about the topic with the experimenter shortly before the simulation.
However, the strategy did not work as she had hoped.
5)
When the AiA was introduced, players with valuable assets were less likely to want to
participate in the market. This may be because they understood that in the AiA they would lose
their bargaining power over a captive group of sellers, thus losing their power to set favorable,
unenforceable terms of transactions. Another explanation is that these players simply did not
understand the AiA and saw no reason to change the current allocation scheme. However, some
players with high-value assets observed that once the market grained a critical mass they would
not be able to depend on poorer colleagues for low-priced water, and the market could be a more
economical solution over bribes and IOU’s. They also indicated that they preferred the market to
the uncertainty of a water allocation manager. Players with low-value assets preferred the
market, regardless of whether they understood it, because they believed it would provide more
certainty than informal, unenforceable agreements.
6)
When the AiA was introduced Tamil Nadu and K1 attempted to “play” the market as
though it were a traditional market—one where participants self-identified as either buyers or
sellers. Sellers attempted to inflate or “bid up” the price of water; while buyers attempted to
deflate the price with “low-ball” bids. Participants who wanted to sell, those with low
productivity potential, ended up buying water at high prices—the inflated bids they entered to
inflate price.
One member of Tamil Nadu, player T2, realized after round one that “playing” the
market and placing bets of 1 did not drive down the unit of water cost, nor did it allow him to
buy any water. In round two, T2 placed two bets of 5 and three bets of 4 to ensure that he would
be able to buy water. He understood that while it may raise the clearance price for units of
water, it also allowed him to farm and make a profit. In the end, T2 had a profit of 24 instead of
the projected profit of 15 after round one.
This experience seemed to be helpful for players as they tested the bounds of the system
for weak points to exploit. They indicated that the negative consequences caused them to
understand the market better. A series of trial runs would be helpful before instituting a real
AiA. Alternatively, players in the simulation may not have had an incentive to properly
understand the AiA because they had only factitious value invested as opposed to their own
property.
Institutional barriers, in this case team divides, seemed to complicate the introduction of
the market. Players were more apprehensive, about transacting with players from other teams
because they had not transacted with them previously. Coming from informal markets, trust
played a large role in transactions.
122
7)
When asked about the system, some players expressed interest in who would benefit the
most and the least from the AiA and what that would mean for its chances at implementation.
One participant described a “graduated slope” of positive impact. People who would benefit the
most would be the poorest, who were also the people most disadvantaged by the current system
prior to the AiA. These players had no use for water and therefore didn’t receive any when it
was scarce. When water had a value in the AiA, they were able to sell it to those who could
produce more with it. K3 was a good example of this. People with middle-value assets were
neither harmed nor helped significantly by the system. Those players with highly productive
assets would be hurt by the system because they would have to pay for water that they received
for free or through an informal market in which they set the terms. Because the richest and
presumably most powerful elements of society would be most badly hurt by implementing this
system, one player (a lawyer) expressed doubt as to whether it would be politically feasible to
implement. Other players advised that a situation where players could see and grasp the
unfairness and wasted potential would be the most fertile ground for a market. These players
also stated that the introduction of a market made them nervous about being cheated.
Effects of Simulation on Willingness to Participate in Water Markets
Player
Player 1 (“Amanda”)
Player 2 (“Kyle”)
Player 3 (“Christina”)
Player 4 (“Ben”)
Player 5 (“Paul”)
Player 6 (“Keren”)
Player 7 (“Seth”)
Player 8 (“Erica”)
Views on Markets and Auctions
in Water Allocation
“Water markets created a new source of income to the poor who struggle with
farming and providing for themselves/their families. The learning curve could
cause them to ignorantly spend money they don’t have on water they don’t
need. Proper implementation and helpful teaching tools could shorten the
learning curve.”
“Water markets can be confusing, but they are still the most efficient way of
allocating scarce resources”
Had no strong opinions
“The water allocated through a central judge was confusing without a set of
clear guidelines. This approach encouraged favoritism and left our team with
more water than we needed. ( not sure the terminology for 'central judge' but
basically the non-free market approach is what I referred to)” –Favored the
‘free-er’ market approach.
“Under the political situation described and simulated, the poor are doubly
disadvantaged. Markets have an important role to play, but implementing
them will be nearly impossible because prevailing political forces have a
vested interest in the status quo.”
No strong opinions
“Markets corrupt. Free markets corrupt absolutely. I would, nonetheless,
participate in a market if I were being disadvantaged by the system.”
“Markets seem like a really good way of making the system work better. They
don’t always work well for everyone, but they might help poor people with bad
land move up in society.”
Conclusions
Role-play simulations of the AiA increased players’ confidence about using markets to
re-allocate water. Even when players did not immediately understand the format of the auction
123
or how best to play it, most preferred to an arbitrary political process. Simulated jurisdictional
boundaries may have increased confusion in the initial rounds; however, most players seemed to
catch on as rounds progressed. The experimenter and the players observed that the AiA defused
conflict and tension by providing recourse for players who felt cheated by the politics of initial
allocation. This was true regardless of whether players initially understood the AiA or played it
correctly. Troublingly, Kerala, a well-endowed state that had a higher ratio of water to players
than the other states seemed to be disadvantaged by the AiA in this simulation. The author needs
to investigate this trend further. It may be possible that the AiA creates has a tendency to “selfcorrect” these inequities. Additional testing may be necessary to determine why this happened.
124
XI. Buy-Sell One Round Auction (ORA)
Based on research of the Cauvery Basin and observations from the AiA simulation
described in the previous section, the author devised and tested a one-round, multi-bid auction
that functions similarly to an AiA. Like the AiA, the Buy-Sell One Round Auction (ORA) aims
to maximize efficient use of land and water by providing a mechanism whereby the owners of
inefficient land and water rights (inefficient irrigated land) can sell water to owners of efficient
land without water rights (productive idle land). The ORA also seeks to overcome endowment
effect and participation effect; although these effects may be less pronounced in the Cauvery
Basin (Venkatachalam 2007).
The ORA uses a questionnaire to determine the amount of water a farmer (or other user)
received (or the minimum he will receive) through the legal-political processes involved in
allocating and reallocating water in his region. It asks the price at which the farmer would be
willing to sell the units that he did receive. These are “sell bids.” Each sell bid corresponds with
a unit of water for sale in the auction. The questionnaire asks how many units (additional units)
the farmer would like to buy at any price and at what prices he would buy each of those units.
These are “buy bids.” Buy bids generally correspond with productive plots of land that a farmer
wishes to irrigate. The distinction of buy bids from sell bids is the operative mechanical feature
of the ORA that allows it to happen in a single round, while maximizing efficient allocation.
ORA Questionnaire

How many units of water do you have this season based on assigned/expected rights
through legal political process? ___________

At what price would you be willing to sell those units? Please list a value for each unit:
______, ______, ______, ______, ______, ______, ______, ______, ______, ______

How many units of water would you like to buy this season at any price? ______

Please list the prices at which you would buy these units of water:____, ____, ____, ____, ____, ____, ____
______, ______, ______, ______, ______, ______, ______, ______, ______, ______
After participants return their card, the sell bids are recorded and listed in descending
order of price. Sell bids with prices higher than the highest buy bid are discarded -- the farmers
who own this water keep it because the prices they listed were higher than any bidder in the
market is willing to pay. The remaining sell bids constitute water for sale in the auction. These
remaining sell bids, starting from the lowest price are matched with buy bids, starting from the
highest offer. Low sell bids (corresponding with real water that would irrigate the least
productive land) match with high buy bid offers (corresponding with the most productive land
that would lie idle). Buy bid offers must be greater than or equal to sell bid prices.78 Matching
continues with progressively lower buy bid offers matching with progressively higher sell bid
prices until buy bid offers no longer exceed (or equal) sell bid prices. The market price is set at
the lowest buy price that still “buys” a remaining unit of water. Bidders who entered buy bids
78
In order for a hypothetical sale to be possible, buy offers must exceed or prices sale prices. This parameter is used
to delimit the set of buyers and sellers.
125
greater than or equal to the market price will buy water at the market price from bidders who
entered sell bids lower than or equal to market price. Rights to water units corresponding with
sell bids higher than the market price are returned to owners.
The diagram show the results of a simulated ORA conducted by the author and a research
partner.
Psychological and User-Friendly Aspects
The Buy-Sell One round auction (ORA) has elements that arguably recommend it for
developing world scenarios, like the Cauvery Basin. First, it differentiates between buying and
selling when the players place bids. This serves two purposes. First, it may help a farmer
unfamiliar with non-traditional (in this case, bid-only) auctions more quickly understand how
best to participate in the auction. Differentiating between “buy” and “sell” allows the participant
a feeling of "agency" in the process, and thus a feeling of control. Secondly, it "forces" the
player to carefully evaluate the value of water on his land. A participant must break down and
delineate exactly how much he values each unit or hypothetical unit of water on his farm before
the start of the auction. The segmented, methodical approach makes the market more
"cumbersome," but may make it more comfortable to some.
In the ORA, participants are not compelled to be in a certain place at a certain time or to
phone-in or electronically log-in bids via a network in real-time. The auction is one step, lowtech and can be completed by filling out a questionnaire from a participant’s home. Participants
must delineate the terms under which they will sell and under which they will buy. This helps
participants understand how to participate in a way that maximizes their potential gains and the
efficiency of the auction. Through the ORA process, water users are unlikely to fear that their
ownership of water is being put into jeopardy by a system that they do not fully understand or
control. The ORA format may reduce participants’ or prospective participants’ fears of being
cheated or mistakenly losing their water in an unfavorable deal.
Like the modified AiA tested above, the ORA offers recourse for farmers and other water
users after water rights have been assigned, fairly or unfairly, through a periodic or on-going
126
legal-political process. The ORA could conceivably work to reallocate any intermediate good
that creates value based on productive capacity of land or capital infrastructure.
Bidding Form
ORA Questionnaire

How many units of water do you have this season based on assigned/expected rights
through legal political process? ___________

At what price would you be willing to sell those units? Please list a value for each unit:
______, ______, ______, ______, ______, ______, ______, ______, ______, ______

How many units of water would you like to buy this season at any price? ______

Please list the prices at which you would buy these units of water: ___, ____, ____, ____, ____, ____
______, ______, ______, ______, ______, ______, ______, ______, ______, ______
Form Instructions
To sell:
If you have water this season, estimate its value to you, irrigating your best land.
Place sell-bids for water reserved for good lands at prices greater than the profits those irrigated
lands would bring in. Sell "extra" water rights that would go towards poor lands at low prices -lower than those fields would bring you in profit if those lands were irrigated.
Explanation:
Low sell bids will get matched up first. Higher sell bids might not get matched up, depending on
the market price of water and whether or not there is someone willing to pay your prices.
To buy:
If you have land, but not enough water to irrigate it, submit buy bids. For good fields without
water, submit higher buy bids – slightly less than what those fields would bring you in profit if
irrigated. For poor fields without water, submit lower buy bids – slightly less than the profit
from those fields when irrigated.
Explanation:
High buy bids will be matched up first; low buy bids might not get matched up depending on the
market price and whether there were sellers willing to sell to you at your price.
Summary:
Determine price-points at which it makes sense for you to buy or sell units of water designated
for specific fields or purposes. The auction will run and you will buy or sell depending on
whether or not those price points are reached.
Simulation
The ORA simulation used painter’s pallets to simulate farms, just like the AiA
simulation. Participants filled out questionnaires and submitted them to the experimenter.
Participants were allowed to watch how the market handled their bids, which increased
transparency in the auction and consequently comprehension and trust of the participants.
127
ORA Total Bids
Total Sell Bids: 15
Sell bids placed: 12 12 11 10 6 5 5 4 3 3 3 3 3
Total Buy Bids: 18
(note: forms above are recreated from originals,
which were copies of a handwritten form)
ORA Run 1 Bid Results
Blue depicts water sold/bought
Sell Bids
12
11
10
9
8
7
6
5
4
3
2
1
Buy Bids
K2 K2
T2
Ke2
T2 K2 K2
Ke2
T2 T2 K2
Ke2
K2
T1
Ke2 Ke2 Ke2
K3 K3 T1 T3 T3 T3
T2
T2 T1 T1 T3
ORA Run 2 Bid Results
Blue depicts water sold/bought
Sell Bids
12
T2 K2
Buy Bids
Buy bids placed: 9 9 9 6 6 6 5 4 4 4 4 3 3 1 1 1 1 1
128
11
10
9
8
7
6
5
4
3
2
1
Ke2
Ke2 Ke1
K2
Ke2 Ke1 T1
K2 K2 K2 T2 T2
K1
K2 T2 T2
K3 T3 T3 T3
Ke2 Ke2 Ke2 Ke1 Ke1
K3 K1
K1 T1 T1 T2
ORA Run 3 Bid Results
Blue depicts water sold/bought
Sell Bids
K2
T2 Ke2
T2
Ke2 Ke2 Ke1 Ke1
K2 K2
T1
T2 T2 Ke2 K2 K2 K2 K2
K3 K3
Ke2 Ke1 Ke1
T3 T3 T3
T1 Ke2 Ke1 Ke1
K1
T1 T2
K1
K1
Players
Clearing Price
T1
Tamil Nadu
T2
T3
ORA Results
pre ORA
ORA 1
-5
16
10
15
15
21
9
Profit Total
Ke1
14
ORA 2
6
10
12
27
42
52
34
34
Production Total
K
e
r
a
l
a
12
11
10
9
8
7
6
5
4
3
2
1
Buy Bids
14
ORA 3
6
10
12
24
40
49
14
46
46
14
129
Ke2
Profit Total
Karnataka
10
16
8
K2
K3
Production Total
Basin
Profit Total
Production Total
Profit Total
24
38
38
38
38
Production Total
K1
14
24
15
20
20
10
24
21
34
34
106
106
4
60
55
140
145
42
28
28
18
11
10
11
56
55
124
132
30
32
118
96
Observations & Conclusions
Several years of trail ORA’s could precede implementation of a real auction. Trial
auctions would be easy to conduct with mailers, which participants would fill out every year or
every agricultural season. Hypothetical results could be tabulated and results cards mailed back,
stating the individual’s hypothetical outcome. After several years of trial auctions, farmers
would be asked if they wanted to participate in a real ORA. Once grass-roots support for the
auction grew, instituting it would be easier. Because WUA determine and coordinate irrigation
schedules, the WUA board would have little trouble coordinating the ORA (Venkatachalam
2013).
Once participants grasped the system, the auction was favorably received. The
methodical nature of the bid process helped participants understand the system and helped those
who did not, to participate. The mechanical complexity of matching buyers with sellers in the
system, combined with the threat-point of not being able to sell water that was worthless to the
participant, or not being able to buy water to irrigate valuable land, deterred attempts to “game”
the system. When participants did try to game the system (sellers listing high prices and buyers
listing low prices), the bids were thrown out. This hypothetically creates a scenario where less
transactions occur (endowment effect), decreasing the efficiency of the market; however, it
increases the “safety” of the market. As discussed previously, water markets in Tamil Nadu, and
likely in Karnataka, may not be as susceptible to endowment effects (Venkatachalam 2007).79
The results of the ORA were similar to those of the AiA. They showed that water moved
around a network of participants when the market was introduced. Production and profits
increased consistently. In the Indian context, the ORA may be suitable because it is low-tech,
participants only need to mail in forms or speak with a state official, as opposed to being present
at a live auction. The official languages of the three Cauvery states are different, which might
make a live auction difficult to manage. Roads in rural India are poor, and rural people may not
have access to vehicle, computer or telephone, making participation in a larger-scale live auction
more difficult. The ongoing nature political squabbles and the frequent uncertainties they create
might necessitate more frequent auctions, meaning that those who have difficulty traveling
would be doubly inconvenienced in the case of a live auction that takes place far away from the
participant’s homes. The auction doesn’t begin until everyone has submitted their card. People
who do not understand the auction, can slow down the process until they feel comfortable
proceeding. Again, this lowers the efficiency of the market in a live setting by raising
79
The researches conducting the Bhavani used similar techniques to the ones in the ORA, asking maximum buy
price and minimum sell price.
130
transaction cost. Furthermore, it makes the system “safer” to those unfamiliar with it. Marginal
land in India may correspond with reduced access to education, and marginally-landed
participants are likely to be net-sellers in at water auctions. If these participants try to “game”
the system, the only penalty is that their high bids will be thrown out. This may reduce
objections from pro-poor activists and politicians who seek to minimize official trade of water
resources to maintain hegemony.
The ORA may work best in settings where participants’ lands have a range of productive
capacities and in settings where most participants can delineate scenarios where they would buy
and scenarios where they would sell. The ORA may be less effective in settings with large
groups of sell-only participants. The author speculates that in the Cauvery Basin, those farmers
who fall into the this sell-only category are likely to be working marginalized land and very
poor, making the threat-point of a non-sale high enough to deter sellers from high-bidding
around the margin.
131
XII. Conclusion
This study addresses the political, federal institutional and economic drivers of
intensifying inter-state water conflicts (ISWC) and shortages in India and proposes a novel
solution. An ongoing process of federalization in the Indian system has created a mismatch
between inter-state water dispute resolution mechanisms and the politics of the day. Decreasing
centralized power and increasing state-based power, manifested in national and state-based
political parties, has made unworkable a dispute resolution system premised on the superior
power of the central government and a dominant national party. The problem is compounded by
rapidly increasing population size and economic demand for water. ISWCs in states with a
legacy of ethno- and caste-based nationalist movements are more difficult to resolve. The center
has a weaker license to operate in these states. Multiple state-based parties dominate political
contests in these states, and their representatives in parliament hold unbridled pivotal power in
fragile coalition governments. Further a well-established precedent of ethno-political outbidding
makes inter-state disputes more intractable. The Cauvery basin is an illustrative example;
however, other basin disputes such as the Ravi-Beas and the Krishna also conform to the theory
described.
The study predicts that market forces provide a workable way of balancing increasing
economic demand with finite supplies of water in these basins. Market forces may be more
adroit at balancing supply and demand than solutions entailing more comprehensive
management of water. Furthermore, prevailing political conditions make a political or
institutional fix infeasible.
The author tested two auctions in this study and tested the effects of role-play scenarios
on willingness to accept markets as a way of allocating water. A uniform-price, bid-only
auction, known as an All-in-Aucton (AiA) was tested for its ability to reduce economicallydriven political conflict in an “after politics” context and for its ability to redistribute water to
efficient uses, while increasing profits and overall production. The author developed a new80
auction system and tested its ability to move water to efficient uses and increase profits and
production.
Role-play scenario games increased participants’ willingness to accept markets as water
allocation tools. The AiA, while difficult in a three team scenario (as predicted by Zetland 2013:
79), was still successful at reducing conflict. Furthermore it consistently increased production
and profits. The ORA similarly increased production and profits. Some characteristics of the
ORA may lend themselves to conditions in the Cauvery Basin; although, the auction would need
to be tested in field-based settings to determine susceptibility to endowment effect.
The author infers that introducing market forces after politics will create a feedback loop,
which will reduce conflict and shortages. Providing farmers and other water users who employ
water as an intermediate good with an alternate and official means of obtaining or selling water
will reduce economically-driven apprehension about water supply. In turn, politicians,
especially in states with strong ethno-nationalist legacies where political outbidding is a deeply
entrenched, will be less likely to politicize and prolong interstate water disputes. Depoliticization of water resource allocation may allow markets to expand to broader “command
areas” and may allow individual property rights over water to take hold. The eventual
80
The author is research similarities of ORA to auctions developed by Lawrence Ausubel of the University of
Maryland and his “Auctions Lab” program.
132
implementation of inter-state water auctions through the processes described above would
greatly reduce conflicts and shortages in the Cauvery Basin.
133
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