The Supreme Court’s recent order to the Karnataka government to release 15,000 cusecs of Cauvery river water to Tamil Nadu, which was later revised to 12,000 cusecs following violent protests in Bengaluru, underscores the gravity of the challenge of water crises faced by the nation.
The social unrest is merely symptomatic. Its roots, and perhaps even a relatively better solution than historically implemented ones, lie at the fundamentals of economics.
There’s no doubt that given its value to the humankind, water is a fundamental human right. But like any other resource, it’s also scarce. There’s only so much water available to feed the needs and requirements of everyone on earth. If equitable distribution of water were pragmatically possible, water wars would never have occurred – at least not to such magnitude. But the issue is complex and solutions must therefore account for this complexity.
It’s also evident by now that India’s historically attempted solutions to water crises have been nowhere proximate to eliminating the crux of the problem. On the contrary, the crisis seems to be exacerbating every year. This behooves us to at least begin discussing the truly audacious questions about ownership. Clarity about ownership shall inevitably lead to clarity about its sharing.
India derives its water laws from the English common law, which bases ownership according to the riparian system of water rights. In simple terms, this system allocates water according to land ownership adjacent to the water body. Evidently, those living in the interior, landlocked regions have weaker, more subordinate property rights under this system.
The alternative to riparian system is the legal doctrine of prior appropriation, which was adopted in most of the western states of North America owing to their aridity and acute water scarcity.
Prior appropriation accords water rights to the person who first takes water for “beneficial use”, regardless of whether he owns the land. Property rights are strongly defined under this system, which makes water allocation as well as sharing simpler.
In India, the issue of water sharing was first dealt with, extensively but insufficiently, by the Indus Commission’s report in 1942. The commission was appointed to investigate the complaint of the government of Sind over its right to the waters of river Indus and its consequent disputes with Punjab.
Its report was the first authoritative examination of the issues surrounding the rights relating to inter-state water bodies, and discussed the water law as it applied in three cases: between individual riparian owners; between a provincial government and its inhabitants; and between two provinces.
With regards to water rights between two provinces, the commission held what it called the principle of “equitable apportionment” or the distribution of waters according to each state’s fair share of an inter-state river.
This was categorically different from both riparian as well as appropriation doctrine. The only problem was the question of what exactly was a state’s “fair share” was left on the circumstances of each case. This left the door open for discretion and arbitrariness, the ramifications of which are reflected in the today’s Cauvery water sharing issue.
Subsequently, the Narmada Disputes Water Tribunal in 1978 and later Ravi and Beas Waters Tribunal in 1987 followed the same principle – the latter tribunal to solve the dispute arising from Punjab’s contention that neither Haryana nor Rajasthan had any claims to the waters of Beas and Ravi.
These tribunals, as also the Indus Commission, however, not only failed to address the issue of property rights with regard to water but also expressly dismissed the prior appropriation doctrine that paves the way for those rights.
Interestingly, an April 2016 paper titled ‘Economic Analysis of Property Rights: First Possession of Water in the American West’, published by the National Bureau of Economic Research, throws light on the favorable effects of prior appropriation doctrine of water rights on economic growth.
The authors Bryan Leonard and Gary Libecap studied 7,800 rights in Colorado, United States, established between 1852 and 2013, and found that this doctrine led to large scale investments in irrigation as it granted the right to divert water to lands distant from a stream.
Investments in turn led to long-run increases in income per acre in agriculture. This, Leonard and Libecap write, “does not incorporate multiplier effects from higher agricultural incomes that might have doubled the economic impact in each state.”
The bottom line being that property rights are critical to the solution of any disputes relating to the distribution of scarce resources such as water. These rights need to be defined properly, following which they also need to be strongly protected. The water wars pertaining to the Cauvery river would have been prevented had India adopted the prior appropriation doctrine that guarantees those rights.
Interestingly, the farmers of Tamil Nadu had an upper hand in the 1894 and 1924 water sharing agreement negotiations partly because the Chola kings had built dams and reservoirs as far back as the 10th century.
The rulers of Karnataka built their first reservoir only in 1934. This is the classic prior appropriation doctrine at work, albeit subtly.
It may be radical, even primitive, for India at this stage of economic and social evolution to consider shifting to prior appropriation doctrine given the numerous political and social exigencies. But then an alternative, better, long term and sustainable solution is far from sight!
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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.