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ISSN:2249-7137

Vol. 5, Issue 5, May 2015

Impact Factor: SJIF 2013=5.099

P ublis he d b y: S out h A s ia n A c ade m ic R es e arc h J our nals

ACADEMICIA:
An International
Multidisciplinary
Research Journal
( A D o u b le B l i n d R e fe r e e d & R e v ie we d I nt e r na t io na l J o ur na l)

WATER FINANCE: NEXT CHALLENGE BEFORE INDIAN ECONOMY


Mr. Suryawanshi Santosh D*

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*Ph.D Research Scholar,


Department of Economics,
Solapur University,
Solapur, India.
ABSTRACT
Water is the most valuable natural resource. The growing existence gap between
Irrigation potential created (IPC) and irrigation potential utilized (IPU) important
issue for the Indian government in the perspective of supply of safe drinking water,
demand for industrial and agricultural purpose and so. The rising gap raises
questions about the need for public investments coming year in creating further
irrigation potential in the country, if the existing potential created remains underutilized. In this context need to more finance for water and irrigation in India. How
can increase finance for water this is major challenge before Indian government in
the rule of effective public expenditure management policy.
KEYWORDS: Water finance, India Economy, Expenditure, AIBP, IPC and IPU,
Water Requirement & Resources.
__________________________________________________________________________
INTRODUCTION
Water is the most valuable natural resource. There has been an increased awareness about the
significance of water for survival and its limited supply. By 2050, world population is going to
touch 8 billion mark! Water will become scare. Global farming accounts for 70% of water use,
while only 17% of farmland is irrigated and it provide only 40% (estimated) of worlds food.
Water application losses in irrigation are quite high-almost 40% of the total irrigation water is
lost as evapo-transpiration (UNESCO). Sustainable development and efficient management of
water is an increasingly complex challenge in India. Increasing population, growing
urbanization, and rapid industrialization combined with the need for raising agricultural
production generates competing claims for water. (Pc11 th plan) India with 2.4% of the worlds
total area has 17 percent of the worlds population; but has only 4% of the total available fresh
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Vol. 5, Issue 5, May 2015

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water. This obviously indicates the need for water resource development, conservation, and
optimum use. (Pc-11thPlan)

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Irrigation is a state subject and irrigation projects are formulated, executed and funded by
the State Governments themselves from their own resources. Central assistance is released in the
form of block loans and grants not tied to any sector of development or project. A large number
of major and medium irrigation projects in the country are languishing due to various reasons,
the most important of them being inadequate provision of funds by the concerned State
Governments. As a result, large amount of funds spent on these projects are locked up and the
benefits envisaged at the time of formulation of project reports could not be achieved. This is a
cause for concern to the nation and initiative is required at the national level to remedy the
situation. Since the irrigation projects are capital intensive, and states with limited resources at
their disposal find themselves unable to meet the desired fund demands of all the projects, the
implementation of these projects get delayed.
The Water Resources Planning, development and management is of supreme concern to
the water resource planners, administrators and Indian government. The water resources plans
have an important role in the development and ensuring availability of water for different uses.
(cwc 2005) In our country Water Resources Development Projects aimed at making availability
of water for different uses, are being largely accomplished, operated, managed and maintained
by the Government of India.
WATER RESOURCES
The water source potential of in India have assessed from time to time by different government
agencies. The different estimates are shown in Table 1. It may be seen that since 1954, the
estimates have stabilized and are within the proximity of the currently accepted estimate of 1869
billion cubic metric (bcm) which includes replenish able groundwater which gets charged on
annual basis.
TABLE 1 ASSESSMENTS OF WATER RESOURCES IN INDIA
Agency

Estimate in bcm

Deviation from 1869 bcm

First Irrigation Commission (190203)

1443

23%

Dr A.N. Khosla (1949)

1673

10%

Central Water and Power Commission


(195466)

1881

+0.6%

National Commission on Agriculture()

1850

1%

Central Water Commission (1988)

1880

+0.6%

Central Water Commission (1993)

1869

Source: Eleventh Five Year Plan


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WATER REQUIREMENT
The National Commission on Integrated Water Resources Development (NCIWRD) has assessed
the requirement of water for various sectors in the year 2000. This requirement have based on the
assumption that the irrigation efficiency will increase to 60% from the present level of 3540%.
The Standing Committee of MoWR also assesses it periodically. These are shown in Table 2
TABLE 2 WATER REQUIREMENT IN INDIA BY 2050
Water Demand in BMC

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Sector

Standing Sub-Committee of MoWR

NCIWRD

2010

2025

2050

2010

2025

2050

Irrigation

688

910

1072

557

611

807

Drinking water

56

73

102

43

62

111

Industry

12

23

63

37

67

81

Energy

15

130

19

33

70

Others

52

72

80

54

70

111

Total

813

1093

1447

710

843

1180

Source: Eleventh Five Year Plan


PER CAPITA AVAILABILITY OF WATER 1
The annual water availability in terms of utilizable water resources in India is 1,122 km3. Besides
this, the quantity of 123 km3 to 169 km3 additional return flow will also be available from
increased use from irrigation, domestic and industrial purposes by the year 2050. The per capita
availability of utilizable water, which was about 3,000 m3 in the year 1951, has been reduced to
1,100 m3 in 1998 and is expected to be 687 m3 by the year 2050.
TABLE 3PER CAPITA AVAILABILITY OF WATER
Year

1951

1991

2010

2025

2050

Population (10 )

361

846.3

1,157

1,333

1,581

Average Water Resources


(m3/person/year)

3,008

128.3

938

814

687

Source: Eleventh Five Year Plan


1

http://www.nih.ernet.in/rbis/India_Information/Water%C2%A0Budget.htm

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OBJECTIVE
1. To Identification of existence of a gap between Irrigation potential created (IPC) and
irrigation potential utilized (IPU).
2. To study the Financial Expenditure on Irrigation.
3. To examine the progress of Accelerated Irrigation Benefit Programme.
METHODOLOGY AND DATA

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This research paper have based on secondary data, relevant secondary data have collect from
government report such as Economics Survey(2013-2014 ),Handbook on Indian Economy(Dec
2014) and water and related statistics(Central water commission 2010). Collected statistical data
have analysis through growth rate, percentage of change, percentage, correlationand Summary
Statistics.
GAP BETWEEN IPC AND IPU
The growing existence gap between Irrigation potential created (IPC) and irrigation potential
utilized (IPU) important issue for the Indian government in the perspective of supply of safe
drinking water, demand for industrial and agricultural purpose and so. The Figure 1is based on
the data available shows the increasing gap between these two parameters that are considered
suitable substitutions for supply of and demand for water for irrigation purposes. Obviously, the
rising gap is a concern for the policy makers who have to do a balancing act to allocate scarce
resources across several important sectors of the economy. The rising gap raises questions about
the need for public investments coming year in creating further irrigation potential in the
country, if the existing potential created remains under-utilized. However, one is not very
definite if the observed gap between these two parameters truly portrays the gap between supply
of and demand for irrigation water in reality. In this context need to more finance for water and
irrigation in India. How can increase finance for water this is major challenge before Indian
government in the rule of effective public expenditure management policy.

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Vol. 5, Issue 5, May 2015

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FIGURE 1 : GAP BETWEEN IPC AND IPU (FIRST TO X PLAN PERIOD IN INDIA)

Plan-wise IPC and IPU in India


7281

X Plan

10867

7623

Ninth Plan

17032

8378

Eighth Plan
4266
4564

Annual Plans

9764

Seventh Plan
6178

Sixth Plan

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IPU

8604

6375

Fifth Plan

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11311

4182
4595

Annual Plans

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9761

IPC

7914

6317
6988

Fourth Plan
3596
3550

Annual Plans

4392
4500

Third Plan
2738
2814

Second Plan

2439

First Plan
0

2000

3645

4000

6000

8000

10000

12000

14000

16000

18000

(Unit : 000 Hectare)

Source: Central Water Commission (P&P Directorate), MOWR. (Minor Irrigation Division) and
Working Group Report of XI Plan
The Progress of IPU is less than IPC. The poor rate of achievement of target reflects deep-rooted
problems with major and medium irrigation projects. Major irrigation projects normally have a
gestation period of 1520 years while medium projects take 510 years for completion. Against
these norms, a large number of major as well as medium projects are on-going for 3040 years or
even more. This is due to poor project preparation and implementation as well as a thin
spreading of available resources. (10th plan)
FINANCIAL EXPENDITURE ON IRRIGATION
There has been a consistent increase in the financial expenditure on irrigation sector over
different Plan periods. But the expenditure has not matched with the growth of total Plan
expenditure on all sectors as is obvious from the share of expenditure on irrigation to the total
which declined from 7.19 % during Third Plan to about 5.46 % in XI Plan.
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TABLE 4 FINANCIAL EXPENDITURE ON IRRIGATION (1961 TO 2012)


Amount (Rs)

% of Growth

Total Plan (Rs)

% of Growth

Third Plan

664.7

8576.5

1961-1966

(7.19%)

Fourth Plan

1354.1

1969-1974

(7.90%)

Fifth Plan

3876.5

1974-1979

(8.95%)

Sixth Plan

10929.9

1980-1985

(9.09%)

Seventh Plan

16589.9

1985-1990

(7.05%)

Eighth Plan

32525.3

1992-1997

(6.97%)

Ninth Plan

55420

1997-2002

(6.06%)

Tenth Plan

103315

2002-2007

(6.34%)

Eleventh Plan

210326

2007-2012

(5.46%)

(92.81%)
103.72

15778.8

83.98

(92.10%)
186.28

39426.2

149.87

(91.05%)
181.95

109291.7

177.21

(90.91%)
51.78

218729.6

100.13

(92.95%)
96.05

434100

98.46

(93.03%)
70.39

859200

97.93

(93.94%)
86.42

1525639

77.57

(93.66%)
103.58

3644718

138.90

(94.54%)

Source: Economic Survey 2011-2012 and 2013-2014-Statistical Appendix


The expenditure on irrigation sector have increased from Rs. 664.7 crores in 3 rd Plan to
Rs. 210326 crores in the 11th Plan. In the same time period total plan expenditure have increased
from Rs 8576.5 in 3rd plan to Rs3644718 in 11th plan.
A major problem affecting irrigation systems in the states is the severe erosion of the
financial status of these systems owing to very low water charges. Not only does this encourage
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inefficient water use and a tendency for head-end canal users to shift to water intensive crops, it
also creates an environment in which irrigation charges do not cover even operating costs leading
to progressive neglect of maintenance which further reduces efficiency.
PROGRESS OF ACCELERATED IRRIGATION BENEFIT PROGRAMME
Irrigation is a state subject in India but the Government of India supports the states strength
through the Accelerated Irrigation Benefit Programme (AIBP). AIBP was launch in 199697.
The Main ambition of AIBP is accelerating the implementation of large major and multi-purpose
irrigation projects.Which were beyond the resource capabilities of the states. Originally, AIBP
assistance was in the form of a loan to the states. In 200405, a grant component was introduced
and from 200506 grants were provided only under AIBP.

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The standard rule is grant assistance of 25 per cent of the project cost but for
drought/flood-prone and tribal areas 90 per cent, grant assistance is being provided since
December 2006. The Central Loan Assistance (CLA)/grant released and the irrigation potential
created since the inception of AIBP have given in Table 5
TABLE 5: CLA/GRANT AND IRRIGATION POTENTIAL CREATED THROUGH
AIBP, 19962012
Year

Amount of
CLA/ Grant
Released
(Rs crore)
500
1996-97
952
1997-98
1,119
1998-99
1,450
1999-2000
1,856
2000-01
2,602
2001-02
3,062
2002-03
3,129
2003-04
2,867
2004-05
1,900
2005-06
2,302
2006-07
5,446
2007-08
7,598
2008-09
6,946
2009-10
6837
2010-11
5783
2011-12
Source: www.cwc.nic.in

% of change

90.4
17.5
29.6
28.0
40.2
17.7
2.2
-8.4
-33.7
21.2
136.6
39.5
-8.6
-1.6
-15.4

Irrigation Potential
Created
(in 000 ha)
74.5
182
259
223.2
528.8
442.1
388
447
510.4
529.7
872.3
521.2
507.9
752.4
514.4
187.26

% of change

144.3
42.3
-13.8
136.9
-16.4
-12.2
15.2
14.2
3.8
64.7
-40.2
-2.6
48.1
-31.6
-63.6

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The Central Loan Assistance (CLA)/grant was released for AIBP 500 crore in 1996-97. It
was increased 7598 crore in 2008-2009. After 2009 its amount have decline.Irrigation Potential
was created under the AIBP 74.5 thousands hec in 1996-97 and its Irrigation Potential have
increased 872.3 thousands hec in 2006-07. Amount of CLA/ Grant Released 5783 crore in 20122013 and same year Irrigation Potential Created 187.26 thousands ha.
In the Figure 2 show the CLA/Grant and Irrigation Potential Created through AIBP
during the period of 1996 to 2012. It is clear indicate the Central Loan Assistance (CLA)/grant
have increased upward linear trend line but Irrigation Potential Created under this Programme
are constant between 74.5 to 872.3 thousands ha.
FIGURE 2 : CLA/GRANT AND IRRIGATION POTENTIAL CREATED THROUGH
AIBP 19962012
Amount of CLA Grant Released

Irrigation Potential Created

AMOUNT IN CRORE & IPC IN 000 H

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Linear (Amount of CLA Grant Released )


8000
7000

6000
5000
4000
3000
2000
1000
0

YEAR

Linear correlation between Amount of CLA/Grant Released and Irrigation Potential


Created is 0.400634. This correlation show the positive correlation between Amount of
CLA/Grant Released and Irrigation Potential Created.
The equation for the correlation coefficient is:

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TABLE 5.1 SUMMARY STATISTICS, USING THE OBSERVATIONS 1996-97 2011-12

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Summary Statistics, using the observations Amount of CLA/


1996-97 2011-12
Grant Released

Irrigation
Potential
Created

Mean

3396.81

433.760

Median

2734.50

477.450

Minimum

500.000

74.5000

Maximum

7598.00

872.300

Std. Dev

2341.38

211.034

C.V.

0.689289

0.486524

Skewness

0.614818

0.208154

Ex. kurtosis

-1.05895

-0.314725

IQ range

4147.25

294.750

Table No-5.1 show the summary statistics of Amount of CLA/Grand released and
irrigation potential created darning 1996 to 2012. The average amount of CLA/Grant released by
government in last 16 year is Rs 3396.81 crore per annum and irrigation potential created
433.760 thousands hector in same period. Std. Deviation of amount of CLA/ Grant Released and
Irrigation Potential Created are positive variance. Both variables Skewness is also
positive.Kurtosis is the measure of Flattoppedness of a curve. But it is negative.
POLICY IMPLICATIONS
1. The Principal requirement of felling the gap between IPC & IPU.
2. Need of adequate financial resources for water finance also effective coordination
between central and state government.
3. Taxing water charges on crop basis
4. The need of common water policy among the Indian States
5. Acceptable funds should be provided for the operation and maintenance of the irrigation
system.
6. The acceptable water rates may be improved from the irrigation system.
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CONCLUSION
Indian government has successfully completed a large number of irrigation projects under the
five year planning period. This had absolutely helped us in meeting the challenge of food and
water security of rural masses. Many water linked project are operating at poor efficiency due to
high delivery loss and poor on farm level irrigation management. Government of India
undertaking various efforts to improve the performance of irrigation projects effectiveness, but
after spending huge amount on water do not reduce gap between IPC and IPU.
REFERENCE
Central Water Commission (2013): Water and Related Statistics, Central Water Commission,
Government of India, New Delhi.
Draft of 10th five year plan

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Draft of 11th five year plan


Draft of 12th five year plan
Economic Survey 2011-2012 and 2013-2014-Statistical Appendix
Gadgil, D R (1948): Economic Effects of Irrigation: Report of a Survey of the Direct and
Indirect.
Government of India (1972): Report of the Second Irrigation Commission, Vol I, Ministry
ofIrrigation and Power, New Delhi.
J. Briscoe and R.P.S. Malik (2006): Indias Water Economy: Bracing for a Turbulent Future, The
World Bank.
K. Pomeranz (2009): The Great Himalayan Watershed: Agrarian Crisis, Mega-Dams and the
Environment, NewLeft Review, No. 58, JulyAugust 2009.
R. Ackerman (2011): New Directions for Water Management in Indian Agriculture.
Report (2008) on Studying Gap between Irrigation Potential Created and Utilized in India, Indian
Institute of Management Vastrapur, Ahmedabad-380015.
www.cwc.nic.in
www.mowe.gove.in
www.planningcommission.nic.in
www.unesco.org

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