Water valuation and pricing in India: imperatives for sustainable water governance

This paper highlights the importance of water valuation and pricing for sustainable and efficient water allocation and management in India. An efficient water-pricing mechanism could be a tool to address the impending crisis of water scarcity, which necessitates a robust, objective, and holistic valuation technique. Every unit of water consumed for economic purposes has an ecological footprint, and this opportunity cost or externality factor needs to be considered. This paper discusses the importance of considering the bundle of ecosystem services provided by water and emphasises the necessity of capturing externalities through inclusive water pricing. It assesses the Indian scenario, revealing disparities in water pricing across states and the urgent need for an efficient water tariff system to mitigate the growing demand-supply gap. The paper examines two cases in this context: (i) a climate-resilient priced drinking water facility in the Sundarbans that adopts a multifaceted approach to water tariffs that balances efficiency, equity, revenue generation, and sustainability
while considering various socioeconomic factors and environmental costs; and (ii) a case in the Upper Ganges demonstrating how the valuation of ecosystem services associated with flow regimes can help in efficient water management.