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Groundwater Irrigation in North India: Institutions and Markets

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  • Banerji A
Abstract
This paper analyzes the institutions and markets that govern groundwater allocation in the sugarcane belt of Uttar Pradesh, India, using primary, plot-level data from a village which shares the typical features of this region. Electricity powers tubewell pumps, and its erratic supply translates into randomness in irrigation volumes. The paper finds that plots are water-rationed, owing to inadequate supply of power. A simple model shows that a combination of such rationing and the village-level mechanism of water sales can lead to great misallocation of water across plots, and result in large crop losses for plots that irrigate using purchased water. We infer the existence of a social contract that mitigates these potential losses in the study area to a remarkable extent; in its absence, average yields are estimated to be 18% lower. The finding that the water allocation is close to efficient (given the power supply) marks a sharp contrast with much of the existing literature. Notwithstanding the social contract, the random and inadequate supply of power, and therefore water, is inefficient. The dysfunctional power supply is part of a larger system of poor incentives to produce reliable and adequate power. In simulations we find that such reliability can improve yields by up to 10 %, and pay for a system of electricity pricing that gives incentives to the power supplier to actually provide adequate power. However, even at reasonably high power prices, irrigation volumes are large enough to continue to seriously deplete the water table. The problem is that traditional rights of water use do not take into account the shadow price of the groundwater. We provide a rough first analysis to suggest that a 15% markup on the economic unit cost of providing electricity would make for intertemporally efficient water use. [WP SANDEE No. 19-06]

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  • Banerji A, 2007. "Groundwater Irrigation in North India: Institutions and Markets," Working Papers id:899, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:899
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    References listed on IDEAS

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    1. Schoengold, Karina & Zilberman, David, 2007. "The Economics of Water, Irrigation, and Development," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.), Handbook of Agricultural Economics, edition 1, volume 3, chapter 58, pages 2933-2977, Elsevier.
    2. Meinzen-Dick, Ruth Suseela, 1996. "Groundwater markets in Pakistan: participation and productivity," Research reports 105, International Food Policy Research Institute (IFPRI).
    3. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    4. Hanan G. Jacoby & Rinku Murgai & Saeed Ur Rehman, 2004. "Monopoly Power and Distribution in Fragmented Markets: The Case of Groundwater," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(3), pages 783-808.
    5. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    6. Evenson, Robert E. & Pray, Carl E. & Rosegrant, Mark W., 1999. "Agricultural research and productivity growth in India:," Research reports 109, International Food Policy Research Institute (IFPRI).
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    Cited by:

    1. Banerji, A. & Meenakshi, J.V. & Khanna, Gauri, 2012. "Social contracts, markets and efficiency: Groundwater irrigation in North India," Journal of Development Economics, Elsevier, vol. 98(2), pages 228-237.
    2. Amarasinghe, Upali A. & Sharma, Bharat R., 2009. "Water productivity of food grains in India: exploring potential improvements," Book Chapters,, International Water Management Institute.
    3. Chowdhury, Nasima Tanveer, 2010. "The relative efficiency of water use in Bangladesh agriculture," Quarterly Journal of International Agriculture, Humboldt-Universitaat zu Berlin, vol. 49(2), pages 1-18.
    4. Watto, Muhammad, 2013. "Measuring Groundwater Irrigation Efficiency in Pakistan: A DEA Approach Using the Sub-vector and Slack-based Models," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152204, Australian Agricultural and Resource Economics Society.
    5. Amarasinghe, Upali A. & Sharma, Bharat R., 2009. "Water productivity of food grains in India: exploring potential improvements," IWMI Books, Reports H042635, International Water Management Institute.
    6. Strand, Jon, 2012. "Allocative inefficiencies resulting from subsidies to agricultural electricity use : an illustrative model," Policy Research Working Paper Series 5955, The World Bank.
    7. Watto, Muhammad Arif & Mugera, Amin William, 2013. "Measuring Groundwater Irrigation Efficiency in Pakistan: A DEA Approach Using the Sub-vector and Slack-based Models," Working Papers 144943, University of Western Australia, School of Agricultural and Resource Economics.
    8. Kuppannan, Palanisami, 2009. "Water markets as a demand management option: potentials, problems and prospects," IWMI Books, Reports H042160, International Water Management Institute.

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