Water Policy 23 (2021) 130–141

Irrigation water pricing policies and water resources management

Fakeha Parween, Pratibha Kumari and Ajai Singh *

Department of Water Engineering and Management, Central University of Jharkhand, Ranchi 834 205, India
*Corresponding author. E-mail: ajai.singh@cuj.ac.in

Abstract

As water is a state subject in India, an enormous variation of irrigation water pricing across the states is noticed.
Revenue collection under irrigation water charges of the states is not encouraging. The present paper reviews the
structures of water pricing mechanism in different states of India and suggests a way to achieve sustainable water
resources management in India. Various reports, water policy documents, and major recommendations of the irri-
gation commission were reviewed and analyzed. It was observed that low revenue collection is mainly due to the
low rate of water taxes, no periodic revision, and flaws in the current revenue collection mechanism across the
states. The water regulatory authority should be made a statutory body to manage various water uses and their
fair pricing. A volumetric pricing system can be implemented in wells and tube-well-irrigated areas and for surface
irrigation, and this requires considerable investment in irrigation water supply infrastructure and development of
operational plans. Until a well-developed volumetric system comes into practice, the current system of revenue
assessment and collection must be rationalized and simplified. An appropriate power tariff policy for rural
areas and inclusion of the irrigation sector in a ground water conservation fee is required.

Keywords: Groundwater; India; Irrigation water; National water policy; Revenue collection; Water pricing

Highlights

• Volumetric pricing can be implemented in wells and tube-wells irrigated areas.

• Until the volumetric system comes into practice, current system of assessment must be rationalized and
simplified.
• A nationally coherent irrigation water policy is necessary for implementation of the volumetric system.
• Appropriate power tariff policy for rural areas and inclusion of the irrigation in Groundwater Conservation Fee
is required.

This is an Open Access article distributed under the terms of the Creative Commons Attribution Licence (CC BY 4.0), which
permits copying, adaptation and redistribution, provided the original work is properly cited (http://creativecommons.org/
licenses/by/4.0/).
doi: 10.2166/wp.2020.147

© 2021 The Authors

Downloaded from http://iwaponline.com/wp/article-pdf/23/1/130/847490/023010130.pdf

by guest
 F. Parween et al. / Water Policy 23 (2021) 130–141 131

1. Introduction

Water is an important natural resource and essential for life on earth. Consistent efforts are being
made to develop and manage precious water resources. The growing demand for water is expected to
surpass supply, if not managed properly. Due to spatial and temporal variation of water resources avail-
ability, integrated efforts in each field of water such as development, distribution, consumption, and
management are required. In recent times, there has been increasing interest in employing a water pri-
cing system as a tool for managing the demand of water. The financing of irrigation projects was
initiated and provisioned during the British era in India. Gradually, the financial aspect of the irrigation
project deviated from its initial aim after World War II. For developing nations, proposing a new irriga-
tion infrastructure plan and construction of dams and reservoirs became important investment options,
especially in newly independent states. To be self-sufficient, states made a consistent effort to produce
enough food grain to feed the common man, create income opportunities for rural people, balance the
overall development of all the regions, and address the poverty issues (Molle & Berkoff, 2007).
Development was perceived largely in terms of creating infrastructures such as big dams, irrigation
water supply schemes, and flood control measures. These water-based projects received huge funds.
Free goods or non-economic goods such as air and sunshine do not have a price and are abundant in
nature. Water was also included in the list of free goods but due to the exponential growth in population,
increased food demand, changing lifestyles, and the surge of industries, water has been converted into
an economic good from its earlier status of a free good. Although the World Bank recognized the
reasonable share of payment from the beneficiaries of large irrigation projects, the fourth Dublin prin-
ciple (1992) emphasized the importance of the economic value of water use in general and irrigation
water in particular. This concept of the economic value of water was further strengthened in the Rio
Declaration on Environment and Development of the United Nations in 1992 (EU, 2000) and its
Agenda 21 (United Nations, 1992), mechanisms, and regulatory measures.
If water is termed as an economic good, this should have some price attached to it. Domestic water and
water used by industries are charged reasonably but irrigation water can be termed as a non-merit good. In
many countries, non-merit goods and services are provided by funding support of the government. The
development of irrigation infrastructure is one of them. Irrigation, in terms of economic principles, is
not non-divisible, or non-exclusive in use, nor does non-rivalry exist between its users. Therefore, an irri-
gation service, although an economic good in the theoretical sense, cannot be termed as a pure private
good which can be bought, sold, and priced in the market based on demand and supply, but is a
quasi-public, non-merit good which can neither be priced as per the free market mechanism nor can be
provided exclusively as a subsidized or free service by the state. Thus, the pricing policy for irrigation
water must take care of the appropriate balance before framing an economically justified irrigation
water pricing policy. This is challenging, especially in democratic developing countries.
Several research papers have been published on water pricing mechanisms and many have tried to link water
pricing with the performance of irrigation projects. Economists and water resources planners and managers
differ in the adoption of approaches for an optimal water-pricing policy. Nagaraj (1999) studied the relevance
and viability of approaches adopted for managing the institutional set up of France and advocated the accord-
ance of financial autonomy to the water institutions and participatory approaches. It is worth mentioning here
that not only the introduction of surface water pricing, but also a proper groundwater bill/act needs to be
enacted for a country. Rajaraman (2005) evaluated the irrigation water pricing for Karnataka state of India
and found local user groups as an option for adopting a flat rate and overseeing any informal water trading.

Downloaded from http://iwaponline.com/wp/article-pdf/23/1/130/847490/023010130.pdf

by guest
 132 F. Parween et al. / Water Policy 23 (2021) 130–141

In another study done in China by Webber et al. (2008), it was suggested that farmers should pay not
only the irrigation water charges but also the pumping cost of water. The feasibility of incentive-oriented
policy instruments was also explored (Viaggi et al., 2010). Dono et al. (2010) applied a mathematical
model to study the economic aspects and the impacts on usage of water under the volumetric pricing
method and area-based pricing method for a farm sector in a Mediterranean area that relies on a dam
for irrigation. Saleth & Amarasinghe (2010) discussed the status and effectiveness of various demand
management options and opined that the direct returns from demand management investments can
improve the efficiency of the irrigation sector and boost the water economy as a whole. Statistical tools
were applied to study the behavior of farmers of the Krishna river basin, India when they choose options
(Veettil et al., 2011). Shen & Reddy (2016) analyzed the water pricing reforms undertaken in China and
India and opined that China has taken several steps farther in terms of implementation of policy reforms.
Chaudhuri & Roy (2019) are of the opinion to introduce a volumetric water pricing system and suggested
employing automatic metering devices to charge for the actual volume of water used. They were also cau-
tious about the challenges to be encountered in installing metering devices in a vast country like India.
Improved water rights and the presence of a Water Users Association reduces this preference for volu-
metric pricing. Many research works were carried out to study the impact of increased water pricing
and other parameters on conservation of water and water demands by farmers at different scales
(Chang et al., 2014; Aidam, 2015; Ziolkowska, 2015; Joshi et al., 2016; Loc et al., 2016).
The increased dependence on groundwater, especially for Rabi season crops, is a serious matter if
sustainable water resources and power sector viability are kept in mind. The basic prevalent assumption
is that at higher electricity charges, farmers will be encouraged to improve water-use efficiency and
water conservation. In arid and semi-arid regions of India, extraction of groundwater is normally
more than the average annual replenishment. Uncontrolled withdrawal of groundwater for crop pro-
duction, along with subsidized electricity, has caused a drastic reduction in water level in many parts
of the country (World Bank, 2010). In most of the states, electricity bills are charged on the basis of
connected load, and consumption of units of power is not considered. Electricity supply to the agricul-
tural sector in India is considerably subsidized under the existing power tariff systems (Scott & Sharma,
2009). This has caused decreasing and interrupted power supply, largely due to the poor financial con-
dition of the State Electricity Boards (SEBs) and further provides incentives for unsustainable use of
both electricity and groundwater. Power tariff changes influence groundwater use efficiency and pro-
ductivity positively (Kumar, 2005). It is worth mentioning here that the number of groundwater
wells in India increased from about 100,000 in 1960 to about 12 million in 2006 (Bassi, 2014).
Since pumps on the deepest tube wells are predominantly electric, 85% of the groundwater pumping
energy is provided by electricity (Dharmadhikary et al., 2018). Power pricing policies have a direct
bearing on the rural sector and therefore tariff policy must be made in such a way that it influences
the groundwater use and extraction decisions of the growers.
One way to achieve the reliance in the irrigation sector is to improve the supply side. Another way
may be to manage the demand for water in the agriculture sector. Demand management and market
mechanisms include options such as the implementation of appropriate irrigation water pricing, devel-
oping water markets, strengthening the water rights systems, revising the energy bills and supply
regulations, and promotion and incentives for adoption of modern water-saving technologies such as
micro-irrigation and sprinkler irrigation systems. This paper attempts to review the existing irrigation
water pricing mechanism in India and various related provisions in the National Water Policy of the
country so that a policy can be modified to enhance the sustainability of the water resources of India.

Downloaded from http://iwaponline.com/wp/article-pdf/23/1/130/847490/023010130.pdf

by guest
 F. Parween et al. / Water Policy 23 (2021) 130–141 133

2. Methods of charging irrigation water prices in India

The water pricing system consists of many components. Based on the natural and economic conditions
of the command area of any irrigation project, several methods have been developed for irrigation water
pricing. These methods are broadly grouped into four categories: water market, quotas, non-volumetric
pricing, and volumetric pricing (Johansson et al., 2002). Developing water market mechanisms can
deal with the inefficiencies of conventional irrigation water supply institutions. Water markets are
found to be more flexible in fixing the irrigation water price. There should be a well-defined water
right and the appropriate setting up of institutions to develop formal water markets (Thobani, 1997; Zilber-
man et al., 1997). Quota allotments are used to address the fairness of water distribution and management
issues that may arise due to the prevailing water market. A certain quota of water is allotted which can
address equity concerns and can encourage efficient allocations (Dinar et al., 1998).
The irrigation water pricing under non-volumetric methods normally depends upon the crop and area
under cultivation or sometimes on land values. This method is convenient to implement and is suitable
for surface irrigation systems. Due to the high costs of installation of a metered system, a non-volumetric
system is found to be more efficient and easy to implement per unit area pricing than volumetric pricing
(Smith & Tsur, 1997). Under volumetric irrigation water pricing system, charges for the quantities of
water consumed are levied. The countries employing the volumetric pricing approach include Australia,
England, France, Israel, Jordan, Mexico, Morocco, Spain, and the USA. In California, about 80% of the
more than 100 irrigation districts have shifted to the volumetric charging system for the past 20 years
(Burt, 2006). In India, although volumetric water pricing is recommended in the National Water Policy
(Ministry of Water Resources, 2012), hitherto, this has not been practiced due to a lack of development
of water metering infrastructure in the field. In general, water pricing mechanisms may not be very
effective in generating income, but being a welfare government, it always attempted to manage the avail-
ability of water to certain sectors.
In India, the management and development of the water sector come under state control. Fixing the
price of irrigation water in India is a sensitive issue and social, economic, and political considerations
play a very important role. The water pricing mechanism differs from state to state. Farmers’ opinions
are very clear and they are more worried about the benefit of supply of irrigation water. The contribution
of irrigation, which is only one of the basic inputs for agricultural production, is quite tedious, if not
difficult, to be evaluated towards the gain in farmers’ income. The Indian National Water Policy State-
ment of 1987 states,

‘The water rates should be such as to convey the scarcity value of the resource to the users and to foster
the motivation for the economy in water use. They should be adequate to cover the Annual Operation
and Maintenance (O&M) Charges and a part of the fixed costs of irrigation works. Efforts should be
made to reach this ideal over a while ensuring assured and timely supplies of irrigation water.’

The water charges for surface and groundwater must be considered in the interests of small and mar-
ginal farmers. This was further emphasized by the Vaidyanathan Committee (Vaidyanathan, 1992) to
cover the O&M costs and interest on the capital cost. Further, the National Water Policy (2002) reiterates
the same, to cover O&M costs and a part of the capital costs later on. It was envisaged that the irrigation
water pricing mechanism should encourage its efficient use, reward its conservation, and ensure equitable
access for all. Volumetric water pricing was also proposed (MoWR, 2012). The 12th Finance Commission

Downloaded from http://iwaponline.com/wp/article-pdf/23/1/130/847490/023010130.pdf

by guest
 134 F. Parween et al. / Water Policy 23 (2021) 130–141

(2005–2010) recommended an O&M cost norm of INR ₹ 600/ha for utilized water resources potential and
₹ 300/ha for unutilized potential. Half the rate of these norms was suggested for minor irrigation projects.
For hill states, a 30% higher rate of operation and maintenance expenditure was suggested with a 5%
annual rate of growth. The 13th Finance Commission recommended environment-related total grants of
₹ 10,000 crores with ₹ 5,000 crores each for forests and water sector management.
In India, all public irrigation systems are government-administered and there is no direct link between
water charges and O&M cost. The water rates vary largely from state to state and are decided more as a
political decision and are charged for the supply of water keeping in view of the fair and equal water dis-
tribution and management issues for efficient irrigation water supply systems. The water rates presently
being charged are highly subsidized and are much less than even the recurring O&M expenses (CWC,
2010). In India, owing to its simplicity, charging of irrigation water on an area basis is the most wide-
spread practice. Normally, the water charges on an area basis take into consideration the source of
water, how the water is being supplied, season, crop type, duration, land type, and type of irrigation project
(major, medium, and minor). The basic idea about the fixing of irrigation water price should be to generate
sufficient revenue to at least cover O&M costs which are required for the maintenance of the system on a
sustainable basis. Nevertheless, the paying capacity of the growers must be taken into account, especially
in India, where small and marginal farmers are quite large in number. The Draft National Water Frame-
work Bill (2016) advocated the full economic pricing for water used for commercial agriculture and
industry and a graded pricing system may be implemented for domestic use.
In many states of India, where agricultural crop production is higher, groundwater is the main source of
irrigation, especially during Rabi season (November–March). The farmers do not have to pay for the water
from tube wells dug on their own land. The electricity is supplied free or at subsidized rates for agriculture in
many states. This has resulted in drastic depletion of groundwater storage in many districts of India. Ground-
water pumping can be controlled if an appropriate power tariff policy is implemented for rural areas. Zekri
(2005) used three criteria, including water quotas, electricity quotas, and electricity pricing to analyze the
best option for controlling the pumping of groundwater. Enforcing an electricity quota along with gradual
taking away of the subsidy on the electricity price was found to be the most equitable solution. Kumar et al.
(2011) demonstrated that an increase in power tariffs in the agricultural sector may be a socially and econ-
omically viable option to bring efficiency and achieve sustainable groundwater extraction.

3. Pricing of irrigation water in India – current status

The current pricing system, as mentioned above, in a state varies with seasons, crops, and irrigated
areas. Although the first water policy was adopted in 1987, Kerala, a southern state, imposed irrigation
water pricing for the first time in 1974. The seven States/UTs of Arunachal Pradesh, Andaman and
Nicobar Islands, Nagaland, Meghalaya, Mizoram, Puducherry, and Lakshadweep have recently formu-
lated their state water policy (Tables 1 and 2). Much variation of water pricing across the states is
observed. Maharashtra is charging the maximum rate for flow irrigation as ₹ 6,297/ha and the minimum
as ₹ 238/ha. Himachal Pradesh collects ₹ 28.17/ha for all irrigation uses. The states also follow incon-
sistent water policies and do not consider irrigation water charges as a source to generate revenue.
Punjab had a specified water pricing for irrigation water but abolished it in February 1997. This was
again continued from 12th November 2002 and the charge of a flat rate of ₹ 375.00/ha has been
levied since 28 January 2010. On the other hand, Tripura has been charging ₹ 312.50/ha since 1 October

Downloaded from http://iwaponline.com/wp/article-pdf/23/1/130/847490/023010130.pdf

by guest
 F. Parween et al. / Water Policy 23 (2021) 130–141 135

Table 1. Water rates for wheat crop under flow irrigation by state (CWC, 2013).
S. No. States/UTs Rate (Rs/ha) Date since on applicable Status as on
1 Andhra Pradesh 148.20 to 1,235.00 01.07.1996 12.01.2010
2 Arunachal Pradesh No water rates – 29.12.2008
3 Assam 150.00 to 751.00 30.03.2000 07.03.2009
4 Bihar 74.10 to 370.50 17.11.95/26.11.01 08.02.2010
5 Chhattisgarh 123.50 to 741.00 15.06.1999 05.02.2010
6 Delhi 34.03 to 1,067.04 6 N.A. 14.01.2009
7 Goa 60.00 to 300.00 01.02.1988 09.03.2010
8 Gujarat 160.00 to 300.00 01.01.2007 04.02.2010
9 Haryana 24.70 to 197.60 27.07.2000 02.02.2010
10 Himachal Pradesh 28.17 01.04.2009 03.02.2010
11 Jammu and Kashmir 29.65 to 74.13 01.04.2005 04.02.2010
12 Jharkhand 74.10 to 370.50 26.11.2001 and 14.11.1995 13.01.2009
13 Karnataka 37.05 to 988.45 13.07.2000 30.01.2009
14 Kerala 37.00 to 99.00 18.09.1974 06.02.2009
15 Madhya Pradesh 50.00 to 960.00 01.11.2005 05.01.2010
16 Maharashtra 238.00 to 6,297.00 01.07.2003 02.04.2009
17 Manipur 45.00 to 150.00 August 2003 27.12.2008
18 Meghalaya No water rates – 09.03.2010
19 Mizoram No water rates – 06.02.2009
20 Nagaland No water rates – 15.01.2009
21 Orissa 28.00 to 930.00 05.04.2002 05.01.2010
22 Punjab 375.00 28.01.2010 01.02.2010
23 Rajasthan 29.64 to 607.62 24.05.1999 21.1.2010
24 Sikkim 10.00 to 250.00 2002 19.01.2010
25 Tamil Nadu 2.77 to 61.78 06.11.1987 04.03.2002
26 Tripura 312.50 01.10.2003 01.04.2009
27 Uttarakhand 35.00 to 474.00 18.09.1995 18.12.2006
28 Uttar Pradesh 30.00 to 474.00 18.09.1995 11.09.2007
29 West Bengal 37.06 to 123.50 06.04.1977 03.02.2010
30 Andaman and Nicobar Islands No water rates – 01.01.2009
31 Chandigarh No water rates 01.02.2010
32 Dadra and Nagar Haveli 110.00 to 830.00 29.01.1996 31.08.2005
33 Daman and Diu 200.00 1980 28.08.2008
34 Lakshadweep No water rates – 12.06.2008
35 Puducherry No water rates 01.01.2005 12.12.2008

2003 for water used in agriculture. The multiplicity of factors contributes to the process of fixing water
rates in states/Uts, and their common as well as diverging considerations form the basis of fixing overall
water rates. As there is still no independent water regulatory authority in the majority of states, the mech-
anism of fixing water charges for various uses is ad hoc, non-consultative, and non-transparent.
No water rates are levied from the farmers when they lift water from rivers or in the downstream of a
reservoir or barrage in Gujarat. As drip and sprinkler irrigation systems involve a continuous process of
watering fields, the rate of drip and sprinkler irrigated crops is considered as 35 and 65% of the rate of
flow irrigation, respectively. This is a kind of incentive which must be followed by other states also. The
capacity and assuredness of irrigation are kept in view while fixing water rates in Haryana. Maharashtra
has fixed water rates by considering the volume of water supplied, paying capacity of the farmer,

Downloaded from http://iwaponline.com/wp/article-pdf/23/1/130/847490/023010130.pdf

by guest
 136 F. Parween et al. / Water Policy 23 (2021) 130–141

Table 2. Water rates for lift irrigation by state (CWC, 2013).

S. No. States/UTs Rate(Rs/ha) Date since on applicable Status as on
1 Andhra Pradesh 148.20 to 1,235.00 07.01.1996 12.01.2010
2 Arunachal Pradesh No specific water rates 29.12.2008
3 Assam 150.00 to 751.00 30.03.2000 07.03.2009
4 Bihar 333.45 to 1970.75 06.05.1998 08.02.2010
5 Chhattisgarh 123.50 to 741.00 15.06.1999 05.02.2010
6 Delhi 34.03 to 1,067.04 N.A. 14.01.2009
7 Goa 120.00 to 600.00 01.02.1988 09.03.2010
8 Gujarat 160.00 to 300.00 01.01.2007 04.02.2010
9 Haryana 43.23 to 98.80 27.07.2000 02.02.2010
10 Himachal Pradesh 56.34 01.04.2009 03.02.2010
11 Jammu and Kashmir 74.13 to 741.30 01.04.2005 04.02.2010
12 Jharkhand No separate rate for lift irrigation – 13.01.2009
13 Karnataka No separate rate for lift irrigation – 30.01.2009
14 Kerala 17.00 to 148.50 18.09.1974 09.03.2010
15 Madhya Pradesh 50.00 to 960.00 01.11.2005 15.03.2010
16 Maharashtra 297.00 to 5,405.00 01.07.2003 13.04.2010
17 Manipur 45.00 to 150.00 01.08.2003 27.12.2008
18 Meghalaya No water rates – 09.03.2010
19 Mizoram No water rates – 06.02.2009
20 Nagaland No water rates – 15.01.2009
21 Orissa No separate rate for lift irrigation 05.04.2000 30.03.2010
22 Punjab 375.00 28.01.2010 01.02.2010
23 Rajasthan 14.80 to 1,215.24 24.05.1999 21.01.2010
24 Sikkim No separate rate for lift irrigation – 19.01.2010
25 Tamil Nadu No separate rate for lift irrigation – 02.01.2009
26 Tripura 312.50 01.10.2003 01.04.2009
27 Uttarakhand 15.00 to 237.00 18.09.1995 06.01.2009
28 Uttar Pradesh 15.00 to 237.00 18.09.1995 30.12.2008
29 West Bengal 251.94 to 2,015.52 01.07.2003 03.02.2010
30 A and N Islands No water rates – 01.01.2009
31 Chandigarh 23.00 per hour 01.01.2010 01.02.2010
32 Dadra and Nagar Haveli 75.00 to 275.00 29.01.1996 31.08.2005
33 Daman and Diu 200.00 1980 28.08.2008
34 Lakshadweep No water rates – 12.06.2008
35 Puducherry No water rates 01.01.2005 12.12.2008

sufficient recoveries to be at least equal to the annual cost incurred in providing services, tapping of full
potential, and the level of the average gross income. The rates for flow irrigation in respect of non-cash
crops are fixed roughly at 6% of the gross income from these crops and about 12% of the gross income
in the case of cash crops, as recommended by the Maharashtra State Irrigation Commission. Also, the
water rates are so fixed as to meet the expenditure on maintenance and repairs of irrigation projects and
ensure a 1% return on capital cost. The water rate, as suggested by Maharashtra Irrigation Commission
as 6 to 12% of the gross income, in fact, may be brought to 3 to 12% of the gross income to be
implemented in other states. This 3% will take care of the paying capacity of the small and marginal
farmers. Again, the question will arise on how to determine the farmers’ income. In many states, farmers
sell their produce to the local middle man, and most of the transaction is carried out in cash. It may be

Downloaded from http://iwaponline.com/wp/article-pdf/23/1/130/847490/023010130.pdf

by guest
 F. Parween et al. / Water Policy 23 (2021) 130–141 137

difficult to ascertain the true income. Crop produce sold at government cooperatives is well recorded
and the total amount is transferred to the farmers’ bank account. Government cooperatives or the
mode of transactions must be strengthened and flawless.
The rationalized irrigation water pricing mechanism alone is not sufficient if the revenue collection
mechanism is not streamlined and strengthened. In most states, there is a wide gap between the revenue
assessed and the revenue realized by the government agency. The average revenue realized as a percen-
tage of revenue assessed during 2000–01 to 2007–08 for some of the states varied between 0.86% and
92.14%, including Andhra Pradesh (24.15%), Assam (0.86%), Bihar (7.73%), Chhattisgarh (31.72%),
Gujarat (63.45%), Haryana (92.14%), Himachal Pradesh (71.25%), Jammu and Kashmir (56.46%),
Kerala (83.58%), Madhya Pradesh (84.02%), Maharashtra (81.21%), and Orissa (61.66%) (Indian
Environmental Portal, 2019). It is evident that some of the states are collecting revenues to the tune
of 60–90% but it is not clear how close the collection is to the O&M cost, nor whether this collected
revenue is entered into the accounts of the irrigation department or not. There is considerable deviation
in the norms and practices followed for the collection of irrigation water revenue among the different
states in India. In some states, assessments, as well as collection of the irrigation water revenue, are man-
aged by the State Water Resources Department. In other states, revenue assessment is carried out by the
Irrigation Department and revenue collection is the domain of the Revenue Department of State Gov-
ernment. In some other states, both responsibilities are carried out by the Revenue Department. There
are also states where there is no mechanism for raising the bill and collection of revenue for irrigation
water. Thus, poor revenue receipt leads to inappropriate operation and maintenance of irrigation water
supply infrastructure and lack of new initiatives and investment in irrigation projects. This further
reduces the opportunities for implementation of effective irrigation water pricing policy, and if not
enacted through act or law, this will always be relaxed for political benefit.
The water regulatory authority should be made a statutory body and be given the mandate to regulate
various water uses and their fair pricing. Irrigation water, although subsidized for farmers, must be
priced reasonably. Therefore, the states should constitute an autonomous board which may be named
‘State Water Pricing Board’ to formulate the state water policy, set the norms for O&M costs, estimate
the actual expenditure, assess the requirement of manpower, and develop the criteria for revising water
rates to be applicable for drinking purpose (rural/urban), irrigation water (flow/lift/groundwater), and
industrial water use. Delay in raising billing demands causes an accumulation of arrears which finally
tend to be written-off or sometimes waived. Coordination among different government agencies
involved in assessment and collection needs to be streamlined. The same department may be entrusted
with the responsibility of raising demand and collection of revenues. The revenue collected should be
reflected in the account where the cost of O&M is entered.

4. Volumetric pricing system – impediments

A volumetric water pricing system may be easy to implement and can provide a stable cash flow once
commissioned. It ensures economic efficiency if processes are kept at the marginal cost of water. This
system encourages the idea of water resources management because irrigation water charges increase
with the use of water. The system ensures the volume of water, timing, and reliability of supply, and
thus charging based on a volume basis is appropriate and will be appreciated by farmers, if supply is
ensured in a crucial time. In the case of domestic, industrial, and commercial use of water, uniform

Downloaded from http://iwaponline.com/wp/article-pdf/23/1/130/847490/023010130.pdf

by guest
 138 F. Parween et al. / Water Policy 23 (2021) 130–141

volumetric charges are levied with the same rate per 1,000 m3. This type of pricing mechanism is the most
prevalent in the Organisation for Economic Co-Operation and Development (OECD) countries, and also
throughout the world (Whittington, 2002). Agricultural water use is metered in only a few countries. There
is no single best practice that can be recommended to one country or sector. Water-using sectors in various
locations face different situations and needs for pricing approaches (Dinar, 2015). The variations in irriga-
tion water rates are observed across countries (Table 3). For irrigation water charges, most countries follow
a two-part pricing system (fixed and volumetric components), with the volumetric component up to at
least 75% of the total water charges. Some eastern European countries like Hungary, Poland, and the
Czech Republic only use volumetric pricing systems (OECD, 1999). Pricing of irrigation water also
depends upon the source of water. For example, in Jordan and Turkey, irrigation water supply is charged
from groundwater sources. Although the volumetric and other irrigation pricing systems are followed,
water is still subsidized in most countries (Tsur & Dinar, 1997). In the United States, some growers
who have agreements with the federal government pay a very nominal cost (USD 5 to 10 per
1,000 m3). Those who buy the water from state-level irrigation water agencies normally pay a higher
cost (USD 20 to100 per 1,000 m3). It was noticed that irrigation water prices increased considerably if
the source of water was groundwater in Ogallala aquifer (Seo et al., 2008). The Government of India
made provision for levying a ground water conservation fee (GWCF) to be paid with effect from June
1, 2019 by industry and domestic users for consumption beyond a certain limit. The irrigation sector,
which accounts for the largest share of groundwater consumed, is exempted. Obviously, the indiscriminate
use of groundwater by the irrigation sector would not be avoided. This must include the irrigation water in
order to avoid the over-exploitation of groundwater by the irrigation sector.
How will the volumetric pricing mechanism for irrigation water be developed in India? This is not
clearly elaborated in any policy documents. In order to develop a fully fledged volumetric pricing
system in India, considerable investment is required to make the necessary changes in irrigation
water supply infrastructure and develop operational plans which make a good balance between effi-
ciency and equity objectives. This will need the installation of an extensive network of water
metering systems, which is expensive. Setting up appropriate institutions will be required for monitoring

Table 3. Pricing mechanisms adopted and irrigation water charges in selected countries (Tsur & Dinar, 1997; CWC, 2010;
FAO, 2014).
Pricing
Country mechanism Water price
USA (California) Volumetric US$ 5 on average per acre-foot (Range: US$2–US$200 per acre-foot);
and US$19.32 per acre-foot in some cases
Jordan Volumetric US$0.04 per cubic meter for the 1.5 meters of irrigation depth and US
$0.08 for any additional amounts
United Kingdom (Wales 13–28/1,000 m3
and Northumbria)
Jordan 21.13
Bulgaria Volumetric 45.54 per ha (maize) for two irrigations
India Area/crop- Flat rates, betterment levy, etc. Varies across states. Ranges from US$0
based in Punjab to US$100 in Maharashtra per hectare of flow irrigation
Australia Volume 4.36/1,000 m3, Nearly all O&M is recovered
France (Adour-Garonne W.A.) Volume 5.26/1,000 m3, 100% O&M

Downloaded from http://iwaponline.com/wp/article-pdf/23/1/130/847490/023010130.pdf

by guest
 F. Parween et al. / Water Policy 23 (2021) 130–141 139

and maintenance. Irrigation authorities must be willing to take on greater responsibility for irrigation
system management, and stakeholders, i.e., farmers, may be included to share their experiences for
better management of irrigation water allocations. When the phone and electricity bill of each customer
can be raised and collected, there is no question of not implementing the volumetric system. This must
be initiated in a phase-wise manner and long-term plans must be announced. Automation in the canal
system will increase accuracy and billing efficiency. The volumetric system may allow flexibility in
different crops. A phase-wise effort may be made to take up the system and there will always be a chal-
lenge as far as automation and security are concerned. The availability of mobile phones and online
payment systems can facilitate billing and payment issues. The only issue is to meter the irrigation
water. This has to be done one day in India, why not today?
Until a well-developed volumetric system comes into practice, the existing system of assessment
based on crop-wise irrigated areas must be rationalized and simplified, especially the revenue collection
mechanism. The concept of water as a free good needs to be replaced, and revenue collection must be
strict, which will inculcate a habit of paying water taxes among farmers. Assessments can be made to
improve the quality of irrigation, the level of cost recovery at least, the O&M costs, and 1% interest on
capital employed as recommended by the Planning Commission from time to time.

5. Conclusions

In the present paper, an effort was made to review and analyze surface as well as groundwater irriga-
tion water pricing in order to enhance water resources sustainability. Irrigation water pricing
mechanisms differ from state to state. Even with the existing pricing mechanism, the revenue collection
of states varies from 60 to 90% of revenue assessed. Revenue collection is very poor in many states and,
therefore, unable to provide adequate funds for O&M costs of the irrigation projects. The low revenue
collection is primarily due to the low rate of water taxes levied by states and flaws in the existing mech-
anism to ensure full and timely collection of the assessed revenue. A water regulatory authority, as
mentioned in the consecutive three National Water Policies of India, is missing from many states.
This should be made a statutory body and be given the mandate to regulate various water uses and
their fair pricing. A rational water pricing mechanism, periodic review of water rates, and system for
timely recovery of water charges are key to providing reliable services. Cost increase due to inflation
must be taken into account during the periodic review. The water rate, as suggested by Maharashtra Irri-
gation Commission as 6 to 12% of the gross income, in fact, may be brought to 3 to 12% of the gross
income to be implemented in other states. This will enable each category of farmer to pay water tax.
Groundwater pumping may be controlled by implementing an appropriate power tariff policy for
rural areas. The policy must be formed after wider consultation with farmers. A volumetric pricing
system can be implemented in the case of wells and tube-wells where the timing is controllable and mea-
surable, and the volume supplied can be determined with the help of hours of supply. A GWCF should
address the over-exploitation of groundwater by the irrigation sector.
An efficient volumetric pricing system in India can be developed if considerable investment is made
in irrigation water supply infrastructure and the development of an operational plan which has a good
balance between efficiency and equity objectives. Irrigation authorities must be willing to take on
greater responsibility for irrigation system management. This must be initiated in a phase-wise
manner and long-term plans must be announced. Until a well-developed volumetric system comes

Downloaded from http://iwaponline.com/wp/article-pdf/23/1/130/847490/023010130.pdf

by guest
 140 F. Parween et al. / Water Policy 23 (2021) 130–141

into practice, the existing system of assessment based on crop-wise irrigated areas must be rationalized
and simplified, especially the revenue collection mechanism. The concept of water as a free good needs
to be replaced and revenue collection must be strict, which will inculcate a habit of paying water taxes
among the farmers. The time has come when we need to move from the vision envisaged in our national
water policy to focus more on the action and make water everybody’s business. Nationally coherent
water policy and proper plans for infrastructure development are required when resorting to any type
of irrigation water pricing mechanism in India.

Data availability statement

All relevant data are included in the paper or its Supplementary Information.

References
Aidam, W. P. (2015). The impact of water-pricing policy on the demand for water resources by farmers in Ghana. Agricultural
Water Management 158, 10–16.
Bassi, N. (2014). Assessing potential of water rights and energy pricing in making groundwater use for irrigation sustainable in
India. Water Policy 16, 442–453.
Burt, C. M. (2006). Volumetric Water Pricing. ITRC Report No. 06-002, Cal Poly, San Luis Obispo, CA, USA.
Central Water Commission (CWC) (2010). Pricing of Water in Public System of India. Information System Organization,
Water Planning and Project Wing, CWC, Government of India, New Delhi.
Central Water Commission (CWC) (2013). Water and Related Statistics. Water Resources Information System, Directorate
Information System Organisation, Water Planning & Projects Wing, Central Water Commission, New Delhi, India.
Chang, C., Chung, C., Sheu, J., Zhuang, Z. & Chen, H. (2014). The optimal dual-pricing policy of mall parking service. Trans-
portation Research Part A 70, 223–243.
Chaudhuri, S. & Roy, M. (2019). Irrigation water pricing in India as a means to conserve water resources: challenges and poten-
tial future opportunities. Environmental Conservation 46, 99–102.
Dinar, A. (2015). Global Water-Pricing Practices Suggest Approaches to Managing California Water Scarcity. University of
California, Riverside. Science Daily. 2 June 2015. Available at: www.sciencedaily.com/releases/2015/06/150602132228.htm
Dharmadhikary, S., Bhalerao, R., Dabadge, A. & Sreekumar, N. (2018). Understanding the Electricity, Water and Agriculture
Linkages, Volume 1: Overview, Prayas (Energy Group), Maharashtra, India.
Dinar, A., Balakrishnan, T. K. & Wambia, J. (1998). Political Economy and Political Risks of Institutional Reform in the Water
Sector. World Bank Policy Research Paper No. 1987. The World Bank, Washington DC, USA.
Dono, G., Giraldo, L. & Severini, S. (2010). Pricing of irrigation water under alternative charging methods. possible shortcom-
ings of a volumetric approach. Agricultural Water Management 97, 1795–1805.
Draft National Water Framework Bill (2016). River Development and Ganga Rejuvenation, Department of Water Resources,
Ministry of Jal Shakti, Government of India, New Delhi, http://mowr.gov.in/policies-guideline/policies/draft-national-water-
framework-bill-2016.
EU (European Union) (2000). Communication From the Commission to the Council, The European Parliament and The Econ-
omic and Social Committee: Pricing Policies for Enhancing the Sustainability of Water Resources. COM(2000) 477 final,
European Union, Brussels, Belgium.
FAO (2014). Zambia: Irrigation Market Brief: Country Highlights. FAO Investment Centre. Available at: www.fao.org/3/ai4157e.pdf
Indian Environmental Portal (2019) Available at: http://www.indiaenvironmentportal.org.in/files/JS_Pricing%20of%20Water%
20in%20Public%20System-%20Final-RN_.29.10.pdf (accessed August 14, 2019).
Johansson, R. C., Tsur, Y., Roe, T. L., Doukkali, R. & Dinar, A. (2002). Pricing irrigation water: a review of theory and prac-
tice. Water Policy 4, 173–199.
Joshi, J., Ali, M. & Berrens, P. R. (2016). Valuing farm access to irrigation in Nepal. A hedonic pricing model. Agricultural
Water Management 181, 35–46.

Downloaded from http://iwaponline.com/wp/article-pdf/23/1/130/847490/023010130.pdf

by guest
 F. Parween et al. / Water Policy 23 (2021) 130–141 141

Kumar, M. D. (2005). Impact of electricity prices and volumetric water allocation on groundwater demand management:
Analysis from Western India. Energy Policy 33(1), 39–51.
Kumar, M. D., Scott, C. A. & Singh, O. P. (2011). Inducing the shift from flat-rate or free agricultural power to metered supply:
implications for groundwater depletion and power sector viability in India. Journal of Hydrology 409, 382–394.
Loc, H. H., Irvine, N. K., Diep, H. T. N., Quyen, K. T. N., Tue, N. N. & Shimizu, Y. (2016). The legal aspects of ecosystem
services in agricultural land pricing, some implications from a case study in Vietnam’s Mekong Delta. Ecosystem Services
29, 360–369.
Ministry of Water Resources (2012). National Water Policy. Government of India, New Delhi. Available at: http://mowr.gov.in/
sites/default/files/NWP2012Eng6495132651_1.pdf
Molle, F. & Berkoff, J. (eds) (2007). Water pricing in irrigation: the lifetime of an idea. In Irrigation Water Pricing: The Gap
Between Theory and Practice (F. Molle & J. Berkoff, eds.). CAB International, Wallingford, UK, pp. 1–20.
Nagaraj, N. (1999). Institutional management regimes for pricing of irrigation water: the French model lessons for India. Agri-
cultural Systems 61, 191–205.
National Water Policy (2002). Ministry of Water Resources, Government of India, New Delhi. Retrieved from http://nwm.gov.
in/sites/default/files/nwp20025617515534.pdf.
OECD (1999). Agricultural Water Pricing in OECD Countries. Document ENV/EPOC/GEEI (98)11/FINAL, OECD, Paris, France.
Rajaraman, I. (2005). Fiscal perspective on irrigation water pricing: a case study of Karnataka, India. Water Policy 8, 171–181.
Saleth, R. M. & Amarasinghe, U. A. (2010). Promoting irrigation demand management in India: options, linkages and strategy.
Water Policy 12, 832–850.
Scott, C. A. & Sharma, B. (2009). Energy supply and the expansion of groundwater irrigation in the Indus–Ganges basin. Inter-
national Journal of River Basin Management 7(2), 119–124.
Seo, S., Segarra, E., Mitchell, P. D. & Leatham, D. J. (2008). Irrigation technology adoption and its implication for water con-
servation in the Texas High Plains: a real options approach. Agricultural Economics 38, 47–55.
Shen, D. & Reddy, V. R. (2016). Water pricing in China and India: a comparative analysis. Water Policy 18, 103–121.
Smith, R. B. W. & Tsur, Y. (1997). Asymmetric information and the pricing of natural resources. Land Economics 73(3), 392–403.
Thobani, M. (1997). Formal water markets: why, when, and how to introduce tradable water rights. World Bank Research
Observer 12(2), 161–182.
Tsur, Y. & Dinar, A. (1997). On the relative efficiency of alternative methods for pricing irrigation water and their implemen-
tation. World Bank Economic Review 11, 243–262.
United Nations (Department of Economic and Social Affairs) (1992). Agenda 21. Available at: http://www.un.org/esa/sustdev/
documents/agenda21/english/agenda21toc.htm
Vaidyanathan, A. (1992). Report of the committee on pricing of irrigation water. Planning Commission, Government of India,
New Delhi.
Veettil, C. P., Speelman, S., Frija, A., Buysse, J., Huylenbroeck, V. G., Veettil, C. P., Speelman, S., Frija, A., Buysse, J. &
Huylenbroeck, V. G. (2011). Complementarity between water pricing, water rights and local water governance. A Bayesian
analysis of choice behavior of farmers in the Krishna river basin, India. Ecological Economics 70, 1756–1766.
Viaggi, D., Raggi, M., Bartolini, F. & Gallerani, V. (2010). Designing contracts for irrigation water under asymmetric infor-
mation. Are simple pricing mechanisms enough? Agricultural Water Management 97, 1326–1332.
Webber, M., Barnett, J., Finlayson, B. & Wang, M. (2008). Pricing China’s irrigation water. Global Environmental Change 18,
617–625.
Whittington, D. (2002). Municipal Water Pricing and Tariff Design: A Reform Agenda for Cities in Developing Countries. Issue
brief 02-29. Resources for the Future. Available at: http://www.rff.org/files/sharepoint/WorkImages/Download/RFF-IB-02-29.pdf
World Bank (2010). Deep Wells and Prudence: Towards Pragmatic Action for Addressing Groundwater Overexploitation in
India. The World Bank, Washington DC, USA.
Zekri, S. (2005). Using economic incentives and regulations to reduce seawater intrusion in the Batinah coastal area of Oman.
Agricultural Water Management 95, 243–252.
Zilberman, D., Chakroavorty, U. & Shah, F. (1997). Efficient management of water in agriculture. In Decentralization and
Coordination of Water Resources. Parker, D. D. & Tsur, Y. (eds). Kluwer, Boston, MA, USA, pp. 221–246.
Ziolkowska, R. J. (2015). Shadow price of water for irrigation. A case of the High. Agricultural Water Management 153, 20–31.

Received 11 July 2020; accepted in revised form 20 October 2020. Available online 25 November 2020

Downloaded from http://iwaponline.com/wp/article-pdf/23/1/130/847490/023010130.pdf

by guest