Calcutta Notebook


The Supreme Court has recently directed the State of Punjab to maintain status quo on the Satluj-Yamuna Link Canal. This comes in midst of an old dispute. The Central Government had allotted certain amount of waters of the Satluj River to Haryana. A canal had to be made in Punjab to carry the water to Haryana. But Punjab did not accept the award. Instead it enacted a new law nullifying the award. The validity of this Punjab enactment was challenged in the Supreme Court. Punjab is arguing that it does not have enough water even to fulfil the needs of its own farmers. It cannot spare water for Haryana. Recently Punjab had started refilling the half-made link canal and also started to give back the land acquired for the canal to the farmers. The Supreme Court has ruled that Punjab must not refill the half-made canal or return the land to the farmers. This order freezes the situation, but does not solve it. Similar conflict has been simmering between Tamil Nadu and Karnataka on the sharing of waters of the Cauvery River for many decades. Bihar is unhappy that it has got no rights to use waters of the Ganga River which flows through the State. As of now nobody knows how to resolve these delicate issues.

The problem is rooted in government's inability to distribute water on the basis of economic principles. Areas of Punjab are today facing problems of water-logging and increase in salinity. Farmers are irrigating their fields many times over. Canal water is available aplenty. Farmers are required to pay for canal water according to the area irrigated irrespective of the numbers of irrigations done. It is profitable for them to make more numbers of irrigation even if the increase in yield is small because they do not have to pay for the additional irrigations. This is leading to increase in ground water level. The salt that was lying dormant in the bowels of the earth is coming to the surface and destroying farmlands. Of course, this extreme event is happening in selected areas of Punjab only. But "over-irrigation" is rampant across the state in command areas of the canals. Farmers are using water worth Rs 100 to produce crops worth Rs 50. Basic law of economics is that value of the output should be more than value of the input. A factory owner uses raw materials of Rs 100 to produce goods of Rs 200. He does not use raw materials of Rs 100 to produce goods of Rs 50. But farmers of Punjab are doing the opposite. They are using water worth Rs 100 to produce a crop of Rs 50 because they do not have to pay Rs 100 for the water. Result is that farmers of Punjab are irrigating the crops ten times with small increases in the yields; while farmers in Haryana are not able to irrigate their crops even two times and are losing huge yields.

This problem can be solved in a win-win manner by using economic principles. The increase in yield that farmers of Punjab obtain by an additional irrigation can be calculated. Say, increase in yield from providing an additional irrigation is 100 kilograms of wheat. The increase in yield from providing an additional irrigation in Haryana would be much more, say, 500 kilograms. This difference in the benefits from irrigation arises because the increase in yield from an additional irrigation declines as the number of irrigation increases. The first irrigation will lead to an increase in yield of say 700 kg, the second will lead to an increase in yield of 500 kilograms. Similarly, the third, fourth and fifth irrigations will lead to an increase in yield of 300, 200 and 100 kilograms The loss to Punjab from giving up the fifth irrigation will be 100 kilograms while the gain to Haryana from providing the second irrigation will be 500 kilograms.

The farmer of Haryana would be happy to give away 200 kilograms of wheat to Punjab if he can get water for an additional second irrigation. His increase in yield will be 500 kilograms. He can give away 200 kilograms to Punjab and still make an additional crop of 300 kilograms. The farmer of Punjab will also be happy to give up the one additional irrigation if he gets 200 kilograms of wheat from Haryana. He will be losing 100 kilograms by not providing the fifth irrigation but he will get 200 kilograms of wheat from Haryana. The country will obtain a net benefit of 400 kilograms of wheat while farmers of Punjab and Haryana will both be happy.
The difficulty in implementing this win-win arrangement is that water is not priced properly. The farmer of Punjab is charged on per hectare basis irrespective of the numbers of irrigations. Reduction of an irrigation would cause him to lose 100 kilograms of yield. Thus he wants that additional irrigation even though the same water could lead to the production of 500 kilograms in Haryana.

This irrational distribution of water can be put to an end by putting a correct price on water. Let us say the Government charges Rs 2500 per hectare per irrigation. The Punjab farmer would not make the fourth and fifth irrigations because he would have to pay Rs 5,000 for these two irrigations while the additional yield of 200 and 100 kilograms of wheat from these two irrigations will beget him only Rs 4,500. On the other hand, the Haryana farmer would be happy to pay Rs 2,500 for the additional irrigation because he would get additional yield of 500 kilograms worth Rs 7,500. Scientific distribution of water requires that water be priced by volume and supplied to the farmer who can derive the maximum benefit from the same.

Indian farmers are opposed to volumetric pricing because that will lead to increased financial burden upon them. The solution is to make a parallel and adequate increase in the support prices of the crops so that the farmer is fully compensated for the money paid towards volumetric purchase of water. Unfortunately, it is the policy of the Government to keep agricultural prices low so that the poor urban consumer is protected. The over-use of water by the farmers, the low support prices of grains, and low incomes of the urban poor are all interlinked. The solution will come by securing an increase in the incomes of the urban poor; followed by an increase in the price of food grains; followed by volumetric pricing of water. That alone will make it profitable for Haryana to pay for water received from Punjab and make it a win-win solution for both the states as well as the country.

Vol. 48, No. 43, May 1 - 7, 2016