Water Trade

Why in news?

India’s per capita water availability has touched the water-stressed benchmark, and is likely to reach the water-scarce scenario by 2050.

India’s water resources are under tremendous pressure.
India receives more than 80% of the rainfall during 4 months of the year.
Unequal spatial distribution – The Barak and Brahmaputra basins have a per capita water availability that is more than that of the Ganga basin.

Water credits – It deals with the transaction between water deficit and water surplus entities within a basin and represents a fixed quantum of water that is conserved or generated.
Carbon credits – It is almost a mirror image of the concept of carbon credits.
However, unlike carbon credits, the water credit system is confined to hydrological boundaries, that is, river basin or watershed.

Multiplayer approach – Industries can buy water credits from water-rich municipalities, who are fund crunched to finance large-scale floodwater harvesting, & wastewater treatment projects, aiding in conserving water.

Australia – India should learn from global water trading successes like that of Australia, to lay a roadmap for water trading and also ensure water regulation by setting up related authorities.

The Murray-Darling basin in Australia is a great example of how water credit system works successfully.

Chicago Mercantile Exchange – Participation in water credit system is seen from actual users such as farmers and municipalities and financial investors.
Improved water quality – With the effective implementation and stringent regulatory standards, water trading also paves way for water quality standards.
Recycling – It promotes growth in the recycle and reuse markets through the utilisation of heavy metals organics released in the water from both the industrial and agricultural sectors.
Strengthen economic ties – The credit system can be used to highlight the water quality merits and strengthen economic relations both at a global as well as regional level.
Reduce government’s burden – The system can reduce the burden of the government that releases funds towards mitigation as well as post-disaster events such as floods and droughts.
Insurance – The markets can even insure irrigated and rain dependent agriculture against droughts by locking in water prices.

Rich institutions dominating – An innate flaw of this water credit system is that the market is dominated by a small number of rich institutions or sellers.
Hence, rich sellers can control the market by buying credits from the poor, and continue to misuse the shared water resources.
Lack of awareness – The market competition among sellers is further reduced due to the lack of awareness about the water credit concept.

There has been no strong dialogue on the implementation of a water credit system, so far.
India needs to aggressively alter and adopt practices to expand finance opportunities within the water sector.
It is anticipated that India could face opposition if water is made a tradable commodity.
In such a case, a regulatory body must be in place to facilitate and successfully maintain free market conditions.