Back-pedaling the market mantra

In late January this year, the Cabinet Secretariat of the Government of India constituted a Committee on Allocation of Natural Resources, under the chairpersonship of former Finance Secretary Ashok Chawla. The importance and significance of the Chawla Committee lay in its timing and origin.

Just weeks earlier, on 6 January, the Government of India had constituted a Group of Ministers (GoM) headed by the Finance Minister to consider measures that the government could take up to tackle corruption. This is the period when the government was besieged by the 2G and other scams. As this and several other scams are rooted deeply into the discretionary and non-transparent allocation of natural resources like coal, gas, spectrum, land, water etc., this became an issue of deliberations in the very first meeting of the GoM.

In this meeting itself, the GoM decided to set up a mechanism to deliberate the issues of enhancing "transparency, effectiveness and sustainability in utilisation of natural resources, consistent with the needs of the country to achieve accelerated economic development". This resulted in the constitution of the Chawla committee. Given its origin, the subsequent developments in the 2G scam, and the various - and still emerging - controversies in allocation and acquisition of land etc., the report of the Chawla committee became a much-awaited one. The Committee submitted its report on 16 May 2011.

The Committee deliberated on and gave some overarching observations, and also presented detailed recommendations for eight sectors: coal, minerals, petroleum, natural gas, spectrum, forests, land and water. As widely reported in the media, the general thrust of the Chawla committee's recommendations is a shift towards more market-based processes for the allocation of these resources, though a detailed reading shows more nuances. One of the important reasons presented by the Committee for this focus is the belief that transparency is more likely in competitive market-linked processes.

Given this, its analysis and recommendations for the water sector - and in this article, I will limit the discussion to this portion of the report - are quite interesting. Indeed, what it says for the water sector is not as important as what it does not say.

What the report does not say

A series of policy, legislative and other measures have been advocated for the water sector in the last decade or so under the broad heading of water sector 'reforms'. This is happening both at the Central as well as the State levels. The basic direction of these reforms is to increasingly transform the water sector into market-based and commercial operations, and a resulting commodification of water. Some of the important elements of these measures include full cost recovery, increase in tariffs, privatisation of water supply and introduction of tradable water rights.

The last in particular is essentially being promoted as a means of allocating water between various competing uses through a market-based mechanism for trading in water entitlements. This, it is said, will allocate water to the highest-value-added use. For example, the Maharashtra Water Resources Regulatory Authority (MWWRA), a statutory body, is mandated with creating such a market of water entitlements. Several other states are in the process of setting up such authorities and the central government is also promoting the MWRRA as a model.

It is interesting then, that the Chawla committee does not even mention this - tradable water rights as a means of allocation of water - let alone recommend it. Indeed, its entire discussion on water is largely devoid of any references to or recommendations of the various market-linked measures that occupy so much of the discourse in the water sector including public-private partnerships or PPPs.

One could argue that this is just because the Committee has simply not looked at these issues as they are in the ambit of the state governments. The Committee itself has stated this as the reason for not looking at issues of drinking water and allocation of sites for hydropower. However, this does not seem to be a tenable explanation for the absence of recommendations of market linked mechanisms for the water sector in the Committee report.

The Committee has looked at in detail the issues of allocations for irrigation, and groundwater. It may be pointed out that the tradable water entitlements are envisaged for firstly for irrigation water systems. The reason offered by the Committee for looking at irrigation and groundwater is that .there is substantial scope for intervention at the level of union Government. in these issues. While this is true, this applies equally well to issues of hydropower (through the mandatory CEA concurrence), urban water supply (through the JNNURM) and other parts of the water sector too. Thus, the Committee could have gone into the issues of tradable water entitlements, PPPs and other market mechanisms in the water sector.

Life-support: A primary function

A more logical explanation for the Committee not recommending tradable entitlements and other market based mechanisms for the water sector, is that this is an act of comission, not ommission, that this is a deliberate and considered response of the Committee. The Committee has recognised that there are multiple dimensions of water use and allocation, "with the primary use being that of life-support". It is this recognition by the Committee of the role of water - in its own words the role of "the fundamental right as life support" - that seems to have determined its recommendations for the sector.

The Committee leaves the decisions on allocations and pricing to its recommended comprehensive national legislation on water, a "framework law" that enshrines water as a common property resource and that firmly embeds the principle of "public trust" in water governance. Moreover, it emphasises building consensus around the various elements of this legislation. It also calls for a river basin level planning and comprehensive programs of aquifer management to be built up on a detailed aquifer mapping of the country.

The recommendations of the Chawla committee are important as they emphasise the life-support function of water as the key element that will determine how it is governed. In that, it represents a saner voice in the clamour for transforming water into a commodity and the water sector into a market operation, under the claim of efficiency, a claim that at best remains unproven even as its adverse impacts have been repeatedly seen in India and all over the world.

Missing: The people

There are however two important lacunae in the Committee's analysis of the situation. One is that in the call for building consensus, it seems to emphasise only consensus amongst government actors and agencies. As far as water is concerned, and indeed other natural resources too, such a consensus should involve everyone including the local communities, and it would have been important for the Committee to highlight this.

The second issue is that the Committee places a lot of emphasis on ensuring transparency in the process of decision making related to allocation of natural resources, and rightly so. However, a point missed by it is that who makes the decisions is as important as how they are made. The Committee mostly assumes that decisions regarding resource allocations and utilisation will be made by the Government (and that too at the higher levels) or by official entities like a regulatory agency. The people seem to be absent in the process.

However, it is critical, especially when dealing with natural resources like water, coal, forests etc. that the communities co-exiting with these resources are involved in the decisions related to their utilisation and allocation. Indeed, they should have the primary place in the process. This involvement would have to be direct and also through the local self-government institutions like panchayats, gram sabhas, municipal bodies, and so on.

Otherwise, the risk remains high that in spite of all the transparency that is urged in this report, the rights, needs and values of local communities everywhere will be disregarded in favour of the values and interests of the economically and politically more powerful players. If that happened, the Committee and its deliberates would have served little purpose.