MARKETS, INSTITUTIONS AND EFFICIENCY GROUNDWATER IRRIGATION IN NORTH INDIA

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.Water markets, water tables, water production function, water pricing.

Technical Efficiency in Production and Resource Use in Sugar Cane: A Stochastic Frontier Production Function Analysis

Using maximum likelihood estimation techniques, the stochastic production frontier is employed to estimate technical efficiency at the plot level by ownership types of water amongst a cross section of sugar cane growing farmers using primary survey data. Inefficiency effects are modelled as a function of farmer specific explanatory variables. Tests reveal that the null hypothesis of no inefficiency and no influence of farmer specific variables on inefficiency can be rejected. Education, land area, discharge of tubewell and distance of plots from the water source are the causes identified in explaining inefficiency. Estimated technical efficiency scores are highest on plots where water is sourced from a privately owned tubewell, followed by plots serviced by partnered tubewells and lowest on plots where water is bought. Income gains from improved efficiency follow the reverse patterns with the largest gains of Rs. 1082 per bigha estimated for buyers’ plots and Rs. 649 per bigha for plots with their own tubewell with the average of Rs. 867 for all plotsStochastic Frontier Production, Technical Efficiency, Groundwater, Sugar cane, India

SOCIAL CONTRACTS, MARKETS AND EFFICIENCY -- GROUNDWATER IRRIGATION IN NORTH INDIA

This paper uses primary data to analyze the institutions and informal markets that govern groundwater allocation in the principal sugarcane belt of North India. In contrast to earlier literature, we find that the observed water trades result in efficient water allocation across farms. We interpret this and other stylized facts in terms of a simple bargaining model with limited inter-player transfers. Poor functioning of the power sector leads to reduced pumping and a water supply constraint. Simulations show that power supply reform can significantly increase farm yields, be financed out of the increased farm profits, and provide an instrument to use for attaining intertemporal efficiency in water allocation.water markets, market structure, water production function.

Ground water irrigation and sustainability : water markets, institutions and power supply in Northern India

This policy brief is based on SANDEE working paper no. 19-06, "Groundwater irrigation in North India : institutions and markets"In South Asia concerns about water scarcity have been mounting for some time, particularly in rural areas where food productivity critically depends on irrigation. Sustainable water consumption is therefore a key development goal, otherwise any strategy that aims to guarantee food security or tackle rural poverty will ultimately fail. This is, however, a particularly big challenge as there are many factors that influence water supply and demand; this means that it is often difficult to decide what strategic approach should be taken to make sure that water sources are used efficiently and sustainably

Improving Agricultural Efficiency Amongst Groundwater Users: The Case of Sugarcane in North India

This paper estimates inequities in production and income for different categories of water users in the context of a rapidly depleting resource by estimating technical inefficiency using frontier techniques. The research is based on primary survey data from a North Indian village that shares characteristics commonly observed in other groundwater-dependant agricultural areas. Estimated technical efficiency scores are highest on plots where water is sourced from a privately owned tubewell, followed by plots serviced by partnered tubewells and lowest on plots where water is bought. Income gains from improved efficiency follow the reverse patterns with the largest gains of Rupees (Rs) 1082 per bigha1 estimated for buyers’ plots and Rs. 649 per bigha for plots with their own tubewell with the average of Rs. 867 for all plots. A policy package of improved power, joint ownership of tubewells, farmer training and better water transportation systems are prescribed as policy measures to alleviate the differences amongst water users

Groundwater Irrigation in North India: Institutions and Markets

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]Water markets, water tables, water production function, water pricing.