WATER USE AND REALLOCATION:IMPLICATIONS FOR ECONOMIC GROWTHA Case Study of Rajasthan

A u g u s t 2 0 1 7s u M M A R Y R E P O R t

smita Misra Lead Water and Sanitation Specialist, World Bank

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Summary report 1

Key FindingS

The key objective of the study is to analyze whether Rajasthan can achieve its economic growth targets with its available water resources and current water allocation pattern. In the above context, the study analyses the water use in agriculture, domestic and industrial (including power) sectors of Rajasthan. It identifies the water allocation patterns in different sectors and calculates the water intensity in each of these sectors. It brings out the constraints that the available water may pose towards achieving the economic growth targets of the State and suggests various strategic options and interventions that policy makers may consider to meet the economic growth target.

The study relies on secondary sources of information including reports of Government of Rajasthan on water resources assessment. A summary of the key findings of the study analysis are presented below.

Water use intensity analysis

The study examines the existing water resources availability and the water allocation pattern with respect to the economic sectors in Rajasthan to calculate the water intensities for each sector:

Water resources availability in rajasthan �1: The overall availability of blue water

resources in the State is 38.24 BCM for year 2010. This includes 15.67 BCM of surface water availability at 50% dependability; 10.61 BCM of ground water and 12.96 BCM of inter-state water allocation (net import). Blue water availability for the year 2013-14 is 38.85 BCM (derived).Water allocation pattern for agriculture, industry and Service (drinking water) �

Sector: The allocation of blue water to agriculture, industry and services (drinking water) sector for the year 2013-14 is 86%, 3% and 11% respectively. In addition to blue water, about 53.23 BCM of green water is also utilized by the agriculture sector based on annual average availability.

1 Source: Government of Rajasthan “Study of Planning of Water Resources of Rajasthan” (2014) by M/s Tahal Group.

Summary report

2 Water uSe and reaLLoCation: IMPLICATIONS FOR ECONOMIC GROWTH

Water use intensities of agriculture, industry and Services (drinking water) �2

Sector: The Gross State Domestic Product (GSDP) of agriculture, industry and services (drinking water) sector in the year 2013-14 is INR 497 billion (USD 8.15 billion), INR 699 billion (USD 11.47 billion) and INR 1,254 billion (USD 20.58 billion) at constant 2004-05 prices. Based on water allocation/usage and the contribution to GSDP by each sector, the water intensities of agriculture, industry and services (drinking water) sector work are 174.29, 1.90 and 3.35 litres/INR (10,621, 116 and 204 litres/USD) respectively. The agriculture sector’s water intensity is significantly higher than that of the industry and services sectors.

diagnosis of the Water Challenge

The water use intensities were applied to economic growth targets of Rajasthan to arrive at the demand-supply gap for water in the year 2024-25.

economic growth targets of rajasthan: � Rajasthan has set itself an economic growth target of 7.70% in the 12th Five Year Plan. The targeted sectoral annual growth rates are 9.5% in services sector, 8% in industries and 3.5% in agriculture. If these growth rate targets are assumed up to the year 2024-25, the GSDP of the State will more than double to ~INR 5,759 billion (USD 95 billion) as against the present GSDP of INR 2,450 billion (USD 40 billion) at constant (2004-05) prices. Water demand in 2024-25 based on Business as usual: � In order to achieve the targeted GSDP for the year 2024-25 based on current water intensities in each sector, the requirement of blue water will increase from 38.85 BCM in the year 2013-14 to 87.63 BCM in the year 2024-25, a significant increase of 126%.3

2 Study analyzes drinking water sector as part of the services sector.3 Study focuses the discussions on blue water only, as this is where specific interventions can have significant impact.

Blue Water Usage in 2013-14 (BCM) Blue Water Requirement in 2024-25 (BCM)Blue Water Demand-Supply Gap in 2024-25 (BCM)

100.00

BC

M

90.0080.0070.0060.0050.0040.0030.00

Agriculture Industry

Blue Water Present Usage and Demand Supply Gap (BCM)

33.31

73.12

39.81

1.33 3.101.77

4.2011.40

7.20

38.85

87.63

48.78

Services+Drinking Water Total

20.0010.000.00

Summary report 3

Water-Cost-Curve - Rajasthan

Agriculture Industry UrbanSupply

Zero Liquid Discharge in Industry

Water Re-use in industry

Solar PVDry Cooling in CSP Plants

Rainwater Harvesting in Urban AreaRainwater Harvesting in Industry

Dry Cooling in Thermal Power Plants

Rehabilitation of Minor Projects

24x7 Urban Water Supply & NRW reduction

Irrigation ProjectsDrip Irrigation

Sprinkler Irrigation

Plastic Mulching

Inter-linking of basinsWatershed DevelopmentRehabilitation of Major/Medium Projects

Recycling in Thermal Power PlantsZero Tillage

10

20

30

40

100

200

300

400

800

Industrial Re-use of Municipal Wastewater WaterSaved/made

available(Million m3)

0.4

587

2.6 3.7 7.7 9.5 10.8 11.7 13.6

19.622.4

33.6

43.2

728.4

Cos

t of w

ater

sav

ed/m

ade

avai

labl

e (c

ents

/m3 )

116 590 686 394 5721 2323 3055 124 200 29 2130 17 446 459 4 34 26

10

20

30

40

100

200

300

400

800

290.5290.5

142.6

70.751.1

49.7

need for strategic options and interventions

The analysis shows that if the present water usage and allocation pattern continues, the State will have a challenge in meeting its economic growth targets. Therefore, Rajasthan needs to look at strategic options to better manage its water resources and augment the water availability to support its economic growth aspirations.

A basket of strategic cross-sectoral options has been examined to reduce the demand-supply gap for water and the summary of analysis is presented below.

a. technical interventions for improving water intensities and augmenting supply

The potential for improving water-use intensity was analyzed for agriculture, industries and services (drinking water) sectors. In addition, the potential for supply augmentation measures were also examined. The technical interventions were analyzed from two perspectives: (a) potential of water saved and or made available by the application of the intervention, and (b) per unit cost of the intervention.

These technical interventions were mapped as a ‘Water-Cost-Curve’. A technical intervention in the cost curve is represented by a block in the chart where the horizontal width is the potential of water saving/availability while the vertical height is per unit cost of water saved/made available.

4 Water uSe and reaLLoCation: IMPLICATIONS FOR ECONOMIC GROWTH

technical interventions Sector project/measure

Water Saving (mCm/

yr)

Cost per m3 water

saved/made available (inr/m3)

totalannualized

Cost (inr Cr)

totalannualized Cost (uSd millions)

Water Use Intensity Improvement Measures

Agriculture

Zero Tillage 587.32 0.23 13.64 2.2

Plastic Mulching 393.71 5.81 228.86 37.6

Sprinkler Irrigation 5,721.52 6.57 3,756.39 616.4

Drip Irrigation 2,323.04 7.15 1,661.50 272.6

Industry

Recycling in Thermal Power Plants 116.4 1.56 18.11 3.0

Dry Cooling in Thermal Power Plants 200.4 13.63 273.22 44.8

Industrial Re-use of Municipal Wastewater 29.6 20.45 60.50 9.9

Rainwater Harvesting in Industry 16.7 30.30 50.49 8.3

Dry Cooling in CSP Plants 6.4 43.07 27.66 4.5

Solar PV 458.9 86.90 3,987.70 654.4

Water Re-use in Industry 3.5 177.03 61.57 10.1

ZLD in Industry 25.6 443.87 1,136.13 186.4

Services + drinking water

Rainwater harvesting in urban areas 44.4 31.15 138.27 22.7

24x7 Urban Water Supply & NRW reduction

34.2 177.00 605.80 99.4

Water Supply Augmentation

Water Resources and Irrigation

Rehabilitation of Major/Medium Projects

590.71 2.24 132.43 21.7

Watershed Development 686.17 4.70 322.53 52.9

New Irrigation Projects 3,054.83 8.29 2,532.09 415.5

Rehabilitation of Minor Projects 124.00 11.93 147.89 24.3

Inter linking of Basins 2,129.53 26.32 5,604.99 919.8

Summary report 5

B. intra-sectoral changes for reducing water demand

This option presents scenarios on how a shift to less water intensive use within the sectors of agriculture and industry could reduce the demand for water.

Agriculture sector: Impact of change in cropping pattern on irrigation (blue) water requirement

The present cropping pattern of Rajasthan has been analyzed taking into consideration the water requirement and the value of output. An analysis of an alternate scenario of cropping pattern-mix, from the current pattern to less water intensive crops, keeping the value of output constant, shows that the irrigation water demand can be reduced by 12%. This translates to 4 BCM water savings for the year 2013-14. The snapshot of illustrative cropping pattern resulting in the reduction of irrigation water requirement is presented below.

Industry Sector: Impact of change in composition of industries on water requirement

An analysis of an alternate scenario of a change in composition of industry mix, keeping the gross value added constant, shows that the water requirement could potentially reduce from 134 million cubic metres to 113 million cubic metres i.e. a reduction of 21 million cubic metres. This represents a 15.3% reduction in water requirement for the selected industries.

Kharif and Other Crops Rabi Crops

Are

a in

Per

cent

age

for E

ach

Cat

egor

y

Are

a in

Per

cent

age

for E

ach

Cat

egor

y40.00%

35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%

80.00%

70.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%LL LH HL HH LL LH HL HH

35.6

3%

15.0

0%

37.5

0%36

.27%

4.13

%

30.0

0%

23.9

7%17

.50%

2.23

%2.

00%

70.0

0%

37.3

2%28

.00%

60.4

5%

0.00

%0.

00%

Cropping Pattern in 2013-14 (Present)Cropping Pattern in 2013-14 (Alternate)

Cropping Pattern in 2013-14 (Present)Cropping Pattern in 2013-14 (Alternate)

Impact of change in cropping pattern on irrigation (Blue) Water Requirement

Overall reduction in water requirement in 2013-14Percentage reduction in water requirement in 2013-14 ~12%

4,000 MCM

note: Four categories of crops are considered: Low - Low (LL); Low - High (LH); High - Low (HL); and High - High (HH). The first character denotes the crop water requirement and the second character denotes the value of output of the crop.

6 Water uSe and reaLLoCation: IMPLICATIONS FOR ECONOMIC GROWTH

The technical interventions and intra-sector composition changes result in reduction of water requirement for agriculture, industry and service (drinking water) sectors as well as possible augmentation of blue water supply. These in turn result in reduction of water intensities in each of the sectors. The blue water demand-supply gap can be reduced by 55% for the year 2024-25 based on the implementation of select technical interventions and intra-sector composition options.

C. inter-sectoral water re-allocation and impact on gSdp

As 45% of the demand-supply gap for blue water in the year 2024-25 remains even after implementation of the technical interventions and intra-sector composition changes, Rajasthan will need to look at the option of inter-sectoral water re-allocation to support the GSDP aspirations of the State. Inter-sectoral water re-allocation analysis presents various scenarios which show that such a measure can help support the State in achieving and exceeding its targeted GSDP. Two sets of such scenarios have been analyzed.

allocation as per prioritization in State Water policy: � The blue water availability considered for this scenario is 38.85 BCM. The water allocations and impact on GSDP are presented on the next page.

It can be seen from this scenario, that if Rajasthan implements the technical interventions, intra-sector composition changes, and allocates water as per the State’s Water Policy, it is possible to support a higher growth rate for the State’s GSDP.

Composition of Industries based on Contribution Towards GVA

30.00%25.00%20.00%15.00%10.00%5.00%0.00%

140

120

100

Other non-metallic

mineral products

Basic metals Chemicalsand Chemical

Products

Textiles

2013-14 (Present) 2013-14 (Alternate)

FoodProducts

Beverages

25.1

3%

25.0

0%

8.38

%

12.0

0%

8.92

%

5.00

%

8.39

%

5.00

%

5.91

% 10.0

0%

3.99

%

3.72

%

Mil

lion

Cub

ic M

etre

s

Water RequirementReductionof 21 MCM

(15.3%)

Impact on Water Requirement

2013-14 (Present)

134

2013-14 (Alternate)

113

Summary report 7

Scenario for supporting additional growth, exceeding the targeted gSdp: This scenario takes in to consideration the additional water (6.59 BCM) which could be made available through the supply augmentation measures. These are presented as part of technical interventions.

The additional water is assumed to be distributed amongst the services and industry sector in different proportions. It is assumed that the agriculture sector continues to receive its share as per the base scenario. The chart presents the range of GSDP growth rates (including

prioritization of Water allocation as per State Water policy

Water allocation Basis and implications impact on gSdp

Priority 1: Drinking Water The drinking water sector is provided the water required for achieving its targeted growth rate of 9.5%. The water allocation will increase from 11% under present allocation to 29%.

Service Sector Growth Rate: 9.5%

Priority 2: Agriculture Sector Agriculture sector gets second priority for water allocation. Agricultural water allocation will reduce from 86% under present allocation to 68%.

Agriculture Sector Growth Rate: 0.73%

Priority 3: Industry Sector Industry Water Allocation is fixed as that for the present allocation. No additional water is allocated.

Industry Sector Growth Rate: 5.08%

the overall gSdp growth rate of 6.98% can be supported by available water in the State by taking into consideration the water allocation priorities as per State Water policy.

Agriculture continues to receive water quantity similar to the base scenario

Allocation of additional (6.59 BCM) of water between Industry-Service sector

Gro

wth

rate

(%) 2

024-

25

1.50%

6.78%

7.7%

9.22%

15.13%

8.26%7.92%8.84%

7.22%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Target State GDP GrowthIndustry GDP Growth

State GDP Growth Agriculture GDP GrowthService GDP Growth

% age of additional water (6.59 BCM) allocation to service sector and remaining to industrial sector95.0% 90.0% 85.0% 80.0% 75.0% 70.0% 65.0%

8 Water uSe and reaLLoCation: IMPLICATIONS FOR ECONOMIC GROWTH

higher than target rates) which could be supported through such water re-allocations. However, the trade-offs in the desired sectoral growth rates need to be considered.

Summary of impact on the gSdp of rajasthan based on technical interventions, intra-sectoral changes, and inter-sectoral water re-allocation

The GSDP of Rajasthan in the year 2013-14 is INR 2,450 Billion (USD 40.2 Billion) with the overall state growth rate of 4.6%4. With the implementation of strategic options i.e. technical interventions, intra-sector composition options and inter-sectoral water re-allocation, a higher overall state growth rate in the range 6.98% to 9.22% can be supported by the available water in the State. The indicative annualized cost implications and the GSDP growth scenarios are presented in the chart below.

Converting strategies into actionable program

The analysis shows that from a water perspective it is possible to support GSDP growth rates which are much higher than the state’s target by taking into consideration a combination of water reallocation options. Taking this forward, the actionable program in three broad categories is also presented.

4 The study analyzes strategic options with respect to the 12th plan growth rate implications for Rajasthan.

40.24 5 6 7 8 9 10

GSDP (USD in Billions)

Ann

uali

zed

cost

(USD

in M

illi

ons

per y

ear) 86.51 106.02

Water Supply Augmentation measures can support an increase in GSDP growth rate from 6.98% to a range between 7.22% to 9.22%.

Water Use Intensity Improvement Measures can support an increase in GSDP growth rate from 4.6% to 6.98%.

With additional water availability and implementation of strategic options, a range of GSDP growth scenarios from 7.22% to 9.22% can be supported by water.

% State growth rate from 2013-14 to 2024-25

Range of GSDPgrowth scenarios

-500

0

500

1000

1500

2000

2500

3000

3500

4000

84.48

Summary report 9

prioritize cross-sectoral water efficiency initiatives: � The analysis presents the prioritization of select technical interventions through a ‘water cost curve’. Rajasthan can use this cost curve to identify the most cost-effective interventions for implementation across sectors and drive water use efficiency programs in agriculture, industry and the drinking water sectors.

Rajasthan can also design specific incentives and policies to facilitate the intra-sector composition changes as these have significant impact on the water requirement.

The analysis presents scenarios for water allocation to different sectors based on the economic growth targets. The analysis can be further expanded to develop a detailed water allocation policy for the State. Several parameters can be considered while developing the detailed water allocation policy, including water allocation prioritization factors such as social considerations, regional favorability, climatic conditions, water-use efficiencies, financial sustainability, etc.

Strengthen water governance systems and institutions: � Presently, the data on water supply to agriculture, industry and service (drinking water) sector is available from the perspective of water allocation. However, the actual supply and consumption at the end-point is not captured or recorded for all uses. Similarly, data relating to economic outputs and water consumption is not captured in a manner that facilitates easy analysis. Therefore, it is important to develop robust data collection, analysis and monitoring system related to water use and GSDP contribution for each sector or sub-sector. This should be taken up at an appropriate level i.e. either the basin or the sub-basin level.

Prioritize Cross-sectoral

Water Efficiency Initiatives

Leverage the Water-Cost-Curve to prioritize technical interventions in agriculture, industry and urban water sector

Design specific incentives and policies to facilitate intra-sector composition changes

Develop a detailed water-sector allocation policy

Strengthen Water Governance Systems

and Institutions

Strengthen data management on water use

Create Institutional Structures to enable implementation: Establish a Water Regulatory Authority and Bureau of Water Efficiency

Create Enablers for Transformation

Create a cross-sectoral forum to bring together the multiple stakeholders to guide the transformation in the water sector

10 Water uSe and reaLLoCation: IMPLICATIONS FOR ECONOMIC GROWTH

It is important to strengthen the institutional framework and establish clear accountabilities to streamline implementation of the technical interventions for water-use efficiency improvements and decisions on water re-allocations. Accordingly, Rajasthan may consider establishing a ‘Water Regulatory Authority’ on matters related to water allocation, tariff rationalization, etc. It can also consider creating a ‘Bureau of Water-use Efficiency’ to advise on water efficiency measures.

Create enablers for transformation: � Rajasthan may consider creating a forum to bring together the multiple stakeholders to guide the transformation in the water sector. The forum could be headed by senior officials from the Government along with working groups to evaluate policies, technologies, projects, etc. The cross-sectoral forum may also comprise working groups to advise on specific policy issues, oversee results of water efficiency improvement measures, and evaluate innovative technologies.

Reference:Water Use and Reallocation: Implications For Economic Growth