Some Key Issues in Policy, Pricing, Regulation, and Financing of Irrigation Development in India Today

This paper discusses the stylised problems relating to water and irrigation in India and argues tht most of the inefficeincies, misuse and environmental damage have their roots in the mispricing of water and electricity. Since the only kind of subsidies thus far used are price based input subsidies they end up distorting the allocative prices, from which the other distortions follow. The problems of the sector can be overcome by changing the method of subsidisation. Converting price based or tariff subsidies to direct subsidies and endowments with improved and managerial initiatives by themselves would not succeed without this crucial tariff and subsidy reform. Such reform would also result in political capital for its initiators, and should make private and public financing of water (and electricity) projects possible.