- October 9, 2022
- Posted by: BiconAdmin
- Categories: Water, Water Audit
NITI Ayog’s WRA draft to guide India’s future water-trading on bourses; bumpy road ahead for implementation
NITI Ayog’s draft report examining the proposed role of Water Regulation Authority (WRA) for water-trading on bourses may serve as the key for water conservation efforts. Yet, this will not be an easy task as speculators may play havoc during patchy season.
Even though India is mulling to introduce trading in water on commodity exchanges muck like other agri-commodities and metals, but that will be not an easy task as speculators may play havoc with water trading during patchy season when water scarcity goes up in many parts of the country, analysts said.
NITI Ayog is in the process of putting out draft recommendations for public consultations, pitching all options including futures and spot trading of water and tradable licences. India’s total annual utilizable water resources is 1123 billion cubic metres (bcm). Of this, 690 bcm is surface water and 433bcm ground water.
Commodity analyst T Gnanasekar, director, Commtrendz Research said “Water is an essential commodity and has a huge impact on the lives of every Indian. Whether water is traded on commodity future trading platforms or derivatives, it will be heavily regulated. Water trading will have a lot of caveat otherwise speculators will enter the trading scenario and play with prices if the country faces patchy seasons. It is doubtful whether farmers will at all benefit from water trading.”
India is studying the global benchmarks and could soon lay out a roadmap for water trading as water is increasingly becoming a scarce commodity. The US has started water trading, though Gnanasekar said it has not picked up much. The US’s water trade market, the first of its kind, was launched on the Chicago Mercantile Exchange with $1.1 billion contracts tied to California water prices.
How water trading works?
This market has allowed farmers, hedge funds, and municipalities to hedge against future water availability in California. The new scheme was announced in October 2020, triggered by the region’s severe heat, wildfire and droughts. While this could clear up uncertainty around water prices, treating water as a tradable commodity puts basic human rights in the hands of financial institutions and investors.
Water scarcity has already impacted every continent and an increasing number of regions are reaching the limit at which they can provide water services sustainably, especially in arid regions. With nearly two-thirds of the world’s population predicted to face water shortages by 2025, water scarcity is a growing risk around the world, as climate change and human activities are leading to severe droughts around the world.
“Water-trading is an internationally acclaimed best practice in water management; however, it has not gained much ground in India. The role of the Water Regulation Authority (WRA) and the possible mechanism and guidelines for water-trading were examined and a draft report was prepared,” said NITI Ayog’s recent annual report. “It is expected that this will serve as a directional input in augmenting water conservation efforts,” the report claimed.
When contacted, a NITI Ayog official said that they were indeed working on the idea. “The idea is being discussed and it is at a very nascent stage. This idea is much ahead of its time. Water politics is a minefield in our country,” the official who did not wish to be named explained.
Also see Water Index
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