WATER USE AND REALLOCATION: IMPLICATIONS FOR ECONOMIC GROWTH A Case Study of Rajasthan SU M M A R Y R E P O R T August 2017 Smita Misra Lead Water and Sanitation Specialist, World Bank Summary Report 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 Rajasthan1: 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  1  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%.3 100.00 Blue Water Present Usage and Demand Supply Gap (BCM) 90.00 87.63 80.00 73.12 70.00 60.00 48.78 BCM 50.00 39.81 38.85 40.00 33.31 30.00 20.00 11.40 10.00 3.10 4.20 7.20 1.33 1.77 0.00 Agriculture Industry Services+Drinking Water Total Blue Water Usage in 2013-14 (BCM) Blue Water Requirement in 2024-25 (BCM) Blue Water Demand-Supply Gap in 2024-25 (BCM) 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. 2  WATER USE AND REALLOCATION: IMPLICATIONS FOR ECONOMIC GROWTH 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. Water-Cost-Curve - Rajasthan Zero Liquid Discharge in Industry 800 800 728.4 Cost of water saved/made available (cents/m3) 24x7 Urban Water Supply & NRW reduction 290.5 400 400 Agriculture Water Re-use in industry 290.5 Industry 300 Solar PV 142.6 300 Urban Supply Dry Cooling in CSP Plants 200 70.7 200 Rainwater Harvesting in Urban Area Rainwater Harvesting in Industry 51.1 100 49.7 100 Dry Cooling in Thermal Power Plants 43.2 40 40 Rehabilitation of Minor Projects 33.6 30 30 Irrigation Projects 22.4 20 Drip Irrigation 19.6 20 Sprinkler Irrigation 10 10.8 11.7 13.6 10 7.7 9.5 3.7 0.4 2.6 587 116 590 686 394 5721 2323 3055 124 200 29 2130 17 44 6 459 4 34 26 Plastic Mulching Industrial Re-use of Municipal Wastewater Water Watershed Development Inter-linking of basins Saved/made available Rehabilitation of Major/Medium Projects (Million m3) Recycling in Thermal Power Plants Zero Tillage Summary Report  3 Cost per Water Total Total m3 water Technical Saving Annualized Annualized Sector Project/Measure saved/made Interventions (MCM/ Cost Cost (USD available yr) (INR Cr) Millions) (INR/m )3 Zero Tillage 587.32 0.23 13.64 2.2 Water Use Intensity Plastic Mulching 393.71 5.81 228.86 37.6 Agriculture Improvement Sprinkler Irrigation 5,721.52 6.57 3,756.39 616.4 Measures Drip Irrigation 2,323.04 7.15 1,661.50 272.6 Recycling in Thermal 116.4 1.56 18.11 3.0 Power Plants Dry Cooling in 200.4 13.63 273.22 44.8 Thermal Power Plants Industrial Re-use of 29.6 20.45 60.50 9.9 Municipal Wastewater Rainwater Harvesting Industry 16.7 30.30 50.49 8.3 in Industry Dry Cooling in CSP 6.4 43.07 27.66 4.5 Plants Solar PV 458.9 86.90 3,987.70 654.4 Water Re-use in 3.5 177.03 61.57 10.1 Industry ZLD in Industry 25.6 443.87 1,136.13 186.4 Rainwater harvesting 44.4 31.15 138.27 22.7 Services + in urban areas drinking 24x7 Urban Water water Supply & NRW 34.2 177.00 605.80 99.4 reduction Rehabilitation of Major/Medium 590.71 2.24 132.43 21.7 Projects Water Watershed 686.17 4.70 322.53 52.9 Water Supply Resources Development Augmentation and New Irrigation Projects 3,054.83 8.29 2,532.09 415.5 Irrigation Rehabilitation of 124.00 11.93 147.89 24.3 Minor Projects Inter linking of Basins 2,129.53 26.32 5,604.99 919.8 4  WATER USE AND REALLOCATION: IMPLICATIONS FOR ECONOMIC GROWTH 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. Kharif and Other Crops Rabi Crops 37.50% 36.27% 35.63% 70.00% Area in Percentage for Each Category 40.00% Area in Percentage for Each Category 80.00% 60.45% 30.00% 35.00% 70.00% 23.97% 30.00% 60.00% 37.32% 25.00% 50.00% 17.50% 15.00% 28.00% 20.00% 40.00% 15.00% 30.00% 10.00% 4.13% 20.00% 2.23% 2.00% 5.00% 0.00% 0.00% 10.00% 0.00% 0.00% LL LH HL HH LL LH HL HH Cropping Pattern in 2013-14 (Present) Cropping Pattern in 2013-14 (Present) Cropping Pattern in 2013-14 (Alternate) Cropping Pattern in 2013-14 (Alternate) Impact of change in cropping pattern on Overall reduction in water requirement in 2013-14 4,000 MCM irrigation (Blue) Water Requirement Percentage reduction in water requirement in 2013-14 ~12%  our categories of crops are considered: Low - Low (LL); Low - High (LH); High - Low (HL); and High - High (HH). The Note: F first character denotes the crop water requirement and the second character denotes the value of output of the crop. 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. Summary Report  5 Composition of Industries based on Contribution Towards GVA 25.13% 25.00% 30.00% 2013-14 (Present) 2013-14 (Alternate) 25.00% 12.00% 20.00% 10.00% 8.92% 8.39% 8.38% 15.00% 5.91% 5.00% 5.00% 3.99% 3.72% 10.00% 5.00% 0.00% Other Basic metals Chemicals Textiles Food Beverages non-metallic and Chemical Products mineral products Products Impact on Water Requirement Million Cubic Metres 140 134 Reduction Water Requirement of 21 MCM 120 113 (15.3%) 100 2013-14 (Present) 2013-14 (Alternate) 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. 6  WATER USE AND REALLOCATION: IMPLICATIONS FOR ECONOMIC GROWTH Prioritization of Water Allocation Water Allocation Basis and Implications Impact on GSDP as per State Water Policy Priority 1: Drinking Water The drinking water sector is provided the Service Sector water required for achieving its targeted Growth Rate: 9.5% growth rate of 9.5%. The water allocation will increase from 11% under present allocation to 29%. Priority 2: Agriculture Sector Agriculture sector gets second priority Agriculture Sector for water allocation. Agricultural water Growth Rate: 0.73% allocation will reduce from 86% under present allocation to 68%. Priority 3: Industry Sector Industry Water Allocation is fixed as that Industry Sector for the present allocation. No additional Growth Rate: 5.08% water is allocated. 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. 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 16.0% Allocation of additional (6.59 BCM) of water between Industry-Service sector 14.0% 15.13% Growth rate (%) 2024-25 12.0% 10.0% 8.84% 9.22% 7.92% 8.26% 8.0% 7.7% 6.0% 7.22% 6.78% 4.0% 2.0% Agriculture continues to receive water quantity similar to the base scenario 1.50% 0.0% 95.0% 90.0% 85.0% 80.0% 75.0% 70.0% 65.0% % age of additional water (6.59 BCM) allocation to service sector and remaining to industrial sector Target State GDP Growth State GDP Growth Agriculture GDP Growth Industry GDP Growth Service GDP Growth Summary Report  7 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. GSDP (USD in Billions) 4000 Range of GSDP 3500 growth scenarios 86.51 106.02 Annualized cost (USD in Millions per year) 3000 2500 With additional water availability and Water Supply Augmentation implementation of strategic options, a range measures can support an increase in of GSDP growth scenarios from 7.22% to 2000 84.48 GSDP growth rate from 6.98% to a 9.22% can be supported by water. range between 7.22% to 9.22%. 1500 1000 Water Use Intensity Improvement Measures can 500 support an increase in GSDP growth rate from 4.6% to 6.98%. 0 40.2 4 5 6 7 8 9 10 -500 % State growth rate from 2013-14 to 2024-25 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. 8  WATER USE AND REALLOCATION: IMPLICATIONS FOR ECONOMIC GROWTH Leverage the Water-Cost-Curve to prioritize technical interventions in agriculture, industry and urban water sector Prioritize Cross-sectoral Design specific incentives and policies to facilitate intra-sector Water Efficiency composition changes Initiatives Develop a detailed water-sector allocation policy Strengthen data management on water use Strengthen Water Governance Systems and Institutions Create Institutional Structures to enable implementation: Establish a Water Regulatory Authority and Bureau of Water Efficiency Create Enablers Create a cross-sectoral forum to bring together the multiple for Transformation stakeholders to guide the transformation in the water sector  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. Summary Report  9 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. 10  WATER USE AND REALLOCATION: IMPLICATIONS FOR ECONOMIC GROWTH Reference: Water Use and Reallocation: Implications For Economic Growth