The Hindu : New Delhi News : Latest river-linking plan suggests levy of water charges

Online edition of India's National Newspaper
Friday, May 28, 2004

New Delhi

New Delhi

Latest river-linking plan suggests levy of water charges

By Gargi Parsai

NEW DELHI, MAY 27. At a time when the United Progressive Alliance is keen on mollifying farmers and the rural poor, it is faced with the recently submitted Action Plan II on the Inter-Linking of Rivers (ILR) that has recommended across-the-board imposition of water charges, levy of cess and duties on select goods of mass consumption, levy of cess on foodgrain procurement and raising agriculture mandi tax as some of the measures to recover costs.

Preliminary estimates put the average investment requirement of the programme at about Rs. 46,000 crores per annum over 12 to 15 years for 30 river links and construction of 32 dams.

The plan prepared by the Task Force on ILR, headed till the elections by Suresh Prabhu, emphasises charging water costs from farmers on the ground that they would benefit most from the irrigation potential that will be created and said they must treat water as another input cost, along with fertilizers, diesel, pesticides and seeds. More importantly, the plan recommends imposition of cess on water deficient States which will benefit from equitable distribution of water resources and increased irrigation potential. In other words, the beneficiary States may be levied cess on usage of water.

The Action Plan recommends that the funding of the programme be linked to the cost-recovery mechanisms and charges be essentially recovered from the beneficiaries of the programme. It notes that irrigation pricing should be able to cover its annual maintenance and operational costs. The subsidies in the irrigation sector are one-eighth of the total subsidies in 1994-95 and recoveries have declined over the years, it says.

The plan recommends funding the Rs 5.6 lakh crore river-linking programme through a combination of private participation, public-private participation and public funding. It suggests raising part of the funds through private participation in creation of hydro power projects and through public-private partnership by development of canal tributaries and command areas.

For private sector to participate in the development of irrigation infrastructure, the Plan has recommended annuity (annual revenues) model. Under this model, the private developer bears the financing, construction and operations risk, while the government bears the market risk and assures annual revenues to the private operator.

The rest of the annual funding is suggested to be from public participation by mobilising funds from the financial sector, as well as through imposition of cess and duties

The plan notes that although all over the world 90 per cent of water is delivered in the public sector, private players have started playing a role in water supply. For that, the Task Force wants the government to consider admitting private players in water distribution on recovery of royalty basis — a move strongly opposed by NGOs.

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