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BR Research

Water pricing: still important

  Looking back, developments in the water sector during the past two years appear to have been ground-break
Updated 20 Feb 2020

 

Looking back, developments in the water sector during the past two years appear to have been ground-breaking. Lower than average rainfall during summer 2018 led to alarm surrounding water scarcity, that took a life of its own with the onset of dam building campaign. Luckily, sanity prevailed as the debate was soon diverted toward more serious demand-side challenges such as inefficient consumption, low water productivity, and absence of integrated regulatory framework for water sector governance.

Facts highlighted ad nauseum don’t need restating. As agriculture’s high-water footprint, poor expenditure recovery, and low productivity received limelight, it appeared as if an inflection point had been reached where political sensibilities would no longer hinder rationalization of pricing for irrigation water.

As more and more consumers in the urban sectors struggled to receive potable water supply for basic needs, estimates of less than forty percent cost recovery through abiana showed that the rent-seeking in the farming sector needed to be put to an end to ensure a more equitable water distribution across all societal segments. Conversation sparked in the policymaking circle in the aftermath of National Water Policy, and the Supreme Court symposium raised optimism that the wheels had been set into motion. But it appears that the momentum has now been lost.

The first straw – ironically – was heavy (and untimely) precipitation during 2019, that not only appears to have restored water reservoirs, but also shifted the focus from matters of water governance to effects of climate change on water supply variability. The effects of crop destruction and resulting shock to supply of major agricultural commodities due to extreme weather events during last year is already showing in reduced supply of cotton, wheat, sugarcane, and even corn.

The second straw – consequentially – turned out to be the pressure on commodity prices, a story that has been retold repeatedly in the case of flour and sugar price rises. As the federal and provincial governments – rightly or wrongly – take price control measures in the spirit of public welfare – the rising cost of production of traditional crops has taken centre stage, as the lack of competitiveness compared to international commodity market prices becomes talk of the day.

Given the changing direction of public policy conversation toward commodity price inflation, all hope for raising abiana rates to rationalize water consumption in farming sector seems to be lost. Administratively, increasing abiana collection once again appears to have become a non-issue; granted that in the fiscal scheme of things its theoretical quantum does little to improve government’s revenue target. But there is another side to the story.

Fixing the abiana problem indeed has direct consequences for cost of farm production in the immediate term. But for so long as it is seen only from the lens of lowering water consumption in the agriculture sector, its policy-use case will offer low utility. On the other hand, rationalizing abiana pricing can also serve as a supply-side tool, as higher cost of water use may force growers to use water more efficiently, and invest in productivity improving tools to increase output per volume of water used.

If basic principles of global warming are any guide, the country should not face a crisis of water availability in immediate term – as increased glacial melt should theoretically improve surface freshwater supply – more than 90 percent of which feeds into irrigation.

The real challenge is of erratic weather patterns, which would inevitably affect crop productivity, no matter which direction total water supply moves. If that is correct, then exigency demands that policy focus should explore all possible incentives that can result in increased agricultural output. That means rationalizing abiana pricing should be centre-stage, and not take a backseat.