Groundwater Sales Promote Equity

In Pakistan, as in other countries in South Asia, farmers who can afford it are investing in private tubewells to assure a supply of irrigation water when they need it. When these farmers have more water than they can use, they sometimes sell the excess to nearby relatives and neighbors. Until now, these informal water markets have received little research attention. But, as water becomes more scarce and degraded, countries need information to formulate policies that improve access to water resources, particularly for tenants and smallholders. "Groundwater Markets in Pakistan: Participation and Productivity," Research Report 105 by Ruth Meinzen-Dick, looks at how water markets operate, who participates, the nature of the transactions, and the effects of the markets on agricultural productivity and incomes. Its findings are relevant throughout South Asia.

Private tubewells boost production by increasing farmers' control over the amount and timing of irrigation applications, which not only improves yields but allows farmers to switch to higher-value crops, thus increasing income. In Pakistan, farmers with more than 25 acres are most likely to own a tubewell, whereas farmers with less than 10 acres are usually the buyers of groundwater. In Punjab and North-West Frontier Province, the study area, 15 percent of the farmers owned tubewells. About one-third of the owners (5 percent of the total sample) sold water, at least occasionally, and 30 percent bought water. The report finds, however, that policies to encourage those with middle-sized farms (10 to 25 acres) to invest in tubewells might improve equity, because such farmers may not use all of the water on their own acreage, as large farmers often do, and they are more likely to be able to finance a well than small farmers. Policies to assist poor farmers with credit to purchase tubewells would be beneficial, especially policies that encourage farmers to join together to purchase, install, and operate tubewells as shared enterprises. Farmers, whether they are building a private well or sharing in a jointly owned one, would benefit from technical assistance in locating pockets of fresh water, the report concludes.

The report indicates that owning a tubewell contributes more to increased productivity than purchasing water, largely because purchased water is not reliable: farmers cannot count on being able to purchase adequate supplies of water at just the time they need it. Farmers who owned their own tubewells had gross margins of Rs. 5,000, more than twice as high as farmers who only purchased water; farmers who had access to both canal water and their own tubewells had gross margins of Rs. 18,000.

At present, farmers must sell groundwater to those who live nearby because the cost of pumping it long distances is prohibitive. Where possible, farmers should be permitted to run water through canal courses as long as they do not interfere with canal operations. Although private tubewells increase farmers' control over water and hence increase productivity, they are a viable option only in areas where good quality water is abundant. In Punjab as a whole, 25 percent more groundwater is already being pumped out of the ground than is being recharged. Where good groundwater is limited, efforts to share water supplies equitably through development of water markets and joint ownership of wells must take high priority.

International Food Policy Research Institute (IFPRI)