Groundwater markets in Gujarat, India

Abstract

Markets for groundwater have emerged where well owners have surplus water and there is high demand for irrigation water. This has increased the return on groundwater investments and induced investment in mechanisms to reduce conveyance losses. Private sales of water overcome the problem of indivisibility of groundwater investments and have provided non‐well owners access to groundwater. Although well owners are in a potential monopoly position, pricing is influenced by the fact that water has to be sold in the vicinity of the well. Water charges are determined by costs, monopoly rents and local tradition. The barrier to market entry is the investment required to construct a well irrigation system. Buyers of private groundwater have improved water control and hence increased agricultural production.