Water Markets and Institutional Mechanisms in Diverse Environments — A Review

The paper has reviewed the operation of water markets and their implications on equity and sustainability in diverse environments such as water-endowed, water-scarce and water-over-exploited. The study has found that inter- and intra-regional variations in natural resource base and users’ access determine the socio-economic status, including poverty and household income. The water markets work on the principles of profit maximization, especially in the water-scarce conditions, while these are under-developed in the water-endowed regions. In the over-exploited regions, operation of water markets is absent, except exchange of irrigation water. The terms and conditions of water markets work differently in different water environment settings. The water markets mitigate inequalities in accessibility to irrigation water in the short-run. But, there exists threat to sustainability in the long-run. The study has suggested the need to identify institutional arrangements to promote water markets in potential and discourage them in problematic areas. There is urgent need of evolving an integrated approach at different levels that dictate water markets. To ensure benefits of water markets and input application, land reforms are needed in the form of land consolidation in the regions where landholdings are fragmented and subdivided in many parcels.