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First Page

Synopsis of Project



Content Table

Executive Summary

Section 1
Overview of Ground Water

Key Definition



Groundwater is water that has penetrated into the

ground and is stored in aquifers. i.e. All water
which is below the ground surface in the saturation
zone and in direct contact with the ground or
Layers of rock or other geological strata of certain porosity
and permeability to which permits sufficient penetration of
surface water as well has flow of ground water
A distinct volume of groundwater within an aquifer or


ter body

Groundwater and surface water are inextricably related through the water
cycle. Extracting groundwater can impact surface water resources and vice

Groundwater volumes and sectors

Here we discuss groundwater volumes in terms of yield, entitlement and
actual usage and the sectors of the economy which use groundwater.
Groundwater volumes can be expressed in several different ways:
1. Total reserves
It is the total level of groundwater stocks. This volume is largely
unknown due to the complexity and uncertainty over the nature and
extent of many groundwater aquifers.
2. Sustainable yield
It is generally the level of groundwater extraction that is sustainable
i.e. the amount of groundwater that can drawn without any negative
implication on environment.
3. Entitlements
This is the volume that groundwater users are allowed to extract as
specified on a relevant licence.
4. Annual use
This is the volume that has been actually extracted from groundwater
sources through bores or wells (or other means) and used by the
various sectors of the economy. Due to the majority of groundwater
bores and wells not being metered or groundwater levels consistently
monitored, use figures are very uncertain.

End use sectors

Groundwater is used in a number of different contexts. Agriculture is a key
user, accounting for approximately 60-70% of Indias total groundwater use
(**Ministry of Water Resource)
. The remaining 30-40% is used within industries such as mining and
manufacturing, and also for urban consumption (for commercial, industrial,
municipal and domestic end uses). In areas where reliable surface water is the
main resource, groundwater will generally only be utilised when surface water
is temporarily unavailable. However in some cases groundwater will be used

to supplement surface water sources and can often be a cheaper source of

supply. In arid and semi-arid India, groundwater serves as the only reliable
source of freshwater.
1. Irrigated agriculture
Irrigated agriculture includes crops), vegetable growing, fruit and tree nut
growing, livestock farming and other crops. It does not include agricultural
support services, forestry or aquaculture.
Groundwater is generally used in agriculture to irrigate crops and pasture
for livestock. In some areas groundwater is used as a cheaper supplement
for surface water and in many cases is blended to meet quality
requirements (i.e. groundwater being of lesser quality in this circumstance
is blended with surface water which is higher quality). In areas that would
otherwise be too arid to cultivate, groundwater can enable agriculture to
be feasible and in semi-arid areas (where another supply source might
exist in limited volumes), groundwater can improve agricultural
productivity by increasing available water
2. Drinking water for livestock
In arid areas in India groundwater essentially provides the only source of
drinking water for livestock, without which livestock grazing could not
occur. This use predominantly consists of cattle and sheep grazing, but
also includes water for some other livestock species.

3. Mining
Mining includes coal, oil, gas, metal, minerals, quarries and exploration
activities. Groundwater is an important resource for many mining
activities. In Indias arid zones, many large mining projects and much of
the petroleum production industry are completely dependent on
groundwater. The mining industry uses water for the following operational
activities: Ore and waste transportation in slurries and suspension,
Separation of minerals through chemical processes, Physical separation of
material such as in centrifugal separation, Dust suppression during
mineral processing and around roads and conveyors

4. Manufacturing and other industries

Manufacturing includes manufacturing of food, wood and paper,
petrochemicals and metals.

5. Water supply and Households

Some urban and rural water providers use groundwater as a key water
supply source for providing to urban and rural end uses.
In an urban setting, groundwater is first extracted then treated via
treatment plants before being delivered to households, industry, municipal
and other commercial uses. In a rural setting, groundwater will
supplement water for irrigation purposes. In rural open channels are used.

Section 2
Types and drivers of economic value

Types of value
The economic value of groundwater is derived from various attributes as
shown in the figure below. These can be divided into three main categories
being extractive, non-extractive and option values. For the purposes our
project the scope of the economic value is limited to extractive use value only.

Total Economic value

Different types of


Irrigation, Minning ,
manufacturing etc

Kept for future use and
furture generations

1. Extractive values

Recretional value,
Environmental support
and quality managment

Extractive value provides the value associated from the actual, intended
or potential use of the extracted groundwater by the various sectors of
the economy. It therefore includes the value relating to actual
consumption of groundwater as well as the value given to end-products
formed by groundwater use. The extractive value of groundwater is
context based.
2. Non-Extractive values
Groundwater also provides important non-extractive values. It
supports the natural water flows that are vital for ecosystems and
wetlands, as well as providing base flow into surface water resources
and supporting recreational activities like natural scenery etc., also it
prevent land subsidence and act as a barrier against seawater intrusion
into aquifers.
3. Option values
Option values relates to the value produced from preserving the
groundwater future benefit, or for future generations. For example
groundwater can be stored while surface water is use acting as a
security in case of depletion of surface water. This can be applied
particularly for farmers seeking to minimize the risk of droughts. This is
the insurance value that exists even in years where water is not used.

Drivers of value

There are four key drivers of the value of groundwater being scarcity, cost of
alternative water sources, quality and reliability.
1. Scarcity
The price for water generally reflects the physical costs to supply the
water (such as piping infrastructure and treatment plants) and not the
actual value of the water itself. These prices are often independent as
they reflect the efficient costs of supplying water.. When water is scarce,
people will tend to value it more highly. In areas where groundwater
serves as a close substitute for surface water, the value users attribute
to groundwater will tend to be higher when surface water is scarce.
Factors that will drive scarcity include:


Droughts the prolonged drought experienced in India increases water

scarcity, particularly for surface water. This has the effect of increasing
the value for water generally as was evidenced by the high water
trading prices paid in some of the worst drought years.
Climate change Caused due to increases in temperature and rainfall
variability, can impact river flow, groundwater levels and the
connectivity between rivers and shallow aquifers, as well as increase
demand for water.
2. Cost and availability of alternatives
The value of groundwater will be significantly influenced by the
availability of alternative water sources and associated costs. This
availability depends principally on location of use. In coastal areas,
alternative options include desalination from seawater, recycled water
from urban areas, rainwater collection and storm water reuse. Inland
areas are more limited in the available options.
3. Quality
The value of groundwater will also depend on its quality, especially in
terms of salinity levels and pollutant concentration. How water is used
will impact the quality required. For example, where groundwater is
used for drinking water, low quality groundwater will only be valuable if
it can be treated appropriately, and this may come at significant costs.
In contrast, mining and some industrial processes do not require high
quality groundwater.
It is important to note that poor quality groundwater has been shown to
reduce crop yield, farmers may place a higher value on higher quality
groundwater. However, farmers are sometimes mix low-quality
groundwater with surface water for irrigation use especially in states of
Uttar Pradesh and Bihar.

Common methods for assessing value

There are many available approaches to estimating the economic value of a
resource such as groundwater, using both revealed preference and stated
preference techniques.
1. Revealed preference
The value of a product or service is revealed through market prices.
Cannot be applied effectively on ground water
2. Stated preference
The value of a product or service is determined by what the consumer
says they are willing to pay. Stated preference techniques are generally
used in the absence of markets, such as for environmental values which
dont usually have a market price.

The most appropriate valuation methodology will vary, depending on

the circumstances, data availability and what value (extractive, nonextractive and option value) is being assessed. For the scope of our
project we are just going to calculate extractive value as this is the
only value for which data is available and can be used to get some
concrete mathematical answer.

Economical Methods to calculate Extractive Value:

A number of approaches have been used to estimate the value of natural resources.
The most commonly used in the case of Groundwater are the Residual value and
proxy market prices..

1. Residual value method

The residual value represents the value of the product that is generated from the use
of groundwater. It is calculated by determining the revenue associated with using
groundwater to produce the given product. This methodology is generally assumed
to be appropriate when it is not possible or prohibitively costly to replace
groundwater with an alternative source.

2. Proxy market price method

The proxy market price is revealed not through the market price paid for the resource
itself, but through other costs to access the resource. It includes the costs that
groundwater users are willing to pay to access groundwater resources, such as
drilling, pumping etc.

Economical Methods to calculate Non-extractive and option

Groundwater also provides value that does not relate to its extractive use.
Groundwater supports different environmental values and, by extension, industries
that depend upon those environmental values such as tourism and forestry.
Another important value of groundwater relates to the option to use it in the future,
or its insurance value, which can helps in investment decisions for agriculture and
mining and provides value even when the groundwater is not used.
These environmental and option values of groundwater have not been valued here.
However, under some circumstances they are arguably be just as important as

Section 3
Macro-economic analysis of Groundwater Value for Indian Irrigated Agriculture

India: Groundwater Scenario for Agricultural Use

Groundwater has come to be the major contributor for irrigated agriculture in
India. India uses 200 km 3 approx. of groundwater annually because it has
come to play a unique and increasingly critical role in supporting dynamic
smallholder peasant agriculture.
The importance of groundwater to the agricultural economies of India can
easily be seen from the fact that some 60% of the irrigated areas in India are
served by groundwater wells.
Throughout India, the history of protective well irrigation goes back to the
millennia. However, intensive groundwater use on the scale we see today has
grown to current shear number in last 50 years. In India, the total number of
mechanized wells and tube wells rose from less than 1 million in 1960 to an
estimated 19 million in 2000.

In the following pages some figures as well as data tables are shown to
innumerate visually and statistically the growth of groundwater use for
irrigation purpose in India. This data from figures and tables will be
subsequently be used for calculating the extractive value of groundwater in
the a aforementioned context.

Groundwater Locations in India

Major aquifer systems of India

Comparison of Irrigated Areas of Different Countries with India

Growth of Groundwater Use in Irrigation (Comparison with India)

Growth of Irrigation Pump no. in India

Changing Scenario of Groundwater-Surfacewater use in Irrigation


State-wise Ultimate Irrigation Potential of Groundwater

Table 3.2 Sources of Irrigation: Groundwater Vs Surfacewater (Year

wise 1950-2009)

Approximate Water level depth and Well cost*

*et al. Gandhi and Bhamoriya,India Infrastructure Report (2011)

Proximate size of the agricultural groundwater Use in India*



Number of wells (million)


Average output/well (m3/hr)


Average hours of


Groundwater used (km3)


* Shah, T.; Singh, O. P.; Mukherji, A. 2004b. Groundwater irrigation and South
Asian agriculture: Empirical analyses from a large-scale survey of India,
Pakistan, Nepal Terai and Bangladesh

Indian Agriculture Industry: an overview of Revenue


For Kharif Season

For Rabi Season

*Data from Indian brand equity foundation(http://www.ibef.org/)

Calculation of Extractive value using Proxy Market Price Method


The proxy market price is revealed not through the market price paid for the
resource itself, but through other costs to access the resource. It includes the
costs that groundwater users are willing to pay to access groundwater
resources, such as drilling, pumping etc.

For the scope of our analysis we are considering the pumping cost of
groundwater used for irrigation purpose

Total P.M.V = GW X <average Energy

required for water lifting per m3> X
<average cost per Kwh>
Good data on the groundwater-irrigated area, groundwater draft and the
number of mechanized irrigation wells in operation are hard to find. However,
our estimate is that between them about 189-204 km3 (et. al Shah, T.; Singh,
O. P.; Mukherji, A. 2004: Groundwater irrigation and South Asian agriculture:
Empirical analyses from a large-scale survey of India, Pakistan, Nepal Terai
and Bangladesh) of groundwater every year.
India uses 21-23 million pumps, of which about 13-14 million are electric and
around 8-9 million are powered by diesel engines (NSSO 1999, for India).
If we assume that an average electric tube well (with a pumping efficiency of
25%) lifts water to an average head of 30 meters

this energy
the regions
energy X g X ]
total energy
=[ GWcosts
X <water
level depth>
industry US$3.78
of pump>
Inserting value we get 68.6 billion kWh equivalent per year.
The cost of electricity for pumping is US$0.05 (Indian Rs 2.5) per kWh,

Calculation of Extractive value using Residual value method (2007)

The residual value represents the value of the product that is generated from
the use of groundwater. It is calculated by determining the revenue
associated with using groundwater to produce the given product.

Total R.V = <Revenue

generated from irrigated
agriculture > X <



Total Revenue generated *=

US$148.2 bn
% Contribution of GW** = 60%
T.R.V = US$ 174 Bn

Comparing Total P.M.V and Total

The wide variation in the range of total P.M.V and Total R.V is due to
1. The energy prices for irrigation purposes are heavily subsidized in India
2. The total R.V also includes the value added by fertilizer, pesticides etc.
which are required and contributed to an overall increment of price
3. The revenue also includes profit made by farmers