Structure, Determinants and Efficiency of Groundwater Markets in Western Uttar Pradesh

Irrigation is a vital ingredient in the modern agriculture, groundwater development through modern water extraction mechanisms (WEMs) have therefore, been receiving greater emphasis in recent past. However, the ownership of private WEMs is confined mostly to the large farmers. The small and marginal farmers and even large farmers with fragmented holdings are buyers of irrigation water from the neighbouring WEM-owners. This has led to spontaneous emergence of groundwater markets. Although the water markets benefit both buyers and sellers in one or the other way, they have created certain implications in the utilization of this resource. The present study has examined the structure, determinants and efficiency of groundwater markets and has suggested policy options for the realization of equitable benefits from this resource in Western Uttar Pradesh. It is observed that a large proportion (82 %) of the farm holdings enter into one or the other form of water market activities. The number of buyers decreases as the farm-size increases, while the number of sellers increased with the increase in the size of farm. The buying of groundwater is favoured by the farmers with small size and fragmented holdings, low education attainment and less probability of joint-ownership of a WEM. The possibility has been shown of increasing the productivity in major crops like sugarcane and wheat by reducing the excessive water-use on self-users farms, which in turn would increase the availability of water on the buyers’ farms. The study has identified various policy options which would lead to minimizing the inequitable distribution of benefits and improving the efficiency of water-use under the prevailing groundwater markets system.