* Benjamin Franklin, Poor Richard’s Almanack (1746)
In many parts of the world, water is a scarce resource. There is not enough water available either for drinking and other uses like agriculture, industries, swimming and instream uses. Some countries have access to surface water (sea, lakes, rivers) which is replenishable, but some countries only have access to groundwater which is partially renewable with a distinct possibility that the reserve will be depleted completely. Groundwater is a scarce resource; it means the reserve is limited. How should the supply of scarce water be? How should the water be allocated among different groups of users (competing users)? Should both the surface water and groundwater be allocated in the same way? How should these resources (surface water and ground water) be priced in the market? What is the significance of problem in developed and developing countries? These are the questions that come into the mind when dealing with a scarce resource. In this essay I am going to discuss about all these questions.
Before I start discussing about the problem of scarcity, I want to make clear how the earth’s renewable supply of water is governed and how large amounts of earth’s water is available for human use; then I want to distinguish between different types of water supply available. The earth’s renewable supply of water is governed by the hydrologic cycle, a system of continuous water circulation. Enormous quantities of water are cycled each year through this system, though only a fraction of circulating water is available each year for human use. Only 2.5 percent of the total volume of water on the earth is freshwater and only 1 percent of this amount is available for human consumption and for the ecosystem (Gleick, 1993). The source of all available supplies is either surface water or groundwater or both of them. Surface water consists of rivers, lakes, freshwater and all types of water reserves that flow on the earth’s surface. Groundwater, by contrast, consists of water collected in layers of underground rock which is called aquifers. Some groundwater is renewed by percolation of snow and rain, but some types of groundwater cannot be renewed (or recharging or water accumulation’s process takes a very long time) once it is depleted.
Because the supply of water comes from two different sources, namely surface water (which is renewable), and groundwater (which is partially renewable or not renewable at all), the efficient allocation of these two resources, does not follow the same procedure. An efficient allocation of surface water requires a balance among a host of competing users, and supply and acceptable means of handling the year to year variability in water flow. Because surface water is renewable, therefore intergenerational effects are not important. There are different potential users of water who need the surface water for both consumptive use (drinking or agriculture) and non consumptive use (swimming, fishing, and boating). The efficiency requires that the surface water should be allocated among these users in a way so that the marginal net benefit is equalized for all users. For example if we have five users, the marginal net benefit should be equalized among five of them. For example: MNB1=MNB2=MNB3=MNB4=MNB5. (When MNB implies Marginal Net Benefit) Surface water supplies are not constant from year to year or month to month. Because precipitation, runoff and evaporation vary from year to year, in some years, the amount of available water will be less than in others. There must be a system to allocate water when the flow is above the average or below the average. Because of the depletable nature of groundwater, when it comes to efficient allocating, intergenerational effects become important. Groundwater is also treated like other depletable resources. When withdrawals exceed recharge, then the amount of the...