In this article published in Commodity Vision, the author presents the concept of the establishment of a 'futures market in water availability' in the context of the risk of water availability that Indian agriculture has been facing in the recent years.
With South Asian agriculture being dependent on the timely occurrence of the monsoons, any deviation from the scheduled arrival of the monsoon causes problems not only for the farmers, but also produces a threat to the food security of the region. However, the author argues that, there is no market in South Asia where users and investors exposed to water availability risk can effectively hedge against such a risk.
There can be numerous advantages of the futures market for water:
However, the author argues that a lot needs to be done for such an institution to be effective. The most crucial one is creating adequate infrastructure to bring about real-time flow data in the public forum. A knowledge base that is transdisciplinary as well as trans national for water resource economics, institutions, and hydrological engineering has to be created.
A regulatory authority should be created and consist of specialists in various aspects of water resource management, rather than merely having bureaucrats, and should have their regional offices in various capital cities of south Asia.
It is important to place sufficient information on all water-related aspects in the public domain, and also develop adequate analytical methods and instruments for better prediction. With knowledge based on adequate information, an efficient futures market for water can help in discovering the price of water, which will reflect upon the scarcity value of the resource, concludes the article.
Download the article from below: