Managing Watershed Externalities in India: Theory and Practice |
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Authors: | John Kerr Grant Milne Vasudha Chhotray Pari Baumann AJ James |
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Institution: | (1) Michigan State University, 151 Natural Resources Building, East Lansing, MI 48824, USA;(2) World Bank, Washington, DC, USA;(3) University of Manchester, Manchester, UK;(4) Independent consultant, Rome, Italy;(5) Independent consultant, Gurgaon, India |
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Abstract: | Watershed development is the focus of poverty alleviation programs in rural India. Watershed projects aim to solve problems
of externalities, but they also create their own externalities, which cause uneven distribution of costs and benefits that
undermine project objectives and harm the poor. Numerous approaches exist to internalize externalities, including awareness
creation, moral suasion, investment subsidies, regulatory limits and fines, indirect benefits, mergers, and recent innovations
like payment for environmental services and cap and trade. These can be judged on several criteria; the best approach would
solve the problem cost effectively and help or at least not hurt poor people. Watershed projects in India were examined to
identify the approaches taken to internalize watershed externalities. Investment subsidies and indirect employment benefits
are the least effective approaches theoretically, but they are the most commonly applied, most likely because they are easy
to administer and bring popular short term gains. Some theoretically favorable approaches that have been used elsewhere, such
as payment for environmental services, may not work as well in India due to high transaction costs. However, one key innovation
that easily could be applied in India is to make investment subsidies contingent on performance. Legal support and property
rights reform would be needed for other favorable approaches. |
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Keywords: | externalities India payment for environmental services poverty soil conservation subsidies watershed |
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