Water Resources Planning and Managements

Unit – II
(As per the syllabus of pune university)

Presented by
Mr. Ravichandra Masuti BE. M.tech..,
Hydraulic Modeller
JACOBS CONSULTING ENGINEERING SERVICES
PUNE-41
CONTENTS
PART A
Economics of water: water as economic good, intrinsic value, principals of
water pricing and water allocation, capital cost, opportunity cost, internal rate
of return, benefit cast analysis, principals of planning and financing of water
resources projects, discussion on any two case studies (3 to 4 hrs)

PART B
Paradigm shift in water management: Global And National Prospective Of
Water Crisis, Water Scarcity, Water Availability And Requirements For
Human And Nature Concept Of Blue Water, Green Water, And Virtual Water
And Their Role In Water Management. Sustainability Principles Of Water
Management, Frame Work For Planning A Sustainable Water Future.
(3 to 4 hrs)
Introduction
• What is Economic good?
• A consumable item that is useful to people but scarce in relation to its
demand, so that human effort is required to obtain it.
• A product or service which can command a price when sold in market.
• Commodities may be used as a synonym for economic goods.
• A commodity or service that can be utilized to satisfy human wants and that
has exchange value.
• An economic good is a good or service that has a benefit (utility) to society.
Also economic goods have a degree of scarcity and therefore an opportunity
cost.
• However with economic goods where there is some scarcity and value,
people will be willing to pay for them.
Why Water as an Economic good
• Water should be treated as an economic commodity to extract the
maximum benefits
• as well as to generate funds to recover the costs of the investments
and of the operation and maintenance of the system.
• Water had been treated for long as a free commodity, Revenues
recovered are far below the capital cost incurred.
• . Financial component of any planning process is needed to recover
construction costs, maintenance, repair and operation costs.
• It has performed various function.
• Goods and services provided by water.
 Functions performed by water
• It has two classifications:
• TYPE 1:
• REGULATION FUNCTTIONS: regulate and control environmental processes and life support system

• CARRIER FUNCTION: medium for ecological processes

• PRODUCTION FUNCTION: raw material in production

• INFORMATION FUNCTION: Pleasure, spiritual healing, aesthetic experience.

• TYPE 2:
• HYDROLOGICAL FUNCTION: flood retentions, Ground water recharge, soil moisture
• BIO-GEO CHEMICAL FUNCTIONS: nutrients, chemical reactions, land forms, sedimentations.
• ECOLOGICAL FUNCTIONS: habitat for biodiversity, food chain, life support system
Use and value of water

• Domestic use: Human welfare, Change in life style,

improved health
• Irrigation use: change in value of crop, reduction in
production cost Human welfare, health, etc
• Industrial use: change in value of products, reduction
in costs, improved economic conditions
Important definitions
• Opportunity cost:
• the loss of other alternatives when one alternative is chosen.
• A benefit, profit, or value of something that must be given up to acquire or
achieve something else
• Opportunity cost is what a person sacrifices when they choose one option
over another options
• If, for example, you spend time and money going to a movie, you cannot
spend that time at home reading a book, and you cannot spend the money on
something else. If your next-best alternative to seeing the movie is reading
the book, then the opportunity cost of seeing the movie is the money spent
plus the pleasure you forgo by not reading the book
Typical example of opportunity cost
• If an urban water supply scheme is planned, it will involve taking of a
water from industrial or agricultural use. There fore opportunity cost
in the urban water scheme will be equal the net benefits that would
have been delivered if the same water had been used for industry or
agriculture.

• Opportunity cost (oc)= incremental benefit/unit vol. of water in RS/cum

• Problem: in a certain region formers are at present growing paddy crop with
irrigation. Irrigation water requirement is 8000cum/ha and the annual net
income of 1ha of paddy is Rs. 11600. there is proposal to divert water from
irrigation to other users. Calculate the O.C of water if the net income with out
irrigation is rs 7100/ha
solutions
• ANNUAL INCOME WITH IRRIGATION: RS. 11,600/-
• ANNUAL INCOME WITHOUT IRRIGATION: RS. 7100/-
• NET BENEFIT FROM IRRIGATION: RS. 4500/-

• OPPORTUNITY COST OF WATER= Net benefit/Vol. of water

= 4500/8000
RS=0.562/Cum of water
• Capital costs are fixed, one-time expenses incurred on the purchase
of land, buildings, construction, and equipment used in the
production of goods or in the rendering of services.
• Capital costs is the total cost needed to bring a project to a
commercially operable status.
• marginal cost is the change in the total cost that arises when the
quantity produced is incremented by one unit
• it is the cost of producing one more unit of a good.
• marginal cost (MC) at each level of production includes any
additional costs required to produce the next unit.
• Marginal Benefit (MB) : change in the total benefit if the activity
increased by one unit
• Intrinsic value: refers to the value of a company, stock, currency or
product determined through fundamental analysis without reference to
its market value.
• It is also frequently called fundamental value.
• This value may or may not be the same as the current market value.
• Intrinsic value of water includes stewardship (ethical) , bequest (legal)
and pure existence of water
• paradigm shift: a fundamental change in approach or underlying
assumptions.
• It is a dramatic change in methodology or practice. It often refers to a
major change in thinking and planning, which ultimately changes the
way projects are implemented.
“Concepts of water” in water Resources Planning
• What is Virtual Water?
• Virtual water is defined as the total volume of water needed to produce and
process a commodity or service.
• For example, it is estimated that 1700 litres of water are required to create
500g of rice.
• The virtual-water content of a product can also be defined as the volume of
water that would have been required to produce the product at the place
where the product is consumed
Virtual water requirement for various products
• Green Water
• is the water infiltrating into the soil, taken up by roots, used in photosynthesis
and transpired by the crop;
• water hidden in soils, and is often not recognized and valued. Green water is
estimated to enable 85% of the world's crops to grow.
• There are three groups of definitions for green water
• water from soil moisture that is evapotrispired
• water from soil moisture that is only transpired, and
• any soil moisture.
• White Water
• It is intercepted and directly evaporated by the crop canopy and the ground
surface;
• Blue Water
• It is made up from run-off to rivers and deep percolation to aquifers that finds its
way to rivers indirectly.
• the surface water in our rivers, lakes and in the ground (aquifers)
Concepts of Water
Distribution of water
Cost-Benefit Analysis
• It is a systematic approach to estimating the strengths and weaknesses of
alternatives that satisfy transactions, activities or functional requirements
for a business.
• It is a technique that is used to determine options that provide the best
approach for the adoption and practice in terms of benefits in labor, time
and cost savings etc.
• The following is a list of steps that comprise a generic cost–benefit analysis.
• List alternative projects/programs.
• List stakeholders.
• Select measurement(s) and measure all cost/benefit elements.
• Predict outcome of cost and benefits over relevant time period.
• Convert all costs and benefits into a common currency.
• Apply discount rate.
• Calculate net present value of project options.
• Perform sensitivity analysis.
• Adopt recommended choice.
BENEFIT-COST RATIO METHOD
• The BC ratio is defined as the ratio of the present worth of benefits and the
present worth of costs.
• The following steps are followed to choose the best alternative by this
method:
1. Calculate the BC ratio for each alternative.
2. Choose all alternatives having a BC ratio exceeding unity. Reject the rest. If the
sets of mutually exclusive alternatives are involved, proceed to steps 3, 4 and 5.
3. Rank the alternatives in the set of mutually exclusive alternatives in order of
increasing cost. Calculate the BC ratio by using the incremental cost and the
incremental benefit of the next alternative above the least costly alternatives.
4. Choose the more costly alternative if the incremental BC ratio exceeds unity.
Otherwise, choose the less costly alternative.
5. Continue the analysis by considering the alternatives in order of rank.
Incremental Benefit and Cost
• Any change in the proposed project plan results in changes in associated
benefits and costs.
• The terms incremental benefit and incremental cost indicate the changes
that occur in the benefit and the cost, respectively, due to alterations in the
project plan.
• 1 Problem:Two alternative projects are under consideration. The estimated
cost of the first proposal is Rs. 40 million, whereas that for the second is Rs.
45 million. If the benefits from these proposals are Rs. 45 and 48 million,
respectively, which proposal should be adopted?
Solutions:
• The BC ratio for proposal 1 - 45/40 - 1.125. The BC ratio for proposal 2 48/45 - 1.067.
Since both proposals have BC ratios greater than 1, both will be analyzed using the
incremental principle as per step 3 described earlier. The first proposal will have rank 1,
and the second one will have rank 2. Thus, incremental cost (second proposal over first
proposal) = 45 - 40 = Rs. 5 million. Incremental benefit (second proposal over first
proposal) = 48 - 45 = Rs. 3 million. Incremental BC ratio = 3/5 = 0.6.

• Since incremental benefit-cost ratio is less than 1, the less costly alternative will be
selected. Therefore,

• proposal 1 will be selected.

2.problem
• A project costing Rs. 2.0 million is expected to produce the benefits of
Rs. 3.0 million. Before starting the project, it is observed that the
adoption of some advanced technology can increase the benefits to
Rs. 3.2 million. If the consultation charge for the advanced technology
is Rs. 0.5 million, state whether the adoption of advanced technology
is justified?
Solution 2
• BC ratio without advanced technology = 3.0/2.0 = 1.5.
• Incremental cost of advanced technology = 0.5 million rupees.
• Incremental benefit from advanced technology = 3 . 2 - 3.0 = 0.2 million
rupees.
• B/C Ratio with advanced technology= 3.2/(2 + 0.5) = 3.2/2.5 = 1.28.

• Since the incremental cost of the advanced technology is more than the
incremental benefit, the adoption of advanced technology is not justified.
Further, the BC ratio without the advanced technology is higher than
with advanced technology. Hence, it is advisable to continue with the
original plan.
Thank you