Water Risks for Indian Industries

Among the major developing nations, India is facing serious and persistent water resources crisis owing to a growing imbalance of supply and demand. The simultaneous effects of agricultural growth, industrialization and urbanization coupled with declining surface and groundwater quantity, intra and interstate water disputes, and inefficiencies in water use practices are some of the crucial problems faced by India’s water sector. With a population of more than 1.2 billion, an agricultural economy based on intensive irrigation, and fast developing large urban industrial centers, there are a wide range of activities that have the potential to jeopardize the sustainability of available water resources in India. Over the last two decades, water sources have been depleted and polluted at increasing rates. Deep groundwater levels are consistently dropping, and flow in major rivers has been decreasing in the dry season.  Shallow groundwater and surface water bodies have become severely polluted from agricultural pollution as well as untreated industrial and urban discharge.

The water challenge in India is fundamentally related to agriculture. Lately however, the interdependence of water and business has been emerging as a critical issue. With the shift in paradigm, the concept of “corporate risk” around water has transpired as a hot topic raising awareness of the diverse ways in which water use can pose substantial threats to businesses in certain regions and sectors. In many developing countries and emerging markets, providing a sufficient supply of drinking water or ensuring working waste water systems is a daunting challenge.

Against the limitations identified above, a preliminary survey with 27 major industrial sectors was conducted jointly by the Columbia Water Center (CWC) and the Federation of Indian Chambers of Commerce and Industry (FICCI) – to gauge the industrial perceptions and impacts pertaining to water-climate risks. The main aim is to identify the major risks faced by the industrial sector, how they are responding to it, and identify those at high risk.

Water availability and use

Groundwater is the major source of water for different industrial sectors across India. 55% of those surveyed used groundwater with or without some other source of water. Surface water, with or without other source of water accounted for 52% of water sourcing; while municipal water, with or without other source accounted for 43% of water sourced. Of all the organizations which mentioned that water is easily available and do not mention paying a higher price – maximum use only groundwater (31%), or a combination of groundwater with another source (62%). These organizations are spread across key sectors: viz., manufacturing (electronics, heavy machinery, automobile, chemicals and fertilizers), power and power transmission, pharmaceuticals and life sciences, agriculture and food processing, consumer goods and even services (banking, education, diagnostics).

When the survey responses were analyzed in conjunction with the district level water demands and balance estimates as done by CWC it was observed that about 43% of industries surveyed are located in districts experiencing periodic multi-year droughts and require large inter-annual or carry over storages to meet the existing demands for water (including agricultural water use). About 21% are in districts where the average demand for water persistently exceeds annual supply.

Of the industries surveyed, which are based in these two categories of water deficit regions, about 75% are experiencing water availability or/and water pricing issues.

Risks associated with water

With regard to resource constraints, while 60% of the respondents agree that availability of water is impacting their business today, the figure rises to 87% after 10 years.

Different industrial sectors of India’s rapidly transitioning economy have different risk profiles and exposure in a specific geographic context. At least one in five companies in the most water-intensive sectors is already experiencing damage to their business from drought and other shortages, flooding, and rising prices. Thus, even as businesses seek to secure long-term prosperity, to maintain competitive advantage and brand differentiation, and to secure stability and choice in supply chains — depending on the type of business there will be different levels and types of risks related to increasing scarcity of water.

When enquired about the nature of risks associated with water – it was found that inadequate availability is the major risk being faced by the industries (83%) followed by regulatory or policy framework in the state (53%). Increased competition from other sectors is not seen as a threat to industries as yet with only 15% of the respondents in that category. A small fraction that sees increased competition from other sectors primarily hint at agriculture and lobbying by environmental groups and communities as a risk to water availability. Additionally, 47% of the industry respondents indicated paying high costs for obtaining water.

The findings based on the response to the survey indicate that corporates do realize that water risks are real and a number of them are already conducting regular audits to figure out avenues for conservation and efficiency. The results also highlight a potentially problematic difference between the risk perceptions of the policy makers and those of the industrial sector. This is largely due to unavailability of data in a format which is of good quality and publicly available, through which analysis could be performed.

Therefore, FICCI and the Columbia Water Center are further collaborating to help the industrial sector at large get a grip on what data should be formally collected, how it should be analyzed and how the sector should collectively address the internal and external policy frameworks to quickly address the existing and emerging risks. Our long term objective is aimed at the following broader questions: “Which industrial sectors are at most risk and what kind of data needs to be collected and updated, and how frequently?; Which stakeholders, from central and state agencies should be participating on a regular basis?; How can existing ministries and agencies (Ministry of Water Resources (MoWR), Ministry of Environment and Forests (MoEF), Ministry of Agriculture (MoA)) – who collect data periodically – be actively involved in this process?; How can we make this process of near real time data access self-sustaining throughout India?”