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  • Writer's pictureMahima Shanker

Evaluating Water - A Practical Perspective

There is a difference between ‘value’ or ‘worth’ of water (including various social/community aspects), and ‘valuation’ or ‘pricing’ (in economic terms) of water. The previous article enumerated the various forms in which water holds value for humans, flora, fauna and Earth as a whole. From a practical standpoint, evaluating water essentially requires assigning a tangible value to it, which, by itself, can be complicated. For instance, considering the social value of water w.r.t sustaining life, consuming lesser than required quantity of water or contaminated water leads to illness; this in turn leads to loss of workdays or absence from school. Some of these values can be monetized, e.g. cost of hospitalisation or medicines and lost income from not being able to work. Certain studies have calculated such costs and they were significantly high. A WHO Study[1] found that the total annual global economic losses associated with inadequate water supply and sanitation were about US$ 260 billion, or 1.5% of Gross Domestic Product of the countries included in the sample set.

However, all the uses and significance of water can not be allotted physical values; many of them, as seen above, are not easily measurable. Moreover, the value of water even in its various uses differs. For instance, value of water for domestic use will be lower than the value of the ‘human right to water’. Apart from this, the value of water varies among regions, cultures and individuals; for instance a person living in a desert will value water more than one living in a region full of lakes. Owing to such complexities and varying circumstances, no standard way of evaluating water has been adopted in the world.

Evaluating water - A few methodologies

In pure economic sense, the actual value or price of water will depend on what one is willing to spend for it. This is determined either directly through ‘Stated Preference’ technique or indirectly through ‘Revealed Preference’ technique. Through the former, also called the contingent valuation method (CVM)[2],value of water for agricultural, industrial, domestic and recreational use is estimated by conducting surveys. In this method people are asked to reveal how much they are willing to pay for good quality water with assured supply for domestic use. The second indirect method is based on observed market values.

In line with the CVM, a survey was conducted for household services in Cairo, Egypt; it was found that water service connection was worth more than the improved reliability of services. Another finding was that if project costs are recovered through fixed tariffs, charges for water and wastewater services are higher than people are willing to pay [3].

Turkey, in an effort to integrate natural capital (including water sector) accounting into planning and management efforts, undertook a study along with the World Bank. The study - valuation of Beysehir Lake (Turkey’s largest freshwater lake) - identifies the main types of water values based on the Total Economic Value (TEV) framework. It includes direct use values, (i.e. water for agriculture and domestic sectors, recreation etc.); indirect use values (i.e., pollution and flood control); option values (e.g. potential future uses of water ecosystems) and non-use values (e.g. biodiversity conservation, cultural heritage). It then calculates all benefits, based on methods like market pricing, replacement cost, residual method, benefits transfer.

One of the results of this study was that the total valuation (as per TEV framework) of Beysehir Lake was 7 times its financial value wherein the former includes value of water for irrigation, municipal uses, recreation, fishing, pollution abatement and biodiversity conservation and the latter includes actual revenues derived from tariffs paid for irrigation water, municipal water and fees collected from visitors and sales of fishing licenses. Likewise, it was found that agriculture uses more water than municipal use, but economic value of water allocated for municipal use was about 9 times greater than that for irrigation, suggesting inoptimal water allocation.[4]

Currently the valuation of water in most countries, if at all, is mostly done according to its procurement cost, not as per its ‘worth’. This may be due to the intangibility of many facets of water value. According to the World Water Development Report 2021, though it may be possible to reduce certain complications and standardise some metrics, there still exists the need for better means to “recognize, maintain and accommodate different values” of water.

As is often heard, ‘Water is life’! As such, it is invaluable. However, in today’s times when water sources are dying away due to overuse and contamination, putting a value to water has become imperative, so that people recognise its true worth.


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