Optimal allocation of water based on economic and environmental criteria: cases from Bangladesh and Indonesia

The manipulation and alteration of river flow generate significant benefits as well as impact upon ecosystem integrity with loss of ecosystem goods and services, including riparian livelihoods. Poor communities in developing countries are particularly at stake as their lives largely and directly depend on river flows through fishing, navigation and farming activities. Such water-uses bear significant social and economic value, but are often poorly accounted. Ensuring environmental flow (EF) can act positively in preserving these values; nevertheless it results in more competition among water users. Hence, economically efficient yet socially justifiable and environmentally sound water allocation at a river basin scale is an issue of global importance. Tradeoff is obvious in the process but question arises as to what extent the competing water demands can compromisingly be satisfied. In this regard, the research develops a methodology to allocate water optimally between competing sectors including the environment in a river basin scale considering the marginal benefit that each water-use generates. The dissertation comprises two interlaced topics, successively, i.e. (1) estimating total and marginal benefit functions for the off- and in-stream water uses in a river basin and (2) setting up a model that can allocate water optimally among the competing uses. Off-stream water-use is mainly consumptive use of river water (e.g. for irrigation) that subsequently changes the natural flow regime. In-stream water use refers to use that occurs directly onto the water course (e.g. fisheries, navigation). Environmental flow requirements are estimated and considered as constraints in the optimization model. The model is applied to Teesta River, Bangladesh, and Konto River Basin in Indonesia. The Teesta flow is modified through an irrigation barrage inside Bangladesh since 1990. Water uses in the Teesta are irrigation, instream fishery and navigation. Konto has a reservoir at the upstream since 1970. A series of three hydropower plants are fed from the reservoir and all the plants use the same water. The water is then sent to an irrigation project. Municipal and industrial uses as well as reservoir recreation and fishery also generate benefits. Residual imputation method and yield response to water stress form the basis for establishing the benefit functions for irrigation water use. Income variation of the beneficiaries with the variation of river flow within a year forms benefit functions for instream fishery and navigation. Total benefit for irrigation, fishery and navigation are developed as a quadratic relation with river flow that results in a downward slopping linear marginal benefit function. Marginal benefit for hydropower water use is considered constant slope, whereas a hyperbolic tangent function is developed for estimating benefit for reservoir recreation and fishery. Benefit functions are used as input to the optimization model 'Aquarius'. Alternative scenarios are analyzed and tradeoff between benefit maximization and environmental protection is evaluated for the Teesta and Konto River Basin. Current water management practice in both the basins is found generating the maximum benefit; however, EF is not ensured for any of the studied river. For Teesta site, in existing scenario, irrigation benefit and instream benefits are US$ 43.24 million and 0.58 million respectively when only direct instream uses are considered; whereas ensuring EF results in a benefit reduction of US$ 9.25 million. In case of Konto, overall basin benefits are US$ 16.28 and 15.21 million without and with consideration of EF respectively; however, benefits from instream flow have not been measured in this case. Although the measured instream benefits from direct uses are much lower than offstream benefits in particular for the case study sites, instream flow is critically important for the socio-economy of the local people. Even satisfying the lowest level o