Use less, price more?

Global demand for water already exceeds supply—about 1.1 billion people don’t have access to clean water—and the so-called water gap is increasing at an accelerating rate. That’s what a McKinsey study, commissioned by such water-dependent companies as Coca-Cola, Nestle, SAB Miller and Syngenta, along with the World Bank/International Finance Corp, says.

Cost-effective, sustainable solutions are available to close the gap, particularly if governments and business focus on reducing demand rather than trying to generate additional supply. Just as in the case of energy. There just is no additional source of freshwater as the population increases.

The other controversial issue the report touches on is about water as a “human right”. A scarce resource, water, must be priced in a way to drive conservation.

The report focuses on four countries with big but differing water issues—China, India, South Africa and Brazil. Collectively, they will account for 40% of the world’s population, 30% of global GDP and 42% of projected water demand in 2030.

At a World Bank news conference to launch the report, executives from sponsoring companies discussed the price aspect, as also other issues like biotech crops. Water for basic needs should be subsidized or free, but beyond that it must be priced adequately as in South Africa. Water for washing car, filling swimming pool, watering golf course, etc cannot be a right?

But in rural India, can pricing be the solution? True, free or subsidized electricity here contributes to water shortages because farmers have no reason not to pump as much water as they can out of the ground.

But poor farmers do not have the capital to invest in a drip irrigation system, so charging them more for water will also not help. Innovative financing is the solution.

Biotech crops also were suggested as a way out of the water scarcity. Intended to grow more food per acre, and considering that agriculture accounts for about 70% of global water use, biotech crops could have a big impact on the water gap. But, can we ignore the safety aspects? Loss of biodiversity, herbicide resistance, etc. It could well be a case of jumping from the pan into the fire.

Should we price water more adequately? Or focus on demand side management?