Water Policy 8 (2006) 15-29

Analysing industrial water demand in India: An input distance function approach

Surender Kumar

TERI School of Advanced Studies, India Habitat Centre, Lodhi RoadNew Delhi, 110 003India, . Tel: 91-11-24682100/2111. Fax: 91-11-24682144/2145 surenderkumarbansal@hotmail.com

This study investigates the water demand of Indian manufacturing plants. It adopts an input distance function approach and approximates it by a translog form. Duality between cost function and input distance function is exploited to retrieve information concerning substitutability and the shadow price of water. The model is estimated using a linear programming approach on a sample of 92 firms over three years. The results show that the average shadow price of water is 7.21 Rupees per kilolitre (Rupees/kl) and the price elasticity of derived demand for water is high, −1.11 on average, a value similar to that found by other researchers working in developing countries (for example, China and Brazil). This indicates that water charges may be an effective instrument for water conservation.

Full article (PDF Format)