Intertemporal allocation of groundwater resources with stochastic surface supplies: The case of southern India

Groundwater use is likely to be inefficient in myopic situation where many share a common aquifer but fail to recognize the stock value of the resource. A stochastic dynamic programming is used to establish an optimal allocation of groundwater that weighs the trade-off between present and future returns. The system is optimized within a conjunctive framework with uncertain surface supplies. The study is applied to southern India where exploitation of groundwater is causing concern to producers and the government.;The social benefits under an optimal allocation is found to substantially exceed the benefits under myopic pumping. The estimated benefits to management is ;A tax policy through electricity pricing that varies with the quantity pumped is found to attain optimal steady state levels. The producers lose ;A zero-energy marginal cost pumping scenario currently practiced in the State depletes the aquifer by 380 feet, beside offering no incentive to save either groundwater or electricity. Government's initiative and producers' willingness are vital to price the energy at opportunity cost and to meter the pumping for closer monitoring.;Groundwater, used as a supplemental source, mitigates the fluctuations in an uncertain surface supply. The stabilization value of groundwater indicates the difference between an uncertain and a certain situation. Under steady state conditions, the stabilization value of groundwater is found to be substantial in the total value of water and merits consideration in groundwater development and management.