NTPC Ltd has been forced to curtail electricity production at a plant in West Bengal because of low water levels in the Farakka feeder canal. After two consecutive drought years, this could be the beginning of a new set of woes for India.

Water levels are depleting fast in India’s reservoirs. Weekly data published by the Central Water Commission show that storage availability at 91 major reservoirs in the country is a mere 29% of their total storage capacity. The same measure last year was a respectable 40%. These reservoirs account for about 62% of the estimated capacity to have been created in India.

As the chart alongside shows, the current level is 71% of last year’s capacity. It’s also below the average level of the last 10 years.

What are we in for?

“It is already a big crisis and very alarming for places where the reservoir capacity is much lower," says Anil Jain, managing director, Jain Irrigation Systems Ltd. Whenever water availability is low, the first to suffer is industry, followed by agriculture and then drinking water, adds Jain.

Dhananjay Sinha, head-research, institutional equities, Emkay Global Financial Services Ltd, says, “Low water storage capacity levels at major reservoirs in the country will definitely have an adverse impact on construction, real estate, roads and hydel power."

Water is a feedstock for thermal power plants. It generates steam to spin turbines and is also used as a coolant. The problems at NTPC’s Farakka plant could be the canary in the coal mine. Hydel plants, too, run on river water.

Having said that, all thermal plants are not dependent on reservoirs. Many are located on riverbanks and close to seashores. Similarly, in hydel, plants in the Himalayan region are mostly run-of-the river projects. Problems occur for reservoir-based plants, which are mostly controlled by state utilities.

According to the Central Electricity Authority, production at state sector plants dropped by one-fifth in February and by the same amount for the current fiscal till February. The state sector has 25,151 megawatts (MW) capacities accounting for 10% of total capacities in India. In the 11 months to February 2015, production had dropped almost 8%. The production loss is substantially higher this time.

What of the farmer?

Weak monsoons have had an impact on groundwater levels and that has already taken a toll on the farmer, says Jain. Simply put, farmers will now suffer from a double whammy of lower price realizations and less moisture content in the soil. “That, in turn, has affected the rabi crop," according to Sinha.

Needless to say, given the sustained distress in the farm sector over the past years, a normal rainfall in the coming monsoon season is crucial. “It will be critical in fulfilling the central government’s promise of improving farm sector economics. And in my view, there is a likelihood of the central government announcing a higher increase in minimum support prices of major crops this time to the tune of ~10%," reckons Sinha.

What can offer comfort?

As Jain says, the situation will be manageable if La Niña comes through this year—rather than El Niño—which will mean a better monsoon. “If not, it will be a hard time for the entire country."

According to Dharmakirti Joshi, chief economist of Crisil Ltd, “Two years of weak monsoon have led to this situation."

If La Niña plays out in the near term, and there are normal rains—well distributed over time and across regions—then it will help replenish the water reservoirs and assist a rebound in agriculture, says Joshi.

But, he adds, “we are in for troubling times ahead, if the above two factors do not play out satisfactorily."

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