A Bonded River Basin? The Cauvery Colavery: A River Basin Cause Bond !
A Bonded River Basin? The Cauvery Colavery: A River Basin Cause Bond !
Ganga Prasad Rao
Energy, Environmental and Mineral Economist
Evernote: gprao
Disclaimer
This manuscript applies elements of FV-Finance to solve an inter-jurisdictional, inter-temporal, socio-economic and engineering optimization-cum-compensation problem applicable to a widespread natural resource – inter-jurisdictional river basins. The proposed solution – that of a ‘Real’ Cause Bond supplemented by an Environmental-Hydrologic-Engineering Cell, and a Socio-Economic Resolution Cell, SERC, built around an FV-PV Bond Gold Collateral, leans on various financial markets in both PV and FV contexts. Since FV-Finance is necessarily subjective, and open to alternative designs & interpretations, the reader is cautioned regarding the various assertions in the manuscript. The author, while asserting all rights to the manuscript, makes no claims as concerns the accuracy, or outcomes from implementing the design, and recuses himself from any and all unanticipated financial consequences.
Introduction and Context
History is replete with conflicts, beyond Conquest of Troy, that is. These conflicts concern natural resources as diverse as gold and diamond mines, rivers, mineral and energy resources, as well as strategic assets such as locational advantages. And while those other conflicts are localized to certain geographical sites, the case of inter-jurisdictional river basins invites a far deeper comprehension and cognizance. Typically bounded by geographical boundaries, some of which also happen to be linguistic boundaries, and inevitably stretching across climatic and groundwater zones, the equitable and efficient apportioning of river basin resources amongst various classes of users – Public and the Private, as well as hydrologic, physical and political entities, constitutes a longstanding issue amongst stakeholders in many contested river basins around the world. Though the immediate issue concerns rights to river water, the broader conflict not only encompasses such issues as consumptive and non-consumptive rights to various assets within the river basin, and their interactions, but also repercussions upon the real society and the nominal economy. The apportioning of river basin resources, due its economic impacts upon the multitudes of socio-economically vulnerable farmers (as well as contract farmers and private ‘landlord farmers’), often takes an ugly overtone when it exacerbates further in to opportunistic political, parochial or linguistic riots. With an expansion of population and income, and the spread of the Gold-hedged Real-Nominal, PQ-LQ economy, the value of riverine resources – whether consumptive or non-consumptive, has enlarged dramatically. In turn, the expansion of the competitive nominal economy within and beyond the nation’s borders has induced intense contest for consumptive riparian rights and non-consumptive entitlements. Even legally-binding rulings enforced by a superior jurisdictional or judicial authority, are flouted by enraged politicians and their inflamed followers. These conflicts turn endemic to the region, and even in to political issues of salience at the ballot box, with socio-politico-economic repercussions extending beyond the basin. With this context, this manuscript explores the possibility of a novel, Real-Nominal, market-based, social-financial-engineering institution to better capture the complexities of resource allocations within a river basin, and offer an efficient, flexible, yet comprehensive, market-based, voluntary mechanism for negotiating and trading the various consumptive goods, and non-consumptive services offered by any hydrologically-modeled river basin. The proposed paradigm may be generically, or analogically extendable to natural resource exploitation in various contexts, and to the realization of other societal ‘real’ goals and causes.
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The Pluses and the Minuses
A Cause Bond mechanism, by integrating the structure of a divided society in to the Bond, facilitates the elicitation and satisfaction of Individual, Group, as well as Public and Private interests – whether Cause, Monetary, or Political/Social. In turn, this permits elicitation of Cause/OC/Public/Private, as well as Pareto/ZS lines and keys that are monetizable externally in FV and PV markets, locally and worldwide. By implication, a Cause Bond may tackle issues that’d normally be obstructed for reasons the Real-Nominal divide, social and political compulsions, and the inability to resolve non-physical, long-gestation, low-PV return Real FV issues. Cause Bonds are a public support-based mechanism to pursue and obtain outcomes that the Nominal economy does not find attractive, or conducive to its larger goals. By including social and economic opponents to the Cause, earning peace with them by suffering their blackmailed-exit, and offering pareto-stakes to all participants, the Bond seeks a private closure to its current activities and plans in to the future, that in turn permits it to anticipate, strategize around, and tie up its futures conformably with the larger socio-economy in a manner that obviates the need to interact with the Real society and the Nominal business repeatedly. The FV-hedging and FVPV exchange mechanism offered by the Bond, combined with the availability of low cost Real-Nominal, Cause-dedicated capital, imply the Bond Administrator may lengthen his foresight and confidently engage in long-run investments that aren’t as easily implemented under traditional political organizations, or economic institutions. Concomitantly, co-opting nominal businesses as Bond OC, permits of a faster progress toward Cause goals; the latter benefited for Cause-conducive PV business from within the Bond.
The Cause Bond is also a novel mechanism to engage Nominal and Real Blackmailers formally, and attenuate them to the extent the willingness to pay expressed by (Cause members and) the Cause Long Friend. Beyond the short-run competitive and long-run Social/Sectoral/Cause benefits, access to multiple Bond mechanisms - both, internal and external - to compensate those Bond PV- or FV-impacted with Nominal-PV, or Social FV resolutions, permits the Bond Administrator the leg-room to ignore short-run exigencies and concentrate on the long-run welfare of the entire river basin, confident that the FVPV Collateral mechanism has the resources, and the political apparatus within the Cause the means to resolve short-run Bond-induced ZS impacts within its jurisdiction. Offering a mechanism to resolve social and economic PV-impacts, that might otherwise obstruct welfare-enhancing, long-run policies, attenuates a major irritant in the optimization of inter-jurisdictional river basins, and recommends them as a real-nominal finance-based, non-governmental policy instrument to the society.
The River Basin Cause Bond, by permitting trading in entitlements, land leases and bonds, and with the flexibility to alter the initial allocation of bond units through the mechanism of Bidding Permits, has sufficient degrees of freedom to overcome the inequities imposed by pre-existing social injustices, (economic inequities), cross-cutting political boundaries, even parochial control over headwaters. Thus, and in a sense, the River Basin Cause Bond, by permitting trading, restrains, and in the limit negates, the advantages conferred by economic wealth-derived property rights, and thus reaffirms the central tenets of the Coase theorem in its operations.
A distinct advantage of Cause Bond-based management of River basin resources is that Bond trading would engender incentives conducive to, and facilitatory of new infrastructure and trading in water entitlements & farm leases. Incentives revealed in Cause Bond trading, by pareto integrating/distancing Cause and OC/OE activities, obtains economic opportunities not revealed through conventional hydrology-based logic underlying basin management. Trading, by revealing shadow values as they exist for different entities in the Bond, suggest new infrastructure, strategies and policies that enlarge both, socio-economic opportunities, and optimize the exploitation of riverine resources to the benefit of all members of society and bond stakeholders. By taking periodic cognizance of, arbitraging and analyzing entitlement trading, and land leasing rates, as well as various other user costs, product/service prices and infrastructure costs, the Bond would reveal spatial and temporal shadow values and opportunities associated with various supply-side infrastructure, and demand side policies, -and investments, whether existing, proposed, or perceived. Thus, and for example, a Bond would offer suggestions for the siting, timing of, and the temporal order in sinking ground-water recharge wells in its entire jurisdiction; these shadow-value-guided decisions would obtain a long-pareto outcome that might elude hydrology-based models.
The mechanism proposed above, is inclusive of societal divisions, comprehensive in its hydrologic, agricultural and technological cognizance, flexible, yet efficient, and has a built-in inequity-correcting mechanism that leverages the strengths and functions of the FV-Gold Collateral, the Bullion, and the global FMP market to fund its compensations. The mechanism, albeit complex, has the potential to obtain a Win-Win for the River basin Cause Bond, other Cause bonds, the Bullion, and even the global FMP-Equity market.
Subject to a review of auction rules that govern the initial allocation of Bond units, the property rights regime that determines allocation and trading in riparian entitlements, and cognizant of the intricacies of Privilege Bond-, Collateral Gold- and FMP-mediated monetizations of FV streams that emanate from Bond and Gold trading, the River Basin Cause Bond is recommended as a non-governmental financial alternative to NGOs, multi-lateral institutions, and government policy makers for implementation, initially in distinct river basins, and eventually, perhaps, to resolve the many issues that might arise in national river grids. Beyond inter-jurisdictional resource allocation, the generic mechanism of Cause Bonds could be extended to solve various problems and issues that confront societies – from natural resource exploitation, diffused nominal externalities, and intractable social issues, to the realization of minority causes.
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