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 Determinants of Institutional Performance in
Watershed Management: A Study of the Nature and
Performance of Watershed Development
Institutions in Andhra Pradesh, India

Vasant P. Gandhi
Indian Institute of Management, Ahmedabad, India

Lin Crase
Latrobe University, Victoria, Australia

Contributed paper prepared for presentation at the 56th AARES Annual Conference,
Fremantle, Western Australia, February7-10, 2012
Copyright 2012 by Vasant P. Gandhi and Lin Crase. All rights reserved. Readers may make
verbatim copies of this document for non-commercial purposes by any means, provided that
this copyright notice appears on all such copies.
 Determinants of Institutional Performance in Watershed
Management: A Study of the Nature and Performance of Watershed
Development Institutions in Andhra Pradesh, India
Vasant P. Gandhi
Indian Institute of Management, Ahmedabad, India

Lin Crase
Latrobe University, Victoria, Australia

Abstract

The study examines the nature and performance of watershed development

institutions in India. Improving productivity and incomes in rainfed areas, which have
much poverty, is a major challenge in India, and a huge initiative through which this
is pursued is Watershed Development (WSD) programs which are massively funded
by the Government of India, state governments and external donors. In watershed
development, combining scientific approaches with community participation and
knowledge is a major problem and requires effective institutions, which is a major
weakness. The study examines the design and performance of watershed
development institutions using new institutional economics, and management theory
of governance. It analyzes data collected in a primary survey of 18 watershed
institutions and 542 beneficiary households in Andhra Pradesh. The results identify a
number of features including rationalities and institutional characteristics closely
related to performance, and this could add to new institutional economics theory as
well as the better design of institutions.

Introduction

The research examines the nature and performance of natural resource

management institutions, particularly, institutions involved in watershed development
in India, which is being implemented on a large scale by the government since it is
found to be a powerful instrument of transformation and poverty alleviation in the
rural areas. The research first develops a conceptual framework based on new
institutional economics, and management theories of governance to study
watershed institutions. It then uses it through a large primary survey to examine the
institutions at the grassroots to understand their behavior and identify features
associated with performance and success. This helps develop recommendations for
better design of such institutions.

Effective management of natural resources is becoming increasingly crucial

for growth and development in India and many other counties. This is particularly so
in rainfed areas where much scarcity, fragility and poverty exist. Researchers
indicate that there is a crisis in the management of natural resources in India (Saleth
1996, Vaidyanathan 1999, Brisco and Malik 2006, Gandhi and Namboodiri 2002,
2009, and Crase and Gandhi 2009), and the crisis is not about having too little but
about managing the resources badly (World Water Vision 2000). Research and
experience indicates that the major difficulty is not physical or technical but of poor
institutional development and design (Saleth 1996, Crase and Gandhi 2009). This is
particularly in combining scientific approaches with community participation,
knowledge and ownership. Natural resource management is complex and good
institutional arrangements are urgently needed. Effective management of natural
resources is increasingly critical for agriculture, rural livelihoods and poverty
alleviation.

Watershed Development in India

Watershed Development (WSD) programs are a major national initiative, and

receive enormous importance and government funding in India, mainly because their
huge potential for improving incomes and livelihoods, and alleviating poverty in
rainfed areas. From 1995-96 to 2007-08, over Rs. 77 billion were spent on WSD
programmes. The World Bank has provided $1.73 billion for WSD from 1990 to 2004
(World Bank 2007). In the recent years, the Mahatma Gandhi National Rural
Employment Guarantee Scheme (MNREGS) with an annual budget of Rs. 4000
billion is being dove-tailed with the WSD programmes in most states. This has
enormously increased the support to and importance of WSD programmes in India.

Shiferaw et al (2008) observe that India, in particular, gives high priority to

watershed programs as a strategy for integrated development of rural communities,
especially in rain-fed and drought-prone areas. Kerr (2007) observes that India
follows a three prong approach of watershed development: conserve and strengthen
the natural resource base, make agriculture and other natural resource-based
activities more productive, and support rural livelihoods to alleviate poverty. The
Indian approach to watershed development goes much beyond conservation
technologies and emphasises the need to amalgamate technological tools with
broad-ranging social, political, and economic factors (Shiferaw et al 2008).

A watershed is technically considered a geo-hydrological unit or an area that

drains to a common point (see Figure 1), and scientists and engineers have
developed a variety of technologies which offer solutions to difficult watershed
conditions. These include interventions ranging from simple check-dams to large
percolation and irrigation tanks, from vegetative barriers to contour bunds, and
changes in agricultural practice e.g. in-situ soil and moisture conservation, agro-
forestry, pasture development, horticulture and silvi-pasture (ICAR 2009). These are
shown to have dramatic results for the area. Practical definitions of the watershed
have varied but for government projects and budgets, a watershed project is treated
as an area of about 500 hectares in a village (Gandhi, 2010). A varied hierarchy of
institutional arrangements of the government and other agencies undertakes the
planning and implementation. Examples of watershed development in a “Ridge to
Valley" concept, and a watershed development area are shown in Figure 1.

2
Figure 1: A: Watershed Development in a “Ridge to Valley” Concept

A. Bench terracing
B. Contour Trenches & Bunds B
C. Gully Controls C
D. Brush wood dams
E. Rock Fill dams. D
F. Check Dams
E
G. Farm Ponds
H. Percolation Tanks F
I. Wells, irrigation Tanks & Other
G H I
Conservation Measures.

B: Outline of a Watershed Development Area

3
 The history of watershed development in India can be traced to the Famine
Commission of 1880, again the Royal Commission of Agriculture of 1928, which
recognized its importance for India. After independence in 1947, the government
establishment a special centre at Jodhpur in 1952 and in 1959 this was designated
as Central Arid Zone Research Institute (CAZRI). The first large scale government
supported watershed programme was launched in 1962-63, and a mega sized
project named the Drought Prone Area Development Programme (DPAP) was
launched in 1972-73. Then, a special programme for the hot desert areas, the
Desert Development Programme (DDP) was launched in 1977-78. Later the
Integrated Wastelands Development Programme (IWDP) was added. In 1993, the
Government of India constituted a technical committee headed by Dr C.H
Hanumantha Rao to review these programmes. The Committee proposed a revamp,
recommending various measures including sanctioning of works on the basis of the
action plans on watershed basis, and introduction of participatory modes of
implementation, through involvement of beneficiaries of the programme and NGOs.
Based on its recommendations a new set of guidelines came into effect in 1995. The
coverage of various programs since then is outlined in the Table below, and shows
the huge size.

Table 1 : Number of Projects, Area Covered and Funds released for Watershed
Development from 1995-96 to 2007-2008 in India
Name of Number of Area covered in Total funds released by
Programme projects lakh ha. Central Government (Rupees
sanctioned Million)
DPAP 27439 (60.9 %) 130.20 (41.2 %) 28378 (36.7 %)
DDP 15746 (34.9 %) 78.73 (24.9 %) 21032 (27.2 %)
IWDP 1877 (33.9 %) 107.00 (33.9 %) 27976 (36.1 %)
Total 45062 322.93 77386

The watershed programme has become the centre-piece of rural

development in India. In 2003 under the “Hariyali” guidelines, watershed
development was put under the implementation of the Panchayati Raj Institutions
(PRIs). In 2006, an apex national body called the National Rainfed Area Authority
(NRAA) was setup and brought out new “Common Guidelines for Watershed
Development Projects” in 2008 for a unified approach combining of most
programmes into the Integrated Watershed Management Programme (IWMP).

Initially, the watershed development included only natural resource

management (NRM) activities, but later to enhance the income impact from the
improved resources, production enhancement (PE) activities such as modern inputs
and technology where added. Later to include and have an impact on the landless
and women, the livelihood component of enterprise promotion (EP) activities where
added.

4
 The institutional arrangements for implementation of watershed development
programmes includes higher level entities such as the National and State level
Watershed Programme Implementation and Review Committees, and the state
Department of Rural Development. At the district level, the District Rural
Development Agency (DRDA) earlier and now the District Water Management
Agency (DWMA) is the highest body for headed by a Project Director (PD). The
lower level entities include Multi Disciplinary Teams (MDT), Project Implementing
Agencies (PIA) and Watershed Development Teams (WDTs), and other entities
such as the Panchayat, Watershed Committee, Village Organization, Water User
Groups and Self Help Groups. The examples of two institutional structures seen in
WSD programmes at the district level are given in Figures 2 & 3 below:

Figure 2

Institutional Arrangements -I
Institutional Framework of watershed development prior to 2001

DRDA

MDT

WC WDT PIA

WUG WUG WUG WUG

Figure 3

Institutional Arrangements -II

Institutional Framework for watershed project with the livelihood component

DWMA DRDA

MDT

WC WDT PIA
VO

WUG WUG WUG WUG

SHG SHG SHG SHG

Conceptual Framework for Studying Institutions

In the new institutional economics, institutions are considered humanly

devised constraints that structure human interaction (North 1990). New institutional

5
economics offers different approaches to understand the institutions, including
transaction costs and property rights (North 1997, Drobak and Nye 1997). A
principal premise is that economic activities have both transformation costs and
transaction costs. Often, transaction costs are ignored, and when large, substantially
reduce performance. Good institutions is to reduce transaction costs. According to
North (1997), the major challenge is to evolve institutions in which: (1) The
transaction costs are minimized, (2) The incentives favour co-operative solution, in
which cumulative experiences and collective learning are best utilised.

Based on the foundations of new institutional economics, and the empirical

literature which has followed (for example Ostrom 1992, Crase et.al. 2002, Herath
2002), Pagan (2009) has identified characteristics that should be expected in
effective institutions, linked to new institutional economics fundamentals. These are
very briefly described below:

1. Clear Objectives: Good institutions show clear objectives and clarity of purpose.

2. Good Interaction: Good institutions show good internal interaction, bringing

formal and informal rules together.

3. Adaptiveness: Facing change and variation, successful institutions demonstrate

adaptiveness.

4. Appropriateness of Scale: Good institutions have the appropriate scale of size

and scope.

5. Compliance Ability: Good institutions show ability to bring compliance.

Apart from these, the management theory of organizational design and

governance (Nystrom and Starbuck 1981, Groth 1999, Ackroyd 2002, Crase and
Gandhi 2009) indicates that good institutions should address at least three important
rationalities which are very briefly described below:

1. Technical Rationality: The efficient conversion of inputs into outputs, requiring

technology, expertise and efficient methods.

2. Organizational Rationality: Division of labor, specialization and coordination.

3. Political Rationality: addressing the perceptions of fairness and justice.

To refine the conceptual framework further, case studies of six watershed

development projects in three districts in Andhra Pradesh were done during 2009/10
under an the ACIAR supported collaborative project on “Enhancing Institutional
Performance in Watershed Management in Andhra Pradesh”. The case studies
showed that it was necessary to expand the framework and include a number of
additional rationalities. The expanded list is given below:

6
1. Technical Rationality: Efficient conversion of inputs into outputs, technology and
operational procedures, experts, soundness in the selection of technologies and
structures, their location, their specifications and their construction.

2. Economic Rationality: Consideration of costs, benefits, and net returns,

economically efficient use of resources, demand, markets, prices, costs,
profitability and returns to investment, impact on improving incomes and
livelihoods

3. Environmental Rationality: Consideration of the environment in the selection of

methods and activities, conservation of water, land and natural vegetation,
externalities, sustainability

4. Social Rationality: Consider the social or people setting, seeking the acceptance
and cooperation of the different social groups, participation, distribution of the
support and benefits

5. Political Rationality: Addressing fairness and justice, leaders, powers and

interests, meetings and contact with leaders/ groups, involvement in the
formulation of rules and plans, balancing of needs and concerns, avoiding
disputes.

6. Organizational Rationality: Organization and coordination, formation of

appropriate local organizations, effective leaders/ staff sub-committees/ groups,
systems and meetings, bring rationalities together, managerial skills, knowledge,
training.

7. Financial Rationality: Discipline and care in proper handling of these financial

resources, procedures, responsibility and accounting systems, checks and
monitoring, preventing misuse, government sanctions.

8. Government Rationality: A mega mover and supporter, the kind, quantum, speed
and nature of government support, the guidelines, budgets as well as structures,
procedures of the government, knowledge, guidance, commitment/ drive of
government functionaries.

The conceptual framework depicted in the Figure below seeks to comprehensively

put together the different aspects discussed above.

7
Figure 4: A Depiction of the Conceptual Framework

Government Guidelines, Programs,

Rationality Funding, Structure,
Demand, Prices, Markets, Procedures, Expertise,
Costs/ Benefits, Returns, Support, Speed
Water & Soil Conservation,
Sustainability, Environment

Economic &
Environmental Organizational Local Organization,
Rationality & Financial WC, VO, UG, SHG,
Rationality Leadership, Coordination,
Clear Objectives Compliance Financial Discipline
Clarity of Purpose To Rules,
Procedures

Good Interaction
Appropriate Bringing Formal &
Scale Informal Together
Scale, Size, Scope

Adaptiveness
Adaptation & Flexibility
to Settings & Changes
Social & People, Castes/Tribes, Land
Political Groups, Customs, Beliefs,
Technical NRM Methods, Locations, Rationality Power Centers, Leaders,
Rationality Specifications, Quality, Involvement/ Participation,
New Crops, Varieties, Distribution of Benefits
Technologies, Enterprises

8
Measuring Performance of Watershed Institutions

What constitutes performance of watershed institutions? Research by Gandhi

and Namboodiri (2002) on this question indicates that in a developing country
context such as in India multiple objectives need to be achieved and natural
resource institutions must address at least four major challenges:

1. Overcoming scarcity (or improving availability and efficiency): Achieving

adequate and timely availability, and efficient use

2. Equity: Achieving and improving equity in the resource availability and benefits

3. Environment: Utilization with least ill effects or benefits to the environment,

sustainability

4. Financial soundness or viability: Achieving financially soundness and viability

Some specific indicators may include improvement in water availability,

conservation of soil, soil fertility and the environment, improvement in stability and
sustainability, improvement in crop and animal production, improvement in farmer
incomes, and improvement in non-farmer incomes.

Empirical Analysis of Watershed Institutions

Data

Data for the empirical study was collected from several rainfed districts of the
state of Andhra Pradesh through the above mentioned ACIAR supported research
project. This is the largest state in the southern plateau region of India and is over 50
percent rainfed. It provides a good setting for watershed development work and has
substantial incidence of poverty. Watershed development is given high priority and
Andhra Pradesh has the highest number of watershed projects among the states in
the country (over 9000) at different stages of implementation. WSD projects have
been taken up under various development programmes/ guidelines including the
Drought Prone Area Programme (DPAP), the Desert Development Programme
(DDP), and the Andhra Pradesh Rural Livelihoods Project (APRLP), recently brought
together under the Integrated Watershed Management Programme (IWMP)
guidelines. Andhra Pradesh is at the forefront of strengthening of institutional and
participatory processes in watershed development and the focus on improving
livelihoods especially of the poor.

For the primary field survey a sample of 18 varied watersheds, 6 in each of

the 3 study districts: Anantapur, Mahbubnagar, and Nalgonda, were selected in

9
association with the Department of Rural Development, Andhra Pradesh, to cover
different agro-ecological conditions including rainfall, water and topography, social
conditions, different programmes/ norms/ administrative structures such as DDP,
DPAP, APRLP, Hariyali, with and without involvement of NGOs, VOs, SHGs, varying
age/ maturity (nearing completion or recently completed), and varying outcomes, as
broadly known.

Detailed survey instruments were developed based on the conceptual

framework, and the understanding of the ground situation from the 6 case studies.
The final sample of 18 watersheds and 542 beneficiary households selected through
stratified random sampling. The sample coverage is described in the Table below.

Table 2: Sample Survey Coverage in Andhra Pradesh

Name of the Number of
Name of the Watershed
District Village and Beneficiaries
Mandal Program/ Type
Watershed covered
Mahabubnagar Mahabubnagar Jainallipur APRLP 30
Bijnapalli Vattem Hariyali I 34
Koilkonda Malkapur Hariyali IV 30
Gopalpet Keshampet DPAP VIII 26
Midjil Narsampally APRLP 32
Balanagar Modampalli DPAP VIII 36
Total 188
Anantapur Kanaganapali Narasampalli DDP VIII 28
Narpala B.Pappur APRLP 34
Mudigubba Uppalapadu DDP VI
25
Extended
Atmakuru Muttala Hariyali I &II 30
Gooty Rajapuram APRLP 35
Penukonda Duddebanda Hariyali IV 30
Total 182
Nalgonda Munugod Ratipalli DPAP -IV 30
Nakrekal Chandupatla Hariyali II 30
Narayanpur Gudimalkapur APRLP 30
Pedagura Nilikal APRLP 30
Kethepalli Gudiwada DPAP VII 24
Shaligolala Valala Hariyali I 28
Total 172
Grand Total 542

The questionnaire coverage included basic features of the households, agricultural

and natural resource features, the watershed activities taken up, their assessment,
and the activity level different institutional functionaries. Through sets of pertinent

10
questions it also sought the assessment of the beneficiaries on the eight different
rationalities using a five-point rating scale. Similarly, it sought their assessment on
the implementation of the five different institutional features. The performance of
the institutions was recorded in terms of parameters such as change in the depth of
water table, change in irrigated area and changes in the cropping pattern. It was
also assessed in terms of the perceived overall success of the institution on a five
point rating scale, as well as performance on the objectives of overcoming scarcity,
equity, environment and financial soundness through response on sets of questions
on a five point rating scale. Data was collected during 2010-11. The analysis of the
data on selected aspects is presented here.

Sample Profile

The profile of the respondents on selected features is described below. The Table
shows the responses on the reliance on the WSD institution. It indicates that for 77
per cent of the sample the reliance is substantial, and very substantial for another 16
percent. Thus, the WSD institution is important for almost all the respondents. The
table also indicates that the sample is quite evenly distributed across upper, middle
and lower reaches. With respect to land owned, about 50 percent own less than 5
acres of land and only about 11 per cent have more than 10 acres of land. About 20
per cent of the sample is landless. A majority of the villages surveyed are located
between 5-20 km from the nearest town.

Table 3: Profile of the Sample

Reliance on WSD Institution
Percent
Very substantial 15.5
Substantial 76.8
Some 7.2
Very little .6
Total 100.0
Location In Watershed
Percent Percent
n.a. .2 .3
Upper 19.7 30.2
Middle 19.0 29.1
Lower 26.4 40.4
Total 65.3 100.0
No land/ Not
34.7
relevant
Total 100.0
Total Land Owned

11
 Acres Percent
>0 - 2 13.7
2-4 21.7
4-5 14.3
5-8 11.6
8-10 7.9
Over 10 10.9
Total 79.7
Landless 20.3
Total 100.0
Distance of Village to Nearest Town

Kms Percent
Up to 5 11.1
5-10 39.7
10-20 32.3
20-30 11.8
Over 30 5.2
Total 100.0

Watershed Development Activities Observed

A large number of watershed development activities were reported in the survey,

see Table below. Check dams have been reported by 205 beneficiaries, percolation
tanks by 70, mini percolation tanks by 47 and drip irrigation by 44 beneficiaries.
Apart from these, a large number of production enhancement activities such as
distribution of fertilizers, good seeds, fruit trees and dairy animals were reported.
Further, a large number of enterprise promotion activities such as tea shops, grocery
shops, tailoring, cloth business, sheep and goat and many more were reported.
Their reported usefulness varies, with check-dams, gully control, sprinkler and drip
irrigation showing high scores among the more frequent NRM activities. Thus, the
sample of beneficiaries encompasses a large number of different watershed
development activity experiences.

Table 4: Watershed Development activities undertaken & reported by the beneficiaries

Natural Resource Management (NRM) Activities
Usefulness rating (1=Poor to 5=Excellent)
N Maxi- Standard
Minimum Mean
mum Deviation
Check Dams 205 1.00 5.00 4.0976 .74770

12
Village Pond 4 3.00 5.00 3.7500 .95743

Farm Pond 15 3.00 5.00 4.1333 .63994

Percolation Tank 70 1.00 5.00 3.8857 .71308

Mini Percolation Tanks 47 1.00 5.00 3.8936 1.12741

Sunken Pits 2 3.00 4.00 3.5000 .70711

Gully Control 40 3.00 5.00 4.1750 .63599

Drip Irrigation 44 1.00 5.00 4.2273 .77350

Sprinkler Irrigation 39 3.00 5.00 4.4872 .60139

Bunding 20 1.00 5.00 3.3500 1.13671

Leveling 4 4.00 5.00 4.7500 .50000

Agro Forestry 8 1.00 4.00 1.7500 1.38873

Other NaturalVegetation Planted 1 1.00 1.00 1.0000 .

Mango 5 4.00 5.00 4.6000 .54772

Sweet Orange 2 4.00 5.00 4.5000 .70711

Rock Fill Dams 8 4.00 5.00 4.3750 .51755

Production Enhancement (PE) Activities

Fertilizer 46 3.00 5.00 4.2174 .55430

Seed 45 1.00 5.00 3.6667 .95346

Plants 83 1.00 5.00 3.8313 1.32351

Drip Irrigation 18 3.00 5.00 4.5556 .61570

Sprinkler Irrigation 7 4.00 5.00 4.8571 .37796

Animals 6 4.00 5.00 4.3333 .51640

Others 44 2.00 5.00 4.0682 .54550

Enterprise Promotion (EP) Activities

Retailing Food 72 3.00 5.00 4.5278 .53001

Retailing General 38 3.00 5.00 4.3421 .58246

Ag. Proc/ Livestock/ Poultry 148 1.00 5.00 4.3378 .64475

Skilled/ craft Activities 52 4.00 5.00 4.4231 .49887

Others 17 3.00 5.00 4.1765 .52859

13
Involvement in Watershed Development Institutions

The Table below indicates that there was considerable variation in the activity level
of different groups and structures in relation to the watershed development
institution. The Table indicates that 53 percent report the general body was active to
very active and 44 percent report that it was passive. However, the leader or head of
the institution was reported active by 90 percent of the respondents. The landless
were reported passive by 51 per cent and the women were reported active by 44
percent. The involvement and activity level would have a bearing on the
performance.

Table 4: Activity or involvement in the WSD Institution

Not
Very relevant
Active Passive None
Active or
reported
1. General Body 9.4 43.7 43.7 2.0 1.1
2. Managing Committee 29.0 53.9 11.8 0.4 5.0
3. Chairman/ Leader/ Head 44.6 43.9 6.8 - 4.6
4. Secretary/ Staff 24.7 59.4 10.7 0.6 4.6
5. Watershed Committee (WC) 22.7 31.2 8.5 0.6 37.1
6. Village Organization (VO) 50.4 22.3 9.6 2.2 15.5
7. User Groups (UGs) 16.6 18.6 17.3 2.6 44.8
8. Self Help Groups (SHGs) 39.1 31.2 18.8 6.8 3.9
9. Panchayat 7.6 40.4 47.2 4.8 -
10. Sarpanch 22.0 33.4 41.3 3.1 0.2
11. Government Officials 31.5 59.6 8.5 0.4 -
12. Technical experts 20.1 61.8 15.7 2.2 0.2
13. NGO 18.5 13.5 0.9 32.8 67.2
14. Upper Caste 31.5 38.9 26.0 3.3 0.2
15. Backward Caste 41.5 55.9 2.2 0.4 -
16. Schedule Caste 17.3 66.8 14.2 1.7 -
17. Schedule Tribes 14.9 36.7 19.4 5.2 23.8
18. Women 44.3 31.2 22.3 2.2 -
19. Poor 5.5 42.6 45.6 6.3 -
20. Large/medium farmers 31.2 56.1 12.2 0.6 -
21. Small/marginal farmers 26.8 65.9 7.2 0.2 -
22. Landless 5.0 36.9 50.9 7.0 0.2
23. Labour/wage earners 4.4 43.2 45.9 6.5 -
24. Youth – young people 2.4 19.2 72.5 5.9 -

Assessment on Rationalities

Different questions were asked to make an assessment about the status of different
rationalities. The table below shows a few of the questions asked on technical,
environmental, economic, and social rationalities and the responses obtained from

14
the beneficiaries. On technical rationality, the Table shows that technical experts
and considerations were reported to be involved in most cases for NRM activities but
not so far EP activities. With respect to the maintenance of structures substantial
number only partially agree that this was good and on the high capability of experts
many only partially agree.

With respect to environmental rationality, whereas this was reported to have been
taken into consideration in most cases for NRM activities, environment was not
reported as considered for a large number of PE and EP activities. On economic
rationality, most beneficiaries agree that the NRM structures were well selected for
economic benefits, but a vast number indicated that market demand and profitability
were not considered and good marketing arrangements were not created. With
respect to social rationality, most beneficiaries agree that mobilization and
involvement of various social groups was actively done, but many indicate that the
interest and benefits of small and marginal farmers and the landless were not taken
into consideration. On all these counts there appears to be considerable variations.

Table: Assessment on rationalities I – selected questions and responses (percent)

Technical Rationality
Strongly Agree Partially Disagree Strongly
Agree Agree Disagree
1. Technical experts and considerations were
actively involved in the constructions/
implementation of NRM structures/ activities 26.2 65.1 7.4 0.6 0.6
2. The structures were well maintained and in
very good condition for conservation of water
and soil 22.6 49.1 23.9 3.8 0.6
3. Technical experts were involved in selection
and training for enterprise promotion (EP)
activities. 8.3 16.6 3 24.9 47.2
4. The technical experts involved were highly
capable. 6.6 36.1 32.7 15.9 8.7
Environmental Rationality
1. The environmental impact (on soil, water,
forests and natural vegetation) was actively
considered in deciding NRM struct/ activ. 18.3 57.5 16.1 6.8 1.2
2. In deciding the PE and EP activities,
environmental impact (on groundwater,
soil, natural vegetation) was taken into
consideration. 2.4 32.1 19.1 26.1 20.3
Economic Rationality
1. NRM structures/ activities were correctly
selected for the best economic benefit to
the villagers. 39 55.9 4.6 0.6 0
2. Market demand, prices, and profitability
were actively considered in the selection
of WSD activities. 0.4 2.6 6.4 39.8 50.8

15
3. Good marketing arrangements existed/
were created for the produce from WSD
activities. 0.2 2.3 5.8 18.9 72.8
Social Rationality
1. Mobilization and involvement of various
social groups was actively done in deciding
about the WSD activities. 20.1 50 17.5 11.8 0.6
2. Interests and benefits to small and marginal
farmers were actively considered in
deciding about WSD activities. 25.8 34.6 27.3 7.7 4.7
3. Interests and benefits to landless
households were actively considered in
deciding about WSD activities. 7.5 23.6 40.8 22.3 5.8

The table below gives the responses of the beneficiaries on selected questions
pertaining to political, organizational, financial and government rationalities. On
political rationality, most beneficiaries indicate that the participation of all village
leaders was invited at the start of the project, but a large number indicate that the
institutions did not have strong politically able leadership, and they were not able to
balance the demands of various power groups, and settle major disputes. On
organizational rationality, most beneficiateis indicate that good local institutions were
created for WSD activities, but in a large number indicate that user groups were not
created for NRM activities, and many indicate that there was lack of regular
meetings, and also deficiencies in the coordination and management of activities.

On financial rationality, around 60 per cent of beneficiaries indicate that the funds
were efficiently handled and there was no dispute about the management of funds
but the rest indicate some difficulty with respect to this, and a majority indicate that
the financial position of the institution is not very sound. On government rationality,
whereas about 20 to 30 per cent benefiaries indicate that there was substantial
government help and it was speedy, the rest indicate difficulty with respect to this,
and majority indicate that the government could not help in resolving disputes and
problems. There is, however, substantial variation in these responses.

Table: Assessment on rationalities II – selected questions and responses (percent)

Political Rationality
Strongly Agree Partially Disagree Strongly
Agree Agree Disagree
1. The participation of all village leaders
was invited through meetings and
consultation at start of the WSD project 34.5 39 14.1 10.9 1.5
2. The WSD institution had strong
politically able leadership 4.3 20.5 51.6 16.6 7
3. WSD institution was able to balance the
demands of various village powers, and 3.7 25.2 17.1 40.6 13.4

16
 groups, and settle all major disputes
Organizational Rationality
1. Good local institutions/organizations
were created/ designated clearly to lead,
plan and implement WSD activities 15.8 54.8 18.4 9.3 1.7
2. Active User Groups (UGs) were created
for NRM activities 18.5 22 18 17.8 23.7
3. There were regular meetings for all WSD
activities (NRM, PE and EP) 28.2 38.1 20 8.2 5.4
4. Planning, implementation and delivery of
the WSD activities (NRM, PE and EP)
was very well coordinated and managed. 11.9 47.9 28.3 9.7 2.2
Financial Rationality
1. The funds were very efficiently handled
for the intended purpose and
beneficiaries 28.1 40.5 27.7 3.7 0.0
2. There was no dispute about the
management of funds 15.7 45.4 25.7 10.9 2.2
3. The financial position of the WSD
institutions is extremely sound/ surplus 9.6 17.5 22.6 27 23.2
Government Rationality
1. The government officials helped in
mobilizing village people and creating
the local organizations for WSD 8.7 33 33 14.9 10.3
2. The local organization and government
officials received speedy support and
cooperation from the higher officials. 2.6 20.5 37.1 34.8 5
3. The government officials helped in
resolving any disputes and problems. 0.2 10.2 14.1 20 55.4

Assessment on Institutional Features

The table below provides responses on a few of the questions regarding the
presence of institutional features, which are derived from the concepts of new
institutional economics. On the clarity of objectives, a majority indicate that the
objectives of the WSD institution were cleared to everyone, but a signficiant number
indicate that there were deviations from the objectives in various WSD activities. On
the presence of good interaction, a majority indicate that there was a good
interaction between WSD institution and the villagers, but many indicate deficiency
in good leadership to facilitate the interaction and also deficiency in the interaction
between the WSD institution and higher level institutions such as the government.

On adaptiveness, most beneficiaries indicate the rules and procedures were

flexible/not very rigid, but many find deficiencies in the process for adapting the
rules, and in actual adaption of rules by the institution. With respect to the issue of
scale, most indicate that the scale was appropriate but many indicate that the higher

17
level issues were not properly addressed by higher level authorities. With respect to
compliance, most beneficiaries indicate that the institution used its powers to bring
compliance, but a large percentage only partially agree, and in a majority of cases,
no external monitoring or enforcement was indicated.

Table: Assessment on institutional features – selected questions and responses (percent)

Clarity of Purpose/Objectives
Strongly Agree Partially Disagree Strongly
Agree Agree Disagree
1. The WSD institution’s objectives and
purpose were clear to everyone 33 55.7 6.9 3.9 0.6
2. Deviations from NRM, PE and EP
objectives were not frequent. 17.5 39.2 26 15.1 2.2
Good Interaction
1. There was good interaction between the
WSD institution and the villagers. 29.5 54.4 11.1 3.1 1.8
2. There was good leadership to facilitate and
guide the interactions 10.8 44.1 30.5 9.5 5.2
3. There was good interaction between the
WSD institution and higher level
institutions such as the government. 14.2 26.2 34.4 21.9 3.4
Adaptiveness
1. The rules and procedures of the WSD
institution/ project were flexible/ not
very rigid 13.3 65.9 12.9 6.8 1.1
2. There were processes/ ways for
adapting the rules and procedures
according to the needs and suggestions. 7.3 30.9 43.8 16.3 1.7
3. There were instances when the rules
and procedures were adapted by the
institution to improve the benefits. 21.5 35.7 14.3 23.6 4.9
Scale/Size
1. The area governed by the WSD
institution was appropriate for good
management and results 25.9 44.3 26.8 2 0.9
2. The higher level/ bigger issues/ matters
were properly addressed by higher level
authorities/ institutions/ government 2.8 14 40.3 33.2 9.7
3. The lower level/ smaller issues/ matters
were properly addressed by lower level
groups (e.g. UG, SHG, individuals) 24.3 40.1 13.4 11.9 10.3
Compliance
1. The WSD institution used its powers to
bring compliance 21.8 36.8 35.5 5.2 0.7
2. The compliance to the rules was
sufficient 13.1 54 26.4 5.4 1.1

18
 3. There was external monitoring and
enforcement of the rules, procedures
and funds handling/ utilization 5 13.9 40.5 33.1 7.4

Assessment of Performance

The performance of WSD institutions in a setting such as India needs to be

assessed on several dimensions (see Gandhi and Namboodiri 2002) and this
includes dealing with scarcity (conservation, availability, and efficiency in scarce
resources such as water). It also includes dealing with equity which addresses the
distribution of benefits across villagers - large and small farmers and landless, and
different social groups. Further, environmental issues need to be addressed such as
sustainability, soil erosion, flooding, and depletion of groundwater. Next, financial
soundness such as obtaining, raising and managing funds, and having a surplus,
needs to be assessed. Finally, the perceived overall success of the institutions can
also be assessed.

The table below gives responses on a few of the questions asked to assess
performance on these different counts. The responses indicate that in a majority of
cases, structures for conservation of natural resources have been created and water
conservation has improved, but there are deficiencies regarding maintenance and
protection of the structures, and in most cases, there is inadequate monitoring of
water use. With respect to equity, most agree that there is a fair distribution
between small and large farmers, but in many cases, not so across farmers and the
landless, and often there is no monitoring for equality in the distribution of benefits.

On the environmental front, most indicate that soil erosion has reduced and there is
no flooding or water logging. However, in many cases, there has been a depletion of
the groundwater and that institutions have hardly monitored or controlled the
environmental harm. With respect to finance, most beneficiaries indicate that the
institutions got sufficient funds from the government, but in a majority of cases,
contributions could not be raised from the beneficiaries, the financial disciplines was
not monitored by the government, and the institutions was not financially sound.
With respect to the overall success, about 47 per cent consider the institutions to be
successful, but 43 per cent consider the performance only satisfactory and only 9
per cent consider their institutions highly successful. There is a large amount of
variation in the responses regarding various parameters of success, indicating
considerable variation in performance.

Table: Assessment of performance – selected questions and responses (percent)

Scarcity
Strongly Agree Partially Disagree Strongly
Agree Agree Disagree
1. A number of structures for conservation of
water, soil and natural resources were
constructed 25.0 62.4 11.7 1.0 0.0

19
2. Water conservation has improved 35.5 55.7 8.6 0.2 0.0
3. The structures were well maintained &
protected 13.5 51.4 26.4 7.7 1.0
4. Water use of villagers was monitored and
controlled 2.3 16.7 38.4 33.9 8.7
Equity
1. The benefits were equally distributed between
small and large farmers 16.4 42.8 24.0 15.1 1.7
2. The benefits were equally distributed between
farmers and the landless 5.6 29.9 27.1 22.7 14.7
3. The benefits of were equally distributed
between different social groups 11.7 44.6 22.6 16.3 4.8
4. Distribution of benefits was monitored/
controlled for equality 8.9 37.9 34.2 14.9 4.1
Environment
1. Soil erosion reduced in the village 14.2 47.8 34.3 2.6 1.1
2. There was no flooding or water logging in the
village 43.8 31.2 20.0 4.1 0.9
3. There was no great depletion of ground water
in the village 4.8 48.4 32.0 14.0 0.7
4. The institution monitored and controlled
environmental harm/ depletion 1.1 13.7 25.9 43.3 15.9
Finance
1. The institution got sufficient funds from the
government 14.4 65.1 16.1 4.4 0.0
2. The institution could raise contributions from
the beneficiaries 6.7 14.5 17.6 26.3 34.9
3. Financial discipline was monitored by the
government 9.2 21.4 34.7 30.6 4.1
4. The institution was financially sound/ surplus 10.9 17.9 17.5 28.9 24.8
Overall Assessment of Success
Highly Succe Satisfac Somewh Very
Success ssful tory at poor poor
ful
Rating percent 8.7 46.5 43.4 1.3 0.2

Results of Multivariate Analysis

A major purpose of the research was to examine the relationship between

institutional characteristics and the performance of the WSD institutions. The
relationship of different institutional features to the institutional performance
indicators is examined through multivariate estimation here. Since the performance
indicators are range-bound ratings with values from 1 to 5, OLS regression would be
unsuitable and a limited dependent variable procedure is required. The TOBIT
regression is selected and used for econometric estimation (see Madala 1983). The
Table below presents the results of the Tobit regression between the overall success
rating and the different rationalities. The assessment of each rationality has been
done based on response to a set of pertinent questions, shown above, and these

20
responses have been aggregated to provide an aggregate assessment. Dummy
variables have been included for the districts.

The results validate the usefulness of the framework in explaining institutional

performance. Results show that overall success is positively and strongly related to
technical rationality. It is also strongly related to environmental, organizational and
financial rationality. However, the relationship with economic, social and government
rationality is not statistically significant. The relationship with political rationality is
found to be negative. The results indicate a strong institutional importance of
technical, environmental, organizational, and financial rationality in the overall
success of watershed institutions. Financial rationality followed by organizational
rationality are particularly important. The negative relationship with political
rationality indicates that excessive focus on this is associated with poorer
performance.

Table 6: Tobit Model: Overall success and Institutional Rationalities

Parameter Standard Approx
Variable DF Estimate Error t Value Pr > |t|
Intercept 1 1.22884 0.354505 3.47 0.0005
TechR 1 0.067174 0.034307 1.96 0.0502
EnvR 1 0.081121 0.033154 2.45 0.0144
EcoR 1 0.098149 0.069857 1.4 0.16
SocR 1 -0.04804 0.072712 -0.66 0.5088
PolR 1 -0.13869 0.054413 -2.55 0.0108
OrgR 1 0.222097 0.083072 2.67 0.0075
FinR 1 0.282279 0.075892 3.72 0.0002
GovtR 1 0.146254 0.091045 1.61 0.1082
DummyAnantapur 1 -0.15792 0.076559 -2.06 0.0391
DummyNalgonda 1 -0.05565 0.075492 -0.74 0.461
_Sigma 1 0.673758 0.022022 30.59 <.0001
n=541

The Table below provides the results on the relationship of overall success to new
institutional economics based institutional features. Each feature has been assessed
through a set of questions, of which the responses have been aggregated. Results
indicates a strong association with the features of good interaction and adaptiveness
at 99 percent level of significance. The relationship with scale is also strong at 90
percent level. The relationship with compliance and with clear objectives is not
significant. The results validate the relevance of new institutional economics in
determining the performance of institutions. In particular it shows that good
interaction, adaptiveness, and scale are very important institutional features for good
performance of watershed institutions.

Table 7: Tobit Model: Overall success and Institutional Features

Parameter Standard Approx
Variable DF Estimate Error t Value Pr > |t|
Intercept 1 1.408218 0.333682 4.22 <.0001

21
 ClObj 1 -0.01437 0.054897 -0.26 0.7935
GoodInt 1 0.262728 0.059559 4.41 <.0001
Adpt 1 0.208558 0.06714 3.11 0.0019
Scale 1 0.121771 0.067606 1.8 0.0717
Comp 1 0.075421 0.0713 1.06 0.2902
DummyAnantapur 1 -0.03377 0.076867 -0.44 0.6605
DummyNalgonda 1 -0.08406 0.078856 -1.07 0.2864
_Sigma 1 0.677771 0.022187 30.55 <.0001
n=540

It has been indicated above that the performance of watershed institutions has four
important dimensions. These are performance in overcoming scarcity, achieving
equity, addressing the environment, and financial soundness. Assessment has
been made on a 5 point rating scale through sets of pertinent questions regarding
the performance of the institutions on each of these performance measures, which
have been aggregated. The Table below provides the results on the relationship
between scarcity and the different rationalities. The results indicate a positive, strong
and statistically significant relationship with technical rationality, economic rationality
and organizational rationality. The relationship with political rationality is found to be
negative and significant. The results indicate that on technical, economic and
organizational rationality within institutions are critical for performance on
overcoming scarcity. Over-emphasis on political rationality may have a negative
impact on the institutional performance on scarcity.

Table 8: Tobit Model: Performance on Scarcity and Institutional

Rationalities
Parameter Standard Approx
Variable DF Estimate Error t Value Pr > |t|
Intercept 1 2.375267 0.186494 12.74 <.0001
TechR 1 0.064098 0.018371 3.49 0.0005
EnvR 1 0.017346 0.018159 0.96 0.3395
EcoR 1 0.093409 0.03684 2.54 0.0112
SocR 1 0.023782 0.038483 0.62 0.5366
PolR 1 -0.10426 0.028726 -3.63 0.0003
OrgR 1 0.143504 0.044187 3.25 0.0012
FinR 1 0.030678 0.040797 0.75 0.4521
GovtR 1 0.017055 0.048243 0.35 0.7237
DummyAnantapur 1 -0.00649 0.040531 -0.16 0.8727
DummyNalgonda 1 -0.09934 0.040198 -2.47 0.0135
_Sigma 1 0.356272 0.011037 32.28 <.0001
n=521

The Table below indicates the relationship between the performance on equity and
the different rationalities. The results indicate a strong and statistically significant
relationship with social, environmental, organizational and financial rationalities. The
results indicate that for achievement of equitable outcomes, the institutional focus on
social, environmental, organizational, and finacial rationalities are particularly

22
important. Technical rationality is negative and mildly significant indicating a mild
inverse relationship.

Table 9: Tobit model: Performance on Equity and Institutional Rationalities

Parameter Standard Approx Pr
Variable DF Estimate Error t Value > |t|
Intercept 1 1.329258 0.263096 5.05 <.0001
TechR 1 -0.04357 0.02559 -1.7 0.0886
EnvR 1 0.131793 0.024664 5.34 <.0001
EcoR 1 0.076976 0.051926 1.48 0.1382
SocR 1 0.25027 0.054005 4.63 <.0001
PolR 1 -0.05744 0.040413 -1.42 0.1552
OrgR 1 0.186862 0.061832 3.02 0.0025
FinR 1 0.161262 0.056713 2.84 0.0045
GovtR 1 -0.11604 0.067978 -1.71 0.0878
DummyAnantapur 1 -0.17331 0.057122 -3.03 0.0024
DummyNalgonda 1 -0.23699 0.056254 -4.21 <.0001
_Sigma 1 0.506655 0.015389 32.92 <.0001
n=542

The Table below examines the relationship between performance on environmental

outcomes and the different rationalities. The results indicate a strong positive
relationship with environmental rationality and organizational rationality. The
relationship with political rationality is negative and significant. The results indicate
the importance and need for environment, and organizational rationalities for
achieving good environmental outcomes. Over-emphasis on political rationality may
lead to negative outcomes.

Table 10: Tobit model: Performance on Environment and Institutional

Rationalities
Parameter Standard Approx Pr
Variable DF Estimate Error t Value > |t|
Intercept 1 2.438907 0.16902 14.43 <.0001
TechR 1 -0.0229 0.016555 -1.38 0.1666
EnvR 1 0.04467 0.015936 2.8 0.0051
EcoR 1 0.03014 0.033387 0.9 0.3667
SocR 1 0.001747 0.034717 0.05 0.9599
PolR 1 -0.07531 0.026084 -2.89 0.0039
OrgR 1 0.209646 0.03978 5.27 <.0001
FinR 1 0.042304 0.036451 1.16 0.2458
GovtR 1 0.031008 0.043799 0.71 0.479
DummyAnantapur 1 0.137554 0.036723 3.75 0.0002
DummyNalgonda 1 -0.05647 0.036164 -1.56 0.1184
_Sigma 1 0.325438 0.009903 32.86 <.0001
n=540

23
The Table below provides results on the relationship between financial soundness
and performance with the different rationalities. The results indicate a strong
association with financial rationality as may be expected. It also indicates a strong
relationship with environmental, economic, social political and organizational
rationalities. The results indicate that institutional focus on these rationalities are
very important for financial soundness and performance. The technical rationality
shows a negative association which may indicate that technical rationality may
involve large expenditures which may weaken the financial position of the institution.

Table 11: Tobit Model: Performance on Finance and Institutional Rationalities

Parameter Standard Approx Pr
Variable DF Estimate Error t Value > |t|
Intercept 1 1.16655 0.156298 7.46 <.0001
TechR 1 -0.05603 0.015202 -3.69 0.0002
EnvR 1 0.048137 0.014652 3.29 0.001
EcoR 1 0.031029 0.030848 1.01 0.3145
SocR 1 0.11395 0.032083 3.55 0.0004
PolR 1 0.060842 0.024008 2.53 0.0113
OrgR 1 0.118801 0.036733 3.23 0.0012
FinR 1 0.261087 0.033692 7.75 <.0001
GovtR 1 -0.01596 0.040384 -0.4 0.6927
DummyAnantapur 1 0.100742 0.033935 2.97 0.003
DummyNalgonda 1 -0.00479 0.033419 -0.14 0.8859
_Sigma 1 0.300989 0.009142 32.92 <.0001
n=542

Conclusions and Implications

The management of natural resources is assuming great importance for sustaining

growth and development in India. Natural resources are becoming a significant
limiting factor and it is increasingly clear that technology alone cannot solve the
growth problem particularly in the rainfed areas; the good management of natural
resources plays a critical role in improving livelihoods and alleviating poverty. Given
its importance, the government has made huge efforts through watershed
development programmes. However, institutional limitations in the delivery of these
programmes has affected the outcomes. It is critical to combine the scientific
approaches and funding of watershed development with community participation,
knowledge and ownership to bring success, and in this institutional design is critical.

The study has applied new institutional economics and management theories of
governance to understand the performance of watershed institutions. A framework
has been developed and empirically explored through a large sample of watershed
development institutions and beneficiaries in Andhra Pradesh, India. The results
indicate the substantial importance of the institutional features of good interaction,
adaptiveness and appropriate scale for the performance of watershed institutions.
The results also show that the addressing of critical rationalities particularly
technical, organizational and financial is extremely important for the performance of

24
these institutions. The results are somewhat mix with respect to social,
environmental, and economic rationalities. Social and environmental rationalities
are found to be very important for achieving equity; environmental and government
rationalities important for performance on the environment; and financial, economic
and social rationalities for the performance on financial soundness. Strong
emphasis on political rationality seems to diminish performance on many fronts.

The results show that the good design of watershed development institutions is very
important for successful outcomes of livelihoods and environment. It is important
that the structure and processes of these institutions strongly provides for technical
rationality in the implementation through the deployment of experts, good technology
and guidance. It is also important that community mobilization for formation of strong
local organizations to implement watershed development is given substantial
emphasis. Through setting proper procedures and monitoring, it is also of great
importance to ensure financial rationality in the implementing organizations. Overall
the institutions must ensure good interaction to bring the formal and informal
together for planning and implementation. This is strongly related with performance.
Adaptiveness in the rules and procedures, and appropriate scale of operation is also
found to be very important to bring good performance. These features need to be
clearly incorporated in the government guidelines and the institutional structures and
systems involved in watershed development programs to improve their impact on
productivity, livelihoods and poverty alleviation.

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