The Stakeholder Model for Water Resource Projects

The Stakeholder Model for
Water Resource Projects
The water resource development projects in India have been facing problems due to
immense time and cost overruns. There is also the risk of taking a skewed path when
planners and policy makers tend to ignore the existence of less-vocal and non-vocal
entities. This could be due to a lack of a proper framework for understanding the nature
and dimensions of the competing, conflicting, and varied demands both by the adversely
affected and the beneficiary entities. This calls for identifying various stakeholders of the
water resource projects so as to develop a stakeholder’s model which is expected to not
only help categorize the stakeholders along the lines of beneficial and adverse effects but
also to gauge their capacity to influence change in the course of the projects.
The stakeholders can be defined as individuals or group of entities who may be
affected by the water resource project during its conception, construction, and operation
who, in turn, may also influence the future course of the project. For identifying the
stakeholders, this paper proposes a three-tier approach leading to an eight-fold classifi-
cation of stakeholders.
As exemplified by the Sardar Sarovar Project, the identified classes of stakeholders
can be structured into a model indicating their octagonal congregate of influences and
the networked effect on the water resource project. Since stakeholders are important
social and economic assets for public good, the best recourse is to create a win-win
situation for all of them or work out a balance in relationships with its diverse constituents
for optimum realization of stakeholder value. With these objectives in view, this paper
suggests a four-level stakeholder relationship model incorporating levels of: (i) unin-
formed, (ii) compliant, (iii) responsive, (iv) engaged. On attaining the highest ‘engaged’
level, the project is able to create synergy among all elements of its relationship network
so as to realize optimum stakeholder value.
The measurement of stakeholder value is of immense importance for understanding
and responding to shifts in stakeholder expectations and reactions. The proposed
‘comparative measure’ approach for evaluating stakeholder value has the advantage of
being discernible, forward-looking, and capable of eliminating the element of percep-
tion in measurement by taking a comparative (rather than absolute) measure of the
impact on beneficiary and adversely affected groups of stakeholders. This approach
requires moral reasoning, involving a rational valuation of emotions (joy or grief) in case
of social stakeholders, and conditions (favourable or unfavourable) in case of non-social
stakeholders, as epitomized by the factual illustration of a decision related to the height
of the Sardar Sarovar Dam.
The implications of the stakeholder model are as follows:

It serves the ‘4S’ management functions of Sensing, Scanning, Signalling, and
Strategizing.

It can be used as a powerful tool for investigation, prognostication, redressal, and
management of stakeholder issues.

It can also be aptly used for guiding the continuous process of national water
resource reforms with an aim to achieve balanced and sustainable development
with minimum conflicts.
To conclude, water resource projects would ultimately help maximize societal wel-
fare and improve the governance system besides becoming stakeholder responsive.
KEY WORDS
Stakeholder Model
Project Management
Water Resource Management
Governance System
Executive Summary
G C Maheshwari and B Ravi Kumar Pillai
presents articles focusing on managerial
applications of management practices,
theories, and concepts
I N T E R F A C E S
VIKALPA • VOLUME 29 • NO 1 • JANUARY - MARCH 2004 63

I
ndia has witnessed a dramatic rise in water-related
problems leading to the present crisis with ever
increasing intensity of conflicts amongst various
users of water. Some of the recent conflicts (e.g., water
sharing dispute on river Cauvery) also bring into focus
the manner in which activism by a few people can
complicate the matter to unmanageable proportions.
They also highlight the fact that the nation realizes the
gravity of the crisis only after it reaches a precarious
state. However, this situation could lead to future water
resource development taking up a skewed path where
policy makers and water resource planners of the nation
may tend to ignore the existence of less-vocal and non-
vocal entities. Despite the country’s enormous experi-
ence in developing a good number of large projects,
almost every present-day project is faced with a fire-
fighting situation causing immense time and cost
overruns besides putting considerable pressure on the
national resources. This, to our mind, is due to lack of
a proper framework for understanding the nature and
dimensions of the competing, conflicting, and varied
demands, both by the adversely affected and the ben-
eficiary constituents as a result of the water resource
sector remaining in the control of the government.
At a time when the central government, many state
governments, the apex judiciary, and most of the polit-
ical parties are at the threshold of formulating new
perspectives and taking measures to meet the challenges
posed by the present situation, the totality of the picture,
the attendant issues or even the parties involved are not
clearly known. This calls for identifying various stake-
holders of water resource projects and recognizing their
concerns for and against the projects. It is with this
objective of charting out a balanced and sustainable
water resource development plan for the country that
we attempt to develop in this paper an appropriate
stakeholder model applicable for water resource projects
calling for innovations in the system of governance.
STAKEHOLDERS OF WATER RESOURCE
PROJECTS
It is a paradox that despite the widely accepted social
domain status of water resource development in India,
the ardent supporters of social welfare economics have
only been opposing the water resource projects. It is also
ironical that the critical issues facing the water resource
projects often assume unmanageable proportions be-
cause of the overstated socio-economic objectives.
Though application of tools and philosophies of main-
stream economics is also attempted in selective in-
stances, they mostly go in vain because of an insufficient
understanding of the project intent. This management
dilemma can be overcome only by a clear understanding
of the vital differences amongst stakeholders of water
resource projects and business enterprises.
Who are Stakeholders?
The stakeholders of water resource projects would
include individuals or group of entities who may be
affected by the water resource project during its concep-
tion, construction, and operation and who, in turn, may
also influence the future course of the project. Unlike
business concerns, both social and ecological elements
are always a part of the direct action environment of
water resource projects. Thus, human as well as non-
human entities are called stakeholders of a water re-
source project if the quality of their existence is affected
by the construction and/or operation of the project. Even
non-living entities such as topographical or archaeologi-
cal elements of an affected place can become stakeholders
of the project because of their silent capacity to arouse
human action.
The effect of the project on the quality of existence
of stakeholders may be limited to the dimension of
economic rejuvenation or repression or may have other
dimensions such as affecting stakeholders’ natural habitat
or their social and cultural milieu and, in some cases,
may even jeopardize the very existence of the entities.
While the consequences of the project may be visible on
some entities during or immediately after the com-
mencement of project construction, on others, they may
become visible only after a considerably long time. The
comparative measure of the stakes will also depend
upon varying perceptions of different stakeholders.
However, the degree of return influence may not be in
proportion to the measure of stakes involved owing to
dissimilarity in stakeholders’ capabilities in bringing a
tangible or intangible influence on project activities.
Water as a ‘Social Good’ and ‘Social Investment’
Water is generally considered as a ‘social good’ having
significant spillover benefits or costs (Gleick et al., 2002).
It is essential for life and health and also has cultural
and religious significance especially in India where
rivers are considered sacred. Because of these reasons
and the fact that India is largely dependent on agricul-
64 THE STAKEHOLDER MODEL FOR WATER RESOURCE PROJECTS

ture for its economic growth, government bodies alone
regulate the water resource projects in India. These
projects are essentially constructed and operated with
the intention of bringing economic and social develop-
ments in certain areas or to a certain set of people rather
than imparting profits to the owners of the projects.
Thus, construction or subsequent operation of water
resource projects cannot be construed as profit-oriented;
rather, it is for maximization of social welfare.
Often, with a view to emphasize efficiency in use
of water, economic tools and principles are applied on
water, but with sub-optimal results. The International
Conference on Water and Environment (1992) held at
Dublin concluded that water has an economic value in
all its competing uses and should be recognized as an
economic good. The application of this concept will
mean that a given amount of water shall be allocated
across competing uses in such a way that the net value
of water resources is maximized. But, this approach
cannot be applied in a mathematical sense because there
are several benefits of water that would defy economic
measurement. Thus, despite the economic elements
being present in water, it may not be fully definable as
an ‘economic good.’ To a limited extent, as in the case
of bottled mineral water — usually consumed by upper
income group people — water may be treated as a
commodity and thus subjected to the market forces.
Also, full or partial privatization of water supply projects
is possible and is even being resorted to in some parts
of the world. But, such efforts are fraught with heavy
risks to both humans and the environment as this can
lead to situations of business people overlooking water
as the basic need for survival of the mankind and
ecosystem. Water may have economic value but it also
has social, cultural, and ecological values that cannot be
entirely realized and taken care of by the market forces.
Water projects are taken up with huge investments
and the natural constraints like topography, geology,
hydrology, etc. may not allow for splitting up of a project
into many smaller investment projects to suit private
participation. Such projects as hitherto envisaged and
implemented in public domain are not always financial-
ly viable and may not be attractive for private sector
participation (Maheshwari and Pillai, 2001). Further,
due to the social and political implications of such
projects, community level efforts are being resorted to
instead of privatization.
Compared to normal business organizations, water
resource projects bring about far more intense social,
economical, and environmental changes and political
pay-offs. These changes, with negative (to some) as well
as positive (to others) consequences, span over much
larger areas and affect a much larger population of
stakeholders. From the human stakeholders’ point of
view, generally, the number of beneficiary stakeholders
surpasses the number of adversely affected stakehold-
ers; however, this assessment of beneficiary and ad-
versely affected stakeholders may not hold good for non-
human stakeholders or for the total stakeholders’ spec-
trum. Compared to commercial organizations, changes
brought about by the water resource projects are long-
lasting and dynamic. The duration of changes may range
from a few years to several decades affecting different
sets of entities at different points of time, and may even
affect the same entities differently at different time
spans. For instance, in the initial years of a construction
project, water may submerge several thousand hectares
of land, affecting a large set of stakeholders (people, flora
and fauna) adversely. Decades later, it may benefit a
larger but different set of stakeholders by providing
them the much needed water. Sometimes, with pro-
longed use of irrigation, the beneficiary areas may get
waterlogged causing adverse affects. The consequences
on the non-living entities such as geology, topology or
atmosphere may vary from small to large at times
causing permanent and irrevocable environmental
changes.
The water resource projects also differ in terms of
strong influences brought about by the stakeholders. In
the case of human and non-human entities, concerns are
voiced by the socially-responsive and environment-
responsive groups. Moreover, the response of different
sets of people varies considerably over time. Project
oustees who are hyperactive during the construction
stage of the project may cease to be active during its
operational stage, while people at the tail end of the
command area may not show any concern during the
construction or initial stages of the project, but may
become most vocal at the operational stage. Because of
the larger time span and possibilities for change in the
scope of the project, people originally classified as
affected may not actually get affected while others, not
originally in the spectrum of benefits or loss, may
eventually get affected. Time-related attitudinal change
is also possible for other reasons; for instance, the people
adversely affected by submergence of their land may
VIKALPA • VOLUME 29 • NO 1 • JANUARY - MARCH 2004 65

later get rehabilitated in the command area of the project
thereby making them beneficiaries of the project.
The business enterprises are, to a large extent,
shielded against direct public or political pressures. The
roles of external stakeholders are generally demanding
in nature while the management plays a reactive role
after a careful examination of the stakeholders’ demands
vis-à-vis organization’s immediate objectives and long-
term mission. In contrast to this, the management of a
water resource project is open to direct public influence
— generally brought through a capricious political
response for want of clientele effect — allowing for
prejudicial dilution of project objectives and mission.
Since a large number of people are affected by even small
scale changes in the scope of such projects, the political
forces play a vital role in influencing decisions related
to them. These decisions have significant financial and
economic outcomes and heighten the role played by
politically active interest groups, exacerbated by the
media to a much larger proportion.
THE STAKEHOLDER MODEL
It is against this background that we attempt to develop
a proper model that will permit identification, classifi-
cation, and understanding of the whole spectrum of
stakeholders and imparting efficacy to the management
system.
Identifying Stakeholders
The stakeholders of business concerns are identified
under two broad categories, viz., internal and external,
because of the highly competitive environment in which
internal stakeholders present a monolith front to counter
the challenges posed by numerous divergent external
stakeholders. But, this approach is highly unsuitable for
identifying stakeholders of water resource projects for
the reason that the internal stakeholders are generally
a part of the government (as policy makers, planners or
project executors) and their existence is not critically
linked with the success of the project. A plethora of
departments and ministries may not present a monolith
front (especially in case of multi-state projects) for
reasons of well established principles of accountability
and thus the notion of internal stakeholders may not be
as crucial as in the case of business organizations.
Moreover, identifying the large and influential segment
of the external environment as mere external stakeholders
may reduce the significance of some of the diverse, but
consequential, stakeholder groups.
What are the other ways of identifying the stake-
holders of water resource projects? One of the approach-
es could be the biological and physical differentiation
of stakeholders along the lines of living and non-living,
human and non-human, urban and rural, etc. Another
approach could be in terms of project outcomes on the
stakeholders with economic, social, cultural or environ-
mental dimensions. Yet another approach is possible
according to the timing of impact (i.e. immediate or
later), extent of impact (severe vs. marginal), or the
stakeholders’ capacity to voice response to changes
caused by the project. As no single approach for iden-
tifying the stakeholders of water resource projects is
capable of permitting full understanding of the various
issues of project construction and operation, we propose
a three-tier approach.
Stakeholders may be identified as beneficiaries and
adversely affected groups. This division, though com-
prehensive in terms of the nature of project’s effect on
stakeholders is too broad and leaves out the inherent
characteristics of stakeholders and their capacity to
respond to the project effects. Hence, this needs further
sub-classification as social and non-social groups de-
pending upon the presence or absence of social relation-
ship between stakeholders and the project. People af-
fected by the project are social stakeholders because
their interests are linked with the project through social
interaction; on the other hand, the affected natural
elements, non-human species, and the future human
generation — unable to forge social relationship with
the project — are examples of non-social stakeholders
(Wheeler and Sillanpaa, 1997). Thus, the second tier of
identification process leads to classification of stake-
holders as:

social beneficiary group

non-social beneficiary group

social adversely affected group

non-social adversely affected group.
So far, the identification has been confined to
stakeholders who are directly affected by the project.
Project effects on indirect stakeholders arise due to their
proximity — resulting from social, environmental or
economic ties — with the directly affected groups and
they also bring influences on the project. The directly
and indirectly affected stakeholders are classified as
primary and secondary sub-groups respectively. The
third tier of identification process, thus, leads to an eight-
66 THE STAKEHOLDER MODEL FOR WATER RESOURCE PROJECTS