Valuation of Mountain and Highland Waters:

The conflict between the highland and the plains with the sharing of the highland waters, of late, has assumed an enhanced importance in the context of ecological disputes. While, policy makers and academicians have suggested several methods to resolve the conflict, the entry point in this analysis lies with the “beneficiaries pay” principle. Keeping with this principle, the paper initiates the idea that one of the ways for resolving the water-related conflict between the highlands and the plains is to make the beneficiary plain pay adequately for the use of the highland water. This is where the most important question arises: what should be the amount of the payment? There have been attempts to answer this question in this analysis. The paper tries to obtain the optimal amount that the plain should pay for the attainment of social optimality. In this context, the concept of the shadow value becomes important. With static and dynamic analyses, it has been shown that the shadow value, which reflects the scarcity value of water as well, should be the amount that the plain should be paying the mountain economy, so that the total societal benefits are maximised.