Global warming has reduced the availability of freshwater resources, pushing 3 billion people to live in water-stressed conditions. However, corporations (at least in California to begin with) can now ensure for themselves a steady supply of affordable water by trading water as a commodity, like oil and gold. These water-commodity contracts, known as water futures, are now offered on the Chicago Mercantile Exchange (CME), which has highlighted that demand for water futures will only grow due to the impact of climate change on the Earth’s water resources.

It’s a controversial development – one that reframes water from the United Nations-defined human right to a good for sale to the highest bidder. This approach puts water into a competitive space where the financially privileged can secure their access by entering into sophisticated water future contracts, further distancing less-privileged individuals from claiming access to water as their fundamental right. Such a reimagining of water could profoundly affect India, as well as the financial order of the whole world.

Water futures allow buyers to fix a price for water resources they expect to use at a future date; this safeguards the buyers (usually manufacturing industries, oil companies, and farming corporations) from the financial risks of rising water prices. In California, which just established a first- of- its- kind “water market” after years of drought that extinguished its groundwater resources last year, the price for water is determined by betting among farmers, investors and municipalities, through transparent pricing regulations, in six different regions. Buyers then purchase a contract at that price, which, in the event of another drought or any other water shortage, allows them to continue purchasing water at the fixed, pre-drought price. This is attractive because it allows them to continue using their normal amount of water, without increasing their operating costs or cutting into profits, even as water becomes scarce. In other words, water futures are a kind of first-dibs, fixed-price water insurance policy.

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Water futures as a commercial market hold high economic prospects. Since the time it was announced in October, the price of water in the California exchange market rose by 131%. The CME has rolled out water-future contracts worth USD 1.1 billion.

In an increasingly water-scarce world, countries with unregulated water future markets will attract more companies, and thus more money flowing into their economies. But this will put immense pressure on developing and densely populated countries like India to sell access to its ever-shrinking water resources on a priority basis – priority being given to those who invest in Indian water futures, not the average, individual, thirsty citizen.

This scenario in India is likely. Each state government in India has a legislative right over the water resources within their territories, but presently, more than 300 water-based state government projects have private sector participation in India. These projects range from construction to supplying contracts. While legal frameworks prevent the profit-driven privatization of India’s water resources, in practice, state governments are free to enter into long-term contracts with private corporations effectively creating space for the private sector to take informal control of water resources. This effectively transfers the ownership of water from the masses to corporate giants.

In a water market like California’s, such private-sector influence could have devastating effects. While the price of water in California’s market is established by bets between investors, farmers, and municipalities, these prices are regulated by clear and transparent norms established by local governments, which are tasked with acting in the interest of their citizens. However, Indian water frameworks at the state level do not have clear and transparent pricing regulations yet; private companies, especially the ones that already have huge investments in Indian water projects, may inflate water prices by placing unregulated bets in an open market. This could facilitate the manipulation of water pricing in India, inflating it through rigged betting practices, where all the water suppliers could raise the standard water price, essentially cutting off all buyers but their corporate counterparts. This would leave individuals vulnerable to a vast network of informally privatized water resources.

There are some protections in place against this outcome. The Supreme Court of India, at several occasions, has clarified that state governments must justify how the general public will be benefited by private involvement in the water sector. This has precluded state and central governments from privatizing water resources fully until and unless they can prove that such privatization is for the larger public interest. Moreover, contracts that sustain themselves through betting, as water futures do, are prohibited in India.

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However, the likelihood of developing water futures in India cannot be ruled out, especially considering India’s recent move towards unregulated and market-driven allocation of its natural resources (e.g. the Environmental Impact Assessment Amendment, the three new farming bills). Such unregulated commodification of natural resources is particularly dangerous in India because it concentrates wealth in the hands of a few. The wealth of India’s richest 1% is more than four times the total of its 70% poorest. Strategically, water as a tradable commodity will fall under the loop of the concentrated wealth of the richest 1% of India, pushing another million Indians into severe water scarcity.

Water futures could yield some favorable results for India – if implemented properly and regulated appropriately. Currently, the rights over water resources in India are linked with the land — the owner of a piece of land effectively owns the groundwater beneath it. This limits the supply of water to the economically vulnerable, especially within agriculture. Establishing a water futures market could help farming and banking institutes develop water future-products specifically curated for farmers with high irrigational requirements. This in turn would enable an Indian farmer, not just a corporation, to lock in future water prices for use during drought. This version of water futures could relieve the government as well from the pressure of free irrigation supplies to farmers — a major vote-fetching technique in rural Indian politics. However, any other benefits can only be achieved if India is able to effectively halt the informal privatization of its water resources and clearly define the ambit of water futures. The baseline for calculating water available for water futures should be set only after fulfilling the domestic supply of water.

This is known as a rights-based water market. In 2016, China conceptualized such a water market, establishing the China Water Exchange (CWEX) to effectively regulate the supply of water to its priority areas by giving water rights to qualifying industries only after allocating a water supply that meets the needs of the public. A similar approach to ensuring citizens’ rights to freshwater while also attracting manufacturing companies by incentivizing them through the stable water pricing of water futures, has also been highly successful in Australia.

At present, water futures are a regional market in California — but it’s a scalable model that can allow the political-corporate nexus to put price tags on more of the natural resources of India. This will unleash another ghost of capitalism in India pushing millions of financially vulnerable people into a deep water-crisis while allowing the richest 1% to profit off their sufferings. It will also change the financial dynamics of the present world order at a tectonic level. Unregulated water markets will become the most attractive “ease of doing business” feature of a country. Such markets will be the new “cheap labor” of the manufacturing world — but instead of requiring economically vulnerable countries like India to strip off their welfare programs just to stay afloat, unregulated water futures will require such countries to massively ration their water resources among the hands of a few corporations, rather than among their individual citizens.

India’s water market is inevitable – what remains is only to decide whether it wants the one that allows the concentration of water resources in the hands of a few corporations or the one that ensures access to water as a basic human right.