The basins of the Indus and Ganges rivers cover 2.20 million km 2 and are inhabited by more than a billion people. The region is under extreme pressures of population and poverty, unregulated utilization of the resources and low levels of productivity. The needs are: (1) development policies that are regionally differentiated to ensure resource sustainability and high productivity; (2) immediate development and implementation of policies for sound groundwater management and energy use; (3) improvement of the fragile food security and to broaden its base; and (4) policy changes to address land fragmentation and improved infrastructure. Meeting these needs will help to improve productivity, reduce rural poverty and improve overall human development.

In Royal Chitwan National Park (RCNP) Bufferzone, Nepal, a study was conducted to assess how irrigation development and method of water sharing have increased household food security and reduced pressure on park resources. The findings indicate that with some variations between communities, increased water availabihty and reliability through irrigation development has improved food sufficiency, returns to farmers, crop diversity, and cropping intensity. Community attributes, leadership and dynamics were the decisive factors that determined the success of government intervention program. Small holders and low-income groups in dry areas have received greater benefits from small groundwater pumping schemes. However, many rural poor still lack access to resource opportunities. Although the Park People Program (PPP)IRNCP successfully improved public relations, grievances still persist among the water user groups that take water directly from the East-Rapti, the boundary river for irrigation. Crop insurance against wildlife depredation continues to be a major factor influencing the relationship, which has not been adequately emphasized by RCNP.

I n t e r n a t i o n a l Water Management I n s t i t u t e years IWMI Celebrating Working PapersThe publications in this series record the work and thinking of IWMI researchers, and knowledge that the Institute's scientific management feels is worthy of documenting. This series will ensure that scientific data and other information gathered or prepared as a part of the research work of the Institute are recorded and referenced. Working Papers could include project reports, case studies, conference or workshop proceedings, discussion papers or reports on progress of research, country-specific research reports, monographs, etc. Working Papers may be copublished, by IWMI and partner organizations.Although most of the reports are published by IWMI staff and their collaborators, we welcome contributions from others. Each report is reviewed internally by IWMI staff. The reports are published and distributed both in hard copy and electronically (www.iwmi. org) and where possible all data and analyses will be available as separate downloadable files. Reports may be copied freely and cited with due acknowledgment. About IWMIIWMI's mission is to improve the management of land and water resources for food, livelihoods and the environment. In serving this mission, IWMI concentrates on the integration of policies, technologies and management systems to achieve workable solutions to real problems-practical, relevant results in the field of irrigation and water and land resources.

To mitigate the drinking water crisis in Kathmandu city, the Government of Nepal has recently initiated the Melamchi project, which will divert water from the Melamchi River to Kathmandu city's water supply network. In the first phase, the project will divert 170,000 cubic metres of water per day (at 1.97 m3/s). There is a plan to triple the volume of water using the same infrastructure as city water demand increases. This paper illustrates the complexities involved in planning and implementing the intersectoral (interbasin) water transfer project, and the socio-economic and hydrological implications of the project in the basin of water supply. This project potentially generates huge economic benefits, mostly accrued to the urban sector. An already a resource-poor water-supplying basin bears all the opportunity costs of the water transfer. The project compensation scheme has focused more on local public goods and has not much considered third party effects such as traditional water mill owners and tenant farmers who may unduly bear the brunt of the project. Effective participation of stakeholders and early negotiation for compensation could minimize such third party effects. The absence of such negotiation has raised some concerns about the effectiveness of the Melamchi project to meet the social obligations in the basin of water origin.

The International Water Management Institute (IWMI) has been working in Nepal since 1986 with the objective of undertaking research in water management and to strengthen the research capabilities of concerned government agencies. The research helped to develop appropriate mechanisms for providing support to Farmer-Managed Irrigation Systems (FMIS) and the initiation of participatory irrigation management (PIM). The river basin studies helped policy formulation for integrated planning and management of water resources besides the methodological contribution through the development of appropriate tools for water management studies. It also contributed to enhancing the capabilities of agency officials and local researchers through their involvement in research activities