Flood Analogy
Flood Analogy
Compares flood handling with that of a bank account
Let us consider a bank account with the following features:
1. Deposits into this account are made directly by borrowers. The amounts of these deposits depend upon current market interest rate, currency exchange rate etc. that are beyond our control. Some borrowers may also repay additional principal. They may make their deposits any time during a month.
2. The account pays a good interest rate for balances between Rs. 20 and Rs. 100 lakhs.
3. Balances over Rs. 100 lakhs do not earn any interest.
4. If the balance exceeds Rs. 125 lakhs, the entire balance in the account loses insurance protection and may lose all its value.
5. Daily withdrawals up to Rs. 2 lakhs per day are free of charge. Additional withdrawals incur penalties that go rapidly up with the amount.
Managing such an account does not pose a difficulty until, all of a sudden, the daily deposit amounts start exceeding the daily limit of withdrawal. Although we may allow the balance to go up to Rs. 100 lakhs, we must strive to prevent it from crossing Rs. 125 lakhs. We must try to make reasonably reliable daily estimates of the deposits likely to be made by our borrowers and make withdrawals so as to keep the balance between Rs. 100 lakhs and Rs. 125 lakhs marks. At times we may have to withdraw more than Rs. 2 lakhs a day, even by paying the penalty, so as to avoid exceeding the Rs. 125 lakh limit.
The situation above would become more difficult to handle if (a) the Rs.125 lakh limit were decreased and/or (b) the daily withdrawal limit of Rs. 2 lakhs were reduced. It would be made easier to handle if (a) and/or (b) were reversed i.e. increased. Therefore, we would try all possible means to have the amounts of the terms 4 and 5 raised to as high limits as possible.
This bank account is analogous to the situation of a reservoir created by a dam such as the Ukai Dam.
1. Bank deposits are like the rainwater filling up the reservoir. We have no control over the rate at which it flows into the lake. We can only try to estimate it.
2. The water stored between the minimum level and the Full Reservoir Level can be put to good economic use.
3. Water stored above the Full Reservoir level (FRL) is not planned for any beneficial use and may cause temporary inconvenience to some people along the periphery of the reservoir.
4. If the water level exceeds the High Flood Level (HFL), the safety of the dam may be jeopardized. We must not exceed that level.
5. Releases exceeding Safe Release rates cause flood damages to the areas below the dam. In order not to exceed the HFL, we may have to make larger releases but must strive to keep them as low as possible.
6. Raising the HFL as well as the Safe Release rates will make handling the situation easier.
Therefore, we should make all possible attempts to (1) restore Ukai Dam HFL to RL 351.00 as per its structural design and also (2) restore Tapi’s capacity of 8.5 lakh cusecs as in 1968.