In an effort to promote judicious use of water, the government is planning to offer incentives, such as tax breaks , to big industrial users if they are able to reduce wastage of water.

The incentives may feature in the new National Water Policy , which is being prepared by the water resources ministry and the Planning Commission. The policy is likely to be introduced next year.

"Currently, all industrial permissions are given conditional upon industries' being able to recycle water," Union water resources minister Salman Khurshid told ET. "Right now we are using disincentives, but ultimately we can use incentives as well."

Industrial wastage of water has emerged as a big concern amid a growing realisation of an imminent water crisis.

The per capita availability of water in India is 1,600 cubic metres. A level of less than 1,700 cubic metres is considered a 'water stressed' condition and less than 1,000 cubic metres is a 'water scarcity' condition. As many as nine out of the country's 20 river basins are now in a water scarce situation.

The new policy will encourage sustainable use of water by reducing wastage and promoting recycling.

The minister said the incentives could be in the form of tax reliefs for industries, which are proactive in sustainable river water usage.

The incentives will be based on the conservation and recycling results against the current levels of water consumption. It is not the use of water but its wastage which is the concern, the minister added. The water ministry is also setting up a bureau of water efficiency that would set water usage benchmarks for different industries.

"Proportion of water recycled by Indian industries must be raised to protect water quality, both in our rivers and in ground water," said a recent Planning Commission presentation on sustainable water management.

India has 2.4% of the world's area, 16% of the world's population but only 4% of the total available fresh water.

"Growth in water resources had remained stagnant for the last many years and without increase in water supply, higher GDP would not be achievable," Planning Commission deputy chairman Montek Singh Ahluwalia said at a recent public function.

"Water resource optimisation has a long way to go and there is increasing awareness and acceptance that India is a water scarce nation," said Ajit Ranade, chief economist with Aditya Birla group.

Industry body FICCI has also set up a water mission under its vice-president and country head of HSBC Naina Lal Kidwai to achieve better management of water resources.

"The aim is to bring about higher water efficiency in industries," said Rajiv Kumar, director general of FICCI.