Himalayan towns showcase a variety of institutional, regulatory, and technology led arrangements for sustaining the flows and quality of water. These arrangements and approaches are largely aimed at mitigating concerns related to alternate land uses in and around water-supply catchments, and their potential impacts on water quality and availability. Recently, incentives for controlling landuse through Payments for Ecosystem Services (PES) type arrangements have attracted some attention in the region, along with numerous other approaches. These include negotiated settlements between up- and down- stream water users, or between international donors and local communities; the enactment of zoning regulations; and the promotion of tree planting and forest protection in water supply catchments. These efforts are largely guided by perceptions and science regarding the benefits of such actions on sustaining water flows.

In addition, alternate uses of water often compete with urban water supply needs and include irrigation, abstraction of water for hydropower and rural domestic use. Other water users may be upstream or downstream of the source of water, around the source, or enroute. They may be prior users, or subsequent claimants, and may have the support of the state in some cases (hydro projects) or just their community in others (irrigation users, washermen). Negotiations between urban water providers and these alternate users typically revolve around the relative volumes required by different users, driven by perceptions over the legitimacy of their competing claims, and their ability to mobilise support for their water needs from regulatory and management authorities elsewhere in the system.

There are numerous drivers for these diverse arrangements. The specificities of towns and their socio-political contexts influence the extent and types of demands around water and in large part the engagement and intervention possibilities around management strategies. The types of sources (such as springs, streams and rivers), the relative altitude of the source to the town, combined with communities‟ relative standing and bargaining power, their distance from the source, the presence of other users (especially hydropower or agricultural users) all have an impact on water supply and demand, and the eventual arrangements that are negotiated within these landscapes. The presence of local institutions, as well as forest and water tenures, and the existing legal / political framework of water management also exert their own influence over the nature and effectiveness of such arrangements.

This paper examines negotiated reciprocal watershed agreements in two specific towns in the Western Himalayas: Palampur (Himachal Pradesh, India), and Dhulikhel (Nepal). Both towns have entered into formal long term agreements for the supply of water with identified upstream communities, which have been supported and facilitated by external agents and donor projects. The paper compares the dynamics of these negotiated settlements, and their current status, as well as the ways in which they are perceived and understood by both upstream and downstream stakeholders. Despite their different histories and trajectories, these case studies provide complementary insights into the political economy of water in the Himalayan region.