With 70% of India's surface water, and an alarming proportion of ground water reserves are contaminated the government should consider policies that involves a mix of regulatory and market driven instruments for water quality management.
In the context of industrial water pollution control, the government uses command and control type regulatory mechanism through Central Pollution Control board (CPCB) and state Pollution Control Boards (PCBs). A recent study has showed that even though many companies have individual (large firms) or collective (small firms) Effluent Treatment Plants (ETPs) the water pollution is growing at an alarming rate. This proves that regulations are ineffective for industrial water pollution abatement. The major reasons for this are high cost involving monitoring, and enforcing law.

Measuring pollution, assessing abatement benefits, and designing regulatory instruments are all important. Currently, there is an urgent need to increase the number of monitoring stations, enhancing scope and frequency of monitoring. Valuation of natural resources is important for
design of environmental policies and performing environmental accounting.

Industrial water pollution abatement policy can work effectively only when it combines regulatory instruments with economic instruments such as pollution discharge taxes, marketable effluent discharge permits, voluntary agreements for environmental improvements, and public environmental information disclosure.

The government has provided tax benefit for use and implementation of pollution control equipment, and has also reduced tariff for imported equipment. Voluntary options such as self monitoring of effluent discharge, disclosure and dissemination of data to public from Environmental Impact Assessment (EIA) are being taken. Tax on effluent discharge, tradable discharge permits are incentive based
policy options to reduce pollution. Currently, India has tradable energy saving certificates (ESCerts) aim to reduce industrial specific energy consumption and hence, air pollution under the PAT (Perform, Achieve & Trade) scheme (much like cap-and-trade system) launched by Bureau of Energy Efficiency (BEE) under the Ministry of Power (MoP). This needs target setting, establishing baseline and monitoring system, and creation of institutional and legal framework to manage the scheme.

Similar to controlling air pollution, the Ministry of Environment and Forest (MoEF), together with Central Pollution Control Board (CPCB) should jointly devise market driven instrument for water quality management.