Putting the cart before the horse—Dal Lake's Tale of Woe

Dal Lake is not only the centre of tourist attraction, but also an important livelihood source for the local population. The economic activities over the years in and around the lake have intensified, resulting in pollution, eutrophication and encroachment of the lake. The present study examined the multiple economic activities carried out on Dal Lake, estimated the net welfare generated, and subsequently developed a solution focusing on establishing an optimal trade-off between the economic activities and pollution abatement expenditures incurred by the government. Employing optimization techniques, needed modifications in the configuration of the enterprises and the pollution abatement costs that could maximize the net welfare from Dal Lake were identified. The economic welfare of the three enterprises was maximized at the optimal level of INR 5684.85 million, with a pollution-abating investment of INR 13.21 million.