India is a large country with 29 states as constituents in its federal structure. The large and growing population imposes great pressure on available natural resources. Disputes arising out of contested river water entitlements between states are common and often intractable. Laws conceived for settling such disputes were created for a particular socio-political environment characterized by strong Centre and relatively non-assertive states. The paper argues that this political configuration has changed dramatically and in turn has reduced the efficacy of the existing statutory mechanisms. A new paradigm for dispute resolution is required. The existing institutional mechanism and its political environment are examined and the structural changes identified. A set of reforms in the dispute resolution mechanism is proposed, which would reduce the friction between the statutory mechanism and its operational environment.