Water scarcity in mountain regions such as the Himalaya has been studied with a pre-existing notion of scarcity justified by decades of communities’ suffering from physical water shortages combined by difficulties of access. The Eastern Himalayan Region (EHR) of India receives significantly high amounts of annual precipitation. Studies have nonetheless shown that this region faces a strange dissonance: an acute water scarcity in a supposedly ‘waterrich’ region. The main objective of this paper is to decipher various drivers of water scarcity by locating the contemporary history of water institutions within the development trajectory of the Darjeeling region, particularly Darjeeling Municipal Town in West Bengal, India. A key feature of the region’s urban water governance that defines the water scarcity narrative is the multiplicity of water institutions and the intertwining of formal and informal institutions at various scales. These factors affect the availability of and basic access to domestic water by communities in various ways resulting in the creation of a preferred water bundle consisting of informal water markets over and above traditional sourcing from springs and the formal water supply from the town municipality.