Earlier Ganesh idols used to be made of clay. And they would have a coin in the idol. And these idols were to be dissolved in Ponds/Lakes. Now the reason for dissolution is this- in order to retrieve the coins, people would walk in the pond. This would set the clay in pond and this is supposed to be effective rainwater harvesting method. This process ensures that rainwater doesn't drain away from pond.
This is the reason widely prevalent in Tamilnadu. Ganesh jala nimajjan, is the most beautiful event of Ganesh utsav. There are some reasons related to both Hindu sanatana dharma and environment. As per many Hindu scriptures, the clay idols of any god should be immersed after performing pooja and worshiping for a certain period. But nowadays the idols made with POP are also immersed in water.
We should immerse only the clay idols in water and not the idols made of
hazardous chemicals like POP and other harmful chemicals. To reserve fresh
water in ponds, lakes and tanks and other water bodies, we need to dig out the
old clay or soil in them. The clay idol is worshiped with turmeric and some
other natural herbs during Ganapati Navarathri. The herbal characters of these
materials help the water animals like fish, tortoise to grow well.