Recommendations of the Water Taskforce by Steve Davies, PSSP
Some Economic Dimensionsof Irrigation Infrastructure in Pakistan ByStephen Davies, Amalia Davies and Chris Goemans
Introduction• Largest contiguous irrigation system in the world: 110 MAF (vs 1.5 MAF in South Platte)• Water scarce country headed towards water stressed: Water needs to be directed to highest needs but it’s a supply driven system• Abiana charges are not collected even though low; farms becoming smaller – from five hectares (1971/3) to three (2000) on average• Naturally deteriorates; investment in infrastructure has been problematic• Objective: figure out full costs, compare to affordability and review options for determining who pays
Major Categories of the Punjab Asset Management Plan, 2006• Historical and Replacement Costs of Assets. Rs 1,170,311 Million (US $ 19.5 billion), or Rs. 139,323/ha (US $2322/ha) over 8.4 Mha. (Without storage reservoirs. )• Rehabilitation and Upgrading Costs. (RS. 144,934 million) ($2.42 billion)• Supervision and Administration Costs. Rs. 3,649.759 million ($60.8 million) per year for 48,503 employees (1072 officers and 47,431 staff). 14,000 redundancies!• M&R Costs. Maintenance and repairs Rs. 2,086 million ($34.8 million).
Replacement Costs of Assets (2005)No. Asset No./Length Replacement Value (Million Percent of Per Unit Cost Rs.) total (Million Rs.)1 Headworks/Barrages. 13 No. 104,859 8.96 8,0662 Canal Systems 22 No. 523,505 44.73 23,7963 Distributaries and Minor Canals 2794 No. 331,186 28.30 1194 Inter-river Link Canals 10 No. 85,000 7.26 8,5005 Tubewells Fresh GW 1133 No. 1133 0.10 16 Tubewells Saline GW 2411Nos. 2411 0.21 17 Surface Drains. 9856 Km. 64,972 5.55 78 Subsurface Drainage 50,000 ha. 2,700 0.23 09 Flood Embankments 3228 Km. 13,468 1.15 410 Spurs 650 No. NA Na11 Small Dams 33 No. 5,313 0.45 16112 Lift Schemes 41 Nos. 1449.70 0.12 3513 Buildings Several 9,106 0.78 1,82114 Lands 20,261 1.7315 Machinery 242 3256 0.28 1316 Workshops Two 327.40 0.03 16417 Vehicles 565 No. 735 0.06 118 Stores Misc. 629 0.05 8,066Total 1,170,311
Total Irrigation Costs, Dollars/hectare/year Dam $37.82 Headwork/Barrages $8.75 Main canals $43.68Distributary canals, minor… $27.63 Inter-river links $7.09Drainage, Flood Embank.… $7.33 Others $3.16 Dollars/Hectare/Year
Allocation of Annual Costs between Private and Public Sectors Total Asset Public Private (1+2)Dams $2.30 $13.02 $15.31Headworks/Barrages $3.54 $0.00 $3.54Main Canals $0.00 $17.68 $17.68Distributaries and Minor Canals $0.00 $11.19 $11.19Inter-river Link Canals $2.87 $0.00 $2.87Drainage, Flood control, SmallDams $1.25 $1.72 $2.97Others $0.90 $0.38 $1.28Total $10.87 $43.98 $54.85
Institutional Options from Water Sector Task Force• Option 1 – the ideal –pass on to water users like electricity. – Abiana process does not work (under jurisdiction of provinces).• Option 2 - pass bills to provinces, proportional to water received. – IRSA charges small amounts on water delivered to provinces (approved by CCI)• Option 3 is for Federal and Provincial Governments to assume as part of overall debt/expenditures – common practice for major infrastructure projects worldwide• Comment: Even if not collected, there should be enough overall economic benefits and tax revenue to justify expenses
Benefits and Costs of Irrigation Infrastructure– From 2008 SAM, total value added in agriculture (Agricultural GDP) is $33.65 billion– 56% livestock and 44% crop; implied value added per acre is $687 total and $304 crops;– From WSTF, $250 per acre of wheat value added– Costs per acre are $55– The range of costs relative to value added created 8% to 18%
This is a an expensive piece ofinfrastructure relative to ability to pay! Particularly for small farms
Define away the problem!• If we charge for large dams based on benefits received – Benefits are for hydro power, irrigation, environmental and recreational benefits and flood control – If we allocate costs according to these benefits, could reduce the dam charge by 50%• What number of years and interest rates should be used to convert stock values to flows? – 40 years and 3.5% versus 70 years and 2%
Paying for Dams using Benefits Received (User pays)• Predicted proportion for Tarbela Dam = 65% irr./35% hydro• Ex post, WCD study found 51% irr./49% hydropower• WAPDA uses a ratio of 60% from hydropower and 40% from irrigation• Four multifunction projects in WAPDA’s priorities (Diamer Basha, Kurram Tangi, Dasu and Munda) and ratio is 74% electricity and 26% irrigation. (With a somewhat high value for water!)
Paying for Dams Based on Benefits Received• Can electricity be charged more to cover this cost? – Higher benefits to electricity than water (and water value is likely optimistic) – Charges easier to collect – Some of a tax on electricity is paid by agriculture – Shift dam operational rules to maximize electricity generation ?
Benefits of Productivity Enhancements• Ran CGE water model and found• 10% water productivity gain increases: – GDP by .65% – Agricultural GDP grows by .52% – Multiplier effects are the remaining: .13% of GDP• Raises agricultural value added by 2.6%• India 30% productivity advantage of about 30% in applied water use
GDP impact of water efficiency improvement 0.80 0.70 Basha dam 0.60Percent change 0.50 Tubewell 0.40 efficiency +10% 0.30 Canal efficiency +10% 0.20 Both efficiency 0.10 improvements 0.00 2010 2015 2020 2025
Secondary Canals and Watercourses Comprise 20% of Costs• With 1997 PIDA Act, new institutions have been created: Area Water Boards (main canals), Farmer Organizations and Water User Associations at the watercourse level• A checkered history: Much slower development than thought; Dispute resolution has been good, abiana collection not.• Accounts for about 20 percent of costs. What about “Cutting them loose?”• Currently establishing and transferring responsibility to FOs starts with a rehabbed distributary canal.
Secondary Canals and Watercourses, Cont.• Could develop a menu of extended agricultural and irrigation services and get closer to market rates over time.• However this is just shifting costs; if labor that is underutilized could be used more, this makes sense• If not, maybe not good for the system, as less coordination and more susceptibility to breakdowns in the system, shifted to farmers who cannot pay
Final Assessment• With reduced dam, watercourse costs and longer time horizon, total could go to $33 per acre, or between 4 and 12% of value added• Adding in productivity just lowers costs by 1% and tax revenue from remaining sectors could reduce costs by about another $3• This sets targets, but achieving them will not be easy. Costs are shifted but not necessarily reduced