IWMI Anik Bhaduri, Upali Amarasinghe, Tushaar Shah, BK Anand Benefits and Cost of Irrigation Water Transfers: A case study of Polavaram

Objectives - Irrigation cost/benefit assessment Main objective –Assess direct/indirect irrigation benefits and costs of the Polavaram project Specifically, net benefits due to irrigation water transfers on –Crop production –Livestock –Fisheries –Forward linkages (agro based industries, transporation, storage etc.) –Backward linkages (Farm equipment s, agriculture inputs supplies, Equipment maintenance etc. )

Outline - Presentation What Polavaram irrigation proposes? Present status of irrigation in RBC (en-route link) and LBC Emerging cropping patterns and irrigation Net benefits of irrigation – source wise Cost/benefits of the irrigation water transfers

Does irrigation benefits exceed the cost? It does, but under different circumstances Scenario I Scenario II Scenario III Scenario IV B/C ratio1.04:11.36:11.47:11.24:1 IRR

What Polavaram proposes?

Transfer or use 287 tmc of water

Cost/benefit methodology Conceptual and empirical Domain of the analysisDomain of the analysis –Assess benefits of irrigation in LBC & RBC Valuation of ex-ante benefit analysis - Reference conditionReference condition –Area that could be like Polavaram command after irrigation water transfers Net value added per ha or m3 of after water transfers –Requires the differences irrigated and rainfed crop yields, input application, other cost of production, land rent etc.

Cost/benefit methodology Sample of 1000 farmers –37 mandals, 50 villages –521 farmers in the RBC, 479 farmers in the LBC CategoryLand Holding,HaPercentage of farmers Marginal < Small Semi Medium Medium Large Large >

Current status of irrigation ←94% of the RBC crop land are irrigated ←Groundwater is the dominant source →80% of the LBC crop lands are irrigated →Groundwater is the dominant source

Current status of irrigation

←Net value is high in areas with GW water depth m →They have high capacity pumps, and diversified cropping patterns

Polavaram project irrigation

Benefits and costs

Benefits and Cost Scenario IIIIIIII crores Annual Increase in the Value of crop Output -Left Bank In crores crores Annual Increase in the Value of crop Output -Right Bank In crores crores Annual Increase in the Value of crop Output - Total Command Area In crores crores Net Gain with Multiplier Effect ( 1.20) In crores Increase in Value (Rs) Per cubic meter of water

Benefits and Cost analysis - Assumptions Assumptions- –Life of the Project-100yrs –Depreciation rate 1% per year –Rate of Interest –8% –Period of Construction-15 yrs –Rehabilitation Cost-None –Ignores the positive externalities of groundwater –Recharge and negative externalities of water logging and salinity.

Cost of supplying irrigation Estimated Total Cost of The Project for Irrigation (In crores) Operation and Maintenance Cost (In Crores)2.91 Depreciation Cost (In Crores)40.64 Annual Cost (In Crores)368.70

Benefit cost ratio and IRR Scenario IIIIIIII Total Command Area1.04:11.36:11.47:11.24:1 Right Bank0.62:11.06:10.95:11.09:1 Left Bank1.38:12.44:12.64:11.38:1 Internal Rate of Return (%)

Livestock benefits

Scenario Net Gain (RS Crores) Net Gain (%) IFarmers will retain less livestock in surface irrigated area the after Polavaram 2510% IIFarmers will retain their livestock in surface irrigated area the after Polavaram % III10% reduction in Fodder Cost4519% Livestock benefits

Salient Observation and Policy Implications Much of cultivated area in the proposed command area is already irrigated, and particularly in the right canal command area. Ground water is the most dominating form of irrigation in the command area. Farmers are using groundwater to grow high valued annual crops. Present cropping intensity is high as 165% in the right command area due to extensive cultivation of annual crops using groundwater irrigation

Higher benefits if the farmers continue to grow annual crops and benefit cost ratio will be more favorable for the implementation of the project. Polavaram Dam may also be useful in GW sustainability where much of the groundwater resource is used to grow high valued annual crops, particularly in the rabi season. Livestock benefits will be substantial if the farmers retain their livestock even after the introduction of surface water or with a reduction in fodder cost. Livestock can increase the overall benefits of the Polavaram dam by 8 to 32 % depending upon different scenarios. The gains will be maximum if the farmers grow maize for livestock feed in the rabi season and retain their livestock. Salient Observation and Policy Implications

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