IWMI

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Benefits and Cost of Irrigation Water
TransfersA case study of Polavaram

• IWMI
• Anik Bhaduri, Upali Amarasinghe, Tushaar Shah, BK
  Anand

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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. )

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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

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Does irrigation benefits exceed the cost? It
does, but under different circumstances
Scenario I Scenario II Scenario III Scenario IV
B/C ratio 1.041 1.361 1.471 1.241
IRR 6.38 7.87 8.45 7.40
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What Polavaram proposes?
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What Polavaram proposes?
Transfer or use 287 tmc of water
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Cost/benefit methodology

• Conceptual and empirical Domain of the analysis
• Assess benefits of irrigation in LBC RBC
• Valuation of ex-ante benefit analysis - Reference
  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.

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Cost/benefit methodology

• Sample of 1000 farmers
• 37 mandals, 50 villages
• 521 farmers in the RBC, 479 farmers in the LBC

Category Land Holding ,Ha Percentage of farmers
Marginal lt1 15.46
Small 1.0-2.0 26.81
Semi Medium 2.0-4.0 29.89
Medium Large 4.0-6.0 10.31
Large gt6.0 17.53
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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

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Current status of irrigation
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Current status of irrigation
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Current status of irrigation
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Current status of irrigation
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Current status of irrigation

• Net value is high in areas with GW water depth
  75-100m

• They have high capacity pumps, and diversified
  cropping patterns

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Polavaram project irrigation
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Benefits and costs
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Benefits and Cost
Scenario I II III II
Annual Increase in the Value of crop Output -Left Bank In crores 236.34 276.81 325.60 236.34
Annual Increase in the Value of crop Output -Right Bank In crores 83.42 141.61 127 146.16
Annual Increase in the Value of crop Output - Total Command Area In crores 319.76 418.43 452.60 382.50
Net Gain with Multiplier Effect ( 1.20) In crores 383.71 502.11 543.12 459.00
Increase in Value (Rs) Per cubic meter of water 0.77 1.00 1.09 0.92
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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.

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Cost of supplying irrigation
Estimated Total Cost of The Project for Irrigation (In crores) 4064.29
Operation and Maintenance Cost (In Crores) 2.91
Depreciation Cost (In Crores) 40.64
Annual Cost (In Crores) 368.70
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Benefit cost ratio and IRR
Scenario I II III II
Total Command Area 1.041 1.361 1.471 1.241
Right Bank 0.621 1.061 0.951 1.091
Left Bank 1.381 2.441 2.641 1.381
Internal Rate of Return () 6.38 7.87 8.45 7.40
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Livestock benefits
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Livestock benefits
Scenario Scenario Net Gain (RS Crores) Net Gain ()
I Farmers will retain less livestock in surface irrigated area the after Polavaram 25 10
II Farmers will retain their livestock in surface irrigated area the after Polavaram 103 44.8
III 10 reduction in Fodder Cost 45 19
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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

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Salient Observation and Policy Implications

• 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.

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• Thank you