ISLAMABAD, Aug 5: The government is considering recovering the entire cost of irrigation projects, including dams, from their beneficiaries.

It will discourage projects that do not provide a clear roadmap for cost recovery, thus changing the concept of financing of development schemes.

The idea is based on a proposal of the Planning Commission which believes that availability of freshwater faces such distortions that traditional modes of financing the projects have become unsustainable.

“The price of one litre of fresh drinking (bottled) water is Rs30, while farmers in Punjab get about 60,000 litres of fresh Indus water for just Re1 for irrigation of sugarcane crop,” says the commission.

“To ensure the stakeholders’ consent to pay the supply cost of water, their participation in planning, designing, development and management of the project shall be termed mandatory,” says the commission.

For this to happen, a legal agreement between government and beneficiaries to ensure paying of full cost of service provision by the latter may be one option, the commission says.

It has also proposed that the canal water rates need to be rationalised in the context of groundwater cost to minimise market distortion in water pricing in areas where both groundwater and surface canal water irrigation are in vogue.

Secondly, the commission proposed to assess the potential for formal canal water markets to facilitate exchange of water entitlements among users and sectors by provincial governments to achieve high economic value of water. “However, for such
markets to function properly, clearly defined water rights, transparent water allocation system, legal arrangements for dispute resolution and to some extent farm storages to store surplus waters would be a prerequisite.”

In addition, a network of reservoirs and supply infrastructure for reliable reallocation of water would also be needed at national and provincial levels. For this to deliver, lessons from Australia, an arid country with a success story in water trading, be learnt.

The commission proposed that water trading at the level of Indus River System Authority (Irsa) be examined to facilitate exchange of water on reasonable price among the provinces to change the current practice of blame-game about stealing of water among the provinces into a trading market where the provinces could sell and buy water.

This will encourage the provinces to invest the revenue from selling water into high efficiency irrigation technologies and practices for water conservation.

On top of the provincial governments should immediately start performance evaluation of the pilot area water boards to remove all constraints to smooth and effective transfer of canal management to farmer organisations.

In addition, the commission argued that there was a need for change of mindset, especially at the policy level, to turn around poorly-maintained highly-subsidised canal irrigation system into an efficient service-oriented financially sustainable entity.

Development of canal irrigation system, it said, required huge costs which none other than the respective government can afford.

In addition, large-scale irrigation systems were developed primarily for strategic purposes such as food security, employment generation and rural development. Up to this point, the provision of infrastructure is a strategic investment, the cost of which
may not be recovered from the water users but from the general taxpayers.

However, beyond this point, irrigation water was used at farm level for personal gains where profits are made from irrigated agriculture (increased value of land, reliable food production and higher yield compared to rain-fed agriculture), where water
worked as a private utility.

To keep continue harvesting of such individual gains, the irrigation system requires timely maintenance and infrequent upgradation to deliver the required level of service. Financing of these recurring works has to be the responsibility of water
users. If inputs like land, seed, fertilisers, weed-control chemicals, machinery and labour are purchased largely at market rates why not water?, the commission questioned.

Likewise, if huge individual profits are taken from irrigated agriculture compared to rain-fed farming why not the direct beneficiaries pay the operation and maintenance costs?

These are the challenging questions for policymakers coupled with issues of unprecedented fiscal deficits and changing public spending priorities like security and energy sectors.

Based on these arguments, the commission called for an immediate need to a change of mindset among the policymakers, water managers and water users to transform world’s largest singular irrigation system into a financially sustainable entity by
recovering the required level of costs from water users.

“Water users should pay for keeping irrigation infrastructure functions properly to maintain uninterrupted supply of water for agriculture on sustainable basis to avoid water crises similar to the energy crises we are facing today due to non-payment of
bills,” it concluded.