RESEARCH PROGRAM ON WATER, LAND AND ECOSYSTEMS (WLE) The policy brief The policy on the irrigation service fee exemption:  High subsidy but low performance of on-farm water management?  

RESEARCH PROGRAM ON WATER, LAND AND ECOSYSTEMS (WLE)  The policy brief  The policy on the irrigation service fee exemption:  High subsidy but low performance of on-farm water management?   

RESEARCH PROGRAM ON WATER, LAND AND ECOSYSTEMS (WLE) The policy brief The policy on the irrigation service fee exemption:  High subsidy but low performance of on-farm water management?  

11:18 - 19/03/2018

RESEARCH ON THE SCIENTIFIC AND PRACTICAL BASIS TO HARMONISE WATER ALLOCATION WITH WATER TREATMENT FOR IRRIGATION SYSTEMS IN THE RED RIVER DELTA
Community based water quality monitoring: a multi-benefit approach to water governance in the Red river basin, Vietnam
Small-scale irrigation – effective solution for sloping land areas
Assessment of climate change impacts on river flow regimes to support decision-making in water resources management in The Red River Delta, Vietnam – A case study of Nhue-Day River Basin
Impact of existing water fee policy in the Red River Basin, Vietnam

As agriculture sector especially rice production still plays a very important role in the RRB, many irrigation and drainage systems have been constructed in this area [MARD, 2014]. There are 30 large-scale irrigation and drainage schemes (with command area larger than 2000 ha). Based on annual water balancing, the total annual water volume still meets water requirements in the area. However, because of temporally and spatially high variability

RESEARCH PROGRAM ON WATER, LAND AND ECOSYSTEMS (WLE)

The policy brief

The policy on the irrigation service fee exemption:  High subsidy but low performance of on-farm water management?

 

 

MK33 PROJECT: CAPACITY BUILDING AND PROFESSIONAL DEVELOPMENT OF WATER GOVERNANCE AND REGIONAL DEVELOPMENT PRACTITIONERS IN THE RED RIVER BASIN

 

Fellow: Dr. Le Van Chinh

Mentor: Asso.Prof. Dr. Bui Cong Quang

8/21/2016

 

The policy on irrigation service fee exemption:

High subsidy with low performance of on-farm irrigation management?

Executive Summary

Water consumption in agriculture sector is often considered the major factor relating to the water scarcity issue at different levels from on-farm to basin and national wide. To address water scarcity issue, the irrigation service fee has been adopted as a primary mean in many countries to manage water uses  in irrigated agriculture. In the context of climate change, improving the performance of irrigation schemes and using water efficiently are pressing issues in Vietnam, especially in the Red River Basin. However, recently, Vietnam has applied the policy on irrigation service fee exemption. This study aims to evaluate impacts of this policy focusing on on-farm irrigation management in the Red River Basin of Vietnam. Based on results and findings of the study, revision of the policy is recommended.

Introduction

Emerging issues in water management in the irrigated agriculture in the RRB

As agriculture sector especially rice production still plays a very important role in the RRB, many irrigation and drainage systems have been constructed in this area [MARD, 2014]. There are 30 large-scale irrigation and drainage schemes (with command area larger than 2000 ha). Based on annual water balancing, the total annual water volume still meets water requirements in the area. However, because of temporally and spatially high variability of rainfall with about 70% rainfall in rainy season, water shortage often occurs in dry season in the RRB [Le and Jensen, 2014]. In the context of increasing water demand among water users because of population growth, economic development and climate variability, the water shortage in the RRB would be more severe in the future. Thus, the improvement of water allocation efficiency in the agriculture sector by adopting an appropriate irrigation service fee regime is very necessary in the basin.

To adapt the climate change and improve the quality of agriculture production, Vietnam has pursued the ambitious reform of the agriculture sector toward the orientation of enhancing the added valued and sustainable development. A comprehensive measure consisting of both physical and non-physical measures was developed for all sub-sectors including irrigation. Improving the performance of irrigation schemes and using water efficiently are pressing issues in the sector [MARD, 2014].

The role of water pricing policy in irrigated agriculture

Many studies on water management indicate that the important way to achieve the efficiency and equity of water use is water should be managed as an economic good. This also is confirmed by Dublin statement: “water has an economic value in all its competing uses and should be recognized as an economic good” [Miguel and Villarreal, 1999]. Number of studies in water management illustrates that water issues are expected to be a major constraint on sustainable development in some countries during the next few decades, and water pricing is considered as a key tool for addressing this constraint.

In Vietnam, water used for agricultural production accounts for 80% of total freshwater with­drawals [KBR., 2009; MARD, 2004]. Thus, irrigation water is often considered the major factor relating to the water scarcity issue. Increasing competition of water demand among different water users lead to the challenge for the ag­riculture sector in terms of water use. Number of studies in water management illustrates that water issues are expected to be a major constraint on sustainable development in some countries during the next few decades, and water pricing is considered as a key tool for addressing this constraint by improving the capacity of water saving.  Therefore, irrigation service fee (ISF) mechanism should be adopted as a primary mean in many countries for efficient water allocations and for better conservation [Robert, 2000].

Objective of the study

The overall objective of this study is to contribute to the improved water management in the RRB through the improved knowledge of the water fee policy in irrigated agriculture. Specifically, the study is to evaluate the impacts of the current ISF policy in irrigation management focusing on on-farm irrigation management level, and recommend for revising the ISF policy it.

Approaches

Methodology of the study

A conceptual framework (Fig. 1) of the study on ISF policy impacts in the irrigated agriculture is developed for analyzing and quantifying the numerous impacts. Two hypotheses of the study are explored via case studies, field surveys and secondary information in selected irrigation systems.

Fig. 1. Research framework

Surveys at irrigation schemes for a period from 2012-2014 were conducted to collect data for the study.

For the in-depth study of the impact evaluation, a typical irrigation scheme - the Cau Son scheme in the RRB covering 19.300 ha of irrigated land, and its on-farm irrigation areas were selected for the detailed investigation. About 100 households in this site was selected to investigate the household economy and on-farm water management performance before and after the ISF applied in 2008.

Impact evaluation method (difference in difference) (Khandker, 2010) has been applied to analyze and identify the difference of the household economy and on-farm water management performance since the IFS exemption policy was implemented. The performance of on-farm water management is estimated in terms of flexibility, relia­bility and equity as defined by MASSCOTE approach (Renault et al., 2007)

Results

There is an increase of irrigated area since the ISF policy applied. For the period of 2012-2014, annually irrigated area is increased on the average of 63.800 ha (3% of cultivated area). The ratio of irrigated area to cultivation area is increased from 85% to 91% for the period from 2008-2014. This study found that this achievement are mainly caused by the improved irrigation schemes thanks to better condition of maintenance and repairs of irrigation facilities under the huge current subsidy. In fact, annually, about 5,200 structures and 4,300 km of canals have been repaired in the RRB.

Fig.2:  The irrigated area in the RRB, period from 2012-2014

Increased budget for O&M. Thanks to the ISF exemption policy, total fund for O&M subsided by the Government in the RRB has risen significantly, about 3.5 times from 846 bill. VND in 2008 to 2,998 bill. VND in 2014. Budget, for maintenance and repair of hydraulic structures is also increased 3.5 times.

High salary cost for water management staff is reported. In fact, increased staff in irrigation management companies  (IMCs) and water user groups (WUOs) leads to significant salary cost accounting for 48% of total operation and maintenance expenditure.

Decreased the performance of on-farm water management. According to results of the impact evaluation method (Table 1), the performance of on-farm irrigation management was adversely affected by the ISF exemption policy. All features including flexibility, reliability and equity have statistically significant difference (p<0.01) and negatively. This indicates that the ISF exemption has made the water use efficiency worse at on-farm level since the police was applied. This is confirmed with other evidences from the survey and other studies that water losses and low water use efficiency are reported in many irrigation schemes. Also, weak cooperation between IDMCs and WUOs is also recognized in many places.

Table 1. Impacts on on-farm irrigation performance

Outcome variables

Diff-in-Diff

Standard error

T

  p>|t|

Flexibility

-0.258

0.051

-5.07

0.000***

Reliability

-0.258

0.051

-5.02

0.000***

Equity

-0.248

0.061

-4.06

0.000***

* Means and Standard Errors are estimated by linear regression

**Inference: *** p<0.01; ** p<0.05; * p<0.1

 

Unchanged net income of the households. Based on impact analysis, the economy of surveyed households has no significant difference (P>0.1) in related activities including income from cultivation, cultivation cost and total net benefit. This illustrates that in the site study, the IFS exemption policy has no impact on the economy of the farming household.

Table 2. Impacts on household economy

Outcome variables

Diff-in-Diff

Standard error

T

  p>|t|

Cultivation income

1.20E+06

8.70E+05

1.34

0.183

Cultivation cost

-3.80E+05

3.80E+05

-0.99

0.324

Total income

8.60E+05

6.70E+06

0.13

0.897

Total net income

3.00E+06

4.00E+06

0.77

0.445

* Means and Standard Errors are estimated by linear regression

**Inference: *** p<0.01; ** p<0.05; * p<0.1

 

Findings and lesson learnt from the study

Results of the study indicate that the IFS exemption policy has both negative and positive impact on irrigated agriculture. Positively, since the policy was implemented, the irrigated area in the basin has increased and budget for operation and maintenance of irrigation systems also significantly has gone up. Many irrigation facilities have been upgraded with the purpose of improving the water use efficiency.

However, the policy also creates the adverse effects to the labor forces in irrigation management entities (WUOs and IMCs) with unexpected increase in their staff, causing high salary expenditures. Importantly, in the study site the policy has negative impact on (low) performance of on-farm water while make no improvement of the household economy as expected. This indicates institutional issues caused by the ISF policy that is under this context there is no close and direct linkage between water users and irrigation management entities.

Conclusion and Recommendations

The ISF exemption policy has contributed to increase irrigated area in the RRB, so it supports for the development of agriculture sector in this region. Thanks to the subsidy from this policy, many irrigation systems have been rehabilitated. Nevertheless, considerable increase of subsidy fund (3.5 times) has created a burden on central budget while the efficiency of water use, at on-farm level, is still questionable. In addition, the current mechanism of the irrigation service fee seems break the service oriented management in irrigation and drainage.

While further studies on this topic in other places are required to have more firm evidence, the revision of the current policy on ISF exemption should be considered.  In the context of market economy, the changes of this policy should follow service-oriented management in irrigation and drainage, where service providers and water users should be linked via service contract under the direct payment mechanism as previously. Also, to minimize the negative impact of the subsidy policy in irrigation sector, change of subsidy form for farmers by the Government should be taken into consideration.

 

References:

 

KBR. (2009), Vietnam Water Sector Review, Kellogg Brown & Root Pty Ltd , Australia.

Khandker, S. R., G. B. Koolwal and H. A. Samad (2010), Handbook on impact evaluation: Quantitative methods and practices, The World Bank, Washington D.C.

Le, C. and J. Jensen (2014), Individual lift irrigation: a case study in the Cau Son irrigation and drainage area, Red River Basin, Vietnam, Paddy Water Environ, 12(1), 223-238.

MARD (2004), Report on renovating and improving the performance of irrigation and drainage systems, Ministry of Agriculture and Rural Development, Hanoi, Vietnam. (in Vietnamese).

MARD (2014), Protocol on improving the performance of exisiting irrigation and drainage systems, Water Resources Directorate, 784/QD-BNN-TL, Ministry of Agriculture and Rural Development, Hanoi, Vietnam. (in Vietnamese).

Miguel, S. and F. G. Villarreal (1999), The Dublin Principles for Water as Reflected in a Comparative Assessment of Institutional and Legal Arrangements for Integrated Water Resources Management, Global Water Partnership/Swedish International, S105-25 Stockholm, Sweden.

Robert, C. J. (2000), Pricing Irrigation water: A literature survey, The World Bank, Wasington D.C.