The%20Incidence%20of%20Canal%20Irrigation%20Subsidies%20in%20India

1
The Incidence of Canal Irrigation Subsidies in
India

• Mona Sur, Dina Umali-Deininger, R.S. Pathak,
  Bharat Ramaswami and Kihoon Lee.

2
Objectives of the Study

• Use available data to identifying the
  beneficiaries of surface irrigation subsidies and
  quantify the magnitude of the subsidy captured by
  different groups of agricultural households.
• This study is part of a larger study on public
  expenditures and subsidies to canal irrigation.
• The follow-on study will examine the issue of
  canal irrigation subsidies based on 3 case study
  sites in AP. Its emphasis will be on the
  measurement and allocation of subsidies among
  multiple users of water.

3
Measuring the Subsidy

• Analysis in this study is confined to examining
  financial subsidies.

4
Issues in Measurement

• Assume OM share of farmers proportional to the
  volume of surface water used in irrigation.
• Lack of data on the interest charges and
  depreciation.
• Assume 100 efficiency in delivery. Is this
  valid?
• OM expenditures also capture inefficiencies/overs
  taffing in the ID. Should users bear this cost?
• Canal irrigated area is for 5 principle crops.
  This to some degree underestimates gross cropped
  area irrigated by canals.

5
Distribution of the subsidy across farm households

• Canal irrigated area area only irrigated by
  canals and area irrigated conjunctively with
  groundwater and canals.
• Amount of subsidy accruing to different farmers
  is proportional to the canal irrigated area on
  their farms . Cant account for locational
  differences head-enders vs. tail-enders.
• Quality of service reasonable and the same across
  farmers.
• Assume collection efficiency is the same across
  all farms.
• Water requirements depend on the crops grown.
  Charges also depend on crops grown. Hence,
  subsidy accruing to different farmers depends on
  their cropped area and crop mix.

6
Background

• Surface irrigation (canal irrigation) is
  subsidized all over India.
• Subsidies for surface irrigation arise from two
  factors (i) water tariffs that are set well
  below the supply cost of water (or not charged at
  all), and inefficiencies in collecting tariffs.
• Subsidies have contributed to fiscal crises in
  Indian states, constrained resources for proper
  OM and rise of multiple environmental problems.
• The social justification of the subsidies are
  also increasingly debated.
• How are these subsidies distributed across the
  population and whether they benefit the poor?

7
The data

• State budget data for 5 states Rajasthan,
  Maharashtra, Andhra Pradesh, Karnataka and Uttar
  Pradesh.
• 54th round of the Indian NSS from 1998 to infer
  how subsidies are distributed across agricultural
  households.

8
Incidence of Canal Irrigation Subsidies
9
Example from Maharashtra

• Actual OM spending in 1997/98 Rs. 4.31 billion
• 82 of surface water used in irrigation. OM
  share of farmers Rs. 3.52 billion.
• Receipts from water revenue Rs. 816 million
  Cost recovery from irrigation Rs. 246.5 million.
  60 collection efficiency.
• Subsidy Rs. 3.27 billion. Average subsidy
  Rs. 10,685/ha.
• Assuming 100 collection efficiency average
  subsidy Rs. 10,149/ha.

10
Maharashtra
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Questions

• How problematic is the assumption that OM costs
  are proportional to the volume of water used?
• Sunk costs (to include or not?)
• Subsidy/HH vs. subsidy/hectare?
• For follow on work non-consumptive users.