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International Journal of Modern Research in Management Page | 42
IJMRM International Journal of Modern Research in Management, (IMR-IJMRM)
Volume 1, Issue 1 (May – June 2017) PP 42-57
e-ISSM: XXXX-XXXX, p-ISSN: XXXX-XXXX
www.Ijournalmrm.Com __________________________________________________________________________________
Application of the Public-Private Partnership Model to Sustainable
Irrigation System in Pakistan
Saif UR Rehman¹, CAO Qingren², Sardar Ahmad³, Muhammad Shoaib Farooq⁴
¹,²,³-School of Management, China University of Mining & Technology, Xuzhou, Jiangsu, 221116, China
⁴-Institute of Business and Management, University of Engineering and Technology, Lahore, Pakistan
____________________________________________________________________________________________________
Abstract: Ground water has been a source of irrigation from ancient times; new technologies are being
adopted to make the extraction process more efficient and cost-effective. Solar power is a sustained source of
energy which has developed into a reliable mean to replace fossil fuels due to scarcity, environmental impact
and rising costs. Solar power, being adopted as an important configuration to supply energy for irrigation
system, needs to be provided reasonably with a moderately advanced layout. Despite availability of huge
potential, the solar power for sustainable irrigation system lacks adoption at large scale due to reasons like
requirement of huge initial investment, ambiguous financial rights, roles, and responsibilities, limited number of
participants, interlaced risks. The Public-Private Partnership (PPP) Model is an effective supply path for
infrastructure development. Introducing the model innovatively into the irrigation system, can help introduce
social capital, relieve local finance from the burden, establish sustainability of processes, enhance profitability
and reduce risks with efficient project management. Focusing PPP projects at the participant level in the
irrigation system, the paper straightens out supporting mechanisms of the government, financing agencies and
social capital with the help of specific intermediaries, for effective and efficient construction, operation and
maintenance of a sustainable system for areas in dire need of irrigation.
Keywords: sustainable irrigation system; public-private partnership (PPP); ground water; solar power, social
capital.
1. Introduction
Agriculture is the backbone of Pakistan‘s economy (Mustafa et al., 2016); (Farrakh, 2001), and water is therefore
an essential ingredient for her sustained economic development. The agricultural produce, in addition to
providing food security constitutes 20.9 percent of gross domestic product (GDP), around 70 percent of total
export earnings and 43.5 percent employment of labor force (PES, 2014) More than 60 percent of total
population is living in rural areas, out of which 90 percent of rural population is directly or indirectly involved
with agricultural economic activity (Pakistan Year Book, 2013); (Paul & Salam, 2007). Away from these the
entire secondary products industry is dependent on the agriculture one way or another (Paul & Salam, 2007).
The food availability is affected by production of agriculture sector (Ejaz et al., 2012), from 56 million rural
population of Pakistan; around 21 million are suffering from food insecurity in terms of daily calorie
consumption. Baluchistan, the biggest province in terms of area is severely hit, here from the total 25 districts,
20 are hit with food insecurity. Six out of 17 districts of Sindh and five out of 20 in KPK are food insecure, the
province of Punjab is better off than the rest of the country (Haq, 2008); (SDPI, 2003). When segregated into
urban and rural areas, the later are hit harder where 80 of the 120 rural districts suffer from food insecurity with
38 districts pointed out as on the extreme of insecurity (SDPI, 2003).
Statistics published in Pakistan Economic Survey (PES, 2014), water availability for Kharif was 69.3 MAF,
shows year-on-year rise of 5.8 percent and 3.3 percent more than the normal. At the same period the availability
of water for Rabi season is recorded at 33.1 MAF which is 9.1 percent less than the normal availability of 36.4
MAF. Annual rainfall in the region is trendless and its patterns are not constant (Thapliyal & Kulshrestha, 1991); (Rupkumar et al., 1992); (Singh & Sontakke, 2002), due to seasonal nature of the Himalayan runoff (Flower &
Archer, 2006); (Frenken, 2012), annual flows are recorded to be around 85 percent in the summer season and in
winter it was recorded as only 15 percent which makes it less dependable; similarly the flow of water from rivers
is also very much dependent on rainfall and is affected by lack of storage capacity, degradation of available
storage capacity and regional disputes like threats to Indus water treaty (Frenken, 2012). The only reliable source
which can be utilized without mentioned problems is ground water. Ground water is being used for irrigation
from a mix of methods dating back thousands of years, manual and animal drawn wells are still operational in
various areas of the country, at few places which are connected to the electric grid, farmers are using electric
Application of the Public-Private Partnership Model to Sustainable Irrigation System in Pakistan
International Journal of Modern Research in Management Page | 43
pumps whereas at off-grid areas, farmers are forced to use other sources like diesel engines to run the pumps
(Agriculture Census, 2010).
Suffering from shortages of supply, resulting from the scarcity of water and the method of fixed rotation,
adopted to irrigate a vast land size in the region, the system becomes even more unreliable and too rigid to meet
crop-water demands. Thus the farmers are left with no option than to use groundwater to irrigate their fields at
peak demand (Frenken, 2012). There are certain areas where development has found its way into the system and
ground water has become a sustainable source of water needs, almost all of the urban and a big portion of rural
households and businesses like cottage industries and small factories are provided water from the underground
water table. Hand pumps, traditional wells and tube wells are installed to fill the rising demand of these sectors
(Agriculture Census, 2010).
1.1 Current status of irrigation system and potential of ground water
The agriculture area of Pakistan is divided into three sections, one that is irrigated from the rivers, the western
rivers (Frenken, 2012) record average flow to 142 MAF, from this, irrigation utilizes 104 MAF whereas about 35
MAF outflows to the Arabian Sea. Second section is dependent on rain-fall; annual average rainfall in Indus
Basin areas is 40 MAF. The third section of area is the one that is irrigated from ground water using wells and
tube wells, this ground water accounts for the 40 percent of the total crop water requirements of the country
(Frenken, 2012) ;(Agriculture Census, 2010).
Fig. 1. Map of Irrigated land in percentage. Source: Global Map of Irrigation Areas (GMIA), Food and Agriculture Organization, United
Nations.
Groundwater is obtained with the help of animal driven wells, electric and diesel fuels. One million electric and
diesel fuel driven tube wells are currently operational across Pakistan, 87 percent of these are run on diesel
(Agriculture Census, 2010). Failures of grid-power, extended and long hours of load shedding and poor
electricity supply in Pakistan (Haq, 2008); (Agriculture Statistics of Pakistan, 2011) are the major hurdles
towards growth of electric tube wells compared to diesel-operated tube wells (Frenken, 2012); (WAPDA, 2008).
There is a great potential in this sector for a sustainable irrigation system using renewable source of power to
utilize full potential of ground water and increase production from agriculture land. Using advanced technologies
in surveys and mapping for groundwater, around 5 MAF of new and unexplored fresh groundwater sources has
been identified, which is able to irrigate 3.3 MAF of additional land. Pakistan council of research in water
resources (PCRWR) has been adopting a "Strategic Water Utilization Plan" to help better management of
available resources of ground water in the country (PCRWR, 2016).
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Table No. 1 Source: ACO-GOP, 2012
Table No. 1 above shows that the area currently able to be cultivated with available irrigation means is 28.08
Mha, another 3.18 Mha (classified as "Barani") is dependent on flood or seepage of water. Here an area is termed
as "cultivated" if cropped at least once a year. Some of the area termed as "culturable waste" 3.59 Mha is
currently not cultivated but it can be added to cultivated area if availability of water is ensured along with factors
like non availability of funds for manpower, leveling, removal of salinity in the soil with fertilizers is taken care
of (ACO-GOP, 2012).The total area equipped for irrigation is 28,082,097 ha, the area irrigated with groundwater
alone was 10,124,710 ha according to the census report while 5,623,067 ha were irrigated with water from both,
canals "surface water" and tube wells "groundwater"(Frenken, 2012).
Note: mha = million hectares
Table No. 2 Source: Water Table Depths and Areas Affected: Indus Plain, Trends by Province – Frenken, 2012
According to the Frenken, 2012, Pakistan has a potential of 55 MAF of groundwater, canal commands and
river's flood plains are among the major extraction areas. Groundwater quality is vastly studied and mapped into
fit for irrigation and drinking (Fig 2), the groundwater quality is found to be within the range of fresh and usable
(salinity is found to be less than 1000 mg/l TDS (Total Dissolved Solids) near the major rivers that moves to
higher value as move farther away, where it reaches a value 3000 mg/l TDS).
Table No. 3 Source: Agriculture Census, 2010
The scope and goals for development of water resources are visible in Vision 2025 document shared by WAPDA
(WAPDA, 2002), with a proposed 64 MAF of additional storage capacity to be added into the system by the year
2025 and other such projects are estimated to be completed with an investment of US $50 billion. It will be
highly beneficial to include sustainable groundwater irrigation initiatives into this strategy mix, as these
initiatives can be installed and operational in a very short period of time compared to the building dams or
Application of the Public-Private Partnership Model to Sustainable Irrigation System in Pakistan
International Journal of Modern Research in Management Page | 45
reservoirs, it will provide a fast relief for agricultural sector suffering from severe water shortages (PCRWR,
2016).
To overcome water shortage problems, Pakistan government‘s 11th
five year plan for agriculture, recommends a
strategy of ‗More Crop per Drop‘ by increasing crop productivity per unit of water through promotion of water
saving technologies. These measures will include the lining of watercourses, drip and sprinkler irrigation system,
land leveling, permanent raised-beds, and substitution of high delta water crops (sugarcane, rice) with low delta
crops (maize, oil seeds, pulses, etc.). A multi-pronged strategy will be adopted for improved water use efficiency
to sustain food and water security (Planning Commission Report on 11th 5 Year Plan, Food security and
agriculture development).
Fig. 2. Ground Water Quality in Pakistan, Source: Frenken, 2012.
1.2 Technology advancements for sustainable irrigation
The concept to use solar cells to convert sun light into electricity started after discovery of the photovoltaic
process in 1880 (Perlin, 2013), and commercial use of solar cells started in 1981 (UDE, 2016). Solar energy is
considered to be the most viable clean and sustainable energy source which has seen great advances in recent
years in terms of technology development and considered as having great potential to replace fossil fuels. It is
believed to hold the potential to fulfill energy requirements of entire world if a meager quantity of 0.02% is
utilized from total available on the globe (Perez & Perez, 2009).
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Fig. 3. Solar Radiation Map with Monthly average radiation and Sun hours per day. Source: USAID, 2004
As per Pakistan Energy Book, 2012 and findings of the Global Renewable Energy Mapping Program, 2014, the
country is situated at a point of highest solar insulation in the world; the solar resources are immense with
suitability of Photovoltaic (PV) as well as Thermal installations for harnessing the solar potential (Fig 3). In
some regions of Baluchistan, Central and South Punjab, solar radiation is recorded highest, with Annual Direct
Normal Solar Radiation for a set up of concentrated Solar Power (CSP) in Baluchistan in the range of 7 to 7.5
Kwh/Sq.Mtr/Day and 5 to 5.5 Kwh/Sq.Mtr/Day in Northern Sindh and Southern Punjab and in other areas of
Pakistan reaching 4.5 to 5 Kwh/Sq.Mtr/Day. Utilizing currently available solar technology around 700,000
Megawatts of power can be obtained in Pakistan alone which is manifold the requirement for decades to come.
Government initiatives towards renewable energy have proved fruitful, one example is the Quaid-i-Azam solar
park at Bahawalpur (Punjab), a project to produce 100 megawatts of power completed in 2014 and proposed to
be extended to a capacity of 1000 Megawatts in future (NEPRA, 2014), the first large scale solar installation in
Pakistan, is able to produce about 12pc more power than the energy production requirements set by the National
Electric Power Regulatory Authority (NEPRA, 2014); (The Daily Mail, 2015). The plant is more efficient than
planned and providing an average yield of 169 GWh against the planned annual target of 153 GWh (NEPRA,
2014); (The Daily Mail, 2015). Capitalizing upon the immense potential available in the large areas of the
country, a large setup of street lights and road signs have been already converted to solar energy to gain a
sustainable operation. There is however a great need of awareness drive to promote this as at various levels to
obtain maximum benefit, and the sector in dire shortage of energy is the agriculture sector of Pakistan
(Agriculture Corner, 2015).
Operation and maintenance of solar energy systems require significant expertise and knowledge which is
unfortunately not available to local farmers most of which are poorly educated or illiterate, the process of a high
level of market awareness and technical know-how is required for selection of adequate solar tube well system;
the success of this initiative is highly dependent on operational cohesion of pump motor, solar panel and
inverter/ controller and provision that the technical standards are strictly followed (The Daily Dawn, 2013).
There is a significant gain in adopting solar energy in agriculture and particularly in irrigation systems, the cost
of operating an average tube well with grid-power stands at Rs 138(USD $1.38) per hour, whereas the same if
running on diesel costs Rs. 173(USD $1.73) and with solar power utilized to make it operational only Rs.
83(USD $0.83) are required (Agriculture Corner, 2015). Farmers who have tube wells with less than 50 feet
water table can save Rs. 131(USD $1.31) per hour and Rs. 314,400 (USD $314.40) per year with solar tube
wells compared with diesel use. This amount is sufficient enough to pay back the initial investment required to
install the solar setup (The Daily Dawn, 2013).
1.3 Large Scale Investment, unclear future
The initial investment on solar irrigation system is very larger while the returns on the other hand are healthy but
dependent on various other factors like soil and weather conditions, market behavior, interest of farmer etc. The
infrastructure needs to be in use for a long period of running time along with the maintenance concerns that
requires steady capital inflows (Jamil & Ahmad, 2010). If the individual farmer is a single investment body, the
burden on it is heavy and prospect of winning an investor lacks flexibility (Yang et al., 2016). At present,
installation of a single unit for 5 to 8 Acres costs USD 10,000-30,000, and if included with the drip or sprinkler
irrigation system costs additional USD 0.1-0.2million/Acre. Without including operation and running fee, a
single unit with complete infrastructure of solar panels, tube well pump, bore hole, drip irrigation system costs
about USD 1 million. Because the lack of economic strength and limitation on the availability of financial
resources under the circumstance of today‘s weak economy, whereas the government encourages the
construction of renewable energy and efficient irrigation systems through financial subsidies and tax preference,
provincial and municipal financial ministries provide supporting subsidies, causing high pressure on local
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International Journal of Modern Research in Management Page | 47
finances and local potential debt crisis. This requires strong inflow of capital which features profit-driven and
sustainable revenue streams. With the heavy pressure on need of irrigation infrastructure due to drought
situations in the country, there is an even urgent demand for it, we should make coordinated arrangements about
the investment space converted into sustainable projects and then into orderly construction, maintenance and
operation.
One dreadful example of investment lost in past is the business of compressed natural gas (CNG), investors were
lured to this investment, building and equipment infrastructure worth billions of dollars has come to the verge of
closure, investment worth of millions of dollars by private individuals has been lost as the government decided
to close the sector completely leaving the majority of station owners uncertain about the future (The Express
Tribune, 2012).
Currently, unclear liabilities and rights exist among the investment bodies in the field of agriculture
infrastructure development there is great need to reform the current position to enable mutual trust and
collaboration among various actors of these development projects. First of all top level design has to be
developed from bottom up, understanding the importance of the role of market and thus reducing government's
dominance and acknowledge the nature and risks of market mechanism without exaggerating the market role.
Secondly taking into account the growing need and priorities attached with the development of sustainable
irrigation system, rights and liabilities for infrastructure development, land acquisition and pricing and taxation
should be allocated among various departments and sections of local as well as provincial and central
government. Access, license and price of total infrastructure cost are needed to be standardized and vigorously
administered. Moreover, the policy making and implementation regarding irrigation system involves many
departments like the Planning Division, Provincial Coordination Body, Ministry of Finance, and this may cause
disunity of data. Diversified and redundant bodies with lose control and lack of manageability may take place,
which may result in discontinuity and poor management across the system. Rationally, capital investors while
taking part in an initiative are worried about their income and interests rather than social benefits from the
irrigation infrastructure construction. Therefore, public participation in this type of infrastructure development is
not sufficient. Although sustainable and efficient irrigation systems can bring many positive effects, only part of
it may impact the land owners who are highly concerned about the operation of sustainable and efficient
irrigation infrastructure projects.
1.4 Unreliable supply and expensive power tariffs
Experts highlighted that the existing per kilowatt-hour (KWh) power tariff for various consumer sectors in
Pakistan is Rs. 14(14 cents) and with General Sales Tax (GST) added at the rate of 17 per cent GST and excise
duty levied at 3.5 per cent it reaches to Rs. 16.95 (16.95 cents), which stands at the highest in the region (The
Express Tribune, 2014). Compared to the tariff in other countries in the region like Bangladesh and India where
the tariff for the same unit stands at Rs. 5.47(5.47 cents) and Rs. 7.36 (7.63 cents) respectively, while in the US,
the same quantity of electric power cost equals to Rs 8.59 (The Daily Times, 2014).
According to statistics provided by NEPRA and Pakistan Electric Power Company, the country is experiencing a
shortage of 6 gigawatts or about 60% of its total generation (NEPRA, 2014). This shortage can be termed to be
the failure to mis-management and failure to anticipate growth in need and the delay in initiation and
implementation of projects to increase power production. In addition to these, there is widespread power theft
and lack of investment in the existing power grid (Reuters, 2010).
Fig. 4. Electric Supply Vs Load Gap 2006-07 to 1015-16, Source: PEPCO WAPDA House Lahore.
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Fig. 5. Sector wise consumption percentage of electricity, Source: Pakistan Economic Survey, 2010
1.5 Previous experience with subsidy-based agriculture infrastructure
According to Frenken, 2012, Land and Water Division report, various initiatives has been undertaken by
government of Pakistan including a project at National level for improvement of 88,000 water courses at the cost
of 66 billion rupees (about US$0.8 billion in 2009), using the cost sharing program where 70 percent of the
funding was contributed by the government and 30 percent by users. A national program to introduce a high
efficiency irrigation system with subsidy based financing was jointly started by federal and provincial
governments. Subsidies of Rupees 90,000 per hector (US$1,070/ha in 2009) was provided to interested farmers
who had to contribute the remaining amount. After huge investments and completing the projects with the help
of private sector companies, no significant result was seen in the end. Recently, this project has been transferred
to PARC owing to the extremely slow progress (Frenken, 2012).
Above mentioned project suffered setbacks and slow progress, sustainability of the initiatives was a big issue as
a large percentage of infrastructure was abandoned by the recipients after one year of its operation (Frenken,
2012) owning to various causes, among these the biggest were the non-availability of uninterrupted power
source, financial costs in running the system on off-grid power solutions (Diesel Generators) and lack of
technical skills required for operating the system (Alam et al., 2012). Understanding difficulties in previous
irrigation systems and learning from past experiences, we propose that instead of providing subsidy to farmer or
building the setup for individual land-owner and then transferring the infrastructure to landowner to operate,
government should consider a set-up of sustainable agriculture system based on ground water, large enough to
sustain a village, built and operated using the proposed innovative PPP model.
Although the trend of diversification of participants is already present in the irrigation infrastructure
development, as visible in the previous subsidy based infrastructure development projects in Pakistan, however,
functional on the ground, this caused problems in standardization and collaboration and a poor interaction among
prospect players. Firstly, the multivendor style leading construction and development, and a private consultant to
ensure the standards, not only increases financial pressure, but also can‘t ensure operational efficiency of
irrigation systems because the parties involved are benefited till the completion of the project. Secondly the
farmer (the receiver) and government (the financer) are not technically able to foresee the efficiency and
sustainability of infrastructure, which is not conducive to large-scale, modern irrigation system involving
intensive construction and operation.
1.6 Risks in large scale infrastructure projects
Sustained irrigation infrastructure construction and operation is a long process, careful planning and technical
assessment of site, require a countrywide feasibility and planning drive. Overall implementation may require
perhaps over one decade, and the project of this length of duration and magnitude is highly susceptible to
encounter various kinds of risks. These risks may decrease pace of proceedings and activities and lose the
project's ability to stick to the plan. Adjustment in prices of factors of production may appear due to changing
price levels and costs of labor etc. Despite availability of investors and experienced team of executives,
switching governments‘ concentrations and changing policies. Consumers will also face uncertainties like
sustained operation and availability anxiety, crops security risks and price risks (Alam et al., 2012). From the
point of view of dynamic investment process, there exist construction risks and profitability risks. The problems
of land acquisition, infrastructure construction, and operational staff placement are some of the key challenges
that can cause major risks to the investment.
Shift from surface water or rain water to ground water sounds easy but involves huge initial costs, as the
previous sources require little to no investment to irrigate the farmland. Purchase or lease of land for set up of
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International Journal of Modern Research in Management Page | 49
irrigation system, can be a big hurdle towards sustainable irrigation system, retaining agriculture land will cost
huge investments larger investment required to be made which might shift the prospect of achieving the
breakeven to many years. Finally, there exist exit risks. With continuous advances in solar technology, adoption
of better technology may need to change the setup periodically, requiring investment throughout the life of the
infrastructure. Furthermore, the clear-up work in case of an exit will require further inputs.
2. The Public-Private Partnership
The Public Private Partnership (PPP) is a form of long-term collaboration between government authority and the
private sector, established to create a new setup for management of risk while delivering essential and complex
services to citizens (Barlow et al., 2013); (Zheng et al., 2008). It creates an environment of innovation and
sustainability using complementary skills and expertise of each partner thus improve the prospect of success and
delivery of value for money to the taxpayer (Moszoro &Gasiorowski, 2008). This type of partnership is not new,
but recently has seen much rise in number and types of various aspects of initiatives being undertaken under this
form (Barlow et al., 2013); (Smith, 2008). Around the world, governments are pioneering different types of
partnership models across a range of public services.
The experience of PPPs demonstrates a clear trend, which has seen some steady improvements, learning from
experience to develop new and innovative ways of involving the private sector in public services (Zheng et al.,
2008). A range of PPP models are well established in the delivery of infrastructure projects such as "Design,
build, finance and transfer", Design, build, finance and maintain" and "Design, build, finance and operate".
However, PPPs are now becoming increasingly common for delivering complex public services, involving
technical expertise from private to excel in health, transport, education and energy (Barlow et al., 2013).
PPPs sounded very good when considered on paper but in Pakistani context where bureaucracy and red-tape
culture is still prevalent, functions based on cumbersome and paper based systems, decision making is slow and
corruption is at infestation point. Projects in public sector involve many a departments working under different
administrative ministries, collaboration is painfully slow, even the basic functions like approval of funds,
sanction of contract, land acquisition, environment clearances and low equity base of concessionaires often lead
to delays and litigation. Farther the problem, the state owned or affiliated organizations are also in the
competition with the private participants, these enterprises being close to the individuals running public
departments are very difficult to compete. Due to all these problems, PPPs in their current shape and function
were seen as a flawed model in the Pakistani context.
Other than the hurdles faced by PPPs in developing countries as discussed above, there are three types of risks
attached to the conventional PPPs, the first is the Political Risk, especially in the developing countries because of
the possibility of dramatic overnight political change. The second is the Technical Risk construction difficulties,
for example unforeseen soil conditions, breakdown of equipment and the third is Financing Risk, foreign
exchange rate risk and interest rate fluctuation, market risk (change in the price of raw materials), income risk
(over-optimistic cash-flow forecasts), cost overrun risk (Walker & Adrian, 1995); (Sapte & Denton, 2006);
(Mishra, 2006).
There is a great need to innovate the PPP model for local conditions, identification of bottle necks in the process
and changing policies to extract maximum benefit from the collaborative opportunities and available resources.
2.1 International examples of PPP in irrigation infrastructure development
Design-build-operate (DBO) model is successfully running an irrigation project, consisting of an area of 79,800
hectares based on Public-private partnership in West Delta of Egypt (Quinter & Alice, 2015). A contractual
agreement was made with private partner, to design and develop an operational system of irrigation with
operational responsibilities for the next 30 years. Here the government will own the assets and provide major
share of the financing and risks. The risks transferred to government among others also include the currency
devaluation risk. An innovative decision process is adopted from design till the completion of infrastructure
involving a local users' council to decide any legal, financial, operations and policy issues on part of users. The
pricing is compounded with a fixed fee for total area of land holdings by the users and a volumetric fee based on
water provided for irrigation.
Pontal Public-Private Partnership in Irrigation is a project covering an area of 7177 hectares for development of
commercial irrigation infrastructure in Brazil (PICA, 2016). The land will be provided by the government which
will further facilitate the execution agencies with facilities including the existing infrastructure to ensure that the
project is completed as early as within six years of the initiation. The developer of the infrastructure will ensure
its operation and the remuneration collected after sale of water to users, whereas the government will provide the
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International Journal of Modern Research in Management Page | 50
capacity payments as per Irrigation Concession Agreement of Pontal Public-Private Partnership (Quinter & Alice,
2015).
Olmos Irrigation Project in Peru comprises irrigation development of 43,500 hectares with the help of hydraulic
infrastructure (Peru, 2014). Working on the model of Build-Own-Operate-Transfer where the government
finances the initiative from the land auctions to local farmers who then develop the land for agriculture and
private partners are contracted to provide necessary irrigation services and charges for the same from the local
farmers under Olmos (Peru) PPP Contract for Irrigation (Quinter & Alice, 2015).
2.2 Innovative application of PPP on sustainable irrigation system
Sustainable agriculture system is an important initiative to supply water for crops and effective provision and a
proportionate beforehand layout, to meet the needs of farmlands in various areas of the country. In the 11th five
year plan, the application of the PPP model on projects in various fields has gradually become popular. Their
popularity is depicted with the advances of shared ownership, recently achieved supply-side reforms,
mechanisms developed based on market, for enhancement of capital investment in sustainable ecological and
environment friendly setup and the innovative project management financed and managed based on reformed
PPP platform and project portfolio by the Planning Commission of Pakistan, Ministry of the Finance and other
related departments. During the last five years, most of the work in infrastructure development has been
completed using some kind of PPP projects and the same has been included into the development plan. With
many demonstration projects, a wide range of covers and increasingly mature institutional environment, the PPP
mode‘s leading role cannot be underestimated. With vast scope and availability of sources for sustainable
irrigation system like ground water and solar intensity supplemented by rigorous needs and stimulus policies at
every level of planning, there is a great need for innovative application of lessons learned from previous PPP
projects and innovate the process to covey supporting mechanisms of the government, social capital and
intermediary agents in the development of sustainable agriculture system, to achieve the effective provision of
the much needed irrigation system.
A vast array of sectors like communication, infrastructure, energy, health, water treatment, irrigation and
transportation has seen application of PPP model across the globe (Mouraviev & Kakabadse, 2014);(Vian et al.,
2015); (Singh & Kalidindi, 2006);(Ameyaw & Chan, 2015);(Valipour et al., 2015). The model can successfully
achieve risk sharing and delivering success with a win-win situation in cases where the public and private sectors
have a developed mean of interaction and have reached agreements, issues are resolved and governance is
improved using various intermediaries, by involving various stakeholders into the legal framework the much
desired social capital is directed to maintain a healthy flow of trust, social cohesion, productive interactions,
investments, revenues and the requisite finances along with latest technology and required skills.
Despite immense potential, technological advances and wide spread usage, the initial investment on solar-power
to replace conventional grid or fossil fuel dependency is a huge hurdle. Return on investment is slow with
compared to the initial investment, which restricts private investors from participating into these initiative. It is
easier for farmers holding larger areas, who can spend on the project, but for majority of famers in Pakistan, with
land holdings averaged from 5 to 8 Ha (Table 3), where 61 percent of these owned fewer than 5 acres (Pakistan
Year Book, 2013), it is not economically feasible to go for such initiatives due to not meeting the economy of
scale and thus not easy to persuade investors. Lack of awareness, knowledge and skills required to install,
operate and sustain such infrastructure are other big issues that are restricting a larger majority of farm owners
from adoption of this technology.
An innovative approach is proposed for government to engage various players like regulatory role of public
sector including central government, local governments and international agencies working for sustainable and
green development projects. Capital finance provider agencies may be involved with better regulations and
reforms in the taxation policies. Social capital is introduced into the system, to maintain trust and cohesion of
beneficiaries, create a climate of productive interactions among all the stakeholders necessary for sustainability
of any initiative. And at the end the intermediaries who are involved with a specific function in their area of
expertise and help buffer any major threat to the project in terms of legal, financial or technical aspects of the
PPP Model. The model proposed here provides space for mobilization of resources towards irrigation initiatives
and impress various participants of to play a leading role by adopting the Public-Private Partnership (PPP) model
of ―Design, Build, Finance and Operate‖. With the successful interaction of the above mentioned players, it will
be easier for the PPPs to avoid delays and litigations which are hampering progress and full potential of these
initiatives.
After 18th Amendment and subsequent National Finance Commission (NFC) awards where, the concerns of the
national governance along with public governance and development of economy and infrastructure has been
segregated among provinces. The amendment further emphasizes that the finance is the pillar of national
Application of the Public-Private Partnership Model to Sustainable Irrigation System in Pakistan
International Journal of Modern Research in Management Page | 51
governance and allocation of resources will thus play a decisive role towards good governance. Particularly
proposing the involvement of a market based mechanism for introduction of new and more social capital into the
development sectors where necessary and agriculture is one of the most important sectors under provincial
control. The innovative PPP model with Design, Build, Finance and Operate combines the advantages of public
and social capitals, and can generate unique advantages because of macro and micro management features. The
previously held undesirability labeled on such projects, built and transferred with the help of private sector to
users due to their lower quality and failure of sustainable operations has been checked in this method. The model
has been significantly proved as an important tool for initial infrastructure development of public utility projects,
with long-term, large-scale and slow-return investment (Yang et al., 2016).
3. Proposed mechanism to innovate PPP Model for sustainable agriculture system
To improve governance in agriculture, it is imperative to revisit the role of public institutions and modify
control-oriented and supply-driven system to one that is decentralized and demand-driven (Planning
Commission of Pakistan, 11th Five year plan, Food Security and Agricultural Development). The reason for the
government to undertake revamped PPP model to the sustainable irrigation system is that it would provide high-
quality hazard less and sustainable irrigation system, taking inputs from available resources of solar power and
ground water and provide an irrigation system at lesser costs for the farmers‘ community. Innovation in the PPP
model should be actively accepted by the government, build a sustainable partnership among the irrigation
solution providing bodies (both public and private) and improve continuous awareness of service among all the
stake-holders.
Fig. 6. Static relationship framework of the PPP model to sustainable irrigation system
Application of the Public-Private Partnership Model to Sustainable Irrigation System in Pakistan
International Journal of Modern Research in Management Page | 52
Innovation in the PPP model and its application to local projects should come with clarified rights and liabilities
among governments and private enterprises and elaborate the division of powers, and legal roles and rights of the
investors. The government should pay attention to the development of top-level design, and national standards at
earliest, unify irrigation systems with technology, specifications and interface standards of solar and modern
irrigation systems and improve system compatibility. Considering the demand scope and beneficiaries of
irrigation system, the government should take steps to regulate the processes, devise policies and define rights,
roles and responsibilities for all kinds of R & D investment of science and technology and personnel training for
irrigation infrastructure and take the major responsibility for sustainable irrigation system layout and provision
of resources required for infrastructure development. Local government bodies at provincial and district level
should further assume the overall responsibility for provision of necessary facilities in their jurisdiction region.
Through data mining results, they can analyze availability of ground water, nature of crops and water needs,
availability of solar intensity in the area, provision of state-owned facilities to facilitate the planning and
development processes to prevent purposeless and blind development and wastage of resources on redundant
construction. Help and experienced guidance could be obtained from foreign organizations involved in
development of green environment and world development funding bodies like World Bank. Governance and
regulations could be improved with expert opinions from world‘s leading management bodies. Specific to each
project, innovation in operation mechanism of the government including reforms in the PPP model for
sustainable irrigations system can be developed from the government‘s emphasis on infrastructure development
in light and guidance of the 11th five year program.
3.1 Role of government in regulating rights, roles and responsibilities of participants of PPPs.
Government‘s active participation and facilitation with all available means in the initial development phase of
irrigation system will provide great benefits like reducing costs, creating scale economy and guide market
demand to enable enterprises in overcoming the blindness and disorder in the construction, promote
technological innovation of irrigations system to reduce operational risks along with the cost. Governments
should at all levels, recognizing better economic prospects, particularly the tools for financial analysis should be
considered an upgrade, for promoting the application of this model (Fig. 6) in the field of sustainable irrigation.
When taking into account the financial expenditures, governments should define the responsibilities in all
features of investment shares, operation and maintenance, breakdown of all the risks and supporting services
from all related stakeholders extending to entire lifespan of every PPP project. Government should come up with
a plan to develop a reliable platform for procurement, perfect the bidding and tendering process, maintain a high
level of the public welfare of the projects through financial subsidies, simplify the approval process of
development of new irrigation technologies, a mean of construction, examination and approval of the sustainable
irrigation system projects.
In order to solve or lessen the impact of instability of financial returns and inadequacy of initial profits, they
should consider decreasing the risks to financial investment through introduction of social capital. For collection
of revenues and sustaining a continuous stream without taking much toll from the users and investors, the
government should implement a variable taxation policy, the areas solely dependent on the sustainable irrigation
system can be placed into a different zone than those that are using it for short-lived source of supply when
needed for the crops, and thus a variable taxation policies may be implemented without disturbing the balance.
For the purpose of budget management these projects may need to supplement the financial capacity to control
risks with the increasing size of the project. As it is visible that the country's economy is in decline phase due to
mis-management of resources and in-efficient ways of project management, which has increased burden on debt
risk of the government, thus government is reluctant to start new projects of bigger magnitude. The adoption of
PPP model will ensure that the financial load on the government is shared by private investors and financial
leverage has been created with the help of policies which decreased management pressure and involving social
capital will ensure increased inflows and sustainability of entire system.
With better planning and refined policies government can define expenditure responsibility as a key factor of
fiscal policy for Public-Private collaboration, the same can be strengthened with careful evaluation of policies
and give more space to private investors to work around and strengthen the relationship with legal framework
development for PPP model. Such actions will surely strengthen the relationship and provide a sphere for good
governance with enhanced departmental collaboration and continuous improvement in governance, strengthen
departmental functions with adoption of technology in communication and decision making like e-governance,
allow different stakeholders to engage in constructive communication, market optimization and strengthening the
legal environment, and improvement in the disclosure of information.
Furthermore, some other issues that are required to be considered are the development of infrastructure and
streamlining its operations that should be prioritized to increase the development of sustainable irrigation system,
with a planned development of value added agriculture industry for sustained development. With development of
value addition industry being fed on agriculture produce can ensure sustained operation of irrigation system.
Application of the Public-Private Partnership Model to Sustainable Irrigation System in Pakistan
International Journal of Modern Research in Management Page | 53
Farmers will participate in the project only if their products are carried away and sold at good price and they get
good value for their input.
Governments should start the PPP model for irrigation systems as a case, creating a culture of similar
investments in other sectors. Compliance with the contract is the basic concept of this model, success of the
model can be ensured with strict compliance with regulations; the democratic idea is the basis. At every possible
levels of the society, governments should provide high-quality facilitative service for partner organizations,
strengthen the publicity of sustainable means of energy in the public domain and help to create an atmosphere
with sustainable development under its control.
For construction of ecological civilization, it is necessary that government should introduce measures during the
next five year, through implementing green energy and development of villages and small towns and changes in
the energy availability structure by improving efficiency, promoting energy production and using sustainable
means of energy and encouraging sustainable irrigation systems development based on ground water. In short,
the government should revise and envision on traditional concept, make an overall planning, be concerned about
social capital and its prospects for sustained development and create a healthy social environment to encourage,
support and guide the sustained development. Government should provide a mix of necessary services, including
an information platform and an evaluation system that can change itself with the changing requirements of the
situation but still firm enough to be accepted by all stakeholders, and able to check unwanted events to cause
spoilage of funds, high profits at the cost of public interests, only this will ensure involvement of social capital,
sustained flow of financial capital, productive interaction and sustained development of PPP culture, suitable for
development in the country.
3.2 The operating mechanisms of social capital to innovate the PPP model application to sustainable
irrigation system
With incentive delivered by the government policies, more social capital is introduced into irrigations systems.
In Pakistan, state-owned public enterprises, private enterprises and collective national and international
enterprises are the major sources of social capital. Various types of participants of sustainable irrigation system
sharing social capital for the project are shown in Fig. 7. Sustainable irrigations system providing a source of
irrigations can generate revenue from users to sustain its operation and attain the break-even for the investment
made by participants. No matter whom pays for the fees, the supply of water and generated revenues are
essential to guarantee social capital returns and start the supply of funds for infrastructure, PPP model can be
adopted with the regulation of infrastructure operators. Inclusion of social capital into the PPP model will help
development of sustainable irrigation system with intact cycle of feasibility, approval, bidding, selection of
contractor, execution of plan, avoiding political, social, technical and financial risks, so that it can improve the
efficiency of project management.
Fig. 7 Major participants in social capital of PPP projects of the sustainable irrigation system
The financing bodies, private companies and government or semi-government enterprises and with the
introduction of various intermediaries to establish a clear framework of policies can help develop mutual trust,
productive interactions and relatively good reputation in technology and operations can hold noticeable
advantages in innovative setup of PPP projects. With the active participation of public and private assets,
asymmetric interactions and lack of necessary information with risks like ambiguity in clear reporting of profits
and losses during financial operations can be avoided. With coordination between the many types of partners,
Social Capital
Providers
Contractor
Sponsor
Agriculture Consumers
Agriculture based
IndustriesShare
Holders
Environmental Protection
Organizations
Farmer/Land owners
Manufacturers and Suppliers
Application of the Public-Private Partnership Model to Sustainable Irrigation System in Pakistan
International Journal of Modern Research in Management Page | 54
policy restrictions can be eased and economic reforms of mixed ownership can allow both parties to enjoy
financial gains and benefits from sustained development of infrastructure as in the case of proposed sustainable
irrigation system. With all the parties signing contracts to ensure financial guarantees to the shared capital and
set up an independent authority in form of a project operation company, held by the private partner, thus the
advantages of public and social capital could be fully materialized.
3.3 The role of intermediaries in application of innovative PPP model on sustainable irrigation
system
Cooperation between participants is the key for success of PPP projects; in case of sustainable irrigation system
this cooperation can be obtained by introduction of intermediaries. Intermediaries not only improve cooperation
among the participants but also help a symmetric flow of information along with reducing risk by improving this
process. Financial intermediaries can act as an effective way of providing financial support under principles of
sustainable operations. Mutual cooperation can help increase lines of credit, credit ratings, innovation in process
of insurance and risk/gain sharing and launch of related innovative products such as green funds, green bonds,
infrastructure development bonds and other hybrid financing products. Financial institutions can collaborate for
promotion of equity, project usufruct, pledge financing means, establish project specific fund investment
companies, enhancement of operation and maintenance capacities, set aside the traditional bureaucracy of
delayed decisions and introduce fairness and transparency in construction and operation of projects. Further the
collaboration between the financial institutions can help build a guarantee system of multi-level to promote the
operation of financing and guaranteeing these funds, extend the practical financing techniques and achievement
of a closed loop of risk.
Legal intermediaries on the other hand can play a significant part in the construction of irrigation setup.
Government can appoint legal advisories to define the rights and liabilities of the parties referring to existing
contract models with full standardization and high feasibility in demonstration projects. Legal professionals are
also needed to play their active role throughout the bidding process of government procurement and appointment
of contractor. If disputes appear in a running project, fast track should be adopted to settle them timely and they
should rely on the law, and its interpretation for disputes to be solved in shortest possible duration. Arbitration
institutions, a third party, can be empowered to take initiatives and new policies regarding their positive role in
the process be introduced if necessary. Steps should be taken for enhancement of mutual trust, executive
decisions and politically motivated initiatives should be discouraged and all the initiatives should be carried out
according to law.
Furthermore, during evaluation of assets in PPP projects the evaluation agencies should reasonably evaluate all
the assets. Appointment of professional approach or hiring a professional advisory body with good industrial
experience in the field can evaluate infrastructure contributed by government. To avoid loss from under-
evaluation and reach a consensus, various methods can be adopted to evaluate assets according to their nature.
International cooperation is very important for the projects concerned with green and sustainable development,
recent developments around the globe and growing concern about global warming and climate change has
played a greater role in reaching consensus on this issue. A unanimous decision was reached in UN's Climate
change convention in Paris, 2015 where 195 countries reached the agreement that financial, technical and
capacity building support will be provided to all such initiatives at the global level. In the context of
globalization, the usage of solar power instead of fossil fuel is being encouraged as a green trip mode with lesser
carbon footprint and declined emissions. New technology is in favor of these initiatives however import policies
are a big hurdle in the process, a comprehensive plan is required to be made to develop local industry, in this
regard manufacturer can be granted tax holidays or cutting off import duties to increase investment in
manufacturing solar panels in the local industry. Initiatives may be taken to participate in the establishment of
international standards, and learn from advanced technology, management experience and means of inflow of
capital for the sustainable irrigation system from advanced countries. The Global Infrastructure Facility
Partnership (GIF) Program has provided a global stage, where it mobilizes efforts for all institutions to invest,
focusing on preparing, planning for sharing of risk in projects of infrastructure development. These institutions
are playing their much needed part in supporting the infrastructure of Emerging Markets and Developing
Economies (EMDEs).
4. Conclusion
The PPP model has interior driving forces to cause the concepts, technology and institution‘s innovation.
Irrigation systems need the introduction of the new PPP model, to innovate operation mechanisms of participants.
By defining charging infrastructure and the innovative PPP model, this paper proposes the provision of
sustainable irrigation system based on solar power and ground water, through long-term cooperation between the
public sector and other market participants, to achieve a successful implementation, beneficial to all. Based on
the supply and demand gap, advances in the related technologies, policy dividends and relatively abundant social
Application of the Public-Private Partnership Model to Sustainable Irrigation System in Pakistan
International Journal of Modern Research in Management Page | 55
capital, this paper analyzes main reasons for adoption of sustainable irrigation system. The reasons contain need
of a huge initial investment, ambiguous rights, roles and liabilities, a limited number of participants in
construction and operation, mingled risks and imperfect supporting systems.
On the basis of economics fundamental theories, this paper clarifies that there exists a great opportunity for the
development, installation and operation of sustainable irrigation system with the PPP model, it further proposes
that the important factors that can promote the PPP model in irrigation field are enthusiasm of contributors of the
social capital, the ability, experience and skills of participants in the field of project management and operation
and a variety of innovative legal, financial and management approaches to solve problems of irrigation. The
paper stresses that the decisive role of the market in resource allocation needs to be played fully and the
government can instill and encourage the market‘s strength in this field.
The paper analyses the bodies in the construction of the PPP model to sustainable irrigation from the macro point
of view and proposes to push innovative mechanism for application of the proposed model, shown in Fig. 6.
Instead of sweeping suggestions and vague declarations the government should put forward suggestions related
to mechanism of direct investment, government procurement, and subsidies, various related tax privileges and
budgetary arrangements in fiscal expenditures. With the creation of favorable market environment, a pull
strategy to promote industries that are dependent on agriculture to keep a demand of growth in agriculture
produce after implementation of reforms in irrigation system in specific areas of these projects.
From the perspective of social capital contributing bodies, companies should be prepared for project financing,
planning, constructing and operating, and play an exemplary role in the project. Related industries should also
have appropriate scale development. From the perspective of the intermediary, finance, law, asset valuation,
faster decision making and arbitration of disputes and international cooperation should play an adhesive role and
achieve mutual benefits and a win-win status.
PPP model is still attracting vigorous promotion and enthusiasm is high at all levels of governments therefore the
innovative participation of players in contributing social capital for these projects has more and more
engagement. However, the normalization of project implementation needs improving, and it seems necessary to
keep paying attention to top-level design, elaborate management and interconnection. Especially, further
research is needed on the government and the market's relationship, the pricing rules of water charges, value of
money evaluation, risk mitigations and risk transfer and construction of an efficient contract model. Systematic
exploration is also required on the information age "e-governance", dynamic information retrieval and analytics
mechanism of decision making techniques and methods to develop a sustainable irrigation for efficient
agriculture growth.
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