Challenges and Developments in Financing Irrigation and

Drainage Sector

Uma Lele(with inputs from Tushaar Shah, Mohamed Ait Kadi,

Herve Plusquellec, Richard Reidinger)A Keynote Presentation prepared for the Plenary

Session on sub theme of the ICID First World Irrigation Forum,

Mardin, Turkey, September 30, 2013.

1. Agricultural Intensification is the key 2. Water is critical to intensification3. Increasing water use efficiency and water productivity is of utmost

importance, in the context of total factor productivity4. Financing of Irrigation and Drainage Needs New Paradigms 5. Modernize surface irrigation. Do not just rehabilitate6. Modernization is no silver bullet

1. Keep Service Delivery to the Clients at the Center stage2. Make modernization contextual due to immense

diversity among regions and countries and within countries.

3. Do not copy blindly –innovate, adapt, monitor, evaluate and disseminate

7. Improve quality of service s to farmers.8. Develop national capacity to deal with complexity.

Key Messages

Information Technology Revolution

Satellite Imagery

Precision Farming

Sprinkler Irrigation Systems

Drip Irrigation

Modernization of Surface Irrigation Systems Catching Up?

Huge Advances in Irrigation Technology

4

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

0

500

1000

1500

2000

2500GDP Growths by Region

(constant 2000 US$)(1970-2011)

East Asia & Pacific (developing only) High incomeLatin America & Caribbean (developing only) Middle East & North Africa (developing only)South Asia Sub-Saharan Africa (developing only)

Base

Year

1970=

100

Source: WDI and Global Development Finance, World BankNote: MENA--data is not available for the year 2011

Global Growth Is Driven by All Developing Regions since 1990

Highly Changed Global Environment

• Globalization—international trade in food, integration of markets• Huge Technological Change—IT, • Land and Water Grab• Biofuels• Declined international assistance and declined food aid• Increased Role of Private Sector Investments?

• Public Private Partnerships—Boutique projects• for High value crops

• Climate related investments— Some supportive of watershed protection• PES, • Mitigation • Adaptation

• Best of Science

FAO Financing Projections to Meet Global Food Demand to 2050

• $ 4 Trillion Investment in Agriculture needed by 2050

• $ 1 Trillion in irrigation and drainage-85% in depreciation/replacement

• To Feed ---9 Billion+ in 2050:

• Cereal Production (Net of Biofuels) Increase by 60% over 2005 level to meet demand growth

• 1.1 percent grow the needed annually down from 2.2 percent in the past 4 decades

• Diversification of diets –some water intensive, some water saving

• Almost all Growth in Food Demand Will be in Developing Countries

• Reduction of Waste ?

Real Agricultural Prices Have Fallen Since 1900, Even as World Population Growth Accelerated

Source: USDA, Economic Research Service using Fuglie, Wang, and Ball (2012).

Sources of Investment in Agriculture

Source: The State of Food and Agriculture 2012.

Sources of Growth in Investments in Irrigation and Drainage—Some Examples

National Public Investments in

agriculture China-$600 billion over

10 years India-$70 billion in 5

years Turkey MoroccoInternational

Assistance• World Bank• Asian Development

Bank

Private Investments

• Farmer Investment• India--half of the public

sector-1950-2011 of $ 117 to $ 334 billion

• China—Water Users’ Association—20 to 30 pc

• Private Investment • PPPs <$10m?• Private Industry--

unknown-

10Source: International Water Management Institute analysis done for the Comprehensive Assessment of Water Management in Agriculture using

the Watersim model.

Water Scarcity will Increase Food Insecurity

Areas of Physical and Economic Water Scarcity

Global Hunger # of Undernourished by Region

South Asia304

East Asia167

Sub-Saha-ran Africa234

Rest of the World163

2010-12Total=868 million

Population Living in Poverty by Region

South Asia506.77

East Asia250.9

Sub-Saharan

Africa413.73

Rest of the World43.58

2010Total=1214.98 million

Data Source: The State of Food Insecurity in the World 2012Source: http://iresearch.worldbank.org/PovcalNet/index.htm?1

(using 2005 PPP and $1.25/day poverty line)

Agricultural Total Factor Productivity (TFP) Index Growth by Region (1961-2009)

19611963

19651967

19691971

19731975

19771979

19811983

19851987

19891991

19931995

19971999

20012003

20052007

20090

50

100

150

200

250

300Growth is Lagging in Sub-saharan Africa and

South Asia

Source: Fuglie, Wang and Ball 2012

Base

Year

1961=

100

East Asia

MENASouth-East Asia

LAC

OceaniaSub-Saharan Africa South Asia

Average Annual Change in Agricultural Capital Stock per Worker in Low- and Middle-income Countries (1980–2007)

Source: FAO 2012.

Actual and Projected Growths of Area Equipped for Irrigation by Region (1961-2050) (Base Year 1961=100)

0

50

100

150

200

250

300

350

Sub-Saharan Africa South Asia East and South-East Asia

Latin America and Caribbean Near East and North Africa

Source: FAO, 2013.

Arable Irrigated Land: Equipped and in Use (million ha) (1960-2050)

 

Source: Alexandratos and Bruinsma 2012.

 

Total Area Equipped for Irrigation by Region(1000 ha)(1961-2011)

 

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

Sub-Saharan Africa Northern America Latin America and Caribbean

Eastern Asia South Asia South-Eastern Asia

Source: FAOSTAT

Total Area Equipped for Irrigation (Brazil, China, India and Indonesia)

(1000 ha) (1961-2011)

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

0

10000

20000

30000

40000

50000

60000

70000

Brazil ChinaIndia Indonesia

Growth of Surface and Ground Water in India (1951-2007)

Source: FAOSTAT Faures and Mukherji 2011

Growth of Public Irrigation Investment & Stagnant Canal Irrigation Area in India

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

0

10

20

30

40

50

60

0

6

12

18

24

30

36

42

Trends of public expenditure in major and medium irrigation and net irrigated area under different sources in India

Expenditure Tanks Canals Groundwater

Expen

dit

ure

(bil

lion

US

$,

in 2

000 p

rices)

Net

irri

gate

d a

rea

(mil

lion

ha)

GroundwaterIrrigated Area

Groundwater

CanalIrrigated Area

TankIrrigated Area

Expenditure US$ (2000 prices)

Source: Strategic Analyses of the National River Linking Project (NRLP) of India, Series 5. Proceedings of the Second National Workshop on Strategic Issues in Indian Irrigation. International Water Management Institute 2009.

Distribution of Electric and Diesel Pump-sets in South Asia

Source: Tushaar Shah (2009) Climate change and groundwater: India’s opportunities for mitigation and adaptation.

+3 million of Drip Irrigation

Total Area Harvested for Cereals (million ha) (1961-2012) (Brazil,

China, India and Indonesia)

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

0

20

40

60

80

100

120

Brazil ChinaIndia Indonesia

Total Cereals Yield (hg/ha) (1961-2012) (Brazil, China, India and

Indonesia)

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

0

10000

20000

30000

40000

50000

60000

70000

Brazil ChinaIndia Indonesia

Source: FAOSTAT

Share of Agriculture & Allied Sector in Total Gross Capital Formation (Percent) in India (1950-51 to 2008-09)

1950-1

951

1952-1

953

1954-1

955

1956-1

957

1958-1

959

1960-1

961

1962-1

963

1964-1

965

1966-1

967

1968-1

969

1970-1

971

1972-1

973

1974-1

975

1976-1

977

1978-1

979

1980-1

981

1982-1

983

1984-1

985

1986-1

987

1988-1

989

1990-1

991

1992-1

993

1994-1

995

1996-1

997

1998-1

999

2000-2

001

2002-2

003

2004-2

005

2006-2

007

2008-2

009

0

5

10

15

20

25

30

Public Sector Private Sector Total

Public + Private Private

Public

Source: Central Statistical Organization (CSO), India.

Total ODA and ODA to Agriculture + Forestry + Fishing, Forestry (Only) and Agricultural Water Resources [Current Prices (USD

billions) (1967-2011)]

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

0

20

40

60

80

100

120

140

160

180

Agriculture, Forestry, Fishing Only ForestryAgricultural Water Resources Total ODA

Source: http://stats.oecd.org/Index.aspx?DatasetCode=TABLE5

OECD Aid to Developing Countries

0

5

10

15

20

25

30

35

40

Declining Share of Aid to Agriculture in ODA (1960-2013)

Share of Agriculture (%) (IBRD+IDA) Share of Agriculture (%) (ODA)

Establishment of the CGIAR 1972

McNamara Speech 1973 World Bank

ODA

WB’s 1997 Vision to Action

WB 2002 Reaching the Poor

WB 2008 WDR

Source: http://stats.oecd.org/Index.aspx?DataSetCode=CRSNEW# World Bank

Share of IBRD-IDA Total Commitments by Agricultural Sub-sectors (Real=Nominal/MUV) (MUV Index 2000=100) (1960-

2011) (%)

(C+E+N) Agric. Extension & research 7% (F+I+J) Animal

Production 2%

(G+L+M)Crops 8%

(O)Forestry 5%

(H)Irrigation & Drainage 32%

(P+Q)General Ag. 11%

(R)Public Ad-min-Agriculture

1%

(K+S+T)Agric. Marketing and Trade + Agro-

industry 7%

Agriculture adj. 15%

Agricultural cred 12%

Total=116.6 US$ Billions

Source: World Bank

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

0

5

10

15

20

25

30

Number of Irrigation & Drainage Projects Funded by IBRD-IDA and Total

Commitments to Irrigation & Drainage (US$ Billion) (Real=Nominal/MUV)

(1960-2011)

Number of projectsIBRD-IDA Commitments to Irrigation & Drainage

MUV Index 2000=100 Com

mit

men

ts(U

S$ B

illi

on

) (R

eal=

Nom

inal/

MU

V)

Nu

mber

of

Irri

gati

on

& D

rain

age p

roje

cts

Source: World Bank

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

0

0.2

0.4

0.6

0.8

1

1.2

1.4

0

1

2

3

4

5

6

7

8

9

10

Number of Water Sector Projects with I&D Component Funded by ADB and

Water Sector Loans and Grants with I&D Sector (US$ Billion) (Real=Nominal/MUV) (1969-2011)

Number of projectsTotal Water Sector Loans and Grants with I & D Component (Billion USD)Waterpart (Billion USD)

Wate

r S

ecto

r Loan

s an

d G

ran

ts (

US

$ B

illi

on

) (R

eal=

Nom

inal/

MU

V)

Nu

mber

of

Wate

r S

ecto

r P

roje

cts

wit

h I

&D

Com

pon

en

t

Source: Asian Development Bank

Examples of Modernization

MoroccoVietnamChinaPeruChileTurkeyIndonesia?South Asia?

1. Volumetric Water Charges2. Sophistication of

Engineering not enough3. Sophistication of

Organization4. Water User’s Associations5. Increased Water Charges6. Training7. Incentives8. Dedicated Staff9. Investments10.Institution11.Good Governance

Africa now a growing recipient of ODA (Commitments) to Agricultural Water Resources

by Region (Current Prices) (USD billions) (1995-2011)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

0.2

0.4

0.6

0.8

1

1.2

1.4

Europe Africa North and Central America South America

East Asia South and Central Asia Middle East

Source: http://stats.oecd.org/Index.aspx?DatasetCode=TABLE5.

To Improve Management Develop a reliable data for water

resources and make information public; 

Institute a transparent system of performance benchmarking;

Establish a performance management culture

Raise Irrigation Service Fees (ISF) increasing it closer to the marginal value product of irrigation;

Improve ISF collection to 80-90 per cent of the assessment; ensure that the operating turn-over of an irrigation system is at least 10-12 percept of capital investment;

 

Establish and levy a ‘conjunctive use’ charge on groundwater irrigation

  Link Operation and Maintenance budgets

of irrigation systems Irrigation Service Fee collection;

  Develop Water User Associations,   Hive off successful irrigation systems as

autonomous farmer irrigation companies with perhaps contracts with private sector for delivery of produce;

  Improve irrigation service delivery, including

the management of the main and delivery systems which includes:

 

To Modernize

Improve Performance diagnosis through tools such as RAP and MASCOTTE

 

Undertake Training in modernization at ALL levels including academics, training institutes, consultants, contractors, governments, project managers. Systems operators.

 

Invest in modernization and Implement rather than considering rehabilitation with modernization

“ I only hope that (my failure to speak out three decades ago) will encourage others to be bolder so that policies and practice can be better grounded in realities and ………. offset the professional, institutional and personal forces that so easily distort perceptions and generate and sustain misleading and damaging myths. We need not just to struggle to know reality. We need whistle blowers. And we need them to blow more and a good deal louder than I did”– Robert Chambers