BHATTARAI Madhusudan1 ; BARKER Randolph3 ; and NARAYANAMOORTHY A.3
1 Postdoctoral Scientist (Economist), International Water Management Institute (IWMI), P. O. Box 2075, Colombo, Sri Lanka. Fax : 94-1- 786854 (E-mail: m.bhattarai@cgiar.org
2 Principal Researcher, International Water Management Institute, P. O. Box 2075, Colombo, Sri Lanka. Fax : 94-1- 786854 (E-mail: R.Barker@cgiar.org
3 Reader, Gokhale Institute of Politics and Economics (Deemed to be a University), Pune – 411 004, India. Fax: 91-20-5652579 (E-mail: na_narayana@hotmail.com.
Irrigation represents by far the largest investment in the agricultural sector. During the peak in construction of new irrigation systems during the 1970s and 80s irrigation accounted for as much as 50 percent of investment in agriculture. Even today, there are major investments to rehabilitate surface irrigation systems and reduce conveyance losses. Yet given the magnitude of these investments there is an appalling lack of research on incremental impact of irrigation versus other factors and particularly on indirect (non-farm sector) benefits of irrigation. The indirect benefits include income and employment effects in the agro-industry and non-farm sector of the regional economy and lower prices for food grains benefiting in particular low income consumers. There are also negative externalities associated with the irrigation, such as social dislocation and environmental damage (see in WCD, 2000). However, the focus of the study is on the scale of the positive benefits.
Who have been the actual beneficiaries of irrigation development in the recent past? Is it the farming sector alone or also the urban consumers and industrial labors and other broader sections of the society? To the degree that the non-farm sector has been a major beneficiary of irrigation development, what are its implications for setting effective financing, investment, and cost-recovery policies in irrigation? The main purpose of this study is to address the above questions by analyzing direct and indirect marginal benefits of irrigation.
This study uses state level secondary data from 14 states of India from 1970 to 1994 to analyze how the irrigation benefits have been divided between producers (farmers) and the overall rural economy. These 14 states account for more than 90 percent of the Indian agrarian economy. We also discuss some of the key literatures on irrigation cost recovery and key irrigation financing studies relevant to the issue of direct and indirect benefits.