Can rice farmers pay irrigation costs?

Abstract

Thailand is spending massive budgets in development and maintenance of irrigation systems for rice production. Along with tighter budgets and the ever-decreasing weight of agriculture in the domestic economy, debates are becoming more intense on the need for alternative, internalized modes of financing irrigation water supply, including farmer-targeted charging systems. This article investigates the correlation between the use value of irrigation water and the costs incurred by water supply, on a case study basis, in order to assess the feasibility of charging farmers for such costs. Climatic and production uncertainty was subject to sensitivity analysis (Monte Carlo). Analyses show that the use value (0.35THB/m3 [1 Thai Baht = 0.03 US$]) exceeds total costs (0.1 THB/m3), meaning that farmers could theoretically pay for irrigation water supply. However, results were obtained under favourable production conditions. Furthermore, if farmers were to cover the total cost of irrigation, including capital costs (2,208 THB/ha/season), production costs would then increase by approximately 36% in both seasons. Also, farmers would lose approximately 36% of their net income as water charge in the wet season and 25% in the dry season. If farmers were to pay for operation and maintenance costs only (1,403 THB/ha in both seasons), production costs would then increase by approximately 23%. In view of their low income, charging farmers is not feasible or acceptable. Besides, the study notes that farmers already pay pumping costs at field level, and are well aware of the value of water. This article further discusses alternative charging options, on a broader basis. A charging system spread throughout the rice chain, down to milling, retail, and export segments, proves to be acceptable; it may even include farmers, at low cost for them, and reinstate their status and active participation in the chain. The article also suggests that a broader ecosystem services approach may be used.