Financial viability and profitability of irrigation in Crimea, Ukraine

Abstract

Following the collapse of the Soviet Union in 1991, the financial sustainability of irrigated agriculture in Crimea (Ukraine) has been endangered due to transitional problems. The undefined state of ownership, absence of secure agricultural markets and lack of farmers' funds for operations and maintenance resulted in irrigation equipment breaking down. Consequently, irrigation water demand has fallen dramatically. This paper looks at whether irrigated agriculture is financially viable and profitable in a market economy. By comparing the price paid for water delivery services with the actual irrigation water expenditure, it becomes clear that there is currently only partial cost recovery. By comparing returns to irrigation water with the potential costs of water delivery, it is clear that irrigation could be profitable in the future even in the most distant areas. It is interesting to note that on-farm costs account for a substantial share of the total potential irrigation costs and the challenge is therefore to reduce and fund on-farm costs.