Use of Indirect Benefit Analysis in Establishing Repayment Responsibility for Irrigation Projects

Abstract

Od NE of the major factors responsible for settlement in the western United States has been irrigation. The area-development aspects of irrigation are widely recognized, but the problems confronting further expansion of irrigation are much less widely understood, even in irrigated areas. These problems stem from the disparity between the rapidly increasing costs of modern irrigation projects and the ability of the project farmers to repay those costs. The increased costs are partially attributable to the longrange upward trend in the costs of materials and labor. More basic are the increased physical problems of bringing water to the remaining undeveloped lands. In its comprehensive report, prepared in 1950, the President's Water Resources Policy Commission acknowledged the contribution made by irrigation developments in the past and stressed the desirabilitv of reclaiming additional arid lands. To close the gap between project costs and the payment ability of the farmers, the Commission recommended that local interests who benefit indirectly from irrigation projects should repay a share of the costs proportional to the benefits received.' In reality this is a logical 'extension of the conservancy district concept, which has been applied to irrigation projects only in a few instances. It has long been recognized that the farmers-the direct beneficiaries-are not the only beneficiaries of irrigation projects. From even the most casual observation of urban growth and other evidence of economic activity in irrigated areas, it is obvious that important benefits accrue indirectly to nonfarm segments of the population. The fact that the benefits accrue indirectly does not make them any less real. It seems only equitable that these indirect beneficiaries be assessed, along with the direct beneficiaries, for a fair share of the project costs. A consideration of the problems involved in applying the recommendation of the Water Resources Policy Commission, however, underscores the inadequacy of present procedures for economic appraisal of irrigation projects. It is especially in the field of the indirect benefits (which may be either positive or negative) that information and techniques have been deficient. The direct benefits have received much systematic study in the past, and can be estimated within a reasonable margin