ECONOMIC VALUE OF IRRIGATION WATER: A CASE OF MAJOR IRRIGATION SCHEME IN SRI LANKA

It is generally agreed that inefficient use of irrigation-water and poor performance of irrigation systems are critical issues; especially in the light of the apparent lack of water resources. This study attempts to determine the economic value of irrigation-water in a government properly managed irrigation project (GPMIP) by eliciting farmer’s willingness to pay (WTP) using contingent valuation method followed by single bounded dichotomous choices. A stepwise backward binary multivariate logistic regression model was used to measure WTP and to determine the factors that influence the variation in WTP. Primary data were obtained from 367 farmer households in Nagadeepa irrigation schemes in dry zone. The estimated value of irrigation water was Rs. 5,275 ($40) per hectare per season which is 8.6 percent of net income in paddy farming per hectare at present in selected irrigation scheme. Further, if farmers can increase further their household farming income by 5.9%, it is possible to cover additional cost which would be driven due to pricing irrigation water and it is not an unreachable challenge with proper irrigation services. One of the most important policy implications of this study is the possibility of restructuring the existing irrigation pricing system by taking into account the economic value of irrigation water. Such policy reform can encourage farmers to use irrigation resources efficiently by motivating improvement in water management practices and generating revenue for operation, maintenance and capital replacement and irrigation sustainability in the country.