What ails Irrigation System Performance?-Price or Proces
Water pricing is undoubtedly the most significant issue dominating the reform agenda in irrigation systems. Low charges and decreasing water rates have been a constant quandary of irrigation systems. The vicious circle of poor-performance plaguing irrigations systems in India is more often than not is ascribed to low water charges. Water fees and tariffs are collected for financial sustainability and for incorporating water efficiency norms in the sector. Water fees collected either as tariffs or taxes from farmers are intended to cover at least the O&M cost though originally it was also contemplated that it should extend to include the capital cost of the project to make the project financially sustainable. However, it is found increasingly difficult to implement both the objectives, as the pricing and also the collection were unable to attain either of its stated objectives.
One of the oft repeated suggestions, as a foremost condition of the reform, in recent years has been that water tariff needs to be increased to cover the cost of supply of irrigation waters to the users. This is a difficult option, as water tax / tariffs usually is a politically sensitive issue which no government in power likes to effect negatively. Embroiled in politics, even a small increase and strict collection of taxes often has adverse political repercussions. Governments have therefore been wary of meddling in this contentious issue. Nonetheless the reform protagonists placed it as a first condition to move forward. The thrust of the irrigation reforms was thus more on developing a mechanism for increasing tax collections-ostensibly argued to cover at least the O&M costs so as to minimize losses and make the system efficient. The issue of process of collection & replough and share of re-plough to the farmers got sidelined in this debate of whether to increase the tax or not. There are several reasons that made regular Operations and Maintenance of the irrigation infrastructure difficult.
In Andhra Pradesh the key focus of the second generation of irrigation reforms was shifted from the thrust on increasing tax collections to enabling and empowering the FOs as significant units in streamlining this contentious process. The thrust in the past six years has thus been on generating the conditions, detailing the process, putting in place the legal framework, facilitating generation of revenues for the conduct of regular O&M. This has been a cumbersome process, graduating from the condition of water tax collections accruing directly to the revenue department towards ensuring that the FOs get access to a certain percentage of the tax collections for conducting O&M. This section briefly details the steps and processes that have brought about a remarkable turn-about in the financial sustainability of FOs-one of the major achievements of the PIM process in Andhra Pradesh in the past five years.
Water Charges in Andhra Pradesh-The Water Tax Act 1988
The Water Tax Act 1988 and Water Tax Rules 1990 have been the reference point for the collection of water tax further aided by the Andhra Pradesh Farmers Management of Irrigation System Act 1997. The initiation of reforms in the irrigation sector in 1996-97 focused on integrating farmers directly into the management of irrigation service to aid transforming the vicious circle of irrigation systems into the virtuous circle of the irrigation service.The water charges were last revised in Andhra Pradesh during 1996-97. Increase of water charges and an attempt to institutionalize the pricing of irrigation water price through the establishment of a Water Charges Review Committee (WCRC) to recommend and oversee financially sound water pricing mechanisms in the sector set the irrigation sector in the state on the road to financial self sufficiency. The FOs were expected to operate and maintain the irrigation system performing activities which are heavily dependent on the availability of financial resources. These funds also needed to be made available in time as most of these activities are seasonal.
The schedule according to the Water Tax Act 1988 and the Revised Rates in 1997
Crop Type |
Water Charges per acre Category I |
Water Charges per acre Category II |
||
Pre revised Amount Rs.) |
Revised Amount Rs.) |
Pre revised Amount Rs.) |
Revised (Amount Rs.) |
|
First or single Wet crop |
60 |
200 |
40 |
100 |
Second and third Wet crop |
60 |
150 |
40 |
100 |
First crop irrigated Dry |
40 |
100 |
20 |
60 |
Second and third crop irrigated Dry |
40 |
100 |
20 |
60 |
Long Duration crop |
120 |
350 |
80 |
350 |
Aqua-culture per year |
0 |
500 |
0 |
500 |
Modalities of Allocation and Transfer of Water Tax Collected:
The government of Andhra Pradesh committed to the reform and rehabilitation of the irrigation sector and transform it into a farmer managed financially viable sector linked the cost and efficiency principle in the sector by proposing to entrust or transfer a part of the dues collected to the WUA for irrigation service improvement. The objective was to build local organizations rapidly, from the WUAs at the minor canal level to be federated at the distributory canal level, and later at project (or scheme) level. The ultimate purpose was to develop self-financing and autonomous irrigation schemes managed by WUAs. However, though the water tax was levied and the FOs were constituted in 1997, there was no mechanism for linking Operations & Maintenance and water tax collected. Also there was no provision for regular fund support to the FOs for operation and maintenance of the respective projects. The absence of sustainable financial resources threatened the very sustainability of the FOs.
Demand Assessment, Collection and Plough Back of Irrigation Water Tax:
The new process established that the Competent Authority in the Irrigation Department for different WUAs jointly with the concerned WUA Presidents was to make an assessment of the crop wise area irrigated and furnish the same to the Mandal Revenue Officers (MRO), who in turn were to fix the demand after azmoish by the Revenue Inspectors, Village Administrative Officers etc. Based on the actual collections, the Mandal Revenue Officer was authorized to issue proceedings every quarter to adjust amounts due to WUAs/DCs/PCs/Gram Panchayats (GPs) within one month of the end quarter. Based on these proceedings, the concerned Treasury Officer was authorized to issue cheques in favor of the WUAs/DCs/PCs/Gram Panchayats in the ratio fixed by the irrigation Department from year to year. The Water Tax collected for the year 2001 was to be adjusted in the following ratio:
Sector |
Water Charges per acre |
Allocation Recommended |
||||
WUAs |
D.Cs |
P.Cs |
Gram Panchayat |
Irrigation Department |
||
Major |
Rs. 200/- |
50 |
20 |
20 |
10 |
100 |
Medium |
Rs. 200/- |
60 |
-- |
30 |
10 |
100 |
Minor |
Rs. 200/- |
90 |
-- |
-- |
10 |
-- |
Increased Devolution of Share of Water Tax to FOs:
Devolution of management functions to FOs needed to be supplemented with funds. Water taxes formed one of the important sources of funds for operations and maintenance. However, in initial years, such funds were not available to the FOs and were in the hands of the irrigation staff of the government. This was changed over a period. Table below presents evolution of tax share to Farmers Organizations.
This increased devolution of funds facilitates more funds available with FOs to ensure timely maintenance. Another limitation on tax re-plough was that it was limited to the current year tax collections only. Arrear tax collections were not included for calculating the amounts of tax re-plough. This procedure was modified during the meeting of Water Management Committee in 2008 and the arrear tax collection was also made eligible for calculating the re-plough.
Year |
WUA |
DC |
PC |
Gram Panchayat |
State Govt. |
1997- 00 |
NIL |
NIL |
NIL |
NIL |
100 |
2000-01 |
25 |
10 |
10 |
5 |
50 |
2007-08 |
45 |
15 |
15 |
5 |
20 |
2008 onwards |
60 |
20 |
15 |
5 |
0 |
Exclusive and Separate provision for tax re-ploughs Thrust on improving funds flow to FOs led to creating a separate budget head for tax re-ploughs by the government under the administrative control of the Commissioner, Command Area Development from 2007-08.
Irrigated Area Assessment and Assessment of Water Tax:
A uniform proforma was created, wherein the Competent Authority (engineering) and WUA President prepare the particulars of areas irrigated during the standing crop period depending upon crop season and furnish it to the Dy. Executive Engineer and Executive Engineer. The Executive Engineer than is called upon to furnish the WUA/Division wise irrigated area particulars to the MRO and the Superintending Engineer concerned. The EE has also to take into account time assessment of area provided by APSRAC in arriving at the actual area irrigated in his jurisdiction. The concerned SE than furnishes the same to the Chief Engineer, Commissioner, CAD and CCLA and monitored by the Chief Engineer of the project concerned.
The New Water Tax Demand, Collection and Plough Back Procedure:
Based on new procedure laid for assessment of area irrigated, a new process of rising the demand and collection of the water tax was identified (G.O 96, 2007). The order empowers the Tahsildar to fix the demand as per the area assessment furnished by the Executive Engineer. Formats were created for raising the Water Tax demand and the DCB statement. The Tahsildar was made responsible to collect and remit the tax amount, credit the collections into 0020 land revenue account and provide copies of the DCB statement to the WUA and the EE concerned. The Managing Committee of the WUA and the Competent Authority are called upon to assist the Tahsildar in collection and remittance of tax amount and maintain account of the water tax collection at the WUA level.
Further, for ensuring the sustainability of the FOs, government of Andhra Pradesh ordered (G. O. 170, 2008) adjustment of the entire tax collection to the account of FOs as per the respective shares. According to the new provision, selected portions of the water tax collected are apportioned for meeting the administrative costs. The evolution of the share of the FOs has progressively increased and reached a stage of 100% plough back. The revised ratio for utilization of the tax amounts collected and the progressive increase of the FOs share over the years is given the tables below.
The Share of the Water User Associations, Distributory Committee
and Project Committee of the Collected Water Tax 2007
Sector |
WUAs |
DCs |
PCs |
GPs |
|||
Works |
Administration |
Works |
Administration |
Works |
Administration |
|
|
Major |
50% |
10% |
15% |
5% |
14% |
1% |
5% |
Medium |
50% |
10% |
-- |
-- |
30% |
5% |
5% |
Minor |
80% |
10% |
-- |
-- |
10% |
-- |
-- |
Water Tax to Water Usage Charges:
Another key step initiated by the government of Andhra Pradesh is a policy decision to abolish the water tax levied under the Water Tax Act and convert it into a water usage charge. The FOs are to be authorized to collect the water usage charges and use it as per the approved action plan for maintenance of the system. This will facilitate the ultimate objective of financial sustainability of the FOs and timely availability of funds for maintenance. The FO representatives and the government are jointly working out the implementation guidelines of this alternative likely to be introduced in future.
Financial Sustainability in Minor Irrigation:
1. Corpus with FOs:
The generating of a corpus amount for continued sustainability of a project even after the withdrawal of loan/grant amounts has been another significant system initiated by CAD has created an alternate method for continued financial sustainability in management of irrigation projects. The pilot project initiated for restoring water bodies with the help of WUAs led to an exploration of a fresh approach in participatory management of water bodies. A mandatory 10% contribution from farmers in cash or in kind, to be supplemented by loan/grant amounts has become the novel method of rising finances for restoration works.
2. National Framework for restoration of water bodies:
Originally developed to undertake the project for the restoration of the water bodies linked to agriculture in AP and this approach was later adopted as the National Framework for restoration of water bodies, and started a practice of generating a corpus from farmers contributions for taking up restoration works. Recognizing the efficacy of this scheme, the same was adopted and up-scaled as the project technique to be adopted in the four states taking up the restoration projects under the National Framework for restoration of water bodies unfolding under the aegis of the Government of India and World Bank. The Government of India launched a pilot project in 2004 for the restoration of the water bodies linked to agriculture in 9 states of the country.
3. Extension of the Corpus Scheme:
Moreover, implementation of the Andhra Pradesh Community Based Tank Management Project and exploration of options for ensuring financial sustainability of FOs beyond the project life has laid foundations of the concept of depositing 5% points of the contribution in an account with WUAs for post project maintenance. The significance of this scheme can be gauged from the fact that the implementation of this scheme in about 3000 tanks covering about 250,000 ha in a project size of about Rs 10,000 Million is expected to generate a corpus of about Rs 300 million with the participating WUAs. The approach has been sought to be extended to about 3000 more water bodies in the state through the Government of India funding. Effectively about 6000 water bodies out of about 11200 in the state would be restored by WUAs and will have a corpus as well for future maintenance. Moreover, recognizing the potential of this scheme for ensuring continuous finances for the maintenance of water bodies, this approach is now converted as a central government scheme approved by the Planning Commission for XIth plan.
The Turn-About: Making PIM Financially Sustainable:
The varied changes initiated to simplify and reduce time and complications in transfer of the plough back money to the FOs, and the 100% plough back of the tax collected to the FOs represented important efforts made to make the system functional. However, financial resources for O&M have not been adequate for almost a decade from 1993 onwards. Lack of O&M is one of the leading factors adversely affecting the performance of irrigation projects. Putting the entire responsibility of O&M on FOs suddenly at one go could overburden them eventually effecting their overall performance. This would have put the inexperienced and just initiated FOs under enormous pressure for effecting satisfactory service delivery. It was therefore decided to modernize and rehabilitate the entire irrigation infrastructure i.e. all major, medium irrigation projects with active participation of FOs for making the irrigation infrastructure operable systems which the FOs could sustain with the 100 % tax revenue re-ploughed. Towards this end a massive modernization process was started that proposed to upgrade the canal systems into operable conditions.
A few safeguard mechanisms were necessary to further the process of FOs taking over the O&M functions in post modernization. It was also essential to ensure that the FOs do not suffer for want of funds which could not sustain and hence negate the benefits of modernization. A separate budget provision was created in 2008 with the Commissioner CAD, to meet the additional O&M requirements if any to provide additional support. This fund was also made available for utilization for additional O&M until the ongoing modernisation works get completed. These carefully structured financial interventions were to on a regular basis provide:
-
100% water tax revenue which would continue to accrue funds to the tune of almost of Rs 1500 million to FOs
-
Ensure tax revenue from industries and power to the order of Rs 1200 million to the treasury
-
This meant that the government needed to balance meeting the establishment cost to the tune of Rs1250 million, non plan support of about Rs 600 million, additional grant of about Rs 2000 million in addition to the cost of modernization and damages with the revenues that it could get from water tariffs
One of the commendable achievements of the process and financial sustainability process has been the steady increase witnessed in tax collection and re-plough. It has been seen that with regular maintenance, the quantum of O&M requirement projected by the farmers has started declining which in turn has reduced the need of additional budget support. The graphical representation of the tax collection and re-plough over the past decade showcases some interesting trends. It can be seen that the finances required to fund the action plan prepared by the FOs is less than the tax collection (point A) and also lesser than the tax re-ploughed (point B). This scenario if continued would start generating surplus at FOs level. In fact if the tax collection increases to about 1500 million over the next two years, there will be no need to enhance the tax. The experience underlines emphatically that what is needed to make O&M operational is not an increase in tax rate-the most recommended and oft repeated suggestion but empowered farmers, sensitized towards effective maintenance needs of irrigation infrastructure.
Figure – Making Rational Choices – Irrigation Water Tax Increase?
Year |
Tax Collected |
FO Action Plan |
Tax Re-plough |
Budgetary Support |
2000-2001 |
700 |
0 |
0 |
0 |
2001-2002 |
580 |
0 |
0 |
0 |
2002-2003 |
900 |
0 |
0 |
0 |
2003-2004 |
350 |
0 |
0 |
0 |
2004-2005 |
570 |
0 |
0 |
0 |
2005-2006 |
840 |
0 |
0 |
0 |
2006-2007 |
670 |
0 |
300 |
0 |
2007-2008 |
690 |
0 |
360 |
0 |
2008-2009 |
1150 |
2000 |
600 |
2000 |
2009-2010 |
1320 Target |
1600 |
1000 |
600 |
Related Downloads
- Allocation of Water Tax, G.O, 115, 2001
- Allocation of Water Tax, G.O 894, 2002
- Allocation of Water Tax, Clarification, Memo no: 18239, 2005
- Plough Back for Administrative Charges-Circular Memo, 2007
