Beneath The Surface
On water market
Abdul Bayes
One of my best friends Mahfuz Anam, the editor of The Daily Star, one day expressed his surprise to me over the news of the existence of water markets in rural areas. My friend frankly admitted, while participating in a workshop, that he was not aware of a market called water market. It is true that many of us are not aware of the fact that there is in fact a market for water because there is always a demand for and supply of water. Had water been unlimited, there would be no market since there would be no supply constraint. However, during the coffee break, he requested me to continue to write on such developments for which I picked up my pen. And to this effect I heavily draw upon the research of Dr Mahabub Hossain, a top agricultural economist.Bangladesh witnessed rapid expansion of irrigation facilities sicne the mid-1980s following major policy reforms in the marketing of agricultural inputs. For irrigation, the government removed the ban on private sector investment for minor irrigation equipment and allowed the private sector to import agricultural machinery, reduced import duties, and removed the restrictions on the standardisation of irrigation equipment. As a result, considerable investment has been made in developing ground water irrigation facilities. Four major systems are in operation for payment for irrigation water. The common practice, at the initial stage, when the market was developing, the system was to share one-fourth of the harvest with the owner of the machine in exchange for providing irrigation water as and when needed. It was a time when "water lords" emerged with monopoly in the water market and charged exorbitant price for the water. That system prevailed for a long time. Later, a system of fixed cash rental per hectare per season was developed. Recently, a system of water charge per hour of actual use of the machine has emerged. The hourly rate varies depending on who bears the cost of the fuel for operating the machine. With the development of the hourly water charge, water is being used more efficiently and the unit cost of irrigation has declined. The machines are now used for supplementing irrigation of the rainy season rice crop (aman), particularly during times of inadequete rainfall. Undoubtedlky this has helped ameliorate the adverse effects of drought on the yield of aman rice. According to Dr Hossain and his co-researchers, ownership of irrigation equipment is distributed fairly equally. According to the 1996 agricultural census, 44 per cent of the equipment was owned by small farmers -- owning up to 1 hectare -- 43 per cent owned by medium farmers, and only 13 per cent by the large ones. The shares of operated land for three groups were 41 per cent, 41 per cent, and 18 per cent, respectively. It appears that this new investment in the development of the productive capacity of the land has benefitted all categories of farmers. One could possibly argue that such development took place on the heels of liberalisation of imports that helped procurement of low cost equipment, especially from China. According to the survey undertaken by the authors, the number of pumps owned by the sample households increased from twenty in 1987/1988 to eighty-six in 1999/2000, while the unit replacement cost of the pump declined from $753 to $173. We thus tend to observe a reduction in irrigation equipmemt cost and increased competition in the water market over the years. Admittedly, this should have definitely impacted upon the cost of irrrigation. However, irrigation costs creeped up mainly due to the cost of diesel. If one visits rural areas during the winter season, one could observe millions of pumps watering the fields, especially the boro paddy. One greatest disadvantage of the development of such water market is the depletion of the ground water level in the absence of a proper regulatory framework. To the critics, it has also contributed to causing environmental hazards. But by and large, the competitiveness in the water market and the fall in irrigation costs following a reduction in the equipment prices seemed to have helped the growth of modern agriculture. However, farmers need to be trained on the uses and abuses of using pumps, the distance between each pump and other associated anomalies. Bangladesh needs to have a ground water policy with an emphasis on its proper implementation. Water is becoming scarce day by day and its price must be set economically. The rapid depletion of the ground water level might raise the extraction costs in the future and thus negate the benefits. Before such adverse effects impinge on us, it is imperative that we develop a sound water policy to help irrigation and thus modernisation of agricultural activities. Healthy competition is always welcome, but unhealthy competition could kill the goose that would lay golden eggs. Abdul Bayes is a Professor of Economics at Jahangirnagar University.
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