Optimal allocation of water in village irrigation systems of Sri Lanka

292 Pages·2011·4.78 MB·English

by  Trudy Weekes

OPTIMAL ALLOCATION OF

WATER IN VILLAGE IRRIGATION

SYSTEMS OF SRI LANKA

Mohottala Gedara Kularatne
M.Sc. in Socio-Economic Information for Natural Resources Management, ITC,
University of Twente, The Netherlands, B.A. (Economics) Hons, University of
Peradeniya, Sri Lanka
Principal Supervisor: Associate Professor Clevo Wilson
Associate Supervisor: Professor Tim Robinson
Associate Supervisor: Professor Sean Pascoe

Submitted in fulfilment of the requirements for the degree of
Doctor of Philosophy (Research)

QUT Business School
Queensland University of Technology
Gardens Point Campus, Brisbane, Australia
May 2011

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Keywords
Culture-based fisheries, equi-marginal principle, imposing theoretical consistency,
marginal value product, optimal allocation of water, rice farming, Sri Lanka,
stochastic frontier production function, technical efficiency, village irrigation
systems.
OPTIMAL ALLOCATION OF WATER IN VILLAGE IRRIGATION SYSTEMS OF SRI LANKA i
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Abstract
This PhD study examines whether water allocation becomes more productive
when it is re-allocated from „low‟ to „high‟ efficient alternative uses in village
irrigation systems (VISs) in Sri Lanka. Reservoir-based agriculture is a collective
farming economic activity, which inter-sectoral allocation of water is assumed to be
inefficient due to market imperfections and weak user rights. Furthermore, the
available literature shows that a „head-tail syndrome‟ is the most common issue for
intra-sectoral water management in „irrigation‟ agriculture. This research analyses
the issue of water allocation by using primary data collected from two surveys of 460
rice farmers and 325 fish farming groups in two administrative districts in Sri Lanka.
Technical efficiency estimates are undertaken for both rice farming and culture-
based fisheries (CBF) production. The equi-marginal principle is applied for inter
and intra-sectoral allocation of water. Welfare benefits of water re-allocation are
measured through consumer surplus estimation.
Based on these analyses, the overall findings of the thesis can be summarised
as follows. The estimated mean technical efficiency (MTE) for rice farming is 73%.
For CBF production, the estimated MTE is 33%. The technical efficiency
distribution is skewed to the left for rice farming, while it skewed to the right for
CBF production. The results show that technical efficiency of rice farming can be
improved by formalising transferability of land ownership and, therefore, water user
rights by enhancing the institutional capacity of Farmer Organisations (FOs). Other
effective tools for improving technical efficiency of CBF production are
strengthening group stability of CBF farmers, improving the accessibility of official
consultation, and attracting independent investments.
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Inter-sectoral optimal allocation shows that the estimated inefficient volume of
water in rice farming, which can be re-allocated for CBF production, is 32%. With
the application of successive policy instruments (e.g., a community transferable
quota system and promoting CBF activities), there is potential for a threefold
increase in marginal value product (MVP) of total reservoir water in VISs. The
existing intra-sectoral inefficient volume of water use in tail-end fields and head-end
fields can potentially be removed by reducing water use by 10% and 23%
respectively and re-allocating this to middle fields. This re-allocation may enable a
twofold increase in MVP of water used in rice farming without reducing the existing
rice output, but will require developing irrigation practices to facilitate this re-
allocation.
Finally, the total productivity of reservoir water can be increased by
responsible village level institutions and primary level stakeholders (i.e., co-
management) sharing responsibility of water management, while allowing market
forces to guide the efficient re-allocation decisions. This PhD has demonstrated that
instead of farmers allocating water between uses haphazardly, they can now base
their decisions on efficient water use with a view to increasing water productivity.
Such an approach, no doubt will enhance farmer incomes and community welfare.
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Table of Contents
Keywords ................................................................................................................................................. i
Abstract ................................................................................................................................................... ii
Table of Contents ................................................................................................................................... iv
List of Figures ....................................................................................................................................... vii
List of Tables ...................................................................................................................................... viii
List of Abbreviations ............................................................................................................................. ix
Statement of Original Authorship .......................................................................................................... xi
Acknowledgments ................................................................................................................................. xii
Dedication ............................................................................................................................................. xv
CHAPTER 1: INTRODUCTION ....................................................................................................... 1
1.1 Overview ..................................................................................................................................... 1
1.2 Context ......................................................................................................................................... 4
1.3 General problem .......................................................................................................................... 6
1.4 Objectives of the thesis ................................................................................................................ 9
1.5 Research questions ..................................................................................................................... 10
1.6 Data analysis .............................................................................................................................. 12
1.7 Contribution to knowledge ........................................................................................................ 13
1.8 Thesis outline ............................................................................................................................. 14
CHAPTER 2: ALLOCATION OF WATER RESOURCES IN SRI LANKA .............................. 17
2.1 Introduction................................................................................................................................ 17
2.2 Water resource in Sri Lanka ...................................................................................................... 17
2.3 Water resources management and allocation ............................................................................. 20
2.3.1 Use of water resources in reservoir-based agriculture and related issues ....................... 23
2.3.2 Volume of water used for competing water demands .................................................... 25
2.3.3 Technical limitation of water allocation ......................................................................... 27
2.4 Reservoir water as a commodity ................................................................................................ 29
2.4.1 Missing markets for reservoir water allocation .............................................................. 29
2.5 Reservoir water as a common property issue of non-market solution ....................................... 31
2.5.1 Issues in non-market solutions for reservoir water allocation ........................................ 35
2.6 Chapter summary ....................................................................................................................... 36
CHAPTER 3: PRODUCTION FUNCTIONS AND OPTIMAL ALLOCATION OF WATER . 37
3.1 Introduction................................................................................................................................ 37
3.2 Theoretical overview of stochastic production frontier and analytical framwork ...................... 38
3.2.1 Frontier production functions ......................................................................................... 38
3.2.2 Technical efficiency and technical inefficiency ............................................................. 44
3.2.3 Selection of the functional forms and theoretical consistency ........................................ 47
3.2.4 Estimation of theoretical consistency ............................................................................. 50
3.2.5 Simple three step procedure for imposing monotonicity ................................................ 50
3.2.6 Estimation of technical efficiency .................................................................................. 51
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3.2.7 Estimation of technical inefficiency ............................................................................... 52
3.3 Estimation of optimal allocation of water .................................................................................. 53
3.3.1 Marginal value product (MVP), equi-marginal principle ............................................... 53
3.3.2 MVP and technical efficiency (how derived from SPF) ................................................. 58
3.3.3 Estimation of inter-sectoral optimal allocation of water ................................................. 59
3.3.4 Estimation of intra-sectoral optimal allocation of water ................................................. 61
3.4 Estimation of consumer surplus of water re-allocation .............................................................. 62
3.5 Chapter summary ....................................................................................................................... 64
CHAPTER 4: DATA COLLECTION AND MODEL DEFINITION ........................................... 65
4.1 Introduction ................................................................................................................................ 65
4.2 Data ............................................................................................................................................ 65
4.3 Study areas ................................................................................................................................. 66
4.4 Sample selection methods .......................................................................................................... 67
4.5 Selected sample .......................................................................................................................... 67
4.5.1 Rice farmer study ............................................................................................................ 67
4.5.2 CBF farmer study ........................................................................................................... 68
4.6 Data collection method .............................................................................................................. 69
4.6.1 Rice farmer survey .......................................................................................................... 69
4.6.2 CBF farmer survey ......................................................................................................... 70
4.7 Model definition......................................................................................................................... 70
4.8 Chapter summary ....................................................................................................................... 75
CHAPTER 5: EFFICIENT WATER USAGE IN VILLAGE IRRIGATION SYSTEMS FOR
RICE FARMING ................................................................................................................................ 77
5.1 Introduction; ............................................................................................................................... 77
5.2 Rice production .......................................................................................................................... 77
5.3 Literature review ........................................................................................................................ 79
5.4 Empirical model ......................................................................................................................... 84
5.5 Results ........................................................................................................................................ 86
5.6 Discussion .................................................................................................................................. 93
5.7 Chapter summary ....................................................................................................................... 99
CHAPTER 6: EFFICIENT WATER USAGE IN VILLAGE IRRIGATION SYSTEMS FOR
CULTURE-BASED FISHERIES PRODUCTION ........................................................................ 101
6.1 Introduction .............................................................................................................................. 101
6.2 CBF production ........................................................................................................................ 101
6.3 Literature review ...................................................................................................................... 105
6.4 Empirical model ....................................................................................................................... 107
6.5 Results ...................................................................................................................................... 109
6.6 Discussion ................................................................................................................................ 116
6.7 Chapter summary ..................................................................................................................... 122
CHAPTER 7: INTER-SECTORAL OPTIMAL ALLOCATION OF WATER ......................... 125
7.1 Introduction .............................................................................................................................. 125
7.2 Inter- sectoral water allocation ................................................................................................. 125
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7.3 The current water allocation system ........................................................................................ 127
7.4 Optimal allocation of water ..................................................................................................... 129
7.5 Empirical model ....................................................................................................................... 133
7.6 Results ..................................................................................................................................... 134
7.7 Discussion ................................................................................................................................ 137
7.8 Chapter summary ..................................................................................................................... 140
CHAPTER 8: INTRA-SECTORAL OPTIMAL ALLOCATION OF WATER ......................... 141
8.1 Introduction.............................................................................................................................. 141
8.2 Intra-sectoral water allocation.................................................................................................. 141
8.3 Literature review ...................................................................................................................... 143
8.4 Empirical models and results ................................................................................................... 147
8.5 Results ..................................................................................................................................... 148
8.6 Discussion ................................................................................................................................ 151
8.7 Chapter summary ..................................................................................................................... 156
CHAPTER 9: RESERVOIR WATER RE-ALLOCATION AND COMMUNITY WELFARE157
9.1 Introduction.............................................................................................................................. 157
9.2 Reservoir water re-allocation ................................................................................................... 157
9.3 Literature review ...................................................................................................................... 159
9.4 Results and estimation of potential gains from water re-allocation ......................................... 161
9.5 Discussion: Issues associated with reservoir water re-allocation ............................................. 164
9.5.1 Establishing water user rights ....................................................................................... 165
9.5.2 Internalising CBF externalities ..................................................................................... 167
9.5.3 Co-managment as a mechanism for water re-allocation ............................................... 169
9.6 Chapter summary ..................................................................................................................... 173
CHAPTER 10: CONCLUDING REMARKS ............................................................................. 175
10.1 Conclusions.............................................................................................................................. 175
10.2 Summary, key findings and discussions .................................................................................. 175
10.3 Policy implications .................................................................................................................. 179
10.4 Limitations and future direction of research ............................................................................ 185
BIBLIOGRAPHY ............................................................................................................................. 187
APPENDICES ................................................................................................................................... 205
Appendix A ............................................................................................................................. 205
Appendix B ............................................................................................................................. 209
Appendix C ............................................................................................................................. 211
Appendix D ............................................................................................................................. 213
Appendix E ............................................................................................................................. 221
Appendix F ............................................................................................................................. 229
Appendix G ............................................................................................................................. 235
Appendix H ............................................................................................................................. 253
Appendix I ............................................................................................................................. 257
Appendix J ............................................................................................................................. 261
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List of Figures
Figure 1.1. Identification of the research problem. ................................................................................. 8
Figure 1.2.The water allocation problem between competing uses. ....................................................... 9
Figure 1.3. The chapter outline of the thesis. ........................................................................................ 15
Figure 2.1. Method of water allocation in village reservoirs................................................................. 25
Figure 2.2. Semantic diagram of intra-sectoral water allocation. ......................................................... 26
Figure 2.3. Graphical presentation of land and water relationship. ...................................................... 27
Figure 3.1. Overall analytical framework. ............................................................................................ 38
Figure 3.2. Simple isoquant diagram of input-orientated TE measures. ............................................... 45
Figure 3.3. Rice-water frontier production function. ............................................................................ 46
Figure 3.4. Concavity and monotonicity properties of a production function. ..................................... 49
Figure 3.5. Non-monotonic production frontier with non-monotonic interval. .................................... 49
Figure 3.6. Efficient level of inter-sectoral allocation of water.............................. .............................. 54
Figure 3.7. Illustration of current and optimal water allocation in rice and CBF production. .............. 55
Figure 3.8. Determining the optimal distance of water allocation................................ ........................ 56
Figure 3.9. Inter-sector water re-allocation. .......................................................................................... 63
Figure 5.1. Frequency distribution of TE estimates .............................................................................. 93
Figure 6.1. Frequency distribution of TE estimates ............................................................................ 115
Figure 7.1. Measuring water levels in village reservoirs........................................... .......................... 128
Figure 7.2. MVP of water for CBF and rice production in VISs ........................................................ 136
Figure 8.1. Relationship between declining rice output and distance from water source.. ................. 143
Figure 9.1. Farmers‟ welfare benefits of reservoir water re-allocation. .............................................. 162
Figure 9.2. Co-management settings for reservoir-based agriculture in VISs .................................... 172

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List of Tables
Table 2.1 Basic economic characteristics of reservoir water as a commodity ..................................... 29
Table 2.2 A trichotomy of resource user regimes ................................................................................. 33
Table 4.1 Number of reservoirs used for CBF in the selected districts ................................................. 66
Table 4.2 The breakdown of the total sample ....................................................................................... 68
Table 4.3 Description of variables of the inefficiency model ................................................................ 73
Table 4.4 Description of variables of the inefficiency model ................................................................ 75
Table 5.1 Summary statistics of variables involved in the stochastic frontier model ............................ 87
Table 5.2 Initial maximum likelihood estimates (unrestricted frontier estimation) .............................. 88
Table 5.3 Performances of monotonicity and quasi-concavity ............................................................. 89
Table 5.4 Minimum distance estimation ............................................................................................... 90
Table 5.5 Final stochastic frontier model ............................................................................................. 91
Table 5.6 Inefficiency model ................................................................................................................. 92
Table 6.1 Incorporation of agricultural and CBF activities in village reservoirs .............................. 104
Table 6.2 Summary statistics of variables involved in the SFM for CBF production ......................... 110
Table 6.3 Initial maximum likelihood estimates (unrestricted frontier estimation) ............................ 112
Table 6.4 Performances of monotonicity and quasi-concavity ........................................................... 113
Table 6.5 Minimum distance estimation ............................................................................................. 113
Table 6.6 Final stochastic frontier ...................................................................................................... 114
Table 6.7 Inefficiency model ............................................................................................................... 114
Table 6.8. Mean TE of selected South and South Asian countries ...................................................... 116
Table 7.1 Inter-sectoral optimal allocation and shadow value of water ............................................. 135
Table 8.1 Sectoral average production and TE levels ........................................................................ 149
Table 8.2 Estimated technical inefficiency model for sectoral rice production .................................. 150
Table 8.3 The optimal intra-sector allocation of water ...................................................................... 151
Table 9.1 Analysis of demand shifting due to water re-llocation ........................................................ 163
Table 9.2 Consumer surpluses for rice and CBF production with water re-allocation ...................... 164
Table 10.1 Decision-making of kanna meetings in the framework of co-management strategy ......... 182

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