Govt mulls SPV for irrigation

The government can consider funding mega-irrigation projects via a special purpose vehicle (SPV) on infrastructure, says the mid-term appraisal (MTA) of the 10th Five-Year Plan.

But the funding needs to be linked to reforms in the water tariff policy and greater reliance on participatory irrigation management through water users' associations, it says.

"Irrigation projects may not be financially viable on a stand-alone basis in the conventional sense because of low water charges," the MTA says, adding that as long as their economic returns are high and loans are guaranteed by state governments, the financing problem can be resolved.

There is a need to explore new sources of funds for such investments, including the SPV proposed for infrastructure financing, in Budget 2005-06.

Funding assistance for this purpose should, however, be strictly linked to reforms in water tariff policy and greater reliance on participatory irrigation management through water user associations, the MTA says.

States should set up water regulators to periodically revise water tariffs. These can set differential tariffs for high water consuming crops, linked with the ground-water status, and also recommend a lower scale of subsidy on power tariffs for agriculture in water-depleted areas to discourage over-drawing ground water.

Water users' associations can manage distribution of water and also collect tariff. Part of the tariff can be retained for system maintenance.

These associations can also be empowered to set water tariffs at higher levels and retain all additional collection, the MTA says. There are 9 on-going mega projects with inter-state benefits, each with a potential to irrigate more than 1 lakh hectares.

the completion of these will add a potential 3.3 million hectares of irrigated land at a cost of Rs 27,700 crore.

The mega projects include the Teesta barrage in West Bengal, Indira Gandhi Nehar in Rajasthan, Western Kosi in Bihar, Shahpur Kandi in Punjab, Sardar Sarovar in Gujarat, Indira Sagar and Omkareshwar in Madhya Pradesh, Upper Krishna Stage II in Karnataka, and Gosikhurd in Maharashtra.

Given the resource constraint in the states, the completion of these projects within a reasonable period of time is unlikely unless additional resources are provided, the MTA points out, adding that there is a case for considering central support for a new mega-irrigation scheme aimed at wrapping up these projects.