Direct and Total Benefits of Irrigation in India and its Implications to Irrigation Financing and Cost Recovery

Who benefits from irrigation development in an economy and who should pay for the cost? This question so far has not been well addressed in the irrigation literature. To answer this question we need to know, in addition to the information on farmers' level benefits (increased crop productivity), the magnitude of the total economy wide benefits derived by the farm and non-farm sector in the economy from irrigation development. In this study, taking an example from India, we have estimated the marginal benefits of irrigation, both direct (farm level benefits) and total (rural economy wide). Then we compute irrigation multiplier values in India, which range from 3 to 4.5. This suggests that two thirds or more of the benefits from irrigation development have actually been accrued to the non-farm sector in the economy, a factor which should be considered in developing a rational cost recovery and irrigation financing policy. The present literature on irrigation financing and cost recovery are very farmers' centric, and they neglect the economy wide benefits and the semi-public good characteristics of irrigation infrastructure systems. But, the empirical information on distributional implications of irrigation impacts derived here suggest otherwise. Hence, the study findings on irrigation multiplier value, as derived here, have large implications for irrigation financing policies, and setting broader scale of rural development public policies such as poverty alleviation and food security in the tropics where the rural livelihoods still largely rely on the productivity of irrigated agriculture and the performance of the irrigation systems.