Faculty of Business and Law

SCHOOL OF ACCOUNTING, ECONOMICS AND FINANCE

School Working Paper - Economic Series 2007

SWP 2007/07

Institutional Economics Approach to Irrigation Management with special Reference to Developing Asian Countries

Gamini Herath and Mokhtharul Wadud

The working papers are a series of manuscripts in their draft form. Please do not quote without obtaining the author’s consent as these works are in their draft form. The views expressed in this paper are those of the author and not necessarily endorsed by the School.

Institutional Economics Approach to Irrigation Management with special Reference to

Developing Asian Countries

Gamini Herath and Mokhtharul Wadud

Associate Professor and Lecturer respectively

School of Accounting, Economics and Finance, Deakin University, Geelong Campus at Waurn

Ponds, Victoria, Australia

Email: gamini.herath@deakin.edu.au

Many countries in Asia, Africa and Latin America have turned over irrigation systems to farmer

groups. There is general consensus that neoclassical economics has failed to address many issues in

irrigation water management. Institutional issues have been at the heart of some of these failures. The

New Institutional Economics (NIE) has been used by policy makers to address issues with respect to

irrigation water manageemnt. The NIE by focusing on transactions costs and collective action

procedures were able to overcome some of the critical bottlenecks in improving productivity of

irrigation. The NIE also highlights the need to pay attention to the informal institutions such as

rotational irrigation in developing countries and initiate irrigation management transfers to water user

associations. The WUAs have shown much promise yet many problems need to be resolved to further

improve irrigation water use. Water pricing is still at its infancy despite some limited experiences.

Until the institutional and technological problems are simplified pricing will remain less effective.

1.0 Introduction

The management of irrigation water in developing countries in Asia, Africa and Latin America has

become a critical issue for policy makers in recent decades due to increasing scarcity of water. For

nearly half a century, governments have invested heavily on large irrigation infrastructure often

supported by donor agencies such as the Asian Development Bank and the World Bank. Governments

also undertook the responsibilities for the management of irrigation water supplies. Government

intervention in irrigation water management resulted in increasing government subsidies and higher

levels of government regulation and control. The cost to the farmers of this heavily subsidized canal

water is extremely low, varying between 5 percent and 15 percent of the canals’ operating costs.These

created perverse incentives for farmers, bureaucrats and politicians to engage in rent-seeking activities

(Lam, 2001; Gulati and Narayananan, 2002). The lower than expected returns have also been

attributed to the inability to price irrigation water at their opportunity costs (Rosegrant et al, 1995).

Wrong pricing policies for irrigation water have been implicated for the major deficiencies of

irrigation systems throughout the developing world. A flat fee is levied, implying a zero marginal cost

for water. It is very rare to find the use of marginal cost pricing for irrigation in any country. The

departures from marginal cost pricing do not seem to follow any regular principles and often ad hoc

charges are used.

Mainstream economists champion greater adoption of market approaches which use the price system

to overcome the complexities of irrigation water management. However, available evidence confirm

that market approaches alone cannot guarantee a satisfactory outcome to irrigation water management

problems because of common property characteristics of water (Vandenberg, 2002; Lam, 2001; Saleth

and Dinar, 2004). The design of incentives that will ensure that full social and economic costs of

irrigation water are covered is challenging. Further, market based policies are unlikely to achieve

efficient use of water unless they are linked to institutions capable of implementing, monitoring and

enforcing pricing policies at the local and national levels.

Many scholars argue that institutions are very important to improve irrigation water management

problems (Ostrom,1990; Ostrum, 1993). However, neoclassical economics provided very little insight

in understanding institutional conditions such as rotational irrigation in developing countries and how

a wide diversity of institutional arrangements can be used to achieve improved water allocation in

different settings. How to incorporate and sustain institutional innovations to ensure efficient use and

management of irrigation water under diverse ecological, economic, social, and political constraints is

an ongoing debate on irrigation water resource development (Saleth and Dinar, 2004).

Efficient use and management of irrigation water require changes in institutions and new institutions.

To achieve this, a clearer understanding of the dynamics of institutional change including the dynamic

between individual choice, institutional design, and the incentives embedded in the institutional

environment is essential (Lam, 2002; Lam, 2001). Recent literature on development provides

evidence of a continuing effort by economists to obtain a better understanding of the role of

institutions in irrigation water management (Lam, 2004).

The New Institutional Economics paradigm (NIE) provides a flexible framework to understand a wide

network of institutions that influence economic behaviour and performance (Williamson, 1985; North,

1990). Unlike neoclassical economics, NIE provides a finer theoretical focus by which to analyse the

structure of transactions and their governing institutions. NIE delineates the forces that generate and

distribute the production of income by analysing the nature of transactions. NIE recognises that the

allocation of rights and responsibilities of transactions, depend on the nature of the transaction, costs

of monitoring and enforcement, the bargaining position and the relationship between the trading

parties.

NIE can play a crucial role in the context of developing economies where legal rights could be murky

and information asymmetry would be widespread. In this paper, we examine the performance of

innovative institutional approaches for irrigation water management in developing countries. The aim

of this paper is to identify the potential and problems in strengthening irrigation water management

institutions through analysis of existing institutional structures in developing countries and draw

policy implications for improved management. The specific objectives of this study are to

(a) review the role of institutions and irrigation investment on income, poverty and inequality in

development in Asian countries.

(b) assess the performance of WUAs in developing countries in Asia , and

(c) identify the limitations of WUAs to irrigation development. .

2.0 Methodological aspects of New Institutional Economics

Institutions embrace a wide diversity of concepts. Institutions in a broad sense govern and limit

human interaction. Societies’ institutional framework is the set of rules and constraints that govern

human behaviour which can include legal rules, organisational forms, norms of behaviour and

enforcement mechanisms. The most common definition of institutions is that they are “rules of a

society that facilitates coordination among people by helping them to form expectations which each

person can reasonably hold in dealing with each other” (Ruttan and Hayami, 1984). According to

North (1990), institutions are the “humanly devised constraints that shape human interaction. North’s

definition is broader and encompasses legal and regulatory frameworks along with cultural, social and

cognitive processes which provide a norm structure to guide interaction.

The “rules of the game” definition of institutions is particularly important because it supports market

activity, efficiency, economic growth and development. Markets are institutions because they

embody rules and regulations, formal and informal which govern their operations. Similarly, formal

organizations such as labour unions are institutions because they provide sets of rules governing the

relationship both among their members and non-members. Williamson (1985) defined institutions as

the “mechanisms which govern transactions “and hence institutions are transactions cost minimising

arrangements. However, the crucial question is not how the definitions differ or not but how economic

efficiency and distributional features of institutions (Nabli and Nugent, 1989) evolve over time and

what their efficiency and distributional implications are.

The NIE, in contrast to the Old Institutional Economics (OIE) of Ayers etc is an overarching

paradigm which provides powerful insights into how institutions affect incentives. NIE acknowledges

that differences in institutions are the primary reasons for differences in economic performance. Weak

institutions undermine the development potential. NIE has identified several themes the most common

being transactions cost, collective action and property rights (Nabli and Nugent, 1989). Coase (1960)

suggests that firms emerge to economize on transactions costs of market exchange. Coase (1937)

pioneered the idea that the boundaries of the organisation depend not only on the production

technology, but also on the costs of transacting business, a framework that was later developed by

Williamson emphasising transactions costs as the determinant of institutions (Williamson, 1975;

1985). Economic organisations impose costs because complex contracts are usually incomplete and

future is generally uncertain. These are costs associated with economic exchange and include search

and information cost, bargaining and decision costs and enforcement costs. Institutions evolve to

lower these transaction costs which are the key to the performance of economies. NIE identifies

institutional arrangements that minimise perverse incentives in various transactions.

According to Williamson (1975, 1985), asset specificity, bounded rationality and opportunistic

behaviour by contractual parties determine the institutional form. Bounded rationality can lead to

opportunistic behaviour (adverse selection, moral hazard) and institutions evolve in order to minimise

opportunistic behaviour. Under these circumstances, hierarchical approaches may evolve to govern

transactions (Simon, 1957; Dequech, 2001). Incomplete information and information asymmetry can

also lead to opportunistic behaviour which is costly to correct and institutions such as rotational

irrigation, collective action and social capital (institutional capital ) have emerged in order to

minimise transactions costs and improve economic performance (Williamson, 1985).

theory of collective action

Collective action approaches are widely used by self-interested individuals to manage common

property resources such as irrigation water. Collective action and self-governance help manage

common property resources and avoid the “tragedy of the commons” (Runge, 1986; Ostrom,1990;

Bromley, 1992). Rules and endogenous authority systems can encourage members to cooperate

towards a group strategy because the rules provide certainty about expected actions of others (Runge,

1981; 1986). Collective action is affected by attributes such as group size, similarity of group

characteristics and goals (Olson ,1982). Ostrum (1990) identifies custom and social conventions as

facilitating collective action (Nabli and Nugent, 1989). According to Runge (1986) low incomes,

critical dependence on a local resource and high uncertainty with respect to those resources can lead

to collective forms of management. The more homogeneous a community, the more likely that the

optimal outcome is communal management, since people will share similar economic goals and

uncertainties as well as socially accepted norms of cooperation. Runge (1986) argues that people will

cooperate for their common good without provision of external (state) coercion if they can be assured

that a critical mass of users obey a common property arrangement (Moorhead and Lane, 1993).

Institutions can also be considered a form of capital. A societies institutions can be regarded as

cultural or social capital (Barkes and Folke 1992). Social capital is closely linked to collective action

in irrigation water management in developing countries. Some consider social norms, cultural values,

trust and reciprocity and social sanctions as social capital (Rudd, 2000; Woolcock, 1998). Social

capital is productive, self-reinforcing and cumulative and can improve economic performance. Social

capital enables participants to act effectively to pursue shared objectives. There are stronger

incentives for cooperative action by local groups in cases where exploitation would occur from purely

individualistic behaviour under ‘common property resource systems’ (Ostrom, 1990).

Property rights are related to collective action and self-management. The absence of clearly defined

and well-enforced property rights and the prevelance of inefficient and corrupt judiciaries and

bureaucracies significantly increase risks and costs of transactions and in many cases transactions

from occurring at all. Coase (1960) believes that government involvement is inefficient if property

rights are well established. Demsetz (1967) and Coase (1960) argue that, in the absence of

transactions costs, private property rights is the most efficient system of land use. Property rights

lower transactions costs and exclusive rights provide sufficient incentives to encourage development

and cultivation (North and Thomas, 1977). Property rights for water users entail right to access a

certain amount and quality of water, collective protection against conversion of irrigated lands, use of

irrgation infrastructure, irrigation services etc. However, if transactions costs are high private property

rights may not be the best property system.

3.0 Irrigation management experience in developing countries

Early Phases of Irrigation Development

Most developing countries in South and South East Asia have shown a similar trajectory in irrigation

investment over the last fifty years. In India, the state exploited irrigation water resources by

constructing large barrages and reservoirs. Most large command areas in India are more than 100000

ha. specially in canal irrigation. At the time of independence in 1946, India had 22.5 million ha under

irrigation, of which 9.7 million ha were under major and medium schemes (Gandhi, 2002). By 1985, a

total potential of 68 million ha had been created – 30.6 million in major and medium schemes and

37.4 million ha under minor irrigation projects. The potential irrigated area in year 2000 exceeded

90.0 million ha (Gandhi et al 2007). But after 2000, there has been a significant slow down in the

growth of the irrigated area. In India there has been an unprecedented increase in exploitation of

ground water and since 1995-96, tubewells have become a major source of irrigation water for

farmers compared to canals and other wells (Gandhi et al 2007). Increased use of tube wells has led

to overuse of ground water in north western India and lowering of the water table. Punjab is India’s

most agriculturally productive region and encouraged by favourable prices too many tube wells have

been drilled and groundwater is quickly becoming depleted in parts of the state.

Sri Lanka has approximately 500,000 ha of land under irrigation (350,000 ha under major irrigation)

managed by the Irrigation Management Division (IMD) and the Irrigation Department (ID). The

Mahaweli diversion scheme, a major irrigation project in Sri Lanka was initiated in the 1970s, and has

approximately 50,000 ha (Raby,1991). Until the 1980s, new irrigation construction accounted for 20-

40 percent of total public investment but operation and maintenance (O&M) accounted for only 5

percent (Aluvihara and Kikuchi, 1991). Major construction ended in the 1980s due to escalating costs

and management failures. Since the 1980s emphasis was on rehabilitation and schemes such as Gal

Oya showed good returns to rehabilitation, the IRRs exceeding 26 percent (Aluvihara and Kikuchi,

1991). By the 1980s, institutional changes were initiated as a major policy to improve water

management whose returns were higher compared to new construction and rehabilitation.

In Sri Lanka groundwater use has been supported by government subsidies since the 1970s. (Kikuchi

et al, 2003). After the 1980s, lined dug wells and irrigation pumps were used by private individuals to

grow subsidiary crops and occasionally paddy. The absence of well-defined property rights structure

and use of groundwater by a few undermined local management efforts and led to poor performance.

Currently, increased agro- well use to supplement irrigation or to grow additional areas has not led to

serious problems. There is no market and most use is for private purposes. However, the

unprecedented increase in agro-wells especially in the dry and intermediate zones, highlight the need

to develop appropriate institutions to minimize ground water exploitation, lowering water table and

reducing costs.

Similar features can be observed in Nepal. Until the 1950s, irrigation development in Nepal, was

largely the concern of the local communities. Most of these schemes are small. Government

involvement in irrigation development began around the 1950s, and the focus was on the construction

of large agency managed schemes. Small scale irrigation was given little attention. By 1988, there

were 16 000 farmer- managed irrigation schemes in Nepal irrigating an area of 714000 ha (67 percent

of the irrigation area).

The development of irrigation in other countries such as Pakistan and Bangladesh shows similar

trajectories. In both these countries, early investment was characterised by heavy investment on large

irrigation infrastructure. Pakistan also shows rapid development of groundwater in the last two

decades, similar to India and Bangladesh. There are now nearly half a million tube wells in Pakisn’s

Punjab province alone, supplying about a third of the irrigation at the farm gate (Shah et al, 2000). In

Bangladesh, following recommendation by the World bank, minor irrigation through low lift pumps

(LLP) for surface water and shallow tube-wells for ground water spread very rapidly in the 1970s.

Currently, both traditional method such as ‘doon’ (a water lifting device), swing basket and modern

methods such as LLP, STW and deep tube wells (DTW) and handpumps (HP) are used for irrigation

(Ahmed and Sampath, 1992). Despite abundant rainfall during monsoon, groundwater has been the

main source of irrigation in Bangladesh, with lack of suitable reservoirs or tanks for dry winters

(Ahmed and Sampath, 1992). Table 1 shows that Bangladesh uses almost 69 percent of its’ water

from groundwater sources. In India the percentage is also very high being around 59 percent.

China relied on irrigation investment to spur rural growth and reduce poverty and inequality. In the

year 2000, the investment on irrigation exceeded the annual budget targeted specifically at poverty

reduction and was more than 10 times the spending on agricultural research (Huang and Hu 2001).

Table 1:Groundwater use in some selected countries in south Asia

Country Year Irrigated area (000ha) surface water groundwater

Bangladesh 1993-95 3750 31 69 India 1990-93 50100 41 59 Nepal 1994-96 1060 81 19 Pakistan 1990-91 14330 66 34

Source: Bhandari and Shivakoti 2005.

Impact of early efforts in irrigation development

These investments no doubt had some dramatic impact. For example, In the Indian Punjab,

agricultural productivity grew by around 6 per cent and by the end of the 1980s, wheat and rice yields

doubled. Annual per capita income rose from $60 in 1980-81 to $440 in 1997-98. However,

Rosegrant and Evenson (1992) could not establish a firm positive relationship between irrigation

invesmtent and productivity for India. Sri Lanka produced only about 40 percent of total rice

requirements after independence in 1948, but by 1985, 90 percent self-sufficiency in rice production

was achieved. Between 1951 and 1985, domestic rice production increased six-fold at an annual

compound growth rate of 5.3 percent (Aluvihare and Kikuchi, 1991). Hossain (2000) established a

positive relationship between irrigation and agricultural income in Bangladesh. The irrigation

investments in China led to improvements in food self-sufficiency in the 1960s and 1970s.

Fan et al (2000) found that the massive investments on irrigation in China had only a modest

effect on overall production, poverty and inequality.

However, there were many problems in agency managed irrigation (Gulati, et. al. 2002). Poor

maintenance of irrigation facilities under public provision is a salient feature in many countries. Sri

Lanka spent less than 10 percent of total expenditure on maintenance during 1950-88 (Aluvihare and

Kikuchi, 1991). China lost almost 1 million hectares due to poor maintenance since the 1980s. Some

36.6 percent of the irrigated areas in Pakistan is waterlogged. The decline in the availability of

suitable land for irrigated agriculture, extremely high costs of developing irrigation infrastructure,

increased O and M costs, poor cost recovery are the major features of the early period of irrigation

development which are run mostly by government (Gulati et al, 1995, Rosegrant 2002). There was

heavy subsidisation of the irrigation management in Sri Lanka which had a poor record of cost

recovery. Less than 50 percent of the maintenance costs have been collected from farmers at any time

(Herath 2002). In India, Pakistan, Bangladesh, Philippines, and Indonesia, irrigation user fees are 10-

90 percent less than the cost of operation and maintenance. The cost to the farmers varied between 5-

15 percent of the operating costs. The World Bank found that in seventeen irrigation schemes it

examined, less than 30 percent of the total costs were recovered through pricing or other fees

(Sampath, 1992). There has been a several fold increase in the irrigation subsidies.

Another major deficiency has been the wrong pricing policies in irrigation (Rosegrant, Schleyer, and

Yoder, 1995). Pricing is not related to the scarcity or the cost of delivery. The charges were fixed in

nominal terms and hence the real price of irrigation is very low. A flat rate pricing means the marginal

cost is zero which created inefficiency in water use. Efficiency in developing country projects is

typically 25 to 30 percent, compared with 40 to 45 percent under best practice (World Development

Report, 1994).

Poor maintenance also led to adverse environmental consequences. By 1989, 15 percent of the

irrigated area had become severely waterlogged. In Pakistan, soil salinity caused 25 percent reduction

in production of major crops in the SGW areas. In the Sind Province the reduction is around 40-60

percent in the saline groundwater areas. Similarly there have been serious environmental

consequences such as soil erosion, poor drainage, lowered water quality and salinity in the entire

region.

Market approaches for irrigation development

Some economists argue that past failures in irrigation management is due to the absence of market

incentives. Market approaches through proper pricing of water can efficiently allocate water

resources, reduce drain on financial resources and limit governments role as suppliers of irrigation

water. Demand side water saving can provide incentives for farmers to shift from water intensive rice

to higher valued and less water intensive crops (Rosegrant et al., 1995).

In Java, Indonesia when direct water charges are levied, the area harvested of crops which require

more water is reduced in favor of less water demanding crops. In both seasons, harvested rice acreage

fell by 10 percent indicating a shift to less water intensive crops. Martin and Yoder (1983) examined a

communal irrigation project in Nepal. The Chherlung Thulo Kulo irrigation system was developed by

initially issuing altogether 50 shares to the 27 households. Shares were issued based on proportional

contribution of farmers to initial investment costs of the system and entitled the holders to 1/50 of the

total water delivered by the system. Demand and supply factors have led to a market transfer of shares

among farmers as well as a rise in the prices of the shares over time. The total amount of water

delivered by the systems has increased over time due to improvements in the irrigation system.

In Bangladesh, over the 1970s and 1980s, groundwater sourced private irrigation expanded rapidly

with farmers’ increased access to technologies such as DTW and STW. However, despite abundance

of groundwater, private irrigation in Bangladesh has not been very successful due to high degree of

land fragmentations and lack of large farms (Boyce 1987; Palmer-Jones, 2001). Unless few farmers

own land that are contiguous, purchase of a tubewell is not cost-effective and farmers are left with

options such as joint or cooperative ownership of tubewells, water trading or tubewell hiring, which

are not generally conducive to emergence of a competitive irrigation water market given Bangladesh’s

segregated rural society and soio political dominance by the rural elite (Boyce, 1987; Palmer-Jones,

2001 and Adnan, 1999).

There can be monopoly elements in the water market specially for groundwater. These have been

identified by Shah (1993) and Meinzen-Dick (1998) for India and Pakistan. Sri Lanka’s ground water

development differs from those of India and Pakistan in two significant ways, with implications for

water market development (Kikuchi et al, 2003). In Sri Lanka, ground water developed spontaneously

and had only informal social institutions with little legal environment or regulation. There is no sale of

ground water from wells by Sri Lankan farmers.

Chile appears to be the most publicized case of privatization. Farmers may sell some water but use the

remainder with highly efficient on farm irrigation technology for the orchard and vegetable crops

grown in the area. Chile’s experience shows that tradability of water has contributed to diversification

and rapid growth of the agricultural sector. Yet the market approach to irrigation is not highly

successful. The limited experiences does not provide sufficient evidence on the veracity of market

pricing to improve water management. Hence pursuing a market approach with efficient water pricing

remains highly controversial. Further, the price elasticity of demand may be as low as 0.3 and

charging higher prices may not necessarily lead to use of less water.

For efficient markets to function, there should be clearly defined property rights. It is difficult to

define property rights for water which has common property characteristics. In most developing

countries in Asia, wet rice growing by small scale farming using gravity fed irrigation is hardly

conducive to defining property rights to the water or identifying the user of the water. Volumetric

pricing of irrigation water is difficult as there are no individual meters to measure water deliveries.

Problems of uncertainty with respect to availability and delivery in gravity fed systems discourage

farmers from agreeing to price reforms. The poor status of the infrastructure of the systems further

undermine potential for pricing reforms.

Many governments have moved away from imposing the full costs upon the users of irrigation for

political reasons because charges are resisted by farmers (Samad, 2005). The political consequences

of reallocating water away from agriculture are too high. According to Price (1994) “ in South Asia,

the cost of foregone agricultural production, multiplier effects regionally, and the resulting social

problems of large pockets of poor rural residents are possible results that are politically unacceptable

to governments and present little incentive to promote open water markets”.

Many researchers have found that pricing and other market mechanisms are not a panacea for the

problems of irrigation systems. Pricing water will not lead to efficient allocation and financial

viability under existing technological, socio-economic and institutional conditions. Some countries

such as Syria and Tunisia have used water efficient technologies which may have potential in Asia

(Dinar and Mody, 2004). When water is scarce, water markets can lead to inequitable distribution.

The general conclusion with respect to the potential of efficient pricing is that it is not simply an

institutional issue. Privatisation and market allocation of water is neither feasible nor desirable in the

short term. It is suggested that the government limit itself to the provision of technical and financial

assistance and create an environment where farmers and water users can work through WUAs. The

government should provide strong institutional support and leadership for water markets to emerge.

This means that efforts be directed to make WUAs financially autonomous, where the need to obtain

fees becomes important and makes the organisation cost conscious. This means that the WUAs should

have the ability to set fees, reduce their own administrative costs, and that the fees should reflect the

level of management of the scheme.

4.2 Institutional Reforms for Improved Water Management

Over the last two decades, emphasis has moved from irrigation development to improving irrigation

water management in all developing countries. The institutional changes inherent in the transition

from predominantly supply-based to demand-based water management require innovative approaches.

Most policy makers and experts agree that better management of irrigation water can be achieved if

the irrigation systems are distanced from political interference and de-bureaucratised (Gulati and

Narayanan, 2002). The trust and reciprocity present in rural communities increase the success of

collective action. The literature is replete with examples of indigenous collective action processes

successfully managing irrigation water. For example, the farmer managed irrigation systems of Nepal,

Sri Lanka India (Warabandi) etc. are well managed and rely on local rules and norms to achieve

higher cropping intensities and yields than government sponsored systems (Barker and Molle 2005).

For example, the Warabandi system in India is more than 125 years old. India had the ahar-pyne

system in Bihar, Phad system in Maharashtra managed by farmers (Ballabh 2005). In Africa and

Latin America collective management outperformed agency based management.

Beginning in the 1980s, many countries in Asia, Africa and Latin America have turned over irrigation

systems to farmer groups WUAs for collective management (Samad and Vermillion 1999). This is

referred to as Irrigation Management Transfer (IMT) (Herath 2002). IMT ostensibly reduces the role

of government, achieves higher returns to irrigation investment, ensure greater control, responsibility,

greater equity and fairness in the distribution of benefits and can lead to poverty reduction. The

WUAs reflect empowerment of farmers to make their own decisions in water allocation and

management.

The preconditions for IMT is that the WUAs take delivery of water from the irrigation authorities and

that measurement devices are installed to determine volume of water released (Gulati and Narayanan,

2002). On a limited number of occasions, IMT involves complete privatization through actual sale or

disposal of all public assets, while in other cases, IMT involves partial transfer with management

control of main water source retained by public authority and O & M responsibilities of secondary

water sources provided to the WUAs (Johnson, 1995). Some WUAs were introduced through

government sponsorship to make the irrigation systems financially viable and to empower farmers

through greater participation (Raby 1991).

While the objectives of IMT for local irrigation management are clear, the design of WUAs in the

face of variations in the environment, agrarian structure, and the politico-economic environment is

complex and difficult (Herath 2002). Serioius problems have been experienced in most countries in

adopting IMT / WUAs for management. IMT is still new and it is expected that the ideal conditions

will gradually emerge as the WUAs gain sufficient confidence and experience. The experience to date

could provide valuable insights to improve the long term potential of IMT. This experience is

analysed in the next section by selecting a sample of institutional initiatives (reflecting top-down,

bottom-up approaches) and their achievements.

5.0 Descriptive analysis of the performance of WUAs

This section demonstrates the implications of IMT on alleviation of poverty and on inequality of

income distribution and sustainability based upon several published case studies. These case studies

are limited to IMTs after adoption of IMT in the 1980s.

Sri Lanka

In 1988, the Sri Lakan Government adopted IMT for major irrigation schemes and in the following

year management responsibilities were transferred to legally registered WUAs. The government

irrigation agency was responsible for the headwork and the main canal system while the WUAs were

responsible for the O&M activities below the distributory channel (Samad and Vermillion 1999). In

Sri Lanka, the major emphasis for involvement of user groups in O &M was to make irrigation

systems financially viable rather than to empower farmers (Raby, 1991). With the introduction of the

WUAs, full recovery of O&M costs from members was expected. The WUA concept spread rapidly.

By March 1997, there were 757 WUAs (Saleth and Dinar 1999).

The WUAs can formulate farm plans for the area, market local produce and distribute farm inputs,

formulate rules for the maintenance of irrigation infrastructure, devise procedures for the distribution

of water, and impose and collect irrigation fees (Samad 2002). The O&M (excepting the tank and the

main canals) was the responsibility of the WUA although some of them had limited financial

autonomy and could undertake contracts of up to Rs. 50,000 only (Raby 1991).3. This does not appear

to have happened and the government frequently subsidizes maintenance costs (Herath 2002, Samad

2002).

In the Gal Oya Project in south eastern Sri Lanka, local FOs were introduced in 1980 with

considerable success (Uphoff, 1996; Ostrom, 1990). In the 1997 cropping season, the FOs were able

to bring nearly 60,000 acres under cultivation with around 1 acre-foot of water when the irrigation

Department indicated that not more than 26,000 acres can be cultivated. Also prior to the FOs were in

place, around 8-9 acre-feet of water were released per acre in the dry season. In 1985, it was down to

5.5 and reached 4.5 acre feet in the late 1980s. The average yield was 95 bushels per acre which is 10

percent higher than the norm (Uphoff and Wijayaratna, 2002). Despite pessimism by technical

personnel, a million dollars worth of rice was produced during the dry season when water is

considered inadequate to grow rice (Uphoff and Wijayaratna, 2000) farmers were able to distribute

very limited water effectively that a better than a normal crop was obtained (Uphoff and Wijayaratna,

2000). These achievements were far above what the engineers have ever expected. Amarasinghe et al

(1998) estimated that about half of the improvement of efficiency in Gal Oya is due to FOs. The

3 US$ = Rs. 100 in 2005.

success in Gal Oya reflects the important of using social capital to empower farmers to evolve the

most appropriate institution to suit their own unique situation.

The Rajangana and the Mee Oya irrigation schemes in the North Central and the North Western

Provinces in Sri Lanka managed under WUAs for more than 10 years reflect less successful cases

(Aheer, 1999). The poor performance is due to inadequate commitment of resources by farmers which

constrained increased efficiency of water management. Lack of experience and poor fee collection

created financially weak FOs. There were competing demands for the finances of the FOs including

construction of buildings, purchase of capital equipment, working capital for service provision and

advances for rehabilitation and maintenance (Aheer, 1999). The poor stature of the FOs led to wastage

of irrigation water and exacerbation of environmental problems (Aheer, 1999; Moore 1981). The

failure is attributed to the premature transfer of irrigation responsibilities to farmers with poor

training. Further, these transfers were made more for budgetary reasons and donor pressure and not

because farmers were ready for genuine transfer (Aheer, 1999, Raby 1991).

In Sri Lanka, rules stipulate that only formal right holders to irrigated land can become members

(Meinzen-Dick and Zwarteveen, 2003). The failure to adequately represent women in WUAs and FOs

has further exacerbated the equity objectives (Molen, 2001). Studies show that female participation is

not widespread and enrolment in FOs is very low compared to male participation.

Sri Lanka’s water sector is beset with many other socio-political issues which constrained the rapid

progress of IMT. For example, IMT complementary measures such as water entitlements, and

irrigation water pricing, created major conflicts in policy circles (Gunatilake and Gopalakrishnan

2002). Pricing water and rights over water was not acceptable to policy makers. They also argue that

irrigation charges may not lead to efficient allocation and financial viability unless water rights and

land rights are properly aligned (Gandhi, et al., 2006).

India

In India there were 4420 WUAs in the early 1990s (see Table 1). By 1999-2000, the state of Andhra

Pradesh had more than 10000 WUAs. The main objectives of the WUAs were autonomy, equity in

distribution, water allocation and repair and maintenance. Under the Andhra Pradesh Farmer

Managed Irrigation System Act in 1997, 10,292 WUAs were created and elections were held for 9800

WUAs. It had a three tier arrangement with the lowest level WUAs having around 400-1000 ha of

land. However, the performance of the WUAs was below standard due to insufficient devolution of

power (Ballabh 2005). The users contribution of 15 percent has not been collected and there was no

flexibility in pricing, distribution and enforcing the distribution schedules. There has been systematic

corruption and the officials have no incentive to manage the systems for the benefit of the farmers,

which shows the difficulties of engineering organisational changes at the grass roots level (Ballabh

2005).

In Gujarat too several of the WUAs have been very successful. For example, in the Baldeva Medium

Irrigation Project and the Pigut Medium Irrigation Project in Gujarat, the WUAs are in charge of

water management, setting fees and collect 100 percent of the fees. In the Pigut schemes, costs

recovered increased from 89 percent in 1989, it’s first year, to 100 percent in 1992-93. There is

greater efficiency in water use and water used per unit area decreased by 40 percent. The Mohini

project in Gujarat, bulk water was sold on a volumetric basis to the WUA by the irrigation agency and

the WUA collects water charges from the farmers.

In 1999, the government of Madhya Pradesh in India adopted irrigation management through WUAs.

Marotia (2002) examined empirically 22 WUAs in the Chhattisgarh state. He found that 95 percent of

the funds allocated for repair and maintenance have been used by the WUAs, and 62 percent of the

farmers paid their irrigation fees. Only 5 percent of the WUAs had adequate water supply and 55

percent had moderate and scarce water supplies. The voluntary contribution of labour was found to be

poor. Marotia (2002) attributes these problems in the WUAs to the newness of the WUAs and that

over time they could be expected to perform better. An extensive report on the state of the IMT in

India is provided in Brewer et al. (2002). 11

Koppen et al. (2002) compared the impact of WUAs on poor farmers and contend that rich and the

poor farmers are served alike and have equal access to canal water. They however, cautioned that in

Andhra Pradesh and Gujarat there is potential for elite capture specially in large scale canal irrigation.

In Andhra Pradesh where a high proportion of small farmers are concentrated at the tail end of

irrigation schemes, particular disadvantages may occur for these groups and improving accessibility to

water may remain a challenge.

One criticism of at least some of these WUAs in India is that they focus on farmer participation but

not so much on cost recovery and sustainability (Gulati and Narayanana, 2002).The impetus for

institutional change in the early years came from external agencies which influenced the legal

framework within these institutions. What is more appropriate is state-wide policy to design

institutions to suit the physical, technical and socio-political framework of the individual states. The

irrigation authorities still retain considerable authority in the water sector.

Pakistan

Pakistan invested heavily on WUAs. Between 1981and 1991, the World Bank and USAID funded

four projects for a total of $ 175 million. The On-Farm Water Management Projects 1 and 2, Irrigation

System Rehabilitation Project (1982-1987), and Command Water Management Project (1984-1992)

(Kijne, 2001). Thousands of WUAs were formed because formation of WUAs was a condition to

receive subsidies for water course improvements, such as lining, desilting and outlet reconstruction.

Most of the WUAs existed only to be eligible for the subsidy and when the subsidies ended the

WUAs disintegrated. Lack of government support also meant that there was no genuine participation

by farmers.

The WUA in Pakistan possess significant prospect of taking over a share of responsibilities subject to

provision of appropriate legislative cover and training (Byrnes, 1992; Latif & Pomee, 2003). In 1997

the Provincial Irrigation Drainage Authority (PIDA) was formed to improve water management.

PIDA of each province became financially autonomous authorities responsible for policy decisions,

water acquisition and allocation at provincial level while FOs would take over the O & M of minors,

dstributaries and lower level drainage infrastructure (Latif and Pomee, 2003).Research on the

Fordwah Eastern Sadiqua (South) Irrigation and Drainage Project (Punjab) and three sites in the Left

Bank of Outfall Drain Project area (Sindh) where 200 WUAs were formed reveal a multitude of

failures (Kijne, 2001). A major failure was that the government ignored the requests made by the

WUAs to implement the joint agreements and also that there were no social organisers in establishing

WUAs (Uphoff, 1992).

Bangladesh

In Bangladesh, all irrigation systems under public control were transferred through IMT excluding

projects located in tribal areas and small systems controlled by local government. The transfer

included formation of WUAs, selection of WUA leaders, training of WUA members on finance,

administration and O & M, farmers’ participation in repairs and improvement and training for agency

staff.. IMT increased the total irrigated area, equity & timeliness of water delivery and declined

irrigation costs for the government, with unchanged efficiency of water fee collection. There has been

a further need for clearer legislation regarding functioning of the WUA. Shortage of irrigation agency

officers who are responsible for forming WUAs and lack of funds have been some of the major

problems faced during the IMT process. It is realised that in Bangladesh the WUAs need further

training in irrigation water management as well as in crop production and agro-processing. Training is

also needed for irrigation agency personnel to improve their coordination skills of the WUAs. Poor

farmers are generally at the tail end of irrigation systems and often deprived of access to irrigation

water (ADB, 2003). A large number of non government organisations (NGOs) are engaged in

development of rural society, health & sanitation, poverty alleviation, employment generation etc. and

these NGOs could play role to further promote operation and activities of WUAs (Faruqee and

Choudhry, 1995). The process of IMT has been smoother in countries such as Indonesia,

Colombia, and Nigeria, where governments have had the political will to increase water fees

to close to the real O&M cost, which in turn, encouraged farmers to take over management

responsibilities to reduce water costs (Johnson, 1995).

Laos

A study of the Ban Vuen-Tonhen WUA in Savannakhet Province of Laos provides useful results on

the equity impact and the ability to pay the irrigation fee after IMT (Rasphone et al 2006). This is one

of the nine pilot IMT programs in Laos. The study shows that after IMT, farmers who switched over

to more lucrative crops such as chillies, peanuts and tobacco obtained significant increase in incomes

and were able to pay the irrigation fee. But rice cultivation has been found to be unprofitable. In two

WUAs where subsistence farmers dominated, rice was a main crop and many farmers failed to pay the

irrigation fee. Overall, the performance of these WUAs have been rated outstanding. They had a long

history of farmer-manged irrigation using water from the Mekong River where electric pumps supply

water to the command area.

Taiwan

In Taiwan the farmers organisations are responsible for operation and management. Taiwan currently

has 17 irrigation Associations (IAs) to perform these functions. These are public legal entities with

high degree of autonomy supported by a network of self-governing Irrigation Groups (IP s) formed

and managed by local farmers. These IAs had some public authority and they have proved robust

institutions although new pressures are appearing that may affect these performances. There was great

flexibility in the systems and greater monitoring through the use of formal as well as informal rules.

The WUAs in Taiwan are considered the best in Asia. They have high autonomy, public legal entity,

can own property and can formulate budget plans and had high leverage in operation and

management. IAs are divided into districts (IDS) with 150 ha each. Leaders coordinate collective

action, provide information, draw farmers attention, minimize farmers costs of collective action. A

district has irrigation blocks of 50 ha. Voluntary contributions of by IGs are used for maintenance

using informal rules.

The major factors that led to the successes of WUAs in Taiwan are (a) diversity of design that can

develop different water management plans (b) collective action taken not on a large scale (c) merger

of individual and collective interests (d) farmers making decisions on monetary contributions and (e)

no excessive bureaucracy (Lam, 2002).

However recent political changes have raised serious concerns on the resilience of the WUAs in

Taiwan. In addition to political changes, the fall in the price of rice, lowering the size of the farms

and declining importance of agriculture in GDP have exacerbated the conflict. Compared to the 1960s

and 1970s, IAs are less involved in user payment for O&M and system improvements in recent years

and rather government exercises much greater control (Levine et al., 2000).Political elements have

strained the viability of the present IAs. Both the KMT and the Democratic Progress Party (DRP)

have political interests in the agricultural sector because it is a large voting bloc which undermined

the social capital for collective action. According to Lam (2005) “the strategies of replacing farmers

self organisational efforts with financial inputs and more advanced technology, of confining the

meaning of self-governance to elections, and strengthening the state’s control over the IAs- all tend to

damage the synergistic relationships between the farmers and the IAs, and bring about more problems

than they solve”.

4.2.2 Statistical studies of the performance of WUAs

regression approaches

The performance of IMT has also been analysed using different statistical techniques provided

appropriate data are available and a few selected studies are examined here. Samad (2002) examined

the financial performance of 50 selected schemes in Sri Lanka using piece-wise linear regression for

the period 1985-1990 (pre IMT) 1990-1995 (post IMT). The results show that there has been a

statistically significant decline in the governments recurrent costs during the pre-IMT period across all

categories of schemes irrespective of whether IMT has been implemented or not. This trend

continued after IMT without change indicating that IMT has not led to any reduction of the

government expenditure on O&M. The analyses also showed that all schemes that were rehabilitated

and transferred had increased yields. Productivity of paddy in schemes with either rehabilitation or

IMT only showed a declining trend. This implies some degree of complementarity between

rehabilitation and management.

Two detailed surveys were carried out in the Nachchaduwa and the Hakwatuna Oya irrigation

schemes in Sri Lanka to assess the cost of irrigation, quality or irrigation service and maintenance of

irrigation activities to farmers after IMT (Samad, 2002). In general, water fee collections have not

been well developed and a minority of farmers paid any irrigation fee. The costs to the farmers have

not increased after transfer. The quality of service has not improved after transfer which is attributed

to the problems of rehabilitation done without farmer consultation. Many farmers reported adequate

water supply before and after transfer but around 25 per cent of the farmers reported worsening of

water supply after IMT. Around 60 percent of the farmers were dissatisfied with the maintenance

works done after rehabilitation in the Nachchaduwa scheme. Productivity in terms of paddy yields has

increased after transfer.

Samad (2002) conducted the same analysis for Nepal, India and Indonesia. Two sites in India were

examined using piece-wise linear regression namely the Mulla and Bhima schemes (minor canals) in

the state of Maharashtra. The study did not show any significant reduction of O&M expenditure by

the government compared to non-transferred canals (Brewer et al, 1999). The cash costs have

increased but the transactions costs are low because of WUAs basically keeping the costs unaltered.

The two Indian sites show that IMT has been beneficial for water distribution. Farmers believe that

there is a clear improvement in the access to water when needed after transfer. The physical condition

of the transferred minors is better after transfer. In India, cropping intensity has improved in the Mulla

scheme and declined in the Bhima scheme (Vermillion et al., 2002).

The analysis for Nepal shows that budget allocation for O &M after transfer has declined. In the West

Gandak Scheme in Nepal, irrigation cash costs to farmers were higher in the transferred minors than

the non-transferred minors. Also, in terms of adequacy and timeliness, the surface water irrigation and

the ground water schemes have improved. Farmers in the transferred minors faced fewer difficulties

in getting assistance from the WUAs. In the Bhairahwa Lumbini Ground Water Scheme transferred in

1999, the pumping cost have gone up but the labour costs, in terms of labour and in-kind assistance

for maintenance etc. have not changed after IMT. The yields of paddy and wheat in the transferred

Palhi minor have been increasing over the last three years. There is no significant difference in the

aggregate yields between the transferred and the non-transferred schemes (Samad, 2002). Cropping

intensity in the Wesat Gandak in the 1992-96 period has not increased.

The limited regression analysis reported here shows that IMT is not a superior institutional form in all

respects. There are negative and positive achievements in the schemes examined. It is difficult to

separately identify the contributions of rehabilitations and development in the models used. This

observation does not negate the role of institutions but that one should design institutions taking into

account a myriad of location specific factors. Some of the failures can be attributed to top down

development of IMT, lack of clarity of the rules and sanctions for rule violations such as non-payment

of irrigation fees. The method of appointing or electing office bearers, and issues such as gender can

affect the success of these groups.

Mutivariate Analysis

Huang et al (2005) made an extensive investigation of irrigation investment China in unravelling the

impact on income, poverty and inequality. They used multiple regression analysis to estimate the

impact on incomes and found that increasing irrigated land per capital by one hectare will lead to an

increase of 3082 yuan in annual cropping income per capita. The plot level dat they used reveals a

strong relationship compared to aggregate data. .

The analysis also showed that irrigation had positive impact on incomes when other factors are held

constant and that comes mainly through croppiAn increase in irrigated land per capita of one standard

deviation (0.097 ha) leads to an increase in per capita household income by of 255 yuans which is

about 10 percent of average household per capita income.

Huang et al (2005) used simulation to examine the impact of irrigation on poverty and found that

incidnec eof poverty would fall by 1.6 per cent if allnon-irirgated land were converted to irrigated

land. It also shows that poverty head count can fall by about 12 million due to irrigation development.

It also highlights the the importance of other factors such as education which can improve the overall

effects of irrigation. For example, increasing the level of education by one year can decrease poverty

by 1.7 percent.

Decomposing the Gini coefficient to estimate the impact on inequality showed that irrigation could

help equalize income. Cropping income from irrigated land is most equally distributed with a Gini

coefficient approximately 0.1 to 0.2 points lower than those of other income sources. Cropping

income from irrigated land for all households would decrease the Gini coefficient for total income by

0.1 per cent abating regional inequality.

Logit analysis of factors affecting institutional effectiveness

Bardhan (2000) used logit analysis to examine collective action in irrigation management in 48

irrigation communities in Tamil Nadu, India. The selected irrigation system in each village (tank or

branch of a canal) had a command area of roughly 50 ha. The schemes were heterogeneous some

being more than 20 years old and others new. Bardhan (2000) found that co-operative behaviour is

affected negatively by inequality of land holding and urban and market relationships. Co-operation

was positively related to duration of access to water, monitoring by guards, social homogeneity and

smallness of the group. One major function of the WUA is to provide labour for repair and

maintenance of irrigation field channels. The WAUs were fund raising mechanisms in most

associations (Bardhan,2000). Involvement of the Public Works Department (PWD) is positively

related to situations where water scarcity is severe but such involvement has increased violation of

water sharing rules and hence not conducive to co-operation. For Nepal, logit analysis shows that

Nepalese farmers consider timeliness of availability as the most critical factor determining the success

of irrigation water management (Maskey and Wan, 1995).

Box and Tios’s intervention analysis

The Gal Oya Project in Sri Lanka was analysed by Murray-Rust et al (1999) to evaluate the impact of

different interventions on the performance of secondary units using time impact assessment model.

The Box & Tiao’s intervention analysis, determines the average condition in two equal time periods

before and after intervention and identifies possible causes of deviation from the average conditions.

The analysis shows that areas that were intensively organised showed the greatest capacity to adopt

improved management techniques and the benefits were quickly realized. It was also apparent that

these areas were also the most favoured areas before rehabilitation and the level of benefits were very

unsatisfactory (Murray-Rust et al, 1999).The tail end areas showed the best results in terms of water

use, production and productivity.

3.0 The future of irrigation institutions in developing countries – Some Lessons

The above review necessarily has certain limitations. In the IMT study of five countries by Samad

(2002), the methodology used does not clearly delineate the impact of institutional change. The

impacts of WUAs were not captured properly in the estimated equations which may include the

impact of other factors such as technology, climate, labour inputs and ownership. Unless these factors

are separated out, and a more methodologically rigorous evaluation is employed, the impact of

institutional change cannot be precisely determined.

In most of the other studies reviewed, only selected aspects of institutions were examined. They

ignored aspects such as the characteristics of users and user groups that can affect institutional

sustainability. Most studies failed to identify the adverse distributive consequences of IMT, in terms

of head-tail problem, elite capture, and vulnerable groups such as the very poor and women farmers,

specially impact on equity and poverty. These are of fundamental importance in providing policy

direction to design cost-recovery strategies. A holistic approach including the equity effects of IMT

could have yielded more robust results to provide better policy direction for institutional change.

Insights for strengthening impacts

Despite these limitations, the above review of IMT provides considerable insights into irrigation water

management. Samad’s (2002) study shows that rehabilitation prior to transfer is a prerequisite which

implies that there is some degree of complementarity between rehabilitation and IMT and that

sequencing institutional change, need to be carefully examined to reduce poor performance of WUAs.

The study shows that farmers should be involved in the planning of rehabilitation process to ensure

better performance because any post-construction change is not easy.

The study supports the view that social capital can play an important role in the evolution and

sustainability of water management institutions (Lam 2005; Uphoff and Wijayaratna 2002). Policy

makers should consider social capital as a resource and use it for promoting collective action in the

social dynamics of the farmer community. Local social capital can form the foundation for use rules,

monitoring, and enforcement mechanisms for irrigation water management but political expediency

can undermine the social capital as in Taiwan. The government should play the role of the facilitator

in establishing institutions.

There is a need to strengthen WUAs so that they deal with not just water allocations but undertake the

complex tasks of financial management and technical support to communities to ensure sustainable

management of irrigation resources. These capacities were weak in most WUAs, and governments

need to improve skills and knowledge to enhancing local administrative, managerial, and financial

capacities of participants (Lam 2001). Burton et al. (2003) suggests application of asset management

procedure during transfer stages that would bring in important benefits including identification and

audit of all infrastructural assets, identification of water users’ desired level of service; and

identification of the cost of system maintanence over time commensurate with agreed level of

provision.

In general, existing property rights over water may not be the most appropriate from equity and

efficiency perspectives. Any new water right should guarantee that the farmers get water of the

desired quality and quantity at the required time. As the WUAs are strengthened, it is essential to

revise the enabling framework and water rights systems including land rights in order to secure

efficient and equitable water allocations. For example, property rights to groundwater in India, Sri

Lanka, Bangladesh etc. need to be revised before excessive extraction creates serious negative

externalities.

To make IMT a winning strategy, we should identify the significant differences in the different

schemes and recognize that the rural environment is a complex, dynamic socio-cultural system with

many stakeholders and hence understanding the rural environment is central to better conceptualize

the most appropriate type of institution for a given irrigation system.

Challenges

The links between IMT and welfare outcomes need to be more intensively studied. Evidence of

institutional impacts is currently based upon indicators which fail to take into account broader

indicators of development. Often, success of WUAs is measured by quantitative measures such as the

number of WUAs established or the extent of financial disbursements--not the impact on poverty and

equity etc.

A stakeholder may have many uses for water and there are many stakeholder such as farmers,

industries etc. which must be brought into the decision-making process(Lam 2005; Meinzen-Dick,

2002). Recognition of multiple uses and users will be complicated but if water is to be allocated

efficiently, this aspect need to be recognised and the challenge needs to be faced.

One of the principle aims of is to create conditions by which the new institutions become self

sustaining and no longer require government assistance. The basic problem is the lack of

finance as a potential source of future finance. The WUAs have not succeeded in making the

transition from essentially publicly subsidised organisations to fully fledged financially viable

institutions. In a mature water economy, efficient pricing would be used. Market pricing of water is a

politically sensitive issue and can raise fierce opposition as shown for Sri Lanka, India etc. The

experience reveals that this ideal is far from beibng achieved. WUAs are still not covering their O&M

costs. In other words, the institutions created do not ensure long term sustainability. They were not

financially viable and are caught in the classical dilemma ie they will not generate savings to be

financially viable because they were not financially viable in the first instance. Efficient pricing is

inevitable in the long run and can be facilitated by removing institutional imperfections (Sampath

1992). Future research should investigate the conditions under which IMT can be implemented along

with water markets.

Institutional reforms aimed at reducing poverty must seek to redesign institutions so that they help

empower, organize and mobilize bureaucratic transparency and accountability. Institutions are rooted

in patterns of power relations which can promote primarily to reinforce the higher unequal balance of

socio-economic power that is a cause of poverty.

There is a significant ground water market in most countries specially in South Asia and groundwater

extraction can increase due to increase in the demand for water in the future as well as due to

enhanced accessibility and improvement of extraction technologies. Such an increased extaction of

water is a concern because of the potential damage to delicate underground aquifers which are

common property resources. It is necessary to monitor groundwater development in order to ensure

that adverse effects are minimized and appropriate institutional safeguards are introduced to reduce

potential damage.

Financial independence, accountability, and training should lead to better fee collection, which can be

used for system maintenance. Appropriate mechanisms for user fee collection requires better

understanding of the farmers’ problems and production processes. Uncertainty and variability of

water allocation is the most important hindrance to user-fee collection. Irrigation fees can also raise

equity issues.

Water institutions need to be dynamic in order to successfully face emerging trends and

circumstances. Training and education activities geared towards improving the skills and knowledge

of participants to improve water allocation practices are essential ingredients for success. Training

and education support prepares institutional participants to face emerging circumstances. They

disseminate information on current and pending legislation as well as rules and obligations.

4. Concluding comments

This paper shows that institutional initiatives for improved irrigation water resources management in

developing countries have not been an unqualified success. The analysis presented in this paper

indicates that there are many factors that affect the outcomes of IMT. Farmers should be involved in

the design of both technical and managerial changes. Participatory management should provide

greater autonomy to local groups and incorporate social norms and cultural values. The greater

success of some of the major and minor schemes testifies to the importance of local, cultural and

social factors when it comes to management.

Furthermore, the failure of top-down arrangements in WUAs in some of the major irrigation schemes

need to be examined more critically. Training on different aspects of participatory irrigation

management including financial management can increase the potential of local people to orient their

futures towards more financially autonomous institutions. WUAs can change the existing pattern of

income distribution. Governments should ensure that vulnerable groups (for example, tail-enders and

women farmers) are fully incorporated into the decision making process to ensure better distribution

of benefits.

Poverty alleviation needs to pay attention to the differences in the rural environment which is a

complex, dynamic socio-cultural system to conceptualize the type of institution for a given situation.

For NIE to succeed, government is an essential element, but it has different role to play by providing

conflict resolution assistance, enhancing the claims of poor people and addressing the power relations

by which certain elite groups are able to dominate the legal and institutional framework.

Progress towards markets will improve as the technical, socio-economic, and institutional features

evolve, removing imperfections and making efficiency a more realistic goal. Undoubtedly, political

factors would still constrain progress towards efficiency but, with the changes proposed above, the

ubiquity of the political process can be reduced.

We accept that institutions play an important role in poverty alleviation. The aim is to examine the

limits and constraints of relying too much on these institutions as panaceas for complex

developmental purposes. A broader approach is needed to develop institutions that are structurally

suited for irrigation water management and protection at the local level. This usually means more than

just revising old institutions and traditions. It means new forms of organisation, associations and

platforms for common action in rural communities and more appropriate forms of government

intervention. There is some unfounded euphoria over the potential benefits to be obtained from

institutional change. The danger is that institutional change for poverty alleviation could be imperilled

by an indiscriminate flow of resources to institutional change that are not properly designed and not

ready for rapid growth.

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