Measuring Irrigation Subsidies in Andhra Pradesh and Southern India: An application of the GSI Method for quantifying subsidies

The second report in GSI's series measuring irrigation subsidies provides the starting point for a debate on the use of irrigation subsidies in India.

Subsidies to irrigated agriculture in major irrigation projects in just the four south Indian states (Tamil Nadu, Andhra Pradesh, Karnataka and Kerala) were conservatively estimated at US$575 million per year from 2004 to 2008.

The full subsidy is certainly substantially more, as significant numbers of small- to medium-size schemes were not included in the study, nor were substantial electricity subsidies to private groundwater irrigators. The majority of the subsidies were for interest on capital, and operation and maintenance (O&M) costs, over and above the revenue generated from providing irrigation services, hydro power generation and pollution abatement fees. Irrigation projects that were not completed to schedule were found to have significant cost overruns leading to government funding tied up in projects not delivering any benefits or revenue. When governments were unable to collect revenue from farmers, re-investment back into completed systems stopped and system maintenance declined. Collecting basic data for the study was a challenge. Government-funded supply costs were not recorded and compiled with the notion of generating accurate cost estimates for irrigation activities. What data are available are often spread over a variety of government departments. The study recommended that the government encourage water authorities to maintain better records and publicly provide information on water costs, revenues and subsidies, in a more organized and accessible manner. There may be clear public policy reasons for providing subsidies. However, without accurate information on subsidy volumes, public policy debate is hampered and the relative costs and benefits of alternative paths to policy goals impossible to assess.