Author(s)

K. W. Easter

Abstract

This paper identifies a number of institutions that are critical for the financial sustainability of irrigation projects. The framework of analysis is based on Williamson’s four-levels of institutions (Williamson, O.E., The new institutional economics: taking stock, looking ahead, J. of Economic Literature, 38 (September), pp. 595–613, 2000) which are used to highlight the importance of institutions and the problems that arise when implementing institutional change. Examples are provided of institutional reforms and changes that have helped different countries raise both cost recovery and collection rates. A key objective in designing water instruments is to provide farmers and managers assurance regarding the actions of others in the system. Without the appropriate institutions, it is difficult to effectively use economic instruments such as water prices, taxes, or markets to improve the financial sustainability of irrigation projects. Keywords: cost recovery, economic instruments, water pricing, institutional arrangements, financial sustainability. 1 Introduction Strong finances to support and maintain both irrigation and its associated drainage system are essential for sustainable irrigation. Historically, the lack of adequate finances has resulted in inadequate system operation and maintenance (O&M) and caused many irrigation systems to be built with inadequate control structures and, in many cases, no facilities for drainage. The end result has been projects that decline rapidly in their ability to provide adequate and timely water delivery. In a few years these same projects also face declining irrigated acreage as water logging and salinity problems force land out of production. Thus, once it has been determined that it is appropriate to build an irrigation system of a

Keywords

cost recovery, economic instruments, water pricing, institutional arrangements, financial sustainability.