Economic evaluation of small multi-purpose ponds in the Zhanghe irrigation system, China

Abstract

Ponds are small reservoirs that allow farmers in irrigated areas to capture rainfall, store surplus water from irrigation canals, and conserve water from other sources. Though ponds have been used widely in irrigated areas for many years, recent increases in the construction of ponds due to growing water shortages and government policies generate interest in understanding effectiveness of investing in ponds.We examine the economics of small, medium, and large ponds. All sizes of ponds are profitable with healthy internal rates of return, positive net present values and benefit–cost ratios larger than 1. However, when the imputed cost of family labor is included, small and medium ponds fail to justify investment. Overall, larger ponds offer higher economic benefits than small and medium ponds. Efficiency gains can be achieved by constructing large ponds, which are also economically viable.

Introduction

China is not particularly well endowed with water resources, yet water has been used as a cheap resource in agricultural production, which has led to water shortages. In recent years, the Chinese government has implemented policies that re-allocate water from the agricultural sector to fulfill growing demands in the industrial and urban sectors (Hong et al., 2001). Water conservation projects have been implemented with the introduction of water saving irrigation (WSI) practices. Some farmers have reduced their water use voluntarily, while others have been required to adopt WSI practices (Mushtaq et al., 2006). Farmers also have contributed to water savings by successfully maintaining agricultural production despite a considerable decrease in water deliveries, by relying on local resources such as ponds.

Ponds are small reservoirs that allow farmers in irrigated areas to capture rainfall, store surplus water from irrigation canals, and conserve water from other sources. The ponds allow users to obtain water on-demand and to store water close to water users (Loeve et al., 2001). Ponds are helpful in reducing floods, recharging groundwater, and providing drainage in high rainfall periods (Anbumozhi et al., 2001, Walter, 1963). In Hubei Province, China, ponds play an important role in agriculture by providing supplemental irrigation. The Zhanghe Irrigation System (ZIS) obtains one-fourth of its water from small, medium, and large ponds to complement supply from the main Zhanghe reservoir (Moya et al., 2001). Ponds are categorized on the basis of storage capacity. Small ponds have a storage capacity of less then 1000 m³; medium ponds have a storage capacity between 1000 m³ and 10000 m³; while large ponds have a storage capacity of more than 10,000 m³.

An irrigation pond (called tank in South India) is a durable asset providing a stream of benefits for several years (Pandey, 1991). As a considerable amount of investment is required to make irrigation water available, it is important to understand the effectiveness of investment. This is an important question where farmers are investing substantial capital in the establishment, renovation, and expansion of ponds.

In the past, economies of scale have been the main consideration in the selection of water storage type, often with unacceptable social and environmental costs (Keller et al., 2000). Many large dams have been built because of their low-cost per cubic meter of water stored, not because they were a particularly appropriate form of storage. However, according to the International Water Management Institute (IWMI, 2004), if a storage project is to serve its purpose with maximum efficiency, then a variety of options should be considered. Therefore, the goal of this paper is to evaluate the costs and benefits of ponds.