WHAT ARE THE EFFECTS OF NEW TECHNOLOGIES FOR THE EFFICIENT USE OF WATER IN AGRICULTURE?

Responsible researcher: Eduarda Miller de Figueiredo

Paper title: Inefficient water pricing and incentives for conservation

Intervention Location: Bangladesh

Authors: Ujjayant Chakravorty, Manzoor H. Dar and Kyle Emerick

Sample Size: 400 villages

Sector: Environment

Variable of Main Interest: Water management, input costs and agricultural profits

Type of Intervention: AWD technology – irrigation tubes

Methodology: Experimental Evaluation

Technology contributes to potential solutions for using water more efficiently. Alternate Wetting and Drying (AWD) is a plastic pipe that is perforated and open at both ends, which is planted in a rice field to irrigate only when the crop needs water. A random sample of 400 villages from three districts of Bangladesh was drawn and monitored during the “ boro ” season. The results demonstrate that AWD generates an effect on water levels only for farmers facing non-zero marginal prices.

Policy Problem

Agriculture is responsible for almost 70% of water use in the world (FAO, 2016). Developing countries increased their food production by irrigating their crops in the dry season, so the expansion of underground irrigation caused depletion in many regions, mainly in Asia.

Technology contributes to potential solutions for using water more efficiently. Alternate Wetting and Drying (AWD) is one such solution, where a plastic pipe, perforated and open at both ends, is planted in a rice field to irrigate only when the crop needs water. The profitability of this technology crucially depends on whether farmers face volumetric pricing and it has no effect on profits from seasonal water charges.

Implementation and Evaluation Context

The purpose of this article is to look at how a basic market failure, in the form of a zero marginal price for water, affects the use, impact, and demand for AWD technology.

The experiment took place in three districts: Mymensingh, Rangpur and Rajshahi. In Rangpur and Rajshashi the water table is deeper, so wells are expensive to dig and thus almost always owned by the government. Those in Mymensingh are privately owned because their water table is shallower, which reduces the cost of digging a well.

In Rajshashi water has a volumetric price where farmers can pay for each hour of pumping using a prepaid card. This card is loaded at local stores, in the same way that prepaid cell phones are loaded. In Rangpur, however, it is necessary to pay a fee per acre for the right to irrigate the field for the entire season. In Mymensingh well owners widely use per acre charges, where contracts take the form of a two-part tariff, where the per acre charge is coupled with a charge for each unit of fuel or electricity used during pumping. For the research, the authors assume that the farmer faces a volumetric price both if he lives in a location with a prepaid pump and when he lives in a location where he is responsible for the fuel costs of pumping.

About 90% of the land is cultivated with rice during the rainy season from June to November. All land is cultivated with rice during the “ boro ” season from January to May. boron season that the study experiments take place, as during this period precipitation is rare in this region and, therefore, rice cultivation requires irrigation.

Policy/Program Details

A random sample of 400 villages was drawn, divided equally between the 3 districts mentioned above. A survey was carried out at the beginning of the study with the 4,000 farmers involved, comprising data on family demographics, agricultural production, water management and water prices.

Each village was randomly assigned to one of the two groups before the start of the 2017 “ boro ” season. The study team visited the 200 villages in the treatment group, where each of the farmers was provided with an AWD tube with the appropriate training. In the other 200 villages in the control group, nothing was done.

Regarding descriptive statistics, only 17% of farmers had heard of AWD but none of them were using such technology so far. Just over a third of farmers face a non-zero marginal price for water.

Method

To estimate the causal impact of AWD technology on water management, input costs, and farm profits, the average effect across the entire sample was reported. Heterogeneous effects and average treatment effect were reported. Increasing acceptance of AWD should increase the likelihood that treated farmers are being dry, i.e., not having standing water in the field.

A follow-up survey was also carried out in July 2017, after the “ boro ” rice crop had been harvested and close to the planting time for the next rainy season. Such research allowed the collection of information on irrigation management, input use, crop production, revenue and profit. Therefore, these data provide the basis for calculations of profitability and the effect of AWD on profit.

The proportion of prepaid irrigation cards for farmers in many villages is less than one. The authors identify 144 villages in Rajshahi district, which were not included in the first experiment, where the majority of farmers were not using their own prepaid card. They were randomly divided into two groups of 96, one of which became the treatment group, where the authors sought to increase the share of farmers who pay for irrigation using their own card. To answer whether the demand curve for AWD changes when farmers are encouraged to pay for water at the time of pumping, a random variation in AWD prices was used with the random incentive of using a credit card.

Main Results

The results demonstrate that the treatment increases the drying effect by around 4%, but it is a medium noisy effect. Furthermore, AWD generates an effect on water levels only for farmers facing non-zero marginal prices.

Introducing AWD technology in volumetric priced locations reduces the amount of irrigation water by 18%. However, the correlation between volumetric price and water use is small and statistically insignificant, however, the authors point out that this result may be driven by any limited variation within strata or correlation between unobservables and volumetric prices.

The estimates found align with the agronomic literature only when prices are defined in volume metrics. Where the water savings estimated with the experiments range from 5%-65%, while the effect found in this study was 19.2% on water levels when prices are volumetric.

Post-harvest research has shown that farmers receiving AWD report 3.6 fewer irrigations – 19% impact. For this purpose, the reasonable explanation, according to the authors, is that farmers in the treatment group knew that using AWD reduces the number of irrigations and responded accordingly.

In relation to profit, this only increases with the adoption of ADW when the price of water is marginal, with an increase of around 7% (US$23). Where it has been shown that the overall effect on profitability comes from lower water costs and higher revenues, not increases in yield. Therefore, AWD leads to positive returns only when the price of water is marginal.

For those farmers with Rajshashi (prepaid cards), the results demonstrate that AWD increases profit by 11% to 12% for farmers with cards, however, this prepaid card system is not randomly assigned. Therefore, such a result may be from factors correlated with card ownership rather than the card itself.

The results for the estimates for the Rajshahi prepaid card sample demonstrate that there were high acceptance rates, but that the introduction of hourly irrigation cards caused demand for AWD to increase at higher prices.

Furthermore, the results demonstrated that AWD technology can offer substantial benefits. However, farmers who value technology and use it appropriately depend on water having a marginal price

Public Policy Lessons

The article demonstrates that modest efforts to reduce application costs and increase farmer access to marginal prices have a positive and significant effect on demand for water conservation technology. Thus, collaborating with the literature on water prices, as it has become more scarce, making its efficient use in agriculture necessary.

References

FAO. 2004. Water charging in irrigated agriculture. An analysis of international experience. HR Wallingford Ltd.