A cost recovery model for tertiary canal improvement projects, with an example from Egypt

The potential farm-level gains from improvements in a tertiary canal vary among farmers according to their location along the canal. An economic model describing that variation is developed using the concept of irrigation success, which considers the degree to which water volume and quality, and the timing of irrigation events match the requirements of plants throughout a season. A bid-rent model in which farm-level costs and returns are viewed as a function of irrigation success is used to describe the appropriate roles of public agencies in supporting or financing tertiary canal improvement projects and to evaluate cost recovery programs. An empirical version of the model is used to develop cost recovery alternatives for Egyptʹs Irrigation Improvement Project. A potentially viable cost recovery program is designed using the following criteria: (1) the net benefits of the improvement project are non-negative for all the farmers after making any required payments; (2) the net benefits are the same for all the farmers required to make annual payments, and (3) the total revenue collected each year is equal to the average annual cost of the project. Such a program would require estimated payments of $175 per ha for middle-reach farmers and $412 per ha for tail-end farmers along a typical canal in Egyptʹs Irrigation Improvement Project. The net benefits for farmers in each of those groups would be an estimated $102 per ha. Head-end farmers would not be required to pay an annual fee, though they would receive a net gain equal to an estimated $40 per ha reduction in annual pumping costs. Alternative programs that require smaller payments from middle-reach and tail-end farmers, while imposing costs also on head-end farmers, are designed using a combination of fixed and variable charges. Volumetric water charges ranging from $4.00 to $7.00 per 1000 m3 are examined, in conjunction with annual assessments ranging from $40 to $170 per ha. The installation of single-point pumping stations at the head ends of improved tertiary canals provides an opportunity to implement volumetric charges in cooperation with water user associations.