Economics of buried pipe systems

Analysis of buried pipe (BP) systems usually consider their effect on the gross margins of irrigators, overlooking the financial implications for the intermediary organisation supplying the water - the KSS or farmers' cooperative, in the case of the Deep Tubewell II Project. Where the KSS is a genuine co-operative and the land in the incremental command area belongs to its members, gross margin analysis may capture the key variables in the decision to invest in a buried pipe system. Where narrower factional interest, dominate, the financial effects on operating cost, and the income from water charges are a better guide to the balance of incentive. A model of the financial effects of BP schemes on KSS finances has been developed, using typical operating costs and water charges and conveyance efficiencies. (The capital cost of the well is treated as a sunk cost and does not enter the calculations). Improvements in irrigation efficiency on the existing command area (CA) save pumping costs, but cannot alone justify a BP investment. The critical variables were the capital cost (chiefly determined by the length of buried pipe) and the incremental command area. Examples of this analysis will be given for a range of BP schemes, as will graphs of the relationship between incremental CA, rates of water charge and the financial viability of the scheme. Financial viability is defined here as the ability to meet full loan repayments in the first year. (This is rather a restrictive assumption due to the "front-loading" of instalments). Where the length of pipe is short relative to potential incremental CA, the returns from irrigation would be more than adequate to meet repayments if the full potential CA is irrigated. Experience suggests that this potential is not always attained; more investigation is required to find out why this is.