The country’s irrigation water supply system is more or less faced with the same issues — low tariff, line losses, theft, etc. — that have dragged down the power sector. It needs to be reformed with a view to encouraging efficient and productive use of the resource.

"Problems in Pakistan's water supply have their roots in the public goods supply model, similar to that in the power sector," points out the State Bank of Pakistan in its new report on the state of the economy during 2011/12.

"(Just like the power sector) the (water) resource is under-priced, the transmission system is replete with line losses, and low cost recovery and heavy subsidies have led to persistent losses, crumbling the finances of supplying agencies," the report argues.

Irrigation water tariff (abiana) is extremely low, accounting for less than 0.5 per cent of the crop revenues in Punjab and Sindh. Even with these low rates, average revenue collected is just 60 per cent of the total receivables, which cover only 24 per cent of the supply costs. The partial water tariff collection covers merely one fourth of the annual operation and maintenance costs.

Low tariffs and failure to recover full supply costs makes new investments in this sector heavily dependent on funding from the government and the foreign financial institutions. It is in addition to the regular support for meeting the running costs.In the last financial year, for example, Punjab, Sindh and Khyber Pakhtunkhwa together provided Rs17.3bn to cover deficits in irrigation system. In the federal budget for the current year, capital expenditure on water claims 10 per cent or Rs44bn of the total public sector development programme (PSDP) outlay. This is in addition to cumulative provincial allocations of Rs27.8bn.

Although the central bank realises the constraints to full cost recovery from the irrigation sector in view of high rural poverty, it stresses the need for complete recovery of at least the supply costs with a long-term vision to move towards full recovery. As foreign funding is short in supply and fiscal constraints of the government growing due to revenue losses, the irrigation water supply system continues to suffer from massive underinvestment, underlines the report.

The bank's recommendation for full recovery of irrigation water supply costs supports the stance of the Planning Commission of Pakistan, which came up with a study on Canal Water Pricing in Pakistan last year. The commission had recommended full recovery of operation and maintenance costs, suggesting that the tariff should reflect water scarcity in the country.

Therefore, cost recovery becomes an important issue in irrigation water governance. The 'right' price of water fully recovers supply costs (operational and capital) and also places a value on the resource to ensure financial and environmental sustainability, the SBP says. The bank suggests that volumetric use should be accounted for and the tariff rate should increase with consumption.

Currently, a flat rate is charged per unit of the area cropped, which means that small and large landholders are charged in the same proportion. Graduating the tariff structure with increasing consumption will put a tax on large landholders, and can also be used as a mechanism for cross-subsidising supply costs for small farmers.

The lack of enough investments in the irrigation sector and inefficient use of water is adding to water shortages facing the country due to climatic changes. Farmers, for example, faced 15 per cent water shortage for their winter crops in the financial year 2012 although the overall, annual water availability rose by 1.7maf to 89.9maf from 88.2maf the previous year. Sindh faced with 30 per cent shortage compared to Punjab's six per cent.

With increasing scarcity, the irrigation water — which claims 94 per cent of the total water supply in the country — is also coming under stress, according to the World Bank. It says Pakistan is one of the most arid countries in the world, having the lowest per capita freshwater supplies in the region — less than half the global benchmark of 1000 cubic centimetres. On top of it, the declining water supply through canals has led to heedless rise in tube-wells. Over the past decade, the number of tube-wells has grown by 52 per cent, reflecting an addition of 0.4 million tube-wells, which is fast depleting the underground water-table.

The report points out that water availability did not improve even for summer crops during the current fiscal due to delays in the monsoon rains and the "situation is likely to worsen in future as freshwater supplies continue to be overwhelmed by mounting demand pressures."

"The distinct cycles for water demand and supply also add to the difficulty. Specifically, while supply peaks during summer because of monsoon rains and glacier melting, demand is spread over the year," it says, suggesting construction of new water storage to hedge against dry seasons. "Without storage, excess water simply runs off into the sea. Over 40 per cent of the water that flows through the Indus River is lost each year."

Though water supply cannot be increased, better management can ease water shortages to some extent. The immediate focus should be on prudent supervision of existing water resources (i.e., recovering bills, controlling theft, building storage, controlling seepage, and encouraging water efficient irrigation technologies), financial sustainability of irrigation agencies in the government to enable them to bear regular repair and maintenance costs, and an increased awareness of the real cost of water. — Nasir Jamal