An economic analysis of intersectoral water allocation in southeastern Sri Lanka
WELIGAMAGE, SARATH PARAKRAMA
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This dissertation analyzes current patterns and expected benefits of allocation of water in Kirindi-Menik-Kumbukkan composite river basin in southeastern Sri Lanka. The Veheragala Diversion Project changed the historical flow regime of Menik Ganga River by diverting water to the Kirindi Oya Basin for irrigation. This diversion reduced water flow to the Yala Protected Area Complex, a unique, nationally and globally important wildlife refuge situated further downstream, but dry season flows were enhanced. This study develops and applies empirical methods to estimate economic benefits related to two major uses: irrigation and environment. A procedure to quantify water applied on rice farms, based on farmer recall, was developed and empirically used in the Kirindi Oya Irrigation and Settlement Project (KOISP), where differential access to water between its two subareas exists. A production function for rice with water quantity as an input was estimated. Plans to allocate newly diverted water to maximize system-wide annual net benefits by equating marginal value products of water were generated. The value of water for the environment was estimated through a contingent valuation study that asked respondents about their willingness to pay for water releases through the YPC. Benefits were expected as emanating from non-use values of water. Findings showed a diverse pattern of distribution and abundance of irrigation systems across three river basins when the sizes and the types of systems were considered. Average water quantity applied by farmers in the Old Irrigated Area of the KOISP was 17 percent higher than that of farmers in the New Irrigated Area, while annual net rice revenues were 36 percent higher in the Old irrigated Area. The optimum water allocation plan for the KOISP would generate annual incremental net benefits of SLR 157 million and is 28 percent higher than the "Business as Usual" Plan. Mean willingness to pay for water releases estimated using random willingness to pay method was SLR 627 per household per annum. This can be aggregated to a national benefit stream with net present worth of SLR 17.4 billion. This value can be considered as the value of water allocated for environmental uses.