The use of OBA in small- scale irrigation in developing countries - - PowerPoint PPT Presentation

GPOBA Webinar October 8 2014

The use of OBA in small- scale irrigation in developing countries

Rajesh Advani, Infrastructure Specialist, GPOBA Jacob Burke, Lead Irrigation Specialist, Water GP

Introduction

Objectives

• 1. Evaluate the scope for OBA in financing

small-scale irrigation schemes to support poor farmers in developing countries

• 2. Propose design and implementation

arrangements for possible OBA schemes Country focus Bangladesh, India (Madhya Pradesh & Orissa), Ghana, Kenya, Zambia.

Report Outputs

Main Report – results of in-country consultations (India, Zambia) Annex A: OBA financial model user guide Annex B: Review of OBA approach and case studies Annex C: Country studies for desk-based review

• Ghana
• Kenya
• Zambia
• Bangladesh
• India – Madhya Pradesh, Orissa

Scope to apply OBA in the irrigation sector

• 1. Sector Fit

Government policies generally consistent with OBA principles Concerns: Provider pre-financing; sector bureaucracy; subsidy administration in India

Overall assessment

There is scope to apply OBA to boos small holder irrigation - but in conjunction with

• ther on-farm investments and extension support. The independently verifiable
• utput is not just the delivery of a water service (unlike WSS or energy utilities). The

technology application and producer price margin in irrigated crops needs to be clear from the outset.

• 2. M&E,

Implementation

Irrigation projects have employed 3rd parties to verify

• utputs (Karnataka)

Concerns: Capacity

• f govts. and WUAs

to manage an OBA contract.

• 3. Scope for

subsidies and grants

Demand is evident – a step-up approach. Concerns: Potentially difficult to measure delivery of irrigation service

• 4. Financial

sustainability of the sector

Possible to levy irrigation service charges. Concerns: Typically set too low to cover O&M costs; collection difficulties

Assessment of project opportunities India and Zambia

India

• Use of Market-based

approaches

• Integrated Micro-irrigation

projects

• Rainwater harvesting tanks

Zambia

• Commercial hub and out-

grower models

India: market-based approaches – treadle pump based

Indicators Indicative costs/ outputs Indicative OBA grant $10m Funding gap

• Approx. $75/farmer

Impact on farmers’ income Up by approx. $400 per year Key risks Pre-financing ability of NGOs

INTERNATIONAL DEVELOPMENT ENTERPRISES INDIA (IDEI)

Supply-chain partners produce and then market products

Smallholder farmers Cash Payments

Reporting

OBA subsidy

GPOBA

IVA

India: Integrated Micro-Irrigation Projects (IMIP)

Indicators Indicative costs/ outputs Indicative OBA grant $5m to $10m Funding gap

• Approx. $800 - $1,600

Impact on farmers’ income Up by approx. $550 per ha per annum Water use efficiency Improve by 45% to 60% Key risks Relies on counterpart funding from state governments.

Farmers

• Electricity & water charges
• Contribution to costs of micro-

irrigation technology

Water Users’ Association

• Organize Farmers
• Collect fees from farmers

Private Partners

• Pre-finance, develop, operate & maintain

infrastructure

• Provide training to WUA & farmers

Electricity Board Water Board Government

• Concession agreement

with private partner

• Payments
• Handover Land

IVA

India: Rainwater Harvesting Tanks

Smallholder Farmers NGO i.e. Pradan

Commercial Bank

IVA

Reporting Verification Loan (pre-finance)

Implementation Support

GPOBA

OBA subsidy Indicators Indicative costs/ outputs Indicative OBA grant

• Approx. $9m

Funding gap $890 – lower if additional support from government Impact on farmers’ income Increase up to $222 per farmer per year, and $400 after loan repaid Key risks Level of smallholder farmer demand and ability of NGOs to pre-finance.

Project opportunities for OBA support in Zambia

Indicators Indicative costs/ outputs Indicative OBA grant $5m Funding gap $5,000 - $25,000 Impact on farmers’ income Increase up to $1,350 per hectare per annum Key Risks

• High cost per farmer
• Incentives for private firms to continue providing on-going support

to small farmers until market fully develops

KEDE Ltd

(JV – 3 comm. farmers)

IVA

Reporting

GPOBA

OBA subsidy

Smallholder Farmers

Sugar Sugar Sugar Factory

Provides Irrigation Services & pre-finance Manage Off-take

Issues

Linkage with a viable crop model.

• Is crop responsive/suited to the choice of irrigation technology?
• Are production costs/producer prices viable in the long term?
• Are all the other inputs (including extension) reliable?

Technology choice and scaling

• Standards….are there any?.
• Quality assurance – pumps, pipe fittings, emitters?
• Service/spare parts provision – is the market large enough?

How to keep it simple for the IVA

• More than verification of a functioning tap and water meter
• One-off inspection or more?
• What about complex contractual agreements?

Conclusions

Market-based approaches for a range of micro-irrigation technology and rainwater harvesting tanks are potentially good candidates for OBA funds.

• Successful at supporting large numbers of small farmers.
• Less complex to implement and private service providers more agile.
• Risk: need to assess appetite of private sector for OBA financing – specifically

the structure of outputs and link to indicators, such as long term improvements in land productivity.

Opportunities for OBA funds to support larger scale interventions would need to be structured carefully

• IMIP approach offers an innovative opportunity to support small farmers in

India. Risk: Complexities of working with State governments and limited time-frame of OBA intervention.

• Commercial hub-outgrower models offer another opportunity.

Risks: Incentives for larger farmers to continue ongoing provision of irrigation services to smallholder farmers. Funding gap is large.

Next steps

 Deep dive analysis of project opportunities.  Further analysis of risk appetite for linking OBA subsidy disbursements to verification that the productivity has improved - particularly where private sector provider has limited control on farmer output.  Scope for project funding over 3-5 year timeline, given consultants’ recommendations of longer involvement for GPOBA for larger-scale

• pportunities.

 Develop concept note for OBA financing for most viable opportunity and where there is strong demand from clients and government, and sector/ country fit for the Bank and donors.