21An Assessment of the Economic, Environmental and Social Impacts of NSW Agriculture’s Advisory Programs in Water Use Efficiency

Executive Summary

This publication reports an assessment of the economic, social and environmental impacts of the former NSW Agriculture’s advisory programs in water use efficiency1. Since 1998 the principal vehicle for this advisory work has been the WaterWise on the Farm (WWF) Initiative. Description of WaterWise on the Farm WWF is an initiative of the former NSW Agriculture’s Water Management Subprogram and operates as an extension program as part of the NSW Water Reform Structural Adjustment Program (WRSAP). The WRSAP is an integrated package of extension, education and financial products and services designed to assist NSW irrigators to improve the efficiency of their use of irrigation water to offset the reduction in average long term irrigation extractions arising from the implementation of reforms in regulated and unregulated rivers and groundwater systems.

WWF is an extension program for informing and assisting NSW irrigators to improve the efficiency and effectiveness of irrigation water use, to minimise the negative environmental impacts of irrigation water use, and to improve the sustainability of the irrigated agriculture farm sector. Since 1999 the Water Management Subprogram has received budget enhancements of around $2.8 million annually to deliver WWF.

Through WWF, the Water Management sub-program has developed and delivered introductory vocational based training to just under 4,400 irrigators at June 30, 2003; conducted issue specific field and group events; developed, refined and implemented the statewide irrigation and drainage management planning framework; conducted communication campaigns through electronic and print media; and supported capacity building activities within the irrigation industry.

The core training provided by the WWF Initiative is the four day ‘Introduction to Irrigation Management Course’ (IIMC) which focuses on planning and implementing best practice irrigation and drainage management on farms. The course aims to promote the concept of Best Irrigation Management Practice (BIMP) and Technologies through "Right Amount - Right Time - Right Place" as an overarching guiding principle in using water. Technical staff also provide ongoing advice about efficient irrigation technologies to those who undertake the course and other irrigators.

Scope of this evaluation

The scope of this evaluation is confined to the extension activities of the Water Management Subprogram, most notably the WWF Initiative, related to greater efficiency in the on-farm use of irrigation water. The evaluation does not consider other aspects of WRSAP including the provision of financial services. In particular, the water reform process in NSW and Australia has an objective of improving river health by diverting some water from irrigated agriculture with significant economic, social and environmental benefits and costs. No attempt has been made here to consider the impact of the broader water reform process. Our objective has been to relate the economic, social and environmental benefits from the adoption of water efficient technologies being promoted by WWF and the Water Management Subprogram to the investment by the NSW Government in WWF.

We have evaluated WWF as an extension program attempting to hasten the adoption of technologies and practices related to improving water use efficiency. The economic effects of the WWF initiative include water savings, product yield or quality improvements, and reductions in costs that may arise from the adoption of water management technologies recommended in WWF related activities. We have made some assessment of environmental and social impacts of these productivity gains but this is necessarily qualitative rather than quantitative.

Approach to evaluation

The WWF Initiative has attempted to reach irrigators in many industries across NSW. This was a deliberate choice to ensure that all industries affected, not just the large industries, had access to some assistance in adjusting to change occasioned by the Water Reform process. The promotion of different sets of technologies and best management practices across multiple industries and locations made a comprehensive evaluation of the program difficult. Given limited resources for this evaluation, we decided to focus on those regional/industry complexes where program management felt that WWF had been most effective, in the expectation that the benefits from these selected areas would more than cover the total costs of the Initiative. The complexes selected for evaluation included:

• i) Lucerne industry in Central and Northern NSW;
• ii) Cotton industry in Northern NSW;
• iii) Cherry industry around Orange and Young; and
• iv) Viticulture industry in Southern NSW

To the extent that we have not attempted to assess the benefits of WWF in other catchments and industries, the evaluation represents a conservative estimate of the value of the Initiative. This evaluation required about 60 days of professional time and our judgment was that little would be served by extending the analysis to other complexes.

In each of the four evaluations, we have characterized the impact of the WWF Initiative as bringing forward the adoption of either new technology or best management practices by a certain number of years rather than influencing the maximum level of adoption. The Lucerne industry case study was the only exception, where the lack of industry structures suggested that WWF would actually increase the maximum level of adoption as well as influencing its rate.

A mixture of technologies and best management practices was evaluated across the case studies. In the case of lucerne and cotton, the WWF Initiative promoted better scheduling of irrigation applications involving more frequent but lower volumes of water which had the effect of reducing groundwater accessions and evaporation whilst reducing yield losses associated with both under and over watering. Better irrigation scheduling is principally a management change although normally some relatively minor infrastructure changes (reducing the length of runs, increasing the size of outlets etc) are also required. In the case of viticulture, the principal change promoted by WWF involved the conversion from furrow or spray based systems to drip irrigation systems. Changing to more efficient drip irrigation systems reduced crop water use and groundwater accessions whilst also providing yield and quality gains. More efficient water use in the cherry industry involved increasing the number of drippers per tree to allow faster and more targeted irrigation reducing watertable accessions and increasing fruit size.

Economic, social and environmental effects

The economic benefits from WWF were estimated to be approximately $88.0 million (in 2002 dollars), exceeding estimated total expenditure on the Initiative from 1999 to 2005 of $19.8 million (also in 2002 dollars). Hence the net present value from this investment is estimated to be $68.2m, the benefit-cost ratio is 4.45 and the internal rate of return is 49 per cent. Investments by the Initiative in the lucerne and cotton industries generated the greatest benefits in absolute terms. Details of the economic impacts of WWF in the four industries can be found in Table 1.

It should be noted that these economic benefits are shared by irrigators, agribusiness and consumers in the form of increased income and have important social consequences for regional communities. In addition, the skills developed by irrigation communities through the Waterwise initiative have added to regional social capital allowing more effective participation in the water reform process and greater capacity to adjust to reduced access to water. These potential benefits of increased social capital were not quantified in this report. The social impacts of the water reform process were considered to be outside the scope of this evaluation.

These estimates of economic impacts also reflect at least some of the on-farm environmental impacts of changes in water use efficiency. Changes in water use were valued at market prices. In addition technologies to improve water use efficiency can have positive environmental outcomes through reduced groundwater accessions and lower levels of irrigation salinity. These impacts were identified but not valued. Improved river health arising from the water reform process was attributed to the broader reform process and was not valued in this report.

Funders and Beneficiaries

The costs of WWF have been primarily met by the NSW Government with a minor contribution from the Australian Government through the Natural Heritage Trust (NHT). The NSW Government contribution has been through the Department’s Consolidated Revenue Funds and through a budget enhancement. Irrigators incur opportunity costs in attending the training courses offered but these costs have not been valued in the financial analysis reported here.

Irrigators are clearly the principal beneficiaries of WWF. However, WWF was established to assist irrigators adjust to water reforms. Many of these impacts, primarily reduced access to irrigation water, were imposed early in the reform process whereas benefits accrue as improved practice is implemented. Governments have regularly intervened to assist adjustment processes particularly those arising from changes in government policy. Hence there are legitimate grounds for WWF to be publicly funded even though many of the benefits of increased water use efficiency are captured by irrigators. Funding for the Initiative is scheduled to cease in 2005. Were WWF to continue then industry might be expected to meet a share of the costs unless there are further changes in irrigators’ entitlements to water.