Privatizing canal irrigation

Widespread dissatisfaction with state management of canal irrigation systems has focused intense interest on potential private sector remedies for the problems afflicting the sector. Privatization promises a number of benefits—lower operating costs, increased productivity, innovation, mobilization of capital, higher service quality, and larger service areas. However, canal irrigation is a natural monopoly, where the large capital investments required preclude multiple private service providers in a given service area. Nevertheless, the paper argues that there are a number of ways to take advantage of positive features of the private sector, without wasteful duplication of infrastructure or leaving farmers at the mercy of greedy investors. Three primary options—renewable management contracts, franchises, and self‐provision of services by clients—are described and illustrated. Another way to examine possibilities for privatization is to look at the types of organizations that provide irrigation services. The defining aspects of an organization are governance, source of funds, economic motive, and type of staff. The paper defines a set of five types of service providers based on these characteristics. These types are departments, authorities, districts, associations, and public utilities. The characteristics of each are discussed, with examples. To rise above the basic performance floor provided by a public bureaucracy, an institutional structure including private elements requires a supporting policy environment. Critical elements of a supportive environment include policy stability, legal respect for contracts and agreements, and reasonably impartial regulation, allocation, and adjudication. In the absence of a sufficiently supportive national governance environment, private elements in the irrigation management system are unlikely to flourish or, conversely, may have the ability to take advantage of weaker parties. Copyright © 2003 John Wiley & Sons, Ltd.