WATER GLOBAL PRACTICE Public Disclosure Authorized The Cost of Irrigation Water in the Jordan Valley in the Jordan The Cost of Irrigation Water Public Disclosure Authorized The Cost of Irrigation Water Public Disclosure Authorized in the Jordan Valley CAROLINE VAN DEN BERG AND SANA KH. H. AGHA AL NIMER with support from Turi Fileccia, Luz Maria Gonzalez, and Suhail Wahseh Public Disclosure Authorized The Cost of Irrigation Water in the Jordan Valley April 2016 Caroline van den Berg and Sana Kh. H. Agha Al Nimer with support from Turi Fileccia, Luz Maria Gonzalez, and Suhail Wahseh © 2016 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 19 18 17 16 This work is a product of the staff of The World Bank with external contributions. 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Contents Acknowledgments vii Abbreviations viii Executive Summary ix 1 Introduction 1 Background 1 Objectives 2 Methodology 3 Notes 4 2 Institutional Framework of the Irrigation Water Sector in the Jordan Valley 5 Note 6 3 Water Balance in the Jordan Valley 7 Introduction 7 Water Scarcity in the Jordan Valley 9 Conclusions 14 4 Irrigated Agriculture in the Jordan Valley 15 Introduction 15 Agricultural Transformation in the Jordan Valley 17 Current Production Systems and Cropping Patterns in the Jordan Valley 20 Crop and Farm Economics in the Jordan Valley 22 Main Issues Farmers in the Jordan Valley Are Facing 24 Crop Water Productivity 27 Conclusions 28 Notes 29 5 Jordan Valley Authority’s Current Revenues 31 Introduction 31 Water Revenues 31 Water Revenues from Irrigation 33 Water Revenues from Industry 36 Conclusions 36 Notes 37 6 Jordan Valley Authority’s Operation and Maintenance Costs 38 Introduction 38 Water Operation and Maintenance Costs 40 Staff Costs 41 Energy Costs 41 Maintenance Costs 43 Income Statement of Water Business, Jordan Valley Authority 45 Conclusions 48 Notes 49 The Cost of Irrigation Water in the Jordan Valley iii 7 Jordan Valley Authority’s Operation and Maintenance Cost Requirements 50 Introduction 50 Requirements for Operation and Maintenance Staff Costs 50 Energy Costs 51 Maintenance Costs 53 Depreciation 54 Summary of Operation and Maintenance Requirements 55 Conclusions 55 Notes 56 8 Proposed Tariff and Cost Recovery 57 Concepts of Cost Recovery 57 Scenario Analysis 58 Sensitivity and Risk Analysis 60 Benchmarking Jordanian Irrigation Tariffs 62 Conclusions 63 Notes 63 9 Impact of Cost Recovery on Farm Incomes 64 Farm Models 64 Effect of ariffsT on Farm Incomes 64 Farm Incomes under Different Cost Recovery Scenarios 66 Effect of Cost Recovery Scenarios for Poor Farmers 67 Notes 69 10 Conclusions 70 Improving Revenues 70 Increasing Efficiency in Service Delivery 72 Impact of Tariff Increases on Poor Farmers 73 Appendix A Allocation of Water in the Jordan Valley 74 Appendix B Water User Associations in the Jordan Valley 75 Appendix C Crop Budgets 77 Appendix D Subsidy Principles 91 Appendix E Irrigation Pricing Systems 92 Appendix F Jordan Valley Authority Staffing 93 Appendix G Risk Analysis 94 References 98 Box 1.1 Evidence of Misclassification of Expenditures across Budget Types 4 Figures 4.1 Historical Area and Cropping Pattern Trends for Major Crops in the Jordan Valley 20 4.2 Share of Crops in the Jordan Valley, 2010 22 iv The Cost of Irrigation Water in the Jordan Valley 4.3 Geographic Distribution of Cropping Patterns in the Jordan Valley 23 4.4 Historical Production Trends in the Jordan Valley 23 5.1 Irrigation Revenues, 2005–12 32 6.1 Composition of Jordan Valley Authority Operation and Maintenance Costs 39 7.1 Cropping Patterns in the Jordan Valley in 1994, 2000 (Before Legalization of Fruit Crops), and 2010 51 8.1 Risk Analysis of Irrigation Operation and Maintenance Cost Based on Quota Allocations with 2013 Electricity Price 61 8.2 Risk Analysis of Irrigation and Operation and Maintenance and Depreciation Cost Based on Quota Allocations with 2017 Electricity Price 62 Map B.1 Geographic Distribution of Water Users Associations 76 Tables 3.1 Water Inflows into the Jordan Valley 8 3.2 Water Inflows and Water Used into the Jordan Valley 9 3.3 Profile fo Farmers Facing Water Scarcity, by Location 10 3.4 Profile fo Farmers Facing Water Scarcity, by Cropping Pattern 10 3.5 Profile fo Farmers Facing Water Scarcity, by Source of Water 11 3.6 Profile fo Farmers Facing Water Scarcity, by Farming Method 11 3.7 Profile fo Farmers Facing Water Scarcity, by Irrigation Method 12 3.8 Profile fo Farmers Facing Water Scarcity, Regression Analysis 12 3.9 Profile fo Farmers Facing Water Quality Problems, Regression Analysis 13 4.1 Irrigation Projects in the Jordan Valley (from North to South) 16 4.2 Total Cultivated and Irrigated Area in Jordan in 2011 16 4.3 Quota System by Jordan Valley Authority (2004 Onward) 16 4.4 Total Crop Area and Production in the Jordan Valley, 1994–2010 17 4.5 Total Vegetable Crop Area and Production in the Jordan Valley, 1994–2010 18 4.6 Total Field Crop Area and Production in the Jordan Valley, 1994–2010 18 4.7 Total Tree Crop Area and Production in the Jordan Valley, 1994–2010 19 4.8 Major Production Systems in the Jordan Valley 21 4.9 Cropping Patterns in the Jordan Valley 21 4.10 Crop Production in the Jordan Valley 21 4.11 Crop Production Systems Revenues and Costs in the Jordan Valley, Full Cost 25 4.12 Crop Water Productivity 28 5.1 Irrigation Water Tariffs 32 5.2 Jordan Valley Authority Revenues, 2000–12 34 5.3 Water Volume Supplied and Billed 35 5.4 Collection Efficiency of Irrigation Water Tariffs 35 The Cost of Irrigation Water in the Jordan Valley v 5.5 Estimated Irrigation Revenues Based on Quota Allocations, 2011 36 6.1 JVA Operation and Maintenance Costs 39 6.2 JVA Employment 40 6.3 JVA Actual Expenditure in Government Budget 40 6.4 Energy Use at Pumping Stations in Each Directorate 42 6.5 Energy Costs at Pumping Stations in Each Directorate 42 6.6 Energy Tariff at Pumping Stations in Each Directorate 43 6.7 JVA Operation and Maintenance of Water Services 44 6.8 JVA Financial Performance Indicators 45 6.9 Summary of Current Costs for Irrigation Water, 2012, Three-Year Average 45 6.10 Asset Inventory of the JVA 46 6.11 Depreciation as a Percentage of Current Assets and Implicit Lifetime of Assets 47 6.12 JVA Financial Performance Indicators with Depreciation Included 47 7.1 Current and Required Number of Employees for Water Activities, Jordan Valley Authority 51 7.2 Current and Required Electricity Costs for Irrigation Water Pumping 52 7.3 Current and Required Fuel Costs 53 7.4 Current and Required Pumping