Improving Irrigation Water Use Efficiency Holds the Key to Tackling Water Scarcity in South Asia: Technical Potential and Financing Options

Water scarcity is worsening to the point that it has become a limiting factor to the growth of major economies in South Asia, and agriculture is by far the largest water-using sector. Overuse of water for crop production is one of the main causes of water scarcity. This overuse results from low irrigation water use efficiency (WUE) associated with water intensive cropping systems, use of un-optimised irrigation supply systems, uneven water distribution in crop fields, and subsidised electricity for pumping irrigation water. There is huge potential to improve irrigation water efficiency in South Asia by promoting low water consuming crops, adoption of water saving technologies including micro irrigation and laser land levelling, which can significantly reduce the agricultural sector's water footprint in South Asia. Our estimate shows, if the full potential of these technologies were to be utilised, Bangladesh, India and Pakistan could save 21%, 31% and 28% of their water respectively, compared with current levels of water use. Securing funds for additional investment is always a major challenge for South Asian developing countries. Estimates show that a 20% WUE improvement will need USD 0.5 billion, USD 4.7 billion, and USD 1.4 billion of capital investment for Bangladesh, India and Pakistan, respectively. In order to secure capital for WUE improvement, this policy brief recommends to shift existing electricity subsidies from pumping water to improving irrigation WUE. Currently, the agriculture sector receives large subsidies for pumping irrigation water, which is one of the main causes of low irrigation WUE. Direct removal of subsidies from the agriculture sector is also a politically sensitive issue. However, instead of providing subsidies for irrigation electricity supply, this subsidy amount could be shifted to on-farm WUE improvement. This rearrangement of agricultural subsidies would offer farmers low-cost water efficient technologies or services, and generate multiple benefits including economic, social and environmental. A financial compensation mechanism for trading water rights between agriculture and industrial sectors could be established to reduce the financial burden on governments for WUE improvement investment. Under this mechanism, industry would provide financial compensation to farmers to adopt water-saving technologies, and the amount of water saved would be used for industrial production. Financial compensation could be paid to farmers as a subsidy for water-saving technologies.