ANALYSIS OF INSTITUTIONAL ARRANGEMENTS FOR WATER GOVERNANCE, CROP PRODUCTION EFFICIENCY, COMMERCIALIZATION, AND IMPACT ON HOUSEHOLD WELFARE IN IRRIGATION SCHEMES OF THE AMHARA REGION, ETHIOPIA

Abstract

This study examines the institutional arrangement for water governance, crop production efficiency, commercialization, and impact on household welfare using cross-sectional data obtained from 544 randomly and proportionately selected sampled households from four districts of the Amhara region, northern Ethiopia. Data were analyzed using descriptive statistics and econometric models. The stochastic frontier production (cost) model was used to investigate technical (cost) efficiency, whereas the multivariate probit model was utilized to analyse the determinants of participation in collective irrigation action. Fractional probit and two-limit Tobit models were employed to analyze the determinants of input and output commercialization decision of crop producers, and finally the inverse probability weighted regression adjustment (IPWRA) estimation technique was employed to analyze the welfare impacts of membership in WUA. The results of the qualitative analysis had revealed that although the irrigation institution in the study areas, especially the Raya Kobo irrigation schemes, has a long history as an informal institution, the available legal framework does not have specific regulation on the irrigation institutions; instead, they are recognized as irrigation beneficiaries’ cooperatives (IBC) and / or Water Users Association (WUA) under the legal framework for agricultural cooperatives. The primary objective of the irrigation institutions in the study areas was to ensure effective, efficient and sustainable management of irrigation water and related resources. Institutions were characterized by low rule enforceability, absence of credit service, absence of committed leaders and members, inappropriate or absence of sufficient legal support for rule and sanctions enforcement from government bodies, extreme interference by higher officials, and nonfunctional institutional arrangements. However, the existing institutions were partially consistent with Ostrom’s design and the principle of long-lasting institutions. In particular, in promoting the development of communal agricultural services, more attention should be paid to specifying the responsibilities and obligations of the main provider of irrigation services in the supply of rural public goods. This study had also identified factors that affect collective actions in irrigation. The results of the MVP model revealed that the decision to participate in collective action for irrigation was significantly influenced by family size, membership in WUA, membership in agricultural cooperatives, age of the scheme, extension contact, access to training, total land size, land fragmentation index and social capital. The SFA results show that the average technical and economic efficiency scores were found to be 72.8 and 76.6 percent, respectively. This indicated that there are substantial inefficiencies in crop production in the study area. The result showed that if the average farmer can reach the level of economic efficiency of the most efficient counterpart, then the average farmer could obtain an increase of 27% in production by improving technical efficiency with the existing technology. Technical and economic inefficiencies are significantly affected by sex, age, land fragmentation, distance to market, total expenditure, off/nonfarm income, irrigation experience, and livestock ownership. The mean input and output commercialization index for the sample households was 0.126 and 0.648, respectively. The result further revealed that the farmers were semi-commercialized for the output side but poorly xvii commercialized for the input side. As a result, the commercialization levels of farm production of the households fall in the commercial farming system. About 6.8%, 15.4% and 77.8% of the sampled households were categorized under low, medium, and high commercialization levels, respectively. Furthermore, factors that determine the commercialization of input and output were age, distance to the nearest main market, distance to the nearest town, distance nearest place of the improved seed market, experience in irrigation farming, cooperative membership, membership in the water users association, share of crop income, total tropical livestock units, proportion of irrigated area and agroecological location. The decision to participate in WUA was significantly influenced by sex, proportion of irrigated land, oxen ownership, cultivated land size, distance from water source, connection in the administrative apparatus, distance to the nearest town, and agroecology. In addition, the IPWRA model result indicated that membership in the WUA has a positive and significant impact on the welfare of smallholder crop producers. The study found that WUA membership had a positive effect on all four outcomes. The average treatment effect of being a member in WUA on market participation, crop income, total income and consumption expenditure was higher by 3.2%, 8.9%, 8.8% and 9.4%, respectively, than being nonmember. The result revealed that WUA members had significant welfare improvements in their household consumption and income per equivalent adult. Based on the findings, the study suggests that appropriate institutional arrangements should be put in place with regard to the utilization of water, maintenance, operation, and management of the irrigation schemes. Government and private donors should continue to promote the formation and organization of farmers into groups. The role of group membership in farming outcomes can be improved if smaller groups are promoted. To improve crop production efficiency in the study area, it is necessary to implement a cluster farming system among small farmers, where knowledge sharing can be encouraged. In addition, calling for the need to think about land consolidation at least within farms. The study recommends a higher public and private sector contribution toward commercialization through training, strengthening institutional service, skill and experience, financial support and infrastructure facilities. Thus, smallholder farmers in irrigated agriculture have great potential for commercialization if policies are taken to address those significant factors. Furthermore, improving women's farming skills through training, expanding education, and ensuring better and reliable extension services was necessary to improve efficiency and productivity. Given the irrigation opportunities available in the study area, it is important to address the challenges of irrigation crop producers by formulating an engagement plan for stakeholders working on the capacity building of rural institutions, encouraging and assisting water users associations to be empowered more to enforce their bylaws, designing appropriate support such as promoting and empowering women, strengthening and influencing policies to improve rural family planning, strengthening existing farmer cooperatives and water users association to reinforce farmer-to-farmer knowledge sharing, improving farmer's resource endowment, promotion of improved crop varieties, improving the integrated crop-livestock production system, applying recommended agronomic practices in irrigation crop farming, providing training, finance and encouraging market links through contract farming and out-grower schemes to benefit from WUA and further improve their welfare