Water Journal : Water Journal April 2015
water APRIL 2015 78 Feature article I nfrastructure built mainly for irrigation is an important part of Australia’s total water infrastructure. Maintaining the contribution this infrastructure makes to regional economies and exports, and to future food security requires financing of new infrastructure as well as funding of modernisation and augmentation of existing infrastructure. Existing infrastructure has been funded almost entirely by governments. Future government expenditure on irrigation infrastructure may reduce as available funds are increasingly applied to other industries. Private sector funding of irrigation infrastructure will require improving the attractiveness of irrigation infrastructure as an investment class. Few irrigation infrastructure projects will be financially self- sufficient, but there are other benefits from introducing private funding to projects. These benefits include risk management in areas such as project development, construction and insulation of governments from the demands of irrigators. Further, the entrepreneurial project development and management skills that might be applied to projects could provide savings in a competitive bidding environment. EconomIc ImportancE of IrrIgatIon InfrastructurE With the minerals boom, Australia’s relative dependence on irrigated agricultural exports has diminished; however, it continues to be important for food security. At around $2.5 billion per annum, cotton is Australia’s largest irrigated export crop and the 25th most valuable export. Milk and other dairy products, at more than $2 billion (much of this irrigated production) is the next most important irrigated commodity export. Other irrigated commodity exports account for at least another $2 billion. By comparison, for 2014–15, Australia’s three largest exports – iron ore, coal and natural gas – provided export income of $131 billion (Australian Government Department of Foreign Affairs and Trade, 2015). However, receipts from iron ore and thermal coal have dropped as a consequence of reduced prices. Regionally, irrigated production can be much more significant. For instance, in Victoria, where much of dairy production is irrigated, dairy produce is the state’s second most valuable export after education. Further, irrigated agriculture is the principal economic activity in many regional areas (Victoria Department of Environment and Primary Industries, 2014; Australian Government Department of Education, 2014). With the anticipated doubling of Australia’s population in the next 40–50 years to 46 million, Australia’s present high self-sufficiency in food production will be reduced without increased production. This is particularly sofor the irrigated crops that provide much of the higher value food consumed today. Irrigation infrastructure has a long planning and development window, so needs to be a vital component of planning to accommodate future population. IrrIgatIon InfrastructurE for fundIng Irrigation infrastructure for funding includes dams and distribution systems, but for the purposes of this paper excludes on-farm infrastructure. Opportunities exist for financing new infrastructure and the augmentation, modernisation and renewal of existing infrastructure. The Water Infrastructure Options Paper released by the Commonwealth in 2014 reports on 63 potential projects, mostly regional and irrigation water infrastructure projects submitted by states (Australian Government Department of Agriculture, 2014). Thirty-one projects have been identified as having the potential for Commonwealth involvement, and four of them are already funded with existing Commonwealth assistance. Figure1 illustrates the unit cost (development cost per megalitre water delivered) for projects where water delivered and capital cost data are available. Figure 1. Unit ($/ML yield) cost for identified potential water infrastructure projects. (Source: Australian Government Dept Agriculture 2014) Only one small augmentation project is shown, but larger projects such as current plans to increase distribution capacity from the Burdekin Dam can sometimes provide both low construction cost per megalitre and scale. Future opportunities for funding exist also with irrigation infrastructure modernisation. The Commonwealth has provided more than $2 billion funding for modernisation of A REVIEW OF FUNDING OPTIONS FOR IRRIGATION INFRASTRUCTURE Irrigation infrastructure is important to the Australian economy by ensuring future food security and providing an export income independent of minerals. Geoff Croke from Psi Delta looks at the benefits of introducing private funding to the irrigation sector.
Water Journal February 2015
Water and CSG