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National Water Act, 1998 (Act No. 36 of 1998)

A Pricing Strategy For Raw Water Use Charges

7. Application of Pricing Strategy to Different Categories of Water Use/User Sectors

7.4 Irrigation Sector

 

 

Established schemes and commercial farmers

 

1) Existing agreement with SAAU

Negotiations were concluded in 1995 with the South African Agricultural Union (SAAU) on a strategy for tariffs to be imposed on State irrigation schemes. This strategy was based on the following principles:

 

Full recovery of operation and maintenance (O&M) plus catchment management costs, plus
a surcharge on the above costs to counter under-recovery during droughts, plus
an agreed upon amount to cover future replacement, betterment and drainage works costs. Prior to the construction of any betterment or drainage works, negotiations regarding the repayment would have to be carried out on an ad hoc basis with the respective Advisory Committee or Irrigation Board.

 

To give impetus to implementation of the strategy, it was further agreed that tariff increases would be gradually and uniformly effected from 1996/97 onwards on the following basis:

 

The full recovery of annual operating, maintenance and current drainage/betterment costs, plus a 10% surcharge had to be reached within 5 years at each scheme, i.e. by the end of the 2000/2001 financial year.
The following catchment management costs would be added to O&M costs: abstraction and storage control, afforestation permit control, the Working for Water Programme (subsidised by 90% as a result of subsequent representations to the Minister) and water weeds control.
Increases for 1996/97 would be based on one-fifth (20%) of the difference between the estimated 1996/97 costs plus 10% and the 1995/96 tariffs. For the following four years, the increases would be based on one-fourth, one-third, half and full recovery of the corresponding differences between costs and tariffs as recalculated annually.
On schemes where the current tariffs already exceeded the following year’s costs plus 10%, tariffs would remain at the current level.
A maximum annual increase of 50% on the current tariffs would apply.

 

2) Water resource management charge

Full recovery of water resource management costs must be achieved in a phased approach. The agreement reached with the South African Agricultural Union (SAAU) makes provision for the allocated costs for the Working for Water Programme (water conservation) to be subsidised by 90% due to the fact that this activity will only increase the assurance of supply to this sector and will not make additional allocations possible. The catchment management activity costs relating to water conservation (invasive plant and water weed control) and water utilisation (storage, abstraction and afforestation permit control) which have already been introduced, plus a 10% surcharge (to account for under-recovery of costs during drought years), will be phased in together with operation and maintenance costs, to be recovered in full by March 2001. Thereafter the other water resource management costs in terms of this strategy will also be introduced for water pricing purposes, but only after the majority of water uses in a particular water management area have been registered.

 

3) Water resource development and use of waterworks charge

In line with an agreement between the DWAF and the SAAU, described in 1) above, all management, operating, maintenance and current refurbishment costs, together with certain water resource management costs plus a 10% surcharge, will be recovered in respect of existing Government schemes by March 2001, by gradually phasing out the subsidy over a five year period. The agreement also makes provision for the full recovery of future refurbishment and betterment costs. This agreement will be reviewed before April 2001, from which date the introduction of a depreciation charge on existing schemes, in line with 5.3.2 of this pricing strategy, will be considered. This depreciation component will replace the obligation to pay for the future replacement, betterment and drainage costs in terms of the current agreement.

 

It is not DWAF’s policy to develop new Government irrigation schemes. Where a storage dam scheme is developed for other purposes and established irrigation farmers will benefit by an increased assurance of supply, the full operation and maintenance costs will be payable. New farmers would only be given access or existing farmers allowed to expand on condition that the full financial cost (O&M plus depreciation plus return on assets) would be payable for such new development.

 

4) Phasing in of charges

Total existing tariffs will be increased gradually to reach full recovery of the SAAU negotiated costs by March 2001. The maximum annual increase of existing tariffs will be limited to 50% of the previous tariff during this period. Tariffs would also not be decreased in any year. From April 2001, the other water resource management activity unit costs for water resource management and a depreciation component of water resource development costs should be added to the charge. Terms of a new agreement will be negotiated in this regard with the full spectrum of organised irrigation agriculture (not only the SAAU).

 

Ex-homeland schemes and emerging irrigation farmers

 

In redressing the imbalances with respect to irrigation farming in the past, it should be noted that the State is committed to supporting disadvantaged individuals and communities through land restitution, land reform, or other programmes of corrective action. These could include concessionary periods during which the full cost of water, based on the approach proposed in this document, is not levied. A phasing-in period of 5 years for catchment management plus the use of waterwork charges on State irrigation schemes is proposed, in order to bring the strategy in line with current practice on established schemes.

 

The following strategy will be applied to the pricing for ex-homeland irrigation schemes and emerging farmers given access to established or new government water schemes:

 

Betterment costs at ex-homeland government water schemes supplying emerging farmers of the historically disadvantaged groups must initially not be taken into account for pricing purposes. The reason for excluding these is that most of the government water schemes in the former homelands are in a highly dilapidated state due to years of neglect of maintenance. The catchment management and operation and maintenance costs plus a surcharge of 10% as contained in the agreement with the SAAU, must be phased in over a period of five years, starting with one-fifth of such costs in the first year after registration or licensing of the emerging farmers.

 

For new farmers of the historically disadvantaged groups, who are given access to established or new government water schemes, there must be a phasing in of the full cost recovery of the same costs allocated to established farmers in terms of the negotiated agreement with the SAAU. This must also be over a five-year period, commencing after registration or licensing.

 

Future negotiations to be conducted with the SAAU before 2001 regarding the implementation of a depreciation charge must also include representation by representative bodies of these emerging farmers. The further phasing in of the full charges in terms of the raw water pricing strategy must then be done over the same number of years for both the commercial and emerging farmers, but staggered in time due to different commencement dates.

 

Established commercial farmers of the historically disadvantaged groups, whose existing irrigation development will be stabilised by any new State storage dam built for other purposes, will be liable to pay the water resource management charges, as well as the operation and maintenance cost of the dam, without subsidies.

 

Registration of irrigation water use for pricing purposes

 

An existing lawful water use as defined in section 32 of the Act, can continue to be exercised until the responsible authority requires that water use be licensed. As the extent of existing lawful use has in many cases not been quantified by means of the authorisations granted in terms of legislation which was in force immediately before this Act came into effect, the Act empowers the responsible authority to record the extent of such existing lawful use by means of a registration process, subject to regulations made under section 26(1)(c) of the Act.

 

The necessary regulations to guide the registration of existing water use will be promulgated. These regulations will enable the DWAF to register existing lawful use in all water management areas from October 1999 in order to facilitate the effective allocation and management of water use and waterworks and the imposition of charges as set out in the pricing strategy. In terms of section 59(2) of the Act, any person registered in terms of a regulation under section 26, or holding a license to use water is liable for water use charges.

 

For pricing purposes, irrigators not supplied from waterworks owned by the Government or water management institutions, must be registered for their estimated average annual volumetric water use, which will be based on the crop water requirements of those crops and irrigated areas which constitute their registered existing lawful use and the estimated water losses incurred by their registered on-farm irrigation systems. On Government or WUA schemes, the water use on the scheme will be registered as a unit and will be based on the sum of the individual volumetric allocations at field edge, adapted for assurance of supply to represent long term average annual use, plus average annual distribution losses on communal infrastructure.

 

The following methods will be used by DWAF to determine the volumetric extent of average annual water use of individual irrigators for pricing purposes, based on information provided on the official registration application forms:

 

Irrigation requirement:
The annual irrigation requirement (the amount of water to be distributed onto the soil surface) is calculated by subtracting the average annual effective rainfall (that part of the rainfall that effectively replaces irrigation) from the average annual crop water requirement (the minimum quantity of water necessary for optimal plant growth for the specific crop at the specific location).

 

The following procedure will be followed to calculate the crop water requirement:

 

The SAPWAT computer program currently being developed under the auspices of the Water Research Commission, using the internationally accepted Penman-Monteith climatic model for crop water requirements as developed by the FAO, plus the effective rainfall for different crops at 350 weather stations country-wide, will be used for estimating the irrigation requirements for those crops noted in the program, anywhere in South Africa. The weather station with climatic characteristics nearest to those experienced on the specific farm will be chosen and for crops not noted in the program, a crop with more or less similar characteristics will be chosen in the model.

 

In-field irrigation losses:
The irrigation system used does have some built-in losses that must be added to the irrigation requirement to be able to establish the total quantity of water used.

 

The following system efficiencies (which accounts for losses between the farm dam and where water is placed on the soil surface) as given in the "Irrigation Design Manual", 1996, produced by the Agricultural Research Council, will be used:

 

Irrigation method

System efficiencies

Flood : Furrow

65%

Flood : Border

60%

Flood : Basin

75%

Sprinkler : Dragline

75%

Sprinkler : Quick-coupling

75%

Sprinkler : Permanent

85%

Sprinkler : Hop-along

75%

Sprinkler : Big gun

70%

Sprinkler : Side-roll

75%

Sprinkler : Boom

75%

Sprinkler : Travelling gun

75%

Sprinkler : Travelling boom

80%

Centre pivot

85%

Linear

85%

Micro sprinkler

85%

Micro spray

90%

Drip

95%

 

Irrigation management:
If no irrigation scheduling or any other method to improve irrigation efficiency is used, the management of the specific irrigation system is not optimal and a further quantity of water is lost. A quantity of 10% of the total use will then be added.

 

Stepped water tariffs

 

To promote water conservation and the beneficial use of water in terms of the National Water Act, the introduction of stepped water tariffs for irrigation will form part of the pricing strategy. The present agreement with the SAAU regarding the phasing-in of the recovery of current expenditure at schemes may lead to under-recovery of costs if stepped tariffs are introduced immediately, and such an immediate introduction may therefore be counterproductive. The introduction of stepped tariff structures also needs further applied research and refinement and can furthermore only be effectively applied where water supply is accurately measured and monitored.

 

The development of stepped tariff structures to promote water conservation will also form part of the revised agreement to be concluded with organised agriculture, which will be implemented from April 2001.

 

Government institutions

 

Water supplied for irrigation purposes from State schemes to other government departments or institutions financially supported by government departments, will be charged a tariff based on full financial cost recovery, without subsidisation.

 

Purchase of "extra water"

 

The current policy of allowing scheduled irrigators on Government water schemes to purchase "extra water" under certain conditions at heavily subsidised prices will be discontinued. Only under exceptional circumstances, such as an unexpected heat wave, will irrigators be allowed to purchase additional water over and above the quotas. The tariff for such extra water will be the raw water tariff for domestic and industrial supply.

 


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