February 25, 2005

2005: Highlight # 5

Amita Shah takes a dim view of heavily subsidized watershed works and explores mechanisms for cost-sharing which will also deliver greater participation... 

Economic Rationale, Subsidy and Cost Sharing in Watershed Projects

Imperatives for Institutions and Market Development

Amita Shah

The legacy of a drought-relief measure, step-motherly treatment to drylands, and the delayed, uncertain and social nature of benefits have been the arguments used to justify and defend subsidies for watershed programs. However, the heavy subsidization of investments is unlikely to sustain in the wake of increasing pressure on state resources. Exploring cost-sharing mechanisms therefore becomes critical.

This paper argues that there is a scope for rationalization and shifting of subsidies (a) from private to public resources; (b) from water intensive to water saving devices; and (c) from better-off irrigating farmers to landless and rainfed farmers.

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