The financial viability of irrigation management companies: A case study of Cu Chi irrigation system, Vietnam

Abstract

A crucial, yet little understood, element in the economic studies of irrigation is the role played by companies who manage the supply of water. Many of these companies are publicly managed as they have the potential to act as monopolists. Possibly as a consequence of their ownership structure, analysts have questioned the economic viability and management of these firms. The case is made that many of these companies do not run profitably, that they rely on government subsidies to survive, that they do not spend enough on maintenance and that they run down their capital base. The purpose in this paper is to specify the measures that allow analysts to examine the financial viability of a publicly owned irrigation management companies and to apply these to a scheme in Vietnam. Of concern and contention in any irrigation scheme is the price that a company should charge for water in order to recover costs in the short-run. It was found that the company under investigation could not operate without subsidies and did run down their assets. It was found that a great disparity exists between what the consumers were charged for water and what the company received for supplying it. To ensure the sustainability of the Irrigation Management Companies in long term, they may have to increase the water fee by 3.75 times the current rate set by the provincial government (US$ 20 per ha).