Deficiencies in new irrigation policy, warns association

Press, 18 February 1983, Page 21

Deficiencies in new irrigation policy, warns association

The Government's new irrigation policy falls a long way short of the ideal as a blueprint for the future of water storage and water harvesting according to the president of the New Zealand Irrigation Association. Mr John Morris, of Winchmore. The policy announcement of late last year has been studied in detail by the Irrigation Association, which includes representatives from most established and proposed irrigation areas, and Mr Morris this week released the association’s response. "After waiting for nearly three years for the new irrigation policy, we could be forgiven for believing that it would be a major step forward.” he said. “After close study in the past few weeks much of the early enthusiasm has gone and the hard realities must be faced by potential irrigators. the Government and its advisers in Wellington. “The part of the policy which gives a Government grant of 70 per cent for headworks and off-farm construction of new irrigation schemes indicates that this Government has a very definite commitment to irrigation and can clearly see its advantages to the community and to the nation.

“A grant of 70 per cent for ; headworks and off-farm coni struction is a desirable move [ for run of the river schemes ■ but it seriously disadvan- ■ tages schems which necesI sarily involve water storage ' and water-harvesting techniques. "Since the long term future of irrigation must hinge on these factors, the new policy falls a long way short of the ideal as a blueprint for the future.” he said. “A greater level of Government grant is essential to develop storage-type schemes and areas where regional and national benefit is evident and enough flexability should be built into the Public Works Act to allow this. “Investment in a farming venture is generally a longterm pay-back proposition and irrigation, as an investment opportunity, also fits this situation. “The development of widespread irrigation is the next major step that many farmers throughout New Zealand qan take to boost the level of production and one of the only hopes they have of remaining viable in low rainfall areas.” But it was in the area of on-farm development that the association believed the new irrigation policy had, its greatest

shortcomings. “To suggest, as has been done, that this section of the policy is generous, is simply not true,” said Mr Morris. “The terms of funding ‘onfarm’ irrigation under the new policy seem to be contrary to the best advice given to Government from a good many very competent sources. “While a deferment of interest payments on irrigation loans from the Rural Banking and Finance Corporation may, on the surface, appear a desirable step, it does not recognise that the irrigation loan is just one part of the development involving irrigation. “This development entails gearing a farm up to a much higher level of production with greater costs incurred in almost every facet of farm expenditure. “The new policy expecting the irrigation loan to be repaid in a short term of 10 years is contrary to the principle of irrigation development as a long-term investment. These two factors combine to place a debt servicing structure beyond the reach of many farmers,” he said. The association used as an example a $lOO,OOO investment in direct irrigation development, which would require annual servicing

charges of nearly $19,800 at the end of the initial threeyear deferment of interest. This was a servicing rate of 19.8 per cent, including the official 9 per cent interest rate. Over the full 13-year term of the loan the annual servicing would be 15.2 per cent and the policy allowed for the interest rates to be increased after the first three years, which would further increase the debt-servicing problem. “It is apparent that members .of the Government’s Irrigation Policy Committtee are not aware of the significant associated commitments and costs required to be borne by the farmer during the process of irrigation development,” said Mr Morris. “These can include additional and/or upgrading of plant and 'equipment, crop storage facilities, sheep handling . facilities, labour facilities, water supply, additional livestock, additional fertilizer and lime, and current account servicing;

"Also, the $lOO,OOO to $120,000 example of the average irrigation development cost tends to be conservative when one looks at total irrigation of an average farm in the Canterbury area. “The range of cost is now $9OO to $l4OO per ha (excluding the associated costs mentioned abo.ve) on an average farm size of 200 hectares. “That is a total cost of direct irrigation development of $230,000, or an annual servicing cost over the 13year period of nearly $35,000." he said. The association said two important changes must be made to the irrigation policy for it to be an effective encouragement to irrigation development: (a) The initial, three years interest must be “writtenoff” and not deferred. This move would acknowledge the benefits of irrigation to the community and the nation, with the increase in employment opportunities and associated wealth that is created from a regional development point of view. “Irrigation schemes do not

make individual farmers wealthy. They allow individual farms to retain their viability in the face of the increasing cost/price squeeze. Irrigation creates wealth for the community and the nation as a whole," said the association. (b) The repayment term for irrigation loans should be extended from 13 to 18 years. “The effect of these changes would be to reduce debt-servicing from an intolerable and unsustainable level to a more practical and acceptable level in relation to farm profitability." said the association. Mr Morris said that private irrigation would continue to grow in spite of this new policy but Government’s commitment to the development of community irrigation schemes cannot be sincere when it set financial constraints that made it impossible for farmers to see any economic advantage in irrigation. “Without changes by Government this new policy will fail to encourage widespread development of irrigation.” he said. i