Increased irrigation charges another burden on farmers

Press, 25 September 1987, Page 14

Increased irrigation charges another burden on farmers

Sixty per cent of farmers using water from the Amur! Plains irrigation schemes would make a financial loss if the Government’s re-cently-announced water charges of $6B a hectare were applied across the board.

The new rates will mean farmers in stage one of the Waiau scheme will face water charges more than four times higher than last season’s. Farmers say the new level of charges and their effect on farmers’ incomes would be unsustainable for any business, let alone farming in its present state. In announcing the new charge last month, the then Minister of Works and Development, Mr Colman, said it was substantially less than the $137 needed to pay outstanding debt and recover the scheme’s run-

By

DAVID LUCAS

ning costs. Water charges to the farmer are intended to cover the cost of operating and maintaining the scheme and to recover 50 per cent of the cost of off-farm works (not Including headworks) over a period of 40 years, plus interest. To ease the burden on farmers in the early stages of the scheme’s life, the charges are deferred and build up to the full amount over seven years. Mr Colman said the new rate of $6B a hectare for the farmers on stage one of the Waiau scheme, who received their first irrigation water seven years ago, was the same as the 1974 notified charge, adjusted for construction inflation.

An independent survey of the effect of the new charge on farmers indicated that at least 60 per cent would make a loss; even at $25 a hectare, about half the farms would still not be in credit, said Mr Oliver Grigg, chairman of the Amurl Plains Irrigation Committee.

High interest rates over the last three years had been a major factor in pushing the costs out of all proportion. Farmers generally accept that their water charges should reflect the cost of operating, maintaining and renewing the scheme, which would make up a water charge of about $l5 to $2O a hectare. But the off-farm distribution and interest components were not realistic in today’s economic climate, said Mr Grigg. The farmers’ half-share of the off-farm works for the Waiau and Balmoral schemes is estimated to cost $6.2M, not including interest. Both the Waiau and more recent Balmoral schemes were soundly conceived when they were voted in by farmers, but policy changes by successive Governments had caused major problems, said Mr

Grigg. The interest component of the Waiau scheme had increased tenfold since farmers voted in favour of the Waiau scheme in 1975. The increase had been a direct result of the Government’s financial policies and was out of the control of farmers. Even without the increased water charges, farmers were faced with huge increases in other costs and were having difficulty servicing their existing debts which were largely related to on-farm irrigation development costs. A report prepared for the Amuri irrigation committee by a farm consultant, Mr Bob Englebrecht, says that water charges at almost any rate on top of the debt-servicing levels already affecting farmers, would be an extreme burden for many farmers. Farmers had been caught midstream by changes in political and economic direction made by the Government during the last three years, and most would probably not have voted for the irrigation development proposal if they had known the likely implication of their decision.

The high level of onfarm debt already incurred by farmers in the scheme was shown by a survey which indicated that 27 per cent had lodged applications for debt restructuring, compared with 14.2 perr cent for the whole of North Canterbury. The percentage of farmers in arrears to the Rural Bank was substantially higher than for the rest of the region, said Mr Grigg. He foresees the likely consequences of these financial restraints (including the $6B charge) being a slow down in the rate of further development of the scheme, which in turn would have led to a greater use of the supply works.

As well, on-farm work already started, such as fencing, would probably

not be completed and inputs necessary to ensure the best use of irrigation water, such as fertiliser, would not be applied.

The Waiau scheme was approved by the Government in 1977 and was intended to provide water to 17,000 ha on 80 properties. Just aver 9000 ha has been • developed for irrigation.

The Balmoral scheme, approved four years later, was planned to bring water to 5500 ha on 25 properties. To date 1200 ha has been developed. Construction of the schemes is regarded as being generally in line with budget estimates. The main problems have been interest, inflation and, to a smaller degree, miscalculation of some components of the capital cost, factors which were beyond the control of farmers.

The Englebrecht report says that those farmers who developed their properties early, and quickly, are substantially better off than those who started . development later or those who developed more slowly. The rapid, early developers had the benefit of irrigation at more favourable financial returns.

The schemes are considered to be well-de-signed and well-built, but need to be fully completed for their full benefits to show through. In a report on the expected benefits, Mr Geoff Dunham, an agricultural consultant with the M.A.F. at .Rangiora, has estimated the total annual value of goods and services produced by the scheme when completed would be S22M, and farm gate production would increase by 80 per cent.

However the economic squeeze in farming will mean completion of the schemes is likely to be a long way off as farmers are already fully extended financially. The Irrigation committee is making representations to the new Minister of Works, Mr Prebble, about the future of the scheme and there is also a national review underway of the various schemes.