Idea Transcript
THE IMPACT OF IRRIGATION DEVELOPMENT ON RICE PRODUCTION IN LAMPUNG PROVINCE
Wan Abbas Zakaria Dyah Aring H.L. Yaktiworo Indriani
University of Lampung Bandar Lampung
June, 2004
Table of Contents Background and Policy Issues.............................................................................................3 Research Methods ................................................................................................................ 3 Analysis and Results............................................................................................................. 3 Input-Output Analysis......................................................................................................... 3 Private Revenues and Costs ............................................................................................... 6 Components ........................................................................................................................ 6 Social Revenues and Costs ................................................................................................. 9 Irrigated Rice....................................................................................................................11 Competitiveness and Efficiency.........................................................................................12 Conclusions ......................................................................................................................... 14 References ........................................................................................................................... 15
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Summary The Indonesian Government seeks to raise rice production by increasing irrigation. Irrigation infrastructure is being expanded in Lampung Province. This study examines the competitiveness (private profitability) of irrigated and rainfed rice production in Lampung. According to the results of the study, carried out using the PAM methodology, rice production was competitive in both the irrigated and rainfed farming systems during both the wet and dry seasons. Rice production in the irrigated system had much higher competitiveness than that in the rainfed system. The social returns to management and land (social profitability) of rice production in the irrigated system during both wet and dry seasons were about half of social revenues. The comparable returns in the rainfed system during the wet season were about one-third of social revenues, and those in the rainfed system during the (drought-affected) dry season were negative. But no conclusions can be drawn about efficiency until it is possible to make estimates of the social value of land used to grow rice during a year of normal rainfall. The development of irrigation infrastructure could increase the productivity and competitiveness of rice farming. But no firm conclusions can be drawn from the results of this study about whether public investment in additional irrigation in Lampung Province is efficient. A complete benefit-cost analysis of irrigation investment in Lampung would require estimates of the social opportunity cost of land used for rice production in normal weather years and information on the investment and maintenance costs of the additional irrigation infrastructure.
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Background and Policy Issues The Indonesian Government seeks to raise rice production by increasing irrigation. Irrigation infrastructure is being expanded in Lampung Province. This study examines the competitiveness (private profitability) of irrigated and rainfed rice production in Lampung. In Lampung Province, rice is produced in an irrigated production system (padi sawah) and in a rainfed farming system (padi sawah tadah hujan/gogo). The productivity of rainfed rice farming is lower than that of wetland rice farming. But the technology and yields of both rainfed and wetland rice farming were similar before the introduction of irrigation. Hence, the benefits of irrigation can be approximated by estimating the increases in profits that can be achieved through the introduction of irrigation in the rice-farming areas. The objective of this research, therefore, is to analyze the impact of irrigation development on the competitiveness of rice production systems in Lampung Province. Research Methods This study employs the Policy Analysis Matrix approach (PAM) to analyze the competitiveness of rainfed and irrigated rice production systems. The first task was to choose representative rice farming systems and study sites. The four principal riceproducing regencies in Lampung Province are Tanggamus, Central Lampung, South Lampung, and East Lampung. The research study was conducted in Central Lampung regency because both rice production (361,007 tons/year) and harvested area (81,747 ha)1 in this area was higher than those in other three regencies. Two villages – Sumber Rejo, Kota Gajah and Binjai Agung, Bekri – were selected to represent irrigated and rainfed rice production systems, respectively.2 Sixty households, chosen randomly – thirty in each village – were interviewed. The data used in this study were obtained from two sources – household surveys (primary data) and publications of government agencies, e.g., BPS (secondary data). Secondary data provided information on policies, foreign exchange rates, and other macroeconomic data. The household survey was employed to collect budgetary data on revenues, costs, and profits at the farm-gate level. Analysis and Results Input-Output Analysis The primary aim of the development of irrigation infrastructure in Lampung (and throughout Indonesia) is to raise rice production through increasing the controlled supply of irrigated water. The increase of cultivated area under a regular water supply improves rice 1 2
Badan Pusat Statistik Propinsi Lampung, 2001 Badan Pusat Statistik Kabupaten Lampung Tengah, 2002
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yields. The impact of irrigation development on rice production technologies, described by input-output coefficients, during both wet and dry seasons is shown in Table 1. The highest productivity (yield) of rice was 5.12 ton gkg/ha (gabah kering giling or unhulled dried rice per hectare) in the technical irrigated system during the wet season. In contrast, the lowest productivity of rice was 2.03 ton gkg/ha in the rainfed system during the dry season I (first dry season). The degree of water control and the intensity of input use (described in Table 1) accounted for most of this yield difference. In addition, the yield in the dry season was unusually low because of drought in 2003. In the technical irrigation system, the irrigation channels were complete and usable, whereas there was no irrigation channel in the rainfed system. Therefore, the security of water supply of the technical irrigated rice farms was much better and more sustainable. Seed use and transplanting labor cost in the irrigated system was lower than in the rainfed system because there was less need for replanting. Farmers growing irrigated rice used more chemical fertilizers and pesticides than did farmers growing rainfed rice, because the more secure water supply allowed greater effectiveness of chemicals and thus provided higher yields. The labor intensity in the rainfed farming system was higher than that in the irrigated farming system, especially in land and nursery preparation and transplanting of seedlings. Because of the instability of water supply, he rainfed farmers had to replant more than the irrigated farmers did. Some farmers used portable water pumps to solve the lack of water in the rainfed system during the dry season I. The pumps were equipped with about 50 meters of plastic pipe to absorb water from small lakes, which was then applied on the farms. The average water pump used 74 liters/ha/season of fuel. Since water pumps were expensive, only a few farmers used them to plant rice.
Table 1. Input-output Relationships for Rice Farming Systems (Lampung Province) Components Tradable Inputs Seed (kg/ha) Fertilizers a. Chemical Fertilizers (kg/ha) - Urea - TSP/SP-36 - KCl - ZA - NPK b. Other fertilizers (pack) c. Pesticide (pack)
Irrigated Rice Wet 2003 Dry I 2003
Rainfed Rice Wet 2003 Dry I 2003
35,40
45,10
42,30
47,50
259,50 199,90 133,10 1,00 1,00
253,10 188,70 130,90 1,00 1,00
276,80 172,30 106,50 1,00
253,33 126,67 63,33 1,00
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Table 1. Input-output Relationships for Rice Farming Systems (Lampung Province) Components
Irrigated Rice Wet 2003 Dry I 2003 -
d. Herbicide (Pack) e. Fuel (lt/ha) Domestic Factors a. Non-Chemical Fertilizers (pack/ha) - manure b. Tractor (pack) c. Draft Animal (pack) Labor (man-days/ha) d. Nursery (DK) (md) 10,50 10,50 e. Land Preparation (LK) (md ) 22,70 24,20 f. Transplanting of seedling (LK) (md) 10,20 10,00 g. Crop care (DK) (md) 10,40 13,70 h. Water irrigation (DK) (md) 2,50 2,60 i. Harvesting (LK) (pack) (md) 1,00 1,00 j. Post harvesting (DK) (md) 4,60 7,70 - Transportation - Machine k. Tax (PBB) (pack) 1,00 1,00 l. Irrigation contribution (pack) 1,00 1,00 m. Other payment (pack) 1,00 1,00 n. Equipment (pack) 1,00 1,00 o. Water pump (pack) Working capital 2.479.143,03 2.321.907,04 Land rent (ha) 1,00 1,00 5.12 4.79 Production (kg/ha) (GKG) Notes: Working capital is cash payment per hectare/season
Rainfed Rice Wet 2003 Dry I 2003 74,00
34,70 -
19,00 18,00 29,60 23,30 15,00 5,10
1,00
1,00 3,30 1,00
1,00 1,00 2.112.059,17 1,00 3.46
1,00 1,00 1.977.545,29 1,00 2.03
Because the degree of water control affected the intensity of input use, the rate of rice productivity (level of rice yields) differed across the four farming systems. The irrigated system had the highest yields – 5.12 tons of gkg/ha during the wet season and 4.79 tons of gkg/ha in the dry season. In contrast, the rainfed system generated much lower yields – 3.46 tons of gkg/ha in the wet season and only 2.03 tons of gkg/ha in the droughtaffected dry season. The availability of regular irrigation water and the higher use of chemical inputs thus increased yields by half in the wet season and more than doubled yields in the dry season. 5
Private Revenues and Costs The profit of rice production was obtained by subtracting costs from revenues. In PAM analysis, profitability is calculated first in private (actual market) prices and then in social (efficiency) prices. Table 2 shows the private prices of inputs and outputs in the four rice farming systems that were studied in Lampung Province. The irrigated farming sites were closer to the central input market and more accessible than the rainfed farming sites. As a result, the prices of tradable inputs, such as fertilizer, were less in the irrigated system than in the rainfed system. However, the wages paid to labor were higher for the irrigated system, because laborers had somewhat easier access to off-farm jobs. Table 2. Private Prices of Inputs and Outputs (Lampung Province – Rp/hectare)
Components Tradable Inputs Seed (Rp/kg) Fertilizers a. Chemical Fertilizers (Rp/kg) - Urea - TSP/SP-36 - KCl - ZA - NPK b. Other fertilizers c. Pesticide (Rp/pack) d. Herbicide (Rp/Pack) e. Fuel (Rp/lt) Domestic Factors a. Non Chemical Fertilizers (pack/ha) - Manure Labor : a. Tractor (Rp/pack) b. Draft Animal (Rp/pack) c. Nursery (DK), mandays d. Land Preparation (LK), mandays e. Transplanting of seedling (LK), mandays f. Crop care (DK), mandays g. Water irrigation (DK) mandays h. Harvesting (LK), mandays
Irrigated Rice Wet 2003 Dry I 2003
Rainfed Rice Wet 2003 Dry I 2003
2.554,2
2.565,5
3.000,0
3.026,7
1.224,3 1.626,6 1.705,7 67.041,8 138.753,0 -
1.225,3 1.657,5 1.695,7 66.478,5 149.000,1 -
1.200,0 1.700,0 1.800,0 127.719,1 -
1.200,0 1.650,0 1.800,0 40.666,7 1.650,0
-
-
6.400,8
6.166,7
13.902,2
13.898,5
10.000,0
10.000,0
13.885,5
13.862,9
10.000,0
10.000,0
13.885,7 14.001,1 15.000,0 692.204,1
13.870,4 14.022,4 15.000,0 507.514,9
9.956,9 10.000,0 420.225,0
9.487,2 10.000,0 310.115,0
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Table 2. Private Prices of Inputs and Outputs (Lampung Province – Rp/hectare) Irrigated Rice Wet 2003 Dry I 2003 15.000,0 15.000,0 12.047,5 12.047,5
Components i. Post Harvesting (DK), mandays - Transportation - Machine f. Tax (PBB) (Rp/season) g. Irrigation contribution (Rp/season) 11.269,7 12.254,0 h. Other payment (Rp/season) 52.962,8 52.142,4 i. Equipment pack (Rp/season) 87.718,6 87.718,6 j. Water pump (pack) Working capital 0,02 0,02 Land rent (Rp/ha) Ouput price (Rp/kg gkg) 1.457,8 1.476,1 Notes: Water pump = cost of pump rent per season
Rainfed Rice Wet 2003 Dry I 2003 10.000,0 10.000,0 7.558,4 7.505,0 20.000,0 64.890,9 0,02 1.439,4
47.461,0 250.000,0 0,02 1.488,4
The input-coefficients reported in Table 1 were multiplied by the private prices shown in Table 2. The results for the four irrigated and rainfed farming systems are presented in Table 3. Table 3. Private Budgets of Rice (Lampung Province - Rp/hectare) Component
Tradable Inputs
Quantities
Seed (Rp) Fertilizers a. Chemical Fertilizers (Rp) - Urea - TSP/SP-36 - KCl - ZA - NPK b. Other fertilizers c. Pesticide (Rp) d. Herbicide (Rp) e. Fuel (Rp) Total tradable inputs
Irrigated Rice Wet Dry I 2003 2003
Rainfed Rice Wet Dry I 2003 2003
90.419
115.704
126.900
143.768
317.706 325.157 227.029 0 0 67.042 138.753 0 0 1.166.105
310.123 312.770 221.967 0 0 66.479 149.000 0 0 1.176.043
332.160 292.910 191.700 0 0 0 127.719 0 0 1.071.389
303.996 209.006 113.994 0 0 0 40.667 0 122.100 811.430
Domestic factors 7
Table 3. Private Budgets of Rice (Lampung Province - Rp/hectare) Component
Quantities
Irrigated Rice Wet Dry I 2003 2003
a. Non Chemical Fertilizers (Rp) - Manure Labor (Rp) a. Tractor b. Draft Animal c. Nursery d. Land Preparation e. Transplanting of seedling f. Crop care g. Water irrigation h. Harvesting i. Post Harvesting - Transportation - Machine Total labor f. Tax (PBB) (Rp) g. Irrigation contribution (Rp) h. Other payment (Rp) i. Equipment pack (Rp) j. Water pump (Rp) Total other expendces Cost of capital
Ouput price (Rp)
222.108
117.167
0 0 145.973 315.201
0 0 145.934 335.482
0 0 180.000 296.000
0 0 120.000 316.700
141.634 145.611 37.500 692.204 69.000 0 0 1.547.124 12.048
138.704 192.107 39.000 507.515 115.500 0 0 1.474.242 12.048
231.996 150.000 0 420.225 33.000 0 0 1.311.221 7.558
234.334 50.700 0 310.115 38.000 0 0 1.069.849 7.505
11.270 52.963
12.254 52.142
0 20.000
0 0
87.719 0 163.999 99.166
87.719 0 164.163 92.876
64.891 0 314.557 84.482
47.461 250.000 422.133 79.102
0
0
0
0
7.468.134
7.067.567
4.974.912
3.016.481
Land rent (Rp) Output
Rainfed Rice Wet Dry I 2003 2003
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Social Revenues and Costs The efficiency of rice production is determined by profitability in social prices. Several assumptions were used in estimating the social prices of inputs and outputs shown in Table 4 and used to create Table 5. 1. The nominal private interest rate was 12 percent per year or 4 percent per season, based on the BRI savings rate, which was the private opportunity cost for self-financed working capital (BRI Lampung, 2003). 2. The nominal social interest rate was 23.9 percent per year (15 percent for the assumed real social opportunity cost of capital and 8.9 percent for the average rate of inflation in Lampung Province) or 7.97 percent per season. 3. The official exchange rate was the average Rp/US Dollar exchange rate from December 2002 through April 2003, Rp8,861/US $. 4. The CIF price of rice seeds was equal to twice the FOB price of Thailand rice (World Bank Development Prospects, Commodity Price Data Pinksheet-May 2003). 5. The CIF prices of fertilizer were an average of CIF fertilizer prices from January through December 2002 (World Bank Development Prospects, Commodity Price Data Pinksheet-May 2003). 6. The FOB price of rice was the FOB price of 25% broken Thai rice from October – December 2002 for wet season and in April 2003 for dry season I (World Bank Development Prospects, Commodity Price Data Pinksheet-May 2003).
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Table 4. Social Prices of Inputs and Outputs (Lampung Province - Rp/hectare)
Component Tradable Inputs
Prices
Seed (Rp/kg) Fertilizers a. Chemical Fertilizers (Rp/kg) - Urea - TSP/SP-36 - KCl - ZA - NPK b. Other fertilizers c. Pesticide (Rp/pack) d. Herbicide (Rp/Pack) e. Fuel (Rp/lt)
Irrigated Rice Wet Dry I 2003 2003
Rainfed Rice Wet Dry I 2003 2003
3.181
3.253
3.181
3.253
930 1.455 1.206 90 1.570 53.633 111.002 0 0
930 1.463 1.206 90 1.570 53.183 119.200 0 0
930 1.463 1.206 90 1.570 0 102.175 0 0
930 1.463 1.206 90 1.570 0 32.533 0 2.240
0
0
6.401
6.167
0
0
0
0
0
0
0
0
13.902,2
13.898,5
10.000,0
10.000,0
13.885,5
13.862,9
10.000,0
10.000,0
13.885,7
13.870,4
9.956,9
9.487,2
14.001,1
14.022,4
10.000,0
10.000,0
15.000,0 692.204, 1
15.000,0
-
-
507.514,9
420.225,0
310.115,0
15.000,0 0
10.000,0 0 0
10.000,0 0 0
Domestic factors a. Non Chemical Fertilizers (pack/ha) - Manure Labor a. Tractor (Rp/pack) b. Draft Animal (Rp/pack) c. Nursery (DK), mandays d. Land Preparation (LK), mandays e. Transplanting of Seedling (LK), mandays f. Crop care (DK), mandays g. Water irrigation (DK) mandays h. Harvesting (LK), mandays i. Post Harvesting (DK), mandays - Transportation - Machine
15.000,0 0 0 10
Table 4. Social Prices of Inputs and Outputs (Lampung Province - Rp/hectare)
Component
Prices
f. Tax (PBB) (Rp/season) g. Irrigation contribution (Rp/season) h. Other payment (Rp/season) i. Equipment pack (Rp/season) j. Water pump (Rp/hr) Working capital
Irrigated Rice Wet Dry I 2003 2003 12.048
12.048
7.558
7.505
11.270
12.254
0
0
52.963
52.142
20.000
0
87718,6 0
87718,6 0
64890,9 0
47461 250000
7,97%
7,97%
7,97%
7,97%
0
0
0
0
1.131
1.154
1.131
1.154
Land rent (Rp/ha) Output
Ouput price (Rp/kg)
Rainfed Rice Wet Dry I 2003 2003
Table 5. Social Budgets (Lampung Province - Rp/hectare)
Component Tradable Inputs
Quantities
Seed (Rp) Fertilizers a. Chemical Fertilizers (Rp) - Urea - TSP/SP-36 - KCl - ZA - NPK b. Other fertilizers c. Pesticide (Rp) d. Herbicide (Rp) e. Fuel (Rp/lt) Total tradable inputs
Irrigated Rice Dry I Wet 2003 2003
Rainfed Rice Wet 2003 Dry I2003
112.595
146.724
134.541
154.532
241.254 290.767 160.580 0 0 53.633 111.002 0 0 969.832
235.304 276.148 157.926 0 0 53.183 119.200 0 0 988.485
257.338 252.148 128.488 0 0 0 102.175 0 0 874.690
235.518 185.372 76.405 0 0 0 32.533 0 165.740 684.360
Domestic 11
Table 5. Social Budgets (Lampung Province - Rp/hectare)
Component
Quantities
Irrigated Rice Dry I Wet 2003 2003
Rainfed Rice Wet 2003 Dry I2003
factors a. Non Chemical Fertilizers (pack/ha) - Manure Labor (Rp) a. Tractor b. Draft Animal c. Nursery d. Land Preparation e. Transplanting of seedling f. Crop care g. Water irrigation h. Harvesting i. Post Harvesting - Transportation - Machine Total labor f. Tax (PBB) (Rp) g. Irrigation contribution (Rp) h. Other payment (Rp) i. Equipment pack (Rp) j. Water pump (Rp) Total other expendces Cost of capital Land rent (Rp) Output
Ouput price (Rp)
0
0
222.108
117.167
0 0 145.973 315.201
0 0 145.934 335.482
0 0 180.000 296.000
0 0 120.000 316.700
141.634 145.611 37.500 692.204 69.000 0 0 1.547.124 12.048
138.704 192.107 39.000 507.515 115.500 0 0 1.474.242 12.048
231.996 150.000 0 420.225 33.000 0 0 1.311.221 7.558
234.334 50.700 0 310.115 38.000 0 0 1.069.849 7.505
11.270 52.963
12.254 52.142
0 20.000
0 0
87.719 0 163.999 197.505
87.719 0 164.163 184.979
64.891 0 314.557 168.261
47.461 250.000 422.133 157.544
0
0
0
0
5.792.706
5.527.104
3.908.150
2.339.507
Competitiveness and Efficiency Table 6 reports the Policy Analysis Matrices (PAMs) for the four Lampung rice-farming systems. Because the cost of land was omitted (and profits were defined as the returns to management and land), the cost of labor constituted more than four-fifths of the measured total production cost in all systems. All four systems were privately profitable and thus could compete at actual market prices. Based on private prices, the irrigated rice production system during the wet season earned the highest profit (Rp 4.5 million per ha), while the rainfed rice production system during dry season I had the lowest profit (Rp 0.5 million per 12
ha). Private profits for rice produced under the irrigation system exceeded those for rainfed rice by Rp 2.3 million per ha during the wet season and by Rp3.6 million per ha during the dry season. Farmers thus benefited greatly from public irrigation investment. Rice production in Lampung thus was competitive, but was it also efficient? The social profits (the returns to management and land) for irrigated rice in both wet and dry seasons were about half of social revenues. These margins provide a wide scope for paying the social opportunity costs of land used for rice production. The social returns to management and land were only about one-third of revenues for the rainfed rice system in the wet season and were negative in the dry season (in part due to the drought in the year of the study). But no conclusions can be drawn about efficiency until it is possible to make estimates of the social value of land used to grow rice during a year of normal rainfall. Table 6. Policy Analysis Matrices (PAMs) (Lampung Province – Rp/ hectare)
Component
Revenue
Tradable inputs
Labor
Domestic Factors Other Exp Capital Land
Profit*) Total
Rice irrigation Wet 2003 Private
7.468.134
1.166.105
1.547.124
163.999
99.166
0
1.810.288
4.491.741
Social
5.792.706
969.832
1.547.124
163.999
197.505
0
1.908.627
2.914.247
Divergences
1.675.428
196.273
0
0
-98.339
0
-98.339
1.577.494
Private
7.067.567
1.176.043
1.474.242
164.163
92.876
0
1.731.281
4.160.242
Social
5.527.104
988.485
1.474.242
164.163
184.979
0
1.823.383
2.715.236
Divergences
1.540.463
187.559
0
0
-92.102
0
-92.102
1.445.006
Private
4.974.912
1.071.389
1.311.221
314.557
84.482
0
1.710.260
2.193.263
Social
3.908.150
874.690
1.311.221
314.557
168.261
0
1.794.039
1.239.421
Divergences
1.066.762
196.699
0
0
-83.778
0
-83.778
953.842
Private
3.016.481
933.530
1.069.849
422.133
79.102
0
1.571.084
511.866
Social
2.339.507
850.100
1.069.849
422.133
157.544
0
1.649.527
-160.120
Divergences
676.974
83.430
0
0
-78.443
0
-78.443
671.986
Dry I 2003
Rice in Dry Land Wet 2003
Dry I 2003
*)
Included land rent
The private revenue from rice produced in the irrigated system during the wet season, Rp 7.5 million per ha, was higher than the social revenue, Rp5.8 million per ha. The ratio of these two valuations of revenue is the Nominal Protection Coefficient on Output (NPCO). As reported in Table 7, the NPCOs for the four systems ranged between 1.27 and 1.29. This output divergence was caused by the import tariff on rice of Rp 430 per kg..
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Table 7. Protection Ratios for Four Rice Farming Systems ( Lampung Province)
No 1 2
Component NPCO [A/E] NPCI [B/F]
Irrigated Rice Wet Dry I 2003 2003 1,29 1,28 1,20 1,19
Rainfed Rice Wet Dry I 2003 2003 1,27 1,29 1,22 1,10
The private tradable input cost of rice production for the irrigated system during the wet season, Rp 1.2 million per ha, was 20 percent higher than the social tradable input cost, Rp 1.0 million per ha. The ratio of these two valuations of tradable input costs is the Nominal Protection Coefficient on Tradable Inputs (NPCI). As reported in Table 7, the NPCIs for the four systems ranged between 1.10 and 1.22. The taxes on chemical fertilizers and pesticides outweighed the small subsidy on rice seeds and kerosene. The lowest NPCI, 1.10, was in the rainfed system during the dry season. That system used fewer of the taxed tradable inputs. Conclusions Rice production was competitive in both the irrigated and rainfed farming systems during both the wet and dry seasons. Rice production in the irrigated system had much higher competitiveness than that in the rainfed system. The social returns to management and land (social profitability) of rice production in the irrigated system during both wet and dry seasons were about half of social revenues. The comparable returns in the rainfed system during the wet season were about one-third of social revenues, and those in the rainfed system during the (drought-affected) dry season were negative. But no conclusions can be drawn about efficiency until it is possible to make estimates of the social value of land used to grow rice during a year of normal rainfall. The development of irrigation infrastructure could increase the productivity and competitiveness of rice farming. But no firm conclusions can be drawn from the results of this study about whether public investment in additional irrigation in Lampung Province is efficient. A complete benefit-cost analysis of irrigation investment in Lampung would require estimates of the social opportunity cost of land used for rice production in normal weather years and information on the investment and maintenance costs of the additional irrigation infrastructure.
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