Background

Up until the end of the 1980s, the GOP was the main actor in irrigation systems. It financed major public hydraulic infrastructure, including about one million hectares of irrigated land in the desert coastal area, an area with strong potential for agricultural exports but totally dependent on irrigation infrastructure due to low rainfall.  The primary problem encountered in those public irrigation schemes were the lack of operation and maintenance (O&M) funds, resulting in the deferral of necessary maintenance and repair and the progressive deterioration of irrigation infrastructure.

In 1989, in an attempt to solve these management and financial problems, the GOP transferred the responsibility for O&M of the public irrigation systems to water user organizations (WUOs). The transfer of responsibilities was not accompanied with a program for strengthening WUO management capacity or an effective technology transfer mechanism to provide incentives for farmers to learn new irrigation methods or agricultural practices.  Finally, the lack of a water user rights system discourages private investments on agricultural system, including irrigation infrastructure, preventing effective water resources management.

Key elements of PSI’s success

PSI design included a multidisciplinary participatory approach, with a heavy capacity building component, aimed at addressing the challenges faced by WUOs and farmer in Peru. Particularly, the PSI combined:

• Off-farm and on-farm irrigation infrastructure improvements to increase water availability and improve timing of water delivery, which are key to increasing yields and encouraging conversion to higher value crops for exports and urban markets;

• Capacity building of WUOs and farmers to improve irrigation scheme management and farmers’ irrigation and agricultural practices, thereby improving the overall performance and sustainability of irrigation and agricultural production;

• Support farmers’ organizations in their cropping and marketing strategies to optimize the revenue/price they can get from their produce and ensuring to the extend that is possible farmers income; 

• Promote financial sustainability and ownership through a cost sharing system having government, WUOs and farmers contributing to irrigation infrastructure improvements; and

• The formalization of water rights for irrigation in an increasing water scarcity environment, encouraging farmers’ investments on irrigation improvements and conversion to higher value crops, and reducing over-exploitation of water resources and water conflicts. 

PSI, PSI II, PSI Sierra and more

The first PSI was approved in July 1996 for a total loan amount of US$85 million and a total cost at appraisal of US$172.4 million. It closed on June 30, 2004. The Project’s objective was to develop capacity for decentralized management of irrigation systems by WUOs, to reduce the role of the public sector in irrigation, and to ensure cost recovery of capital investment and operation and maintenance of irrigation systems.

A follow-on supplemental, Irrigation Subsector Project II (PSI II), with a total cost of US$ 22 million, became effective in November 2005 and  aimed at enhancing and consolidating achievements made under the first PSI, as well as supporting the Government’s program of water rights formalization and water resources management improvements.

PSI and PSI II were instrumental in the development of two important institutions in Peru. First, the PSI, the institution in charge of implementing the PSI, is now an organization under the Agriculture Ministry responsible for improving the profitability of agriculture at the national level by developing technical, economic and institutional irrigation sub-sector. Second, the PROFODUA, also under the Agriculture Ministry, is responsible for aligning and adjusting water use rights for irrigation, granting licenses and / or permits depending on water availability.

The Bank is now preparing an Irrigation Subsector Project in the Sierra of Peru, tailoring the successful approach of PSI to the particular challenges of Peru’s highlands. In the Andean region, agricultural plots are small and farmers’ organizations have a more traditional structure. Socially, the highland, home of many Peru’s indigenous people, also has a high incidence of poverty with 72% of its population being poor. This proposed Project will strengthen the technical, financial and management capacity of farmers and traditional water users’ organizations in targeted irrigated areas of the Sierra through improved collective and on-farm irrigation infrastructure, irrigation management practices, water users’ organizations, a better coordination between the irrigation scheme and the agricultural supply chains linked to it and the formalization of water rights.

PSI successes in the coast at a glance:

• Of the 64 WUO existing in the Costa, two thirds are technically and financially fully autonomous; moreover, through technical support by agricultural extension workers, the project introduced new technologies and transferred knowledge; and within the WUOs, the project developed transparency in procedures and decisions in water distribution, which reduced conflicts among water users over water allocation.

• Operations and maintenance (O&M) cost recovery increased from US$7.8 million/year in 1998 to more than US$25 million/year in 2006.

• Average O&M cost recovery increased during the same period from 45 percent  to 81 percent.

• Approximately  295,000 farm families and 435,000 ha benefited from the project.

• Approximately 5,000 ha were equipped with improved on-farm irrigation technologies such as sprinklers.

• Approximately 6,500 new jobs were created.

• Water conveyance efficiency increased on average about 55 percent - 68  percent in improved irrigation systems.

• Formalized about 190,000 new water rights.

• Yields per ha were raised by 20-50 percent in on-farm improvement areas. 

• Surveyed farmers increased their household incomes on average by 30 percent in on-farm improvement areas.