Module 1 - India: Using a Public Expenditure Review of the Irrigation Sector to Assess the Fiscal Impact of the Maharashtra Water Sector Improvement Project

Table 1.4: Projected share of irrigation expenditure to total capital outlay, Rs million

 

 

The difficulty of providing irrigation with such a high share of the projected capital outlay is real. Although the share of MWSIP is very small (0.6% or less of the projected capital outlay) per year, it is critical for the ID to make a realistic reassessment of capital expenditures for itself and the IDCs, for example, in the range of 40 to 45 percent. The DoF shared the opinion that other ID projects needed to be scaled down in view of the financing constraint. The constraint may get tighter if the state government’s fiscal projections are not realized, as occurred in happened in the 2002/03 to 2004/05 MTFP.

 

Lessons Learned

 

The irrigation sector PER was an important tool for clarifying the fiscal impact of the project and helping to allay Bank management’s concerns regarding the availability of counterpart funding. The PER also confirmed the significant progress made by the state government in achieving full cost recovery of O&M expenditures and by the ID in achieving a better balance between maintenance work and staff costs. Notably, Maharashtra is the very first state in India to implement full cost recovery of O&M, and the PER helped to convince management of the project’s fiscal feasibility.

 

Although the PER was specific to the irrigation sector, colleagues specializing in macroeconomics were extremely important in supporting the analysis of statewide expenditure data, in facilitating access to DoF officials, and in pursuing the policy dialogue with them on the MTFRF and its links with development plans in the irrigation sector. This cross-sectoral collaboration also helped to build broader ownership of the project.

 

The PER also highlighted the importance of integrating expenditure information at the scheme level into the ID’s management information system. This integration will enable easier and more timely access to expenditure data, which can contribute to more effective policy making (for example, estimating O&M and formulating water rates), planning, and implementation.