Over the past few years, the irrigation sector has gained traction, with greater focus on multipurpose irrigation projects and infrastructure creation through a number of government’s flagship programmes. Besides the government-increased investment in the irrigation sector, private capital has been encouraged to cater to irrigation requirements, weather stations, digital information on rainfall and soil moisture.
India Infrastructure Research tracked
some of the projects, according to which there are a total of 226 upcoming irrigation projects, with a total investment requirement of Rs 8.38 trillion. State-wise, Kerala accounts for a maximum share of ~40 per cent in total investment involved in the project pipeline, followed by Andhra Pradesh (9.89 per cent) and Maharashtra (9.73 per cent).
Indian Infrastructure looks at the opportunities offered by the upcoming irrigation projects to various stakeholders…
Contractors
Construction accounts for a significant share in the total cost of an irrigation project, around 50-60 per cent. However, the actual cost of an irrigation project depends on a plethora of factors such as the type of irrigation project (minor, medium or major irrigation); the technique or technology deployed; the source of water supply; the scope of a project’s work; and location. Based on the projects tracked by India Infrastructure Research, the irrigation sector offers an opportunity of Rs 4.2 trillion-Rs 5 trillion to engineering, procurement and construction contractors. State-wise, Gujarat offers the maximum construction opportunity of about Rs 1,069.81 billion, followed by Andhra Pradesh (Rs 915.65 billion) and Maharashtra (Rs 745.56 billion). These three states are expected to create a combined irrigation potential of 6,043,000 hectares. Some of the major irrigation projects that offer significant construction opportunities are the Kalpasar dam project, the Subarnarekha-Mahanadi link and the Babu Jagjivan Ram Uttarandhra Sujala Sravanthi project.
Pump manufacturers
According to estimates, by 2023-24, 3.06 million solar pumps will be installed across the country. (For the period 2019-20 and 2023-24, the total market demand for solar pumps has been forecasted on the basis of the compounded growth of installed solar pumps from 2015-16 to 2018-19.)
Besides, under the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyaan (PM-KUSUM) alone, the Ministry of New and Renewable Energy has envisaged the installation of 1.75 million stand-alone solar pumps (Component B of the scheme) and 1 million grid-connected solar pumps (Component C of the scheme), that is, a total of 2.75 million solar pumps to be installed by 2023-24. This translates to a growth rate of approximately 73 per cent during the period under consideration, from 2019-20 till 2023-24. All this is expected to create vast opportunities for existing pump manufacturers to expand their presence as well as for new players to enter the irrigation market and come up with new innovations and technologically advanced pumps.
Pipe manufacturers
In the irrigation sector, initiatives such as the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), Accelerated Irrigation Benefit Programme and Command Area Development and Water Management Programme are driving the growth of the plastic pipes and fittings industry. By 2022-23, the plastic pipes and fittings industry is expected to reach Rs 490 billion, posting a compound annual growth rate of 12-14 per cent. Based on the project pipeline, upcoming projects will entail installation of pipes and piping systems for conveying water to the fields, providing abundant opportunities to pipes and piping system manufacturers.
Meter manufacturers
According to industry experts, a total of 4,000-5,000 bulk flow meters are likely to be installed for irrigation projects in India over the next three to four years. Given the average cost of a bulk flow meter is approximately Rs 1.5 million, the market size of bulk flow meters is projected to reach close to Rs 6 billion-Rs 7.5 billion by 2023-24, thereby offering huge opportunities to equipment manufacturers in the next two to three years.
Storage system providers
Of the 226 upcoming projects tracked by India Infrastructure Research, 40 projects entailing an investment of more than Rs 1.43 trillion relates to the construction of dams. These dam projects are spread across 11 states – Bihar, Chhattisgarh, Gujarat, Haryana, Jharkhand, Maharashtra, Odisha, Rajasthan, Tamil Nadu, Uttar Pradesh and Uttarakhand. Overall, these dam projects target an irrigation potential of 3.71 million hectares, thus offering huge opportunities for storage system providers.
Technology providers and consultants
Irrigation technologies are being developed to shift from rain-dependent farming to harvesting, storing rainwater and using it efficiently to cultivate crops. Initiatives are also being taken to promote the use of advanced micro-irrigation technologies such as drip and sprinkler irrigation. In this light, the upcoming projects offer significant opportunities to technology providers. Significant opportunities are also expected to arise for consultants from these upcoming projects. Consultancy opportunities range from the preparation of detailed project reports to project management consultancy, survey and investigation works.
Investment requirements
According to industry experts, the Indian agricultural equipment market is expected to reach Rs 901.41 billion by 2024. In the past few
years, some states as well as the central government have provided direct income support to farmers. There is a view that it has come at the cost of investment in the sector. While such support is essential for farmers to meet their input requirements in the short run, investment in the sector is needed to spur growth in the long run.
Under the Union Budget 2021-22, the government has allocated Rs 90.23 billion for the Department of Water Resources, River Development and Ganga Rejuvenation under the Ministry of Jal Shakti. Of this, 0.78 billion has been allocated for major irrigation projects and Rs 55.88 for the PMKSY. The budget has also levied a cess on several items for the creation of agricultural infrastructure as well as a development cess. It is estimated that an amount of Rs 300 billion will be collected every year in the form of cess. This is expected to improve the ratio of investment to subsidies, if the amount collected is used in an efficient way.
Going forward, the government needs to increase investment in the agricultural sector, to reach its desired goal of doubling the farm income in the next few years. The most important step in this direction will be to increase public investment in agriculture and irrigation at 14 per cent per annum, as proposed by the Ashok Dalwai Committee. In addition, the capital use efficiency of the existing major-medium irrigation projects must improve. States also need to prioritise public expenditure, keeping in view the type of investment and the subsidy that will enable higher productivity gains. At the same time, the government needs to increase the outlay of the agricultural sector and encourage private research and development to inject adequate capital. Private capital can also be encouraged in certain rural projects such as for solar power, weather stations, digital information on rainfall, soil moisture and irrigation requirements. Further, there is a critical need to intensify the research on yield augmenting and water conserving technologies.
Moving ahead
In the current Covid-19 scenario, when financing for new irrigation projects might not be easy, it is important to increase water use efficiency by upgrading the existing network, adopting micro-irrigation techniques and use of advanced technology solutions to strengthen the irrigation system in the country. Financing for farmers continues to be a major impediment. Farmers continue to face difficulties in finding financing options and even if they do, the collateral is very high. Hence, finding ways to ensure easier financing norms for farmers should be a priority.
Overall, the sector has a positive outlook and offers huge opportunities. The expansion and uptake of various irrigation projects will offer multiple business opportunities across different segments. Continuous efforts for rapid growth in the sector will result in the removal of major impediments. With various flagship government schemes such as the PMKSY, the policy thrust is likely to enable continued growth of the irrigation sector as well.