Regulatory Impact Assessment (RIA) of Draft Irrigation / Drainage Tariff Methodology
Monday, 01 February, 2016

Currently, the Georgian agricultural sector is characterized by relatively low productivity (by international standards) and its contribution to the GDP of the country is much lower than what it could be, considering that 45%1 of the Georgian labor force is currently employed in agriculture. Increasing the productivity and competitiveness of the Georgian agricultural sector could, therefore, generate substantial economic and social benefits.

There are many bottlenecks that contribute to this current state of affairs:

• Low quality and quantity of irrigation and drainage services;

• Inefficient use of water by farmers;

• Lack of a well-functioning land market;

• High cost of capital and limited access to the financial market;

• High uncertainty;

• Farmers’ low propensity for risk.

While all of these factors affect the productivity and competitiveness of the Georgian agricultural sector, it is clear that having well-functioning irrigation and drainage systems is a crucial prerequisite for the development of the sector. Currently, Georgian amelioration services are falling short of what would be optimal for the country, in both quantitative and qualitative terms.

Georgian Amelioration (GA) is a government-owned company that manages most of the country’s irrigation/drainage infrastructure. It currently serves about 114 thousand hectares (88.4 irrigation and 25.5 drainage), compared to the 500 thousand hectares (386 irrigation and 114 drainage) that were served under the Soviet Union. While the area served under the Soviet Union (in 1988) was undoubtedly excessive (many areas were served at extremely high costs, exceeding the benefits provided), the area currently served can still be substantially increased, generating net benefits for society as a whole. Unfortunately, as emerged from our interactions with the main stakeholders, the quality of services provided by GA is not yet adequate. Most farmers mentioned the lack of reliable service provision by GA as the main problem – a fact that can cause significant losses, especially in the event of droughts.