Cost benefit analysis of village tank rehabilitation programme in Hambantota district, Sri Lanka

Abstract

Village tanks provide multiple benefits to the local people living in their periphery and also to communitiesoutside the area. Non recognition of the true values of this resource has led to their degradation. Forexample, tank rehabilitation is usually not economically justifiable when the paddy benefits alone areconsidered. The main objective of this research was therefore to compare costs of village tankrehabilitation programme with the multiple benefits of village tanks.

Villagers use tank water for agriculture, fish, domestic purposes, livestock rearing, and also for industrysuch as brick production. There are in addition, recreational benefits enjoyed by the households. Suchmultiple benefits have been evaluated by a survey conducted in 10 village tanks (7 isolated and 3cascade tanks) in Hambantota district of Sri Lanka. 175 households who live adjacent to the selectedtanks were interviewed using a pre-tested questionnaire with embedded contingent valuation surveyduring the maha season of2005/2006. Information on the use of tank system for purposes other thanpaddy cultivation was collected and contingent valuation method, market price approach and opportunitycost method were used in order to derive the economic value.

The benefits and costs were analyzed in a cost benefit framework using a 20 year time period and10% discount rate. Results indicate that the rehabilitation project is only justifiable when multiplebenefits are included. When paddy benefits alone are compared with tank rehabilitation costs, itresults in negative net present value.

The implications of the results in reversing the attitudes of the government towards small tanks andtheir role in enhancing rural economies are also discussed.