Under the pressure of increasing water shortages and the need to sustain the development of irrigated agriculture, since the middle of the 1990s, officials in the Yellow River Basin (YRB) have begun to push for the institutional reform of irrigation management. The major purpose of irrigation management reform is to increase the agricultural water use efficiency and also to promote the continuing growth of agricultural production.   

Based on the panel data collected in two rounds (2001 and 2005) in four irrigation districts (ID) in the YRB, Prof. WANG Jinxia, Prof. HUANG Jikun and Ms. ZHANG Lijuan from the Institute of Geographical Sciences and Natural Resources Research (IGSNRR), Chinese Academy of Sciences (CAS) found that after the early 2000s, irrigation management reform has accelerated in Ningxia province, but no progress has been made in Henan Province.    

Until 2004, 21 percent and 30 percent of villages established Water User Associations (WUAs) or contracting management, respectively, to manage their irrigation systems for all samples. Although some improvement on management mechanism was observed, most irrigation management reforms are still nominal. More importantly, over the past several years, more WUA managers gave up the opportunity to establish incentive mechanisms, while more contracting managers preferred to establish incentive mechanisms. However, this trend differs by ID. The decline in the incentives established by the WUAs primarily occurred in WID-N and not in another ID.   Applying both descriptive statistics and an econometric model approach and based on data from two IDs in Ningxia Province, the results demonstrate that the use of incentive mechanisms to promote water saving is effective under the contracting management arrangement and not effective under WUAs. Specifically, providing incentives to contracting managers will significantly lead to the reduction of water use for both wheat and maize, but the same is not true for the incentives provided to WUA management.  

However, with a decrease in water use, although the maize yield will not be significantly influenced, the wheat yield will present a significant decline. Based on the assessment results for the early stage of reform by Wang et al. (2005), even when water use was reduced, the crop yields for both wheat and maize were not negatively influenced.    

These results imply that at the later stage of the reform, reducing water use by providing incentives to managers is at the cost of negative impacts on crop yields, particularly for those crops that are sensitive to the irrigation water supply, such as wheat. This relationship possibly explains why more WUA managers give up the opportunity to earn more money by establishing incentives.    

Further analysis indicates that even when the contracting managers with incentives can earn money by saving water, this result does not necessarily benefit the entire village. The results show that in both Weining and Qingtongxia IDs in Ningxia Province, the marginal value of water productivity was much lower than the irrigation water price. Under the low irrigation water price, the reduction of water use for wheat will result in lost money for the farmers. More importantly, in the same ID, the money lost per hectare for farmers was lower than the amount earned by the contracting mangers. Therefore, the overall villages are the losers. However, if the IDs reallocate water to high value sectors such as industrial sectors, the overall ID will obtain a higher benefit due to the high water supply price for the industrial sectors.   

The study has been published in Journal of Hydrology (Jinxia Wang, Jikun Huang, Lijuan Zhang and Qiuqiong Huang, Do Incentives Still Matter for the Reform of Irrigation Management in the Yellow River Basin in China? Journal of Hydrology 2014, 517: 584–594).