The technical and environmental efficiency of the Australian irrigation schemes

Water resource management reform occupies a prominent place in Australia because deficiencies in the management of water and salinity are rapidly moving Australia towards a serious shortage of quality water. The objective of this study is to develop a comprehensive index to identify a best practice as benchmark for the Australian irrigation industry in relation to irrigation water delivery and the treatment of salinity. The efficiency performance of the sampled irrigation schemes is measured against the benchmark which will also provide information on an scheme's managerial capacity and operating environment. This information can help scheme managers and government agencies and policy makers to identify clear targets management improvements and effective policy. The sampled schemes involved in this study are mainly drawn from the Murray Darling Basin (MDB) which constitutes seventy five percent of Australia's irrigated area. Over ninety five percent water resources in the basin are used for irrigation activities. More than twenty five percent of irrigation water is lost in the conveyance system through seepage, leakage and evaporation. The MDB has also long been recognised as one of Australia's most important environmental concerns. The improvement of the productive efficiency of water delivery off-farm and the efficiency in treating salt emissions in the MDB is important to Australia. This study develops a panel data modelling framework using stochastic frontier analysis and data envelopment analysis techniques, which are used to assess the efficiency of the major Australian irrigation schemes. Although the efficiency measures obtained from the stochastic frontier analysis and the data envelopment analysis are correlated with respect to efficiency scores ranking, there is strong evidence of the presence of random noise in data set applied to the study. Thus, the conclusions in relation to policy implication are drawn from the stochastic frontier analysis which does accommodate random noise. The results reveal the following: (1) there is evidence of some technical and environmental inefficiency in the operation of Australia's irrigation system in each of the years 98/99, 99/00 and 00/01; (2) both technical and environmental efficiency appear to be improving over time; (3) the potential savings of the water resource and potential reductions in salt emissions are substantial if the industry can achieve full technical and environmental efficiency; (4) NSW and Victorian schemes outperform Queensland schemes with respect to technical efficiency but there is no evidence that privately run schemes operate significantly more efficiently than publicly run schemes; (5) the operating environment is not conductive to the achievement of efficiency improvements.