Drip irrigation installations for crop land
Drip irrigation installations for crop land
Business Model Description
Pursue drip irrigation of agricultural land with installations done through one of the following models: 1. farmer investment model, where farmers invest in drip irrigation pipeline network and equipment in their own crop land where irrigation water is close to the edge of farm land; or 2. government-farmer cooperation model, where the government develops the tertiary system and brings irrigation water close to the farm edge and hence improves the underdeveloped tertiary distribution system of irrigation water. The second model may be modified to include agencies involved in water intake and distribution, namely Water User Associations (WUAs) and Water Supplier Agencies (WSAs).
Expected Impact
Improve agricultural productivity and address water access and waste challenges, supporting farmer livelihoods and improving environmental impacts.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Armenia: Ararat
Sector Classification
Food and Beverage
In 2018, agriculture was 13.7% of GDP, 28% of export and 32.2% of labor (9). Key challenges in the sector include inefficient water use and pollution (water stress of 57.43% (21)), inefficient soil use and soil damage (32% agri-land utilized) (12), high food waste and loss (15% in cereals; 19% in roots and tubers; 20% in fish, and 23% in eggs subsector (8)) as well as low farmer incomes.
The Government Plan 2019-2023 promotes the efficient use of agricultural resources and improved access of irrigation water for all. Pillars of the Plan are to enhance the productivity and food security, expand exports, promote effective farming technologies (intensive orchards, drip irrigation, anti-hail systems, modern storage and machinery), and increase income from agricultural activities (1).
In 2018, 48% of labor in agriculture were women. They are more engaged in informal (and less secure) low skill field work, e.g. harvesting, sorting, and packaging. Women have low access to land, technologies, knowledge and finance, and are less likely to run their own farm. They are paid 35% less than men for their work. The Ministry of Agriculture was dominated by men, i.e. 62% men and 38% women (10).
Government support tools in agriculture include low interest rate leasing or lending programmes for farmers to invest in agri-machinery and equipment, technologies (intensive orchards, drip irrigation) and hail protection systems and greenhouses. The Government also leads a programme on promoting agricultural insurance systems (1, 7, 14).
Key bottlenecks in agri-food include prevalence of fragmented smallholders (330,000, with less than 1.5ha each) and low cooperation, low productivity due to low investment in and inefficient farming and marketing technologies and practices, underdeveloped market infrastructure (e.g. low storage capacity), and low use of sustainable practices (3, 14).
Food and Agriculture
Armenia is a water stressed country, which leads to low productivity in crop production. Over 80% of total agricultural production in Armenia depends on irrigation (3). Agriculture suffers from insufficient irrigation water supply, especially during high season. There are high levels (over 50%) of irrigation water losses (21, 25, 26).
The Agriculture Development Strategy 2020-2030 aims at enhancing productivity and market operation in agriculture, development of agriculture data and forecasting systems. One of the key priorities is the promotion of modern facilities and technologies, including farming and post-harvest technologies (e.g. cold storage), modern greenhouses and irrigation, and disaster protection systems (13).
The Government provides subsidies (interest rate subsidy) for financing investment in modern farming and irrigation technologies (1, 7, 13).
Agricultural Products
Pipeline Opportunity
Drip irrigation installations for crop land
Pursue drip irrigation of agricultural land with installations done through one of the following models: 1. farmer investment model, where farmers invest in drip irrigation pipeline network and equipment in their own crop land where irrigation water is close to the edge of farm land; or 2. government-farmer cooperation model, where the government develops the tertiary system and brings irrigation water close to the farm edge and hence improves the underdeveloped tertiary distribution system of irrigation water. The second model may be modified to include agencies involved in water intake and distribution, namely Water User Associations (WUAs) and Water Supplier Agencies (WSAs).
Business Case
Market Size and Environment
USD 50 million - USD 100 million
240,000 ha of Armenia's agricultural land requires irrigation.
In Armenia, 240,000 ha requires irrigation, of which 1/3 faces water access problems (13, 26). Investment costs for a drip irrigation system per ha is $1,500-$2,500 (23).
Agriculture in Armenia involves more than 335,000 smallholder farms with an average land size of 1.3 ha. Most of the irrigation water is supplied to those farmers by 15 Water Supplier Agencies (WSA) (25).
Indicative Return
20% - 25%
Investment required for installing drip irrigation system on a 1 ha land is around $2,500. The estimated IRR of such an investment is approximately 25% (23).
Investment Timeframe
Short Term (0–5 years)
The investment of a drip irrigation system on a 1 ha land pays back within 1-2 years, depending on the crop and region. For some crops, the investment may pay back in the first year via cost savings and enhanced yield (23).
Ticket Size
< USD 500,000
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Capital - CapEx Intensive
Capital - Limited Investor Interest
Impact Case
Sustainable Development Need
Armenia is a water stressed country suffering from high water stress levels of 57.43% (21).
Over 80% of agri-production in Armenia depends on irrigation, which is not available sufficiently, especially during high season. Additionally, there are high levels (over 50%) of irrigation water losses (12, 25).
Poor irrigation techniques by farmers result in low productivity and low income of farmers and agricultural soil degradation. Over 165,000 ha of land (over 8% of total agricultural land) has been damaged due to unsustainable farming and various environmental impacts (12).
Gender & Marginalisation
Women are more engaged in informal (and less secure) low skill field work in the agricultural sector. They have low access to land, technologies, knowledge, and finance, and are less likely to run their own farm. Women are paid 35% less than men for their work (10).
Expected Development Outcome
Better access to irrigation water for stallholder farmers and wide application of water saving technologies and sustainable irrigation practices in agriculture, which results in cost savings and higher productivity of crop production.
Reduced use of chemicals (especially fertilizers pesticides) per hectare and per unit of production, resulting in reduced negative impact on environment (concerning soil and water pollution) as well as in production cost saving.
In India, for example, 40% water and 6,290 kwh/ha electricity savings have been observed due to drip irrigation, as well as reduced needs for fertilizers (31%) and enhanced crop yields by 52% were measured thanks to the irrigation installations (27).
Gender & Marginalisation
Women employed in farming may get higher wage as a result of higher productivity. Women farmers and women led households are expected to get better water access and higher income.
Primary SDGs addressed
2.3.1 Volume of production per labour unit by classes of farming/pastoral/forestry enterprise size
2.3.2 Average income of small-scale food producers, by sex and indigenous status
2.4.1 Proportion of agricultural area under productive and sustainable agriculture
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Indirectly impacted stakeholders
Corporates
Public sector
Outcome Risks
In some areas, irrigation water may be far from farmland, and bringing water closer to the field may require infrastructure and energy investments, which could lead to environmental compromises.
Impact Risks
Limited interest by farmers in drip irrigation due to knowledge gaps about benefits of effective irrigation may lead to limited uptake, hampering the realisation of the expected impact.
Impact Classification
What
Wide use of drip irrigation reduced waste of water, improves farmer access to water, enhances farm productivity and reduces soil pollution and degradation.
Who
Small- and medium-size farmers and rural households with improved access to water, water savings and enhanced productivity.
Risk
The model is proven and drip irrigation technology is readily available and affordable, pending uptake by farmers.
Impact Thesis
Improve agricultural productivity and address water access and waste challenges, supporting farmer livelihoods and improving environmental impacts.
Enabling Environment
Policy Environment
The Government Plan 2019-2023 promotes the efficient use of and access to agricultural resources to improve food security and increase income from agriculture (1).
The Agriculture Development Strategy 2020-2030 prioritizes the enhancement of productivity and agri-market operations. One of the key priorities is the promotion of investments in modern technologies, including the efficient use of water and other agri-resources and access to irrigation (13, 23).
Financial Environment
Financial incentives: The Government subsidizes loan interests directed to the establishment or improvement of drip irrigation systems (2% loans with 3-year period maturity), which aims to increase the farmed area under drip irrigation by 1,700-1,800 ha per year (1, 7, 13).
Fiscal incentives: Irrigation water supply benefits from Government subsidy, much of which is directed towards WUAs and WSAs. In 2018, the total subsidy amounted to USD 11.5 million, of which USD 9.24 million were directed to WUAs (26).
Regulatory Environment
Irrigation water supply is regulated by the Government Decree No 2121-N of 12 December 2002, which sets out the rules on water use, connection to the irrigation system, water measurement, water fee calculation and payment, as well as defines the obligations of water suppliers and users (29).
Marketplace Participants
Private Sector
Suppliers of drip irrigation systems and equipment such as ArtAgro, Green Fairy Tale, Shen and ProfAl). Water User Associations (WUA), Jrar CJSC.
Government
Ministry of Economy, Ministry of Territorial Administration and Infrastructure, State Water Committee.
Multilaterals
Several international finance institutions and multilateral banks support the promotion of drip irrigation, such as the World Bank and the European Union (EU).
Non-Profit
Several development partners support the promotion of drip irrigation, such as USAID, Food and Agriculture Organization (FAO), International Fund for Agricultural Development (IFAD), the United Nations Development Programme (UNDP), Oxfam and GIZ.
Public-Private Partnership
Promotion of drip irrigation may include effective cooperation between state agencies, Water User Associations (WUAs) and farmers, as already set up between the Government, UNDP, UNIDO and farmers under the European Neighbourhood Programme for Agriculture and Rural Development (ENPARD).
Target Locations
Armenia: Ararat
References
- (1) Government action program 2019-2013, https://www.gov.am/am/Five-Year-Action-Program.
- (2) National strategy and action program to combat desertification in the republic of Armenia, Ministry of Nature Protection of Armenia, http://www.mnp.am/uploads/1/1551885091anapat_eng-1.pdf.
- (3) Voluntary National Report (VNR) of Armenia, for the UN High-level Political Forum on Sustainable Development, 2018.
- (4) Law on National Water Policy, https://www.arlis.am/DocumentView.aspx?DocID=1784.
- (5) Law on National Water Program, https://www.arlis.am/DocumentView.aspx?DocID=140524.
- (6) Sustainable Development Report, 2019, https://www.sdgindex.org/reports/sustainable-development-report-2019.
- (7) Ministry of Agriculture, www.minagro.am/պետական-օժանդակության-ծրագրեր.
- (8) FAO, Food Waste and Loss in Armenia, http://www.fao.org/3/a-au842e.pdf.
- (9) World Bank, Development Indicators, https://data.worldbank.org/indicator/NV.AGR.TOTL.ZS?locations=AM&view=chart.
- (10) Statistical Committee of Armenia, Labor Market in Armenia, 2019.
- (11) Statistical Committee of Armenia, Food Security and Poverty in Armenia, 2019. https://www.armstat.am/am/?nid=82&id=2125.
- (12) Statistical Committee of Armenia, 2018, https://www.armstat.am/file/article/eco_booklet_2018.pdf.
- (13) The Strategy of Main Directions of the Development of Agriculture of Armenia 2020-2030, https://mineconomy.am/en/page/1467.
- (21) FAO AQUASTAT, http://www.fao.org/nr/water/AQUASTAT/data/query/results.html.
- (22) Intended Nationally Determined Contributions of the Republic of Armenia under the UN Framework Convention on Climate Change (UNFCCC), https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Armenia%20First/INDC-Armenia.pdf.
- (23) UNDP interviews with stakeholders, 2019.
- (24) Agro-investment Guide Armenia, https://www.eda.admin.ch/dam/countries/countries-content/armenia/en/Investment%20Guide.pdf.
- (25) Voluntary National Report (VNR) of Armenia, for the UN High-level Political Forum on Sustainable Development, 2018.
- (26) Reports of the Water Committee of Armenia, 2018 and 2019, http://www.scws.am/uploads/files/104/Operativ_01.01_.2019_.pdfand http://www.scws.am/uploads/files/23/ardir-hash-2018.pdf.
- (27) An assessment of the economic impact of drip irrigation in vegetable production in India, 2018, A Narayanamoorthya, M Bhattaraib and P. Jothic, Agricultural Economics Research Review 2018, 31 (1), 105-112.
- (28) Water Committee of Armenia, 2019, http://www.scws.am/uploads/files/104/Operativ_01.01_.2019_.pdf.
- (29) Government Decision No 2121 of 26 December 2002, On the Rules on Irrigation Water Supply and Use, https://www.arlis.am/documentview.aspx?docid=10491.