Price review flags concern for Queensland irrigators
1 September 2010
TWO months overdue, the Queensland Competition Authority (QCA) is releasing a series of papers dealing with the issues of reviewing SunWater prices for irrigation schemes.
The delay, while frustrating, was anticipated given the complexity of the issues surrounding the 22 irrigation schemes we have in Queensland.
The challenge, however, will be dealing with the many issues presented in these papers, given that QCA is still expected to complete a final report by April 30 next year.
QFF and irrigator customer groups in each scheme have much work ahead dealing with issues that are important to the future of irrigation in Queensland.
The foremost concerns are the government seeking a rate of return from dams and infrastructure; the assessment of irrigators’ capacity to pay increased prices; and irrigators being looked at to fund large-scale dam upgrades. Irrigators also need to be convinced that prices will be based on the efficient costs of SunWater schemes.
For example, irrigators are already questioning why they should shoulder the costs of upgrading dam spillways to withstand the force of a one in 100,000 year flood event.
The State Government is already proceeding with these high cost upgrades of a number of dam spillways to protect against loss of life if one of these unlikely massive floods occurs. The Emerald flood of 2008 is an example of the flood mitigation benefit to the community provided by large dams. The State also benefited by seeing business (including large coal mines) return to production much faster than would have otherwise been the case, and therefore returning their contributions of taxes and royalties.
With a one in 100,000 year event, which would be far larger than that seen at Emerald, the State would be the significant beneficiary in terms of securing against liability for loss of life and significant financial and economic losses as a result of flooding.
Likewise, irrigators are opposed to being the cash cow that would deliver a rate of return on publicly-funded dams built in decades past to secure much-needed regional development and improved export performance.
If these issues and many of the others being raised are followed through to what might appear to be a rational economic conclusion then QFF has real concerns for what this would mean for the viability of most of the irrigation schemes in Queensland.
If this price review process makes irrigators uncompetitive and they cannot afford the increased prices then there is a real risk that they will stop irrigating, let alone see any benefit in investing to modernise schemes and farm infrastructure.
As I have outlined in recent columns, an impact on local irrigators would quickly translate into a severely negative impact on regional communities.
In addition, the economics of squeezing irrigators until they bleed doesn’t stack up given the contributions they make to the economy.
If all State-owned assets were looked at as revenue machines, then Queensland would be in economic ruin.
Earlier this year, the Courier Mail reported that most Brisbane train journeys are subsidised by taxpayers by about $10.
A policy change to recoup those funds would clog the roads, stall the productive capacity of Brisbane, and affect property values in central city locations or near train lines.
Yet while irrigators are now facing a comparable scenario and are being looked at for a rate of return from the public good benefit of dams, the difference for irrigators is even starker, as many of them have a strong case that they have already paid for the SunWater infrastructure through water and land sales conducted as part of the schemes’ establishment.
In some of these discussions, it has also been suggested that high water prices are needed to make irrigators use water efficiently.
Any irrigator in Queensland who battled drought in recent years has a right to be insulted by such a remark, particularly when it is considered that many irrigation schemes shut down during the extended drought to ensure limited water supplies were secured for urban, mining and industrial use.
We operate on the driest inhabited continent in an extremely competitive global environment, and irrigators continue to invest in improving their water use efficiency.
However, if the government continues to make it harder for them to be profitable, then it will be increasingly difficult for them to continue operating, let alone reinvest in their enterprises and improve water use efficiency.