Structure of the Groundwater Market in Bangladesh: A Case Study of Tubewell Irrigation Investment

Abstract

As a result of the changes in irrigation policy since 1983, the amount of groundwater irrigation in Bangladesh has increased. The cheaper shallow tubewells (STWs) have entered the groundwater market and the hitherto monopolistic deep tubewells (DTWs) have responded to the competition in the groundwater market. An empirical model is developed to help clarify the market structure for groundwater irrigation and economic viability of tubewell operation. Empirical evidence shows that improvement in the groundwatermarket appears to be due to an increase in demand for irrigation for potatoes and vegetables as well as supplementary irrigation for the monsoon paddy. Apparently STWs have higher capacity use and profitability owing to their easier managementand greater cost-effectivenesscompared with DTWs, which may encourage more investment in STWs in the groundwater market, while the subsidy withdrawal from DTWs and abolition of installation restrictions of tubewells will discourage the owning and operating of a DTW.