Economic evaluation of small multi-purpose ponds in the Zhanghe irrigation system, China

Ponds are small reservoirs that allow farmers in irrigated areas to capture rainfall, store surplus water from irrigation canals, and conserve water from other sources. Though ponds have been used widely in irrigated areas for many years, recent increases in the construction of ponds due to growing water shortages and government policies generate interest in understanding effectiveness of investing in ponds. We examine the economics of small, medium, and large ponds. All sizes of ponds are profitable with healthy internal rates of return, positive net present values and benefit-cost ratios larger than 1. However, when the imputed cost of family labor is included, small and medium ponds fail to justify investment. Overall, larger ponds offer higher economic benefits than small and medium ponds. Efficiency gains can be achieved by constructing large ponds, which are also economically viable. (c) 2007 Elsevier B.V. All rights reserved.