DELWP review confirms government’s VFMP concerns

New review backs decision to kill off VFMP.


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Lisa Neville, Victorian Water Minister, says a new report has justified the government's decision to close down the Farm Modernisation Project.

Lisa Neville, Victorian Water Minister, says a new report has justified the government's decision to close down the Farm Modernisation Project.

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Victorian departmental review backs decision to end irrigation modernisation scheme.

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The Victorian Government says a report on the state’s on-farm water program supports its opposition to funding further on-farm works as part of the Murray Darling Basin Plan.

Water Minister Lisa Neville said a review and report on the Victorian Farm Modernisation Project was conducted by the Department of Environment, Land, Water and Planning.

“This report backs our decision to discontinue on-farm programs that would hurt irrigators and regional communities,” Ms Neville said.

Read more: Irrigation funding up for grabs

Read more: No more on-farm projects leaves some irrigators out in the cold

The review found that it was not possible to fund further on-farm works, to transfer water to the Commonwealth, without further social and economic impacts on irrigators and the broader community. 

Ms Neville said the project delivered around 17.4 gigalitres (GL) of water to the environment, on top of the 800 gigalitres of Victorian water already recovered under the Murray Darling Basin Plan, since 2013. 

That was about two per cent of Victoria’s contracted Basin Plan water recovery to date.

That included the $2 billion Connections Project, which modernises the Goulburn-Murray Irrigation District, which is expected to return 279GL of in water savings back to the environment.

Negative outcomes

Ms Neville said the government saw negative socio-economic outcomes.

“Further water recovery from irrigators in our food bowl will cause significant social and economic harm, this review highlights the concerns we have been hearing from our community, and that’s why we’re taking action,” Ms Neville said.

Read more: Questions over irrigation funding

Three funding rounds were planned for the VFMP.

The first $30 million Tranche One transferred nine gigalitres of water to the Commonwealth.

The initial uptake of the $40.2 million Tranche two was very low, only seven irrigators signed up for a total of $1.5 million.

But there was insufficient interest to fully use the funds on offer from the Commonwealth, with around $9.8 million left unexpended.

“It has become more difficult to contract eligible irrigators for on-farm works at the prevailing water market price, with studies confirming that although they are interested in continuing to invest in their farms, the main barriers are uncertainty about water availability and lack of financial resources to do the work,” the DELWP report found. 

Socio-economic impacts

In its summary, the DEWLP reported it had built on findings from the government’s report on Social and Economic Impacts of the Basin Plan in northern Victoria.

That report found the potential for water market effects of on-farm water use efficiency programs, in addition to the risk of stranded assets from years of public and private investment. 

“The review was initiated at a time when very large quantities of high-reliability water had been recovered in Victoria for the environment and it was becoming increasingly important to the DELWP and the community that the VFMP was reaching its limits in terms of irrigator interest on the terms offered by the Commonwealth,” the DELWP report found.

While the review focused on socioeconomic risks of the program, it was also recognised that there was a fundamental diminution in the feasibility of the program to deliver substantially more water for the environment. 

“The relatively more straightforward, lower cost and lower risk options have been exhausted and future water recovery programs will need to take that into account,” the review found. 

“It was not possible to identify options to fund farm works that transfer water to the Commonwealth that can deliver significant volumes of water in time for the rollout of the Basin Plan and effectively mitigate negative social and economic impacts.

“On-farm programs that require water to be transferred to the Commonwealth are an indirect way of buying water and reducing the consumptive pool, impacting agricultural profitability and the viability of public irrigation systems.”

Victoria would continue to explore investment in projects that delivered strong public benefit in low-use and high-loss areas grappling with climate change and reduced water availability.

 In particular, projects that capitalised on distributional losses and operational changes to produce water savings would be developed. 

Ms Neville said at the last Ministerial Council, Victoria negotiated an agreement between all states and the Commonwealth that the state would work on a socio-economic neutrality test to assess all projects that could hypothetically contribute to the 450 GL above the Plan’s 2,750 GL target.

“We also secured agreement from the Commonwealth that they would not seek further water recover from Victoria through on-farm projects,” Ms Neville said. 

The Ministerial Council will discuss the criteria at their next meeting in December. 

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