11. Introduction1.1 Background and justificationAgriculture is the mainstay of the Ethiopian economy as it accounts for about 46% of theGDP, 85% of the export and 80% of the employment opportunities (Makombe et al.,2007). Both industry and services depend strongly on the performance of agriculture,which provides raw materials, generates foreign currency for import of essential inputsand food for the fast growing population. Despite its importance for the nationaleconomy, agriculture is largely based on subsistence farming. The productivity of theagricultural sector is very low and lags behind the population growth rate resulting infood insecurity. To address this problem the Ethiopian Government designed anAgricultural Development Led Industrialization (ADLI) strategy which aims to useagriculture as the base for the country’s overall development (MoWR, 2001). Thisstrategy aims to enhance the productivity of small-scale farmers and to improve foodsecurity both in the rural and urban areas. One of the policies within this strategy isstimulate and/or support the development of small-scale irrigation. Thanks to theenabling policies, irrigated agriculture is expanding rapidly in those areas where there isaccess to irrigation water. The Central Rift Valley is one of the areas where largeinvestments in irrigation development are taking place for the production of cash crops.Rapid population growth results in encroachment of marginal and environmentallysensitive areas contributing to declining soil fertility, erosion, low crop yields, feedshortages, progressive land degradation, and reduction of areas under fallow (Kamara etal., 2002). The declining productivity in rain fed agriculture and the need to double foodproduction over the next two decades has increased the need for expansion of effectiveand efficient irrigation systems (Kamara et al., 2002). Ethiopia has a National IrrigationDevelopment Strategy to use water and land potential to meet food self-sufficiency,generate export earnings, and provide raw materials for industry on a sustainable basis(MoWR, 2001). Specific objectives include to increase the irrigated area, to improvewater productivity in irrigated agriculture, to ensure the financial and technicalsustainability of irrigated areas, and to mitigate water-logging and salinity.2The favorable environmental conditions for the production of both horticultural andfloricultural crops in the Central Rift Valley (CRV) and the value of these crops oninternational markets led to the expansion of the irrigated area. However, improperlyplanned expansion of irrigation is often associated with low efficiency in water use andwith environmental problems such as salinisation, nutrient depletion, water pollution, lossof vegetation cover, soil erosion, over grazing, soil degradation, groundwater depletionand reduction of surface water tables (McCornick et al., 2003). These processes couldreduce the potential and actual land productivity and thus affecting food security at boththe national and local levels. At present water resources of the CRV are noticeably overexploitedmainly due to water extraction for irrigated agriculture (Jansen et al., 2007). Asa consequence of high water abstraction for irrigation, the water level of some of thelakes has already decreased. This may affect the productivity of the lakes, for examplethe fish population in lake Abijata is affected by upstream water abstraction (Legesse etal., 2005).Management of land and water resources in the CRV is complex due to increasedcompetition for irrigation water, land and biomass. The challenge that irrigatedagriculture faces in the coming years is: How to increase water productivity in the face ofgrowing water scarcity and the limited availability of water for agriculture. Moreover,climate change may affect the amount of rainfall and its distribution and requires policydevelopment. Therefore, it is important to evaluate the socio-economic andenvironmental performance of current irrigation schemes which may contribute to(re)design of improved resource management options. Several civil society organizationssuch as Rift Valley Children and Women Development Association (RCWDA),International Development Enterprise (IDE) and Selam Environment and DevelopmentAssociation (SEDA) have projects to improve water use efficiency in irrigatedsmallholder schemes to reduce poverty. My research contributes to this effort with afocus on the institutional understanding of irrigation schemes, input use and cost-benefitanalysis of irrigated crop production as indicator of economic and institutionalperformance.31.2 Problem statementThe increased competition for water in the CRV puts a great pressure on the localhydrology and ecosystem. The sustainability of irrigated agriculture is being questioned,both economically and environmentally (Jansen et al., 2007). The majority of existingirrigation schemes are small, serving usually not more than 200 to 300 households (TahalConsulting Engineers, 1988). Many of these schemes are based on stream and riverdiversions and ground water wells, while some depend on small dams and perennialsprings. Most of the schemes were designed and developed without the consent of thelocal communities. As a result, many of the small-scale irrigation projects have beenoperating below expected returns. The sustainability of small-scale irrigation projectsdepends on (operational) management. Many studies in Ethiopia focus on technicalaspects of irrigation schemes, and very little is known of the socio-economic implicationsof irrigation development (Van Den Burg and Ruben, 2006).Hence, there is a need for better understanding of the socio-economic functioning ofsmallholder irrigation schemes in the CRV, which could contribute to improvements intheir performance. The aim of this research is to assess the socio-economic benefits oftwo community-based small-scale irrigation schemes in Adami Tullu Jido KombolchaWoreda, to identify operational constraints, and to identify options to improve theirperformance.1.3 Research objectivesThe overall objective of this study is to assess the profitability and sustainability ofcommunity-based small-scale irrigation schemes in two selected study areas, i.e. theKebeles Haleku and Dodicha in Adami Tullu Jido Kombolcha Woreda.More specifically, the study aims to: Assess changes in household’s socio-economic characteristics before and afterimplementation of both irrigation schemes. Analyze costs and revenues of four irrigated crops in both irrigation schemes. Identify the institutional arrangements for water management in both irrigationschemes.