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Price freeze for irrigation water an opportunity for a reset

5 May 2020 | The Australian Sugar Milling Council (ASMC) acknowledges today’s decision from the State Government to freeze irrigation prices for 12 months, pass on proposed 2020/21 price decreases, absorb certain dam safety upgrades and to monitor affordability closely over the next year. 

Around 67 per cent of the State’s sugarcane production is dependent on irrigation and irrigated sugarcane accounts for approximately 80% of Queensland’s irrigation water use.

Recommendations to government from the QCA for the 2020/21 to 2023/24 regulatory period would have resulted in further, significant increases in tariffs across the State’s water supply schemes (WSS). Across all cane growing WSSs, QCA’s recommendations represented an approximate 4% per annum increase. Had the changes been approved, cane grower costs would have increased to around $79 million in 2023/24 compared to the approximate $39 million growers were paying back in 2006, on a constant consumption basis.

“With sugar and cane prices at 12 year lows and no short to medium price recovery in sight, it’s crucial that industry and government work together to reset irrigation prices,” said ASMC CEO, David Pietsch.

“The next 12 months must be used to overhaul the failing system that has led to falling water utilisation rates and flat-lining cane and sugar productivity,” he added.

ASMC commissioned, independent economic modelling* has shown how a return to affordable water pricing levels could deliver a much needed boost to Queensland’s coastal communities.

ASMC says up to $220 million additional economic activity could be generated if water prices were reset to levels 25% lower than the costs recommended by the Queensland Competition Authority (QCA) for the four years between 2020/21 and 2023/24.

“The sugar industry has an opportunity to recover from the COVID-19 global shock and deliver jobs and growth for Queensland and its sugar communities,” said Mr Pietsch.

“We look forward to working with Government on the development of a new water pricing approach that is more aligned with economic efficiency and regional development objectives” he concluded.

* Irrigation Prices in the Queensland Sugarcane Regions: an analysis of the community benefits and costs of improved irrigation pricing https://asmc.com.au/sugar-irrigation-cost-benefit/

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