Optimal nitrogen fertilizer decisions for rice farming in a cascaded tank system in Sri Lanka: An analysis using an integrated crop, hydro-nutrient and economic model

CONTEXT: The ancient irrigation systems in Sri Lanka, known as village tank cascade systems, were developed to ensure an adequate and sustainable supply of good quality water to communities. However, there is growing concern about health and environmental issues related to the degradation of water quality caused by excessive nitrogen (N) levels from the overuse of chemical fertilizer. Subsidies for chemical fertilizer have encouraged fertilizer use for rice production in Sri Lanka. OBJECTIVES: The objective was to evaluate the use of N fertilizers for rice production in the Thirappane cascaded tank system and its impact on nitrate water quality. An optimal rate of N use was determined based on private (farm-level) decisions on fertilizer use. However, the private optimal fertilizer rate is not adequate for overall social welfare due to market failures such as incomplete information and the lack of a market to account for the negative impact of fertilizer use on tank water quality. The hypothesis is that the social optimal fertilizer rate is lower than the private optimal rate due to this discrepancy. The study aims to identify the sources of inefficiency in the sub-optimal use of fertilizers from a social perspective. METHOD: We developed an integrated crop, hydro-nutrient and economic model to analyze fertilizer decisions in the rice production process. The method involved conducting a marginal economic analysis based on simulated yield responses to N fertilizer and prices for inputs and outputs. The analysis was performed for three soil types across the Maha (rainy) and Yala (dry) seasons and for three different weather scenarios within each season. RESULTS AND CONCLUSIONS: When the negative impact of nitrate contamination on water quality is taken into account, the optimal N fertilizer rate from a social perspective is always lower than the optimal rate determined solely by private economic considerations. These optimal rates varied based on factors such as soil type, season, weather conditions during the growing season, and fertilizer prices. At unregulated, higher, fertilizer prices, the crop yields achieved at the social optimum were only slightly lower than those achieved under the private economic optimum. However, under regulated, lower, fertilizer prices, achieving the social optimum would require a larger reduction in N fertilizer use and result in a greater decrease in crop yields. SIGNIFICANCE: A systematic analysis that takes into account the social costs can serve as a guide for creating effective policies aimed at enhancing fertilizer decision making.