Enhancing Sustainability in Rice Farming: Institutional Responses to Floods and Droughts in Pump-Based Irrigation Systems in Wajo District, Indonesia

Abstract

Climate change-induced floods and droughts pose significant threats to rice farm development in Indonesia, particularly in regions reliant on pump-based irrigation systems. The urgency of this study lies in the increasing vulnerability of rice production to extreme weather events, necessitating institutional adaptations to enhance irrigation sustainability and financial risk sharing. This study examines the role of irrigation institutions in supporting sustainable rice farming in Wajo District, Indonesia. Using a case study approach, qualitative data were collected from four irrigation service provider (ISP) units across three subdistricts through in-depth interviews and focus group discussions. The analysis focuses on institutional mechanisms, including irrigation payment structures, input credit systems, and cost-sharing arrangements. The findings reveal that institutional frameworks are crucial in mitigating financial risks by promoting adaptive payment schemes and equitable cost-sharing mechanisms. Farmers’ access to critical agricultural inputs, such as fertilizers and pesticides, is enhanced through collaborative financing models, ensuring resilience against climate-induced production risks. However, variations in institutional support led to disparities in irrigation fees, credit access, and financial sustainability across study sites. This study underscores the need for risk-based irrigation pricing models and public–private partnerships to invest in climate-resilient infrastructure, such as water storage facilities and sustainable irrigation systems. In conclusion, it is important to remember that each of us, including agricultural policymakers, researchers, and stakeholders, plays a crucial role in implementing these solutions. By strengthening institutional governance, promoting flexible financial mechanisms, and integrating climate-adaptive pricing models, we can all contribute to enhancing the long-term sustainability of rice farming in Indonesia.

1. Introduction

Water is critical in rice cultivation, transforming it from a natural asset into a productive commodity with significant commercial value [1]. However, Indonesia faces substantial challenges in achieving sustainability in rice development, as many rice fields remain non-irrigated. As of 2017, 41.87% of the 8,164,045 ha rice fields (3,418,236 hectares) relied on rain-fed agriculture, making them highly vulnerable to unpredictable rainfall patterns [2]. This heavy dependence on rain-fed farming threatens the sustainability of rice production, especially as population growth and urbanization drive increasing water demand, exacerbating water scarcity [3]. Without strengthening irrigation systems and institutional frameworks, the long-term resilience of agriculture in Indonesia remains uncertain.

As water scarcity and competition for water resources intensify, the economic value of irrigation water has gained increasing attention. Studies in Sri Lanka and Indonesia indicate that farmers are willing to pay for improved irrigation services, with estimated values ranging from 8.6% of net paddy income to amounts exceeding current water fees [4,5]. However, water pricing as a demand management tool faces challenges due to socio-political concerns and potential negative impacts on farm incomes [6,7]. Treating water as an economic good involves making allocation decisions that balance economic and social trade-offs, distinguishing between valuing water and charging for water use. While volumetric pricing may not always effectively balance supply and demand, alternative policy instruments and well-defined water rights could offer more sustainable solutions [8]. This highlights the need for equitable and efficient water governance to ensure that irrigation water is used sustainably and efficiently in rice production.

Beyond economic and governance challenges, extreme weather events such as droughts and floods have severely disrupted traditional farming practices, posing a serious threat to food security and the sustainability of rice development [9,10,11,12,13,14]. Regions prone to droughts and floods face heightened risks of crop failure, inefficient water management, and economic instability, making them critical for further study. Farmers in flood-prone areas suffer substantial crop losses due to seasonal inundation, while those in drought-prone regions struggle with limited water availability, which constrains rice production. These dual challenges highlight the urgent need for sustainable irrigation solutions that enhance resilience and mitigate environmental risks, ensuring the long-term viability of rice farming in Indonesia.

The economic value of irrigation water has gained increasing attention as water scarcity and competition intensify. Studies in Sri Lanka and Indonesia reveal that farmers are willing to pay for improved irrigation services, with estimated values ranging from 8.6% of net paddy income to amounts exceeding current water fees [4,5]. Treating water as an economic good involves making allocation decisions based on socio-economic trade-offs and distinguishing between valuing and charging for water [15,16]. While volumetric pricing may not effectively balance supply and demand, alternative policy instruments and well-defined water rights could be more fruitful [17,18]. Studies emphasize the need to balance water’s economic and social aspects, particularly in irrigated agriculture, where opportunity costs are high but the ability to pay is often low.

Access to and managing water resources requires robust institutions, particularly in contexts where water possesses good public characteristics and resource scarcity amplifies competition [19]. Institutions, defined as the “rules of the game”, regulate interactions among participants in market exchanges [20,21]. In the context of sustainable rice development, institutions shape equitable water access, investment in resilient irrigation infrastructure, and governance frameworks that support long-term agricultural sustainability [21]. Strengthening these institutions ensures that irrigation services and water management practices adapt effectively to climate variability and increasing production demands.

Pump-based irrigation systems have emerged as a significant approach to addressing water management challenges in agriculture. These systems, often managed by irrigation service providers (ISPs), transform water from a public good into a productive input, ensuring sustainability in agricultural production [22]. The risk-based payment structures introduced in these systems consider factors like disaster-related risks and production outcomes, improving financial sustainability for both farmers and ISPs [23].

The extensive literature on institutions highlights their critical role in managing common-pool resources like water, reducing inefficiencies, addressing the free-rider problem, and promoting sustainable resource use [19,24,25]. Effective governance structures that align with local socio-economic conditions enhance cooperation and ensure adherence to sustainable water management practices [26]. For sustainable rice development, institutional mechanisms must facilitate equitable cost-sharing arrangements, incentivize responsible water use, and support adaptive strategies safeguarding agricultural livelihoods against climate-induced risks.

In irrigation management, institutions influence resource distribution, decision making, and compliance among users. Communal irrigation systems, though prevalent in developing countries, often struggle with challenges like low compliance, inequitable water distribution, and infrastructure deterioration [3]. In addition, the free-rider problem remains particularly salient, as some farmers benefit from irrigation services without contributing to infrastructure maintenance or adhering to schedules [27]. This lack of cooperation leads to overuse and deterioration of the infrastructure. When water is easily accessible or obtained from sub-surface sources, farmers typically ignore the associated expenses or tariffs [28,29]. The absence of user fees and personal investment reduces farmers’ incentives to follow irrigation schedules, resulting in non-compliance [30]. Consequently, there is an increase in pest and disease attacks, which increased production costs for control measures, decreased production, and ultimately lowers farmer revenues [31,32,33]. These challenges highlight the need for institutional frameworks that balance equity, efficiency, and incentives for cooperation.

Furthermore, various studies examine how different institutional arrangements influence irrigation sustainability, drawing from research on public–private partnerships [34], water pricing models [30], and cooperative irrigation structures [19]. These studies clarify how institutional responses shape risk sharing and resilience in irrigation management. Additionally, research on water resource governance incorporates insights from common-pool resource management [19] and irrigation service markets in developing economies [22]. While previous studies have explored traditional irrigation fee structures, such as hourly or volumetric-based pricing [30,35], these conventional models often fail to accommodate climate-induced uncertainties like floods and droughts. This highlights the need for adaptive institutional mechanisms that integrate flexible payment structures and risk-sharing arrangements to enhance the resilience and sustainability of irrigation systems.

Irrigation governance research has largely focused on large-scale, government-managed systems, with limited attention to decentralized, pump-based irrigation models that serve smallholder farmers [34]. While studies highlight cooperative irrigation structures and private sector participation [18], few explicitly analyze financial risk-sharing mechanisms in smallholder irrigation. Additionally, the existing literature extensively discusses irrigation pricing models [18,35], but there is a minimal exploration of adaptive payment structures that account for climate-induced risks such as floods and droughts. This study addresses these gaps by examining institutional responses to climate variability and how irrigation service providers (ISPs) and farmers share financial risks in decentralized pump-based irrigation systems.

This study examines the role of irrigation institutions in enhancing sustainability and financial risk-sharing in pump-based irrigation systems in Wajo District, Indonesia. It explores institutional arrangements for irrigation service provision, cost sharing, and financial risk management while assessing the effectiveness of existing payment structures in reducing financial burdens for ISPs and farmers, especially in flood- and drought-prone areas. Additionally, it analyzes farmers’ access to credit and input financing and their impact on agricultural resilience and productivity.

This study addresses critical gaps in irrigation governance research by focusing on decentralized, pump-based irrigation systems essential for smallholder rice farmers. While much of the existing literature emphasizes large-scale, government-managed irrigation models, researchers have largely overlooked the financial sustainability and institutional responses needed for smallholder irrigation. By examining cost-sharing mechanisms, financial risk management, and farmers’ access to credit, this study provides valuable insights into strengthening resilience in flood- and drought-prone areas. The findings will contribute to developing policies that enhance irrigation governance, promote sustainable financial models, and support climate-adaptive institutional frameworks, ultimately improving the long-term viability of smallholder farming communities.

2. Materials and Methods

2.1. Study Site

This study examines the institutions involved in pump-based irrigation in four specific units situated across three subdistricts: Sabbangparu, Belawa, and Maniangpajo, all within the Wajo district (Figure 1). The district is a significant region for rice production in the South Sulawesi Province of Indonesia, where the availability of water resources plays a critical role in agricultural productivity. The district’s climate is characterized by distinct rainy and dry seasons, allowing for two annual rice planting cycles. However, the limited capacity of the Cenrane River to discharge excess water into Bone Bay is a significant factor in the recurrent flooding, which disrupts farming activities. These floods, occur twice a year, either at the beginning or end of the growing season, heighten uncertainty for farmers. Typically, flooding peaks between June and August, severely impacting the end of the February–June planting season and delaying the subsequent September–January cycle. This cycle of disruption leads to increased risks of crop failure, lower yields, and greater livelihood vulnerability. Conversely, periods of drought exacerbate water shortages, reducing rice output while increasing exposure to pests and diseases [36].

The researchers designed the selection of study sites to capture institutional differences in irrigation management, highlighting the challenges and opportunities unique to each location. Sabbangparu and Belawa, located near Tempe Lake, benefit from abundant water resources but are highly susceptible to seasonal flooding. In contrast, Maniangpajo depends primarily on river-fed irrigation, making it more vulnerable to water scarcity during prolonged dry spells. By examining these contrasting hydrological conditions, this study provides insights into farmers’ varying risks and the adaptive strategies employed to mitigate them. Understanding these dynamics contributes to a broader discussion on sustainable water management and the role of institutional mechanisms in enhancing irrigation resilience in flood- and drought-prone regions.

2.2. Sampling Technique

This study employed a purposive sampling approach to ensure representation across different irrigation service provider (ISP) models and farmer groups. Twenty-nine participants were selected, including managers and operators from four ISPs, farmers holding administrative roles, farmer group members, rice milling unit (RMU) staff, and agricultural extension workers from various subdistricts (

Table 1. Key informant interview respondents.

	Sabbangparu	Belawa	Maniang Pajo 1	Maniang Pajo 2
Manager of ISPs	1	1	1	1
ISPs operator	2	2	2	2
Farmer with the additional role of administrator	1	1	1	1
Farmer group members	2	2	2	2
Manager of RMU	-	1	-	-
Staff of RMU	-	1	-	-
Agriculture extension	1	1	1	0
Total	7	9	7	6

). This diverse yet targeted sample allowed for a comprehensive exploration of irrigation governance, financial risk-sharing, and institutional responses. The selection criteria focused on individuals directly involved in irrigation management, ensuring that participants provided firsthand insights into institutional mechanisms and operational challenges.

Although the sample size is relatively small, it was deemed appropriate for an in-depth qualitative investigation of institutional mechanisms. Prior studies on water governance and irrigation institutions have demonstrated that small but information-rich samples can yield valuable insights, particularly when exploring institutional responses and governance structures [19,25]. This study ensured the collection of high-quality, relevant data by focusing on key informants actively involved in irrigation governance and risk-sharing mechanisms.

Since institutional responses are best analyzed through in-depth qualitative methods rather than large-scale surveys, our study prioritized depth over breadth in data collection. The study used data triangulation to strengthen credibility by comparing findings across stakeholders, including ISPs, farmers, and agricultural extension workers. This approach, which involved cross-validating responses and identifying patterns across multiple perspectives, enhanced the reliability of the results. The selected sample enabled a nuanced understanding of the institutional challenges and financial sustainability of irrigation systems in the study area, as a result of our collaborative efforts with various stakeholders. This approach makes you, our audience, an integral part of our research process.

2.3. Data Colection

The study employed a qualitative data collection approach in two stages to ensure consistency and depth in the gathered insights. The first stage involved in-depth interviews with key informants, focusing on critical aspects of irrigation governance. The study chose semi-structured interviews to allow for flexibility while maintaining a structured discussion on essential institutional themes [39]. We designed the interview questions around key topics, including irrigation cost structures, risk-sharing mechanisms, and farmers’ access to input credit.

Following the interviews, focus group discussions (FGDs) were conducted as the second stage to validate and expand on the findings. These discussions allowed participants to refine their responses, compare experiences, and provide a more comprehensive perspective on irrigation challenges and financial sustainability. To enhance the reliability of the findings, the researchers applied data triangulation by cross-referencing insights from irrigation service providers (ISPs), farmers, and agricultural extension workers. This method strengthened the research’s validity by ensuring consistency across stakeholder perspectives.

Twenty-nine participants were involved in the interviews and FGDs, ensuring continuity in the information collected. The sample included one manager and two operators from four different ISPs, three farmers (one administrator and two group members from each study site), one manager and one staff member from a rice milling unit (RMU) in the Belawa subdistrict, and three agricultural extension workers from each subdistrict—the selection of participants aimed to capture diverse perspectives on irrigation governance and financial risk-sharing mechanisms.

The study collected qualitative data using a case study approach from four irrigation service provider (ISP) units across three subdistricts in Wajo District. The data collection involved the following:

• In-depth interviews—Conducted with 29 key informants, including managers and operators of ISPs, farmers with administrative roles, farmer group members, rice milling unit (RMU) staff, and agricultural extension workers. These interviews focused on irrigation governance, cost-sharing mechanisms, financial risk-sharing, and access to input credit.
• Institutional data—Irrigation governance structures, irrigation payment models, input credit systems, cost-sharing mechanisms, and financial risk-sharing between farmers and ISPs.
• Hydrological and financial data—Collected information on irrigation sources (lake- vs. river-based systems), seasonal flooding and drought impacts, variations in irrigation service fees, and farm profitability.
• Focus Group Discussions (FGDs)—Used to validate and expand on findings from the data collection. These discussions allowed participants to refine their responses and provide a broader perspective on irrigation service models, pricing structures, and financial sustainability.

2.4. Data Analysis

A thematic analysis approach was employed to systematically analyze the qualitative data collected from the interviews and focus group discussions (FGDs) [40]. The study began the process with initial coding, identifying key themes such as irrigation costs, payment structures, and farmer–ISP relationships. This step organized responses into clear classifications, ensuring a thorough examination of relevant aspects of irrigation governance and financial risk sharing. By categorizing responses into distinct themes, the study ensured a structured approach to understanding institutional dynamics in irrigation management.

After completing the initial coding, the researchers applied axial coding to establish connections between the identified themes. They focused on analyzing relationships between pricing mechanisms and their influence on financial risk-sharing between ISPs and farmers. By identifying these linkages, the study explored how different institutional arrangements affect cost distribution, access to irrigation services, and overall financial sustainability. Axial coding also highlighted patterns and variations across different irrigation service models, providing a deeper understanding of governance structures and risk-sharing strategies.

The final analysis stage categorized responses into broader themes, including institutional challenges, financial risk management strategies, and adaptation mechanisms. This thematic analysis enabled a comprehensive examination of how institutions facilitate or hinder sustainable irrigation practices. The qualitative approach provided rich insights into governance structures, reinforcing methodological transparency and ensuring the validity of the study’s findings. By systematically coding and analyzing the data, the study offers well-grounded conclusions on institutional responses to financial and climate-induced risks in pump-based irrigation systems.

3. Results

3.1. Water Source for Irrigation

Table 2. Description of risk potential and water pumping operation cost of ISP.

Description	Lake Water Source		River Water Source
	Sabbangparu	Belawa	Maniangpajo 1	Maniangpajo 2
Rice field location	Skirt of lake	Along the river and rivers’ estuary to the lake	Along river	Along river
Waterdisaster-related risks	High-risk floods two times a year	Moderate flood in the rainy season	Limited water in the dry season	Limited water in the dry season
Production risks in the rainy season	Planted or harvesting failures	Low production due to over irrigation	Low production	None
Production risks in the dry season	Planted or harvesting failures	Less risk in production	Low production	Low production
Consequences faced by ISP (operational costs)	High cost of water pumping operation in two seasons	High cost of water pumping operation in dry season	No operation in the rainy season and a high cost of water pumping operations in the dry season	Less cost in the rainy season and high cost in the dried season for water pump operation

summarizes farmers’ water-related risks and challenges in the four study sites during the rainy and dry seasons. The sites differ in their water sources, lakes (Belawa and Sabbangparu) and rivers (Maniangpajo 1 and 2), significantly influencing irrigation management and associated risks.

Belawa and Saabangparu face semi-annual flooding, typically at the start or end of the planting season. Floods pose a high risk of crop failure, particularly during harvesting, leading to production losses and increased financial burdens. Maniangpajo areas are prone to water scarcity during the dry season, which limits irrigation availability and increases operational costs for Irrigation Service Providers (ISPs). Farmers benefit from natural rainfall in the rainy season, reducing their reliance on pump-based irrigation.

ISPs run their pumps throughout the year or during the two main planting seasons to maintain a sufficient water supply for rice cultivation. In Maniangpajo, however, some ISPs only activate their pumps during the dry season when water availability decreases. They extract surface water from lakes and rivers and channel it to rice fields through irrigation systems equipped with UPVC pipes. ISPs do not use these pumps to remove excess water during floods; instead, they focus solely on supplying irrigation water.

3.2. Irrigation Service Fees

Farmers and providers establish irrigation service fees as a fixed percentage of total production value after deducting harvesting costs. Since rice is cultivated twice a year during the rainy and dry seasons, production yields fluctuate, leading to varying fee rates, particularly in Belawa and Maniangpajo 1. This pricing structure reflects risks associated with water availability and farm productivity, as flooding or drought can significantly impact farmers’ output and the operational costs of irrigation service providers (ISPs). While Maniangpajo 1 and 2 share the same river as their primary water source, differences in institutional arrangements, farmer group structures, and service provider ownership result in distinct irrigation service schemes. These variations influence cost-sharing mechanisms and the financial sustainability of irrigation services, highlighting the crucial role of governance in ensuring equitable access to irrigation while maintaining the viability of ISPs.

The varying irrigation fees across sites reflect a form of risk-sharing between ISPs and farmers. For example, high fees in Maniangpajo 1 during the dry season account for water scarcity risks, while no fees during the rainy season reduce costs for farmers relying on natural rainfall. By incorporating these risks into the fee structure, both parties aim to establish a rate that accounts for the financial sustainability of the ISPs and the economic challenges faced by the farmers.

Table 3. Irrigation service fee paid by farmers to irrigation service providers (%).

	Lake Water Source		River Water Source
	Sabbangparu	Belawa	Maniangpajo 1	Maniangpajo 2
Rainy season crop	20	15	0	15
Dry season crop	20	20	25	15

shows that farmers in Sabbangparu must pay a fixed rate of 20% for every planting season. As reported above, Sabbangparu experiences semi-annual floods, during which the ISPs face high operational costs. Conversely, farmers in Belawa face variable rates of 15% during the rainy season and 20% during the dry season. On the other hand, Maniangpajo exhibits two distinct environments. During the rainy season, farmers at Maniangpajo 1 do not pay irrigation fees as they do not use irrigation services during the rainy season due to abundant rainfall. Nevertheless, during the dry season, they encounter a significant 25% cost for irrigation services, which surpasses that of the other locations in this study. Contrarily, Maniangpajo 2 consistently applies a fixed 15% fee throughout the rainy and dry seasons.

3.3. Institutions for Input Provision

Table 4. Institutional arrangement for input production and irrigation pump investments.

	Lake Water Source		River Water Source
Items of Inputs	Sabbangparu	Belawa	Maniangpajo-1	Maniangpajo-2
Cost of production input	Equally shared between farmers and landowners	Equally shared between farmers and landowners	Borne by farmers	Borne by farmers
Labor for seed planting	Equally shared between farmers and landowners	Equally shared between farmers and landowners	Borne by farmers	Borne by farmers
Land preparation	Borne by farmers	Borne by farmers	Borne by farmers	Borne by farmers
Credit input from ISPs	Interest rate of 20% for one growing season with the facility of repayment schedule in the case of crop failure	Free interest rate with complementary service of land preparation and loan repayment at the harvesting time	Not available	Not available
Irrigation pump enterprise	Farmers groups	Farmers groups	Individual	Individual
Investor of the pump irrigation	Government funding for machinery and water pipes	Government funding and farmer groups for machinery and water pipes	Personal investment	Personal investment
Buyers of rice	Traders	Rice milling unit owned by ISPs	Traders	Traders

presents the institutions in rice farms across the four study sites. In Sabbangparu and Belawa, the rice farming system operates under a shared tenancy arrangement, where landowners and farmers jointly cover the costs of production inputs, including seeds, fertilizers, pesticides, and labor for seed planting. However, there is a variation in the practices employed at the Maniangpajo sites, where farmers bear all the expenses associated with production inputs. South Sulawesi stands out due to its departure from the traditional practice under the shared tenant system, where farmers and landowners often split the costs for various inputs, including seed, fertilizer, pesticides, harvesting, and maintenance.

Given the capital-intensive nature of rice production, farmers rely on input credit from ISPs to acquire essential production inputs like seeds, fertilizers, and pesticides. Farmer groups in Sabbangparu and Belawa operate the ISPs, which receive funding from the government to cover a significant portion of the costs associated with machinery and water pipelines. The ISPs in Sabbangparu offer financial support to farmers, imposing a 20% interest rate on the entire loan for a single farming season. Farmers can delay payment of the input credit and interests until the next planting season if their crop fails without incurring additional borrowing expenses. Harvested rice typically finds its way to numerous buyers, including partners in Belawa or rice traders collaborating with the Rice Milling Unit (RMU) via informal networks.

In contrast, ISPs provide interest-free credit inputs to farmers in Belawa, along with supplementary services such as land preparation and leveling. Farmers in Belawa repay the loan for agricultural inputs and land preparation services at harvest time. Government financing and farmer groups’ assets support the investment of machinery and water pipes. Unlike those in Sabbangparu and Maniangpajo, farmers in Belawa must sell their entire rice harvest to the ISPs, which also own the RMU, as a trade-off for the interest-free loans. Market prices determine the prices received by farmers. Farmers with sufficient funds typically store their products at the RMU without incurring storage fees and sell their rice when prices are optimal.

Private investors own and develop ISPs in Maniangpajo without any financial support from the government. These ISPs operate independently, providing irrigation services seasonally or during dry periods, but do not offer credit input to farmers. Without financial ties to ISPs or an RMU, farmers have the flexibility to sell their produce directly to traders. Figure 2 illustrates the relationship between farmers, ISPs, RMU, and rice traders across different study sites.

3.4. Financial Analysis of Rice Farms

In irrigation pump-based rice farming, farm evaluations usually cover a period of one to two cropping seasons. This study notes this to account for the fluctuations in water fees caused by the risks that farmers and irrigation service providers (ISPs) face throughout the cropping season. Tenant farmers receive remuneration for their land management expertise, while landowners benefit from using their property. The study calculated the irrigation service fee by considering water as a scarce resource and the limited availability of water. After resolving all production expenses, the agreed-upon terms or institutional rules determine the income for both tenant farmers and landowners.

Table 5. Average production, income, and profitability of rice farms at the study sites.

	Water From Lake		Water From River
	Sabbangparu	Belawa	Maniangpajo 1	Maniangpajo 2
	Production (Mt/ha/year)
Range of gross production	9.0–11.0	11.0–13.0	10.5–12.5	11.5–13.5
Average production	10.5	12.0	11.5	12.5
	Revenues and costs per year per hectare (IDR million)
Rice price	4.8	4.6	4.6	4.6
Total revenue	50.4	55.2	52.9	57.5
Total cost	27.3	24.3	23.1	25.6
Harvesting fee (12:1 or 7.69%)	3.9	4.2	4.1	4.4
Labor cost for cultivation	10.8	10.0	10.0	10.0
Input production	3.3	2.9	2.9	2.9
Irrigation fee	9.3	7.2	6.1	8.3
Farmer net revenue	23.1	30.9	29.8	32.1
Share system: Farmer	10.8	14.7	12.7	13.8
Share system: Land owner	12.3	16.2	17.1	18.2

Notes: 1. Labor cost for tractor (IDR 1.5/ha) is borne by farmers. 2. Harvest and water fees are equally borne by farmers and landowners. 3. Input production cost is equally shared in Sabbangparu and Belawa, while fully borne by famers in Maniangpajo. 4. Share system farmers–land owners = 50–50% of net income after all cost deducted based on institution.

shows that farms that obtain water for river irrigation have an annual average yield of 12 tonnes per hectare, which exceeds the average production of 11.25 tonnes from farms that depend on lake irrigation. Out of all the study locations, Maniangpajo 2 stands out as the most profitable rice field, generating a net revenue of IDR 32.1 million per hectare per year (equal to USD 1974.4). The availability of water from the river and a steady set rate for irrigation services of 15% throughout the year are the reasons behind this. Using irrigation pumps in Maniangpajo 2 mitigates the risk of water scarcity due to a lack of rainfall, ensuring a consistent water supply. In contrast, Maniangpajo 1 relies on rainwater, which eliminates the need for irrigation pumps and water fees but necessitates the payment of water fees during the dry season of 25%.

Farmers in Belawa, on average, earn an annual net revenue of IDR 30.9 million (USD 1900.5), which is higher than the net revenue of farmers in Sabbangparu, who earn IDR 23.1 million (USD 1420.8). One contributing factor is the differing irrigation service rates in Belawa, where farmers pay 15% during the rainy season and 20% during the dry season. This pricing structure could reduce operational expenses for irrigation service providers (ISPs), particularly during the rainy season, when farmers can rely more on natural sources such as lake water and rainfall. This access to alternative water sources allows farmers to increase production efficiency, further supporting higher revenues in Belawa. The rice farms in Sabbangparu encounter challenges due to frequent floods throughout the planting seasons. As a result, the operational costs of ISPs are high, and the farmers must pay a fixed rate of 20% for irrigation services. Furthermore, the risks of crop failures and the need for repeated planting increase potential financial losses.

3.5. Production Factor Values

Figure 3 presents the distribution of production factor costs for rice production at the study sites. Each study site reveals variations in the distribution of costs for production factors. Farmers in Sabbangparu spend the most on labor (29.2%), while farmers at the Belawa and Maniangpajo sites spend the most on land (29.3% to 31.7%). Focusing more on the proportion of cost spent on irrigation services, Sabbangparu spent 18.5% of the total costs, which is the highest compared to the other sites. Although the costs of the irrigation service may be lower than the costs of skills, labor, and capital collectively, they may have a significant effect on farm profitability, as reported above. The highest irrigation service expenses occur in regions with limited river water availability (25% in Maniangpajo 1), which requires more extensive and costly irrigation measures to ensure an adequate water supply for crop requirements. On the other hand, areas with a high incidence of lake flooding experience the highest production costs, comprising 18.45% of total costs in Sabbangparu (Figure 3).

4. Discussion

4.1. Factors Influencing Irrigation Cost Variability

4.1.1. Land Tenure and Ownership Arrangements

Land tenure structures significantly influence irrigation cost distribution across the study sites. In areas where shared tenancy models prevail, landowners and tenant farmers jointly bear irrigation expenses, leading to different cost-sharing mechanisms compared to regions where farmers independently finance irrigation services. These institutional arrangements play a crucial role in determining financial responsibilities and risk-sharing dynamics. In Sabbangparu and Belawa, for instance, tenant farmers who rely on lake-based irrigation systems face higher irrigation fees, reflecting the greater risks associated with flood-prone agricultural land [41,42]. This disparity in cost structures impacts the long-term sustainability of irrigation investments, as land tenure arrangements dictate access to financial support and decision making over irrigation infrastructure improvements.

In contrast, farmers in Maniangpajo 1 and Maniangpajo 2 fully finance their irrigation costs, leading to a higher financial burden, particularly during the dry season when water scarcity drives up operational costs. The absence of shared tenancy in these areas means that all irrigation-related expenditures fall solely on farmers, influencing their capacity to adopt efficient water management practices. Consequently, these structural differences in land tenure affect farmers’ ability to invest in sustainable irrigation solutions and influence cost-sharing mechanisms between landowners and cultivators.

4.1.2. Irrigation Service Provider (ISP) Models

The financial structure of irrigation service providers (ISPs) varies between government-supported and privately managed irrigation systems, leading to distinct differences in irrigation fees and cost-sharing models. In government-assisted areas, ISPs offer lower and more flexible irrigation fees, benefiting farmers by reducing operational costs and improving access to water resources. In contrast, privately managed ISPs, which lack government subsidies, must charge higher fees to cover infrastructure maintenance and operational risks [30,35].

This variation is evident in Maniangpajo 1, where farmers avoid irrigation fees during the rainy season but face a steep 25% fee in the dry season, reflecting the ISP’s need to recover infrastructure costs while ensuring financial viability [43]. Meanwhile, in Belawa, government-supported ISPs provide interest-free credit for irrigation services, enabling farmers to mitigate financial pressures during low-production seasons. These distinctions underscore how institutional differences shape irrigation cost structures and impact farmers’ financial resilience.

4.1.3. Access to Financial Resources and Credit Mechanisms

Farmers’ access to financial resources and credit mechanisms is critical in sustaining irrigation services and managing production costs. In regions where government-subsidized credit mechanisms exist, such as Belawa, farmers benefit from interest-free credit provided by ISPs. However, they must sell their harvest to ISP-owned rice mills. This arrangement reduces their dependency on high irrigation fees and provides financial stability, particularly in flood-prone areas with high-income uncertainty [44]. Conversely, in Sabbangparu, ISPs charge a 20% interest rate but offer flexible repayment options, allowing farmers to defer payments in case of crop failure—an informal yet crucial risk-mitigation strategy in the absence of formal agricultural insurance schemes [45].

In contrast, Maniangpajo’s privately owned ISPs, which receive no government support, do not offer credit, forcing farmers to rely on savings or high-interest commercial loans. These differences in financial access shape irrigation affordability and overall farm resilience, highlighting the vital role of institutional support in mitigating risks and promoting sustainable agricultural practices.

4.1.4. Hydrological Conditions and Disaster Exposure

Differences in hydrological conditions across the study sites significantly impact irrigation costs and service fees. Areas prone to frequent floods, such as Sabbangparu, require higher irrigation maintenance costs, which are subsequently passed onto farmers through increased service fees. In contrast, Belawa, with moderate flood risks, experiences relatively lower irrigation costs, reflecting the lower investment required for flood mitigation infrastructure [46,47].

Additionally, the reliance on lake-based irrigation exposes farmers to greater uncertainties regarding water availability, necessitating higher investment in water storage and distribution systems [48,49]. This further compounds irrigation costs in flood-prone regions, creating financial challenges for farmers who depend on unpredictable water sources. Meanwhile, Maniangpajo 1 and 2, which primarily rely on river-fed irrigation, experience increased costs during drought periods, as limited water availability leads to higher energy and infrastructure expenses for water pumping.

Overall, the institutional and socio-economic factors affecting irrigation cost differences underscore the need for tailored financial and governance strategies to ensure equitable access to irrigation services. Addressing disparities in land tenure, ISP financial structures, credit accessibility, and disaster exposure will be crucial in enhancing the sustainability of irrigation systems and supporting smallholder farmers in managing climate-related risks.

4.2. Informal Risk-Sharing Mechanisms in Smallholder Irrigation

The findings highlight the crucial role of institutional differences in ISP models in shaping irrigation cost structures and farmers’ financial resilience, reinforcing prior research on irrigation pricing models and institutional governance [30,35]. In government-supported ISP regions like Belawa, irrigation service providers offer interest-free input credit and adopt flexible fee structures, ensuring farmers’ financial stability while promoting sustainable water use. The tiered fee model—15% in the rainy season and 20% in the dry season—reflects seasonal water availability, mitigating financial burdens during periods of higher rainfall and increased production uncertainty. By absorbing some infrastructure and operational costs through government subsidies, these ISPs ensure that farmers maintain continuous access to irrigation without facing excessive financial strain. This approach aligns with state-supported irrigation governance models, emphasizing equity and affordability as key drivers of irrigation service sustainability [43].

In contrast, privately managed ISPs in Maniangpajo 1 and 2 operate under a cost-recovery model, leading to higher and less flexible irrigation fees, significantly impacting farmers’ financial resilience. Since these ISPs do not receive government support, they must fully recover infrastructure maintenance and operational expenses through direct charges to farmers. This is particularly evident in Maniangpajo 1, where farmers pay no irrigation fees during the rainy season but face a steep 25% fee in the dry season, reflecting the high costs associated with water extraction and infrastructure maintenance under drought conditions. The absence of financial buffers in these private ISPs compels them to adopt rigid pricing structures, which not only limit investment in water-efficient technologies but also expose farmers to more significant financial risks during periods of water scarcity. These findings align with Parween et al. (2021), who argue that private-sector-led irrigation governance models often lead to high service costs, limiting smallholder farmers’ ability to invest in water-efficient technologies [35].

Furthermore, the economic viability of ISP models directly influences long-term irrigation sustainability and smallholder farmers’ capacity to adopt risk-mitigating strategies. Government-backed ISPs in Belawa can offer adaptive pricing mechanisms and financial support, allowing farmers to stabilize production costs and invest in efficient irrigation practices. In contrast, in privately managed ISP regions like Maniangpajo 1 and 2, the high financial burden forces farmers to rely on expensive credit sources, often leading to unsustainable production cycles and reduced investments in water-saving infrastructure. This disparity underscores the need for institutional interventions to support private ISPs in balancing cost recovery with financial accessibility for farmers. The results support the existing literature on irrigation governance, which calls for hybrid public–private partnership models that integrate affordability with financial viability [30,43]. Implementing targeted financial mechanisms, such as irrigation subsidies or seasonal cost adjustments, could enhance the resilience of smallholder irrigation systems while ensuring economic sustainability for ISPs.

4.3. Decentralized ISPs and Risk-Sharing Mechanisms

Unlike previous research focusing on government-managed irrigation systems, this study provides novel insights into decentralized ISPs and their role in risk-sharing mechanisms. Government-run irrigation schemes typically follow rigid pricing models, often relying on predetermined fees that do not adjust to fluctuations in agricultural productivity or climate conditions. In contrast, ISPs in decentralized systems adopt more adaptive cost structures, enabling them to tailor pricing mechanisms based on farmers’ production risks and financial constraints [30,35]. By shifting away from standardized government pricing models, decentralized ISPs introduce financial flexibility and promote greater farmer participation in irrigation governance [50,51].

The study findings reveal that ISPs in privately managed irrigation systems charge higher fees to cover infrastructure maintenance and operational risks. However, they also offer flexible payment structures that align with farmers’ production cycles and risk exposure. These arrangements provide financial relief during low-yield seasons while ensuring irrigation providers can sustain operations. Similar decentralized irrigation governance models have been observed in sub-Saharan Africa and South Asia, where privately managed ISPs use dynamic pricing systems to accommodate smallholder farmers’ financial limitations [52,53]. By integrating risk-sharing mechanisms, such as deferred payments or variable fees based on crop output, ISPs enhance financial resilience and support long-term irrigation sustainability, ensuring the system’s ability to adapt to changing circumstances and providing a sense of security.

In particular, ISPs in Belawa and Sabbangparu demonstrate how decentralized irrigation institutions operate within community-driven frameworks, balancing cost recovery with affordability. Farmers in these areas engage in crop-sharing agreements, allowing them to pay irrigation service fees as a percentage of their harvest rather than through fixed pricing models. This arrangement promotes financial sustainability while distributing risk equitably between farmers and ISPs. Such mechanisms highlight how local institutional adaptations contribute to sustainable irrigation governance beyond the constraints of centralized irrigation models. Researchers have documented similar cooperative financing models in Latin America and Southeast Asia, where local water user associations and service providers govern irrigation systems together [54,55]. Decentralized ISPs also encourage more inclusive decision-making processes. Unlike large-scale government irrigation projects, which often impose top-down regulations, decentralized models enable farmers to negotiate irrigation fees, repayment schedules, and water allocation rules in collaboration with ISPs. These participatory governance approaches have been recognized for enhancing water-use efficiency and reducing financial burdens on smallholders [56,57]. The decentralized approach fosters mutual accountability between farmers and ISPs, ensuring that pricing models remain transparent and adaptive to changing environmental conditions.

These findings suggest that decentralized ISPs are critical in advancing irrigation sustainability by integrating risk-sharing mechanisms that protect farmers from financial shocks while maintaining service viability. Future research should further explore the scalability of these models, particularly in regions where climate variability poses a growing threat to irrigation-dependent agricultural economies [58,59].

4.4. Adaptive Irrigation Pricing Linked to Climate Risks

A key contribution of this study is the introduction of adaptive irrigation pricing in relation to climate risks, a concept that remains underexplored in previous irrigation pricing studies. Traditional pricing mechanisms, such as volumetric charges or hourly rates, fail to account for seasonal fluctuations in water availability and production risks. These rigid pricing models have been criticized for disproportionately burdening farmers during periods of low rainfall or excessive flooding, thereby exacerbating financial instability in smallholder agricultural systems [60,61]. This study demonstrates how ISPs in flood-prone areas, such as Sabbangparu, impose higher irrigation fees to offset increased infrastructure maintenance costs, while those in drought-prone regions, like Maniangpajo 1, implement seasonal exemptions during the rainy season to reduce financial burdens on farmers [43]. These findings align with prior research emphasizing the need for more flexible, risk-responsive irrigation pricing to enhance economic resilience in water-scarce regions [62].

This flexible pricing model allows ISPs to adjust fees based on climate-induced uncertainties, ensuring that both service providers and farmers can manage risks more effectively. Farmers in Maniangpajo 1, for instance, benefit from a 0% irrigation fee during the rainy season, but they pay a 25% fee during the dry season, when water scarcity intensifies operational expenses. By incorporating climate risk factors into irrigation pricing, ISPs in decentralized systems demonstrate an innovative approach to cost management that enhances financial resilience and resource sustainability. Similar adaptive pricing strategies have been observed in India and China, where seasonal variations in water supply influence irrigation fee structures, allowing farmers to plan their expenses more effectively [63,64]. These models reinforce the argument that irrigation pricing should be responsive to hydrological conditions rather than being strictly determined by government-imposed tariffs [60,65].

Moreover, adaptive irrigation pricing strengthens water conservation efforts by incentivizing more efficient usage during peak-demand seasons. Studies have shown that when farmers face higher water charges during dry periods, they adopt more water-efficient farming practices and invest in alternative irrigation technologies [51,66]. This demand-side adjustment, coupled with supply-side cost recovery, creates a self-regulating system that balances financial sustainability with resource conservation.

These findings contribute to the growing discourse on climate-adaptive water governance by highlighting the importance of flexible financial mechanisms in decentralized irrigation systems. Future research should explore how technological advancements, such as real-time water pricing through digital monitoring systems, can further enhance the responsiveness of irrigation pricing to climate variability [67,68].

4.5. Socio-Economic Conditions and Institutional Responses to Irrigation Cost Variation

This study highlights how socio-economic factors influence institutional responses to irrigation cost variations, moving beyond technical and climatic considerations. Land tenure arrangements, financial access, and community governance structures shape irrigation fee structures and risk-sharing agreements [41,42]. Financial sustainability in irrigation management depends on local institutions and cost-sharing models, as seen in regions like Sabbangparu and Belawa, where shared tenancy models reduce financial burdens, unlike Maniangpajo, where the absence of institutionalized cost-sharing results in higher irrigation fees [69,70]. Access to subsidized credit also lowers irrigation expenses, while reliance on commercial loans increases costs [71]. Effective participatory irrigation management requires well-defined roles within water users’ associations and fair cost-sharing mechanisms [72]. This study underscores the importance of robust institutional frameworks, adaptive pricing models, and equitable financial support to enhance the resilience and sustainability of smallholder irrigation systems.

Beyond technical and climatic factors, this study underscores the significance of socio-economic conditions in shaping institutional responses to irrigation cost variations. While prior research has primarily examined irrigation cost differences through hydrological and engineering lenses, the findings of this study emphasize how land tenure arrangements, access to financial resources, and community governance structures influence irrigation fee structures and risk-sharing agreements [41,42].

The financial sustainability of irrigation management is significantly influenced by local institutions and cost-sharing mechanisms. In regions like Sabbangparu and Belawa, shared tenancy models allow landowners and tenant farmers to jointly manage irrigation costs, reducing individual financial burdens [69]. Conversely, in Maniangpajo 1 and 2, the absence of institutionalized cost-sharing leads to higher irrigation fees, highlighting the importance of effective institutional arrangements [70]. Access to financial resources also plays a critical role; farmers benefiting from government-subsidized credit experience lower irrigation expenses, while those relying on commercial loans face higher costs [71]. Furthermore, the success of participatory irrigation management hinges on clear roles within water users’ associations and equitable cost-sharing practices [72]. These findings underscore the necessity of robust institutional frameworks for sustainable irrigation practices.

Overall, this research contributes to the growing body of literature on irrigation governance by providing empirical evidence on how decentralized ISPs, adaptive pricing mechanisms, and socio-economic conditions collectively shape irrigation cost differences. The findings offer critical policy implications, emphasizing the need for institutional frameworks that integrate flexible pricing models, risk-sharing mechanisms, and equitable financial support to enhance the resilience of smallholder irrigation systems.

4.6. Institutional Adaptations and Financial Mechanisms for Sustainable Irrigation Management

4.6.1. Enhancing Financial Inclusivity for Smallholder Farmers

A key policy recommendation arising from this study is the need for more inclusive financial mechanisms to support smallholder farmers facing high irrigation costs. Farmers in privately managed ISP areas often struggle with limited access to affordable credit, forcing them to rely on high-interest loans or personal savings to cover irrigation expenses [30,35]. To address this issue, policymakers should prioritize the expansion of low-interest credit programs specifically tailored for irrigation service payments. Such programs can provide smallholder farmers with financial flexibility, enabling them to invest in sustainable water management practices without exacerbating financial strain.

Integrating financial assistance with irrigation governance can enhance smallholder access to irrigation by facilitating smoother credit disbursement and repayment processes. Collaboration between microfinance institutions, agricultural cooperatives, and irrigation service providers can offer tailored credit packages aligned with farmers’ seasonal cash flows, reducing financial strain during low-production periods. Public–private partnerships can further support smallholders when secure land and water rights, comprehensive support packages, and farmer-owned liability companies are in place [34,73]. Adequate water and agricultural management integration also requires a collaborative governance approach that considers scale dependencies, uncertainty, and diverse interests [74]. These strategies help mitigate financial barriers, encourage sustained investment in irrigation infrastructure, and promote food security and rural development [75].

4.6.2. Encouraging Equitable Cost-Sharing Arrangements Between ISPs and Farmers

The findings highlight the importance of institutional support for more equitable cost-sharing arrangements between ISPs and farmers. Existing disparities in irrigation fees across different regions underscore the need for policy interventions that ensure farmers contribute somewhat to irrigation costs while maintaining the financial viability of ISPs [41,42].

Developing standardized cost-sharing frameworks can help balance affordability with infrastructure maintenance in irrigation systems. Policymakers can introduce regulatory guidelines to ensure transparent cost allocation, preventing excessive financial burdens on farmers while allowing ISPs to recover operational expenses. Research highlights the need for flexible arrangements, as competition among pump owners, social relationships, and risk perceptions influence service structures and pricing [22]. Contract farming can mitigate climate and price risks while promoting crop diversification and water efficiency [76]. Public–private partnerships should ensure fair risk-sharing, accountability, and adherence to social and environmental standards [34,73]. Since irrigation system operations depend on resources and institutional arrangements [69,75], flexible repayment structures like seasonal fee adjustments and crop-sharing can foster a sustainable irrigation financing ecosystem.

Moreover, contractual agreements between farmers and ISPs should include provisions for flexible repayment structures, such as seasonal fee adjustments based on climate risks. Crop-sharing arrangements, as observed in this study, present a viable model for reducing farmers’ upfront financial commitments while aligning incentives between service providers and users. By institutionalizing such collaborative mechanisms, policymakers can create a more sustainable irrigation financing ecosystem.

4.6.3. Scaling up Risk-Based Irrigation Pricing Models for Climate Resilience

This study underscores the potential of risk-based irrigation pricing models in enhancing agricultural resilience to climate variability. Unlike traditional static pricing systems, adaptive pricing structures that account for seasonal water availability and climate risks offer a more sustainable approach to irrigation management [43]. Policymakers should consider scaling up these models in other flood- and drought-prone agricultural regions, ensuring that irrigation fees reflect local hydrological conditions and production risks.

In practice, this could involve piloting climate-responsive pricing mechanisms where irrigation fees fluctuate based on seasonal water availability. For example, regions experiencing recurrent floods could adopt tiered fee structures where farmers pay reduced fees during high-rainfall periods but contribute more during drought-prone seasons to maintain infrastructure sustainability. Additionally, investments in digital water management technologies could enhance fee calculations, ensuring that irrigation pricing remains responsive to real-time environmental changes.

To support widespread adoption, policymakers should facilitate knowledge exchange between regions that have successfully implemented risk-based irrigation pricing and those seeking to adopt similar frameworks. Capacity-building programs and public–private partnerships can further assist in integrating adaptive pricing models into broader water governance strategies, ultimately strengthening smallholder farmers’ resilience against climate-induced irrigation challenges.

By advancing inclusive financial mechanisms, fostering equitable cost-sharing arrangements, and scaling up risk-based irrigation pricing models, policymakers can enhance the sustainability and resilience of smallholder irrigation systems, ensuring long-term agricultural productivity and climate adaptation [77].

5. Conclusions and Policy Implication

This study highlights the critical role of institutional frameworks in shaping irrigation costs and financial risk-sharing mechanisms in pump-based rice farming. The findings reveal that shared tenancy models in Sabbangparu and Belawa alleviate financial burdens through joint cost-sharing, while farmers in Maniangpajo 1 and 2 face higher irrigation fees due to the absence of institutionalized cost-sharing. Adaptive payment systems, such as risk-based irrigation fees and crop-sharing arrangements, effectively align incentives between farmers and ISPs. The provision of interest-free credit by Belawa’s ISPs reduces farmers’ reliance on high-interest loans. In contrast, Sabbangparu’s 20% interest rate offers flexible repayment options to mitigate financial distress—hydrological factors further influence irrigation costs, with flood-prone areas like Sabbangparu experiencing higher infrastructure maintenance expenses. Maniangpajo 1 benefits from free irrigation in the rainy season but faces steep charges in dry periods. Given these challenges, institutional strengthening, financial innovation, and climate-resilient investments are imperative. Policymakers should expand financial support through low-interest credit schemes, microfinance partnerships, and weather-indexed insurance. Implementing adaptive irrigation pricing models, strengthening public–private partnerships, and enhancing institutional governance through transparent cost-sharing frameworks and stronger water user associations is necessary for sustainable irrigation management. These policy measures will enhance long-term agricultural sustainability, strengthen farmer resilience, and ensure adequate water resource management in climate-vulnerable regions.

6. Limitation of the Study

This study has several limitations, particularly its reliance on qualitative methods such as in-depth interviews and focus group discussions. While these approaches provide rich institutional insights, they limit generalizability due to the absence of large-scale quantitative data. The purposive sampling method, though ensuring relevance, may introduce selection bias by failing to fully capture perspectives from broader stakeholders, including policymakers and financial institutions. Additionally, the study is geographically confined to the Wajo District, focusing solely on decentralized, pump-based irrigation systems. As a result, its findings may not reflect the governance challenges faced by large-scale, government-managed irrigation schemes. This study’s focus on flood- and drought-prone areas further restricts its applicability to regions with different hydrological conditions. Moreover, the research does not account for the evolving nature of irrigation governance by only capturing a single point in time. Despite these constraints, the study provides valuable insights into financial risk-sharing and institutional responses, offering policy recommendations to strengthen smallholder irrigation systems.