In a major development for Australian agribusiness, the Murray Darling Basin Plan became law today, following years of negotiation and consultation between the Commonwealth, Basin States and other key stakeholders.

Ensuring access to a secure and sustainable water supply in the face of a drying climate and rising demand for water is a central issue facing Australian agribusiness. Murray Darling Basin Plan ("Basin Plan”) is a national collaborative plan to manage the surface water and ground water resources in the Murray Darling Basin. However, the Basin Plan has been extremely controversial for agricultural producers who rely on water from the Basin because of its objective of returning substantial water flows, previously available to irrigators, to the environment.

The Murray Darling Basin stretches over 4 states and the Australian Capital Territory and accounts for over 34% of Australia’s gross value of agricultural production. The implementation of the Basin Plan is of enormous significance to the continued development of agribusiness in the Basin, specifically in key areas of sheep and cattle enterprises, cereal and rice crops and horticultural crops such as citrus, stone fruits, grapes and vegetables.

Key Features of the Basin Plan

In the period to 2019 when the Basin Plan will be in place, long-term environmentally sustainable levels of take of water from its rivers, known as ‘sustainable diversion limits’ or SDLs will be implemented. The SDLs will set the amount of water on average in each resource area of the Basin that can be used for irrigation, agriculture, drinking and so forth (known as ‘consumptive use’) and the amount dedicated to environmental flows to sustain the environmental health of the Basin river systems.

In the years leading up to the introduction of the final SDLs in 2019, the Basin Plan involves a combination of buybacks of water entitlements currently held by irrigators and infrastructure investments with an aim of increasing the amount of water available to the environment to the equivalent of 3200GL. Water allocation and water trading rules for each of the resource areas and across the Basin will regulate the amount of water available to each entitlement holder from the remaining water in the Basin each year and the temporary and permanent transfer of those entitlements and allocations amongst entitlement holders within and across water resource areas.  There is a real fear amongst irrigators that these actions will result in a significant reduction in the actual volume of water available under their entitlements.

Implementation Challenges

Now that the Basin Plan has formally come into law, its effects on the water access entitlements for agribusiness can perhaps be more easily established. However, some key elements of the implementation of the Basin Plan have not yet been finalised. The Murray Darling Basin Authority, who administers the Basin Plan, has set priorities for 2013 to complete final SDL adjustment calculations, implement salinity targets, prepare supporting material to assist with the water trading rules and develop a transition plan for state water resource plans over the period through to 2019.

The development of these operational details in the coming years will be crucial to evaluating the effects of the Basin Plan on industry scale and changes to the competitiveness of agricultural products.