Evaluating Gains from De-Eutrophication of the Dutch Canal in Sri Lanka: A Cost Benefit Analysis

The Dutch canal wetland system in Sri Lanka is an important wetland area for shrimp farming and has become a promising foreign exchange earner. However, shrimp farming in the Dutch Canal is largely unplanned and un-coordinated with more than 1,300 farms working in an area of 3,750 hectares. The lack of controls has resulted in eutrophication of the lagoon system high enough to cause a decline not only in the shrimp industry's output but also in the lagoon's fish harvest. There is a plan to rehabilitate the Dutch Canal to its original water quality status at an estimated cost (in 1999) of LKR 180 million. In this study, we estimate the increase in shrimp productivity that is likely to occur if the Canal is cleaned. We find that the gains from reducing pollution in the Dutch Canal would far outweigh the cost of clean-up and the government could potentially recover the costs within two years.