The impact of water-pricing policies on water productivity: Evidence of agriculture sector in Iran

Water pricing and reducing the costs of the implementation and maintenance of irrigation systems have been a challenging topic for a long time. Water pricing issues combine two complex dimensions. The first dimension is the economy of the farm and its association with the broader economic system and farming practices. The second dimension is the hydrology and interconnection of the plot with the irrigation system, the river basin, and the underlying water policy framework. Accordingly, this study aimed to investigate how the institutionalization of water applied would affect water productivity through the implementation of a water-pricing policy. To this end, this study formulated a Positive Mathematical Programming (PMP) model with a gross margin maximizing objective function to assess the data collected from 213 farms in Hamadan-Bahar Plain, Iran. The results revealed that a water-pricing policy can change the cropping pattern and also irrigation system within the limitations of the case study. It can also be a driver to motivate farmers to use a modern and more efficient irrigation system. The potential environmental benefits from the improved on-farm irrigation efficiency depend on the government’s ability to prevent the extension of the irrigated area. In absence of such controls, the aquifer depletion will be accelerated. Therefore, an appropriate water-pricing policy could improve water productivity and also reduce water applied.