Employing Economic Instruments to Increase Water Productivity: A Case Study, Zayandehrood River Basin

Demand management in water resources planning is a direct way to increase the net benefit generated by water known as the water use productivity. Considering the water scarcity in the recent years and the unbalance between water demand and water resources, demand management, incentive creation, improving public awareness, and establishing laws and regulations are required to decrease the water consumption, which leads to an improved water productivity. Utilizing economic instruments especially water pricing is one of the useful strategies in demand management. In this study, water pricing and incentive strategies including loan and partial grant to farmers were implemented and simulated in Zayandehrood river basin for a ten-year planning horizon (1997-2006). Also the effects of water pricing and incentive strategies on improving the irrigation efficiency, water productivity, and water consumption are investigated. To maximize the net benefit an optimization model was used with the objective function of maximizing the potential maximum net benefit. The results show that application of incentive strategies with decreasing water consumption increases the net benefit in the 10-year planning horizon to 24932 Million Rials which is 1.8 times of historical values. Based on the developed model and by combining of linear programming and budgeting methods the economic water value is estimated. The results show that improving the irrigation productivity lead to an increase in the economic water value from 1350 to 1780 Rials at the end of the planning period. The results show if water pricing and incentive strategies are used for improving irrigation efficiency, it can persuade the consumers for a decrease in water demand.