Irrigation Water Pricing in Iran: The Gap between Theory and Practice

Pricing policies play an important role in water demand management and its optimal allocation. Determining proper water price leads to optimal allocation of water especially in agricultural consumptions. Applying new subsidy targeting law in Iran which insists on pricing water based on its supply cost, will effects considerably on water resource management in agriculture sector. So, in this study, different Irrigation water pricing methods is investigated and proper irrigation water price is determined using survey data for 2010-2011 farming year in Golestan Province of Iran. At the first step using econometric approach, economic value of irrigation water in different agriculture crops is determined that shows demand side price for water. Then, supply cost of surface and ground water is calculated using accounting approach which shows supply side price for irrigation water. Finally, economic value and supply cost of irrigation water compared and different water pricing methods is evaluated. Results indicated that, weighted average of economic value and supply costs of irrigation water in Golestan province were 1795 and 1399 IRR per cubic meter, respectively. So, improvement of water demand and supply management could be achieved using price policies.