Potential Effects of a Water Market on Enhancing Water Productivity and Reducing Water-Related Conflicts in Fars Province, Iran

The growing demand for water and the declining trend in renewable water resources in most regions has led to serious limitations on water availability calling for the sustainable management of the harvestable resources. This has, in turn, encouraged most planners in the water sector to focus on demand management. A number of tools are already available for realizing water demand management goals; one such tool is establishing a water market. The present study is designed and implemented in two stages to investigate the role of a water market in water resources management. In the first stage, the creation of a water market at the farm and basin levels is simulated using a mathematical planning model. The second stage involves the investigation of the combined effects of the water market and water extraction rationing policies. It is found that rationing policies lead to reduced extractions from groundwater resources. The two-stage random cluster sampling method is used to collect the required data. Pilot villages are selected based on the data obtained from the first sampling stage. Pilot farms are then selected in the second stage based on water availability in each place. The input-output data, quantities of available water, and any other data required are finally collected through interviews with local farmers. Results reveal that the volume of exchanged water accounts for 9.5% of the total water consumed and the average improvement gained in farmers’ income ranges from 15 to as high as 42%. This clearly provides enough incentives for the farmers to enter the water market. Like all other water saving policies and measures, establishing a water market might increase consumption, contrary to the national objectives, in the absence of proper supplementary preventive measures. Thus, a second scenario is designed to investigate the combined effects of both water extraction rationing and water marketing. According to this scenario, the total annual irrigation water allocations to the representative farms in groups 1 and 2 are reduced by 20 and 30%, respectively, to observe reductions in farmers’ income levels of only 8 to 11%. This indicates that the simultaneous implementation of both water extraction rationing and water marketing is able to guarantee reductions in water consumption without any considerable decline in farm income levels. The water thus saved can then be used for groundwater protective measures and environmental water allocations. Water meters and volumetric water delivery systems as components of a sound water bookkeeping system considerable at both farm and basin levels will form the prerequisite measures to any water saving policies such as water marketing.