Water Pricing for Wheat Production in Ghahavand Region using Spatial Econometrics

In recent years, the level of groundwater table of Ghahavand plain has been reduced by excessive withdrawal of groundwater resources. Therefore, it is important to apply an appropriate management strategy for the optimal utilization of this resource. The main challenge in the economic management of water resources in the balance between supply and demand. To address this balance, the economic value of water, similar to other items, plays a decisive role. Therefore, water pricing is recommended as an indirect method for the sustainable use of water in the agriculture sector. The aim of this study is determining the economic value of water using the spatial econometric approach. Due to the relationship between the farm wells and groundwater resources, this study aims to answer the question of how this relationship affects the water demand of farmers. The correlation coefficient show that the use of spatial regression is superior to the classic regression method. The required data in this study were collected through field research and a questionnaire completed by farmers in 2016. The results show that the real price of water in wheat production is 2500 Rials per cubic meter. To control water consumption and balance the supply and demand for water, the difference between the real price and the price paid by farmers can be used for water pricing policies.