The Role of Economic Instruments in Managing the Water of the Gorganrud-Gharesu Basin

Water limitation is one of the most preventing factor of Agricultural production, so it is essential to research on sustainable management of water resources and choosing an optimal strategy for the best use of this input. One of the most effective demand management tools that regulates water consumption patterns in the agricultural sector is the reform of the pricing system based on the economic value of water. The characteristics of each region in terms of availability of water, type of water resources, types of activities and cultivated products make that the farmers' reaction to price changes in the different regions not be the same. In this study, in order to the optimal management of water resources in Gorganrud-Gharesu basin, we estimate the total demand function of irrigation water for this transboundary Basin. The management of a transboundary Basin due to the existing of multiple stakeholders with different objectives and utilities, is one of the most important challenges of water resources management which has received little attention due to its wide dimension.

To this end, by applying the time series data (1999-2015) and the application of the evaluating the performance of active firms in agricultural sector method, first, the linear model of irrigation water demand function for each of the beneficiary provinces (Golestan, Semnan and Northern Khorasan) are estimated in the form of routine actions. Then, by considering the actual values of other factors affecting demand (other than the price factor) in the model, the short-term water demand function for each province is extracted; and finally, through the horizontal summation of the extracted functions, the aggregate demand function of the total water of the basin is estimated.

The results of the estimation of agricultural water demand function of each province indicate that there is a negative and significant relationship between agricultural water price and its consumption, so if the price of water in each province increases by 1%, the amount of water demand in Golestan, Semnan and Northern Khorasan provinces is decreased by 0.17%, 0.33% and 0.26%, respectively. Similarly, the results of aggregate water demand function also confirm the inverse relationship between water price and the amount of water demand in the agricultural sector; so if the price of water in the region increases by one percent, the water demand of the beneficiary provinces is reduced by 0.49% on average.

In order to investigating the reaction of farmers in the area to changes the price of irrigation water, the price elasticity of demand was calculated. Given that the calculated elasticity is smaller than one, so pricing policies cannot alone be an important factor in controlling the excessive use of this valuable resource. In this way, holding promotional classes in order to raise awareness of the farmers about the fact that water is valuable and economic commodities can be effective in changing the cropping pattern, adapting the irrigation method to the Conditions of water, soil and plant's actual requirements and improving irrigation efficiency.