Economic Impact Assessment of Agricultural Water Market Formation in Irrigation Network of Ramjerd Plain in Iran

Over the last two decades, water markets have been considered as a desirable demand management strategy to address water scarcity. Accordingly, it is important to assess the impacts of water market formation on the livelihood of farmers in order to plan for the implementation of this policy in the agricultural sector. In the present study, the effects of water market formation on the changes in crop pattern and farmers' gross margin were investigated. The required data were collected in a multi-stage random sampling method from 100 farm-operators with water quota in Ramjerd Plain Irrigation Network; then, the positive mathematical planning (PMP) model was prepared and the water market formation scenario was implemented, considering an equilibrium price. The results showed that the formation of the water market would increase the area under cultivation of high-yielding crops with high water requirements including rice, tomatoes and sugar beets by 40.67, 23.17 and 10.45 percent, respectively. Also, with the formation of the water market, the gross margins of agricultural activities in all parts of the Ramjerd Plain would increase; accordingly, the gross margins of the total plans of lands with water network quota would improve from about 2194.200 to 2013.080 billion rials (equivalent to nine percent). Therefore, creating a water market can improve the economic efficiency of the region, which obviously requires the adoption of effective rules and regulations and close monitoring of this market. Establishing and strengthening local agricultural water institutions and organizations with legal positions can pave the ground for establishing and monitoring the water market.