Economic Pricing of Water for selected Agricultural Products by Ramsey Method in the Irrigation Network of Northern Khuzestan

At present, the tariff for agricultural water in irrigation networks is calculated based on the Law on Stabilization of Crop Water approved in 1990, based on 1% to 3% of the planted crop. Since the method of calculating agricultural water tariffs is non-volume and based on two performance indicators at the level and price of the product, it does not cover the costs of operation and maintenance of irrigation network facilities. It has caused a waste of water resources. Therefore, water pricing based on economic principles and foundations is one of the most critical requirements. The purpose of this study is to obtain the optimal price of agricultural water in the irrigation networks of northern Khuzestan. To determine this price, the average cost and the marginal cost of production per cubic meter of water were calculated. The water demand function of 8 agricultural products was obtained using time series data from 2003 to 2018 using the ordinary least squares method of OLS. In Eviews software, estimation and price elasticities of water demand were obtained. Then, with the help of MATLAB software, the optimal Ramsey price of water for the above products was calculated. The results show that optimal pricing first leaves the industry with a deficit. According to the Ramsey rule for the study area, the second optimal price (Ramsey price) defines the most efficient prices according to the budget constraint to be met. Also, to achieve maximum social welfare, the price of water for corn, barley, wheat, and rose crops, which have a better-guaranteed income, is higher than the average cost of water, and the products of okra, peas, beans, potatoes, and tomatoes are less than the average cost of water.