Economic Valuation of Water in Agricultural Sector of Hamedan Province, Iran

Water scarcity is the biggest problem in Hamadan Province. In the meantime, agricultural sector is more vulnerable than other economic sectors due to its high share of water consumption. Policymakers are interested in adopting appropriate policies and tools to manage crisis and tackle water scarcity problems. This study aimed to determine the economic value of water in the agricultural sector of the province and the potential for revenue generation of this resource in the production of irrigated crops. Selected products for the study included wheat, barley, alfalfa, potato, sugar beet, corn, grain fodder, watermelon, garlic, cucumber, tomato, grape, and walnut products. Data was obtained through questionnaires and interviews with farmers for the 2018-19 crop year and for estimating economic value of water using Cobb-Douglas production form. The results showed that the economic value of water in different crops was greater than the water supply costs. The economic value of water for the mentioned products was equal to 2043, 3775, 6023, 3506, 2136, 1956, 1778, 4902, 36750, 16337 and 4929, 15840 and 20064 Rials/m3 and, on average, 9232 Rials/m3 of water, respectively. These figures are compared to the cost of extracting water from underground sources the most expensive source is 496 Rials/m3, which shows a big gap between these numbers; therefore, it is possible to price water at the same rate as the above figures. This provides incentives towards more efficient water use in this economic sector.