An Application of Positive Mathematical Programming Model to Analyze the Effects of Alternative Policies to Water Pricing in Mashhad Plain

Management of water resources in Iran is faced with growing demand for water resources, a considerable increase in the costs of supplying additional water and uncontrolled exploitation of underground waters. Economists suggest water pricing to improve water use efficiency; however, government tends to reject that advice due to political risk, economic and cultural concerns. We used a positive mathematical programming (PMP) model at farm level, to analyze the different effects caused by the implementation of water pricing and alternative polices on irrigated agriculture in the Mashhad plain (Khorasan Razavi Province). Three policy options including water pricing, water complementary input factor taxes, and output taxes were examined. The effects of alternative policies are strongly dependent on group of farmers and that would create widespread effects on farm income, water savings and cropping pattern. Water pricing and output tax policies are better suited and effective than water complementary input factor taxation but both input factor tax and output tax policy at certain rates can be alternatives to water pricing policy.