Economic Aspects of Irrigation Water Pricing

Worldwide, irrigation water consumes the bulk of renewable fresh water resources. As water demand increases with rising living standards and population growth, and as prospects for water diversion (extraction) are limited in some regions and nonexistent in others, the course of water policy left open is to increase efficiency of water use. This requires taking account of the full cost of water and the way to achieve this goal inevitably leads to some form of water pricing. Yet, water policy makers and economists are far from agreeing on what constitutes the "right" price of water in any given circumstance and how this price is to be charged. This paper aims to clarify and reconcile some of the conflicting views by discussing the economic aspects underlying irrigation water pricing and their implementation in practice.