Economical valuing of Water in Irrigation and Drainage Lattice in Khuzestan Province (1979-2013)

Abstract

Since early times water has always been considered as the most important factor in development and applying the new, has played the vital part in obtaining the goal of food supply for the world's growing population. The shortage of sweet water in recent years has become a global problem and particularly in Iran due to water shortage the efficient consumption of agricultural water has achieved significant importance. Therefore water pricing policy has been applied in order to improve agricultural irrigation and determine certain approaches to improve irrigation efficiency. This study has adopted the Ramsey pricing method and time serial data throughout (1979 – 2013) years to present the model. ARDL model was used to estimate demand and supply functions. Cobb Douglas function was taken into consideration in order to present water supply function. Pricing capacity and final production costs were calculated according to demand function and production function and Ramsey water price for agriculture section was determined by these two variables by the help of MATLAB software. According to the results of this study, the estimated prices on the base of Ramsey pricing policy are higher than current prices. In fact the comparison between actual price (86 Riyal per qm in 2013) and Ramsey price (96 Riyal) shows that the amount of money paid by the farmers is less than the economic (Ramsey) value of water. This absence of conformity between the numbers indicates great loss for water and sewage companies and on the other hand low elasticity of water demand (-0.06) has resulted in more water consumption.