Efficiency, valuation, and pricing of irrigation water in northeastern Tunisia

Abstract

This study examines the effects of irrigation water use efficiency improvements and citrus price fluctuations on water values in the tree production systems of northeastern Tunisia. It also aims to compare water values with the real price of water as currently paid by farmers and determine the optimal price. Cross-sectional data of a selected sample of 42 citrus farms located in the main producing region of this commodity was used for the analysis. To do so, we used the stochastic frontier production function approach. Empirical findings show that significant inefficiencies do exist in the studied sample of farms. Overall mean technical efficiency and water use efficiency are 78.4% and 44.3%, respectively. Based on these values, simulation analysis indicates that an improvement in water use efficiency combined with an increase in citrus prices could shift the water marginal value curve upwards, which will result in higher water valuation. Results also show that the current water price paid by farmers is much lower than the water value estimated at the level of “theoretical” citrus irrigation requirements. Application of higher irrigation water fees is definitely feasible for the studied production system, however, they need to be accompanied by increased incentives for water use efficiency in addition to better market integration of farmers.