The Cost of Irrigation Water Delivery: An Attempt to Reconcile the Concepts of Cost and Efficiency

Abstract

This work discusses the conflict between two of the main objectives of the EU Water Framework Directive: cost recovery and economic efficiency in the use of irrigation water. In the Mediterranean region, this conflict is commonly embedded in a state of under-utilization of irrigation networks managed by Water User Associations (WUAs). This under-utilization arises from factors independent of farmers’ choice, such as water shortage, crises in the sector, and changes to the Common Agricultural Policy. This prevents the facilities from operating at the minimum average cost. This paper argues that farmers should not suffer this inefficiency, which results in them paying higher water prices to cover the costs of water supply. Indeed, the application of the Water Directive should be rethought, taking into account the specific problems related to irrigation in the Mediterranean region. Based on an econometric analysis of the costs of water distribution in a WUA in Sardinia (Italy), we propose a payment system based on two components. Primarily there is a fee related to the number of hectares under irrigation. In addition there is a fee that considers the intensity of irrigation: this component is to encourage farmers to save water. The results show that the proposed approach has some desirable effects, including higher rates of cost recovery and possibly a reduction in the use of groundwater. Finally, the proposed system is not overly expensive for the rest of the community, who must bear the costs of inefficiencies in the use of irrigation water that do not depend on choices of farmers.