Abstract
The agricultural sector is the largest water user in Iran, therefore, the government plans to increase water cost in this sector by increasing the price of electricity used by agricultural wells, thereby helping to reduce water losses. This research aimed to study the effect of increasing water price on agriculture profit. For this purpose, the cost of agricultural water was calculated in Qazvin province of Iran, for different electricity tariffs of the agricultural, industrial, and public sector of year 2015 by using economic appraisal method, which indicated that the cost of agricultural water was 0.035, 0.052 and 0.094 US$, respectively. Then, the volume of water consumptions and water price share in the cost of production and agriculture profitability were determined for five major crops in Qazvin province. The results indicated that a substantial change has taken place in the water price share, leading to negative profit in agriculture.
Highlights
Agriculture is the main consumer of water in the world and 93% of the annual water is consumed by this sector
The present study aims to estimate the price of water, using economic appraisal method and evaluate the effect of increasing the price of water on agriculture sector profitability, and optimize water use and increase efficiency in this sector
According to the plans announced by the government for the implementation of the second phase of reforming the subsidies, an increase happens in electricity prices in the agricultural sector
Summary
Agriculture is the main consumer of water in the world and 93% of the annual water is consumed by this sector. Supplying the needed water for irrigation is at risk and this section is economically considered as the inefficient and the largest consumer of water. Due to water scarcity in many regions of the country and increasing the competitiveness of other sectors of the economy with agriculture over water, it seems that the incremental increase in the economic value of water in agriculture is essential. It is expected that the increasing the price of water leads to an increase in water efficiency and economic surplus water use in agriculture [1]. Increasing water price is regarded as one of the ways considered by policymakers to improve water use, this policy has not been operated in the agriculture sector, considering demand and supply sides of the economy
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