Valuation of irrigation water in South-western Iran using a hedonic pricing model

Abstract

Population growth, improved socioeconomic conditions, increased demand for various types of water use, and a reduction in water supply has created more competition for scarce water supplies leveling many countries. Efficient allocation of water supplies between different economic sectors is therefore very important. Water valuation is a useful tool to determine water price. Water pricing can play a major part in improving water allocation by encouraging users to conserve scarce water resources, and promoting improvements in productivity. We used a hedonic pricing method to reveal the implicit value of irrigation water by analyzing agricultural land values in farms under the Doroodzan dam in South-western Iran. The method was applied to farms in which irrigation water came from wells and canals. The availability of irrigation water was one of the most important factors influencing land prices. The value of irrigation water in the farms investigated was estimated to be $0.046 per cubic meter. The estimated price for water was clearly higher than the price farmers currently pay for water in the area of study. Efficient water pricing could help the sustainability of the water resources. Farmers must therefore be informed of the real value of irrigation water used on their land.