Abstract
The paper discusses the challenges in using survey-based methods of economic valuation of water: choice experiments, residual value of water and water trading prices. The three different approaches to economic valuation of irrigation water are compared, all based on data from a farmer survey conducted in two irrigation command areas in the Tungabhadra sub-basin (Karnataka State, India). Prices reported by farmers for sale and purchase of an additional irrigation are of the same order as willingness to pay estimates derived from a choice experiment. Because of small number of water trades there is large variation in market-price based estimates. Financial returns to a given crop as a function of irrigation frequency show values that are both lower (for rice) and higher (for areca nut) than choice experiment estimates. Low convergent validity of different economic valuation methods of irrigation water, is in part due to the large variation in water availability and farm conditions across the watershed, but also because of methodological weaknesses. While recognizing these weaknesses, the paper shows that representative farm surveys using a combination of valuation methods can identify heterogeneity in farm conditions and preferences that may otherwise be overlooked when carrying out irrigation pricing reform.
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